TIDMNMC
RNS Number : 8472J
NMC Health Plc
22 August 2019
NMC Health Plc
Financial report for the six months ended 30 June 2019
Strong first half performance underpins full year
expectations
London, 22 August 2019: NMC Health plc (" NMC", the "Company" or
the "Group"), the leading Gulf Cooperation Council (GCC) and
international private healthcare operator, announces its results
for the six months ended 30 June 2019 ("H1 2019").
Key Highlights
-- Strong performance for H1 2019 in core markets of UAE and on
track for broader GCC expansion.
-- EBITDA of $323.5m (post IFRS 16) and $276.3m (pre-IFRS16),
representing growth of 22.5% (for pre-IFRS 16) and FY guidance
remains on track.
-- Working capital cycle days reduced substantially, supporting
one of the highest EBITDA-to-Free Cash Flow for H1 in the history
of the company.
-- Delivering balance sheet strength, with net debt-to-EBITDA improving.
-- Continued successful execution of the Group's strategy has
remained the key to management's ability to guide and then deliver
on strong growth, year after year.
-- Management reiterates the guidance provided on 28 May 2019.
Maintaining an unbroken trend of delivering on promised
growth
NMC's management has consistently guided that a verticals-based
strategy is the best means of capitalizing on the healthcare
markets in the UAE, as well as the wider GCC. This approach
reflects the unique nature of the respective populations, which are
more modest in size yet have demographic and economic
characteristics that are favourable for continued demand for high
quality healthcare access.
Building on the steps taken on this front in past years, NMC has
continued to enhance its vertical framework. This approach,
combined with strong off-take from the end market, has ensured NMC
has continued to deliver a market leading performance.
Notwithstanding the volatility of asset prices, as reflected by
the stock market, the healthcare market remains highly predictable.
NMC's track record of guidance and delivery now extends to six
years, with management confident that 2019 will prove to be no
different.
Post-IFRS 16 Pre-IFRS 16
(US$m) H1 2019* FY 2019 H1 2019 FY 2019 H1 2018 YoY growth
guidance guidance
--------- ------------ -------- ------------ -------- -----------
Revenues 1,236.0 2,500-2,540 1,236.0 2,500-2,540 932.0 32.6%
--------- ------------ -------- ------------ -------- -----------
EBITDA 323.5 665-675 276.3 575-585 225.5 22.5%
--------- ------------ -------- ------------ -------- -----------
EBITDA margin 26.2% 26.6% 22.4% 23.0% 24.2% (180bps)
--------- ------------ -------- ------------ -------- -----------
Net income
to equity holders 138.1 297-305 151.0 320-330 116.5 29.6%
--------- ------------ -------- ------------ -------- -----------
EPS (US$m)
- Basic 0.66 - 0.72 - 0.56 29.1%
--------- ------------ -------- ------------ -------- -----------
Net debt-to-EBITDA 3.4x 3.4-3.5x 2.7x - 3.4x
--------- ------------ -------- ------------ -------- -----------
*: H1 2019 is the first period to reflect the adoption of IFRS
16. As a result, an unadjusted comparison with H1 2018 is not
meaningful
NMC served a total of c. 4.0m patients (+16.7% YoY) in H1 2019
with 1,922 (H1 2018: 1,530) operational beds. Given the sustained
addition of new capacity, 31% of the operational beds are in early
ramp-up phase, translating into an occupancy rate of 67.7% (down
220bps YoY).
The essence of NMC's strategy is to create and autonomize
verticals. H1 2019 saw significant progress against this
strategy:
o Higher complexities continue to evolve in the Multispecialty
vertical, with nephrology becoming a key focus area among Centres
of Excellence, following the success in paediatrics.
o The Fertility business reinforced its position as a global
leader by leveraging on the unmatched knowledge base available to
it.
o The Long-term care business introduced a new business line in
the form of outpatient services through rehabilitation care.
o Cross referrals to other business segments (including
Distribution) from Operations & Management vertical has
translated into substantially higher revenue generation than from
the underlying O&M contracts alone.
For NMC, 2019 is a year focused on:
o Improving utilization and efficiencies of existing assets.
o Integration of acquired assets and continued centralization of
services.
o Completion of partnership with GOSI/Hassana Investment
Company, which is viewed by management as one of the landmark
events in the history on NMC.
o Investment on new capacity across UAE and Oman.
o Deleveraging the balance sheet, with net debt-to-EBITDA
(excluding the impact of IFRS 16) standing at 2.7x in H1 2019 vs.
3.1x at the end of 2018.
o Improving cash flow generation: Group working capital cycle
improved to 90 days (FY 2018: 106 days) as Group receivable days
improved to 89 (FY 2018: 99 days), while inventory days dropped to
56 (FY 2018: 74 days).
o H1 2019 recorded one of the highest EBITDA-to-Free Cash Flow
conversion for the first half of the year historically.
Outlook
Continued successful execution of the Group's strategy has
remained integral to management's ability to sustainably guide and
then deliver on strong growth, year after year. Based on the
performance of the Group in H1 2019 and the continued off-take in
the end market in Q3 2019, management reiterates the guidance
provided on 28 May 2019.
Given the Company's strong operational and financial performance
and continued trend of performing in line with expectations,
management remains highly confident in relation to future
performance. Looking ahead, the Board intends to continue its
successful growth strategy, which it believes will continue to
create significant value for shareholders over the long-term.
Prasanth Manghat, Chief Executive Officer, commented:
NMC Health again achieved strong performance in the first six
months of the year, as we continue to deliver on our growth
strategy in our attractive target markets. Our ability to perform
strongly in a challenging environment testament to NMC's strategy
of developing niche, differentiated verticals in our core markets
that provide the best possible care for our patients.
All key financial and operational metrics of our healthcare and
distribution businesses performed in line with our guidance. We
also made good progress on increasing free cashflow during the
period and we see room for further improvement in H2 2019, as has
been the trend in previous years.
We are also particularly pleased to have closed our
strategically important partnership with GOSI/Hassana Investment
Company which ranks as one of the defining events in the history of
NMC. This partnership will provide us with the ideal platform to
establish a dominant position in the attractive Saudi Arabia
healthcare market.
2019 remains focused on integration and realization of synergies
from previous acquisitions. The Board remains committed to
continuously improving transparency and enhancing the Group's
governance and ESG framework. The establishment of a new committee
to oversee all related party activities in addition to the current
robust program is a good example in this regard.
We continue to view the future with confidence and reiterate our
guidance for the full year 2019.
Presentation and conference call details
-- A presentation displaying the Group's H1 2019 financial
performance in graphical form will be made available at 7am UK time
on 22 August 2019 on https://nmc.ae/investor-relations.
-- NMC will host a conference call for the H1 2019 results at 12
noon UK on 22 August 2019. For dial-in details, please contact FTI
Consulting on NMCHealth@fticonsulting.com. A presentation for the
results call will be made available on
https://nmc.ae/investor-relations at 12 noon UK time on 22 August
2019.
A copy of this report will be available on the Company's
Investor Relations website which can be accessed from
www.nmchealth.com.
Contacts
Investors
NMC Health
Asjad Yahya, Investor Relations +971 56 219 0975
Media:
FTI Consulting, London
Brett Pollard +44 203 727 1000
FTI Consulting, Gulf
Shane Dolan +971 4 437 2100
Cautionary statement
These half year results have been prepared solely to provide
additional information to shareholders to assess the Group's
performance in relation to its operations and growth potential.
These half year results should not be relied upon by any other
party or for any other reason. Any forward-looking statements made
in this document are done so by the directors in good faith based
on the information available to them up to the time of their
approval of this report. However, such statements should be treated
with caution due to the inherent uncertainties, including both
economic and business risk factors, underlying any such
forward-looking information.
About NMC Health
NMC is the leading private healthcare operator in the GCC with
an international network of healthcare facilities across 19
countries. NMC ranks as one of the top two in-vitro fertilisation
("IVF") operators globally. The Group is recognised as a leading
provider of long-term medical care in the UAE through its
subsidiary ProVita. Pursing a selective international expansion
program since 2016, the company now has total capacity of 2,207
beds (excluding beds at CARE) across its network with 30% of this
capacity in the Kingdom of Saudi Arabia (KSA), where the company
has introduced long-term and multi-specialty care services.
Moreover, the recently formed partnership with GOSI/Hassana
Investment Company provides a solid platform for continued growth
in the GCC region's largest healthcare market. NMC served a total
of 4.0m patients in H1 2019, up 16.7% YoY. The Group is also a
leading UAE supplier of products and consumables across several key
market segments, with the major contribution coming from healthcare
related products. The Group reported revenues of US$1.2 billion for
the half year ended 30 June 2019.
In April 2012 NMC was listed on the Premium Segment of the
London Stock Exchange. NMC is a constituent of the FTSE 100
Index.
BUSINESS REVIEW
Healthcare - Strong platform continues to deliver growth
Maternity Long-term Operation Total Healthcare
Detail Multispecialty & Fertility & Home care & Management
------------------------ --------------- ------------- ------------- -------------- -----------------
No. of Countries 4 11 2 10 19
------------------------ --------------- ------------- ------------- -------------- -----------------
Revenue (US$ '000) 695,975 164,495 82,567 14,650 957,687
YoY growth 33.6% 43.9% 30.8% 89.1% 35.7%
% contribution
to Healthcare Revenue 72.7% 17.2% 8.6% 1.5%
Revenue/patient
(US$) 168 1,419 20,637 224
YoY growth 15.7% 32.4% 3.4% 16.8%
Capacity
Licensed beds 1,599 106 502 2,207
YoY growth 16.5% 0.0% 3.5% 12.4%
Operational beds 1,395 100 427 1,922
YoY growth 26.4% 0.0% 31.0% 25.6%
Spare capacity
(beds %) 13% 6% 15% 13%
Patients 3,905,390 115,889 4,001 4,025,280
YoY growth 17.0% 8.7% 26.5% 16.7%
Bed Occupancy 61.2% 79.7% 86.1% 67.7%
The healthcare sector in the UAE in particular, and the GCC in
general, saw the continued playout of two key themes during H1
2019: 1) consolidation, with smaller players ceding market share
and 2) tightening of regulatory environment. Both factors have
proven beneficial for NMC as one of the largest and most successful
healthcare operators in the region.
Within the UAE, NMC has been gaining market share through both
adding capacity and differentiating itself from competitors by
strengthening its verticals. As an example of the former, up to 385
new beds are under construction across Dubai and Sharjah, which
will increase total capacity in the UAE by 31.6%. This is in
addition to the various multispecialty and cosmetics clinics that
have already been opened across the country.
Meanwhile, maintenance capex incurred last year on NMC Royal to
enhance its emergency services is already yielding strong returns.
The upgrade resulted in NMC Royal becoming a regional referral
centre for emergency and trauma cases and the hospital is the only
private facility in Abu Dhabi allowed to receive trauma patients.
Since Q1 2019, this has led to a 6% increase in the number of Level
1 and Level 2 acuity patients accessing emergency services at the
facility. This increase in higher acuity patients serves as a good
reflection of differentiation by offering higher value
services.
Outside the UAE, NMC is reaffirming its leading position in
Oman, with the Company set to become one of the largest private
sector players in the country once the ongoing capacity expansion
of 175 beds is completed. Furthermore, plans are already being put
in place to leverage the existing infrastructure in KSA, which
ranks NMC KSA as the second largest healthcare operator in KSA by
number of beds (including beds from CARE).
Multispecialty vertical
The foundation of NMC's healthcare business, the Multispecialty
vertical benefited from increased utilization of existing
facilities as well as acquisitions completed last year. In terms of
the former, NMC Royal remains one of the most prominent assets by
way of complexity and offerings, profiling the NMC brand into niche
specialties. Management expects this growth to pick up pace in the
short to medium term, as new beds are added to the facility in H2
2019. Moreover, amongst the assets acquired last year, Aspen had
the most significant impact on the top line of the vertical, while
CosmeSurge made the most significant contribution to EBITDA.
Maternity & Fertility vertical
The IVF business remains the largest contributor, as well as
main engine of growth for the Maternity & Fertility vertical. A
truly global part of NMC's portfolio, the IVF business has been
reinforcing its market leading position by continuously building on
the knowledge base available to it. The fundamental question every
fertility business is trying to answer is, how can the success rate
of an IVF cycle be improved. The acquisition of Boston IVF was an
important factor to answer this question. The only IVF facility to
be directly associated with Harvard Medical school, it
substantially adds to the expertise available to the Group.
Moreover, this acquisition supported NMC's fertility business to
record 54.9% YoY growth in revenues to reach US$139.6m in H1
2019.
Long-term & Homecare vertical
Developed on the back of one of NMC's most successful
acquisitions in the form of Provita, the Long-term & Homecare
vertical continues to demonstrate the benefits of combining
powerful organic growth with an M&A transaction.
Previously focused only on inpatient services, the Long-term
& Homecare vertical has now introduced outpatient services in
the form of rehabilitation care. Without the expertise brought in
by this vertical, NMC's multispecialty hospitals would have been
unlikely to introduce this service on their own.
Moreover, the Chronic Care Specialist Medical Centre (CCSMC),
remains one of the most successful investments by NMC in Saudi
Arabia. With 145 (2018: 125) beds now operational the facility
continues to benefit from very high demand, with occupancy level at
over 90%. As in the case of the outpatient rehabilitation services
introduced in UAE, establishing CCSMC would not have been possible
without the expertise acquired through Provita.
Operation & Management (O&M) vertical
The O&M business continues to be associated with the highest
EBITDA margin amongst NMC's verticals, standing in the 70-80%
range. Equally importantly, O&M contracts support substantial
business generation in other healthcare verticals, as well as the
distribution business, through referrals and cross-sales. Expansion
of the O&M vertical is also translating into procurement
benefits for NMC. By combining procurement for the Group's own
assets and assets managed under O&M contracts, NMC benefits
from enhanced bargaining power and terms.
Management continues to view the O&M business as a key part
of future growth, and for 2019 in particular, full year revenues
for the vertical are expected to stand at US$25-26m.
Distribution - New contracts and cross-selling through O&M
boost growth
Revenues for the Distribution division stood at US$304.4m in H1
2019, up 19.4% YoY.
EBITDA margin for the Distribution division stood at 14.3% for
the year
-- Excluding the impact of IFRS 16, EBITDA margin for the
Distribution division stood at 13.6% (up 170bps YoY).
Total SKUs reached 120,627 compared to 115,795, as at the end of
2018.
The sharp growth in revenues, as well as margin improvement, was
supported by new distribution contracts, including one-off
contracts across government and private sectors. Additionally,
referrals and cross-sales on the back of O&M contracts have
translated into sizable revenue growth for the Distribution
division.
KSA: Building out the new footprint
With a population of over 30m, only about a third of which is
currently covered by mandatory insurance, Saudi Arabia represents
the largest healthcare market in the GCC. A number of statistics
also suggest the country ranks as one of the most underserved
markets in the GCC. Healthcare per capita expenditure of c.
US$1,100 for KSA lags developed countries as well as regional
peers, such as UAE, while beds per GDP per capita in Saudi Arabia
is less than half that for the OECD average.
As is the case with most GCC countries, lifestyle disease is
also a major problem in KSA. Almost 70% of the population is obese,
while 30% is diabetic or pre-diabetic. These factors, combined with
the fact that the country has a median age of 29 years (30% of the
population below 19 years of age), make KSA a very attractive
opportunity for NMC.
Against this backdrop, NMC has been steadily developing a
diverse network of facilities in KSA, reaching a total of five
assets across different cities by the end of 2018. H1 2019 marked a
significant leap on this front through the completion of a
partnership between NMC and GOSI/Hassan Investment Company. NMC now
owns 53% of NMC KSA and the remainder is with GOSI. In addition,
NMC KSA now owns 49% of Tadawul-listed National Medical Care
Company ("CARE"), effectively making it the second largest private
player in KSA by beds capacity (including CARE's beds). Note that
NMC KSA currently recognizes CARE as an associate and is recognized
in the Groups financials as such (see note 2.2 and note 15 to the
Financial Statements for details).
The Group's management views the formation of the partnership
with GOSI as one of the top landmark events in the history of NMC
since its inception. NMC KSA is well-positioned to become one of
the most dominant players in the largest healthcare market in the
GCC. Leveraging the medical expertise of NMC and the local market
knowledge and strong reputation of GOSI, NMC KSA has the potential
to transform the KSA healthcare market, similar to the impact NMC
has had on its home market of UAE.
FINANCIAL REVIEW
H1 2019 segmental data
Healthcare Distribution Adj/Elimination Group
----------- ------------- ---------------- ---------
Revenue (US$m) 957.7 304.4 (26.1) 1,236.0
----------- ------------- ---------------- ---------
Revenue growth 35.7% 19.4% 32.6%
----------- ------------- ---------------- ---------
% contribution to Group
Revenue 75.9% 24.1%
----------- ------------- ---------------- ---------
EBITDA (US$m) 313.4 43.6 (33.5) 323.5
----------- ------------- ---------------- ---------
% contribution to Group
EBITDA 87.8% 12.2%
----------- ------------- ---------------- ---------
EBITDA Margin % 32.7% 14.3% 26.2%
----------- ------------- ---------------- ---------
Without IFRS 16 Impact
----------- ------------- ---------------- ---------
EBITDA (US$m) 271.6 41.4 (36.7) 276.3
----------- ------------- ---------------- ---------
EBITDA growth 19.8% 36.5% 22.5%
----------- ------------- ---------------- ---------
% contribution to Group
EBITDA 86.8% 13.2%
----------- ------------- ---------------- ---------
EBITDA Margin % 28.4% 13.6% 22.4%
----------- ------------- ---------------- ---------
EBITDA Margin YoY change -380 bps 170 bps -180 bps
----------- ------------- ---------------- ---------
Revenues
The top line performance of the Group came in line with
management's expectations NMC has continued confidence in achieving
the full-year guidance provided to the market.
Maintaining the trend seen in past years, the Healthcare
division continued to be the most significant driver of top line
growth in H1 2019, supported by improved utilization of existing
assets and the full six months impact of acquisitions completed
last year. That being said, the Distribution division's growth
considerably surpassed the "normalized growth" guidance of 8-9% per
annum. The sharp increase in H1 2019 was led by the signing of new
contracts, including one-off contracts across public and private
sectors.
-- The UAE posted 15.6% YoY revenue growth, demonstrating the
continued strength of NMC's home market.
-- KSA posted the highest growth on a country-by-country basis.
Revenues jumped 71.8% YoY as a number of assets, both existing and
newly acquired in 2018, recorded a rapid increase in
utilization.
The acquisition of Aspen last year has impacted the geographic
revenue split in particular, with UAE accounting for 79.9% of total
revenues in H1 2019, UK 7.5%, KSA 4.4% and other geographies
contributed 8.2%, respectively.
EBITDA
In line with guidance, EBITDA margin has compressed in H1 2019
due to two key factors:
-- Revenue contribution from Aspen Healthcare, which is
associated with lower margins and
-- Increased contribution from a number of assets that are in
early stages of ramp-up (particularly in KSA), and hence at or
below EBITDA breakeven at this stage.
The above being said, given clear evidence of rapidly improving
utilization at the Group's early stage assets during 2019,
management remains comfortable with the previously stated target of
achieving 25% Group EBITDA margin (excluding IFRS 16 impact) in the
next couple of years. Increasing contribution from assets such as
NMC Royal also forms a vital basis for the anticipated margin
improvement.
Analysing revenue and EBITDA growth
Given management's focus in 2019 on 1) improving utilization and
efficiencies of existing assets and 2) integration of previous
acquisitions, no new assets were acquired during H1 2019. That
being said, in order to demonstrate the strong growth profile of
NMC's legacy portfolio, highlighted below is revenue and EBITDA
growth for assets that existed as at the end of 2017. In other
words, all assets acquired during 2018 are excluded for this
exercise.
Revenue growth from assets that existed as at end of 2017 stood
at 13.1%, in line with the upper end of the guidance of 12-13% for
FY 2019.
-- H1 2019 revenues from assets that existed as at end of 2017
stood at US$1,029.6m (H1 2018: US$910.4m).
-- H1 2019 revenues from assets acquired during 2018 stood at
US$232.6m (H1 2018: US$50.5m).
EBITDA growth (excluding IFRS 16 impact) from assets that
existed as at end of 2017 stood at 15.3% YoY, compared to the
guidance of 15% YoY for FY 2019.
-- H1 2019 EBITDA (excluding IFRS 16 impact) from assets that
existed as at end of 2017 stood at US$286.8m (H1 2018:
US$248.8m).
H1 2019 EBITDA from assets acquired during 2018 stood at
US$26.2m (H1 2018: US$8.3m).
Management continues to have conviction in the growth
opportunity and profitability of assets added to the portfolio
since 2018, which continue to make good progress to adding to
overall Group growth potential, and cashflow at comparable
economics over the medium-term. Further detail on the status of
integration and synergy progress is included in these results.
Net income
Net income to equity holders stood at US$138.1m, while adjusted
net income to equity holders stood at US$137.5m (excluding US$0.6m
in gain from bargain purchase from acquisition last year).
Excluding the impact of IFRS 16, net income to equity holders
stood at US$151.0m, up 29.6% YoY. Furthermore, excluding the impact
of IFRS 16, adjusted net income to equity holders stood at
US$150.4m (adjusted for one-off gain of US$0.6m from bargain
purchase on the acquisition of Aspen last year).
On a pre-IFRS 16 basis, EBITDA-to-net income to equity holder's
conversion ratio stood at 55% vs. 52% for H1 2018. This increase
was supported by: 1) greater operational leverage, as existing
facilities continue to improve utilization, 2) six months' impact
of acquisitions completed last year and 3) reduction in financial
leverage. As utilization of existing assets continues to improve,
combined with extraction of synergies from acquired assets, this
trend of improvement in the conversion ratio is expected to
continue in the near to medium term.
Free cash flow conversion amongst the highest for H1
historically
Free Cash Flow for H1 2019 stood at US$77.8m (after US$63.4m
spent on growth capex) in H1 2019, compared cash outflow of
US$12.5m in H1 2018.
Note that, in line with the definition utilized in the FY 2018
results presentation, Free Cash Flow is calculated by adjusting
Profit Before Tax for non-cash income and expenses, working capital
movement and capital expenditure (growth and maintenance).
Alternatively, Free Cash Flow can also be calculated using the
following formula: Cash Flow from Operating activities adjusted for
1) net finance cost paid, 2) finance lease liabilities paid (IFRS
16 impact), 3) EOSB & tax and 4) capital expenditure (growth
and maintenance).
Adjusting for growth capex, Free Cash Flow in H1 2019 stood at
US$141.1m. This translates into EBITDA-to-Free Cash Flow conversion
of 51.1% (H1 2018: 2.1%, FY 2018: 50.9%), one of the highest for H1
in the history of the company.
Note that post-interest expense cash flows are utilized for the
purpose of calculation of EBITDA-to-Free Cash Flow conversion.
H1 2019 H1 2018 H1 2017
------------------------------------- -------- -------- --------
Free cash flow (A) 77.8 (12.5) 52.9
Growth capex 63.4 17.2 10.0
Free cash flow adjusted for growth
capex (B) 141.1 4.7 63.0
EBITDA (excluding IFRS 16 impact) 276.3 225.5 170.7
EBITDA-to-Free cash flow conversion
based on (B) 51.1% 2.1% 36.9%
A significant portion of NMC's operational beds remain in early
stages of ramp-up. Improved utilization of these beds, combined
with continued centralization of services, will further enhance
operational leverage which in turn should improve cash flow
conversion in the coming years.
In fact, H2 has historically witnessed improved Free Cash Flow
conversion compared to H1 in each year since 2012.
FY 2018 FY 2017
------------------------------------------- -------- --------
Free cash flow (A) 146.6 167.5
Growth capex 101.2 31.4
Free cash flow adjusted for growth capex
(B) 247.8 198.9
EBITDA (excluding IFRS 16 impact) 487.4 353.4
EBITDA-to-Free cash flow conversion based
on (B) 50.9% 56.3%
Other income
Other income of US$55.6m (H1 2018: US$41.1m) recorded in H1
2019, includes US$44.1 (H1 2018: 28.7m) reimbursement of costs
incurred by NMC on behalf of other parties, with corresponding
expenses reported in direct costs and general and administrative
expenses (see Note 8 to the Financial Statements for details).
Consequently, other income contributed US$11.5m (H1 2018: US$12.4m)
to EBITDA in H1 2019. This amount primarily associated with
incidental, one-off ancillary services for the Healthcare
division.
Other Income H1 2019 (US$m)
------------------------------------------------------- ---------------
Reimbursement of advertisement & promotional expenses
for distribution business 30.6
Reimbursement of expenses for O&M contracts 13.5
Other ancillary income 11.5
Total 55.6
IFRS 16 reconciliation
The tables below illustrate the changes introduced by IFRS 16
which impact both the income statement and the balance sheet.
Income statement impact
Pre-IFRS IFRS 16 As reported (post-IFRS
(US$m) 16 impact 16)
------------------------------ --------- -------- -----------------------
Revenues 1,236.0 - 1,236.0
EBITDA 276.3 47.2* 323.5
Financial expenses (67.6) - (67.6)
Finance cost relating to
Lease liabilities - (24.3) (24.3)
Depreciation & Amortization (59.4) - (59.4)
Depreciation (right of use
assets) - (36.0) (36.0)
Profit for the period 153.1 (13.1) 140.0
Net income to equity holders 151.0 (12.9) 138.1
------------------------------ --------- -------- -----------------------
*: rental expense removed from operating costs
The group recorded an opening lease liability of US$729.3m (see
note 2.2 to the Financial Statements for details) under IFRS 16. As
on 30th June 2019, the total closing lease liability is US$706.9m.
The Group's estimates of closing lease liability by December 2019
is in line with the guidance of US$690m.
Working capital improvement
Group working capital cycle improved to 90 days in H1 2019,
despite of reduction in payables days. The improvement in Group
working capital cycle was driven by reduction in receivables days
and inventory days in particular.
Group working capital H1 2019 FY 2018 H1 2018
------------------------------ -------- -------- --------
Trade receivables (US$m)* 616 563 555
Receivables days 89 99 107
Inventory (US$m) 215 247 209
Inventory days 56 74 68
Trade payables (US$m)* 225 248 193
Payables days 56 67 57
Working capital cycle (days) 90 106 118
*Includes related parties' trade and non-trade receivables and
payables
The reduction in receivable days in H1 2019 was driven by:
-- Improved Revenue Cycle (RCM) management.
-- Sharp focus on improving receivables collection in KSA.
-- Increased contribution from cash-based businesses, including
IVF, cosmetics and Aspen Healthcare.
Note that the Healthcare segment accounted for 76.1% (FY 2018:
77.1%) of receivables and 36.2% (FY 2018: 30.5%) of inventory in H1
2019.
Other Receivables
Other receivables stood at US$61.2m, compared to US$36.3m in FY
2018. The increase can largely be explained by the inclusion of
following items in H1 2019:
H1 2019
O & M related receivables* 9.0
--------
Accounting reclassification on closing of acquisition 9.5
--------
* Receivables from to non-related party O&M contracts (fees
as well as reimbursement of expenses) entered into late 2018
Related party transactions
In terms of regular operations, NMC is engaged with related
parties in three key forms of transactions: 1) purchase of generic
pharmaceuticals manufactured in Neopharma (owned by Dr. B.R.
Shetty),2) management fees received from Emirates Healthcare Group
for O&M services provided to them and 3) pharmaceutical sales
to medical facilities under O&M contracts. Note 25 to the
Financial Statements provides details of the transactions conducted
with these related parties during H1 2019.
Neopharma is one of a handful of UAE-based generic
pharmaceutical manufacturers. Purchases from Neopharma are done by
the NMC's Distribution business, with the majority of the inventory
meant for resale to other parties. In fact, less than 15% of
purchases from Neopharma are utilized by NMC's own healthcare
business. Furthermore, with both the regulator and insurers
increasingly favouring UAE-based generics, it is vital for the
Distribution division to be able to offer these products to
customers to ensure sustained growth of business. Note that all
purchases from Neopharma are subject to regulated prices fixed by
the Ministry of Health in the UAE.
In terms of management fees, NMC manages all healthcare assets
of the Emirates Healthcare Group under an O&M contract signed
in 2017. A total of US$5.4m (H1 2018: US$2.5m) in management fees
was earned in H1 2019 in relation to these contracts.
In terms of sales to facilities under O&M contracts, the
Distribution division supplied pharmaceutical products worth
US$9.1m during H1 2019. Such cross-sales represent a significant
growth opportunity beyond direct revenue generation from O&M
contracts.
A total of US$13.1m (FY 2018: US$7.3m) was also recognized on
the balance sheet under "Amounts due from related parties", which
includes trade receivables against O&M fees and pharmaceutical
sales, as well as reimbursable expenses under O&M contracts.
Moreover, payables worth US$24.5m (FY 2018: US47.7m) are mostly due
against purchase from Neopharma.
Details of financial expenses
Financial charges of US$44.3m reported for borrowings in H1 2019
includes US$3.1m in bank charges and US$4.3m in non-cash,
accounting expenses.
(US$m) H1 2019 H1 2018
---------------------------------------------- -------- --------
Bank interest 36.9 44.8
Bank charges 3,1 2.6
Financial instruments fair value adjustments 0.7 3.6
Amortization and re-measurement of option
redemption liability 3.6 0.6
Finance cost (Borrowings) 44.3 51.6
Convertible bond and sukuk
Total financial charges of US$23.3m for convertible bond and
sukuk in H1 2019 include US$6.6m non-cash, notional interest on the
convertible bond.
(US$m) H1 2019 H1 2018
----------------------------------------- -------- --------
Coupon payment on convertible bond 4.2 -
Notional interest on convertible bond 6.6 3.2
Interest on sukuk 12.5 -
Finance cost (Convertible bond & sukuk) 23.3 3.2
Capital expenditure
NMC continues to pursue a well-defined and disciplined capital
expenditure program that reinforces its position as the leading
healthcare operator in the GCC. While maintenance capex is helping
upgrade the quality and mix of services at existing facilities,
growth capex is allowing the Group to capitalize on opportunistic
growth initiatives in its home country UAE, as well as other target
markets.
H1 2019 witnessed total capital expenditure of US$96.5m, with
US$63.4m spent on growth capex and US$33.1m on maintenance capex.
This capex, along with that incurred in 2018, is aimed at expansion
plans that are expected to increase NMC's current capacity of 2,207
beds (excluding beds in CARE) by up to 560 beds (up to 385 in UAE
and up to175 in Oman).
UAE was the largest recipient of growth capex, accounting for
87.2% (US$55.3m) of the total for the first half of the year. Oman
ranked as the second largest recipient of growth capex, accounting
for 6.6% of the total, where two new hospitals are being
constructed among other facilities. Furthermore, US$3.9m (6.2%) was
incurred on IVF clinics across Europe to further increase the
Group's fertility clinic network.
Within the UAE, NMC continued to spend on the buildout of a
number of hospitals and clinics. Notably, a new building was
purchased in Sharjah to establish a new hospital (up to 75 beds)
focused on the mid-income segment market.
The Group also continues to expand the network of CosmeSurge
clinics, both within the UAE and the wider GCC.
In terms of expectations for capital expenditure for the full
year, management remains comfortable with the guidance previously
provided of 3% of revenues as maintenance and US$100m in growth
expenditure, bringing the total to c. US$175m.
Summary of growth capex by region (H1 2019)
Region Beds capacity addition Capex incurred (US$m)
UAE Up to 385 Beds & clinics 55.3
-------------------- -------------------------- ----------------------
Oman up to 175 beds 4.2
-------------------- -------------------------- ----------------------
IVF clinics across
Europe Clinics 3.9
==================== ========================== ======================
ACQUISITIONS & INVESTMENTS
Following an active year in terms of M&A in 2018, management
has been focusing on integration and extraction of synergies during
the current year. Excluding the acquisition of CARE shares, there
has been no significant investment activity during H1 2019 (US$65m
spent on acquisition of shares in Tadawul listed National Medical
Care Company and US$2.4m paid in transaction costs related to the
overall transaction). A summary of investments made during H1 2019
is as follows:
Detail US$m
Consideration Paid for 10.32% CARE shares 65.0
-----
Transaction cost relating to overall GOSI transaction 2.4
-----
Total amount paid for strategic partnership with GOSI 67.4
-----
Purchase of minorities in KSA-based subsidiaries 7.4
-----
Deferred/Contingent consideration paid for previous
acquisitions 2.8
-----
Total 77.6
-----
Recognizing the inherent value of its assets in KSA, NMC has
been increasing its stake in previously acquired hospitals through
the purchase of outstanding minorities. The table below highlights
the current ownership of the assets by NMC KSA, compared to last
year (note that the US$7.4m spent during H1 2019 to increase NMC's
stake in Al Qadi and Al Salam hospital which was incurred prior to
the finalization of the partnership with GOSI).
Hospital Name NMC KSA* Ownership %
As on June As on June
2019 2018
As Salama Hospital, Al Khobar 99% 99%
NMC Specialty Hospital, Al Salam,
Riyadh 95% 80%
Chronic Care Specialty Medical
Centre, Jeddah 100% 100%
New Medical Center Hospital,
Hail 100% 100%
Al Qadi Specialty Hospital, Najran 80% 60%
*: Following its partnership with GOSI, NMC owns 53% of NMC
KSA
Goodwill
Goodwill stood at US$1.4b (2018: US$1.4b) in H1 2019,
translating into 28.9% (2018: 37.2%) of the total asset base.
Management remains very comfortable with the performance of the
underlying assets that have resulted in this Goodwill. Having
maintained the same Goodwill testing policy since IPO, the Group
allocates each acquired asset to an operating segment, based on the
business division (Healthcare or Distribution). Given that NMC is
an integrated business, cash generating units are aggregated to
operating segment level. It is the view of management that goodwill
resulting from the acquisitions will generate economic benefits
only when combined with other assets (i.e. assets within the
healthcare or distribution segments), therefore the impairment test
applied at operating segment remains appropriate. Strong
operational performance across both the Healthcare and Distribution
divisions, translating into heathy cash flow generation for both
CGUs, supports the Goodwill recognized on the balance sheet.
OUTLOOK
Remain comfortable with FY 2019 guidance
Given the strong performance in H1 2019, management re-iterates
the guidance provided earlier for FY 2019:
o Post IFRS 16 guidance:
2019 revenues: US$2,500-2,540m
2019 EBITDA: US$665-675m
2019 net income to equity holders: US$297-305m
2019 lease liability: US$680-690m
o Pre-IFRS 16 guidance:
2019 revenues: US$2,500-2,540m
2019 EBITDA: US$575-585m
2019 net income to equity holders: US$320-330m
Governance
Enhancing governance: independent oversight of related party
transactions
Alongside the Group's sustained growth and integration
initiatives, the Board and management also continue to focus on
enhancing governance and ESG. These initiatives, including
increasing financial disclosure and enhancing risk management
processes, underline the Group's drive to ensure that its position
as a responsible business is maintained and continually
enhanced.
As part of this continuing program the Board of NMC has
appointed a Related Party Transactions Committee. The vast majority
of related party transactions entered into by Group companies are
regulated under government control and set pricing. The Group also
has robust internal controls in relation to the identification,
recording and disclosure of RPTs. To further enhance governance,
given the increasing volume of such transactions driven by our
sustained business growth, the Board has decided to follow the
approach taken by other relevant FTSE 100 listed companies, and to
have a Committee providing independent oversight over related party
transactions across the Group.
The Independent Board Committee's principal role will be:
-- Reviewing, with the assistance of independent advisers, RPT
contracts and oversee the framework operated by the Group in
relation to any RPTs which the Group has or will enter into;
-- Reporting to the Board on internal processes ensuring RPT's
are entered into on normal commercial terms and on the availability
and appropriateness of alternative suppliers for contracts entered
into with related parties.
The work of the Committee will be summarised in the Company's
Annual Report each year. The terms of reference for the Committee
are published on the Company's corporate website.
Going concern
The directors are satisfied that the Group has sufficient
resources to continue in operation for the foreseeable future, a
period of not less than 12 months from the date of this report.
Accordingly, the directors continue to adopt the going concern
basis in preparing the condensed financial statements.
Statement of directors' responsibilities
The Interim report is the responsibility of, and has been
approved by, the directors. The directors are responsible for
preparing the Interim Report in accordance with the Disclosure and
Transparency Rules of the United Kingdom's Financial Conduct
Authority. The Disclosure and Transparency Rules ("DTR") require
that the accounting policies and presentation applied to the
half-yearly figures must be consistent with those applied in the
latest published annual accounts, except where the accounting
policies and presentation are to be changed in the subsequent
annual accounts, in which case the new accounting policies and
presentation should be followed, and the changes and the reasons
for the changes should be disclosed in the Interim Report, unless
the United Kingdom Financial Conduct Authority agrees
otherwise.
The directors confirm that this condensed set of financial
statements has been prepared in accordance with International
Accounting Standard 34, 'Interim Financial Reporting' as adopted by
the European Union, and that to the best of their knowledge, the
Business and Finance Reviews contained herein includes a fair
review of:
-- The important events that have occurred during the first six
months of the financial year and their impact on the condensed set
of financial statements as required by DTR 4.2.7R;
-- The principal risks and uncertainties for the remaining six
months of the year as required by DTR 4.2.7R; and
-- Related party transactions that have taken place in the first
six months of the current financial year that have materially
affected the financial position or performance of the Group during
the first six months of the current financial year as required by
DTR 4.2.8R.
For and on behalf of the Board of Directors:
Prashanth Shenoy
Chief Financial Officer
21 August 2019
Principal risks and mitigations
Risk Class Description and Potential Impact Controls and Mitigations
Investment
-- Board oversight in approving and monitoring
Bad decisions and/or delays in relation strategic projects
to either acquisition or organic growth -- Project management controls
investments -- Detailed market and business appraisal and
or an inability to appropriately comprehensive due diligence processes
execute integration or new facility -- Focus on integration pathway to improve
ramp-up plans may result Group revenue generation from intra-group
in: business
-- Lower Return on Investment (ROI); referrals and multi-brand sharing of facilities
-- Lower revenue than expected; and centralized services
-- Decreased margins and market share; -- Strategy to acquire international know-how
-- Potential for impairment of assets; through acquisition plan
-- Potential difficulty in raising -- Re-alignment of existing assets within the
future finance. Group's hub and spoke model (e.g. existing
specialty
hospitals feeding the regional NMC Royal
Hospital, Khalifa City)
----------------------------------------- -------------------------------------------------
Competition
Increased competition due to high -- Integrated Hub-Spoke model
private and public investments in the -- Growing healthcare network
UAE healthcare sector -- Partnership with Government hospitals
and associated investments coming from -- The development of international
new entrants or existing player partnerships and use of increased know-how
partnerships would gained through
lead to market share loss and potential strategic growth plan
reduction in access to future growth in -- Diversification of patient base
UAE healthcare -- Variety in service offerings
spend.
----------------------------------------- -------------------------------------------------
Financial
Failure to focus on, and invest in, -- Frequent monitoring of both fixed and
innovation and technological advances variable cost
and effectively -- Synergy tracking and reporting
deliver new services or enhance patient -- Acquiring the skills associated with the M&A
experience. Inexperience of operating transactions
in new markets/offerings -- Continuous development of both front and
leads to missed opportunity or poor back end IT related processes to enhance
service delivery patient
experience
-- Strategy to target investment in innovation
and future healthcare services development
----------------------------------------- -------------------------------------------------
Financial
Potential adverse effect NMC's revenue -- Diversification of the revenue streams
and profitability as a result of -- Increased collaboration between different
unexpected regulatory group assets and businesses
or cultural changes affecting the -- Frequent monitoring of both fixed and
provision of healthcare, the basis of variable cost
the healthcare insurance -- Good relationships with insurance providers
structure or increases in medical -- Strategy to increase patient volumes and
inflation and pricing pressure and focus on clinical specialisms
bargaining from key insurance -- Proactive approach relationships and
providers in the Group's key markets, dialogue with the Group's regulators
would result in reduced profitability -- M&A Strategy in new markets
----------------------------------------- -------------------------------------------------
Macro-economic Potential instability in revenue
impairing cash flow, working capital
health and greater exposure -- UAE is a stable and booming market to
to credit risk as a result of global and operate in
regional demographic, macro-economic and -- Diverse business and revenue streams
geopolitical -- Long Term debt facilities and unutilized
factors. working capital limits
* Strong banking and supplier relationships
Uncertainty in the global financial
markets may result in exposure to
interest rate risk which
would impact profitability of the Group
----------------------------------------- -------------------------------------------------
Financial
Failure to maximize the opportunity of
acquisitions though successful -- Implementation of a cluster structure to
integration strategies ensure that synergies are attained while
or through ineffective management maintaining
structure or operating model may appropriate autonomy at the facility level
results in: -- Full due diligence
-- Increased market and regulatory/ -- Development of standardised policies across
legal obligations; the Group and centralized support functions
-- Increased culture resistance and -- Post-acquisition integration plan
complexity in shifting the governance -- Rigorous analysis of value of the
model from enterprise acquisition
to corporate structure; -- Focus on the corporate cultures involved
-- Increased operational exposure due -- Executive committee reporting and targets
to the complexity of integrating higher -- Synergy tracking and reporting
number of spokes -- Acquiring the skills associated with the M&A
to centralized hub of excellence; transactions
-- Increased investment risk due to
weak due diligence and other mitigates.
----------------------------------------- -------------------------------------------------
Technology
Failure to develop integrated IT -- ISO 27001 certified framework for IT
systems may result in an inability to policies and controls.
manage group information, -- Strict measures towards clients' data and
accounting errors and operational records
disruption -- Some of the Group's businesses are still
progressing through an integration phase,
however
A Data Security (e.g. VIP patient manual processes, supported by legacy IT
records) breach due to either systems, continues to provide a robust level of
intentional malicious cyber-attack control.
or unintentional data or system loss
resulting in reputational damage,
operational disruption
or regulatory breach.
----------------------------------------- -------------------------------------------------
Compliance & Regulation
-- Quality & Standards Department monitors
Failure to comply with multi regulatory regulatory changes
and standards bodies' requirements -- Partnership with government
could result in -- Good relationships with regulators and
financial fines, inability to renew accrediting organizations
licenses, as well as NMC reputation -- Continuous focus on delivering high levels
damage. of service
----------------------------------------- -------------------------------------------------
Product & Service
-- Regular clinical audits completed by Quality
team
Failure to comply with internationally -- Doctors subject to rigorous licensing
recognized clinical care and quality procedures which operate in the UAE
standards, clinical -- Healthcare division is a regulated business
negligence, the misdiagnosis of medical and five of the Group's principal hospitals
conditions or pharmaceuticals and the have achieved, or are in the process of
supply of unfit achieving, international quality standards
products across both divisions could accreditation
result in regulatory sanction, licence -- Many aspects of the operation of the
removal, significant Distribution division, including the sale of
reputational damage, loss of patient pharmaceuticals,
and customer confidence and potential is regulated in the UAE
criminal proceedings. -- Board oversight and integrated governance
structure
-- Medical malpractice insurance to cover any
awards of financial damages
-- Continuous training and development programs
----------------------------------------- -------------------------------------------------
Human Capital
-- Partnership with education institutes
-- Effective sourcing strategies & recruitment
campaigns
Failure to retain/acquire key -- Ongoing review of senior management
professionals or inability to acquire resources and succession plans in place for key
sufficient Medical staff positions
could potentially lead to inability to -- Competitive salary packages, growth and good
deliver required healthcare services working conditions act as a good retention
and execute growth tool
strategy. -- Clear career path for staff and continuous
training and development programs
----------------------------------------- -------------------------------------------------
Product and service
-- Continuous development of our service
Disruption to the global distribution offering and communication with key suppliers
model may lead to significant changes -- Investment in IT and logistics network to
to the distribution ensure a compelling proposition is provided by
arrangements with "marquee" suppliers NMC to key suppliers.
which would then impact revenue and
profitability of
the trading division.
----------------------------------------- -------------------------------------------------
NMC Health plc
CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
30 June 2019
Independent review report to NMC Health plc
Introduction
We have been engaged by the Company to review the condensed set
of consolidated financial statements in the half-yearly financial
report for the six months ended 30 June 2019 which comprises the
condensed consolidated income statement, the condensed consolidated
statement of other comprehensive income, the condensed consolidated
statement of financial position, the condensed consolidated
statement of changes in equity, the condensed consolidated
statement of cash flows and related notes 1 to 28. We have read the
other information contained in the half yearly financial report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
This report is made solely to the company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK and Ireland) "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the
Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
company, for our work, for this report, or for the conclusions we
have formed.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
As disclosed in note 2, the annual consolidated financial
statements of the group are prepared in accordance with IFRSs as
adopted by the European Union. The condensed set of financial
statements included in this half-yearly financial report has been
prepared in accordance with International Accounting Standard 34,
"Interim Financial Reporting", as adopted by the European
Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of Review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of consolidated
financial statements in the half-yearly financial report for the
six months ended 30 June 2019 is not prepared, in all material
respects, in accordance with International Accounting Standard 34
as adopted by the European Union and the Disclosure and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
Ernst & Young LLP
London
Date: 21 August 2019
1. The maintenance and integrity of the NMC Health plc web site
is the responsibility of the directors; the work carried out by the
auditors does not involve consideration of these matters and,
accordingly, the auditors accept no responsibility for any changes
that may have occurred to the financial information since it was
initially presented on the web site.
2. Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
CONDENSED CONSOLIDATED INCOME STATEMENT
For the six months ended 30 June 2019
Unaudited
--------------------------------------------------
Period Ended Period ended
30 June 30 June
2019 2018
Notes US$ '000 US$ '000
Revenue 7 1,236,007 931,970
Direct costs (692,427) (555,494)
----------------------- -----------------------
GROSS PROFIT 543,580 376,476
General and administrative expenses (275,693) (191,997)
Other income 8 55,633 41,067
---------------------- ----------------------
PROFIT FROM OPERATIONS BEFORE DEPRECIATION,
AMORTISATION, TRANSACTION COSTS
AND IMPAIRMENT 323,520 225,546
Transaction costs in respect of
business combinations - (2,078)
Transaction costs in respect of
convertible bond - (174)
Depreciation
Property and equipment 11 (48,693) (36,695)
Right of use assets 12 (35,998) -
Amortisation 13 (10,684) (6,713)
Impairment of assets - (106)
----------------------- -----------------------
PROFIT FROM OPERATIONS 228,145 179,780
Finance costs
Borrowings (44,275) (48,365)
Convertible bond and sukuk 22 (23,305) (3,189)
Lease liabilities 23 (24,278) -
Finance income 3,593 3,616
Share of net profit of an associate 15 107 -
Adjustment to gain from bargain
purchase on prior
year acquisition 6 607 -
Unamortised finance fees written
off 21 - (13,124)
----------------------- -----------------------
PROFIT FOR THE PEROD BEFORE TAX 140,594 118,718
Tax 9 (514) (2,026)
----------------------- -----------------------
PROFIT FOR THE PERIOD 140,080 116,692
========== ==========
Profit for the period attributable
to:
Equity holders of the Parent 138,123 116,494
Non-controlling interests 1,957 198
----------------------- -----------------------
PROFIT FOR THE PERIOD 140,080 116,692
========== ==========
Earnings per share for profit attributable
to the
equity holders of the Parent:
Basic EPS (US$) 10 0.662 0.561
Diluted EPS (US$) 10 0.659 0.557
CONDENSED CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE
INCOME
For the six months ended 30 June 2019
Unaudited
--------------------------------------------------
Period Ended Period ended
30 June 30 June
2019 2018
US$ '000 US$ '000
Profit for the period 140,080 116,692
Other comprehensive income (loss)
Other comprehensive loss to be
reclassified to income statement
in subsequent periods (net of tax)
Exchange differences on translation
of foreign operations (1,826) (5,790)
Other comprehensive income not
to be reclassified to income statement
in subsequent periods (net of tax)
Re-measurement gains on defined 748 -
benefit plans
----------------------- -----------------------
Other comprehensive loss for the
period (net of tax) (1,078) (5,790)
----------------------- -----------------------
TOTAL COMPREHENSIVE INCOME FOR
THE PERIOD 139,002 110,902
========== ==========
Total comprehensive income attributable
to :
Equity holders of the Parent 137,252 111,376
Non-controlling interests 1,750 (474)
----------------------- -----------------------
Total comprehensive income 139,002 110,902
========== ==========
These results relate to continuing operations of the Group.
There are no discontinued operations in the current and prior
period.
The attached notes 1 to 28 form part of the condensed
consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2019
Unaudited Audited
30 June 31 December
2019 2018
Notes US$'000 US$'000
ASSETS
Non-current assets
Property and equipment 11 869,590 829,900
Right of use assets 12 661,864 -
Intangible assets 13 1,609,514 1,618,450
Investment in an associate 15 318,567 -
Deferred tax assets 6,583 5,794
Advances paid for acquisitions 6 - 18,301
Other non-current assets 4,354 8,478
------------------------- -----------------------
3,470,472 2,480,923
------------------------- -----------------------
Current assets
Inventories 16 214,859 247,306
Accounts receivable and prepayments 17 704,712 639,124
Loan receivable 14 2,501 2,001
Amounts due from related parties 25 13,102 7,346
Income tax receivable 1,463 4,532
Bank deposits 18 67,032 167,156
Bank balances and cash 18 507,116 324,027
------------------------ --------------------
1,510,785 1,391,492
------------------------ -----------------------
TOTAL ASSETS 4,981,257 3,872,415
========== ==========
EQUITY AND LIABILITIES
Equity
Share capital 19 32,513 32,443
Share premium 19 640,946 633,744
Group restructuring reserve (10,001) (10,001)
Foreign currency translation reserve (4,626) (3,007)
Option redemption reserves (40,372) (40,372)
Convertible bond equity component 22 64,960 64,960
Retained earnings 20 711,537 626,015
----------------------- -----------------------
Equity attributable to equity holders
of the Parent 1,394,957 1,303,782
Non-controlling interests 294,016 52,981
------------------------- -----------------------
Total equity 1,688,973 1,356,763
------------------------- -----------------------
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
continued
As at 30 June 2019
Unaudited Audited
30 June 31 December
2019 2018
Notes US$'000 US$'000
Non-current liabilities
Term loans 21 863,065 660,835
Convertible bond and Sukuk 22 790,193 783,009
Post-employment benefit plans 55,674 55,137
Other payables 4,850 15,689
Option redemption payable 8,010 20,179
Lease liabilities 23 665,186 2,995
Deferred tax liabilities 17,562 17,745
------------------------- -----------------------
2,404,540 1,555,589
------------------------- -----------------------
Current liabilities
Accounts payable and accruals 267,426 317,587
Other payables 11,337 6,806
Option redemption payable 41,116 26,019
Amounts due to related parties 25 24,518 47,737
Bank overdrafts and other short
term borrowings 190,351 168,950
Term loans 21 251,596 379,919
Post-employment benefit plans 8,529 6,549
Income tax payable 2,860 4,812
Lease liabilities 23 41,680 1,684
Dividend payable 24 48,331 -
----------------------- -----------------------
887,744 960,063
------------------------ -----------------------
Total liabilities 3,292,284 2,515,652
------------------------- -----------------------
TOTAL EQUITY AND LIABILITIES 4,981,257 3,872,415
========== ==========
The condensed consolidated financial statements were authorised
for issue by the board of directors on 21 August 2019 and were
signed on its behalf by
Prasanth Manghat Prashanth Shenoy
Chief Executive Officer Chief Financial Officer
The attached notes 1 to 28 form part of the condensed
consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
For the six months ended 30 June
2019
Attributable to the equity holders of the Parent
Foreign Equity
currency Option component
Share Share Group restructuring Retained translation redemption of convertible Non- controlling
capital premium reserve earnings reserve reserves bonds Total interest Total
US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000
Balance as at 1 January
2019 (audited) 32,443 633,744 (10,001) 626,015 (3,007) (40,372) 64,960 1,303,782 52,981 1,356,763
Profit for the period - - - 138,123 - - - 138,123 1,957 140,080
Other comprehensive income
(loss) - - - 748 (1,619) - - (871) (207) (1,078)
----------------------- --------------------- ----------------------- --------------------- ----------------------- ----------------------- ----------------------- --------------------- ----------------------- -----------------------
Total comprehensive income
(loss) for the period - - - 138,871 (1,619) - - 137,252 1,750 139,002
Dividend (Note 24) - - - (47,563) - - - (47,563) (2,432) (49,995)
Share exercise for stock
option (Note 19) 70 7,202 - (7,272) - - - - - -
Contribution by non-
controlling
interest - - - - - - - - 534 534
Acquisition of non-controlling
interest (Note 5) - - - (15,416) - - - (15,416) 858 (14,558)
Investment in an associate
(Note 15) - - - 10,523 - - - 10,523 240,529 251,052
Adjustment to prior year
business
combinations (Note 6) - - - - - - - - (204) (204)
Share based payments - - - 6,379 - - - 6,379 - 6,379
----------------------- --------------------- ----------------------- --------------------------- ------------------------ ----------------------- ----------------------- --------------------------- ------------------------- ---------------------
Balance as at 30 June
2019 (unaudited) 32,513 640,946 (10,001) 711,537 (4,626) (40,372) 64,960 1,394,957 294,016 1,688,973
========== ======== ========== ========== ========= ========== ========== ========== ========= =========
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2019
Attributable to the equity holders of the Parent
Foreign Equity
Group currency Option component
Share Share restructuring Retained translation redemption of convertible Non- controlling
capital premium reserve earnings reserve reserves bonds Total interest Total
US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000
Balance as at 1
January
2018 (audited) 31,928 492,634 (10,001) 603,240 5,398 (33,483) - 1,089,716 54,910 1,144,626
IFRS 9 credit
risk adjustment - - - (10,695) - - - (10,695) - (10,695)
----------------------- ----------------------- ----------------------- ----------------------- ----------------------- ----------------------- ----------------------- ----------------------- ----------------------- -----------------------
Balance as at 1
January
2018 (audited) 31,928 492,634 (10,001) 592,545 5,398 (33,483) - 1,079,021 54,910 1,133,931
Profit for the
period - - - 116,494 - - - 116,494 198 116,692
Other
comprehensive
loss - - - - (5,118) - - (5,118) (672) (5,790)
----------------------- --------------------- ----------------------- --------------------- ----------------------- ----------------------- ----------------------- --------------------- ----------------------- -----------------------
Total
comprehensive
income
(loss) for the
period - - - 116,494 (5,118) - - 111,376 (474) 110,902
Dividend (Note
24) (35,739) (35,739) (1,700) (37,439)
Issuance of share
capital-new 477 138,714 - - - - - 139,191 - 139,191
Share exercise
for stock
option 35 2,140 - (2,175) - - - - - -
Equity component
convertible
bond (Note 22) - - - - - - 66,034 66,034 - 66,034
Option redemption
reserve - - - - - (6,890) - (6,890) - (6,890)
Acquisition of
non-controlling
interest (Note
5) - - - (184,406) - - - (184,406) (40,926) (225,332)
Acquisition of
subsidiaries - - - - - - - - 26,591 26,591
Adjustment to - -
prior year
business
combinations - - - - - - - - (1,606) (1,606)
Adjustment for
current
period 566 566 1,886 2,452
Share based
payments - - - 4,791 - - - 4,791 - 4,791
Transaction cost
on issuance
of convertible
bond (Note
22) - - - - - - (1,074) (1,074) - (1,074)
----------------------- --------------------- ----------------------- -------------------------- ------------------------ ----------------------- ----------------------- --------------------------- ------------------------- ---------------------
Balance as at 30
June
2018 (unaudited) 32,440 633,488 (10,001) 492,076 280 (40,373) 64,960 1,172,870 38,681 1,211,551
========== ======== ========== ========== ========= ========== ========== ========== ========= =========
The attached notes 1 to 28 form part of the condensed
consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months ended 30 June 2019
Unaudited
------------------------------------------------------
Period Ended Period ended
30 June 30 June
2019 2018
Notes US$ '000 US$ '000
OPERATING ACTIVITIES
Profit for the period before tax 140,594 118,718
Adjustments for:
Employees' end of service benefits 7,617 5,850
Depreciation of property and equipment 11 48,693 36,695
Depreciation of right of use assets 12 35,998 -
Amortisation of Intangible assets 13 10,684 6,713
Finance income (3,593) (3,616)
Finance costs 91,858 51,554
Loss on disposal of property and
equipment 80 1
Foreign exchange (gain) loss (1) 347
Unamortised finance fees written
off - 13,124
Impairment of assets - 106
Transaction cost in respect of
bond - 174
Share based payments expense 6,379 4,791
Share of net profit of an associate 15 (107) -
------------------------- -------------------------
338,202 234,457
Working capital changes:
Inventories 32,491 (19,935)
Accounts receivable and prepayments (61,603) (95,374)
Amounts due from related parties (5,756) (4,977)
Accounts payable and accruals (5,193) (27,729)
Amounts due to related parties (23,293) (3,425)
------------------------- -------------------------
Net cash from operations 274,848 83,017
Employees' end of service benefits
paid (4,353) (3,815)
Income tax (paid) / receipt (1,084) 370
------------------------- -------------------------
Net cash from operating activities 269,411 79,572
------------------------- -------------------------
INVESTING ACTIVITIES
Purchase of property and equipment 11 (94,735) (55,725)
Purchase of intangible assets 13 (1,786) (690)
Proceeds from disposal of property
and equipment 126 160
Acquisition of subsidiaries, net
of cash acquired 6 (396) (359,605)
Investment in an associate 15 (67,408) -
Purchase consideration paid in
advance - (69,055)
Asset held for sale - (1,312)
Bank deposits maturing in over
3 months 107,471 41,055
Restricted cash 6,787 (32,122)
Finance income received 1,707 1,995
Loan receivables 14 (500) (8,725)
Other non-current assets (2,202) (404)
Contingent consideration paid for
acquisition 28 (2,124) (2,422)
------------------------- -------------------------
Net cash used in investing activities (53,060) (486,850)
------------------------- -------------------------
Unaudited
------------------------------------------------------
Period Ended Period ended
30 June 30 June
2019 2018
Notes US$ '000 US$ '000
FINANCING ACTIVITIES
New term loans and draw-downs 21 375,814 898,783
Repayments of term loans 21 (302,414) (716,280)
Transaction cost of term loan (2,395) (21,228)
Receipts of short term borrowings 80,987 140,879
Repayment of short term borrowings (113,783) (141,532)
Payment of lease liabilities 23 (49,142) -
Convertible bond 22 - 450,000
Transaction cost of convertible
bond 22 - (7,316)
Acquisition of non-controlling
interest 5 (7,432) (82,497)
Deferred consideration paid for
acquisition (705) (3,600)
Dividend paid to non- controlling
interest (1,664) (3,034)
Other payable 534 (2,764)
Finance costs paid (53,123) (41,126)
------------------------- -------------------------
Net cash (used in) from financing
activities (73,323) 470,285
------------------------- -------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 143,028 63,007
Cash and cash equivalents at 1
January 308,076 206,462
------------------------- -------------------------
CASH AND CASH EQUIVALENTS AT 30
JUNE 18 451,104 269,469
========== ==========
The attached notes 1 to 28 form part of the condensed
consolidated financial statements.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
At 30 June 2019
1 CORPORATE INFORMATION
NMC Health plc (the "Company" or "Parent") is a company which
was incorporated in England and Wales on 20 July 2011. The Company
is a public limited liability company operating in the Middle East,
Europe, United Kingdom, Africa, South America, North America and
South Asia. The Group is primarily based in United Arab Emirates
("UAE"). The address of the registered office of the Company is
Level 1, Devonshire House, One Mayfair Place, London, W1J 8AJ. The
registered number of the Company is 7712220. The Company's
immediate and ultimate controlling party is a group of three
individuals (H.E. Saeed Mohamed Butti Mohamed Al Qebaisi (H.E.
Saeed Bin Butti), Dr BR Shetty and Mr Khalifa Butti Omair Yousif
Ahmad Al Muhairi (Mr. Khalifa Bin Butti) who are all shareholders
and of whom two are directors of the Company and who together have
the ability to control the Company.
The Parent and its subsidiaries (collectively the "Group") are
engaged in providing professional medical services, home care
services, long term care services and the provision of all types of
research and medical services in the field of gynaecology,
obstetrics and human reproduction, and the rendering of business
management services to companies in the health care and hospital
sector. The Group is also engaged in wholesale of pharmaceutical
goods, medical equipment, cosmetics and food.
The condensed consolidated financial statements of the Group for
the six months ended 30 June 2019 were authorised for issue by the
Board of Directors on 21 August 2019.
The condensed consolidated financial statements do not comprise
statutory accounts within the meaning of Section 434 of the
Companies Act 2006.
Statutory financial statements for the year ended 31 December
2018 were published and were delivered to Companies House. Those
financial statements were approved by the Board of Directors on 6
March 2019. The report of the auditor on those accounts was
unqualified, did not contain an emphasis of matter paragraph and
did not contain any statement under Section 498 of the Companies
Act 2006.
The condensed consolidated financial statements have been
reviewed, not audited.
2 BASIS OF PREPARATION AND CHANGES TO GROUP'S ACCOUNTING POLICIES
2.1 Basis of preparation
The condensed consolidated financial statements for the six
months ended 30 June 2019 have been prepared in accordance with the
Disclosure and Transparency Rules of the United Kingdom's Financial
Conduct Authority and with IAS 34, 'Interim financial reporting' as
adopted by the European Union.
The condensed consolidated financial statements do not include
all the information and disclosures required in the annual
financial statements and should be read together with the
consolidated financial statements of NMC Health plc as of 31
December 2018 which were prepared in accordance with IFRS (as
adopted in the European Union).
The condensed consolidated financial statements are prepared
under the historical cost convention, except for derivative
financial instruments which have been measured at fair value.
2.2 Changes to Group's Accounting policies
The principal accounting policies adopted in the preparation of
these condensed consolidated financial statements are consistent
with those followed in the preparation of the Group's annual
consolidated financial statements for the year ended 31 December
2018, except for the adoption of new standards effective as of 1
January 2019 as described below and the adoption of accounting
policies arising as result of acquisitions completed in 2019:
New and amended standards and interpretations:
The Group applied, for the first-time, IFRS 16 leases, which is
effective for annual periods beginning on or after 1 January 2019.
As required by IAS 34, the nature and effect of those changes are
described below. The Group has not early adopted any standards,
interpretations or amendments that have been issued but are not yet
effective.
IFRS 16 Leases
IFRS 16 supersedes IAS 17 Leases, IFRIC 4 Determining whether an
Arrangement contains a Lease, SIC-15 Operating Leases-Incentives
and SIC-27 Evaluating the Substance of Transactions Involving the
Legal Form of a Lease. The standard sets out the principles for the
recognition, measurement, presentation and disclosure of leases and
requires lessees to account for most leases under a single
on-balance sheet model.
The Group adopted IFRS 16 using the modified retrospective
method of adoption with the date of initial application of 1
January 2019. Under this method, the comparative information has
not been restated and continues to be reported under IAS 17 and
IFRIC 4. The Group elected to use the transition practical
expedient allowing the standard to be applied only to contracts
that were previously identified as leases applying IAS 17 and IFRIC
4 at the date of initial application. The Group also elected to use
the recognition exemptions for lease contracts that, at the
commencement date, have a lease term of 12 months or less and do
not contain a purchase option ('short-term leases'), and lease
contracts for which the underlying asset is of low value
('low-value assets').
Nature of the effect of the adoption of IFRS 16
The Group has lease contracts for various items of land,
hospital buildings, clinic buildings, staff accommodation and
office buildings among others. Before the adoption of IFRS 16, the
Group classified each of its leases (as lessee) at the inception
date as either a finance lease or an operating lease. A lease was
classified as a finance lease if it transferred substantially all
of the risks and rewards incidental to ownership of the leased
asset to the Group; otherwise it was classified as an operating
lease. Finance leases were capitalised at the commencement of the
lease at the inception date fair value of the leased property or,
if lower, at the present value of the minimum lease payments. Lease
payments were apportioned between interest (recognised as finance
costs) and reduction of the lease liability. In an operating lease,
the leased property was not capitalised and the lease payments were
recognised as rent expense in profit or loss on a straight-line
basis over the lease term. Any prepaid rent and accrued rent were
recognised under Prepayments and Trade
and other payables, respectively.
Upon adoption of IFRS 16, the Group applied a single recognition
and measurement approach for all leases, except for short-term
leases and leases of low-value assets. The standard provides
specific transition requirements and practical expedients, which
has been applied by the Group.
Leases previously classified as finance leases
The Group did not change the initial carrying amounts of
recognised assets and liabilities at the date of initial
application for leases previously classified as finance leases
(i.e., the right-of-use assets and lease liabilities equal the
lease assets and liabilities recognised under IAS 17). The
requirements of IFRS 16 was applied to these leases from 1 January
2019.
Leases previously accounted for as operating leases
The Group recognised right-of-use assets and lease liabilities
for those leases previously classified as operating leases, except
for short-term leases and leases of low-value assets. The
right-of-use assets for most leases were recognised based on the
amount equal to the lease liabilities, adjusted for any related
prepaid and accrued lease payments previously recognised. Lease
liabilities were recognised based on the present value of the
remaining lease payments, discounted using the incremental
borrowing rate at the date of initial application.
The Group also applied the available practical expedients
wherein it:
-- Used a single discount rate to a portfolio of leases with reasonably similar characteristics
-- Applied the short-term leases exemptions to leases with lease
term that ends within 12 months at the date of initial
application
-- Used hindsight in determining the lease term where the
contract contains options to extend or terminate the lease
-- Relied on its assessment of whether leases are onerous
immediately before the date of initial application
The effect of adopting the requirements of IFRS 16, as at 1
January 2019 is as follows:
US$ '000
Increase
/ (Decrease)
Assets
--------------
Right of use assets (Note 12) 695,194
--------------
Property and equipment (Note 11) (6,854)
--------------
Other non-current assets (2,772)
--------------
Accounts receivable and prepayments (9,613)
--------------
Total Assets 675,955
--------------
Liabilities
--------------
Lease liabilities (Note 23) 729,269
--------------
Current portion- finance lease liabilities (1,684)
--------------
Non-current portion- finance lease liabilities (2,995)
--------------
Accounts payables and accruals (48,635)
--------------
Total Liabilities 675,955
--------------
The lease liabilities as at 1 January 2019 can be reconciled to
the operating lease commitments as of 31 December 2018 as
follows:
Lease liabilities details US$ '000
Non-cancellable operating lease commitments disclosed
as at 31 December 2018 169,064
---------
Further lease commitments identified * 352,203
---------
Effect of discounting based on weighted average incremental
borrowing rate as at 1 January 2019. (66,493)
---------
Discounted operating lease commitments as at 1 January
2019 454,774
---------
Amounts reclassified with respect to previously recognised
finance lease 4,679
---------
Payments in optional extension periods not recognised
at 31 December 2018 18,106
---------
Payments with respect to operating leases previously
cancellable at the option of lessee 251,710
---------
Lease liabilities recognised as at 1 January 2019 729,269
---------
* Following a review of lease data validation during the IFRS 16
transition process, additional lease payments were identified which
were previously not part of operating lease commitments.
Summary of new accounting policies
Set out below are the new accounting policies of the Group upon
adoption of IFRS 16 on 01 January 2019:
Right-of-use assets
The Group recognises right-of-use assets at the commencement
date of the lease (i.e., the date the underlying asset is available
for use). Right-of-use assets are measured at cost, less any
accumulated depreciation and impairment losses, and adjusted for
any remeasurement of lease liabilities. The cost of right-of-use
assets includes the amount of lease liabilities recognised, initial
direct costs incurred, and lease payments made at or before the
commencement date less any lease incentives received. Unless the
Group is reasonably certain to obtain ownership of the leased asset
at the end of the lease term, the recognised right-of-use assets
are depreciated on a straight-line basis over the shorter of its
estimated useful life and the lease term. Right-of- use assets are
subject to impairment.
Lease liabilities
At the commencement date of the lease, the Group recognises
lease liabilities measured at the present value of lease payments
to be made over the lease term. The lease payments include fixed
payments (including in- substance fixed payments) less any lease
incentives receivable and variable lease payments that depend on an
index or a rate. The lease payments also include the exercise price
of a purchase option reasonably certain to be exercised by the
Group and payments of penalties for terminating a lease, if the
lease term reflects the Group exercising the option to terminate.
The variable lease payments that do not depend on an index or a
rate are recognised as expense in the period on which the event or
condition that triggers the payment occurs.
In calculating the present value of lease payments, the Group
uses the incremental borrowing rate at the lease commencement date
if the interest rate implicit in the lease is not readily
determinable. After the commencement date, the amount of lease
liabilities is increased to reflect the accretion of interest and
reduced for the lease payments made. In addition, the carrying
amount of lease liabilities is remeasured if there is a
modification, a change in the lease term, a change in the
in-substance fixed lease payments or a change in the assessment to
purchase the underlying asset.
Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to
its short-term staff accommodation leases (i.e., those leases that
have a lease term of 12 months or less from the commencement date
and do not contain a purchase option). It also applies the lease of
low-value assets recognition exemption to leases of office
equipment that are considered of low value (i.e., below US$5,000).
Lease payments on short-term leases and leases of low-value assets
are recognised as expense on a straight-line basis over the lease
term
Significant judgement in determining the lease term of contracts
with renewal options
The Group determines the lease term as the non-cancellable term
of the lease, together with any periods covered by an option to
extend the lease if it is reasonably certain to be exercised, or
any periods covered by an option to terminate the lease, if it is
reasonably certain not to be exercised. After the commencement
date, the Group reassesses the lease term if there is a significant
event or change in circumstances that is within its control and
affects its ability to exercise (or not to exercise) the option to
renew (e.g., a change in business strategy).
The management has exercised significant judgement in
determining the lease term of contracts with renewal options.
Management has exercised judgement to conclude that leases which
previously only included optional renewal terms (at the discretion
of the lessee) and with no non-cancellable term, on adoption of
IFRS 16, the lease term for such leases will extend to the period
the Group is reasonably certain not to exercise an option to
terminate the leases. Management has assessed for each lease type
(i.e. land, hospital buildings, clinic buildings, office buildings,
staff accommodation and others) whether the lease is critical to
the Group's operations, the past renewal history for its leases and
other factors that create an economic incentive for it to exercise
the renewal such as the initial investment made by the Group on the
leased properties (and the useful lives for such leasehold
improvement). On this basis the management has determined their
best estimate of the lease term for each lease. The lease period
determined will be reassessed at each reporting period.
Amounts recognised in the statement of financial position and
income statement are disclosed under note 12.
Apart from IFRS 16, several other amendments and
interpretations, as listed below, applied for the first time in
2019, but do not have an impact on the condensed consolidated
financial statements of the Group.
-- IFRIC 23 Uncertainty Over Income Tax Treatments - effective 1 January 2019
-- Prepayment Features with Negative Compensation (Amendments to
IFRS 9) - effective 1 January 2019
-- Long-term Interests in Associates and Joint Ventures
(Amendments to IAS 28) - effective 1 January 2019
-- Plan Amendment, Curtailment or Settlement (Amendments to IAS 19) - effective 1 January 2019
-- Annual Improvements to IFRS 2015 - 2017 Cycle (Amendments to
IFRS 3, IFRS 11, IAS 12 and IAS 23) - effective 1 January 2019
The Group adopted following accounting policy for investment in
an associate during the period:
Accounting for associates
An associate is an entity over which the Group has significant
influence. Significant influence is the power to participate in the
financial and operating policy decisions of the investee, but is
not control or joint control over those policies.
The considerations made in determining significant influence are
similar to those necessary to determine control over subsidiaries.
The Group's investment in its associate is accounted for using the
equity method.
Under the equity method, the investment in an associate is
initially recognised at cost. The carrying amount of the investment
is adjusted to recognise changes in the Group's share of net assets
of the associate since the acquisition date. Goodwill relating to
the associate is included in the carrying amount of the investment
and is not tested for impairment separately.
The income statement reflects the Group's share of the results
of operations of the associate. Any change in OCI of those
investees is presented as part of the Group's OCI. In addition,
when there has been a change recognised directly in the equity of
the associate, the Group recognises its share of any changes, when
applicable, in the statement of changes in equity. Unrealised gains
and losses resulting from transactions between the Group and the
associate are eliminated to the extent of the interest in the
associate.
The aggregate of the Group's share of profit or loss of an
associate is shown on the face of the income statement outside
operating profit and represents profit or loss after tax.
The financial statements of the associate are prepared for the
same reporting period as the Group. When necessary, adjustments are
made to bring the accounting policies in line with those of the
Group.
After application of the equity method, the Group determines
whether it is necessary to recognise an impairment loss on its
investment in its associate. At each reporting date, the Group
determines whether there is objective evidence that the investment
in the associate is impaired. If there is such evidence, the Group
calculates the amount of impairment as the difference between the
recoverable amount of the associate and its carrying value, and
then recognises the loss within 'Share of profit of an associate'
in the income statement.
Upon loss of significant influence over the associate, the Group
measures and recognises any retained investment at its fair value.
Any difference between the carrying amount of the associate upon
loss of significant influence and the fair value of the retained
investment and proceeds from disposal is recognised in the income
statement.
Significant judgement in assessment of control over
associate
Management has exercised significant judgement to conclude that
as at both the effective transaction date of 23 May 2019 and as at
the reporting date of 30 June 2019, it does not have the power to
control the relevant activities of its investment in National
Medical Care Co. ("CARE"), a company listed on the Tadawul (see
note 15) even though the Group has a 49.20 per cent ownership
interest in CARE and the remaining 50.80 per cent of the ownership
interests are held by a dispersed shareholder base. Further,
through its presence on the board of directors (three out of nine)
and voting rights, the Group is only able to exert significant
influence.
The investment in CARE is accounted for as an investment in an
associate. In making the judgement, the management considered the
Group's absolute size of holding in CARE, the relative size of and
dispersion of the shareholdings owned by the other shareholders,
its ability to appoint directors on the board of CARE and its
ability to influence / vote for proposals which may directly impact
the NMC Group as at 30 June 2019 (while taking into account the
relevant regulations in the Kingdom of Saudi Arabia, in particular
with respect to the appointment of directors).
Management will reassess the above on each reporting period, and
accordingly, as on 30 June 2019, the Group reaffirmed that it does
not have the "power", as defined by IFRS 10, over CARE.
Significant judgement in assessment of control over
subsidiary
Management has exercised significant judgement to conclude that
as at both the effective transaction date of 23 May 2019 and as at
the reporting date of 30 June 2019, it does have the power to
control the relevant activities of its investment in NMC KSA, even
though the Group's stake has diluted to 52.9% on completion of the
share exchange transaction resulting in the investment in an
associate ("CARE)". The Group continues to have control over NMC
KSA as 3 out of 5 directors in the board of NMC KSA represent NMC
LLC. Further, O&M agreement between NMC LLC and NMC KSA gives
the Group control on the relevant activities of NMC KSA.
The investment in NMC KSA is thus continued to be accounted for
as an investment in subsidiary. In making the judgement, the
management considered the Group's absolute size of holding in NMC
KSA, its ability to appoint directors on the board of NMC KSA and
its ability to influence / vote for proposals which may directly
impact the Group as at 30 June 2019 (while considering the relevant
regulations in the Kingdom of Saudi Arabia).
Management will reassess the above on each reporting period, and
accordingly, as on 30 June 2019, the Group's judgment is that it
does have the "power", as defined by IFRS 10, over NMC KSA.
2.3 Going concern
The Group's business activities, together with the factors
likely to affect its future development, performance and position
are set out in the Business Review on page 4 and 5. The financial
position of the Group, its cash flows, liquidity position and
borrowing facilities are described in the Financial Review on pages
6 to 10.
The Group has two diverse operating divisions, Healthcare and
Distribution, both of which operate in a growing market.
The directors have undertaken an assessment of the future
prospects of the Group and the wider risks that the Group is
exposed to. In its assessment of whether the Group should adopt the
going concern basis in preparing its financial statements, the
directors have considered the adequacy of financial resources in
order to manage its business risks successfully, together with
other areas of potential risk such as regulatory, insurance and
legal risks.
The Group has considerable financial resources including banking
arrangements through a spread of local and international banking
groups and utilizes short and medium term working capital
facilities to optimise business funding. Debt covenants are
reviewed by the Board each month. The Board believes that the level
of cash in the Group, the spread of bankers and debt facilities
mitigates the financing risks that the Group faces from both its
expansion through acquisitions and in relation to working capital
requirements.
The Group delivered a strong performance during the first half
of 2019. Both the Healthcare and Distribution divisions have
continued their positive growth in revenue during the first half of
2019. Net profit and EBITDA of both healthcare and distribution
divisions have increased during first half in 2019. EBITDA margin
of Healthcare is increased whereas EBITDA margin of Distribution
remained comparable to last year. The directors have reviewed the
business plan for the year end 2019 and the five-year cash flow,
together with growth forecasts for the healthcare sector in the
UAE. The directors consider the Group's future forecasts to be
reasonable.
The directors have not identified any other matters that may
impact the viability of the Group in the medium term and therefore
they continue to adopt the going concern basis in preparing the
condensed consolidated financial statements
The directors expect that the Group has adequate resources to
continue in operational existence for the foreseeable future. Thus,
they continue to adopt the going concern basis of accounting in
preparing the condensed consolidated financial statements.
2.4 Significant accounting judgements and estimates
The preparation of the condensed consolidated financial
statements requires management to make judgments, estimates and
assumptions that affect the application of accounting policies and
the reported amounts of assets and liabilities, income and expense.
Actual results may differ from these estimates.
In preparing these condensed consolidated financial statements,
the significant judgements and estimates made by management in
applying the Group's accounting policies and the key sources of
estimation and uncertainty were the same as those that applied to
the consolidated financial statements as at and for the year ended
31 December 2018, except as disclosed in note 2.2.
2.5 Accounting Standards and Interpretations issued but not effective
The standards and interpretations that are issued, but not yet
effective, up to the date of issuance of the Group's condensed
consolidated financial statements are listed below. The Group
intends to adopt these standards, if applicable, when they become
effective.
a) Definition of a Business - Amendments to IFRS 3;
b) Definition of Material - Amendments to IAS 1 and IAS 8;
c) The Conceptual Framework for Financial Reporting;
d) IFRS 17 Insurance Contracts; and
e) Sale or Contribution of Assets between an Investor and its
Associates or Joint Venture (Amendments to IFRS
10 and IAS 28) - Available for optional adoption/effective date deferred indefinitely
Management anticipates that the application of the above
Standards and Interpretations in future periods will have no
material impact on the condensed consolidated financial information
of the Group in the period of initial application.
3 FINANCIAL RISK MANAGEMENT
The primary risk arising from the Group's financial instruments
are interest rate risk, foreign currency risk, credit risk and
liquidity risk. These risks and the Group's financial risk
management objectives and policies are consistent with that
disclosed in the consolidated financial statements as at and for
the year ended 31 December 2018.
4 SEASONALITY OF OPERATIONS
The Group does not have any operations of a seasonal or cyclical
nature.
5 ACQUISITION OF NON-CONTROLLING INTERESTS
Acquisition of non-controlling interests for the period ended 30
June 2019:
-- On 02 March 2019, the Group acquired an additional 15%
interest in the voting shares of Al Salam Hospital LLC ("Al
Salam"), increasing its ownership interest to 95% for cash
consideration of US$ 5,786,000 out of which US$2,324,000 was paid
in advance last year. Excess of consideration paid over the
carrying amount of the non-controlling interests amounting to US$
5,336,000 has been recognised in retained earnings.
-- On 04 March 2019, the Group acquired an additional 20%
interest in the voting shares of Al Qadi Hospital LLC, increasing
its ownership interest to 80% for consideration of US$ 8,772,000
out of which US$4,802,000 was paid in advance in last year. Excess
of consideration paid over the carrying amount of the
non-controlling interests amounting to US$ 10,080,000 has been
recognised in retained earnings.
Acquisition of non-controlling interests for the year ended 31
December 2018:
-- On 03 January 2018, the Group acquired an additional 29%
interest in the voting shares of As Salama Hospital LLC ("As
Salama"), increasing its ownership interest to 99% for cash
consideration of US$12,404,000. Excess of consideration paid over
the carrying amount of the non-controlling interests amounting to
US$5,380,000 had been recognised in retained earnings.
-- On 08 February 2018, the Group acquired an additional 49%
interest in the voting shares of Fakih IVF Fertility Centre LLC and
Fakih IVF LLC, increasing its ownership interest to 100% for
consideration of US$212,928,000. Excess of consideration paid over
the carrying amount of the non-controlling interests amounting to
US$179,026,000 had been recognised in retained earnings.
6 BUSINESS COMBINATIONS
Acquisition of subsidiaries
Acquisitions during the period ended 30 June 2019:
During the period, the Group completed the acquisition of some
healthcare facilities in UAE. The agreed purchase consideration for
the acquisition was US$ 2,053,000, out of which US$1,646,000 was
paid in advance in previous year 2018. Net cash with subsidiaries
as on date of acquisition was US$ 11,000.
Acquistions during the year ended 31 December 2018:
Acquisition of CosmeSurge Investment LLC ("CosmeSurge" or
"CS")
On 21 March 2018 the Group acquired 70% of the share capital of
CosmeSurge at a purchase consideration of US$ 129,050,000. At the
date of acquisition, the fair value of identifiable intangible
assets included brands amounting to US$11,572,000 and customer
relationship of US$4,900,000. The fair values of brands have been
assessed using the relief from royalties' method and customer
relationship have been assessed using the multi-period excess
earning method. As at the date of acquisition the Group has booked
goodwill of US$ 91,304,000 on this acquisition.6
Acquisition of Boston IVF ("BIVF")
On 17 December 2018 the Group acquired 70% controlling stake of
Boston IVF Group ("BIVF") at a purchase consideration of US$
64,700,000. At the date of acquisition, the fair value of
identifiable intangible assets included brands amounting to
US$33,381,000 The fair values of brands have been assessed using
the relief from royalties' method (with a related deferred tax
liability in respect of these intangible assets of US$9,914,000).
The related deferred tax liability has been assessed using the rate
of corporation tax (30%) applicable in USA. As at the date of
acquisition the Group has booked goodwill of US$ 42,205,000 on this
acquisition.
Acquisition of Chronic Care Specialist Medical Center
("CCSMC"),
On 05 February 2018 the Group acquired 100% controlling stake in
the voting shares of CCSMC, an unlisted long-term care provider
based in the Kingdom of Saudi Arabia at a purchase consideration of
US$ 52,542,000. At the date of acquisition, the fair value of
identifiable intangible assets included brand amounting to
US$6,981,000. The fair values of brand have been assessed using the
relief from royalties' method. As at the date of acquisition the
Group has booked goodwill of US$ 23,523,000.
Acquisition of Al Salam Hospital ("Al Salam")
On 21 January 2018, the Group agreed to acquire 80% controlling
stake of Al Salam. The agreed cash purchase consideration for the
business was US$36,525,000. At the date of acquisition, the fair
value of identifiable intangible assets included brands amounting
to US$8,345,000 and license right of US$3,733,000. The fair values
of brands have been assessed using the relief from royalties'
method and license have been assessed using replacement cost
method. As at the date of acquisition the Group has booked goodwill
of US$ 24,022,000.
Acquisition of Aspen ("Aspen")
On 17th August 2018 the Group acquired 100% of the issued share
capital of HCN European Surgery Center Holdings limited, which owns
100% of Aspen Healthcare Limited ("Aspen") based in the United
Kingdom. The total purchase consideration was US$7,771,000. At the
date of acquisition, the fair value of identifiable tangible assets
included property plant and equipment ("PPE") amounted to
US$3,010,000. The acquisition of Aspen has resulted into bargain
purchase of US$ 5,567,000.
During the period ended 30 June 2019, the purchase consideration
for the Aspen acquisition has been finalised. On finalisation, the
purchase consideration has been reduced by US$ 607,000 and
accordingly the gain on bargain purchase has been increased by the
same amount.
The fair value assessment of identifiable net assets is in
progress for Aspen as at 30 June 2019, and therefore the fair
values of the identifiable net assets are provisional.
Other acquisitions
Apart from above, during last year, the Group completed various
other acquisitions of healthcare facilities in UAE, KSA, Oman and
Europe. The agreed purchase consideration for these acquired
businesses were US$276,619,000. At the date of acquisition, the
fair value of identifiable intangible assets was US$22,165,000. As
at the date of acquisition the Group has booked a combined goodwill
of US$ 209,275,000 on other acquisitions.
Finalisation of purchase price allocations with respect to
previous year acquisitions
During the period ended 30 June 2019, the purchase price
allocations have been finalised for CosmeSurge, Boston IVF, Premier
and Cytomed. On finalization, fair value of intangible assets has
been reduced by US$ 1,470,000 which resulted in a decrease in
non-controlling interest of US$ 204,000 and an increase of goodwill
by an amount of US$ 1,266,000.
Advances in respect of Acquisitions:
Previous year advances in respect of Acquisitions
adjusted for: US$ '000
Acquisition of non-controlling interest in Al Salam
during the period 2,324
---------
Acquisition of non-controlling interest in Al Qadi
during the period 4,802
---------
Acquisition of Healthcare facilities in UAE during
the period 1,646
---------
Reclassification to other receivables 9,529
---------
Total 18,301
---------
7 SEGMENT INFORMATION
The following tables present revenue and profit information
regarding the Group's operating segments for the six months ended
30 June 2019 and 2018, respectively.
There is no difference from the last annual report in the basis
of segmentation or the basis of measurement of segment profit or
loss. The new acquired companies/businesses (Eve fertility and
Exeter) come under the healthcare segment.
Distribution
and Adjustments
Healthcare services Total segments and eliminations Consolidated
US$ '000 US$ '000 US$ '000 US$ '000 US$ '000
Six months
ended
30 June 2019
Revenue
External
customers 948,797 287,210 1,236,007 - 1,236,007
Inter segment 8,890 17,215 26,105 (26,105) -
----------------------- ----------------------- ----------------------- ----------------------- -----------------------
Total 957,687 304,425 1,262,112 (26,105) 1,236,007
----------------------- ----------------------- ----------------------- ----------------------- -----------------------
Results
Depreciation
and
amortisation (80,195) (5,331) (85,526) (9,849) (95,375)
Finance costs (32,474) (541) (33,015) (58,843) (91,858)
Segment EBITDA 313,400 43,646 357,046 (33,526) 323,520
Segment profit 201,993 37,774 239,767 (99,687) 140,080
Six months
ended
30 June 2018
Revenue
External
customers 698,265 233,705 931,970 - 931,970
Inter segment 7,706 21,306 29,012 (29,012) -
----------------------- ----------------------- ----------------------- ----------------------- -----------------------
Total 705,971 255,011 960,982 (29,012) 931,970
----------------------- ----------------------- ----------------------- ----------------------- -----------------------
Results
Depreciation
and
amortisation (36,484) (1,952) (38,436) (4,972) (43,408)
Finance costs (4,226) (3) (4,229) (47,325) (51,554)
Segment EBITDA 226,752 30,324 257,076 (31,530) 225,546
Segment profit 184,390 28,369 212,759 (96,067) 116,692
The following table presents segment assets and segment
liabilities of the Group's operating segments as at 30 June 2019
and 31 December 2018.
Distribution
and Adjustments
Healthcare services Total segments and eliminations Consolidated
US$ '000 US$ '000 US$ '000 US$ '000 US$ '000
Segment assets
30 June 2019 (unaudited) 4,030,689 382,258 4,412,947 568,310 4,981,257
========== ========== ========== ========== ==========
At 31 December 2018 3,070,981 382,251 3,453,232 419,183 3,872,415
(audited) ========== ========== ========== ========== ==========
Segment liabilities
30 June 2019 (unaudited) 1,068,209 121,980 1,190,189 2,102,095 3,292,284
========== ========== ========== ========== ==========
At 31 December 2018 434,966 124,277 559,243 1,956,409 2,515,652
(audited) ========== ========== ========== ========== ==========
Distribution
and Adjustments
Healthcare services Total segments and eliminations Consolidated
US$ '000 US$ '000 US$ '000 US$ '000 US$ '000
Other disclosures
Capital expenditure
30 June 2019 (unaudited) 93,394 1,786 95,180 1,341 96,521
========== ========== ========== ========== ==========
At 31 December 2018 152,130 4,004 156,134 8,853 164,987
(audited) ========== ========== ========== ========== ==========
Inter-segment revenues are eliminated upon consolidation and
reflected in the 'adjustments and eliminations' column. All other
adjustments and eliminations are part of detailed reconciliations
presented further below.
Adjustments and eliminations
Finance income and group overheads are not allocated to
individual segments as they are managed on a group basis.
Term loans, convertible bond, sukuk, bank overdrafts and other
short term borrowings and certain other assets and liabilities are
substantially not allocated to segments as they are also managed on
a group basis.
Capital expenditure consists of additions to property and
equipment and intangible assets.
Reconciliation of Segment EBITDA to Group profit
Unaudited
--------------------------------------------------
6 months ended 30 June
2019 2018
US$ '000 US$ '000
Segment EBITDA 357,046 257,076
Unallocated group head office administrative
expenses (35,208) (33,413)
Unallocated other income 1,682 1,884
Unallocated finance income 3,593 3,616
Unallocated unamortised finance fees written
off - (13,124)
Finance costs (91,858) (51,555)
Depreciation (84,691) (36,695)
Amortisation (10,684) (6,713)
Transaction cost related to business combination - (2,078)
Transaction cost related to convertible
bond - (174)
Impairment of assets - (106)
Adjustment to gain from bargain purchase 607 -
on prior
year acquisition
Share of net profit of an associate 107 -
Tax (514) (2,026)
----------------------- -----------------------
Group profit 140,080 116,692
========== ==========
Reconciliation of Segment profit to Group profit
Unaudited
--------------------------------------------------
6 months ended 30 June
2019 2018
US$ '000 US$ '000
Segment profit 239,767 212,759
Unallocated finance income 3,039 1,214
Unallocated unamortised finance fees written
off - (13,124)
Unallocated finance costs (59,351) (47,325)
Unallocated group head office administrative
expenses (35,208) (33,413)
Unallocated depreciation (4,119) (814)
Unallocated other income 1,682 1,884
Unallocated amortisation costs (5,730) (4,158)
Unallocated transaction cost related to
business combination - (157)
Unallocated transaction cost related to
convertible bond - (174)
----------------------- -----------------------
Group profit 140,080 116,692
========== ==========
Geographical information
Unaudited
--------------------------------------------------
6 months ended 30
June
2019 2018
US$ '000 US$ '000
Revenue from external customers
Middle East 1,052,531 884,570
Europe and South America 146,670 47,400
North America and others 36,806 -
----------------------- -----------------------
Total revenue as per condensed consolidated
income statement 1,236,007 931,970
========== ==========
Analysis of revenue by category:
Unaudited
--------------------------------------------------
6 months ended 30
June
2019 2018
US$ '000 US$ '000
Revenue from services:
Healthcare-clinic 792,266 614,556
Healthcare-management fees 14,650 7,747
----------------------- -----------------------
806,916 622,303
----------------------- -----------------------
Sale of goods:
Distribution 287,210 236,098
Healthcare-pharmacy 141,881 73,569
----------------------- -----------------------
429,091 309,667
----------------------- -----------------------
Total 1,236,007 931,970
========== ==========
Timing of revenue recognition
Unaudited
--------------------------------------------------
6 months ended 30
June
2019 2018
US$ '000 US$ '000
Goods and service transferred at a point
of time 1,096,443 841,889
Services transferred over time 139,564 90,081
----------------------- -----------------------
Total revenue as per consolidated income
statement 1,236,007 931,970
========== ==========
Analysis of revenue by verticals:
Revenue from services:
Unaudited
--------------------------------------------------
6 months ended 30 June
2019 2018
US$ '000 US$ '000
Multi-speciality & pharmacies 695,976 520,769
Maternity & fertility 164,495 114,311
Long term & home care 82,566 63,144
Operation & management 14,650 7,747
----------------------- -----------------------
957,687 705,971
----------------------- -----------------------
Sale of goods:
Distribution 304,425 255,011
----------------------- -----------------------
Eliminations:
Intra-group eliminations (26,105) (29,012)
----------------------- -----------------------
Total revenue as per consolidated income
statement 1,236,007 931,970
========== ==========
8 OTHER INCOME
Other income includes US$44,153,000 (six months ended 30 June
2018: US$ 28,724,000) reimbursement of costs incurred by NMC on
behalf of other parties, with corresponding expenses reported in
direct costs and general and administrative expenses.
Out of this, US$ 30,657,000 (six months ended 30 June 2018: US$
27,383,000) relates to reimbursement of advertisement and
promotional expenses incurred by the Group on behalf of clients in
the Distribution division. The corresponding expenses are included
under direct costs/general and administrative expenses.
It also includes US$ 13,496,000 (six months ended 30 June 2018:
US$ 1,341,000) which relates to reimbursement on account of
expenses for O&M contracts. The corresponding expenses are
included under general and administrative expenses.
9 TAX
The Group operates in the United Arab Emirates, Spain, United
Kingdom, Kingdom of Saudi Arabia and certain other countries. As
there is no corporation tax in the United Arab Emirates, no taxes
are recognized or payable on the operations in the United Arab
Emirates.
With respect to operations in other countries, the tax
disclosures are as follows:
Consolidated income statement
Unaudited
--------------------------------------------------
Period ended Period ended
30 June 30 June
2019 2018
US$ '000 US$ '000
Current tax
Charge for the period 2,435 2,748
Adjustment in respect of current tax of (330) -
previous year
Deferred tax
Charge for the period (1,172) (722)
Adjustment in respect of deferred tax (419) -
of previous year
----------------------- -----------------------
Income tax reported in the condensed consolidated
income statement 514 2,026
========== ==========
The charge for the period has been calculated using an estimate
of the effective annual rate of tax for the full year per operating
division. This rate has been applied to the pre-tax profits for the
six months ended 30 June 2019, with adjustments made for any
non-recurring items in the period.
10 EARNINGS PER SHARE (EPS)
Basic EPS amounts are calculated by dividing net profit for the
period attributable to ordinary equity holders of the Parent
Company by the weighted average number of ordinary shares
outstanding during the period.
Diluted EPS amounts are calculated by dividing the profit
attributable to ordinary equity holders of the parent by the
weighted average number of ordinary shares outstanding during the
period plus the weighted average number of ordinary shares that
would be issued on conversion of all the dilutive potential
ordinary shares into ordinary shares.
The following reflects the income and share data used in the
basic and diluted earnings per share computations:
Unaudited
--------------------------------------------------
6 months ended 30 June
2019 2018
Profit attributable to equity holders of
the Parent (US$ '000) 138,123 116,494
----------------------- -----------------------
Weighted average number of ordinary shares
in issue ('000) for basic EPS 208,535 207,557
Effect of dilution from share based payments
('000) 1,135 1,462
----------------------- -----------------------
Weighted average number of ordinary shares
('000) for diluted
EPS 209,670 209,019
----------------------- -----------------------
Basic earnings per share (US$) 0.662 0.561
Diluted earnings per share (US$) 0.659 0.557
11 PROPERTY AND EQUIPMENT
Furniture,
fixtures
fittings *Capital
Freehold Hospital Leasehold Motor and medical work
land building Buildings improve-ments vehicles equipment in progress Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
30 June 2019
Cost:
At 1 January
2019 39,152 250,523 37,748 247,227 17,403 437,211 114,098 1,143,362
Adoption of
IFRS 16
(Note 2.2) - - - - - (12,104) - (12,104)
----------------- ----------------------- ------------------- ------------------ --------------------- --------------------- ----------------- -----------------
At 1 January
2019
(adjusted) 39,152 250,523 37,748 247,227 17,403 425,107 114,098 1,131,258
Additions - 1,237 274 5,003 572 24,293 63,356 94,735
Acquisition
of
subsidiaries - - - 1,052 17 500 - 1,569
Transfer from
CWIP 8,740 - 20,204 8,067 - 2,382 (39,393) -
Exchange
difference - (89) (41) (44) (1) (958) 18 (1,115)
Disposals - - - (76) (490) (2,304) - (2,870)
----------------- ----------------------- ------------------- ------------------- -------------------- --------------------- ----------------- -----------------
At 30 June
2019 47,892 251,671 58,185 261,229 17,501 449,020 138,079 1,223,577
----------------- ----------------------- ------------------- ------------------ -------------------- -------------------- ----------------- -----------------
Depreciation:
At 1 January
2019 - 22,564 11,525 85,719 9,563 184,091 - 313,462
Adoption of
IFRS 16
(Note 2.2) - - - - - (5,250) - (5,250)
----------------- ----------------------- ------------------- ------------------- -------------------- --------------------- ----------------- -----------------
At 1 January
2019
(adjusted) - 22,564 11,525 85,719 9,563 178,841 - 308,212
Charge for
the period - 3,335 1,159 14,928 1,377 27,894 - 48,693
Exchange
difference - (55) (12) (31) (1) (155) - (254)
Disposals - - - (68) (486) (2,110) - (2,664)
----------------- ----------------------- ------------------- ------------------- -------------------- --------------------- ----------------- -----------------
At 30 June
2019 - 25,844 12,672 100,548 10,453 204,470 - 353,987
----------------- ----------------------- ------------------- ------------------- --------------------- -------------------- ----------------- -----------------
Net carrying
amount: 47,892 225,827 45,513 160,681 7,048 244,550 138,079 869,590
At 30 June ======= ======= ======= ======== ====== ========= ======= ======
2019
(* Includes multi-speciality hospitals, day care centres,
medical centres and speciality clinics for IVF, fertility and
cosmetics in multiple geographies.)
Furniture,
fixtures
fittings *Capital
Freehold Hospital Leasehold Motor and medical work
land building Buildings improve-ments vehicles equipment in progress Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
31 December
2018
Cost:
At 1 January
2018 32,952 235,768 27,171 184,676 13,758 312,018 35,387 841,730
Additions 5,124 231 362 11,865 3,725 51,050 87,865 160,222
Acquisition
of subsidiaries
(Note 6) 1,076 10,787 10,526 37,198 718 79,464 11,511 151,280
Transfer from
CWIP - 4,659 - 13,856 - 1,588 (20,103) -
Impairment
of assets (431) (431)
Reclassification - (997) - - - 547 - (450)
Exchange
difference - 75 (311) (239) (30) (5,556) (59) (6,120)
Disposals - - - (129) (768) (1,900) (72) (2,869)
---------------- ------------------- ------------------- -------------------- ------------------- -------------------- ---------------- ------------------
At 31 December
2018 39,152 250,523 37,748 247,227 17,403 437,211 114,098 1,143,362
---------------- ------------------- ------------------- ------------------- ------------------- --------------------- ---------------- ------------------
Depreciation:
At 1 January
2018 - 15,613 9,869 62,859 7,825 138,472 - 234,638
Charge for
the year - 7,470 1,764 23,007 2,418 46,910 - 81,569
Reclassification - (516) - - - 376 - (140)
Adjustment
to prior year - - - - 11 1,344 - 1,355
Exchange
difference - (3) (108) (30) (1) (1,564) - (1,706)
Disposals - - - (117) (690) (1,447) - (2,254)
---------------- ------------------- ------------------- -------------------- ------------------- -------------------- ---------------- ------------------
At 31 December
2018 - 22,564 11,525 85,719 9,563 184,091 - 313,462
---------------- ------------------- ------------------- -------------------- ------------------- --------------------- ---------------- ------------------
Net carrying
amount: 39,152 227,959 26,223 161,508 7,840 253,120 114,098 829,900
At 31 December ======= ======= ======= ======== ====== ========= ======= ======
2018
Total capital expenditure in the six months ended 30 June 2019
was US$ 94,735,000 (six months ended 30 June 2018: US$ 55,725,000).
Of the total capital expenditure spent during this period, US$
63,356,000 (six months ended 30 June 2018: US$ 17,242,000) related
to new capital projects and US$ 31,379,000 (six months ended 30
June 2018: US$ 38,483,000) related to further capital investment in
our existing facilities.
12 Right-of-use assets
Set out below are the carrying amounts of Group's right of use
assets and the movements during the period:
30 June
2019
US$ 000
Cost:
Right of use assets recognised on adoption
of IFRS 16
on 1 January 2019 (note 2.2) 695,194
Additions during the period 2,875
Additions from business combination 622
Exchange differences (829)
At 30 June 2019 697,862
Depreciation:
Charge for the period 35,998
At 30 June 2019 35,998
Net carrying amount:
At 30 June 2019 (unaudited) 661,864
The recognised right of use assets relate to the following lease
types:
30 June 2019 1 January
2019
US$ '000 US$ '000
Hospital buildings 480,037 495,927
Clinic buildings 127,068 137,708
Others 54,759 61,559
----------------------- -----------------------
Total 661,864 695,194
========== ==========
13 INTANGIBLE ASSETS
Patient
Software Brands relationship Database Goodwill Others Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
30 June 2019
Cost:
At 1 January 2019 17,453 129,086 20,223 11,723 1,440,291 51,796 1,670,572
Additions 1,503 - - - - 283 1,786
Relating to acquisition
of subsidiaries 1 - - - 2,096 - 2,097
Adjustment to prior
year business
combinations (Note
6) - (653) (27) - 1,266 (790) (204)
Exchange difference (59) (510) - (67) (1,421) 34 (2,023)
At 30 June 2019 18,898 127,923 20,196 11,656 1,442,232 51,323 1,672,228
Amortisation:
At 1 January 2019 8,488 19,375 7,680 2,968 - 13,611 52,122
Charge for the
period 1,313 4,156 1,798 387 - 3,030 10,684
Exchange difference (28) (7) - - - (57) (92)
At 30 June 2019 9,773 23,524 9,478 3,355 - 16,584 62,714
Net carrying amount:
At 30 June 2019
(unaudited) 9,125 104,399 10,718 8,301 1,442,232 34,739 1,609,514
31 December 2018
Cost:
At 1 January
2018 9,959 73,034 13,471 12,136 1,057,765 24,401 1,190,766
Additions 3,629 381 - - - 755 4,765
Relating to acquisition
of subsidiaries (Note
6) 3,734 57,207 6,752 - 390,329 27,083 485,105
Reclassification 450 - - - - - 450
Adjustment to prior
year business
Combinations (Note
6) - - - - 3,461 - 3,461
Exchange difference (319) (1,536) - (413) (11,264) (443) (13,975)
At 31 December
2018 17,453 129,086 20,223 11,723 1,440,291 51,796 1,670,572
Amortisation:
At 1 January
2018 4,950 13,738 4,490 2,159 - 8,525 33,862
Charge for the
year 1,670 7,209 3,190 809 - 5,916 18,794
Impairment 1,783 - - - - - 1,783
Reclassification 140 - - - - - 140
Exchange difference (55) (1,572) - - - (830) (2,457)
At 31 December
2018 8,488 19,375 7,680 2,968 - 13,611 52,122
Net carrying amount:
At 31 December
2018 (audited) 8,965 109,711 12,543 8,755 1,440,291 38,185 1,618,450
Others include private contracts and non-compete
arrangements.
Adjustment to goodwill in the period arises on finalization of
purchase price allocation exercise with respect to acquisitions
made in previous year (refer note 6).
14 LOAN RECEIVABLE
Unaudited Audited
30 June 31 December
2019 2018
US$ '000 US$ '000
Loan receivable 2,501 2,001
----------------------- -----------------------
2,501 2,001
========== ==========
During 2019, the Group invested an additional US$ 500,000 as a
convertible promissory note in a technology company. The note will
attract interest at the rate of 6% p.a and will be repayable on
demand. This investment will support NMC Healthcare to have a
better service offering in the UAE. As the instrument doesn't meet
all the features of a puttable instrument to be classified as
equity in the event of liquidation, we classified the above
instrument as loan receivable
15 INVESTMENT IN AN ASSOCIATE
On 04 March 2019, Group signed Sale and Purchase agreement with
Hassana Investment Company ("Hassana"), the investment arm of the
General Organization for Social Insurance ("GOSI") in Saudi Arabia
to acquire 38.88% stake in National Medical Care Co. ("CARE") at an
agreed price of US$251,052,000 in exchange of shares issued in "NMC
Healthcare Saudi Arabia Company ("NMC KSA")". Legal formalities and
regulatory approvals for the above transaction was completed on 23
May 2019.
On 23 May 2019, Group acquired further 10.32% shareholding in
CARE from the open market for cash consideration of
US$67,408,000.
On completion of the above transaction, Group owns 52.997% and
GOSI owns 47.003% stake in NMC KSA in exchange of CARE shares. NMC
KSA remains a subsidiary of the Group. The excess of the
consideration received on disposal of the 47.003% shareholding in
NMC KSA over the carrying amount of the non-controlling interest
(US$ 240,529,000) amounting to US$10,523,000 has been recorded in
retained earnings.
Reconciliation of the carrying value of the investment is shown
below:
30 June 2019
US$ '000
Additions during the period 318,460
Share of profit for the period 107
-----------------------
At the end of the period 318,567
==========
CARE issues publicly available quarterly financial information
and has a December year-end.
16 INVENTORIES
During the six months ended 30 June 2019, the Group wrote down
US$ 990,000 of obsolete and damaged inventories (six months ended
30 June 2018: US$ 895,000). This expense is included in direct
costs within the condensed consolidated income statement. The
provision for old and obsolete inventories as of 30 June 2019 was
US$ 2,558,000 (31 December 2018: US$ 2,128,000).
17 ACCOUNTS RECEIVABLE AND PREPAYMENTS
Unaudited Audited
30 June 31 December
2019 2018
US$ '000 US$ '000
Accounts receivable 602,467 555,942
Receivable from suppliers for promotional
expenses 16,558 16,012
Other receivables* 61,184 36,329
Prepayments 24,503 30,841
---------------------- ----------------------
704,712 639,124
========== ==========
Receivables from suppliers relate to advertising and promotional
expenses incurred by the Group.
* For the presentation purpose, the healthcare management fee of
US$ 8,786,000 (31 December 2018:US$ 13,721,000) recorded under
other receivables has been reclassified to accounts receivable.
The Group uses a provision matrix to calculate expected credit
loss (ECLs) for trade receivables. The provision rates are based on
days past due for groupings of various customer segments that have
similar loss patterns (i.e., by geography, customer type). The
provision matrix is initially based on the Group's historical
observed default rates. At every reporting date, the historical
observed default rates are updated and changes in the
forward-looking estimates are analysed and updated. Accounts
receivable are stated net of expected credit loss of US$ 33,406,000
(31 December 2018: US$ 30,013,000). It is not the practice of Group
to obtain collateral over receivables and they are therefore
unsecured.
The ageing of unimpaired accounts receivable is as follows:
Past due but not impaired
--------------------------------------------
Neither
past due 91-180 181-365
Total nor impaired < 90 days days days >365 days
US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000
30 June 2019
Accounts receivable 602,467 390,472 135,550 36,606 18,055 21,784
31 December 2018 555,942 358,829 117,029 34,552 21,254 24,278
Accounts receivable
Credit risk is managed through the Group's established policy,
procedures and control relating to credit risk management. A
majority of the receivables that are past due but not impaired are
from insurance companies and government-linked entities in the
United Arab Emirates which are inherently slow payers due to their
long invoice verification and approval of payment procedures.
Payments continue to be received from these customers and
accordingly the risk of non-recoverability is considered to be
low.
Of the net trade receivables balance of US$ 602,467,000 (31
December 2018: US$ 555,942,000) an amount of US$ 304,675,000 (31
December 2018: US$ 287,038,000) is against five customers.
The Group's terms require receivables to be repaid within 90-120
days depending on the type of customer, which is in line with local
practice in the UAE. Due to the long credit period offered to
customers, significant amounts of accounts receivable are neither
past due nor impaired.
Amounts due from related parties amounting to US$ 13,102,000 (31
December 2018: US$ 7,346,000) as disclosed on the face of the
condensed consolidated statement of financial position are trading
in nature and arise in the normal course of business.
18 CASH AND CASH EQUIVALENTS
Cash and cash equivalents included in the condensed consolidated
statement of cash flows comprise of the following:
Unaudited
--------------------------------------------------
30 June 30 June
2019 2018
US$ '000 US$ '000
Bank deposits 67,032 130,470
Bank balances and cash 507,116 302,145
Bank overdrafts and other short term borrowings (190,351) (197,308)
----------------------- -----------------------
383,797 235,307
Adjustments for:
Short term borrowings 79,260 138,432
Bank deposits maturing in over 3 months (5,443) (28,033)
Restricted cash (6,510) (76,237)
----------------------- -----------------------
Cash and cash equivalents 451,104 269,469
========== ==========
Bank deposits of US$ 67,032,000 (30 June 2018: US$ 130,470,000)
are with commercial banks. These are mainly denominated in UAE
Dirham, US Dollar and Euro and earn interest at the respective
deposit rates. These deposits have original maturity between 1 to
12 months (30 June 2018: 1 to 12 months).
Bank overdrafts and short term borrowings include trust receipts
and invoice discounting facilities which mature between 90 and 180
days. Trust receipts are short term borrowings to finance
purchases. The bank overdrafts and short-term borrowings are
secured by corporate guarantees and personal guarantees of few of
the major shareholders of the parent company and carry interest at
EIBOR plus margin rates ranging from 1% to 4%. (30 June 2018: 1% to
4%).
19 SHARE CAPITAL AND SHARE PREMIUM
As at 30 June 2019:
Share capital
Number of Ordinary
shares shares Share premium Total
(thousands) US$'000 US$'000 US$'000
Issued and fully paid 208,770 32,513 640,946 673,459
(nominal value 10 pence
sterling) each)
========== ========== ========== ==========
As at 31 December 2018:
Share capital
Number of Ordinary Share premium Total
shares shares
(thousands) US$'000 US$'000 US$'000
Issued and fully paid 208,237 32,443 633,744 666,187
(nominal value 10 pence
sterling) each)
========== ========== ========== ==========
Issued share capital and share premium movement
Number of Ordinary
shares shares Share premium Total
(thousands) US$'000 US$'000 US$'000
30 June 2019
At 1 January
2019 208,237 32,443 633,744 666,187
Exercise of
stock option
shares 553 70 7,202 7,272
----------------------- ----------------------- ----------------------- -----------------------
At 30
June
2019 208,770 32,513 640,946 673,459
========== ========== ========== ==========
31 December 2018:
At 1 January 2018 204,423 31,928 492,634 524,562
Issue of new shares 3,534 477 138,714 139,191
Exercise of stock option
shares 280 38 2,396 2,434
At 31 December 2018 208,237 32,443 633,744 666,187
========== ========== ========== ==========
20 RETAINED EARNINGS
As at 30 June 2019, retained earnings of US$ 18,806,000 (31
December 2018: US$ 18,806,000) are not distributable. This relates
to a UAE Companies Law requirement to set aside 10% of annual
profit of all UAE subsidiaries. The subsidiaries may resolve to
discontinue such annual transfers when their respective reserves
equals 50% of their paid up share capital.
21 TERM LOANS
Unaudited Audited
30 June 31 December
2019 2018
US$ '000 US$ '000
Current portion 251,596 379,919
Non-current portion 863,065 660,835
--------------------- ---------------------
1,114,661 1,040,754
========= =========
During the year ended 31 December 2018, the Group entered a
syndicated facility amounting to US$ 2.0 billion. The syndicated
facility was used to settle an existing syndicated loan and for
acquisition purposes. The facility is structured into three sub
facilities, these sub facilities are completely repayable within
18-60 months. The facility is secured against corporate guarantee
provided by NMC Health Plc and its certain operating subsidiaries.
The facility carries interest at LIBOR plus margin.
In addition to the above facilities, term loans also include
other long term and short-term revolving loans which get drawn down
and repaid over the period. The Group has charged an amount of US$
nil (31 December 2018 US$ 13,124,000) to the consolidated income
statement with respect to unamortised transaction costs of existing
debts which have been settled using proceeds of new syndicate
loan.
22 CONVERTIBLE BOND AND SUKUK
Convertible bond
At 30 June 2019, there were 2,250 convertible bond units in
issue. Each bond has a par value of US$ 200,000. The bonds carry a
coupon rate of 1.875% per annum, payable half-yearly in arrears on
30 April and 31 October. The bonds were issued on 30 April
2018.
Unless the bondholders exercise the option to convert to shares,
bond will be redeemed by cash on 02 May 2023 or maturity. The bonds
are convertible (at any time between 11 June 2018 and their
maturity date, 02 May 2025) into a fixed number of ordinary shares
of the parent of the Group on the basis of a fixed exchange price
of US$ 72.7301.
The convertible bonds are separated into liability and equity
components based on the terms of the contract. As of 30 June 2019,
the fair value of the liability component of US$ 394,249,000 (31
December 2018: US$ 387,664,000) (net of transaction costs) is
recorded as liability and residual amount of US$ 64,960,000 (31
December 2018: US$ 64,960,000) is recorded as equity component (net
of transaction costs).
The total finance cost recognised during the period amounted to
US$ 10,806,000.
Sukuk
On 21 November 2018, the Group issued US$400,000,000 Sukuk
certificates ("Islamic finance) with maturity for payment on 2023.
Sukuk carry a profit rate of 5.950%, payable half-yearly in arrears
on 21 May and 21 November. The facility is secured against
corporate guarantee provided by NMC Health Plc and its certain
operating subsidiaries.
As of 30 June 2019, the carrying amount of the Sukuk liability
amounts to US$ 395,944,000
(31 December 2018: US$ 395,345,000). The carrying amount
approximates its fair value.
The total finance cost recognised during the period amounted to
US$ 12,499,000.
23 LEASE LIABILITIES
The movements in lease liabilities during the period are as
follows:
US$ '000
Lease liabilities recognised on adoption of IFRS
16 on 1 January 2019 (Note 2.2) 729,269
----------
Additions from business combinations 588
----------
Interest expense 24,278
----------
Additions of new leases during the period 2,875
----------
Lease payments made in the period (49,142)
----------
Exchange difference (1,002)
----------
Lease liabilities as at 30 June 2019 706,866
----------
Non-current lease liabilities 665,186
----------
Current lease liabilities 41,680
----------
24 DIVID
In the AGM on 20 June 2019 the shareholders approved a dividend
of 18.1 pence per share, amounting to GBP 37,785,000 (US$
47,563,000) to be paid to shareholders on the Company's share
register on 14 June 2019 (30 June 2018: a dividend of GBP
27,066,000 equivalent to US$ 35,739,000 was approved and paid on 15
June 2018).
In addition to above, an amount of US$ 2,432,000 (30 June 2018:
US$ 1,700,000) relates to dividend payable to non-controlling
interest, out of which US$ 1,664,000 (30 June 2018: US$ 3,034,000)
paid during the period.
25 RELATED PARTY TRANSACTIONS
These represent transactions with related parties, including
major shareholders and senior management of the Group, and entities
controlled, jointly controlled or significantly influenced by such
parties, or where such parties are members of the key management
personnel of the entities. Pricing policies and terms of all
transactions are approved by the management of the Group.
The Company's immediate and ultimate controlling party is a
group of three individuals (H.E. Saeed Bin Butti, Dr BR Shetty and
Mr Khalifa Bin Butti) who are all shareholders and of whom two are
directors of the Company and who together have the ability to
control the Company. As the immediate and ultimate controlling
party is a group of individuals, it does not produce consolidated
financial statements.
Relationship agreement
The Controlling Shareholders and the Company have entered into a
relationship agreement, the principal purpose of which is to ensure
that the Company is capable of carrying out its business
independently of the Controlling Shareholders and that transactions
and relationships with the Controlling Shareholders are at arm's
length and on a normal commercial basis.
In accordance with the terms of the relationship agreement, the
Controlling Shareholders have a collective right to appoint a
number of Directors to the Board depending upon the level of their
respective shareholdings. This entitlement reduces or is removed as
the collective shareholdings reduce. The relationship agreement
includes provisions to ensure that the Board remains
independent.
Transactions with related parties included in the condensed
consolidated income statement are as follows:
Unaudited
-------------------------
6 months ended 30 June
2019 2018
US$ '000 US$ '000
Entities significantly influenced by shareholders
who are key
management personnel in NMC
Sales 9,066 148
Purchases of healthcare inventory* 39,920 58,940
Rent charged 97 153
Other Income 1,566 2,044
Management fees 5,350 2,450
*Purchases include pharmaceutical products manufactured by
Neopharma for various companies and purchased by NMC Trading
division for distributing to various retailers, hospitals, clinics
etc in UAE. These purchase are made at regulated prices fixed by
the Ministry of Health in the UAE.
Amounts due from and due to related parties disclosed in the
condensed consolidated statement of financial position are as
follows:
Unaudited Audited
30 June 31 December
2019 2018
US$ '000 US$ '000
Entities significantly influenced by shareholders
who are key management personnel in NMC
Amounts due to related parties 24,518 47,737
Amounts due from related parties 13,102 7,346
Outstanding balances with related parties at 30 June 2019 and 31
December 2018 were unsecured, payable on 50-60 days term and
carried interest at 0% (31 December 2018: 0%) per annum. Settlement
occurs in cash. As at 30 June 2019: US$ nil of the amounts due from
related parties were past due but not impaired (31 December 2018:
US$ nil ).
Pharmacy licenses in UAE under which the Group sells its
products, are granted to the shareholders or directors of the
Company, who are UAE nationals. No payments are made in respect of
these licenses to shareholders or directors.
Compensation of key management personnel
Unaudited
--------------------------------------------------
6 months ended 30 June
2019 2018
US$ '000 US$ '000
Short term benefits 11,450 11,075
Employees' end of service benefits 23 23
----------------------- -----------------------
11,473 11,098
========== ==========
The key management personnel include all the Non-Executive
Directors, the three (30 June 2018: three) Executive Directors and
four (30 June 2018: four) senior management personnel.
During the period an additional shares of 357,212 (Six month
ended 30 June 2018: 232,601) was granted to Executive Directors and
other senior management in the form of share options.
Dr CR Shetty, who is a related party of one of the shareholders
is employed as the Group Chief Medical officer. The total
compensation for employment received by that related party in the
six months ended 30 June 2019 amounts to US$ 1,434,000 (six months
ended 30 June 2018: US$ 1,655,000).
26 CONTINGENT LIABILITIES
The Group had contingent liabilities in respect of bank and
other guarantees and other matters arising in the ordinary course
of business of US$ 38,778,000 at 30 June 2019 (31 December 2018:
US$ 26,411,000) from which it is anticipated that no material
liabilities will arise.
27 COMMITMENTS
Capital commitments
The Group has future capital commitments at 30 June 2019 of US$
18,299,000 (31 December 2018: US$ 31,774,000) principally relating
to the completion of on-going capital projects at period end.
28 FINANCIAL INSTRUMENTS CARRIED AT FAIR VALUE
Contingent consideration
Contingent consideration relates to acquisitions completed in
prior years. Movement in contingent consideration payable is as
follows:
Unaudited Audited
30 June 31 December
2019 2018
US$ '000 US$ '000
Balance at 1 January 17,240 10,519
Contingent consideration recognised at
acquisition - 14,604
Remeasurement gain (730) -
Fair value measurement 651 1,176
Unused amount reversed - (6,424)
Exchange gain (72) (272)
Payments made (2,124) (2,363)
----------------------- -----------------------
14,965 17,240
========== ==========
In accordance with the fair value hierarchy under IFRS 13,
contingent consideration is classified as a level 3 derivative
financial instrument. The fair value of outstanding contingent
consideration as at the reporting date is US$ 14,965,000 (31
December 2018: US$ 17,240,000) The valuation technique used for
measurement of contingent consideration is the weighted average
probability method and then applying discounting.
Contingent consideration payable as of 30 June 2019 comprises of
following:
Unaudited Audited
30 June 31 December
2019 2018
US$ '000 US$ '000
Sweden IVF 7,539 7,266
Premier 2,908 2,908
FMC - 696
Cytomed 3,974 3,774
Biogenesi - 1,117
Fecunmed - 735
Royal RAK 544 744
----------------------- -----------------------
14,965 17,240
========== ==========
Sweden IVF
Contingent consideration is payable subject to attainment of
EBITDA targets. Significant unobservable inputs used are EBITDA and
discount rate (10.0%). Full value of contingent consideration
payable is US$ 8,682,000 and its present value is US$7,539,000. A
1% increase in discount rate would result in decrease in fair value
of the contingent consideration by US$ 98,000 and a 1% decrease in
discount rate would result in increase in fair value by US$
101,000. Management believe EBITDA targets for FY 2019 - FY 2021
will be met and accordingly not considered sensitive to fair value
measurement.
Premier
Contingent consideration is payable subject to attainment of
2019 net profit targets. Significant unobservable inputs used are
profit before tax, multiple of 8 and discount rate (11.0%). Full
value of contingent consideration payable is US$ 2,922,000 and its
present value is US$2,908,000. A 1% increase in discount rate would
result in decrease in fair value of the contingent consideration by
US$ 23,000 and a 1% decrease in discount rate would result in
increase in fair value by US$ 24,000. Management believe profit
before tax targets for FY 2019 will be met and accordingly not
considered sensitive to fair value measurement.
FMC
The contingent consideration in relation to FMC were paid as the
target were met.
Cytomed
Contingent consideration is payable subject to attainment of
EBITDA targets. Significant unobservable inputs used are EBITDA and
discount rate (13.5%). Full value of contingent consideration
payable is US$ 4,083,000 and its present value is US$3,974,000. A
1% increase in discount rate would result in decrease in fair value
of the contingent consideration by US$ 21,000 and a 1% decrease in
discount rate would result in increase in fair value by US$ 21,000.
Management believe EBITDA targets for FY 2019 will be met and
accordingly not considered sensitive to fair value measurement.
Biogenesi
The contingent consideration in relation to FMC were paid as the
target were met.
Fecunmed
The contingent consideration in relation to Fecunmed were
remeasured and consequently no contingent liablity is payable as
the revenue target were not met.
Royal RAK
Contingent consideration is payable subject to collection of
recievables. Full value of contingent consideration payable is US$
619,000 and its present value is US$544,000. Management believe
recievables collection targets will be met and accordingly not
considered sensitive to fair value measurement.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR UAURRKOAWUUR
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August 22, 2019 02:01 ET (06:01 GMT)
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