Half-year Report

-Integrated Diagnostics Holdings Plc

1H 2021 Results

Thursday, 2 September 2021

 

Integrated Diagnostics Holdings Plc delivers exceptional growth on the back of strong demand across its entire service portfolio

 

 

(London) Integrated Diagnostics Holdings ("IDH," "the Group," or "the Company"), a leading consumer healthcare company with operations in Egypt, Jordan, Sudan and Nigeria, released today its reviewed financial statements and operational performance for the first half of 2021, recording revenue of EGP 2,293 million, up 141% versus the comparable period of last year. Normalised EBITDA¹ recorded EGP 1,203 million in 1H 2021, representing a 227% year-on-year increase, while net profit expanded 283% year-on-year to reach EGP 668 million for the period. In the second quarter of 2021, revenues reached a new record-high of EGP 1,164 million, up 3% from an already impressive first quarter of the year, with net profit recording EGP 327 million and an associated margin of 28%.

 

Financial Results

EGP mn	1H 2020	1H 2021	Change
Revenues	950	2,293	141%
Cost of Sales	(503)	(988)	96%
Gross Profit	446	1,305	193%
Gross Profit Margin	47%	57%	9.9 pts
Operating Profit2	277	1,094	291%
Normalised EBITDA1	367	1,203	227%
EBITDA Margin	39%	52%	13.8 pts
Net Profit	175	668	283%
Net Profit Margin	18%	29%	10.8 pts
Cash Balance	719	1,587*	121%

*Cash balance prior to payment of US$ 29.1 million dividend for year ended 31 December 2020, distributed on 29 July 2021.

 

Key Operational Indicators

	1H 2020	1H 2021	change
Branches	462	495	33
Patients ('000)	2,890	4,673	62%
Revenue per Patient (EGP)	329	491	49%
Tests ('000)	11,234	16,318	45%
Revenue per Test (EGP)	85	141	66%
Test per Patient	3.9	3.5	-10%

 

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

2 Operating Profit excludes one-off fees incurred in 1H 2021 (EGP 29.0 million) related to the Company's dual listing on the EGX completed in May 2021.

Introduction

 

i.    Financial Highlights

·    Revenue recorded EGP 2,293 million in 1H 2021, up a remarkable 141% versus the comparable period of last year supported by both IDH's Covid-19-related³ tests and a sustained recovery in the Group's conventional test offering. Top-line growth for the first half of 2021 was dual-driven, as tests performed and average price per test posted year-on-year expansions of 45% and 66%, respectively. Covid-19-related tests contributed to 48% of IDH's top-line during the first six months of the year compared to the 9% contribution made during 1H 2020. Excluding Covid-19-related tests, the Group witnessed a 38% year-on-year expansion in revenue generated from its conventional test offering. The year-to-date performance was buoyed by an impressive second quarter, which saw IDH build on the strong momentum from the start of the year to record revenues of EGP 1,164 million for 2Q 2021, up 159% versus 2Q 2020 and 3% from 1Q 2021.

·    Consolidated revenues continued to be supported by the Group's house call service in Egypt and Jordan, which in 1H 2021 contributed to 23% of total revenue versus the 18% contribution made this time last year. Through its house call service, IDH served more than 646,000 patients in 1H 2021 (up 88% versus 1H 2020), performing more than 3.4 million tests (up 49% versus 1H 2020). Leveraging an expanded reach, IDH was able to carry out an average of 3,600 house call visits per day in 1H 2021, up significantly from the 1,900 visits per day performed in 1H 2020.

·    Gross Profit grew by 193% year-on-year in 1H 2021 to record EGP 1,305 million with an associated margin of 57% versus 47% in the same period last year. Improved gross profitability came on the back of strong top-line growth and the subsequent dilution of fixed costs for the period such as direct salaries and wages and other expenses. Gross profit for the second quarter of 2021 recorded EGP 667 million, up 4% from the previous quarter and with a gross margin of 57%.

·    Operating Profit recorded EGP 1,094 million, a 295% year-on-year expansion, with an associated margin of 48% versus 29% last year. The remarkable growth in operating profit was supported by strong gross profitability, the dilution of SG&A outlays for the period due to their relatively fixed nature, and a normalisation of provisions booked in 1H 2021, which recorded EGP 10 million versus EGP 28 million in 1H 2020 to account for expected credit losses in accordance with IFRS 9.

·    Normalised EBITDA⁴ reached EGP 1,203 million in 1H 2021, an increase of 227% from the comparable period of last year. EBITDA margin expanded to 52% for the period versus 39% in 1H 2020. Solid improvements in EBITDA profitability were driven by strong top-line growth in 1H 2021 and the subsequent dilution of IDH's fixed costs for the period. On a quarterly basis, normalised EBITDA recorded EGP 603 million, up 267% year-on-year and largely in line with last quarter's figure. Normalised EBITDA margin stood at 52% for the quarter, down from the 53% margin recorded in 1Q 2021 as IDH booked higher accounting fees (related to the EGX requirement to publish quarterly reviewed financial statements) and additional bonus payments to senior management during 2Q 2021. 

·    Net Profit expanded 283% year-on-year to record EGP 668 million in 1H 2021, with a net profit margin of 29% versus 18% in 1H 2020. Net profit growth was supported by strong EBITDA level profitability and comes despite IDH booking EGP 29 million in one-off fees related to the Company's dual-listing in May 2021. In 2Q 2021, net profit stood at EGP 327 million with an associated margin of 28%.

·    A dividend of US$ 29.1 million (US$ 0.0485 per share) for the year ended 31 December 2020 was distributed to shareholders on 29 July 2021. This represents an increase of 4% compared to a final dividend of US$ 28 million in aggregate in the previous financial year.

 

3 Covid-19-related tests include both core Covid-19 tests (Polymerase Chain Reaction (PCR), Antigen, and Antibody) as well as other Covid-19-related tests which include a bundle of routine inflammatory and clotting markers (which witnessed strong demand following the outbreak of Covid-19) such as Complete Blood Picture, Erythrocyte Sedimentation Rate (ESR), D-Dimer, Ferritin and C-reactive Protein (CRP), among others.

4 Normalised EBITDA is calculated as operating profit plus depreciation and amortization and minus one-off fees incurred in 1H 2021 (EGP 29 million) related to the Company's EGX listing completed in May 2021.

ii.  Operational Highlights

·    IDH's branch network stood at 495 branches as of 30 June 2021, up from 462 branches and 481 branches as of 30 June 2020 and 31 December 2020, respectively.

·    Total tests performed recorded 16.3 million in 1H 2021, up 45% year-on-year. Higher test volumes were supported by both IDH's Covid-19-related⁵ test offering as well as a sustained recovery in the Group's conventional test offering, with the latter up 29% versus the first six months of 2020. In 2Q 2021, IDH performed 8.3 million tests, up 2% from the previous quarter as IDH performed both more Covid-19-related and conventional tests during the second quarter of the year compared to the previous quarter. The quarter-on-quarter expansion is particularly noteworthy as the second quarter included the expected slowdown related to the holy month of Ramadan and Eid vacation.

·    Average revenue per test expanded 66% year-on-year to EGP 141 in 1H 2021. Controlling for the generally higher value Covid-19-related⁴ tests, average revenue per test would have increased 7% versus last year.

·    Total patients served reached 4.7 million in 1H 2021, a 62% year-on-year increase. Meanwhile, average test per patient declined to 3.5 in 1H 2021 from 3.9 last year as an increasing number of patients visit the Group's labs for single Covid-19 tests (PCR, Antigen and Antibody).

·    Revenue generated by IDH's Egyptian operations expanded 140% year-on-year on the back of solid growth across both test and patient volumes. On a service basis, top-line growth was supported by both Covid-19-related⁵ and conventional tests, and was further bolstered by the Group's house call service which in 1H 2021 made up 25% of Egypt's top-line versus 20% last year. Excluding Covid-19-related contributions in 1H 2021, conventional tests performed and revenue generated in Egypt expanded 29% and 38% year-on-year, respectively.

·    Al-Borg Scan recorded revenue of EGP 20 million in 1H 2021, an increase of 124% compared to last year.  The number of radiology tests performed during the first six months of 2021 reached 34,297, more than double the tests performed last year.

·    Wayak turned EBITDA positive during 2Q 2021 on the back of growing revenue and optimised overhead costs. On a year-to-date basis, Wayak's revenue nearly tripled versus last year to reach EGP 4.3 million in 1H2021 supported by a growing customer base.

·    In Jordan, revenue increased 176% year-on-year on the back of strong volume growth for the period. Top-line growth was supported by Biolab's Covid-19-related test offering coupled with solid growth in its conventional test offering, with the latter having made a full recovery from last year's slowdown. In fact, excluding Covid-19-related tests, the number of tests performed and revenue generated would have increased 43% and 41%, respectively.

·    In August, Biolab was selected as the preferred bidder to operate testing stations in Amman's Queen Alia International Airport (QAIA). This landmark partnership will allow IDH to continue playing a frontline role in the fight against Covid-19, while helping to further expand Biolab's volumes and revenue in the coming period.

·    In Nigeria, revenues continued their steady expansion, growing 68% year-on-year (76% in NGN terms) in 1H 2021 supported by a 47% increase in tests performed versus last year.

 

5 Covid-19-related tests include both core Covid-19 tests (Polymerase Chain Reaction (PCR), Antigen, and Antibody) as well as other Covid-19-related tests which include a bundle of routine inflammatory and clotting markers (which witnessed strong demand following the outbreak of Covid-19) such as Complete Blood Picture, Erythrocyte Sedimentation Rate (ESR), D-Dimer, Ferritin and C-reactive Protein (CRP), among others.

iii. Management Commentary

 

Commenting on the Group's performance for the six-month period, IDH Chief Executive Officer Dr. Hend El-Sherbini said: "Halfway through 2021, I am delighted with the Group's operational and financial performance, which has seen us continue to build on an impressive start to the year to deliver another set of record-breaking results. Our revenues expanded an impressive 141% versus last year on the back of growing patient and test volumes, improved pricing and an increasingly optimised service mix. While top-line growth continued to be bolstered by our Covid-19-related⁶ tests, I am happy to report that we have continued to witness robust growth in our conventional test offering for the second quarter in a row, signalling a sustained recovery which we expect to continue even as Covid-19-related volumes begin to taper off. It is particularly important to highlight that the Group's conventional test volumes in 1H 2021 surpassed pre-Covid-19 levels, coming in 4% higher than test volumes recorded in the same six months of 2019 after adjusting for the impact of the 100 Million Healthy Lives Campaign⁷. This is further evidence of the robust underlying demand for high quality diagnostic services present across our markets of operation, and of our continued ability to service this growing market."

 

"On a regional front, both our Egyptian and Jordanian operations continued to report strong revenue growth supported by our conventional and Covid-19-related service offering. Similar to the trend witnessed at the consolidated level, across both geographies we recorded robust growth in our conventional test portfolio supported by a widespread recovery of economic activity coupled with our multi-pronged efforts aimed at stimulating demand across the entirety of our service roster. Top-line growth in both countries was further buoyed by our home call services which continue to grow in popularity especially in our home market of Egypt, where tests performed directly in patient homes made up 25% of the country's top-line in the first half of 2021. Our ability to effectively ramp up the service in step with growing demand is enabling us to perform up to five thousand house visits per day, helping us to tap into new segments of the population while boosting our tests per patient as patients enjoy the added comfort of having the tests administered in their own homes. House call services represent an important driver of future growth for the Company well beyond the end of the Covid-19 crisis, and as such we are continuing our efforts to expand and further streamline the service. In parallel, we are also seeing growing contributions coming from our radiology venture, Al-Borg Scan, which recorded year-on-year revenue growth of 124% as tests performed more than doubled in the first half of the year. To capitalise on the attractive growth opportunities offered by the segment, we are currently aiming to launch at least three new Al-Borg Scan branches over the coming twelve months. Looking ahead, we expect to continue recording growing contributions to consolidated revenue and profitability as Al-Borg Scan's operations ramp up further."

 

"At our Nigerian operations, we witnessed sustained top-line growth of 68% for the first half of this year. This comes as our investments to revamp Echo-Lab's operations and strategic marketing efforts continue to bear fruit, attracting an increasing number of patients to our branches. This is a particularly noteworthy achievement in light of the multiple political and pandemic-related difficulties faced over the last year. Finally in Sudan, despite recording an impressive 217% year-on-year revenue expansion in local currency, the significant devaluation of the Sudanese Pound in February 2021 continued to weigh on the country's results. Despite this, we remain committed to the country in the long-term, with management hard at work to continue driving sustainable long-term growth beyond the current difficult operating environment."

 

"Further down the income statement, we reported impressive margin expansions at all levels of profitability supported by strong top-line and the subsequent dilution of IDH's fixed costs. Additionally, starting in the second quarter of this year we recorded a decline in raw material as percentage of revenues to 16.8% compared to 19.3% in the previous quarter. This was partially due to a decline in Jordan's Covid-19-positive cases requiring confirmatory retests, and is also directly attributable to our successful efforts to reduce PCR test kit costs. Overall, strong top-line growth combined with increased cost efficiencies, higher interest income, and lower provisions booked in the first half of 2021, helped drive a nearly fourfold increase in net profit for 1H 2021 which reached EGP 668 million with an associated margin of 29%."

 

"Heading into the second half of the year, our strategic priorities remain unchanged as we aim to capitalise on the positive momentum witnessed across both our operations and the wider macroeconomic context. In the short-term we will continue to assist governments in Egypt and Jordan in their fight against the Covid-19 pandemic providing our full roster of Covid-19-related services across both our branches and through our expanded house call service. On this front, I am very happy with our efforts to secure multiple new partnerships over the last few months to offer PCR testing to travellers in both Egypt and Jordan. Most importantly, I am pleased to note that Biolab, our Jordanian subsidiary, has been selected as the preferred bidder by Airport International Group (AIG), the operator of Amman's Queen Alia International Airport, to carry out PCR testing for passengers arriving in Jordan. As part of the agreement, Biolab will also offer rapid PCR testing for Covid-19 to departing passengers who were not able to do a PCR test prior to reaching the airport. Through this landmark partnership, we will be able to continue playing a frontline role in the fight against the Covid-19 virus in Jordan while further expanding our reach and patient base in the country. In parallel, we are looking to sign additional strategic deals with international air carriers to perform PCR tests for passengers similar to our existing agreements with National Air Services (NAS) and Pure Health UAE which see us conduct PCR testing for passengers flying from Egypt to Kuwait and the UAE. Our ability to secure such partnerships is proof positive of the strong reputation enjoyed by IDH both locally and internationally, and further strengthens our offering for international travellers which currently sees the Company offer internationally-accredited PCR tests to travellers within and outside the MENA region. Meanwhile, we are working tirelessly to deliver on our post-Covid-19 growth strategy which will see us leverage our expanded patient base, branch network, and service offering to drive new sustainable growth in the years to come. To this end, in the first six months of the year we successfully added 14 new branches in our home market of Egypt, keeping us on track to meet our goal of 30 to 35 new lab rollouts for 2021 and helping us to further cement our leadership position in the country's private sector diagnostics market. In parallel, we continue to assess potential growth opportunities across new African, Middle Eastern, and Asian markets, and have secured a USD 45 million loan from the International Finance Corporation (IFC) to finance our growth plans in the coming period."

 

"In light of our half-year results and the encouraging recovery witnessed across our markets, I am confident that the Group is on track to deliver a record-breaking performance in 2021, with year-on-year revenue growth surpassing the 70% mark and a normalised EBITDA⁸ margin of 47% to 49%. We expect our full-year performance to be supported by both our conventional test offering, which in 1H 2021 continued to witness a robust rebound, coupled with continued strong demand for our Covid-19-related portfolio. Moreover, with Egypt expected to record a new wave of infections later this year, we could see greater than forecasted demand for our Covid-19-related offering in the second half of 2021, with the segment potentially pushing consolidated top-line growth into the 80% range, with an EBITDA margin of around 50%."

 

6 Covid-19-related tests include both core Covid-19 tests (Polymerase Chain Reaction (PCR), Antigen, and Antibody) as well as other Covid-19-related tests which include a bundle of routine inflammatory and clotting markers (which witnessed strong demand following the outbreak of Covid-19) such as Complete Blood Picture, Erythrocyte Sedimentation Rate (ESR), D-Dimer, Ferritin and C-reactive Protein (CRP), among others.

7 The 100 Million Healthy Lives Campaign which ran from November 2018 through June 2019. As part of the Campaign, the Group performed 2.4 million tests in 1H 2019.

⁸ Normalised EBITDA is calculated as operating profit plus depreciation and amortization and minus one-off fees incurred in 1H 2021 (EGP 29 million) related to the Company's EGX listing completed in May 2021.

- End -

 

 

Analyst and Investor Call Details

An analyst and investor call will be hosted at 2pm (UK) | 3pm (Egypt) on Monday, 6 September 2021.

Web conference access details

You can register for the call by clicking on this link, and you may dial in using the conference call details below:

·      Dial-in Number: 820 8840 0136

·      Confirmation Number: 131242

Regular dial-in details

US dial-in number: +1 (646) 558-8656

UK dial-in number: +44 208 080 6592

Meeting ID: 820 8840 0136

Password: 131242

For more information about the event, please contact: [email protected]

 

About Integrated Diagnostics Holdings (IDH)

IDH is a leading consumer healthcare company in the Middle East and Africa with operations in Egypt, Jordan, Sudan and Nigeria. The Group's core brands include Al Borg, Al Borg Scan and Al Mokhtabar in Egypt, as well as Biolab (Jordan), Ultralab and Al Mokhtabar Sudan (both in Sudan) and Echo-Lab (Nigeria). A long track record for quality and safety has earned the Company a trusted reputation, as well as internationally recognised accreditations for its portfolio of over 2,000 diagnostics tests. From its base of 495 branches as of 30 June 2021, IDH will continue to add laboratories through a Hub, Spoke and Spike business model that provides a scalable platform for efficient expansion. Beyond organic growth, the Group's expansion plans include acquisitions in new Middle Eastern, African, and East Asian markets where its model is well-suited to capitalise on similar healthcare and consumer trends and capture a significant share of fragmented markets. IDH has been a Jersey-registered entity with a Standard Listing on the Main Market of the London Stock Exchange (ticker: IDHC) since May 2015 with a secondary listing on the EGX since May 2021 (ticker: IDHC.CA).

 

Shareholder Information

LSE: IDHC.L

EGX: IDHC.CA

Bloomberg: IDHC:LN

Listed on LSE: May 2015

Listed on EGX: May 2021

Shares Outstanding: 600 million

 

Contact

Nancy Fahmy

Investor Relations Director

T: +20 (0)2 3345 5530 | M: +20 (0)12 2255 7445 | [email protected]

 

Forward-Looking Statements

These results for the six-month period ended 30 June 2021 have been prepared solely to provide additional information to shareholders to assess the group's performance in relation to its operations and growth potential. These results should not be relied upon by any other party or for any other reason. This communication contains certain forward-looking statements. A forward-looking statement is any statement that does not relate to historical facts and events, and can be identified by the use of such words and phrases as "according to estimates", "aims", "anticipates", "assumes", "believes", "could", "estimates", "expects", "forecasts", "intends", "is of the opinion", "may", "plans", "potential", "predicts", "projects", "should", "to the knowledge of", "will", "would" or, in each case their negatives or other similar expressions, which are intended to identify a statement as forward-looking. This applies, in particular, to statements containing information on future financial results, plans, or expectations regarding business and management, future growth or profitability and general economic and regulatory conditions and other matters affecting the Group.

 

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

 

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

Group Operational & Financial Review

 

i.    Revenue and Cost Analysis

 

Revenue IDH reported revenue of EGP 2,293 million in 1H 2021, up an impressive 141% from the comparable period of last year driven by both its Covid-19-related9 tests and a sustained recovery in the Group's conventional test offering. Year-on-year top-line growth continued to be dually-driven as tests performed in 1H 2021 expanded 45% versus last year and average revenue per test increased 66% compared to the same six months of 2020. Although strong and rising demand for IDH's Covid-19-related test offering saw it make up nearly half of IDH's consolidated top-line (48% in 1H 2021 vs 9% in 1H 2020), the Group's conventional test offering also recorded robust year-on-year growth of 38% of the period. Growth in conventional business came on the back of a 29% increase in tests performed and a 7% rise in average revenue per conventional test.   Looking at the Group's Covid-19-related offering in more detail, revenues generated from core Covid-19 tests (PCR, Antigen and Antibody) amounted to EGP 830 million in 1H 2021, making up 36% of consolidated top-line for the period. In parallel, revenue generated by IDH's other Covid-19-related tests reached EGP 275 million in 1H 2021.   IDH's consolidated top-line was also supported by its ramped-up house call service in Egypt and Jordan, which contributed to 23% to consolidated revenue for 1H 2021 compared to 18% in 1H 2020. Through its house call service, IDH served more than 646,000 patients in 1H 2021, up 88% versus 1H 2020, performing more than 3.4 million tests, 49% above the figure recorded in 1H 2021. Leveraging an expanded reach, IDH was able to carry out an average of 3,600 house call visits per day in 1H 2021, up significantly from the 1,900 visits per day performed in 1H 2020.   The Group's year-to-date performance was bolstered by a remarkable second quarter, which saw IDH build an already strong first three months of the year. In 2Q 2021, IDH recorded revenue of EGP 1,164 million, up 159% versus the previous year and 3% above revenue recorded in 1Q 2021. As with the year-to-date performance, growth was supported by IDH's full service roster, with the number of conventional tests performed increasing 2.3% quarter-on-quarter despite the typical slowdown associated with the holy month of Ramadan and Eid holiday during 2Q 2021.   Detailed Consolidated Revenue Breakdown EGP mn 1Q 2020 1Q 2021 2Q 2020 2Q 2021 1H 2020 1H2021 Total revenues 500 1,130 450 1,164 950 2,293 Conventional tests 495 594 367 595 862 1,189 Total Covid-19-related tests 5 536 83 569 88 1,105 Core Covid-19 tests (PCR, Antigen, Antibody) 5 399 26 431 31 830 Other Covid-19-related tests 0 137 57 138 57 275 Contribution to consolidated revenue Conventional tests 99% 53% 82% 51% 91% 52% Total Covid-19-related tests 1% 47% 18% 49% 9% 48% Core Covid-19 tests (PCR, Antigen, Antibody) 1% 35% 6% 37% 3% 36% Other Covid-19-related tests 0% 12% 13% 12% 6% 12%   9 Covid-19-related tests include both core Covid-19 tests (Polymerase Chain Reaction (PCR), Antigen, and Antibody) as well as other Covid-19-related tests which include a bundle of routine inflammatory and clotting markers (which witnessed strong demand following the outbreak of Covid-19) such as Complete Blood Picture, Erythrocyte Sedimentation Rate (ESR), D-Dimer, Ferritin and C-reactive Protein (CRP), among others.   Revenue Analysis: Contribution by Patient Segment   Contract Segment At the Group's contract segment, revenue increased 149% year-on-year as test performed expanded 49% and average revenue per contract test increased 68% in 1H 2021. This saw the segment's contribution to total revenues reach 55% for the period versus 53% in the same six months of 2020. Covid-19-related10 testing contributed 47% of contract revenues in the first half of the year as the Company continued to witness strong demand for its offering in both Egypt and Jordan. Excluding Covid-19-related tests, the contract segment would have recorded an 45% year-on-year increase in revenue supported by a 33% rise in tests performed and a 9% increase in average revenue per test.   The contract segment's results continued to include contributions from IDH's agreement with Pure Health UAE (EGP 57 million), which saw IDH become the first lab to conduct PCR testing to screen passengers travelling from Egypt. In 1H 2021, PCR tests for Covid-19 performed as part of the agreement made up 5% of contract segment revenues and 7% of total core Covid-19 tests (PCR, Antigen, and Antibody) performed during the period.   Walk-in Segment Revenue from IDH's walk-in segment recorded a 132% year-on-year expansion in 1H 2021, contributing to 45% of consolidated revenues for the period versus the 47% contribution in the comparable period of 2020. In the first six months of the year, average revenue per test at the walk-in segment increased 71% year-on-year, while tests performed increased by 36% versus 1H 2020. The walk-in segment's revenue was also bolstered by the Group's Covid-19-related test offering, which in 1H 2021 contributed to just under half of the segment's top-line at 49%. Controlling for contributions from Covid-19-related tests in both periods, walk-in revenues for 1H 2021 would have increased a solid 30% versus last year on the back of a 17% rise in tests performed and an 11% increase in average revenue per test.   Key Performance Indicators Walk-in Segment Contract Segment Total 1H20 1H21 Change 1H20 1H21 Change 1H20 1H21 Change Revenue^ (EGP mn) 443 1,029 132% 507 1,264 149% 950 2,293 141% Covid-19-related revenue (EGP mn) 41 506 47 598 88 1,105 Patients ('000) 943 1,523 62% 1,947 3,150 62% 2,890 4,673 62% % of Patients 33% 33% 67% 67% Revenue per Patient (EGP) 470 676 44% 260 401 54% 329 491 49% Tests ('000) 3,063 4,164 36% 8,171 12,153 49% 11,234 16,318 45% % of Tests 27% 26% 73% 74% Covid-19-related tests ('000) 161 758 372% 417 1,842 342% 577 2,600 350% Revenue per Test (EGP) 145 247 71% 62 104 68% 85 141 66% Test per Patient 3.3 2.7 -16% 4.2 3.9 -8% 3.9 3.5 -10%   10 Covid-19-related tests include both core Covid-19 tests (Polymerase Chain Reaction (PCR), Antigen, and Antibody) as well as other Covid-19-related tests which include a bundle of routine inflammatory and clotting markers (which witnessed strong demand following the outbreak of Covid-19) such as Complete Blood Picture, Erythrocyte Sedimentation Rate (ESR), D-Dimer, Ferritin and C-reactive Protein (CRP), among others.   Revenue Analysis: Contribution by Geography   Egypt In Egypt, revenues recorded EGP 1,935 million in the first half of 2021, a 140% increase versus last year supported by a 44% year-on-year rise in tests performed and a 67% year-on-year rise in average revenue per test. Revenue growth for the period was supported by both  Covid-19-related11 test offering, which in 1H 2021 made up 47% of the country's revenue, and conventional test offering. More specifically, when controlling for contributions made by Covid-19-related tests, revenue increased 38% versus 1H 2020 on the back of a solid 29% rise in conventional tests performed during the period.   On a quarterly basis, Egypt recorded revenue of EGP 1,015 million in 2Q 2021, up 166% versus 2Q 2020 and 10% from 1Q 2021. During the quarter, IDH saw Covid-19-related revenues in Egypt reach a new all-time high of EGP 504 million versus EGP 414 million in 1Q 2021 and EGP 273 million in 4Q 2020, as the second quarter coincided with the peak of country's third wave of Covid-19 infections.   IDH's house call service, which throughout 2020 and the first half of 2021 has been successfully ramped up to capitalise on the service's growing popularity, continued to make a growing contribution to revenues, constituting 25% of Egypt's top-line in 1H 2021 (20% in 1H 2020).   IDH's Al-Borg Scan recorded robust revenue growth during the first half of 2021, with its top-line expanding to EGP 20 million, a 124% year-on-year rise. This came on the back of a 103% increase in the total number of radiology tests performed, coupled with a 10% increase in average revenue per test following the introduction of the higher-priced PET-CT scan in late 2020.   Overall, IDH served 4.1 million patients in Egypt and performed 14.6 million tests in 1H 2021, up by 56% and 44% year-on-year, respectively.   Detailed Egypt Revenue Breakdown EGP mn 1Q 2020 1Q 2021 2Q 2020 2Q 2021 1H 2020 1H2021 Total revenues 424 920 381 1,015 805 1,935 Conventional tests 424 507 314 510 738 1,017 Total Covid-19-related tests 0 414 67 504 67 918 Core Covid-19 tests (PCR, Antigen, Antibody) 0 277 10 366 10 643 Other Covid-19-related tests 0 137 57 138 57 275 Contribution to Egypt revenue Conventional tests 100% 55% 82% 50% 92% 53% Total Covid-19-related tests 0% 45% 18% 50% 8% 47% Core Covid-19 tests (PCR, Antigen, Antibody) 0% 30% 3% 36% 1% 33% Other Covid-19-related tests 0% 15% 15% 14% 7% 14%   11 Covid-19-related tests include both core Covid-19 tests (Polymerase Chain Reaction (PCR), Antigen, and Antibody) as well as other Covid-19-related tests which include a bundle of routine inflammatory and clotting markers (which witnessed strong demand following the outbreak of Covid-19) such as Complete Blood Picture, Erythrocyte Sedimentation Rate (ESR), D-Dimer, Ferritin and C-reactive Protein (CRP), among others.   Jordan Revenue generated by IDH's Jordanian operations grew 176% year-on-year in 1H 2021 to reach EGP 324 million. Top-line growth was driven by a 79% increase in test performed during the period and a 54% rise in Biolab's average revenue per test. In the first half the year, Covid-19-related tests (PCR, Antigen, and Antibody) contributed to 58% of Jordan's revenue and to 24% of Biolab's total tests performed. Meanwhile, controlling for contributions made by the Group's Covid-19-related offering, revenue grew by a robust 41% year-on-year on the back of a 43% increase in conventional tests performed in 1H 2021. Revenue generated by Biolab's house call service more than doubled versus last year to reach EGP 34 million in 1H 2021, continuing to make a significant contribution to Jordan's top-line at 11% versus the 13% contribution made in 1H 2020. House call's contribution to Jordan's top-line decreased versus last year in light of the strong growth recorded by Biolab's conventional business which had been impacted by curfews and other Covid-19-related restrictions during the comparable six months of last year.   On a quarterly basis, Jordan's revenue reached EGP 134 million, up 125% year-on-year but down 30% versus 1Q 2021. The quarter-on-quarter contraction comes as Covid-19-related revenue continued to decline on the back of lower infection rates as the country further ramps up its vaccination campaign. When combined with the strong recovery of Biolab's conventional test offering, this saw the contribution made by Covid-19-related tests to Biolab's top-line continue on its declining trajectory from 71% in 4Q 2020, to 64% in 1Q 2021 and 48% in 2Q 2021.   It is also worth noting, that in August 2021, Biolab was selected as the preferred bidder by Airport International Group (AIG), the operator of Amman's Queen Alia International Airport (QAIA), to operate testing stations in QAIA's departure and arrival terminals primarily dedicated to PCR testing for Covid-19. The main focus of the testing stations will be to offer PCR testing for Covid-19 to passengers arriving in Jordan, as well as additional diagnostic tests to patients including rapid Covid-19 testing for departing passengers and other, more generic diagnostic tests. The agreement, which came into effect on 1 August 2021, has a six-month duration with the option to renew for additional six-month periods.   Detailed Jordan Revenue Breakdown EGP mn 1Q 2020 1Q 2021 2Q 2020 2Q 2021 1H 2020 1H2021 Total revenues 58 190 59 134 117 324 Conventional revenue 53 68 44 69 97 137 Total Covid-19-related revenue (PCR, Antigen, Antibody) 5 122 16 65 21 187 Contribution to Jordan revenue Conventional revenue 91% 36% 74% 52% 82% 42% Total Covid-19-related revenue (PCR, Antigen, Antibody) 9% 64% 26% 48% 18% 58%   Nigeria At the Group's Nigerian subsidiary, revenue recorded EGP 25 million in the first half of 2021, up 68% from EGP 15 million in the first six months of last year. In local currency terms, growth was even more pronounced with revenues up 76% year-on-year on the back of a 47% year-on-year expansion in tests performed (patients served were up 25%) and a 14% increase in average revenue per test. The steady rise in volumes recorded in the last two years comes as a direct results of management's strategic investments to revamp Echo-Lab's branches coupled with effective marketing campaigns aimed at stimulating demand for the venture's services. Moreover, volumes are also benefitting from a gradual normalisation of traffic following the easing of restrictive measures enforced to curb the spread of Covid-19 throughout 2020, and the relative stability following protests in the final weeks of last year. On a quarterly basis, IDH's Nigeria operations reported revenues of EGP 13 million, more than double the figure recorded in the second quarter of last year and 3% above revenues reported in the first three months of 2021.   Sudan In Sudan, IDH reported a 25% year-on-year decline in revenues to EGP 9 million for 1H 2021. The country's results were significantly impacted by the devaluation of the Sudanese pound in early 2021 with the average SDG/EGP rate in 1H 2021 standing at 0.07 versus 0.30 this time last year. Nonetheless, management's success in increasing prices saw revenue in local currency terms expand a remarkable 217% year-on-year in 1H 2021.   Revenue Contribution by Country 1H 2020 1H 2021 Change Egypt Revenue (EGP mn) 805 1,935 140% Covid-19-related (EGP mn) 67 918 1,260% Egypt Contribution 85% 84% Jordan Revenue (EGP mn) 117 324 176% Covid-19-related (EGP mn) 21 187 804% Jordan Revenue (JOD mn) 5 15 177% Jordan Contribution 12% 14% Nigeria Revenue (EGP mn) 15 25 68% Nigeria Revenue (NGN mn) 359 632 76% Nigeria Contribution 2% 1% Sudan Revenue (EGP mn) 12 9 -25% Sudan Revenue (SDG mn) 41 129 217% Sudan Contribution 1% 0.4% --- Patients Served and Tests Performed by Country 1H 2020 1H 2021 Change Egypt Patients Served (mn) 2.6 4.1 56% Egypt Tests Performed (mn) 10.1 14.6 44% Covid-19-related tests (mn) 0.5 2.3 318% Jordan Patients Served (k) 160 502 214% Jordan Tests Performed (k) 810 1,447 79% Covid-19-related tests (k) 37 342 822% Nigeria Patients Served (k) 60 75 25% Nigeria Tests Performed (k) 92 136 47% Sudan Patients Served (k) 59 33 -44% Sudan Tests Performed (k) 188 104 -45% Total Patients Served (mn) 2.9 4.7 62% Total Tests Performed (mn) 11.2 16.3 45%   Branches by Country 30 June 2020 30 June 2021 Change Egypt 410 443 33 Jordan 19 21 2 Nigeria 12 12 - Sudan 21 19 -2 Total Branches 462 495 33   -Cost of Goods Sold IDH's cost of goods sold increased 96% year-on-year to EGP 988 million in 1H 2021, a much slower increase than the 141% growth in revenues. As such, gross profit for the period increased 193% year-on-year to EGP 1,305 million in 1H 2021, with an associated margin of 57%, up 10 percentage points from 1H 2020.     COGS Breakdown as a Percentage of Revenue 1H 2020 1H 2021 Raw Materials 15.9% 18.1% Wages & Salaries 17.0% 12.9% Depreciation & Amortisation 8.4% 4.2% Other Expenses 11.7% 7.8% Total 53.0% 43.1%   Raw material costs, which include cost of specialized analysis at other laboratories, recorded EGP 414 million in 1H 2021, and continued to make up the largest share of total COGS at 42%. As a share of revenue, raw material costs increased to 18% in 1H 2021 compared to 16% in the same period of last year. The increase is partially attributable to the retesting of Covid-19 positive cases at IDH's Jordanian subsidiary. Moreover, the year-on-year growth also partially reflects the low base effect resulting from a one-off discount granted by suppliers during the comparable period of last year.   It is worth highlighting that in 2Q 2021, raw material costs as a percentage of revenue declined to 16.8% versus the 19.3% share recorded in the previous quarter. The fall comes on the back of lower Covid-19-positive cases in Jordan combined with management's success in driving down PCR test kit costs. It should be noted that Jordan's raw material costs contributed to around 26% of the consolidated raw material costs for 1H 2021 and to 20% in 2Q 2021. Meanwhile, Egypt's raw materials made up 71% of total raw material costs in the six-month period, with a stable raw material to revenues ratio of 14%.   Direct salaries and wages increased 84% year-on-year to EGP 296 million in 1H 2021 and made up the second largest share of total COGS for the six-month period at 30%. The increase is largely attributable to a rise in the share of profits allocated to direct salaries and wages to EGP 87 million in 1H 2021 from EGP 26 million 1H 2020 following higher net profit recorded at its Egyptian operations,12 in addition to higher bonuses/incentives paid during the period.   Direct depreciation and amortisation was up 22% year-on-year in 1H 2021 to EGP 97 million, largely due to the incremental amortisation of additional branches (IFRS 16 right-of-use assets).   EBITDA IDH's normalised EBITDA13 grew a remarkable 227% year-on-year to reach EGP 1,203 million in 1H 2021. Normalised EBITDA margin expanded to 52% in 1H 2021 versus the 39% margin recorded in 1H 2020, on the back of strong top-line growth and the dilution of fixed costs. EBITDA growth was further bolstered by the normalization of provisions booked during the first six months of the year which in 1H 2021 stood at EGP 10 million versus the EGP 28 million booked in 1H 2020 to account for expected credit losses in accordance with IFRS 9. Normalised EBITDA excludes one-off listing fees of EGP 29 million incurred in 1H 2021 related to the Company's dual listing on the EGX completed in May 2021.   On a quarterly basis, normalised EBITDA recorded EGP 603 million in 2Q 2021, up 267% year-on-year and largely in line with the figure recorded in 1Q 2021. Normalised EBITDA margin stood at 52% for the quarter, down from the 53% margin recorded in 1Q 2021 as IDH booked higher accounting fees (related to the EGX requirement to publish quarterly reviewed financial statements) and additional bonus payments to senior management during 2Q 2021.   In Egypt, EBITDA recorded EGP 1,075 million in 1H 2021, up 223% year-on-year on the back of strong top-line growth. EBITDA margin increased to 56% for the first half of the year from 41% in 1H 2020.   IDH's Jordanian operations recorded a 240% year-on-year rise in EBITDA to EGP 131 million for 1H 2021 on the back of strong revenue growth for the six-month period. In local currency terms, EBITDA grew 242% compared to last year. EBITDA margin recorded 40% in the first half of 2021, up from the 33% margin recorded in the comparable period of 2020.   12 According to IAS 1, 10% of Egypt's net profit is allocated to direct wages and salaries. 13 Normalised EBITDA is calculated as operating profit plus depreciation and amortization and minus one-off fees incurred in 1H 2021 related to the Company's EGX listing completed in May 2021.   In Nigeria, EBITDA losses stood largely unchanged at EGP 4.3 million in 1H 2021. However, it is important to note that the figure includes a one-off adjustment related to the previous year of EGP 3.2 million.    Finally, Sudan's EBITDA recorded EGP 0.7 million in 1H 2021, down 3% year-on-year with an EBITDA margin of 8% compared to 6% last year. EBITDA for the period was weighed down by the sharp SDG devaluation in February of this year. However, in SDG terms, EBITDA more than quadrupled to SDG 10 million supported by management's pricing strategy aimed at mitigating the impacts of the country's hyperinflationary environment.   Regional EBITDA in Local Currency Mn 1H 2020 1H 2021 Change Egypt EGP 332 1,075 223% margin 41% 56% Jordan JOD 1.7 5.9 242% margin 33% 40% Nigeria NGN -101 -108 7% margin -28% -17% Sudan SDG 2 10 309% margin 6% 8%   Interest Income / Expense IDH recorded interest income of EGP 45 million in 1H 2021, up 34% year-on-year on the back of higher cash balances during the period.   Interest expense recorded EGP 54 million in the first half of 2021 versus EGP 37 million in 1H 2020. The year-on-year increase in largely attributable to the loan-related expenses incurred by IDH during the period as the Company secured a new eight-year US$ 45 million facility with the International Finance Corporation (IFC) in May 2021. During 1H 2021, IDH booked loan-related expenses of EGP 12.5 million including a front-end fee, syndication fee, and legal advisory fees. The facility will be used to finance IDH's growth plans across new and existing markets. The loan has a four year grace period and availability period of two years. Higher interest expenses for the period also partially reflect higher interest on lease liabilities related to IFRS 16 following the addition of new branches, as well as higher bank charges resulting from increased penetration of, and reliance on, POS machines and electronic payments during the period.   Interest Expense Breakdown EGP Mn 1H 2020 1H 2021 Change Interest on Lease Liabilities (IFRS 16) 26.4             28.9 9% Interest Expenses on Borrowings14 6.9 4.8 -31% Loan-related Expenses on IFC facility - 12.5 N/A Interest Expenses on Leases 2.2 2.8 30% Bank Charges 1.2 5.4 337% Total Interest Expense 36.7 54.4 48%   14 Related to medium-terms loans for the Al Borg Scan expansion (EGP 3.0  million) and the Group's new headquarters in Cairo's Smart Village (EGP 1.7 million).   Foreign Exchange IDH recorded a net foreign exchange loss of EGP 19 million in 1H 2021 compared to EGP 4 million in the same six months a year ago. The figure largely reflects FX losses on the back of the SDG devaluation versus the EGP in February 2021.   Taxation Tax expenses recorded in 1H 2021 were EGP 367 million compared to EGP 95 million in the same period of last year. The effective tax rate stood at 35% in the period unchanged versus 1H 2020. It is important to note that there is no tax payable for IDH's two companies at the holding level, while tax was paid on profits generated by operating subsidiaries.   Net Profit IDH's consolidated net profit recorded EGP 668 million in the first half of 2021, up an impressive 283% year-on-year. Improving net profitability was supported by strong revenue growth coupled with increased cost efficiencies, higher interest income and normalising provisions for the period. As such, net profit margin stood at 29% in 1H 2021, up from 18% last year.

 

ii.  Balance Sheet Analysis

Assets

Property, Plant and Equipment

IDH held gross property, plant and equipment (PPE) of EGP 1,365 million as at 30 June 2021, up from the EGP 1,247 million as of 31 December 2020. Meanwhile, CAPEX outlays represented around 5% of consolidated revenues in the first half of the year.

Accounts Receivable and Provisions

As at 30 June 2021, accounts receivables' Days on Hand (DOH) stood at 97 days compared to 144 days at year-end 2020, displaying a sustained improvement in collections during the first six months of the year versus 2020. Accounts receivables' DOH is calculated based on credit revenues amounting to EGP 637.9 million during 1H 2021.

Provision for doubtful accounts established during the first six months of 2021 amounted to EGP 10 million, down from the EGP 28 million booked in provisions in the comparable period of last year. This comes as collection cycles continue to normalise following a period of heightened uncertainty in the first stages of the Covid-19 crisis.

Inventory

As at 30 June 2021, the Group's inventory balance reached EGP 142 million, up from EGP 100 million as at year-end 2020. Days Inventory Outstanding (DIO) decreased to 54 days as at 30 June 2021 from 72 days as at year-end 2020. The decline is largely attributable the high turnover of PCR testing for Covid-19.

Cash and Net Debt/Cash

IDH's cash balances increased to EGP 1,587¹⁵ million as at 30 June 2021 compared to EGP 877 million as at 31 December 2020.

Net cash balance¹⁶ amounted to EGP 904¹⁷ million as at 30 June 2021, an increase of 181% compared to EGP 321 million as at 31 December 2020.

¹⁵ The figure does not include dividend payments of US$ 29.1 million distributed to shareholders on 29 July 2021.

¹⁶ The net cash balance is calculated as cash and cash equivalent balances less interest-bearing debt (medium term loans), finance lease and Right-of-use liabilities.

¹⁷ Pre-dividend distribution.

EGP million	FY 2020	1H 2021
Cash and Investments at Amortised Cost	876.8	1,587.0
Interest Bearing Debt ("Medium Term Loans")18	96.5	86.0
Lease Liabilities Property	389.9	468.0
Lease Liabilities Equipment	69.1	128.8
Net Cash Balance	321.3	904.2

 

¹⁸ IDH's interest bearing debt as at 30 June 2021 is split as EGP 26 million related to its medium term facility with the Commercial International Bank (CIB) and EGP 57 million to its facility Ahli United Bank Egypt (AUBE).

Lease liabilities on property stood at EGP 468.0 million as at 1H 2021 versus the EGP 389.9 million booked in FY 2020. The increase is attributable to the addition of new branches during the first six months of 2021 as well as Al-Borg Scan's third branch which is expected to come online in September of this year. Meanwhile, financial obligations related to equipment recorded EGP 128.8 million as at 30 June 2021, up from EGP 69.1 million as at year-end 2020. The increase comes following the renewal of the Company's contracts and the addition of new equipment.

Liabilities

Accounts Payable

As at 30 June 2021, accounts payable balance stood at EGP 225 million up from EGP 178 million as at year-end 2020. However, the Group's days payable outstanding (DPO) stood at 91 days as at 30 June 2021 down from 127 days as year-end 2020. The decline primarily reflects the fact that PCR testing kit suppliers are paid within a period of 15 days.

 

iii. Cash Flow Analysis

Net cash flow from operating activities recorded EGP 866 million in the first half of 2021 compared to EGP 149 million in 1H 2020, demonstrating the company's continued strong cash generation ability.

 

iv. Dividend

A dividend of US$ 29.1 million (US$ 0.0485 per share) for the year ended 31 December 2020 was distributed to shareholders on 29 July 2021. This represents an increase of 4% compared to a final dividend of US$ 28 million in aggregate in the previous financial year.

 

Principal Risks and Uncertainties

As in any corporation, IDH has exposure to risks and uncertainties that may adversely affect its performance. The Board and senior management agree that the principal risks and uncertainties facing the Group include political and economic risks in Egypt, the Middle East and Nigeria, foreign currency exchange rate variability and associated risks, changes in regulation and regulatory actions, damage to the Group's reputation, failure to maintain the Group's high quality standards and accreditations, failure to maintain good relationships with healthcare professionals and end-users, pricing pressures and business interruption of the Group's testing facilities, among others.

 

Other short-term risks include operational disruptions related the Covid-19 pandemic; delays in branch openings and renovations in Nigeria and difficulties in growing Echo-Lab's customer base; prolonged political unrest in Sudan that  can adversely affect patient and test volumes, while further currency devaluation risks will limit the compensatory effect of price increases.

 

Statement of Directors' Responsibilities

Responsibility statement of the directors in respect of the half-yearly financial report

We confirm that to the best of our knowledge, the interim management report includes a fair review of the information required by:

(a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

 

For and on behalf of the Board of Directors:

 

Dr. Hend El Sherbini

Executive Director

 

1 September 2021

 

- Ends --