TIDMIDHC
RNS Number : 8916F
Integrated Diagnostics Holdings PLC
23 May 2017
For the purpose of the Transparency Directive the Home Member
state of the issuer is the United Kingdom.
Integrated Diagnostics Holdings Plc
1Q2017 Results Update
London, 23 May 2017
Integrated Diagnostics Holdings Plc Update on 1Q2017 Results
(London) Integrated Diagnostics Holdings ("IDH" or "the Group"),
IDHC on the London Stock Exchange, the largest fully integrated
private-sector provider of medical diagnostics services in Egypt,
Jordan and Sudan, released today unaudited highlights of its
financial and operational performance in the first quarter of 2017,
reporting unaudited net profit of 89 million Egyptian pounds (EGP)
on total unaudited revenues of EGP 346 million.(1) Unaudited EBITDA
stood at EGP 136 million in 1Q2017, representing period-on-period
growth of 9%.
IDH Chief Executive Officer Dr. Hend El-Sherbini said:
"I am very pleased to report the Group is off to a strong
operational and financial start in 2017. Our revenue growth
accelerated 26% year-on-year in 1Q2017, up significantly from a
fully-year rate of 15% in 2016, spurred by higher patient and test
volumes and better pricing, as well as some favourable currency
translation impact.
"1Q2017 was the first full quarter of operations following the
November 2016 float of the Egyptian pound, which resulted in high
inflation for Egyptian consumers and pressure on the cost of
imported raw materials. Despite this environment, IDH delivered
EBITDA growth of 9%, with the associated EBITDA margin coming under
pressure due primarily to these higher raw material costs.
Expansion-related expenses were also a factor, as we continued to
expand our footprint in the period with the opening of 8 new
branches for 14% annual unit growth to a total network of 362. The
increased contribution of revenues from lower-margin businesses in
Jordan and Sudan was also a factor.
"Strong fundamentals continue to support our growth outlook for
diagnostic services in Egypt. I remain confident that our trusted
brands, strong supplier relationships, growing branch network and
asset-light business model will continue to be our greatest
strengths as we aim to grow our business while preserving our
healthy margins in a still-developing macro backdrop. Accordingly,
we reaffirm our 2017 guidance that targets revenue growth in excess
of 20% and EBITDA margins at or above 40% given our expectation
that the negative currency translation impact on our costs will be
less pronounced as the year progresses."
Results (EGP mn, unless
otherwise stated)
1Q2017 1Q2016 % change
==================== ======= ======= =================
Revenues 346 274 26%
-------------------- ------- ------- -----------------
Operating Profit 123 115 7%
-------------------- ------- ------- -----------------
EBITDA(2) 136 125 9%
-------------------- ------- ------- -----------------
EBITDA Margin 39% 46% -7 pts
-------------------- ------- ------- -----------------
Net Profit 89 84 6%
-------------------- ------- ------- -----------------
Net Profit Margin 26% 31% -5 pts
-------------------- ------- ------- -----------------
Earnings per Share
(EGP) 0.59 0.56 5%
-------------------- ------- ------- -----------------
(1) By the terms regulating the company's listing on the LSE,
IDH is required to release audited financials at the half- and
full-year marks. Management and the Board of Directors have
committed to providing performance updates in the first and third
quarters as an outgrowth of the Company's commitment to
transparency. All figures in this update are accordingly unaudited
and provided from Management accounts.
(2) EBITDA is calculated as operating profit plus depreciation
and amortization.
Financial & Operational Highlights
-- Revenues increased 26% y-o-y to EGP 346.3 mn in 1Q2017,
driven by a combination of the favourable impact of foreign
currency translation of results from the Company's Jordanian and
Sudanese subsidiaries into Egyptian pounds; better pricing; and
higher patient and test volumes.
-- Gross profit rose 12% to EGP 168.8 mn in 1Q2017 versus EGP
150.3 mn a year earlier, with an associated gross profit margin
decline of c. 600 basis points (bp) to 49%. The primary pressure
point was higher raw material costs, reflecting the negative effect
of the November 2016 devaluation of the Egyptian pound.
-- Operating profit gained 7% y-o-y to EGP 122.9 mn in 1Q2017,
with SG&A expenses rising slightly as a percentage of sales due
mainly to the translation of the salaries of the Group's Jordanian
subsidiary into Egyptian pounds.
-- EBITDA was 9% higher in 1Q2017 at EGP 136.3 mn than a year
ago. The Group's EBITDA margin was c. 650 bps lower at 39%,
reflecting increases in raw material costs; rent and utilities
expenses related to branch expansion; and SG&A costs.
-- The net foreign exchange loss amounted to EGP 3.2 mn, largely
related to intercompany transactions. The loss this year was 27%
below the EGP 4.4 mn loss recorded in the year-ago period.
-- Interest expense increased to EGP 3.3 mn on the back of a
supplier's finance lease contract denominated in US dollars.
-- Net profit increased 6% to EGP 88.7 mn in 1Q2017, with an
associated net margin decline of c.500 bps to 26%.
-- Total tests increased 3.5% y-o-y in 1Q2017 to 6.1 mn, and
total patients served gained 5% to 1.4 mn.
-- While total tests-per-patient declined 2% y-o-y, average
revenue-per-patient was up 20% and average revenue-per-test was up
22%, reflecting the Company's ability to raise prices in Egypt's
ongoing inflationary environment.
-- Affirming guidance for the full 2017 year, IDH continues to
target revenue growth in excess of 20%, as well as EBITDA margins
at or above 40%. While the EBITDA margin was 39% in 1Q2017,
management expects the negative impact of the currency translation
impact on costs to be less pronounced as 2017 progresses.
About Integrated Diagnostics Holdings (IDH)
IDH is the largest fully integrated private-sector medical
diagnostics services provider in Egypt. Jordan and Sudan,
comprehensively offering pathology and molecular diagnostics,
genetics testing and basic radiology. IDH's core brands include Al
Borg and Al Mokhtabar in Egypt, as well as Biolab (Jordan),
Ultralab and Al Mokhtabar Sudan (both in Sudan) and the Medical
Genetics Center, which operates in Egypt. IDH is listed on the
London Stock Exchange (ticker: IDHC) and was founded in 2012 by the
merger of Al Borg and Al Mokhtabar, the most established
diagnostics services brands in Egypt.
IDH's forward looking strategy rests on leveraging its
established business model to achieve five key strategic goals,
namely: (1) continue to expand customer reach; (2) increase the
number of tests per patient; (3) use the Mega Lab's enlarged
capacity to provide services to third party labs and hospitals; (4)
introduce new medical services by leveraging the Group's network
and reputable brand position; and (5) expand into new geographic
markets through selective, value accretive acquisitions. Learn more
at idhcorp.com.
Shareholder Information
LSE: IDHC.L
Bloomberg: IDHC:LN
Listed: May 2015
Shares Outstanding: 150 million
Contact
Mr. Sherif El-Ghamrawi
Investor Relations Director
T: +20 (0)2 3345 5530 | M: +20 (0)10 0447 8699 |
sherif.elghamrawi@idhcorp.com
Forward-Looking Statements
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 Company.
Forward-looking statements reflect the current views of the
Company'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
Company'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 Company'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 Company'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
prospectus. 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 Company 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.
Operational & Financial Review
IDH delivered strong operational and financial performances in
1Q2017, especially given the continuing macroeconomic challenges in
its home market of Egypt. The Company's top line was driven by a
combination of the favourable impact of foreign currency
translation of results from its Jordanian and Sudanese subsidiaries
into Egyptian pounds (36% of total), better pricing (33% of total),
and higher test volumes (31% of total). The decline in the
bottom-line margin reflected expense pressure from higher raw
material costs; the currency translation of Jordanian salaries into
Egyptian pounds; higher rent and utility costs related to branch
expansion; and higher interest expenses.
The Group continued to invest in expanding its geographic
footprint, supported by its state-of-the-art Mega Lab with excess
capacity that enables the Company to deploy its Hub, Spoke and
Spike business model to open capital efficient "C" labs more
rapidly. During 1Q2017, IDH added 8 new branches including 5 in
Egypt, 1 in Jordan and 2 in Sudan. At the end of 1Q2017, there were
322 branches in Egypt, 15 branches in Jordan and 25 branches in
Sudan. The total IDH branch network reached 362 in 1Q2017,
representing 14% year-on-year unit growth.
Branches by Country
1Q2017 1Q2016 % change
================ ======= ======= =========
Egypt 322 284 13%
---------------- ------- ------- ---------
Jordan 15 11 36%
---------------- ------- ------- ---------
Sudan 25 22 14%
---------------- ------- ------- ---------
Total Branches 362 317 14%
---------------- ------- ------- ---------
Egypt, IDH's home market, contributed 82% of total revenues at
EGP 283.6 million in 1Q2017, down from 89% in 1Q2016 primarily due
to the favourable currency translation impact of the Company's
Jordanian subsidiary. This currency translation effect also
underpinned Jordan's 144% revenue increase to EGP 49.8 million,
representing 14% of total-company revenues in 1Q2017 versus 7% in
the year-earlier period. Revenues from Sudan were EGP 12.8 million,
accounting for 4% of total 1Q2017 revenues compared with 3% a year
ago.
Revenues in Egypt rose 16% to EGP 283.6 million, spurred by both
total patient and test growth in the contract patient category. The
top line further benefited from price increases of 10% for walk-in
patients and 11% for contract patients. In terms of patient mix in
the period, a 7% gain in contract patients more than offset a 5%
decline in walk-ins (1Q2016: -13%). Contract patient tests were 2%
higher, while those for walk-in patients were on par with a year
earlier. To help stem the decline in walk-in patients, the Company
offered more affordable payment methods on selected tests; launched
tactical advertising campaigns raising awareness of chronic
disease; and implemented new customer relationship management (CRM)
programs that reached out to patients with marketing messages via
SMS, among other steps.
For perspective, Jordan's revenue increase of 144% when
translated into Egyptian pounds was actually 10% in Jordanian dinar
terms. Jordan's Biolab performed well, achieving a 6% increase in
patient volumes and an 11% gain in the number of tests to maintain
growth at historical averages. Sudan's 47% revenue increase to EGP
12.8 million reflects substantial year-on-year growth in both
patient and test volumes.
Revenues by Country
(EGP '000) 1Q2017 1Q2016 % change
============= ======== ======== =========
Egypt 283,608 244,937 16%
------------- -------- -------- ---------
Jordan 49,841 20,403 144%
------------- -------- -------- ---------
Sudan 12,832 8,748 47%
------------- -------- -------- ---------
Total 346,281 274,088 26%
------------- -------- -------- ---------
Key Performance Indicators
1Q2017 1Q2016 % change
=============== ============================== ============================== ============================
Walk-In Contract Total Walk-In Contract Total Walk-In Contract Total
Clients Clients Clients Clients Clients Clients
=============== ========= ========= ======== ========= ========= ======== ========= ========= ======
Revenue
(EGP '000) 134,168 212,113 346,281 104,361 169,727 274,088 29% 25% 26%
--------------- --------- --------- -------- --------- --------- -------- --------- --------- ------
% of Revenue 39% 61% 100% 38% 62% 100%
--------------- --------- --------- -------- --------- --------- -------- --------- --------- ------
Patients
('000) 386 1,109 1,496 401 1,020 1,420 -4% 9% 5%
--------------- --------- --------- -------- --------- --------- -------- --------- --------- ------
% of Patients 26% 74% 100% 28% 72% 100%
--------------- --------- --------- -------- --------- --------- -------- --------- --------- ------
Revenue
per Patient
(EGP) 347 191 232 261 166 193 33% 15% 20%
--------------- --------- --------- -------- --------- --------- -------- --------- --------- ------
Tests ('000) 1,373 4,743 6,117 1,313 4,597 5,909 5% 3% 4%
--------------- --------- --------- -------- --------- --------- -------- --------- --------- ------
% of Tests 22% 78% 100% 22% 78% 100%
--------------- --------- --------- -------- --------- --------- -------- --------- --------- ------
Revenue
per Test
(EGP) 98 45 57 80 37 46 23% 21% 22%
--------------- --------- --------- -------- --------- --------- -------- --------- --------- ------
Test per
Patient 4 4 4 3 5 4 8% -5% -2%
--------------- --------- --------- -------- --------- --------- -------- --------- --------- ------
Our Customers
IDH serves two principal types of clients: contract (corporate)
and walk-in (individuals). Within each of these categories, the
Group also offers a house call service; and within the contract
segment, a lab-to-lab service.
Contract Clients
IDH's contract clients, who in 1Q2017 represented 61% of total
revenues, include institutions such as unions, private insurance
companies and corporations who enter into one-year renewable
contracts at agreed rates per-test and on a per-client basis.
During 1Q2017, the Company served 1.1 million patients under these
contracts and performed a total of 4.7 million tests, with no
single contract client accounting for more than 1% of revenues.
Walk-in Clients
The Group derived 39% of its revenues in 1Q2017 from walk-in
clients. Walk-in clients numbered 0.4 million in 1Q2017 and
received 1.4 million tests. As IDH's markets develop and become
increasingly institutionally-oriented, more patients will be having
pathology tests performed under corporate agreements, a trend that
plays to the Company's strength with the best economies of scale in
the Egyptian diagnostics industry.
The ratio of contract to walk-in patients during 1Q2017 was
74:26 compared with 72:28 in 1Q2016, in sync with the general shift
in patient mix in recent years toward an increasing number of
patients served on corporate contracts. This reflects the natural
market dynamics in Egypt, as companies are extending additional
benefits to their staffs. The trend has been encouraged by
continued high inflation, which is eroding consumer spending power
and thus putting incremental pressure on corporations to provide
either health insurance or corporate plans.
Revenue Analysis
Consolidated revenues increased 26% year-on-year to EGP 346.3
million in 1Q2017, underpinned by IDH's strong brands and focused
marketing strategies. Beyond gains of 5% and 4% in the number of
patients and tests, respectively, selected price increases and a
better mix of tests spurred top-line growth. This is demonstrated
in the key metrics of average revenue-per-patient (up 20%) and
average revenue-per-test (23% higher).
Revenues from contract clients grew 25% to EGP 212.1 million in
1Q2017, supported by an overall trend toward corporate health
insurance coverage, especially in IDH's home market of Egypt. These
strong revenues were achieved despite lesser rates of gain in both
patient and test volumes. While the number of contract patients was
up only 9% and the number of contract tests was just 3% higher,
revenue-per-patient increased 15% and revenue-per-test gained 21%
on better pricing and mix. The number of tests-per-patient actually
declined 5%, and given its heavier weighting, more than offset an
8% gain in tests-per-patient in the walk-in category. Thus, total
tests-per-patient were 2% lower in the period, further
demonstrating IDH's ability to drive revenues through a combination
of selected price increases and improved text mix.
Revenues from walk-in clients rose 29% to EGP 134.2 million in
1Q2017, despite a 4% decline in the number of walk-in patients and
only a 5% increase in test volumes. In part, this represents
consumer migration toward corporate healthcare agreements, a trend
expected to continue. Also, consumers continue to curb their
spending in reaction to persistent high inflation associated with
the devaluation of the Egyptian pound. That said, the Company was
able to achieve a 33% advance in revenue-per-patient; and on 8%
more tests-per-patient, a 23% upturn in revenue-per-test in the
walk-in category, with focused tactical marketing campaigns.
Cost of Sales
Cost of goods increased 43% in 1Q2017 to EGP 177.5 million, or
more than the 26% rate of gain in revenues in the period. The
associated gross margin decline was c. 600 bps to 49% from 55% a
year earlier. The primary pressure point was higher raw material
costs, reflecting the negative effect of the November 2016
devaluation of the Egyptian pound. Chemicals and Supplies was the
largest component of COGS in 1Q2017, representing 39% of total
(1Q2016: 34%). Chemicals and Supplies costs rose 67%, as prices
increased by varying amounts on raw materials sourced from the
Company's suppliers.
Wages and Salaries, the second-largest component of COGS at 32%
of total (1Q2016: 38%), increased 21%.
-- Annual staff salary raises and new hires for new branches
opened resulted in a net increase of EGP 9.5 million in 1Q2017
versus 1Q2016;
-- Higher employee profit share entitlement for Egyptian
operations in the period resulted in an additional EGP 0.2 million
owing to the period-on-period growth in net profit.
Depreciation was 30% higher year-on-year in 1Q2017 at EGP 12.2
million, as capital expenditures grew to EGP 28 million during the
period. The aforementioned amount is mainly related to the
following:
-- EGP 13.5 million for new branches in Jordan
-- EGP 4 million associated with a new warehouse located in 6(th) of October city
-- EGP 3 million in leasehold improvements of 10 new branches
-- EGP 6.5 million related to the renovation of existing branches
Other costs were up 48% on the back of 45 branches operational
in 1Q2017 that were not present in 1Q2016, as well as increases in
utilities' expenses, especially electricity; and higher maintenance
expenses related to the Siemens contract.
EBITDA
EBITDA increased 9% to EGP 136.3 million in 1Q17 versus EGP
125.3 million a year earlier. The associated EBITDA margin declined
650 bp to 39% compared with 46% a year earlier primarily due to
higher raw materials prices (c. 500 bp), while expansion-related
rent and utilities expenses (c. 100 bp) and other SG&A items
(c. 50 bp) were also pressure points. The slight increase in
SG&A expenses as a percentage of sales to 13.2% was
attributable to translating Jordanian salaries in dinars into
Egyptian pounds, as well as to the upward pressure created by the
difference in exchange rates between the two periods when
translating other expenses associated with IDH's two companies at
the holding level.
The Company's Egyptian operations contributed 91% of
consolidated EBITDA down from 96% in the year-earlier period,
mainly as Jordan's contribution rose to 5% from 2% on favourable
currency translation. Sudan contributed 4% of consolidated EBITDA,
up from 2% a year ago.
Interest Income / Expense
IDH recorded interest income of EGP 8.7 million in 1Q2017,
almost double that of EGP 4.4 million in 1Q2016. Beyond the proper
management of excess cash, higher time deposit rates offered by
Egyptian banks this year than last and the associated higher
average yields were also beneficial.
Interest expense increased to EGP 3.3 million on the back of a
supplier's US dollar-denominated finance lease contract.
It is noteworthy that going forward, interest expense will also
reflect additional borrowings to finance the Company's new
corporate headquarters. To support future growth plans, the Group
will be consolidating its current corporate offices in downtown
Cairo into a new headquarters. IDH has acquired a building in Smart
Village, a corporate office park in the city of 6(th) of October
located slightly west of Cairo that will provide sufficient space
for headquarters and central staff.
Foreign Exchange
In 1Q2017, IDH's foreign exchange loss amounted to EGP 3.2
million that was mostly related to intercompany transactions. The
loss this year was 27% below the EGP 4.4 million loss recorded in
the year-earlier period.
Taxation
Income tax expenses recorded in 1Q2017 were EGP 36.4 million
compared with EGP 28.5 million in 1Q2016, with an effective tax
rate of 29% versus 25% a year ago. There is no tax payable for
IDH's two companies at the holding level. All tax is paid within
the operating companies in Egypt, Jordan and Sudan.
The Group's dividend policy is to distribute any excess cash
after taking into consideration all business cash requirements and
potential acquisition considerations. As a result, a deferred tax
liability is recognised for the 5% tax on dividends for the future
expected distribution payable by Egyptian entities under Egyptian
tax legislation. Deferred tax in 1Q2017 was EGP 5.1 million (loss)
versus EGP 0.1 million (gain) in the year-earlier period.
Net Profit
Net profit increased 6% year-on-year to EGP 88.7 million, with
an associated net margin decline of 500 bps to 26%.
Balance Sheet
On the assets side of the balance sheet, accounts receivable
stood at EGP 111.4 million at the end of 1Q2017 compared with EGP
107.2 million at 2016 year end. Notably, IDH adopted a new
collections process that successfully reduced "days-on-hand" to 110
days at 31 March 2017 from 133 days at 31 December 2016. In Egypt,
accounts receivables days dropped to 108 days from 116 days for the
same periods.
On the liabilities side, accounts payable stood at EGP 168.2
million versus EGP 126.1 million at 2016 year end. The Company's
"days payable outstanding" increased to 190 days at 31 March 2017
from 181 days at
31 December 2016 primarily due to raw material price increases
and delayed payments to suppliers, in particular Roche and Siemens.
The Group has since reached a final agreement with Siemens to pay
its balance over a 10-month period in equal monthly
instalments.
IDH's US$ cash balance stood at US$ 28.6 million at 31 March
2017, which is more than sufficient to cover proposed dividend
distributions amounting to US$ 21 million.
Outlook
IDH's forward-looking strategy rests on leveraging its
established business model to achieve four key strategic goals,
namely: (1) continue to expand customer reach; (2) increase the
number of tests per patient by expanding the Company's services
portfolio; (3) expand into new geographic markets through
selective, value-accretive acquisitions; and (4) introduce new
medical services by leveraging the Group's network and reputable
brand position.
-Ends-
This information is provided by RNS
The company news service from the London Stock Exchange
END
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