IDHC Integrated Diagnostics Holdings Plc

Integrated Diagnostics Holdings Plc

9M 2024 Results

Thursday, 14 November 2024

Integrated Diagnostics Holdings plc reports year-on-year revenue growth of 34% in 9M 2024 with improving margins at all levels of profitability

(Cairo and London) - Integrated Diagnostics Holdings ("IDH," "the Group," or "the Company"), a leading provider of diagnostic services with operations in Egypt, Jordan, Nigeria, Sudan, and Saudi Arabia, announced today its unaudited financial statements for the nine-month period ended 30 September 2024. IDH reported revenue of EGP 4,107 million, an increase of 34% from the same period of last year. Top-line growth came on the back of rising test and patient volumes (up 9% and 6% year-on-year, respectively) coupled with higher average revenue per test. Improved operational efficiencies saw top-line growth filter down the income statement with margins improving across the board. More specifically, in 9M 2024, IDH reported EBITDA of EGP 1,249 million, up 43% year-on-year and with an associated margin of 30%. Similarly, IDH's bottom-line expanded an impressive 87% year-on-year to reach EGP 724 million in the nine months ended 30 September 2024, yielding a net profit margin (NPM) of 18%, up five percentage points from 9M 2023.

On a three-month basis, revenue recorded EGP 1,609 million in Q3 2024, representing a 36% increase from last year's third quarter. Meanwhile, IDH's bottom-line expanded 38% year-on-year to EGP 244 million in Q3 2024, with a NPM of 15% for the quarter.

Financial Results (IFRS)

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

Key Operational Indicators3

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

2 Cash balance includes time deposits, treasury bills, current accounts, and cash on hand.

3 Key operational indicators are calculated based on revenue for the periods of EGP 4,107 million and EGP 3,054 million for 9M 2024 and 9M 2023, respectively.

⁴ IDH rolled out 30 new branches in Egypt and two in KSA, while closing 1 branch in Jordan over the past 12-month period. It is important to note that due to the ongoing conflict in Sudan, only one of IDH's 18 branches in the country is currently operating, leading to a net growth in its branch network of 14 branches in 9M 2024.

Introduction

i.    Financial Highlights

·   IDH reported consolidated revenue of EGP 4,107 million in the nine months ended 30 September 2024. This represents a year-on-year expansion of 34% dually driven by a 9% year-on-year increase in tests performed and a 23% year-on-year increase in average revenue per test in the period. On a quarterly basis, revenue also increased by a solid 36% year-on-year to reach EGP 1,609 million in Q3 2024.

·    Gross profit recorded EGP 1,571 million in 9M 2024, up 38% year-on-year and yielding a gross profit margin of 38% versus 37% in the same period of last year. Improved gross profitability reflected lower direct wages and salary expenses which as a share of revenue declined to 18.8% in 9M 2024 from 19.2% in 9M 2023. On a three-month basis, gross profit recorded EGP 646 million up 35% year-on-year and with a margin of 40%, largely in line with last year's third quarter gross margin.

·    EBITDA5 recorded EGP 1,249 million for 9M 2024, an increase of 43% from last year's figure. EBITDA margin recorded 30% for the nine-month period, up from 29% in the same nine-month period of last year. Improved EBITDA profitability reflects higher gross profitability for 9M 2024 coupled with lower SG&A expenses and impairment loss on receivables booked in the period with the first owing to improved operating efficiency and the latter reflecting an improvement in economic conditions and stability across IDH's markets since the start of the year. In Q3 2024, EBITDA came in at EGP 581 million, up 41% year-on-year with a margin of 36% versus 35% in the same three months of last year.

·      Net profit came in at EGP 724 million in 9M 2024, up an impressive 87% from the corresponding period of last year. IDH's NPM for the period improved five percentage points to record 18% in 9M 2024 versus 13% last year. Bottom-line profitability for the period was boosted by FX gains of EGP 265 million in the period (up 166% year-on-year) and a 15% year-on-year decline in net interest expenses for 9M 2024. On a quarterly basis, net profit recorded EGP 244 million in 9M 2024, up 38% from Q3 2023. NPM for the quarter came in unchanged from last year at 15%.

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

ii.  Operational Highlights

·      As of 30 September 2024, IDH's branch network stood at 608 branches, representing a net year-on-year increase of 14 branches compared to its network as at 30 September 2023. In the nine-month period, IDH inaugurated 30 new branches in Egypt and two new branches in its new market of Saudi Arabia. Meanwhile, in Sudan the Company reopened one branch during Q3 2024 with the remaining 17 still indefinitely shut as the country civil conflict continues. Finally, during the year, IDH saw the closure of one of its airport branches in Jordan as demand for Covid-19 testing continued its decline.

·     During 9M 2024, IDH conducted 28.8 million tests across its geographies, a 9% year-on-year increase from the 26.5 million tests performed in the same period of last year.

·     The average revenue per test reached EGP 142 in 9M 2024, an increase of 23% compared to the EGP 115 figure recorded in 9M 2023. This increase largely reflected to strategic price increases rolled out by IDH to address inflationary pressures in its primary markets, including Egypt and Nigeria.

·     IDH served 6.6 million patients in 9M 2024, up 6% year-on-year. Meanwhile, in line with recent trends and reflecting the success of IDH's value extraction strategy, the average number of tests per patient reached a new record-high of 4.4 tests in 9M 2024, versus 4.2 tests in 9M 2023 and 3.7 in 9M 2022. The continued rise in average tests per patient underscores the effectiveness of IDH's initiatives, including its loyalty program introduced in FY 2021, which remains a key driver behind the steady rise in tests per patient.

iii. Updates by Geography

·      In Egypt (82.1% of total revenue in 9M 2024), IDH recorded revenue of EGP 3,373 million, an increase of 35% from the EGP 2,500 million figure recorded in the same period of last year. Top-line growth in IDH's largest market was fuelled by a 10% year-on-year increase in tests performed combined with a 23% year-on-year rise in average revenue per test as IDH successfully increased prices to combat rising inflation in the country. On a quarterly basis, IDH's Egyptian operations reported revenue of EGP 1,304 million in Q3 2024, up 32% year-on-year.

·      IDH's Jordanian subsidiary, Biolab (16.1% of total revenues in 9M 2024), saw revenue reach JOD 10.6 million in 9M 2024, just 2% below last year's top-line figure. Lower revenue came on the back of a 3% year-on-year decline in net revenue per test due to stringent pricing regulations imposed on Jordan's health sector. In EGP terms, operations in Jordan reported revenues of EGP 662 million in 9M 2024 and EGP 276 million in Q3 2024, representing year-on-year rises of 43% and 59%, respectively, due to the translation effect from a weakened EGP.

·      In Nigeria (1.5% of total revenues in 9M 2024), Echo-Lab reported revenue of NGN 2,012 million, an increase of 38% from last year's figure. Higher revenue came on the back of a 63% year-on-year increase in average revenue per test as Echo-Lab continued to raise prices in step with inflation. Rising inflation weighed on patients purchasing power with test and patient volumes for the nine-month period declining 15% and 14%, respectively. In EGP-terms, revenue in Nigeria decline 23% year-on-year to EGP 61 million in 9M 2024 reflecting a weaker Naira during the period. In Q3 2024, revenue in the country increased marginally year-on-year to reach EGP 22 million.

·      Biolab KSA, IDH's newest venture in Saudi Arabia (0.2% of total revenues in 9M 2024), which began operations in Q1 2024 with one branch opening in January and another in March, reported revenue of SAR 790 thousand in 9M 2024. Since inception, Biolab KSA has performed 21 thousand tests with average revenue per test standing at SAR 38. Operations in the new market are continuing to ramp up smoothly with revenue in Q3 2024 standing at SAR 450 thousand, up 60% from revenue recorded in Q2 2024 as Biolab KSA continue to serve a growing number of patients across its two operational branches. IDH views the Saudi Arabian market as a key driver of future growth for the company thanks to the market's large, growing and increasingly health-conscious population which is looking for access to high-quality diagnostic services from a currently highly fragmented market.

·      In Q3 2024, IDH reopened one branch in Sudan after temporarily shutting down all branches earlier this year. It is worth noting that the remaining 17 branches remain closed indefinitely as the civil conflict in the countries continues.

iv. Management Commentary

Commenting on the Group's performance, IDH Chief Executive Officer Dr. Hend El-Sherbini said: "As we enter the final weeks of the year, I am happy to report another set of strong financial and operational figures across our growing footprint. Since the start of the year, we have been hard at work to deliver on our strategic vision and priorities, and I am pleased with the progress achieved up to this point particularly when considering the unprecedented challenges faced across our footprint. This not only leaves us on track to meet our FY 2024 targets, but also enables us to enter the new year in a strong position to drive further, sustainable growth in 2025 and beyond.

Before diving further into our results, it is worth noting that during the third quarter we successfully completed our delisting from the Egyptian Exchange (EGX). Today, we maintain our standard listing on the London Stock Exchange (LSE) and the entire IDH team remains committed to meeting the disclosure requirements of companies listed on the LSE. While our listing on the EGX has helped us increase our local visibility in the market where we generate the majority of our business, we are excited to build on the original path we started on the LSE. We look forward to continuing to create value for all our shareholders who place their trust in our business and story.

Turning to our results, in 9M 2024, we reported consolidated revenue of EGP 4.1 billion, up a solid 34% from the same nine months of last year. Further down the income statement, we reported improving profitability at all levels as our proactive efforts to boost operational efficiencies across every aspect of our operations continued to bear fruit. Notably, we were able to reduce the ramp-up costs of our new venture in Saudi Arabia, achieving a two-percentage-point improvement, which signals the continued normalization of our profitability.

On a regional basis, our Egyptian operations continued to lead the pack, with revenue growing an impressive 35% year-on-year on the back of both rising volumes and prices. Testament to the success of our growth strategies in the market, we saw average test per patient reach another record-high of 4.3 tests, up from 3.8 tests per patient recorded just two years ago in 9M 2022. On a similar note, our radiology venture, Al-Borg Scan, remained a key revenue driver, expanding 53% year-on-year and contributing 5% to the country's top-line. In light of the continued growth seen in the market, we have remained committed to our expansion targets and have thus far inaugurated 30 new branches in our home market. This not only sees us further cement our leadership in the local market but also enables us to tap into new pockets of growth as Egypt's population continues to expand both within and outside Greater Cairo.

In our second-largest market of Jordan, geopolitical instability continued to impact patient volumes which declined 4% year-on-year largely due to lower demand from medical tourists from around the region. Combined with a marginal fall in average revenue per test during 9M 2024, this saw Jordan's top-line in local currency slightly contract from the same period of last year. On the other hand, our Nigerian operations saw year-on-year revenue growth in local currency terms of 38% as we continued to raise prices in line with inflation. A weakening Nigerian Naira over the last year has, however, weighed on our results in Egyptian Pound (EGP) terms as well as on patient's purchasing power with volumes declining versus the previous year.

In our newly launched Saudi Arabian market, we continued to ramp up operations in line with our targets. During the third quarter of the year, our two operational branches located in Riyadh served a growing number of patients and generated SAR 451 thousand in revenue for the three-month period. This marks a 60% quarter-on-quarter expansion from revenue generated in the second quarter of this year and takes total revenue since inception to SAR 790 thousand. Thus far, our performance in the market has been encouraging and has reaffirmed our conviction that the market offers important growth opportunities for IDH to capture in the future. In the coming months, our priority remains delivering exceptional quality and service while building our profile in the market. On the latter front, since the launch of our first branch back in January, we have adopted a comprehensive brand awareness and marketing strategy, which has included outdoor advertising, social media campaigns, community event sponsorships, and partnerships with local healthcare providers, and which has thus far yielded the desired results.

As we wrap up the final month and a half of 2024, our strategy and priorities remain unchanged. In our home market, since the floatation of the EGP back in March we have seen a steady improvement in the macroeconomic environment with international investors increasingly looking to capitalize on the market's attractive fundamentals. We have also seen a steady decline in inflation which we expect to help patients' purchasing power and in turn boost demand for our services. As always, we are prioritizing our patients' wellbeing and remain committed to ensuring our tests and services remain affordable to as many people as possible by sharing the inflationary burden with them. Meanwhile, we are particularly excited to continue ramping up our Saudi Arabian venture as we work to capture the market's full potential. As we close out 2024 and kick start 2025, I look forward to working with everyone at IDH to continue providing exceptional care for our patients and incremental value for all stakeholders.

While we remain mindful of the challenges ahead, in particular around currency fluctuations and inflationary pressures in some of our key markets, our proactive risk management strategies, including price adjustments and cost control measures, have thus far successfully shielded the business and we are confident in our ability to sustain our growth trajectory. In light of this, we are reaffirming our guidance of around 30% revenue growth in FY 2024, with an expected EBITDA margin of approximately 30% for the year, excluding non-recurring expenses and results from our newly inaugurated venture in Saudi Arabia.

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Analyst and Investor Call Details

An analyst and investor call will be hosted at 12:00 pm (UK) | 14:00 (Egypt) on Tuesday, 19 November 2024. You can learn more details and register for the call by clicking on this link.

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

About Integrated Diagnostics Holdings (IDH)

IDH is a leading diagnostics services provider in the Middle East and Africa offering a broad range of clinical pathology and radiology tests to patients in Egypt, Jordan, Nigeria, Sudan, and Saudi Arabia. The Group's core brands include Al Borg, Al Borg Scan and Al Mokhtabar in Egypt, as well as Biolab (Jordan), Echo-Lab (Nigeria), Ultralab and Al Mokhtabar Sudan (both in Sudan), and Biolab KSA (Saudi Arabia). With over 40 years of experience, a long track record for quality and safety has earned the Company a trusted reputation, as well as internationally recognised accreditations for its portfolio of over 3,000 diagnostics tests. From its base of 601 branches as of 31 December 2023, IDH served over 8.5 million patients and performed more than 36.1 million tests in 2023. IDH will continue to add laboratories through a Hub, Spoke and Spike business model that provides a scalable platform for efficient expansion. Beyond organic growth, the Group targets expansion in appealing markets, including acquisitions in the Middle Eastern, African, and East Asian markets where its model is well-suited to capitalise on similar healthcare and consumer trends and capture a significant share of fragmented markets. IDH has been a Jersey-registered entity (i) whose shares are admitted to the equity shares (transition) category (previously, the standard listing segment) of the Official List of the UK Financial Conduct Authority and admitted to trading on the main market for listed securities of the London Stock Exchange (ticker: IDHC) since May 2015.

Shareholder Information

LSE: IDHC.L

Bloomberg: IDHC:LN

Listed on LSE: May 2015

Shares Outstanding: 581,326,272

Contact

Tarek Yehia

Investor Relations Director

T: +20 (0)2 3332 1126 | M: +20 10 6882 6678 | tarek.yehia@idhcorp.com

Forward-Looking Statements

These results for the quarter ended 30 September 2024 have been prepared solely to provide additional information to shareholders to assess the group's performance in relation to its operations and growth potential. These results should not be relied upon by any other party or for any other reason. This communication contains certain forward-looking statements. A forward-looking statement is any statement that does not relate to historical facts and events, and can be identified by the use of such words and phrases as "according to estimates", "aims", "anticipates", "assumes", "believes", "could", "estimates", "expects", "forecasts", "intends", "is of the opinion", "may", "plans", "potential", "predicts", "projects", "should", "to the knowledge of", "will", "would" or, in each case their negatives or other similar expressions, which are intended to identify a statement as forward-looking. This applies, in particular, to statements containing information on future financial results, plans, or expectations regarding business and management, future growth or profitability and general economic and regulatory conditions and other matters affecting the Group.

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

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

Group Operational & Financial Review

i.    Revenue and Cost Analysis

Detailed Segment Performance Breakdown

Revenue Contribution by Country

Average Exchange Rate

Patients Served and Tests Performed by Country

Operational Branches by Country

ii.  Balance Sheet Analysis

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