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RNS
NMC Health Plc  -  NMC   

Final Results

Released 07:00 07-Mar-2018

RNS Number : 9053G
NMC Health Plc
07 March 2018
 

NMC Health Plc

 

FINANCIAL REPORT: Full year ended 31 December 2017

 

Building the platform for profitable expansion

 

London, 7 March 2018: NMC Health plc ("NMC", the "Company" or the "Group"), the leading United Arab Emirates private healthcare operator with international services across 13 countries, announces its results for the full year ended 31 December 2017 ("FY 2017").

 

Financial summary and highlights

 

US$m (unless stated)

FY 2017

FY 2016

Growth %

Revenue

1,603.4

 1,220.8

31.3%

EBITDA

353.4

246.1

43.6%

EBITDA margin

22.0%

20.2%

180bps

Net Profit

209.2

151.4

38.2%

Net Profit margin

13.0%

12.4%

60bps

Earnings per share (US$)-Basic

0.910

0.711

28.0%

Adjusted Net Profit

236.6

165.2

43.2%

Adjusted Earnings Per Share(US$)

1.036

0.781

32.7%





Divisional performances




Healthcare Revenue

1,161.6

823.3

41.1%

Healthcare EBITDA

355.4

241.1

47.4%

Healthcare EBITDA margin

30.6%

29.3%

130bps

Healthcare Net profit

287.8

192.9

49.2%

Healthcare Occupancy

71.6%

74.3%

-270bps





Distribution Revenue

486.8

431.9

12.7%

Distribution EBITDA

51.5

47.1

9.4%

Distribution EBITDA margin

10.6%

10.9%

-30bps

Distribution Net profit

48.0

43.6

10.1%

 

 

Notes:

·    Net Profit equals profit after tax as shown in the Consolidated Income statement

·    Adjusted Net profit equals adjusted profit as shown in Note 16

·    Adjusted Earnings per share equals Diluted adjusted earnings per share as shown in Note 16

·    EBITDA equals Profit from operations before depreciation, amortization, transaction cost and impairment as shown in the Consolidated Income statement.

·    Healthcare and distribution numbers are before considering intra - group eliminations

 

FY2017 Financial Highlights

 

·    Group reported revenues increased by 31.3% to US$1,603.4m.

o Organic growth accounted for 15.6% YoY increase in revenues

·    Healthcare division revenue increased by 41.1% to US$1,161.6m1.

o Healthcare EBITDA margin stood at 31%, up 130 bps YoY

·    Distribution division revenue grew by 12.7% to US$486.8m2

o Distribution EBITDA margin declined slightly to 10.6%

·    Reported EBITDA increased by 43.6% to US$353.4m.

·    Reported EBITDA margin expanded by 180bps to 22.0%.

·    Net profit increased by 38.2% to US$209.2m.

·    Net profit margin increased by 60bps to 13.0%.

·    Adjusted net profit increased by 43.2% to US$236.6m.

·    Earnings per share (EPS) amounted to US$0.910 (FY 2016: US$0.711)

·    Adjusted earnings per share amounted to US$1.036 (FY 2016: US$0.781)

·    Proposed dividend pay-out ratio is maintained at 20% of profit after tax, amounting to GBP3  13 pence per share

 

FY2017 Business Highlights - A year on year (YOY) comparison

·    Healthcare division's patients increased by 33.5% to 5.8.m.

·    Revenue per patient from healthcare services increased by 7.6% to reach US$189.8

·    Hospital bed occupancy rates reached 71.6%, a decrease of 270bps.

·    Operational beds increased from 679 beds to 1365 beds, 101% increase

·    Doctors' employed reached 1437, an increase of 37.9%

·    Distribution division increased its product portfolio by 17.5% to 108,900 stock keeping units (SKUs)

·    Sales and marketing personnel at the Distribution division grew 6.6% to 820

 

1 Before intra-group elimination

2 Before intra-group elimination

3 British Pound

 

 

 

Mr Prasanth Manghat, Chief Executive Officer, commented:

 

2017 proved to be a year of tremendous achievements for NMC, enhancing further the successful track record already achieved by the Group in previous years. Qualification for the FTSE 100 index, consolidation of previous organic and inorganic expansions, extension of our geographic footprint and strengthening and deepening of the management structure all marked a very active year for NMC. In short, we see 2017 as setting the stage for many more years of growth for the Company and we begin 2018 with confidence.

 

Outlook

NMC has moved from success to success over the past many years and I see no reason why this should change in the foreseeable future, despite an otherwise challenging environment. Sustained ramp up of utilization at facilities we opened in recent years, integration of acquired assets and continued discipline in organic and inorganic expansions should all translate into a very promising 2018 and beyond. The most important assets to keep a track of in this regard are: NMC Royal, Brightpoint and Chronic Care for ramp-up of operations, Al Zahra Hospital and CosmeSurge from an integration standpoint and the GCC in general and KSA in particular for additional acquisitions as we continue to see the benefit from acquiring assets and optimising their capabilities within the NMC network/model.

 

The Company continues to benefit from ready access to debt financing and a supportive shareholder base that we will not take for granted. While we continue to apply strict criteria to our expansion opportunities this backdrop gives us confidence in addressing any future funding requirements to support our ambitious growth plans.

 

 

A copy of this report will be available on the Company's Investor Relations website which can be accessed from www.nmchealth.com.

 

Contacts

 

Investors

NMC Health

Prasanth Manghat, Chief Executive Officer

+971 50 522 5648

Prashanth Shenoy, Chief Financial Officer

+971 56 329 0545

Asjad Yayha, Investor Relations

+971 56 219 0975

 

 

Media:

 

FTI Consulting, London

 

Brett Pollard

+44 (0)20 3727 1000


 

FTI Consulting, Gulf

 

Shane Dolan

+971 (0)4 437 2100

 

Cautionary statement

 

These Preliminary Results have been prepared solely to provide additional information to shareholders to assess the Group's performance in relation to its operations and growth potential. These Preliminary Results should not be relied upon by any other party or for any other reason. Any forward looking statements made in this document are done so by the directors in good faith based on the information available to them up to the time of their approval of this report. However, such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.

 

The listing rules of the UK Listing Authority (LR 9.7A.1) require that preliminary statements of annual results must be agreed with the listed company's auditor prior to publication. In addition, the Listing Rules require such statements to give details of the nature of any likely modifications that may be contained in the auditor's report to be included with the Annual Report and whether any audit report has been issued on the statutory accounts. NMC Health plc confirms that it has agreed with Ernst & Young LLP for the preliminary announcement to be notified to RNS. The financial information presented in this preliminary announcement was authorised for issue by the Board of Directors on 6 March 2018. The auditor's report on those financial statements was unqualified and did not contain a statement under section 498 of the Companies Act 2006. The audited financial statements will be delivered to the Registrar of Companies and a copy will also be available on the Company's website (www.nmchealth.com) in due course. The financial information contained in this document does not constitute statutory accounts as defined in section 435 of the Companies Act 2006.

 

This constitutes regulated information for the purposes of the Disclosure and Transparency Rules.

 

 

 

Statement of Directors' Responsibilities

 

Responsibility statement of the directors on the Annual Report & Accounts

 

The Group's Annual Report & Accounts for the year ended 31 December 2017 includes the following responsibility statement.

 

Each of the directors confirms that, to the best of their knowledge:

 

The financial statements, prepared in accordance with the International Financial Reporting Standards as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

 

The Strategic Report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties they face.

 

 

 

On behalf of the Board

 

Simon Watkins

Group Company Secretary

6 March 2018

 

 

About NMC Health

 

NMC the leading United Arab Emirates private healthcare operator with an international network of hospitals. The Group currently operates or manages over 125 assets across 13 countries. NMC is also ranked as one of the top 3 in-vitro fertilisation ("IVF") operators globally. The Group is also a leading provider of long-term medical care in the UAE through its subsidiary ProVita. Pursing an aggressive international expansion program from 2016, the company now has over 35% of its licensed bed capacity in the Kingdom of Saudi Arabia (KSA), where the company has introduced long-term and multi-specialty care services. The enlarged Group received over 5.7m patients in 2017. The Group is also a leading UAE supplier of products and consumables across several key market segments, with the major contribution coming from healthcare related products. The Group reported revenues of US$1.6 billion for the year ended 31 December 2017.

 

In April 2012 NMC was listed on the Premium Segment of the London Stock Exchange. NMC is a constituent of the FTSE 100 Index.

 

 

 

Business and Financial Review

 

FY 2017 continued to build on the achievements of FY 2016, with NMC further consolidating its position as the leading healthcare provider in the UAE and expanding its footprint in KSA. The Group also extended its geographic reach into Oman, where it currently accounts for 20% of the private sector bed capacity in the country.

 

OPERATIONAL OVERVIEW

 

Consolidated revenues of the Group recorded 31% YoY growth in 2017 to reach US$1.6bn. The Healthcare division continues to be the primary driver of top line growth, posting 41% YoY growth in 2017 vs. 13% for the Distribution division. The faster growth continues to translate into increasing revenue contribution from the healthcare business, with its share rising from 52% in 2014 to 72% in 2017.

 

Consolidated EBITDA reached US$353m (+44% YoY), with the Healthcare Division accounting for 87% of the Group EBITDA and Distribution division accounting for the remaining 13%. Higher margins associated with the healthcare business also continue to elevate overall Group margins, with consolidated EBITDA margin reaching 22% in 2017, up 180 bps YoY.

 

With the Healthcare division remaining the primary focus of NMC's organic and inorganic expansion plans going forward, the trend of increasing contribution from this segment to the Group's revenues and profitability is expected to continue for the foreseeable future. Consequently, the Group EBITDA margin is anticipated to rise further in the coming years. Moreover, in terms of the individual businesses, the sustainable EBITDA margin for the Healthcare division stands around 30% versus 9-10% for Distribution. 

 

HEALTHCARE DIVISION

 

Building on the good momentum of previous years, the Healthcare division continued its trend of strong growth in 2017, with revenues posting 41% YoY growth to reach US$1.2bn. Healthcare services accounted for US$1.1bn out of the total, with pharmacies and Operations & Management contributing US$59m and US$8m, respectively. Sustained margin improvement again translated into more rapid expansion at the EBITDA level, which stood at US$355m (+ 47% YoY). EBITDA margin for the year stood at 31%, up 130 bps YoY.

 

A total of 5.8m patients visited NMC's facilities in 2017, up 33% YoY. The sharp rise was driven through a combination of continued ramp-up at facilities opened by the Group in recent years, particularly NMC Royal Hospital, and inorganic additions, particularly that of Al Zahra Hospital, during the year.

 

Average revenue per patient increased 8% YoY to US$189.8. Improving this metric remains an important focus area for NMC and average revenue per patient has risen 88% from US$100.7 at the time of our IPO in 2012. Introduction of higher value healthcare services, such as long-term care and IVF, combined with a concerted move towards undersupplied, more sophisticated medical procedures, is expected to sustain this trend of improving revenue per patient. For 2017 in particular, increasing contribution from NMC Royal Hospital and addition of Al Zahra Hospital to the portfolio supported improvement in average revenue per patient.

 

 

Key healthcare verticals

 

Performance overview by vertical

Detail

Multispecialty

Maternity & Fertility

Long term & Home care

Total

Revenue (US$'000)

833,627

205,761

113,836

1,153,224

Growth

50%

17%

36%


Revenue/patient

139

1,003

20,063

189.8

Growth

15%

12%

-50%







Capacity





Licensed beds

1,168

106

265

1,539

Operational beds

1,000

100

265

1,365

Growth

118%

0%

121%

101%






Spare capacity (beds %)

14%

6%

0%

11%






Patients

5,555,738

205,235

5,674

5,766,647

Growth, YoY

35%

4%

170%


Bed Occupancy

65.9%

76.9%

86.2%

71.6%

 

 

 

Multi-Specialty

 

Benefiting from rapid ramp-up of utilization at facilities opened in recent years (particularly at NMC Royal Hospital and DIP Hospital) and addition of Al Zahra Hospital (NMC's largest acquisition to date), the multi-specialty vertical recorded 50% YoY growth in revenues to US$834m for 2017.   

 

The number of patients within the multi-specialty vertical increased 35% to 5.5m in 2017. Meanwhile, average revenue per patient for the year stood at US$139.4 (+15% YoY). As indicated earlier, healthy ramp-up at NMC Royal Hospital and addition of Al Zahra Hospital to the portfolio have been key catalysts for the increase in number of patients, as well as improvement in average revenue per patient.

 

The number of licenced beds within the vertical increased from 655 in 2016 to 1,168 in 2017, with acquisition of Al Zahra Hospital, assets in Oman and two new hospitals in KSA, accounting for an addition of 398 beds to the portfolio. Additionally, 115 new beds were added in existing facilities, reflecting continued optimization of even the more mature hospitals within NMC's network.

 

NMC Royal Hospital remains the cornerstone of the multi-specialty vertical, with the number of operational beds reaching 200 by end 2017. The remaining 116 licensed beds in the facility are expected to become operational by 2019.

 

In terms of inorganic expansion, 2017 witnessed the inclusion of Al Zahra Hospital to NMC's network. Acquisition of the hospital also completed the Group's hub-and-spoke model in Sharjah, making it the most dominant operator in the Emirate. The year also witnessed expansion of NMC's geographic footprint into Oman through the acquisition of Atlas Healthcare's facilities. The 102 beds in Oman translate into a 20% private sector market share for NMC in the country, positioning it well to benefit from the roll-out of mandatory healthcare insurance planned by the government from 2018. Last, but not least, the Group further strengthened its foothold in KSA by acquiring one multi-specialty facility each across the cities of Ha'il and Najran.

 

Maternity & Fertility

 

The maternity & fertility vertical posted US$205m revenues in in 2017, translating into 17% YoY growth. The business benefitted from continued ramp-up of operations at Brightpoint Hospital, with utilization reaching 77% in 2017 (65% in 2016).

 

The fertility business also maintained its pace of strong YoY growth, marked by a combination of growing performance of the IVF network and an organic expansion with new Fakih IVF clinics added in Al Ain and Oman.  NMC is steadily moving to build on its position as the second largest IVF player in the world and is focusing on expanding its footprint in the GCC, as well as other geographies in the coming months. One of the most important developments in this regard is the recent acquisition of Al Salam Medical Group, which will allow NMC to establish its first IVF clinic in Riyadh.

 

Long-term & Home care

 

The long-term & home care vertical recorded revenues of US$114m in 2017, up 36%. The increase was driven by improved occupancy at existing facilities and addition of new capacity, particularly through the conversion of As Salama hospital in KSA from Multi-specialty to a long-term care facility.

 

Additionally, 16 long-term care beds were added in Al Zahra Hospital, continuing the trend of cross-pollination across assets that commenced with the introduction of 26 long-term care beds in NMC Royal during 2016. 

 

Occupancy rate for the long-term & home care vertical stood at 86% in 2017 vs. 90% in 2016. Meanwhile, revenue per patient for the vertical stood at US$20,063 in 2017, compared to US$39,854 in the previous year.

 

Operations & Management

 

NMC renewed its focus on the Operations & Management vertical in 2017, with a key aim of growing the business strongly going forward. The existing contract for Khalifa Hospital in Umm Al Quwain was renewed for another 5-year period and several new contracts were signed. Two in particular were announced during the year, namely Emirates Healthcare Group's assets and a UAE government hospital in Yemen.

 

Revenues from the O&M vertical stood at US$8m in 2017 (+33% YoY), with substantial further growth anticipated in 2018.

 

Distribution

 

The Distribution business recorded 13% revenue growth in 2017 to reach US$487m. The growth was supported by the recent changes implemented by Dubai Government making insurance mandatory. EBITDA margin for the division declined slightly to 10.6%, translating into 2017 EBITDA of US$52m.

 

NMC further solidified its position as one of UAE's largest distribution companies, increasing the number of its SKUs to 108,900 (+17.5% YoY), with 46% of the products sold under exclusive agency contracts. The supporting infrastructure for the Distribution business also continued to increase, with total warehouse storage area increasing to 725,000 sq. ft. (+11%) and vehicle fleet rising to 232 (+1%).

 

The UAE government has implemented 5% Value Added Tax (VAT), effective from 1 January 2018. While most of NMC's business will not be affected by this tax (the majority of healthcare services are zero-rated and most pharmaceutical products are either exempt or zero-rated), parts of the Distribution business will be subject to VAT. However, the tax burden is expected to be transferred to the end consumer. Additionally, input tax incurred by NMC is refundable and can be adjusted against VAT on the Distribution division.

 

Financial review

 

The Group reported solid results in FY 2017 and is in a sound financial position overall.

 

The Group's reported revenue grew by 31.3% to US$1.6bn (FY2016: US$1.2bn) of which 15.6% was achieved organically with the remaining 15.8% growth resulting from the transformation strategy of the group through acquisitions. Group EBITDA increased by 43.6% to US$353.4m (FY2016: US$246.1m). Group EBITDA margin increased by 180 basis points to 22% mainly as a result of realising some of the acquisition related synergies within the Group and the improvement of margin in existing entities (including the new facilities). Group net profit increased by 38.2% to US$209.2m (FY2016: US$151.4m) and  Group basic earnings per share grew by 28.0% to US$0.910 (FY2016: US$0.711).

 

Overall, our growth in revenue and improved profitability are attributed to both an improvement in performance of our existing hospitals and medical facilities and the acquisitions made within the Middle East, Europe and South America over the last 2 years.

 

Healthcare division

 

Revenue in the Healthcare division continued to achieve improved performance from US$823.3m in FY2016 to US$1,162m in FY2017, a level of growth of 41.1% of which 16.4% was achieved organically with the remaining 24.7% coming from acquired assets.

 

EBITDA improved to US$355.4m in FY2017 (2016: US$241.1m), a level of growth of 47.4%. EBITDA margins were 30.6% (FY2016: 29.3%).

 

The entities which were acquired earlier in the year, in particular Al Zahra Hospital though yet to be fully integrated within the Group performed above expectation in terms of revenues, EBITDA and cash flows.

 

The other entities acquired as part of the Group's Growth Strategy to build an integrated multi-vertical and multi-brand healthcare network across several geographies such as As Salama Hospital, Bin Said Clinics, and Atlas Healthcare Clinics performed in line with our expectations. Overall, our acquisitions have contributed a positive impact on the group revenue, EBITDA and cash flow.

 

Distribution division

 

Within the Distribution division, revenues increased to US$486.8m in FY2017 (FY2016: US$431.9m), a growth rate of 12.7%. EBITDA increased to US$51.5m in FY2017 (FY2016: US$47.1m), a growth rate of 9.4%.

 

The growth in revenue is attributed to the expansion of and consolidation within our distribution network. Further, the introduction of mandatory insurance in Dubai in 2016 continues to have a favourable impact on the Pharma portfolio.

 

Our focus on identifying efficiencies within our operations contributed to an improvement in our margins.

 

Capital Expenditure

 

Total capital additions of US$63.5m (FY2016: US$66.9m) were made during the year, in line with our expectations. Of the total capital expenditure spend during the period, US$31.4m (FY2016: US$38.9m) related to new capital projects and US$32.1m (FY2016: US$28.0m) related to further capital investment in our existing facilities.

 

The Group has assessed all significant capital expenditure projects for indicators of impairment and have concluded that the projects have sufficient headroom and that none of the assets are impaired.

 

 

Acquisitions:

 

During the year, we completed and announced a number of transactions, some of which had a material impact on our results and reflect our focused expansion strategy. Total consideration paid for all the acquisitions was US$641.0m.

 

Intangible assets increased to US$1,156.9m from US$652.9m mainly because of the goodwill recognised in respect of the Al Zahra acquisition.

 

For detailed analysis of the acquired assets, please refer to the Business Combinations note (note 5) of the financial statements.

 

 

 

 

 

Cash

 

Cash and cash equivalents decreased from US$433.4m to US$206.5 m.

 

The Group converted 78.5% (2016: 71.7%) of underlying EBITDA into cash generated from operations. Net cash inflow from operating activities for the 2017 financial year was US$277.5m, compared with US176.4m for the comparative period in 2016.

 

Net debt and funding

 

Net debt increased during the year from US$431.3m to US$1,011.4m, in line with management's expectations. Net debt-to-EBITDA ratio at the end of 2017 stood at 2.9x, remaining at a very comfortable level relative to the Group's cash flow generation capacity.

 

The increase in net debt is largely attributed to the acquisitions made during the year. The overall movement is explained as follows:

 


$m

Net Debt at 31 December 2016

431.3

Free cash flow

(277.5)

Investment capital expenditure

64.8

Acquisitions (Note 5)

628.1

Contingent consideration paid for acquisition (Note 36)

15.1

Deferred consideration paid for acquisition (Note 5)

4.4

Loan receivable

17.9

Dividend paid (Note 26)

42.3

Finance cost paid

54.1

Other Items

30.9

Net debt as at 31 December 2017

1,011.4

Net Debt at 31 December 2016

431.3

 

Working Capital

 

The Group's two divisions, Healthcare and Distribution, have different funding requirements. As in the previous years, the Group continues to fund its working capital requirements for its Healthcare division from operational cash flow, and we do not expect this position to change in the 2018 financial year.

 

In relation to the Distribution division, the working capital requirement is dependent on a number of factors including the timing of receipt of debtors and the timing of payment of creditors as well as inventory flow during the year and the timing of re-imbursement of promotional expenses agreed with our Principals in relation to the sale and marketing of their products. The Distribution division requires external working capital facilities throughout the year, the level of which is dependent on business seasonality. These working capital facilities are arranged through a number of banking providers and in general terms the level of working capital required is between 20%-30% of the Group's total debt facilities.

 

Funding

 

The Group's largest acquisition during FY2017, the acquisition of Al Zahra Hospital was largely financed via borrowings, but also utilising the proceeds of a share placing raising US$322m in December 2016.

 

During the year, the Group entered two new syndicated facilities amounting to US$825m (Facility A) and US$250m (Facility B) respectively. Facility A is repayable over 60 months with an initial grace period of 12 months. Facility B is repayable over 84 months with a grace period of 12 months.

 

In addition to the above facilities, term loans also include other short term revolving loans which get drawn down and repaid over the period.

 

The total debt of the Group, excluding accounts payable and accruals, was US$1,399.0m as at 31 December 2017 compared to US$1,049.1m as at 31 December 2016.

 

Finance costs and income

 

Total finance costs for FY2017 were US$63.8m compared to US$41.7m in FY2016. This was mainly on account of the higher facility amount availed to refinance the existing debts as well as to finance the acquisitions.

 

As part of the Group's capital expenditure programme, borrowing costs of Nil (FY2016: US$0.3m) have been capitalised during the year. The rate used to determine the amount of borrowing costs eligible for capitalisation was1.9% for (FY2016, which is the effective rate of the borrowings used to finance the capital expenditure).

 

Dividend

 

The Board is proposing to continue with its policy of annual dividend payments of between 20% and 30% of profit after tax, outlined in the Company's IPO prospectus in 2012. The Board is therefore recommending that a final dividend of 13 pence per share be paid in cash in respect of the year ended 31 December 2017 (FY2016: 10.6 pence per share).

 

Subject to approval of the shareholders at the company's annual general meeting on 28 June 2018, the dividend timetable is as follows:

 

Ex-dividend date - 14 June 2018

Record date - 15 June 2018

Payment date - 10 July 2018

 

 

 

 

 

 

NMC Health plc

 

Consolidated financial statements

 

Year ended 31 December 2017

                                                                                                                                                                                                                                                                                                                       

CONSOLIDATED INCOME STATEMENT

For the year ended 31 December 2017



2017

2016


Notes

US$'000

US$'000





Revenue

7

1,603,396

1,220,835

Direct costs

8

(968,044)

(753,325)



-----------------------

-----------------------

GROSS PROFIT


635,352

467,510





General and administrative expenses

8

(335,168)

(267,895)

Other income

9

53,203

46,466



-----------------------

-----------------------





PROFIT FROM OPERATIONS BEFORE DEPRECIATION,




AMORTIZATION, TRANSACTION COSTS AND IMPAIRMENT


353,387

246,081





Transaction costs in respect of business combinations

5

(5,969)

(4,603)

Depreciation

17

(58,107)

(45,010)

Amortisation

18

(12,776)

(10,989)

Impairment of  assets

17&18

(3,010)

(1,376)



-----------------------

-----------------------

PROFIT FROM OPERATIONS


273,525

184,103





Finance costs

10

(63,792)

(41,684)

Finance income

11

7,487

9,157

Unamortised finance fees written off

27

(6,794)

-



-----------------------

-----------------------

PROFIT FOR THE YEAR BEFORE TAX

12

210,426

151,576

Tax

15

(1,245)

(174)



-----------------------

-----------------------

PROFIT FOR THE YEAR


209,181

151,402



==========

==========

Profit for the year attributable to:




  Equity holders of the Parent


185,970

132,689

  Non-controlling interests


23,211

18,713



-----------------------

-----------------------

Profit for the year


209,181

151,402

 



==========

==========

 

Earnings per share for profit attributable to the




equity holders of the Parent:




Basic EPS (US$)

16

0.910

0.711

 

Diluted EPS (US$)

 16

0.903

0.707

 



==========

==========

 

















 

 

NMC Health plc

                                                                                                                                                                                                                                                                                                                       

CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME

For the year ended 31 December 2017

 

 



2017

2016


Notes

US$'000

US$'000





 





PROFIT FOR THE YEAR


209,181

151,402





Other comprehensive income




 

Other comprehensive income to be reclassified to income statement in subsequent periods (net of tax)

 




 

Exchange difference on translation of foreign operations


15,304

(4,050)

 





 

Other comprehensive income not to be reclassified to income statement in subsequent periods (net of tax)




 

Re-measurement gains / (loss) on defined benefit plans

28

1

(147)

 



-----------------------

-----------------------

Other comprehensive income for the year (net of tax)


15,305

(4,197)

 



-----------------------

-----------------------

TOTAL COMPREHENSIVE INCOME FOR THE YEAR


224,486

147,205

 



==========

==========

 

Total comprehensive income attributable to :




 

  Equity holders of the Parent


199,497

129,030

 

  Non-controlling interests


24,989

18,175

 



-----------------------

-----------------------

 

Total comprehensive income


224,486

147,205

 



==========

==========

 





 

 

 

These results relate to continuing operations of the Group. There are no discontinued operations in the current and prior year.

 

 

The attached notes 1 to 41 form part of the consolidated financial statements.

 

 

 

 

  

NMC Health plc

                                                                                                                                                                                                                                                                                                                       

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 December 2017

 

 



2017

2016


Notes

US$'000

US$'000

ASSETS




Non-current assets




Property and equipment

17

607,092

459,338

Intangible assets

18

1,156,904

652,983

Investment in Joint Venture


-

834

Deferred tax assets

15

3,418

2,135

Loan receivable

19

-

9,129

Advances paid for acquisitions

5

-

1,614

Other non-current assets

30

43,090

43,053



--------------------------

--------------------------



1,810,504

1,169,086



--------------------------

--------------------------

Current assets




Inventories

20

181,330

144,387

Accounts receivable and prepayments

21

518,842

374,457

Loan receivable

19

32,187

5,387

Amounts due from related parties

31

1,776

3,628

Income tax receivable


3,063

2,208

Bank deposits

22

185,611

137,900

Bank balances and cash

22

202,002

479,940



-------------------------

-------------------------



1,124,811

1,147,907



-------------------------

-------------------------

Asset held for sale

39

3,693

-



-------------------------

-------------------------





TOTAL ASSETS


2,939,008

2,316,993



==========

==========

EQUITY AND LIABILITIES




Equity




Share capital

23

31,928

31,910

Share premium

23

492,634

491,778

Group restructuring reserve

24

(10,001)

(10,001)

Foreign currency translation reserve


5,398

(8,128)

Option redemption reserves

37

(33,483)

(35,027)

Retained earnings

25

603,240

436,337



-----------------------

-----------------------

Equity attributable to equity holders of the Parent


1,089,716

906,869





Non-controlling interests


54,910

42,002



-----------------------

-----------------------

Total equity


1,144,626

948,871



-----------------------

-----------------------

Non-current liabilities




Term loans

27

987,840

594,780

Employees' end of service benefits

28

41,374

26,648

Other payables

30

38,984

40,792

Option redemption payable

37

12,728

37,500

Deferred tax liabilities

15

9,693

8,245



-----------------------

-----------------------



1,090,619

707,965



-----------------------

-----------------------

 

 

 

 

 

 

 

 

NMC Health plc

                                                                                                                                                                                                                                                                                                                       

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 December 2017










2017

2016


Notes

US$'000

US$'000

 

 

Current liabilities




Accounts payable and accruals

29

209,470

158,812

Other payables

30

18,110

26,827

Option redemption payable

37

26,019

-

Amounts due to related parties

31

28,472

14,876

Bank overdrafts and other short term borrowings

22

207,034

219,851

Term loans

27

204,154

234,519

Employees' end of service benefits

28

6,905

3,560

Income tax payable


2,265

1,712

Dividend payable

26

1,334

-



-----------------------

-----------------------



703,763

660,157



-----------------------

-----------------------

Total liabilities


1,794,382

1,368,122



-----------------------

-----------------------

TOTAL EQUITY AND LIABILITIES


2,939,008

2,316,993



==========

==========

 

 

 

The consolidated financial statements were authorised for issue by the board of directors on 6 March 2018 and were signed

on its behalf by

 

 

 

 

 

 

Prasanth Manghat

         Prashanth Shenoy

Chief Executive Officer

         Chief Financial Officer

 

 

 

 

 

 

The attached notes 1 to 41 form part of the consolidated financial statements.

 

 

 

 

NMC Health plc

                                                                                                                                                                                                                                                                                                                                                                                     

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2017

 

Attributable to the equity holders of the Parent


 

 

Share  capital

 

 

Share  premium

 

Group restructuring reserve

 

 

Retained earnings

Foreign currency translation reserve

 

US$ '000

US$ '000

US$ '000

US$ '000

US$ '000

 







 

Balance as at 1 January 2017

31,910

491,778

(10,001)

436,337

(8,128)

 

Profit for the year

-

-

-

185,970

-

 

Other comprehensive income

-

-

-

1

13,526

 


-----------------------

---------------------

-----------------------

---------------------

-----------------------

 

Total comprehensive income for the year




185,971

13,526

 







 

Dividend (note 26)

-

-

-

(27,779)

-

 

Option redemption reserve (note 37)

-

-

-

-

-

 

Exercise of stock option shares (note 23)

18

856

-

(874)

-

 

Adjustment to prior year business combination (note 5)

-

-

-

1,683

-

 

Acquisition of non-controlling interest (note 2.2)

-

-

-

(1,279)

-

 

Acquisition of subsidiaries (note 5 )

-

-

-

-

-

 

Share based payments (note 32)

-

-

-

9,181

-

 


-----------------------

---------------------

-----------------------

---------------------------

------------------------

 

Balance as at 31 December 2017

31,928

492,634

(10,001)

603,240

5,398

 







 


==========

========

==========

==========

=========

 







 

Balance as at 1 January 2016

29,566

179,152

(10,001)

318,092

(4,616)

 

Profit for the year

-

-

-

132,689

-

 

Other comprehensive income

-

-

-

(147)

(3,512)

 


-----------------------

---------------------

-----------------------

---------------------

-----------------------

 

Total comprehensive income for the year




132,542

(3,512)

 







 

Dividend (note 26)

-

-

-

(16,350)

-

 

Option redemption reserve (note 37)

-

-

-

-

-

 

Issue of shares - new (note 23)

2,344

319,970

-

-

-

 

Shares issue costs (note 23)

-

(7,344)

-

-

-

 

Acquisition of non-controlling interest

-

-

-

(587)

-

 

Settlement of put option (note 37)

-

-

-

-

-

 

Acquisition of subsidiaries (note 5 )

-

-

-

-

-

 

Share based payments (note 32)

-

-

-

2,640

-

 


-----------------------

---------------------

-----------------------

---------------------------

------------------------

 

Balance as at 31 December 2016

31,910

491,778

(10,001)

436,337

(8,128)

 







 


==========

========

==========

==========

=========

 

 

 

 

   Attributable to the equity holders of the Parent

 


Option redemption reserves

Total

Non- controlling interest

Total

US$ '000

US$ '000

US$ '000

US$ '000






Balance as at 1 January 2017

(35,027)

906,869

42,002

948,871

Profit for the year

-

185,970

23,211

209,181

Other comprehensive income

-

13,527

1,778

15,305


-----------------------

---------------------

-----------------------

-----------------------

Total comprehensive income for the year

-

199,497

24,989

224,486






Dividend (note 26)

-

(27,779)

(21,160)

(48,939)

Option redemption reserve (note 37)

1,544

1,544

-

1,544

Exercise of stock option shares (note 23)

-

-

-

-

Adjustment to prior year business combination (note 5)

-

1,683

1,631

3,314

Acquisition of non-controlling interest (note 2.2)

-

(1,279)

(1,336)

(2,615)

Acquisition of subsidiaries (note 5 )

-

-

8,784

8,784

Share based payments (note 32)

-

9,181

-

9,181


-----------------------

---------------------------

-------------------------

---------------------

Balance as at 31 December 2017

(33,483)

1,089,716

54,910

1,144,626







==========

==========

=========

=========






Balance as at 1 January 2016

(24,496)

487,697

11,968

499,665

Profit for the year

-

132,689

18,713

151,402

Other comprehensive income

-

(3,659)

(538)

(4,197)


-----------------------

---------------------

-----------------------

-----------------------

Total comprehensive income for the year

-

129,030

18,175

147,205






Dividend (note 26)

-

(16,350)

(5,300)

(21,650)

Option redemption reserve (note 37)

(12,801)

(12,801)

-

(12,801)

Issue of shares - new (note 23)

-

322,314

-

322,314

Shares issue costs (note 23)

-

(7,344)

-

(7,344)

Acquisition of non-controlling interest

-

(587)

(1,365)

(1,952)

Settlement of put option (note 37)

2,270

2,270

-

2,270

Acquisition of subsidiaries (note 5 )

-

-

18,524

18,524

Share based payments (note 32)

-

2,640

-

2,640


-----------------------

---------------------------

-------------------------

---------------------

Balance as at 31 December 2016

(35,027)

906,869

42,002

948,871







==========

==========

=========

=========

 

The attached notes 1 to 41 form part of the consolidated financial statements.

 

 

NMC Health plc

                                                                                                                                                                                                                                                                                                                       

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 December 2017

 



2017

2016


Notes

US$'000

US$'000

OPERATING ACTIVITIES




Profit for the year before tax


210,426

151,576

Adjustments for:




  Depreciation

17

58,107

45,010

  Employees' end of service benefits

28

11,106

7,246

  Amortisation of intangible assets

18

12,776

10,989

  Finance income

11

(7,487)

(9,157)

  Finance costs

10

63,792

41,684

  Loss on disposal of property and equipment


190

31

  Foreign exchange loss


21

358

  Non cash other income


-

626

  Unamortised finance fees written off

8

6,794

-

  Impairment of assets

17,18

3,010

1,376

  Share based payments expense

32

9,181

2,640



-----------------------

-----------------------



367,916

252,379

Working capital changes:




  Inventories


(28,212)

(8,630)

  Accounts receivable and prepayments


(82,078)

(78,638)

  Amounts due from related parties


2,670

487

  Accounts payable and accruals


11,554

15,524

  Amounts due to related parties


13,487

(2,539)



-----------------------

-----------------------

Net cash from operations


285,337

178,583

Employees' end of service benefits paid

28

(3,447)

(1,546)

Income tax paid


(4,379)

(666)



-----------------------

-----------------------

Net cash from operating activities


277,511

176,371



-----------------------

-----------------------

INVESTING ACTIVITIES




Purchase of property and equipment


(63,448)

(59,571)

Purchase of intangible assets

18

(1,413)

(473)

Proceeds from disposal of property and equipment


88

1,574

Acquisition of subsidiaries, net of cash acquired

5

(628,057)

(236,328)

Investment in Joint venture


(2,880)

(928)

Bank deposits maturing in over 3 months


(40,759)

26,764

Restricted cash


52,770

 (84,473)

Finance income received


1,144

6,529

Advances paid for acquisitions

5

-

(1,614)

Loan receivable

19

(17,934)

(10,505)

Other non-current assets


(1,335)

(1,768)

Contingent consideration paid for acquisition

36

(15,053)

(9,567)

Deferred consideration paid for acquisition

5

(4,356)

-



-----------------------

-----------------------

Net cash used in investing activities

 


(721,233)

(370,360)



-----------------------

-----------------------

 

 

  

 

NMC Health plc

                                                                                                                                                                                                                                                                                                                       

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 December 2017

 



2017

2016


Notes

US$'000

US$'000

 

 

 

FINANCING ACTIVITIES




New term loans and draw-downs

27

671,353

631,548

Repayment of term loans

27

(319,111)

(378,660)

Transaction cost of term loan


(16,075)

-

Receipts of short term borrowings


351,775

351,089

Repayment of short term borrowings


(373,318)

(319,556)

Dividend paid to shareholders

26

(27,779)

(16,350)

Dividend paid to non-controlling interest

26

(14,523)

(5,300)

Other payable


1,200

-

Finance costs paid


(54,126)

(32,421)

Acquisition of non-controlling interest


(2,615)

(1,952)

Proceed from new share issue - net


-

314,970



-----------------------

-----------------------

Net cash from financing activities


216,781

543,368



-----------------------

-----------------------

 (DECREASE) / INCREASE IN CASH AND CASH




EQUIVALENTS


(226,941)

349,379





Cash and cash equivalents at 1 January


433,403

84,024



----------------------

----------------------

CASH AND CASH EQUIVALENTS AT 31 DECEMBER

22

206,462

433,403



========

========

 

 

The attached notes 1 to 41 form part of the consolidated financial statements.

 

 

 

 

 

 

 

 

 

 

NMC Health plc

                                                                                                                                                                                                                                                                                                                       

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

At 31 December 2017

 

 

1          CORPORATE INFORMATION

 

NMC Health plc (the "Company" or "Parent'') is a Company which was incorporated in England and Wales on 20 July 2011. The Company is a public limited company operating in the United Arab Emirates ("UAE"), Oman, Saudi Arabia, Spain, Colombia, Italy, Denmark and Brazil. The address of the registered office of the Company is Level 1, Devonshire House, One Mayfair Place, London, W1J 8AJ. The registered number of the Company is 7712220. The Company's immediate and ultimate controlling party is a group of three individuals (H.E. Saeed Mohamed Butti Mohamed Al Qebaisi (H.E. Saeed Bin Butti), Dr BR Shetty and Mr Khalifa Butti Omair Yousif Ahmad Al Muhairi (Mr. Khalifa Bin Butti) who are all shareholders and of whom two are directors of the Company and who together have the ability to control the Company.

 

The Parent and its subsidiaries (collectively the "Group") are engaged in providing professional medical services, home care services, long term care services and the provision of all types of research and medical services in the field of gynaecology, obstetrics and human reproduction, and the rendering of business management services to companies in the health care and hospital sector. The Group is also engaged in wholesale of pharmaceutical goods, medical equipment, cosmetics, food, IT products and services.

 

The consolidated financial statements of the Group for the year ended 31 December 2017 were authorised for issue by the board of directors on 6 March 2018 and the consolidated statement of financial position was signed on the Board's behalf by Mr Prasanth Manghat and Mr Prashanth Shenoy.

 

2.1        BASIS OF PREPARATION

 

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union as they apply to the financial statements of the Group for the year ended 31 December 2017 and applied in accordance with the Companies Act 2006.

 

The consolidated financial statements are prepared under the historical cost convention, except for derivative financial instruments and contingent consideration payable which have been measured at fair value.  The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all periods, presented.

 

Functional and reporting currency

The functional currency of the Company and its subsidiaries in the UAE is the UAE Dirham and the functional currency of the subsidiaries operating outside UAE is the currency of those respective countries. The reporting currency of the Group is United States of America Dollar (US$) as this is a more globally recognized currency. The UAE Dirham is pegged against the US Dollar at a rate of 3.673 per US Dollar.

 

All values are rounded to the nearest thousand dollars ($000) except when otherwise indicated.

 

Going concern

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Strategic Review in the Annual Report. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Financial Review in the Annual Report.

 

The Group has two diverse operating divisions, Healthcare and Distribution, both of which operate in a growing market.

 

The directors have undertaken an assessment of the future prospects of the Group and the wider risks that the Group is exposed to. In its assessment of whether the Group should adopt the going concern basis in preparing its financial statements, the directors have considered the adequacy of financial resources in order to manage its business risks successfully, together with other areas of potential risk such as regulatory, insurance and legal risks.

 

The Group has considerable financial resources including banking arrangements through a spread of local and international banking groups and utilizes short and medium term working capital facilities to optimise business funding. Debt covenants are reviewed by the Board each month. The Board believes

 

that the level of cash in the Group, the spread of bankers and debt facilities mitigates the financing risks that the Group faces from both its expansion through acquisitions and in relation to working capital requirements.

 

The Group delivered a strong performance in 2017. Both the Healthcare and Distribution divisions have continued their positive growth in revenue during 2017. Net profit and earnings before interest tax depreciation and amortization (EBITDA) of both healthcare and distribution divisions have increased in 2017. EBITDA margin of Distribution is almost the same as last year whereas for Healthcare it increased slightly which is due to opening of new facilities during the year.  The directors have reviewed the business plan for 2018 and the five-year cash flow, together with growth forecasts for the healthcare sector in the UAE. The directors consider the Group's future forecasts to be reasonable.

 

The directors have not identified any other matters that may impact the viability of the Group in the medium term and therefore they continue to adopt the going concern basis in preparing the consolidated financial statements.

 

2.2        BASIS OF CONSOLIDATION

 

The consolidated financial statements comprise the financial statements of the Group and its subsidiaries as at 31 December 2017. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if, and only if, the Group has:

·      Power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the investee)

·      Exposure, or rights, to variable returns from its involvement with the investee

·      The ability to use its power over the investee to affect its returns

 

Generally, there is a presumption that a majority of voting rights result in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

·      The contractual arrangement with the other vote holders of the investee

·      Rights arising from other contractual arrangements

·      The Group's voting rights and potential voting rights

 

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary.

 

Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group's accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

 

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.

 

If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities, non-controlling interest and other components of equity while any resultant gain or loss is

recognised in profit or loss. Any investment retained is recognised at fair value.

 

The consolidated financial statements include the financial statements of the Company and its subsidiaries listed below:

 

 




Percentage of holdings



Country of

31 December

31 December



incorporation

2017

2016

Direct subsidiaries:





  NMC Holding Co LLC

UAE

100%

100%


  NMC Health Holdco Limited

UK

100%

100%






Indirect subsidiaries:





NMC Healthcare LLC

UAE

100%

100%


New Pharmacy Company WLL

UAE

100%

100%


New Medical Centre LLC-Dubai

UAE

100%

100%


NMC Specialty Hospital LLC-Abu Dhabi

UAE

100%

100%


NMC Specialty Hospital LLC- Dubai

UAE

100%

100%


New Medical Centre Trading LLC-Abu Dhabi

UAE

100%

100%


NMC Trading LLC-Dubai

UAE

100%

100%


Bait Al Shifaa Pharmacy LLC-Dubai

UAE

100%

100%


New Medical Centre LLC-Sharjah

UAE

100%

100%


New Medical Centre Specialty Hospital LLC-Al Ain

UAE

100%

100%


Reliance Information Technology LLC

UAE

100%

100%


BR Medical Suites FZ LLC

UAE

100%

100%


Bright Point Royal Womens Hospital LLC

UAE

100%

100%


NMC Day Surgery Centre LLC

UAE

100%

100%


NMC Hospital LLC (DIP Hospital)

UAE

100%

100%


Medifertil, S.A

Columbia

61.90%

61.90%


Centro de infertilidad y Reproduccion





   Humana SLU (CIRH)

Spain

88.40%

88.40%


Centro de Medicina della Riproduzione (Biogenesi)

Italy

53.00%

53.00%


EUVITRO, S.L.U

Spain

88.40%

88.40%


Copenhagen Fertility Center Holding Aps (DK)

Denmark

79.60%

79.60%


Huntington Centro de Medicina Reproductive, S/A (BR)

Brazil

53%

53%


ProVita International Medical Center LLC

UAE

100%

100%


Lifewise Home Healthcare LLC

UAE

100%

100%


NMC Royal Hospital LLC

UAE

100%

100%


The American Surgecenter Pharmacy LLC

UAE

100%

90%


The American Surgecenter LLC

UAE

100%

90%


Americare LLC

UAE

100%

90%


Trans Arabia Drug Store LLC

UAE

75%

75%


Sunny Specialty Medical Centre LLC.

UAE

100%

100%


Sunny Medical Centre LLC.

UAE

100%

100%


New Sunny Medical Centre LLC

UAE

100%

100%


Sunny Al Buhairah Medical Centre LLC

UAE

100%

100%


Sunny Al Nadha Medical Centre LLC

UAE

100%

100%


Sunny Dental Care LLC.

UAE

100%

100%


Grand Hamad Pharmacy LLC

UAE

100%

100%


Hamad Pharmacy LLC

UAE

100%

100%


Sharjah Pharmacy L.L.C

UAE

100%

100%


Sunny Sharqan Medical Centre L.L.C.                         

UAE

100%

100%


NMC Royal Medical Centre L.L.C.

UAE

100%

100%


NMC Healthcare L.L.C.

Oman

100%

100%


Fulfil Trading L.L.C.

UAE

100%

100%


Nadia Medical Centre L.L.C.

UAE

100%

100%


Cooper Dermatology and Dentistry Clinic

UAE

100%

100%


Cooper Health Clinic

UAE

100%

100%


Fakih IVF Fertility Centre LLC

UAE

51%

51%


Fakih IVF LLC

UAE

51%

51%


Beiersdorf Cosmetics Trading LLC- Abu Dhabi branch.

UAE

100%

100%


New Marketing & Trading Co.LLC-Abu Dhabi

UAE

100%

100%


Beiersdorf Cosmetics Trading LLC- Al Ain branch

UAE

100%

100%


New Marketing & Trading Co -LLC-Al Ain branch.

UAE

100%

100%


New Medical Centre Trading LLC.-branch 2

UAE

100%

100%


New Medical Centre Trading LLC-branch 3

UAE

100%

100%


Beiersdorf Cosmetics Trading LLC- Ajman branch

UAE

100%

100%


National Marketing & Trading Co. LLC-Ajman

UAE

100%

100%


New Marketing & Trading Company LLC-Ajman branch

UAE

100%

100%


NMC Trading LLC-Ajman branch

UAE

100%

100%


Beiersdorf Cosmetics Trading Co. LLC-Dubai

UAE

100%

100%


National Marketing & Trading Co. LLC - Dubai branch

UAE

100%

100%


New Marketing & Trading Co. LLC- Dubai branch

UAE

100%

100%


New Medical Centre Trading (Store) LLC-Dubai

UAE

100%

100%


New Medical Centre Veterinary Medicine





  & Equipment Trading Co LLC-Dubai

UAE

100%

100%


NMC Trading LLC- Dubai branch

UAE

100%

100%


NMC Trading LLC -Fujairah branch

UAE

100%

100%


NMC Trading  RAK-  branch LLC

UAE

100%

100%


New Medical Centre

UAE

100%

100%


New Medical Centre L.L.C. -branch (Al-Ain,Al wadi)

UAE

100%

100%


NMC Pharmacy

UAE

100%

100%


NMC Pharmacy-Branch

UAE

100%

100%


PVHC KSA

KSA

100%

100%


TVM KSA Acquisition 2 Ltd.

Cyprus

100%

100%


NMC Royal Medical Centre LLC-Branch

UAE

100%

100%


Muscat Central Healthcare L.L.C.

Oman

100%

100%


NMC Healthcare India Pvt. Ltd.

India

100%

100%


NMC International Trading L.L.C.

UAE

100%

100%


Cooper Health Clinic-Branch

UAE

100%

100%


New Reproductive Care Ltd.

Cayman

51%

51%


New Medical Centre Abu Dhabi branch

UAE

100%

100%


New Medical Centre Trading LLC branch 1

UAE

100%

100%


NMC Trading LLC branch

UAE

100%

100%


New Medical Centre Pharmacy Al Ain branch1

UAE

100%

100%


Focus Optics

UAE

100%

100%


Bright Point Pharmacy LLC

UAE

100%

100%


Lotus Pharmacy LLC

UAE

100%

100%


New Medial Centre Pharmacy LLC Sharjah

UAE

100%

100%


New Medical Centre Trading (Store) LLC-Abu Dhabi Br

UAE

100%

100%


Provita International Medical Centre LLC Alain branch

UAE

100%

100%


NMC Medical Professional Trading Centre LLC

UAE

100%

100%


New Pharmacy Company WLL branch 1

UAE

100%

100%


New Pharmacy Company WLL branch 2

UAE

100%

100%


New Pharmacy Company WLL branch 6

UAE

100%

100%


Royal Arsom Wellness Centre LLC

UAE

100%

100%


NMC Medical Centre branch 2 (scientific store)

UAE

100%

100%


New Medical Centre Pharmacy LLC Alain

UAE

100%

100%


Fertilitetsklinikken Lygten A/S

Denmark

79.60%

79.60%


Luarmia, S.L.

Spain

88.40%

88.40%


Al Aseel Laundry

UAE

100%

100%


Zari Spa & Beauty Centre

UAE

100%

100%


Zari Spa for Men

UAE

100%

100%


PEL Assistencia A Infertillidade LTDA

Brazil

53%

53%


Mustashfa Jadeed Fund.                                           

KSA

100%

-


Al Qadi Speciality Hospital LLC

KSA

60%

-


As Salama Hospital LLC

KSA

70%

-


Al Zahra Private Hospital Company

UAE

100%

-


Sunny Halwan Speciality Medical Centre

UAE

100%

-


Hamad Drug Store LLC

UAE

100%

-


Sunny Maysloon Speciality Medical Centre LLC

UAE

100%

-


Centre de Reproduccio Asistida del ("Fecunmed")

Spain

70.7%

-


NMC Royal Medical Centre LLC

Oman

100%

-


NMC Trading LLC

Oman

100%

-

 

 

The Group acquired an additional 10% interest in the voting shares of Americare LLC, The American Surgecenter Pharmacy LLC and the American Surgecenter LLC increasing its ownership interest to 100% for cash consideration of US$2,615,000.  The Group recorded a loss of US$1,279,000 on this in retained earnings

 

 

 

 

 

NMC Health plc

                                                                                                                                                                                                                                                                                                                       

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

At 31 December 2017

 

 

2.3        SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES

 

The key assumptions concerning the future, key sources of estimation uncertainty and critical judgements at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:

 

Significant estimates

 

Impairment of inventories

Inventories are held at the lower of cost and net realisable value. When inventories become old or obsolete, an estimate is made of their net realisable value. For individually significant amounts this estimation is performed on an individual basis. Amounts which are not individually significant, but which are old or obsolete, are assessed collectively and a provision applied according to the inventory type and the Group's policy for inventory provisioning. The gross carrying amount of inventories at 31 December 2017 was US$ 182,549,000 (2016: US$145,565,000) and the provision for old and obsolete items at 31 December 2017 was US$ 1,219,000 (2016: US$1,178,000) (note 20). 

 

Impairment of accounts receivable

An estimate of the collectible amount of trade accounts receivable is made when collection of the full amount is no longer probable.  For individually significant amounts, this estimation is performed on an individual basis.  Amounts which are not individually significant, but which are past due or claims which can potentially be rejected, are assessed collectively and a provision applied according to the length of time past due, based on historical recovery rates.

 

A majority of the receivables that are past due but not impaired pertains to Group's operations in UAE, these receivables are from insurance companies and government-linked entities in the United Arab Emirates which are inherently slow payers due to their long invoice verification and approval of payment procedures. Payments continue to be received from these customers and accordingly the risk of non-recoverability is considered to be low.

 

Gross trade accounts receivable at 31 December 2017 were US$ 455,893,000 (2016: US$326,480,000) and the provision for doubtful debts at 31 December 2017 was US$15,747,000 (2016: US$12,129,000) (note 21).  Any difference between the amounts actually collected in future periods and the amounts expected will be recognised in the consolidated income statement.

 

Impairment of non-financial assets

Impairment exists when the carrying value of an asset or cash generating unit (CGU) exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The fair value less costs of disposal calculation is based on available data from binding sales transactions, conducted at arm's length, for similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a DCF model. The cash flows are derived from the budget for the next five years and do not include restructuring activities that the Group is not yet committed to or significant future investments that will enhance the asset's performance of the CGU being tested. The recoverable amount is sensitive to the discount rate used for the DCF model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes. These estimates are most relevant to goodwill recognised by the Group. The key assumptions used to determine the recoverable amount for the different CGUs are disclosed and further explained in note 18.

 

In addition, the Group has work in progress in respect of Hospital Information System (HIS) and ERP amounting to US$1,783,000 (2016:US$4,345,000). This amount is included in capital work in progress in property and equipment and in software in intangible assets (note 17 and note 18).  As of 31 December 2017, the Group has recorded impairment of US$3,010,000 (2016:US$ nil) against this.

 

Valuation of intangibles assets

The Group measures its intangible assets acquired in a business combination as follows:

 

Brand

Relief from royalty

Database and software

Replacement cost

Patient relationships

Multi period excess earning method

Non-compete agreements

Income approach-with or without method

Rental and private contracts

Multi period excess earning method

 

Estimating the fair value of the brand requires determination of the most appropriate valuation method. This estimate also requires determination of the most appropriate inputs to the valuation method including the base revenue, expected life of the intangible assets, selecting an arm's length royalty rate, discount rate and making assumptions about them. Similarly, estimating the replacement cost of the database

requires an estimate of the number of cycles that are recorded in the database along with the best

estimate of the hours dedicated by the staff (such as doctors, nurses, biologists, and other specialist technicians) to collect the data, the useful life of the database, discount rate and an estimate of tax saving.

 

Estimating the fair value of patient relationships and the non-compete agreements requires an estimate of the expected revenue over an appropriate period of time, a churn rate to account for the reduction in the number of patients over the years, discount rate, rate of inflation and the useful life and the risk inherent in ownership of the asset or security interest being valued.

 

Useful economic lives of property and equipment and depreciation method

Depreciation is calculated on all property and equipment other than land and capital work in progress, at the rates calculated to write off the cost of each asset on a straight-line basis over its expected useful life.  Management has re-assessed the useful economic lives of all asset categories with effect from 1 January 2017, following a review of the useful economic lives of the Group's assets and market research conducted on depreciation rates and methods in the industry:

 


Rate applied from 1 January 2017

Rate applied up to 31 December 2016

Hospital building

2%-6%

2%-6%

Buildings

4.8 % -6%

6%

Leasehold improvements

5.88% - 20%

5.88% - 20%

Motor vehicles

20%

20%

Furniture, fixtures and fittings

12.5% - 20%

12.5% - 20%

Medical equipment

10% - 25%

10% - 25%

 

 

The impact of the re-assessment of useful economic lives and depreciation method is an increase in reported profit of US$ 784,000 in the current year.

 

Useful economic lives of intangible assets and amortisation method

The useful lives of intangible assets are assessed as either finite or indefinite. Intangibles assets are amortised on straight line basis over their useful life. The following useful lives have been determined for acquired intangible assets:

 

Brands - 2-20 years

Software - 5 years

Database -15 years

Patient relationships - 7 years

Non-compete agreement - 3-4 years

Rental contracts - 7 years

Private contracts - 3 years

 

Management has re-assessed the useful economic lives of all intangible asset categories with effect from 1 January 2017, following a review of the useful economic lives of the Group's intangible assets and market research conducted on amortization rates and methods in the industry. Based on the review, useful life of brand relating to Provita and Americare has been revised to 15 years from 10 years and for Fakih brand usefull life has been revised to 20 years from 16 years.

 

The impact of the re-assessment of useful economic lives and amortisation method is an increase in reported profit of US$696,000 in the current year.

 

Contingent consideration on acquisitions

Contingent consideration, resulting from business combinations, is valued at fair value at the acquisition date as part of the business combination. When the contingent consideration meets the definition of a financial liability, it is subsequently re-measured to fair value at each reporting date. The change in the fair value at each reporting date is recorded in the consolidated income statement. The determination of the fair value is based on discounted cash flows. The key assumptions taken into consideration in determining the fair value are the probability of meeting relevant performance targets, securing certain agreements, completing certain acquisitions and the discount factor (note 5).

 

Significant judgements

 

Business combinations and goodwill

Management judgement is applied in determining whether the acquisition represents an acquisition of an asset or a business combination. This involves assessing whether or not the entities and the assets acquired constitute the carrying on of a business, i.e., whether there are inputs and processes applied to those inputs that have the ability to create outputs. When a business combination occurs, the fair values of the identifiable assets and liabilities assumed, including intangible assets, are recognised. The determination of the fair values of acquired assets and liabilities is based, to a considerable extent, on management's judgement. If the purchase consideration exceeds the fair value of the net assets acquired, then the difference is recognised as goodwill. If the purchase price consideration is lower than the fair value of the assets acquired then a gain is recognised in the consolidated income statement.  Allocation of the purchase price between finite lived assets and indefinite lived assets such as goodwill affects the results of the Group as finite lived intangible assets are amortised, whereas indefinite lived intangible

 

assets, including goodwill, are not amortised. The key judgements in respect of the contingent consideration recognised as part of a business combination relate to the performance of the business, the discount rates used and the contractual arrangements of ownership.

 

Valuation of put option

The accounting for put options requires significant management judgment and is driven by the specific contract terms.  Put options were issued as part of the Luarmia SL, CFC HCMR and Fecunmed acquisitions. On the basis of the contract terms and interpretation of relevant accounting standards and guidance, the judgment is that the Group does not have present ownership of the non-controlling interest (NCI) on account of Luarmia SL, CFC HCMR and Fecunmed as at the date of acquisition.  This judgment leads to the next stage of the accounting decisions required.  The Group has concluded that IFRS 10 takes precedence over IAS 32, and the permitted policy choice is that there should be full recognition of NCI using the proportionate method.

 

The financial liability that is payable under the put option is measured at fair value at each reporting date. The key assumptions taken into consideration in determining the fair value are the probability of meeting relevant reproductive cycles, EBITDA and net debt targets (note 37).

 

Leases for buildings and land

Generally our hospitals, day patient medical centres and hospital projects under development are located on land and in buildings which are leased. As at 31 December 2017, the majority of the lease periods range from five to twenty seven years apart from the leases for New Medical Centre Hospital LLC-Dubai ('Dubai General Hospital) and the warehouse facilities, which had leases which are renewable on an annual basis with a total value of US$569,000 (2016: US$801,000) included within property, and equipment as at 31 December 2017 (note 17). If any such leases are terminated or expire and are not renewed, the Group could lose the investment, including the hospital buildings and the warehouses on the leased sites which could have a material adverse effect on our business, financial condition and results of operations. The directors have considered the `following facts in determining the likelihood that these leases will be renewed:

·      Whilst some leases can be for long term durations, it is not unusual and can often be common practice throughout all of the emirates in the United Arab Emirates for landlords to lease land and buildings to companies on annually renewable leases of one year terms and for these Leases to be renewed automatically. Throughout the Group's over 44 year history it has never had a lease cancelled or not renewed, and the Group enjoys a high degree of respect in the region and believes that it maintains strong relationships with the landlords.

 

·      Both the Dubai General Hospital and the warehouse facilities have been occupied by the Group on annually renewable leases, for a period of more than 17 years and each year these leases have been automatically renewed.

 

·      The warehouse facilities have been built by the Group on land leased from government bodies in the Emirates of Dubai and Abu Dhabi on the back of the policies of these governments to attract investment in warehousing in the United Arab Emirates.

 

Lease for NMC Royal Hospital LLC

NMC Royal Hospital LLC is constructed from land leased from Municipality of Abu Dhabi. Remaining period of lease as of 31 December 2017 is 23 years expiring in 2040. Management has determined the

useful life of NMC Royal Hospital LLC building 50 years. Carrying amount of NMC Royal Hospital LLC building included in property and equipment as of 31 December 2017 is US$130,042,000 (2016: US$ 122,463,000). Management believe that lease will be renewed for the full useful life of the building. The directors have considered the facts that throughout the Group's 44 year history it has never had a lease cancelled or not renewed, and the Group enjoys a high degree of respect in the region and believes that it maintains strong relationships with the lessor in determining the likelihood that lease will be renewed.

 

 

 

NMC Health plc

                                                                                                                                                                                                                                                                                                                       

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

At 31 December 2017

 

 

2.4        CHANGES IN ACCOUNTING POLICIES 

 

New and amended standards and interpretations:

The Group applied for the first-time certain amendments to the standards, which are effective for annual periods beginning on or after 1 January 2017. The Group has not early adopted any standards, interpretations or amendments that have been issued but are not yet effective.

 

·      Amendments to IAS 7 Statement of Cash Flows: Disclosure Initiative

 

The amendments to IAS 7 Statement of Cash Flows require entities to provide disclosure of changes in their liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes (such as foreign exchange gains or losses). The Group has provided the information for both the current and the comparative period in Note 40

 

The new standards, amendments to IFRS, which are effective as of 1 January 2017 are listed below, have no impact on the Group.

 

·      Amendments to IAS 12 Income Taxes: Recognition of Deferred Tax Assets for Unrecognised Losses

 

·      Annual Improvements 2014-2016 Cycle

 

Amendments to IFRS 12 Disclosure of Interests in Other Entities: Clarification of the scope of disclosure requirements in IFRS 12

 

 

 

 

 

 

NMC Health plc

                                                                                                                                                                                                                                                                                                                       

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

At 31 December 2017

 

 

3          SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, less discounts and rebates and taking into account contractually defined terms of payment and excluding taxes or duties.

 

Revenue streams include clinic service revenues, sale of goods - Pharmacy, sale of goods -Distribution, Healthcare management fees and revenue sharing arrangement with doctors.

 

The Group assesses its revenue arrangements against specific criteria in order to determine if it is acting as principal or agent. The Group determines it is acting as principal when it has exposure to the significant risks and rewards associated with the transaction and measures revenue as the gross amount received or receivable. When the Group does not retain the significant risks and rewards, it deems that it is acting as n agent and measures revenue as the amount received or receivable in return for its performance under the contract and excludes any amounts collected on behalf of a third party.

 

Clinic, homecare and long term care service revenues:

Clinic, homecare and long term care service revenues represent the revenue which NMC generates from the provision of either inpatient or outpatient medical services, homecare services or long term care services. The group primarily receives these revenues from patients' private /medical insurance schemes. Revenues are recognised when, and to the extent that, performance of a medical service occurs, and is measured at the fair value of the consideration received or receivable.  NMC has determined that it is acting as Principal in these arrangements as it has the responsibility for providing the medical services to the patient, it sets the prices for services which are provided, it bears the credit risk and it bears the risk of providing the medical service.

Gynaecology, obstetrics and human reproduction:

‒          Revenue in respect of the different types of gynaecology, obstetrics and human reproduction services is recognized as follows:

 

·      Donor IVF and Own IVF sales (In Vitro Fecundation):

Revenue in respect of gynaecology, obstetrics and human reproduction is mainly from In Vitro Fertilization (IVF) treatment.

 

Revenue from IVF treatment is recognized based on the stage of the treatment. The treatment is divided into three stages. Each stage takes about 20 days. 24%-25% of revenue is booked in the first stage (at the beginning of the treatment), 50%-65% of revenue is booked in the middle stage (at patient's egg extraction in the case of the use of the patient's own egg or in the case of the use of a donor egg at the fertilization date) and 11%-25% of revenue is booked at the final stage (embryo implantation). These percentages are based on an internal study of the costs incurred in the different streams performed in prior years.

 

·      Cryo transfer sales:

Total cost of the treatment is split in two phases in terms of revenue recognition. 25% is recorded when the doctor agrees with the patient to initialize the treatment and 75% at the embryo implantation. The time between both phases is about 2-3 weeks.

 

·      Intrauterine insemination

Revenue is recognized in full at the insemination date.

 

Sale of Goods - Pharmacy:

The sales of goods from pharmacy relates to the sale of pharmaceutical and other products from hospitals and pharmacies. Whilst the Group does not establish the prices for the pharmaceutical products sold as  both the purchase and selling prices for all pharmaceutical products are fixed by the Ministry of Health, UAE. NMC has determined that it is acting as Principal in respect of these sales as it provides the goods for sale, it bears the inventory risk, and it bears the credit risk from customers. Revenue from the sale of goods - Pharmacy is therefore recognised when the significant risks and rewards of ownership of the goods have passed to the buyer. Significant risk for retail goods is passed to the buyer at the point of sale.

 

Sale of Goods - Distribution:

Where the Group bears the inventory risk and the customer credit risk and has the ability to set the prices for the products sold then the Group has determined that it is acting as Principal.  Revenue from the sale of goods is therefore recognised when the significant risks and rewards of ownership of the goods have  passed to the buyer. Significant risk for retail goods is passed to the buyer for wholesale goods at the time of delivery.

 

For agency relationships, the revenue earned is measured as the Group's share of the revenue, as specified in the contract. Any amounts collected on behalf of the third party are excluded from revenue and are recorded as a payable. There are currently no material agency relationships.

 

Healthcare Management fees:

Management fees represent fees earned for managing a hospital. Management fees are recognised when the services under the contract are performed, and the service level criteria have been met, and are measured at the fair value of the consideration received or receivable, in line with the terms of the management contract.

 

Revenue sharing arrangements with doctors:

The Group enters into contracts with doctors whereby these doctors are employed to perform certain procedures or run outpatient services using the facilities. In return the doctors obtain a share of the revenues that are generated from these facilities. Each contractual arrangement with individual doctors is  assessed against specific criteria to determine whether the Group is acting as principal or agent in the arrangement with these doctors.

 

Other income

Other income comprises revenue from suppliers for the reimbursement of advertising and promotion costs incurred by the Group.  Revenue is recognised following formal acceptance of the Group's reimbursement claims by suppliers and is measured at the confirmed amount receivable.

 

Interest income

For all financial instruments measured at amortised cost, interest income or expense is recorded using the effective interest rate (EIR), which is the rate that exactly discounts the estimated future cash payments or receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or liability. Interest income is included in finance income in the consolidated income statement.

 

Rebates from Suppliers  

The Distribution business receives rebates in the ordinary course of business from a number of its suppliers of pharmaceutical products, in accordance with contractual arrangements in place with specific suppliers. Rebates are accounted for once approval has been received from the supplier following the negotiations which have taken place with them.  Rebates receivable are accounted for as a deduction from the cost of purchasing pharmaceutical goods, once the rebate has been approved by the supplier on the basis under IAS 18 that the probability of inflow is not sufficiently certain and the amounts cannot be reliably measured until that point. When rebates have been agreed in advance, for example when it has been agreed that a certain rebate will be applied to the purchase of specific goods for a set period of time rather than just to a specific one off purchase, then the rebate is recognised as a reduction in the purchase price as soon as the goods are purchased. When rebates are offered based upon the volume purchased and it is probable that the rebate will be earned and the amount can be estimated reliably, then the discount is recognised as a reduction in the purchase price when the goods are purchased and the  assessment is reviewed on an ongoing basis. Rebates receivable are accounted for on a net basis, being set off against the trade payables to which they relate, as they are a reduction in the amount we owe to our suppliers in respect of pharmaceutical products purchased.

 

Current income tax

Current income tax assets and liabilities arising from overseas operations for the current period are measured at the amount expected to be recovered from or paid to the taxation authorities in the respective overseas jurisdictions. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date in the countries where the Group operates and generates taxable income.

 

Current income tax relating to items recognised directly in equity is recognised in equity and not in the consolidated income statement. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.

 

Deferred tax

Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.

 

Deferred tax liabilities are recognised for all taxable temporary differences, except:

 

·      When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss;

 

·      In respect of taxable temporary differences associated with investments in subsidiaries, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

 

Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable

that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised, except:

 

·      When the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss;

 

·      In respect of deductible temporary differences associated with investments in subsidiaries, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be  available against which the temporary differences can be utilised.

 

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.

 

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

 

Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity.  Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

 

Tax benefits acquired as part of a business combination, but not satisfying the criteria for separate recognition at that date, are recognised subsequently if new information about facts and circumstances change. The adjustment is either treated as a reduction in goodwill (as long as it does not exceed goodwill) if it was incurred during the measurement period or recognised in profit or loss.

 

Business combinations and goodwill

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred measured at acquisition date fair value and the amount of any non-controlling interests in the acquiree. For each business combination, the Group elects whether to measure the non-controlling interests in the acquiree at fair value or at the proportionate share of the acquiree's identifiable net assets. Acquisition-related costs are expensed as incurred and disclosed separately in  the consolidated income statement.

 

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.

 

Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Contingent consideration classified as an asset or liability that is a financial instrument and within the scope of IAS 39 Financial Instruments: Recognition and Measurement, is measured at fair value with the changes in fair value recognised in the consolidated income statement.

 

Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interests, and any previous interest held, over the net identifiable assets acquired and liabilities assumed. If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the Group re-assesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognised at the acquisition date. If the reassessment still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain is recognised in profit or loss.

 

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group's cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.

 

Where goodwill has been allocated to a cash-generating unit and part of the operation within that unit is disposed of, the goodwill  associated with the disposed operation is included in the carrying amount of the operation when determining the gain or loss on disposal. Goodwill disposed in these circumstances is measured based on the relative values of the disposed operation and the portion of the cash-generating unit retained.

 

Restructuring reserve

The group restructuring reserve arises on consolidation under the pooling of interest method used for the group restructuring which took place on 1 April 2012. This represents the difference between the share capital of NMC Healthcare LLC, the previous parent company of the Group, and the carrying amount of the investment in that company at the date of the restructure. This reserve is non-distributable.

 

Deferred consideration

Deferred consideration arises when settlement of all or any part of the cost of a business combination is deferred. It is stated at fair value at the date of acquisition, which is determined by discounting the amount due to present value at that date. Interest is imputed on the fair value of non-interest bearing deferred consideration at the discount rate and expensed within finance costs. At each balance sheet date deferred consideration comprises the remaining deferred consideration valued at acquisition plus unwinding of interest imputed on such amounts from acquisition to the balance sheet date.

 

Property and equipment

Property and equipment are stated at cost less accumulated depreciation and any impairment in value.

Depreciation is calculated on all property and equipment other than land and capital work in progress, at the following rates calculated to write off the cost of each asset on a straight line basis over its expected useful life:

 

Hospital building

2%-6%

Buildings

4.8 % -6%

Leasehold improvements

5.88% - 20%

Motor vehicles

20%

Furniture, fixtures and fittings

12.5% - 20%

Medical equipment

10% - 25%

 

The carrying amounts of property and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets are written down to their recoverable amount, being the higher of their fair value less cost to sell and their value in use.

 

Capital work in progress is stated at cost and is not depreciated. Lease costs in respect of capital work in progress are capitalised within capital work in progress during the period up until it is commissioned. When commissioned, capital work in progress is transferred to the appropriate property and equipment asset category and depreciated in accordance with the Group's policies. The carrying amounts of capital work in progress are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets are written down to their recoverable amount.

 

Expenditure incurred to replace a component of an item of property and equipment that is accounted for separately is capitalised and the carrying amount of the component that is replaced is written off.  Other subsequent expenditure is capitalised only when it increases future economic benefits of the related item of property and equipment. All other expenditure is recognised in the consolidated statement of comprehensive income as the expense is incurred.

 

Intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated  impairment losses. Internally generated intangibles, excluding capitalised development costs, are not capitalised and the related expenditure is reflected in consolidated statement of comprehensive income in the period in which the expenditure is incurred.

 

The useful lives of intangible assets are assessed as either finite or indefinite. The following useful lives have been determined for acquired intangible assets:

 

Brands - 2-20 years

Software - 5 years

Database -15 years

Patient relationships - 7 years

Non-compete agreement - 3-4 years

Rental contracts - 7 years

Private contracts - 3 years

 

Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortisation period or method, as  appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the consolidated income statement in the expense category that is consistent with the function of the intangible assets.

 

Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually, either individually or at the cash-generating unit level. The assessment of indefinite life is reviewed annually to  determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis.

 

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the consolidated income statement when the asset is derecognised.

 

Borrowing costs
Borrowing costs that are directly attributable to the acquisition or construction of an asset are capitalised as part of the cost of the asset until the asset is commissioned for use. Borrowing costs in respect of completed assets or not attributable to assets are expensed in the period in which they are incurred.

 

Pre-operating expenses
Pre-operating expenses are the expenses incurred prior to start of operations of a new business unit. These are recognised in the consolidated income statement in the year in which they occur.

 

Inventories

Inventories are valued at the lower of cost and net realisable value after making due allowance for any  obsolete or slow moving items.  Costs are those expenses incurred in bringing each product to its present location and condition and are determined on a weighted average basis.  Net realisable value is based on estimated selling price less any further costs expected to be incurred to disposal.

 

Accounts receivable

Accounts receivable are stated at original invoice amount less a provision for any uncollectible amounts. Accounts receivable with no stated interest rates are measured at invoiced amounts when the effect of discounting is immaterial. An estimate of doubtful debts is made when collection of the full amount is no longer probable.  Bad debts are written off when there is no possibility of recovery.

 

Loans receivables

Loans receivables are initially recognised at fair value. After initial measurement, such financial assets are subsequently measured at amortised cost using effective interest rate (EIR) method, less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the statement of profit or loss. The losses arising from impairment are recognised in the statement of profit or loss.

 

Cash and cash equivalents

For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash in hand, bank balances and short term deposits with an original maturity of three months or less, net of outstanding bank overdrafts.

 

Equity

The Group has issued ordinary shares that are classified as equity. The difference between the issue price and the par value of ordinary share capital is allocated to share premium. The transaction costs incurred for the share issue are accounted for as a deduction from share premium, net of any related income tax benefit, to the extent they are incremental costs directly attributable to the share issue that would otherwise have been avoided.

 

Accounts payable and accruals

Liabilities are recognised for amounts to be paid in the future for goods and services received whether billed by the supplier or not. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. Accounts payable are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

 

Provisions

Provisions are recognised when the Group has an obligation (legal or constructive) arising from a past event, and the costs to settle the obligation are both probable and able to be reliably measured.

 

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and risks specific to the obligation. Increases in provisions due to the passage of time are recognised in the consolidated income statement within 'Finance costs'.

 

Put option-Non controlling interest

In circumstances where the Group has determined that they do not have the present ownership interest in the shares subject to a put option, the Group has concluded that IFRS 10 takes precedence over IAS 32 and accordingly a non-controlling interest (NCI) is fully recognised at the date of acquisition, The Group recognises the full NCI using the proportionate share of net assets method. The financial liability that may become payable under a put option in respect of the NCI is recognised at fair value within liabilities, with  the liability being treated as an immediate reduction to equity attributable to the parent (option redemption reserve). The financial liability is subsequently re-measured to fair value at each reporting date and  the change in the fair value at each reporting date is recorded in the consolidated income statement.

 

Term Loans

Term loans are initially recognised at the fair value of the consideration received less directly attributable transaction costs. After initial recognition, term loans are subsequently measured at amortised cost using the effective interest method. Interest on term loans is charged as an expense as it accrues, with unpaid amounts included in "accounts payable and accruals".

 

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the consolidated income statement.

 

Non-current assets held for sale

The Group classifies non-current assets and disposal groups as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. Non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Costs to sell are the incremental costs directly attributable to the disposal of an asset (disposal group), excluding finance costs and income tax expense.

 

The criteria for held for sale classification is regarded as met only when the sale is highly probable and the asset or disposal group is available for immediate sale in its present condition. Actions required to complete the sale should indicate that it is unlikely that significant changes to the sale will be made or that the decision to sale will be withdrawn. Management must be committed to the plan to sell the asset and the sale expected to be completed within one year from the date of the classification.

 

Property and equipment and intangible assets are not depreciated or amortised once classified as held for sale.

 

Assets and liabilities classified as held for sale are presented separately as current items in the statement of financial position.

 

Employees' end of service benefits

The Group operates an un-funded post-employment benefit plan (employees' end of service benefits) for its expatriate employees in the UAE, in accordance with the labour laws of the UAE. The entitlement to these benefits is based upon the employees' final salary and length of service, subject to the completion of a minimum service period. Payment for employees' end of service benefits is made when an employee leaves, resigns or completes his service.

 

The cost of providing benefits under the post-employment benefit plan is determined using the projected unit credit method. Re-measurements, comprising of actuarial gains and losses, are recognized immediately in the statement of financial position with a corresponding debit or credit to retained earnings through other comprehensive income in the period in which they occur. Re-measurements are not reclassified to profit or loss in subsequent periods.

 

Interest is calculated by applying the discount rate to the defined benefit liability. The rate used to discount the end of service benefit obligation is determined by reference to market yields at the balance sheet date on high quality corporate bonds. The current and non-current portions of the provision relating to employees' end of service benefits are separately disclosed in the consolidated statement of financial position.

 

The Group recognises the following changes in the employees' end of service benefits under 'direct costs' and 'general and administrative expenses' in the consolidated statement of comprehensive income:

 

●          Service costs comprising current service costs

●          Interest expense

 

With respect to its UAE national employees, the Group makes contributions to the relevant UAE Government pension scheme calculated as a percentage of the employees' salaries. The obligations under these schemes are limited to these contributions, which are expensed when due.

 

Share based payments

Equity-settled share-based payments to employees (including executive directors) are measured at the fair value of the equity instruments at the grant date.  The fair value excludes the effect of non-market-based vesting conditions.  Details regarding the determination of the fair value of equity-settled share-based transactions are set out in note 32.

 

The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of equity instruments that will eventually vest. At each reporting date, the Group revises its estimate of the number of equity instruments expected to vest as a result of the effect of non-market-based vesting conditions. The impact of the revision of the original estimates, if any, is recognised in the consolidated statement of other comprehensive income such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to equity reserves / other payables.

 

No expense is recognised for awards that do not ultimately vest, except for equity-settled transactions for which vesting are conditional upon a market or non-vesting condition. These are treated as vesting irrespective of whether or not the market or non-vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied.

 

The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share (see note 16).

 

Foreign currencies

Transactions in foreign currencies are recorded in UAE Dirhams at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date.  All differences are taken to the consolidated income

statement.

 

Translation of foreign operations

On consolidation, the assets and liabilities of foreign operations are translated into US Dollars at the rate of exchange prevailing at the reporting date and their income statements are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the

transactions).  All resulting currency translation differences are recognised as a separate component of equity. 

 

The Group's principal geographical segment is the United Arab Emirates.  The UAE Dirham is pegged against the US Dollar so a single rate of 3.673 per US Dollar is used to translate those assets and liabilities and balances in the consolidated income statement.

 

When a foreign operation is partially disposed of or sold, exchange differences that were recorded in equity are recognised in the consolidated income statement as part of the gain or loss on sale. Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate.

 

Derivative financial instruments

The Group uses derivative financial instruments such as forward exchange contracts, put options and contingent consideration. Such derivative financial instruments are initially recognised at fair value on the date on which a contract is entered into and are subsequently remeasured at fair value. Derivatives with positive market values (unrealised gains) are recognised as assets and derivatives with negative market values (unrealised losses) are recognised as liabilities in the consolidated statement of financial position.

 

Any gains or losses arising from changes in fair value on derivatives during the year are taken directly to profit or loss. 

 

Fair value measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

 

·      In the principal market for the asset or liability, or

·      In the absence of a principal market, in the most advantageous market for the asset or liability

 

The principal or the most advantageous market must be accessible to by the Group.

 

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

 

A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

 

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

 

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

 

·      Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities

·      Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable

·      Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable

 

For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation

(based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

 

Impairment of financial assets

An assessment is made at each consolidated statement of financial position date to determine whether there is objective evidence that a specific financial asset may be impaired. If such evidence exists, any impairment loss is recognised in the consolidated income statement. Impairment is determined as the difference between carrying value and the present value of future cash flows discounted at the current market rate of return for a similar financial asset.

 

Leases

The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at inception date, whether fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset, even if that right is not explicitly specified in an arrangement. Operating leases are recognised as an operating expense in the consolidated income statement on a straight line basis. Lease incentives are recorded as a reduction of rental expense over the lease term, on a straight-line basis.

 

Joint venture

A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture.

 

Joint ventures are accounted for using the equity method (equity accounted investees) and are initially recognized at cost. The Group's investment includes goodwill identified on acquisition, net of any accumulated impairment losses. The consolidated financial statements include the Group's share of the total comprehensive income and equity movements of equity accounted investees, from the date that joint control commences until the date that joint control ceases. When the Group's share of losses exceeds its interest in an equity accounted investee, the Group's carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of an investee.

 

 

4          ACCOUNTING STANDARDS AND INTERPRETATIONS ISSUED BUT NOT EFFECTIVE

 

The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Group's financial statements are listed below. The Group intends to adopt these standards, if applicable, when they become effective.

 

IFRS 15 Revenue from Contracts with Customers

 

Nature of change

The IASB has issued a new standard for the recognition of revenue. This will replace IAS 18 which covers contracts for goods and services and IAS 11 which covers construction contracts.

The new standard is based on the principle that revenue is recognised when control of a good or service transfers to a customer.

 

The standard permits either a full retrospective or a modified retrospective approach for the adoption.

 

Impact

Management has completed a detailed assessment to estimate the potential impact of adopting the requirements of IFRS 15 by reviewing all its material revenue streams. The adoption of the new revenue accounting standard is not likely to have a material impact on the Group's revenue or profitability. However, there will be some changes which will be required to comply with the new disclosure requirements of the new standard.

 

As the adoption of the new standard is not likely have a material impact on the Group, management will adopt the requirements of the new standard using the modified retrospective approach.

 

Mandatory application date/ Date of adoption by Group

IFRS 15 must be applied for financial years commencing on or after 1 January 2018.The Group does not intend to adopt the standard before its effective date.

 

IFRS 9 Financial Instruments

 

Nature of change

IFRS 9 addresses the classification, measurement and derecognition of financial assets and financial liabilities, introduces new rules for hedge accounting and a new impairment model for financial assets.

 

Impact

The Group has undertaken a detailed assessment of the classification and measurement of financial assets.

 

Majority of the financial assets held by the Group are currently measured at amortised cost and these financial assets appear to meet the conditions for classification at amortised cost under IFRS 9. Accordingly, the Group does not expect the new guidance to have a significant impact on the classification and measurement of its financial assets.

 

There will be no significant impact on the Group's accounting for financial liabilities, as the new requirements only affect the accounting for financial liabilities that are designated at fair value through profit or loss and, other than forward foreign exchange rate contracts designated at fair value through profit or loss which are insignificant, the Group does not have any such liabilities. The derecognition rules have been transferred from IAS 39 Financial Instruments: Recognition and Measurement and have not been changed.

 

The new hedge accounting rules will align the accounting for hedging instruments more closely with the Group's risk management practices. As a general rule, more hedge relationships might be eligible for hedge accounting, as the standard introduces a more principles-based approach. The Group does not currently have any material hedging relationships. Accordingly, the Group does not expect a significant impact on the accounting for its hedging relationships.

 

The new impairment model requires the recognition of impairment provisions based on expected credit losses (ECL) rather than only incurred credit losses as is the case under IAS 39. It applies to financial

assets classified at amortised cost, debt instruments measured at fair value through other comprehensive income (FVOCI), contract assets under IFRS 15 Revenue from Contracts with Customers, lease receivables, loan commitments and certain financial guarantee contracts. Though the adoption of the requirements of the new standard may result in an earlier recognition of credit losses the impact of this is not likely to be material. The Group intend adopt the simplified approach to estimating its expected credit losses with respect to trade receivables as these are non-interest bearing.

 

The new standard also introduces expanded disclosure requirements and changes in presentation. These are expected to change the nature and extent of the disclosures about its financial instruments particularly in the year of the adoption of the new standard.

 

Mandatory application date/ Date of adoption by Group

IFRS 9 must be applied for financial years commencing on or after 1 January 2018. Based on the transitional provisions in the completed IFRS 9, early adoption in phases was only permitted for annual reporting periods beginning before 1 February 2015. After that date, the new rules must be adopted in their entirety.

 

The Group does not intend to adopt IFRS 9 before its mandatory date.

 

IFRS 16 Leases

IFRS 16 was issued in January 2016, and specifies how the Group will recognise, measure, present and disclose leases. The standard provides a single lessee accounting model, requiring lessees to recognise assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value. Lessors continue to classify leases as operating or finance, with IFRS 16's approach to lessor accounting substantially unchanged from its predecessor, IAS 17.

 

IFRS 16 applies to annual reporting periods beginning on or after 1 January 2019. The Group is currently assessing the impact of IFRS 16 and plans to adopt the new standard on the required effective date.

 

In addition, the standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Group's financial statements that are not expected to have any material impact on the Group are as follows:

 

·      Amendments to IFRS 10 and IAS 28: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

·      IFRS 17 Insurance Contracts

·      Transfer to Investment Property - Amendments to IAS 40

·      IFRS 2 Classification and Measurement of Share-based Payment Transactions - Amendments to IFRS 2

·      Annual Improvements 2014-2016 Cycle (issued in December 2016)

IFRS 1First time Adoption of International Financial Reporting Standards - Deletion of short-term exemptions for first-time adopters

IAS 28 Investments in Associates and Joint Ventures- Clarification that measuring the investees at fair value through profit or loss is an investment-by-investment choice

·      Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts - Amendments to IFRS4

·      IFRIC Interpretation 22 Foreign Currency Transactions and Advance Consideration

·      IFRIC Interpretation 23 Uncertainty over Income Tax Treatment

 

 

 

 

 

 

NMC Health plc

                                                                                                                                                                                                                                                                                                                       

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

At 31 December 2017

 

 

5          Business combinations

 

During the financial year ended 31 December 2017, the Group completed a number of acquisitions in line with its growth strategy. These acquisitions have increased group's market share in the healthcare industry and complement the group's existing healthcare portfolio.

 

Particulars

Al Zahra

Others

Total


US$'000

US$'000

US$'000

Assets




Intangible assets

1,004

16,314

17,318

Property and equipment

124,196

18,786

142,982

Inventories

6,668

2,064

8,732

Accounts receivable

44,143

15,163

59,306

Other receivables

1,924

1,149

3,073

Cash and bank balances

6,095

2,438

8,533


184,030

55,914

239,944





Liabilities




Borrowings

-

10,329

10,329

Accounts payable

26,077

5,972

32,049

Other payable

11,990

7,084

19,074

Tax payable

-

321

321


38,067

23,706

61,773





Total identified net assets at fair value

145,963

32,208

178,171

Non -controlling interest

-

(8,784)

(8,784)

Goodwill arising on acquisition

416,888

54,685

471,573

Purchase consideration

562,851

78,109

640,960





Purchase consideration:




Payable in cash

562,851

73,739

636,590

Contingent consideration

-

704

704

Deferred consideration

-

2,869

2,869

Advance paid in 2016

-

797

797

Total consideration

562,851

78,109

640,960

 

 

Until last year, each acquisitions was shown separately. From current year, smaller acquisitions have been clubbed together as "Others". Comparatives have been adjusted accordingly.

 

The fair value assessment of identifiable net assets is completed as final for Al Zahra, Atlas healthcare and As Salama hospital. For other acquisitions it is provisional.

 

The non-controlling interest in all acquired entities is measured at the proportionate share of net assets of subsidiaries.

 

Analysis of cash flows on acquisitions is as follows:

 

Particulars

Al Zahra

Others

Total


US$'000

US$'000

US$'000

Cash paid

(562,851)

(73,739)

(636,590)

Net cash acquired with the subsidiaries

6,095

2,438

8,533

Transaction costs

(4,458)

(205)

(4,663)

Net cash flow on acquisition

(561,214)

(71,506)

(632,720)

 

The transaction costs reported in the consolidated income statement comprise of the following:

 

 

 

 

 

2017 US$ '000

2016 US$ '000

 

  Transaction costs for the acquired entities

 

4,663

1,259

 

  Transaction costs for acquisitions in progress

 

1,306

3,344

 


-------------------

-------------------

 


5,969

4,603


 

 

 

 

 

 

 

=========

=========

 

 

Other financial information with respect to acquired entities is as follows:

 

Particulars

Al Zahra

Others

Total


US$'000

US$'000

US$'000

Revenue from the date of acquisition

116,343

44,631

160,974

Profit after tax from the date of acquisition

30,226

1,538

31,764

Revenue from 1 January to 31 December 2017 (unaudited)

126,359

48,605

174,964

Profit (loss) after tax from 1 January to 31 December 2017 (unaudited)

32,014

(6,501)

25,513

Trade receivables gross value as of acquisition date

44,143

15,163

59,306

Trade receivables fair value as of acquisition date

44,143

15,163

59,306

 

 

Acquisition of Al Zahra Hospital ("Al Zahra")

 

On 14 December 2016, the Group agreed to acquire a 100% controlling stake in the voting shares of Al Zahra, UAE providing both in-patient and outpatient service to the highest standards, supported by state of art facilities. Al Zahra is one of the largest full service multi-speciality hospitals in the UAE in Sharjah and Northern Emirates. The hospital has 137 active in patients beds and a capacity of 154 beds (expandable to at least 200 beds), treating approximately 400,000 outpatients and 23,000 in patients bed days per year. It has strong relationships with a number of major insurance providers in Sharjah with approximately 85% of outpatients referred through the insurance channel.

 

The total purchase consideration was US$562,851,000. There were no deferred and contingent consideration payable.

 

NMC acquired control of Al Zahra on 13 February 2017, date on which all conditions precedent were completed, meaning that control has passed to the Group. For convenience, the closest available balance sheet date has been used for the purposes of measuring net assets acquired. This date is 31 January 2017, with full consolidation commencing on 1 February 2017.  We are not aware of any material transactions in the period between 01 February 2017 and 13 February 2017.

 

The consolidated financial statements include the results of Al Zahra for 11 months period.

 

The goodwill recognised is attributable to the expected synergies and other benefits from combining the assets and activities of Al Zahra with those of the Group. It comprises all of the intangibles that cannot be individually recognised such as the assembled workforce, the customer service, future client relationships, the presence in geographic markets, the synergies that Al Zahra & NMC will obtain. Goodwill is allocated to the healthcare segment. None of the recognised goodwill is expected to be deductible for income tax purposes as there is no corporation tax in the UAE.

 

At the date of acquisition, the fair value of identifiable tangible assets included Building of US$86,500,000, land of US$13,500,000 and intangible assets included brands amounting to US$545,000 and software amounting to US$459,000.

 

No acquisition date contingent liabilities requiring full recognition have been noted as yet.

 

Other Acquisitions

 

In the Sultanate of Oman, the Group acquired a general hospital and a private clinic

 

·    The Group agreed to acquire the Healthcare Business and assets of Atlas Healthcare on 05 December 2016. Atlas Healthcare is one of the leading providers of comprehensive healthcare services in Al Ruwi and Al Ghoubra a suburb of Muscat, the capital city of the Sultanate of Oman. Regulatory approvals and legal formalities Completed on 02 January 2017, meaning that control has passed to the Group. For convenience, the closest available balance sheet date i.e. 01 January 2017 has been used for the purposes of measuring net assets acquired. The total purchase consideration was US$28,259,000. There were no deferred and contingent consideration payable.

 

The Group also agreed to acquire the Healthcare Business and assets of Bin Said, a private clinic on 04 October 2016 in Muscat. Regulatory approvals and legal formalities Completed on 01 January 2017, meaning that control has passed to the Group. The total purchase consideration of US$885,000 includes consideration paid of US$19,000 and consideration paid advance of US$797,000 in 2016.

 

In the kingdom of Saudi Arabia, the Group acquired a general hospital

 

·    In the Kingdom of Saudi Arabia, the Group agreed to acquire a 70% controlling stake in the voting shares of As Salama Hospital LLC ("ASH") on 28 August 2016, an unlisted private general hospital which exists to serve the healthcare needs of all people in Al-Khobar by providing acute and long-term care. ASH is the fifth largest hospital in the Eastern province of Saudi Arabia and account for 10% of market share. Regulatory approvals and legal formalities were completed on 02 January 2017, meaning that control has passed to the Group. For convenience, the closest available balance sheet date i.e. 01 January 2017 has been used for the purposes of measuring net assets acquired.  At the date of acquisition, the fair value of identifiable intangible assets included brands amounting to US$5,000,000 and Private contracts of US$7,400,000. The total purchase consideration of US$29,195,000 includes consideration paid of US$26,395,000 and deferred consideration payable of US$2,800,000 in 2018. This is due in 2018 and is included in other payables in the consolidated statement of financial position (Note 30).

 

·    The Group agreed to acquire 60% controlling stake in the Al Qadi hospital located in the southern Saudi Arabia city of Najran houses 100 beds with adjacent land for future growth on 25 September 2017. Regulatory approvals and legal formalities Completed on 15 December 2017, meaning that control has passed to the Group. For convenience, the closest available balance sheet date i.e. 31 December 2017 has been used for the purposes of measuring net assets acquired.  The hospital-initiated outpatient operations in late 2016 and commenced inpatient services in Q1 2017. The facility boasts state of the art clinical equipment and is well positioned to provide tertiary care services to this area of Saudi Arabia. At the date of acquisition, the fair value of identifiable intangible assets included Private contracts amounting to US$3,774,000. The total purchase consideration was US$16,432,000. There were no deferred and contingent consideration payable.

 

In Spain, the Group acquired an IVF clinic

 

·    The Group agreed to acquire 80% controlling stake in Fecunmed IVF clinic located in Spain on 15 December 2017, meaning that control has passed to the Group. For convenience, the closest available balance sheet date i.e. 31 December 2017 has been used for the purposes of measuring net assets acquired. Fecunmed is a private clinic specialized in the diagnosis and treatment of sterility and infertility based in Spain. The total purchase consideration of US$2,521,000 includes consideration paid of US$1,817,000 and contingent consideration payable of US$704,000 on attainment of revenue targets in 2018. This is due in 2018 and is included in other payables in the consolidated statement of financial position (Note 36).

 

The Group acquired 100% controlling stake in Hamad Drug Store LLC ("HDS") located in Sharjah Emirate of United Arab Emirates on 31 August 2017, meaning that control has passed to the Group. The total purchase consideration was US$817, 000. There were no deferred and contingent consideration payable.

 

The fair value of the identifiable assets and liabilities of entities acquired in previous year at the dates of acquisition were as follows:

 

Particulars

Fakih IVF

Others

Total


US$'000

US$'000

US$'000

Assets




Intangible assets

25,324

150

25,474

Property and equipment

4,309

3,176

7,485

Inventories

613

356

969

Accounts receivable

8,579

4,685

13,264

Other receivables

41,436

910

42,346

Deferred tax asset

-

48

48

Cash and bank balances

3,395

1,478

4,873


83,656

10,803

94,459





Liabilities

                     

                          


Borrowings

-

855

855

Accounts payable

4,788

3,844

8,632

Other payable

43,001

903

43,904

Tax payable

-

249

249


47,789

5,851

53,640





Total identified net assets at fair value

35,867

4,952

40,819

Non -controlling interest

(17,575)

(949)

(18,524)

Goodwill arising on acquisition

186,616

47,290

233,906

Purchase consideration

204,908

51,293

256,201





Purchase consideration:




Payable in cash

190,446

45,443

235,889

Contingent consideration

8,128

1,514

9,642

Deferred consideration

7,051

4,336

11,387

Fair value measurement

(717)

-

(717)

Total consideration

204,908

51,293

256,201

 

Under others acquisitions:

Purchase price allocation for Copenhagen Fertility Centre ("CFC") and Huntington Centro De Medina Reproductiva S/A ("HCMR") were provisional as of 31 December 2016 and have been completed during the year. Purchase price allocation of CFC remain same, however updated for HCMR.

 

·              HCMR Brand amounting to US$ 3,824,000 and private contracts amounting to US$ 1,818,000 have been recognised. Corresponding credit has been recognised in goodwill of US$ 2,376,000 deferred tax liability of US$ 1,359,000, NCI of US$ 1,631,000 and exchange gain of US$ 276,000.

 

·              CFC goodwill amounting to US$1,683,000 has been recognised and correspondingly credit to equity.

 

Analysis of cash flows for acquisitions done in previous year disclosed in 2016 consolidated financial statements was as follows:

 

Particulars

Fakih IVF

Others

Total


US$'000

US$'000

US$'000

Cash paid

(190,446)

(45,443)

(235,889)

Deferred consideration paid

(3,410)

(1,902)

(5,312)

Net cash acquired with the subsidiaries

3,395

1,478

4,873

Transaction costs

-

(1,259)

(1,259)

Net cash flow on acquisition

(190,461)

(47,126)

(237,587)

 

During the year deferred consideration amounting to US$ 4,356,000 in respect of Fakih IVF and Nadia has been paid.

 

Other financial information with respect to entities acquired in previous year disclosed in 2016 consolidated financial statements was as follows:

 

Particulars

Fakih IVF

Others

Total


US$'000

US$'000

US$'000

Revenue from the date of acquisition

 

65,171

 

19,881

 

85,052

Profit after tax from the date of acquisition

 

35,293

 

5,039

 

40,332

Revenue from 1 January to 31 December 2016 (unaudited)

 

70,600

 

32,817

 

103,417

Profit after tax from 1 January to 31 December 2016 (unaudited)

 

38,101

 

5,837

 

43,938

Trade receivables gross value as of acquisition date

 

8,579

 

4,929

 

13,508

Trade receivables fair value as of acquisition date

 

8,579

 

4,685

 

13,264

 

Advances paid for acquisitions

As of the reporting date, certain acquisitions are in progress for which the Group has paid an advance of US$ nil (2016: US$ 1,614,000).

 

 

 

 

 

NMC Health plc

                                                                                                                                                                                                                                                                                                                       

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

At 31 December 2017

 

 

6          MATERIAL PARTLY-OWNED SUBSIDARIES

 

The financial information in respect of subsidiaries that have material non-controlling interests is provided below:

 

Proportion of equity interest held by NMC:

 



Percentage of holdings

Indirect subsidiaries

Country of Incorporation

31 December 2017

31 December 2016

   Luarmia SL

Spain

88.4%*

88.4%*

  Fakih

UAE

51%

  51%

 

*Shareholding disclosed is for Luarmia SL only. Within Luarmia SL there are certain other subsidiaries. The financial information provided below is for Luarmia SL and its subsidiaries.

 

Accumulated balances of material non-controlling interest:

 


2017

2016


US$'000

US$'000




Luarmia SL

 

11,113

5,836

Fakih IVF LLC

33,902

34,160

 

Profit allocated to material non-controlling interest:


2017

2016


US$'000

US$'000




Luarmia SL

 

4,180

1,251

Fakih IVF LLC

19,580

16,586

 

The summarised financial information of these subsidiaries is provided below. This information is stated before inter-company eliminations.

 

Summarised statement of profit or loss for 2017:

Luarmia

Fakih

US$'000

US$'000

Revenue

84,414

74,146

Direct cost

(37,870)

(21,154)

Administrative and other expenses

(25,278)

(10,366)

Depreciation and amortisation

(7,272)

(2,666)

Profit before tax

13,994

39,960

Income tax

(918)

-

Profit for the year

13,076

39,960

Other comprehensive Income

15,325

-

Total comprehensive income

28,401

39,960

Attributable to non-controlling interests

4,180

19,580

 

Summarised statement of profit or loss for 2016:

Luarmia

Fakih

US$'000

US$'000

Revenue

66,078

      65,171

Direct cost

 (23,597)

(19,469)

Administrative and other expenses

(26,812)

(8,831)

Depreciation and amortisation

 (6,000)

(3,022)

Profit before tax

9,669

33,849

Income tax

(174)

-

Profit for the year

9,495

33,849

Other comprehensive loss

(3,955)

-

Total comprehensive income

5,540

33,849

Attributable to non-controlling interests

1,251

16,586

 

Summarised statement of financial position as at

31 December 2017

Luarmia

Fakih

US$'000

US$'000

Inventories and cash and bank balance (current)

20,370

10,459

Account receivable and prepayment (current)

14,564

37,848

Property and equipment and other non-current assets (non-current)

145,189

70,868

Accounts payable and accruals (current)

(14,583)

(11,075)

Interest-bearing loans (current)

(17,263)

-

Interest-bearing loans and deferred tax liabilities (non- current)

(36,538)

-

Other payable (non- current)

(20,913)

(38,911)

Total Equity

90,826

69,189

Attributable to:

-

-

   Equity holders of parent

79,713

35,287

   Non-controlling interest

11,113

33,902

 

Summarised statement of financial position as at

31 December 2016

Luarmia

Fakih

US$'000

US$'000

Inventories and cash and bank balance (current)

17,449

13,861

Account receivable and prepayment (current)

8,934

            31,615

Property, plant and equipment and other non-current assets (non-current)

             135,570

        68,454

Accounts payable and accruals (current)

           (17,682)

     (5,113)

Interest-bearing loans (current)

(10,704)

                -

Interest-bearing loans and deferred tax liabilities (non- current)

        (36,592)

              -

Other payable (non- current)

        (20,450)

        (39,102)

Total Equity

76,525

      69,715

Attributable to:



   Equity holders of parent

          70,689

       35,555

   Non-controlling interest

           5,836

             34,160

 

Summarised cash flow information for year ended

31 December 2017

Luarmia

Fakih

US$'000

US$'000

Operating

13,631

35,084

Investing

(4,739)

(5,079)

Financing

(10,408)

(33,365)

Net decrease in cash and cash equivalents

(1,516)

(3,360)

 

 

Summarised cash flow information for year ended

31 December 2016

Luarmia

Fakih

US$'000

US$'000

Operating

15,593

15,003

Investing

(26,607)

(4,914)

Financing

10,398

-

Net (decrease) / Increase in cash and cash equivalents

(616)

10,089

 

 

 

 

 

NMC Health plc

                                                                                                                                                                                                                                                                                                                       

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

At 31 December 2017

 

 

7          SEGMENT INFORMATION

 

For management purposes, the Group is organised into business units based on their products and services and has two reportable segments as follows:

 

·              The healthcare segment is engaged in providing professional medical services, comprising diagnostic services, in and outpatient clinics, provision of all types of research and medical services in the field of gynaecology, obstetrics and human reproduction and retailing of pharmaceutical goods. It also includes the provision of management services in respect of a hospital.

 

·              The distribution & services segment is engaged in wholesale trading of pharmaceutical goods, medical equipment, cosmetics and food.

 

No operating segments have been aggregated to form the above reportable operating segments.

 

The new acquired companies, Al Zahra, As Salama, Al Qadi, Atlas, Bin Said and Fecunmed come under the healthcare segment.

 

Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on EBITDA and profit or loss. These are measured consistently with EBITDA and profit or loss excluding finance income and group administrative expenses, unallocated depreciation and unallocated other income, in the consolidated financial statements.

 

Finance costs and finance income relating to UAE subsidiaries are not allocated to individual segments as they are managed on a group basis. In addition Group overheads are also not allocated to individual segments as these are managed on a Group basis.

 

Transfer prices between operating segments are on an arm's length basis in a manner similar to transactions with third parties.

 

The following tables present revenue and profit and certain asset and liability information regarding the Group's business segments for the years ended 31 December 2017 and 2016.

 


Healthcare

Distribution and services

Total segments

Adjustments and eliminations

Consolidated


US$'000

US$'000

US$'000

US$'000

US$'000

Year ended 31 December 2017

Revenue






External customers

1,146,243

457,153

1,603,396

-

1,603,396

Inter segment

15,374

29,601

44,975

(44,975)

-


-----------------------

-----------------------

-----------------------

-----------------------

-----------------------

Total

1,161,617

486,754

1,648,371

(44,975)

1,603,396


==========

==========

==========

==========

==========

(Expenses) / Income






Depreciation and 






  amortization

(58,143)

(3,526)

(61,669)

(9,214)

(70,883)







Finance costs

(8,692)

(7)

(8,699)

(55,093)

(63,792)







Segment EBITDA

355,401

51,549

406,950

(53,563)

353,387


==========

==========

==========

==========

==========

Segment profit

287,827

48,016

335,843

(126,662)

209,181


==========

==========

==========

==========

==========

Segment assets

2,270,559

296,445

2,567,004

372,004

2,939,008


==========

==========

==========

==========

==========

Segment liabilities

343,258

97,703

440,961

1,353,421

1,794,382


==========

==========

==========

==========

==========

Other disclosures






Capital expenditure

58,214

5,105

63,319

1,542

64,861


==========

==========

==========

==========

==========

Year ended 31 December 2016

Revenue






External customers

816,314

404,521

1,220,835

-

1,220,835

Inter segment

7,001

27,406

34,407

(34,407)

-


-----------------------

-----------------------

-----------------------

-----------------------

-----------------------

Total

823,315

431,927

1,255,242

(34,407)

1,220,835

 

 

==========

==========

==========

==========

==========

(Expenses) / Income






Depreciation and 






  amortization

(43,320)

(3,248)

(46,568)

(9,431)

(55,999)







Finance costs

(5,834)

(9)

(5,843)

(35,841)

(41,684)







Segment EBITDA

241,115

47,113

288,228

(42,147)

246,081


==========

==========

==========

==========

==========

Segment profit

192,932

43,565

236,497

(85,095)

151,402


==========

==========

==========

==========

==========

Segment assets

1,454,767

265,194

1,719,961

597,032

2,316,993


==========

==========

==========

==========

==========

Segment liabilities

256,613

72,405

329,018

1,039,104

1,368,122


==========

==========

==========

==========

==========

Other disclosures






Capital expenditure

61,483

4,171

65,654

1,751

67,405

 

 

 

==========

==========

==========

==========

==========

 

Inter-segment revenues are eliminated upon consolidation and reflected in the 'adjustments and eliminations' column. All other adjustments and eliminations are part of detailed reconciliations presented further below.

 

Adjustments and eliminations

Finance income and group overheads are not allocated to individual segments as they are managed on a group basis.

 

Term loans, bank overdraft and other short term borrowings and certain other assets and liabilities are not allocated to segments as they are also managed on a group basis.

 

Capital expenditure consists of additions to property and equipment and intangible assets.

 

Reconciliation of Segment EBITDA to Group profit

 







2017

2016


US$'000

US$'000




Segment EBITDA

406,950

288,228

  Unallocated group administrative expenses

(54,400)

(42,202)

  Unallocated other income

837

55

  Unallocated finance income

7,487

9,157

  Unallocated unamortised finance fees written off

(6,794)

-

  Finance costs

(63,792)

(41,684)

  Depreciation

(58,107)

(45,010)

  Amortisation

(12,776)

(10,989)

  Impairment of assets

(3,010)

(1,376)

  Transaction costs related to business combination

(5,969)

(4,603)

  Tax

(1,245)

(174)


--------------------

--------------------

Group Profit

209,181

151,402


=========

=========

 

Reconciliation of Segment profit to Group profit






 

 

2017

2016


US$'000

US$'000




Segment profit

335,843

236,497

  Unallocated finance income

2,036

6,699

  Unallocated finance costs

(55,093)

(35,841)

  Unallocated group administrative expenses

(54,400)

(42,202)

  Unallocated unamortised finance fees written off

(6,794)

-

  Unallocated depreciation

(1,090)

(1,034)

  Unallocated other income

837

55

  Unallocated amortisation cost

(8,123)

(8,398)

  Unallocated impairment of assets

(3,010)

(1,030)

  Unallocated transaction cost

(1,025)

(3,344)


--------------------

-------------------

Group Profit

209,181

151,402


=========

=========




 

Reconciliation of Group assets






 

 

 

 

2017

2016


US$'000

US$'000




Segment assets

2,567,004

1,719,961

  Unallocated property and equipment

7,995

10,710

  Unallocated inventory

215

22

  Unallocated accounts receivable and prepayments

16,553

8,656

  Unallocated bank balances and cash

161,028

436,949

  Unallocated bank deposits

184,430

137,869

  Unallocated intangible assets

1,783

2,826


-----------------------

-----------------------

Group assets

2,939,008

2,316,993


===========

===========




Reconciliation of Group liabilities




2017

2016


US$'000

US$'000




Segment liabilities

440,961

329,018

  Unallocated term loans

1,105,524

782,624

  Unallocated employees' end of service benefits

4,706

2,608

  Unallocated accounts payable and accruals

9,109

8,281

  Unallocated bank overdraft and other short term borrowings

207,034

219,851

  Unallocated amounts due to related parties

1,029

488

  Unallocated option redemption liability

26,019

25,252


----------------------

----------------------

Group liabilities

1,794,382

1,368,122


==========

==========

 

Other information

The following table provides information relating to Group's major customers who contribute more than 10% towards the Group's revenues:

 


Healthcare

Distribution and services

Total


US$'000

US$'000

US$'000

Year ended 31 December 2017




  Customer 1

442,070

-

442,070


-----------------------

-----------------------

-----------------------


442,070

-

442,070


==========

==========

==========

Year ended 31 December 2016




  Customer 1

324,285

-

 

324,285


-----------------------

-----------------------

-----------------------


324,285

-

 

324,285


==========

==========

==========

 

 

Geographical information

 


2017

2016


US$'000

US$'000

Revenue from external customers



  United Arab Emirates

1,474,344

1,154,757

  Spain

46,684

55,361

  Others

82,368

10,717


-----------------------

-----------------------

Total revenue as per consolidated income statement

1,603,396

1,220,835


==========

==========

 

Non-current assets



  United Arab Emirates

 

1,528,083

974,522

  Spain

201,456

193,706

  Others

 

80,965

858


-----------------------

-----------------------

Total non-current assets

1,810,504

1,169,086


==========

==========

 

Deferred tax assets



  United Arab Emirates

 

-

-

  Spain

2,877

2,122

  Others

 

541

13


-----------------------

-----------------------

Total Deferred tax assets

 

3,418

2,135


==========

==========

 

Analysis of revenue by category:




2017

2016


US$'000

US$'000




Revenue from services:

 



  Healthcare - clinic

 

999,678

720,051

  Healthcare - management fees

 

13,016

10,135


-----------------------

-----------------------


1,012,694

730,186

Sale of goods:

 

-----------------------

-----------------------

  Distribution

 

457,153

404,521

  Healthcare

 

133,549

86,128


-----------------------

-----------------------


590,702

490,649


-----------------------

-----------------------

Total

 

1,603,396

1,220,835


=========

=========

 

 

 

 

 

 

NMC Health plc

                                                                                                                                                                                                                                                                                                                       

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

At 31 December 2017

 

 

8          EXPENSES BY NATURE


2017

2016


US$'000

US$'000




Cost of inventories recognised as an expense

571,953

457,276

Salary expenses

499,768

371,075

Rent expenses

76,168

65,549

Sales promotion expenses

61,349

50,695

Repair and  maintenance expenses

19,840

13,408

Electricity expenses

10,246

6,652

Legal & licence fees

9,355

8,134

Insurance expenses

9,087

8,338

Motor vehicle expenses

5,093

3,773

Professional fees expenses

4,931

1,585

Communication expenses

4,147

3,724

Printing and stationery

3,514

3,169

IT expenses

2,472

1,656

Others

25,289

26,186


-----------------------

-----------------------


1,303,212

1,021,220


==========

==========

Allocated to :



  Direct costs

968,044

753,325

  General and administrative expenses

335,168

267,895


-----------------------

-----------------------


1,303,212

1,021,220


==========

==========

 

The classifications of the remaining expenses by nature recognised in the consolidated income statement are:


2017

2016


US$'000

US$'000

 

Transaction costs in respect of business combinations

5,969

4,603

 

Depreciation

58,107

45,010

 

Amortisation

12,776

10,989

 

Finance costs

63,792

41,684

 

Impairment of assets

3,010

1,376

 

Unamortised finance fees written off

6,794

-

 


--------------------

---------------------



150,448

103,662

 


=========

=========


9          OTHER INCOME

 

Other income includes US$47,106,000 (2016:US$43,644,000) relating to reimbursement of advertisement and promotional expenses incurred by the Group. Revenue is recognised following the formal acceptance of the Group's reimbursement claims by suppliers and is measured at the confirmed amount receivable.

 

 

 

 

 

NMC Health plc

                                                                                                                                                                                                                                                                                                                       

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

At 31 December 2017

 

 

10         FINANCE COSTS


2017

2016


US$'000

US$'000




Bank interest

53,142

31,648

Bank charges

3,866

3,594

Financial instruments fair value adjustments

4,772

4,282

Amortisation and Re-measurement of



option redemption liability (note 37)

2,012

2,160


----------------------

----------------------


63,792

41,684


=========

=========




11         FINANCE INCOME


2017

2016


US$'000

US$'000




Bank and other interest income

2,067

1,418

Financial instruments fair value adjustments

5,420

7,739


-----------------------

-----------------------


7,487

9,157


==========

==========




12         PROFIT FOR THE YEAR BEFORE TAX

 

The profit for the year before tax is stated after charging:


2017

2016


US$'000

US$'000




Cost of inventories recognised as an expense

571,953

457,276


==========

==========

Cost of inventories written off and provided (note 20)

2,346

1,869


==========

==========

Minimum lease payments recognised as operating lease expense

76,168

65,549


==========

==========

Depreciation (note 17)

58,107

45,010


==========

==========

Amortisation (note 18)

12,776

10,989


==========

==========

Net Impairment of accounts receivable (note 21)

7,956

2,957


==========

==========

Employees' end of service benefits (note 28)

11,106

7,246


==========

==========

Net foreign exchange (gain) / loss 

(550)

490


==========

==========

Loss on disposal of property and equipment

190

31


==========

==========

Share based payments expense (note 32)

9,181

2,640


==========

==========

 

 

 

 

 

NMC Health plc

                                                                                                                                                                                                                                                                                                                       

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

At 31 December 2017

 

 

13         AUDITOR'S REMUNERATION

 

The Group paid the following amounts to its auditor and its associates in respect of the audit of the financial statements and for other services provided to the Group.

 


2017

2016


US$'000

US$'000

Fees payable to the Company's auditor for the audit of the Company's annual accounts

1,008

984

Fees payable to the Company's auditor and its associates for other services:



   - the audit of the company's subsidiaries pursuant to legislation

902

727

   - audit related assurance services

258

198

   - other assurance services

-

11

   - Tax compliances services

-

-

   - Tax advisory services

-

-

   - non audit services

891

1,960


-----------------------

-----------------------


3,059

3,880


==========

==========




The fees paid to the auditor includes US$100,000 (2016: US$61,000) in respect of out of pocket expenses. There were no benefits in kind provided to the auditor or its associates in either 2017 or 2016.

 

Non-audit services in 2016 relate to a Class 1 transaction (significant acquisition) combined with an equity placement and are non-recurring in nature. This includes Reporting Accountants Report on the Historical financial information of the acquired company as well as working capital and Pro-forma financial information report, issuing of Comfort and Consent Letters and the Bring down Public Report.

 

 

 

 

 

NMC Health plc

                                                                                                                                                                                                                                                                                                                       

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

At 31 December 2017

 

 

14         STAFF COSTS AND DIRECTORS' EMOLUMENTS

 

(a) Staff costs

 


2017

2016


US$'000

US$'000




Wages and salaries

445,181

340,910

Employees' end of service benefits (note 28)

11,106

7,246

Share based payments expense (note 32)

9,181

2,640

Staff medical expense

8,865

2,120

Staff recruitment expense

6,975

4,367

Others

18,460

13,792


--------------------

--------------------


499,768

371,075


========

========

 

Staff costs include amounts paid to directors, disclosed in part (b) below. The average number of monthly employees during the year was made up as follows:

 


2017

2016




Healthcare

11,215

8,443

Distribution & services

2,170

2,089

Administration

287

289


-----------------------

-----------------------


13,672

10,821


==========

==========

(b) Directors' remuneration

 


2017

2016


US$'000

US$'000




Directors' remuneration

11,546

7,166


==========

==========

 

Some of the executive directors are entitled to end of service benefits and to participate in share option plans as disclosed in note 32. Further information in respect of this compensation paid to directors is disclosed in the Directors' Remuneration Report.

 

 

 

 

 

NMC Health plc

                                                                                                                                                                                                                                                                                                                       

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

At 31 December 2017

 

 

15         TAX

 

The Group operates in the United Arab Emirates and Spain and certain other countries. As there is no corporation tax in the United Arab Emirates, no taxes are recognised or payable on the operations in the UAE. There is no taxable income in the UK accordingly there is no tax liability arising in the UK. The unused tax losses amount to US$46,549,000 as at 31 December 2017 (2016: US$25,549,000). 

 

With respect to Group operations in Europe and South America the tax disclosures are as follows:

 

                                                                                                                                                        

                                                                                                                                                        

 

 


2017

2016

Consolidated income statement

US$'000

US$'000

Current income tax:



Charge for the year

3,606

2,305

Adjustment in respect of charge for the year

-

(5)


-----------------------

-----------------------


3,606

2,300

Deferred tax:

Charge on profit origination and reversal of temporary differences   

(2,361)

(2,126)

in the current year




-----------------------

-----------------------

Income tax charge reported in the income statement

1,245

174


==========

==========

 

 

Reconciliation of tax expense and the accounting profit multiplied by the Spanish domestic tax rate of 25% (2016: 25%) is represented below:

 


2017

2016


US$'000

US$'000

Group accounting profit before tax from continuing operations for the year

210,426

151,575

Less: Accounting profit before tax from continuing operations (not subject to tax)

192,659

139,594


-----------------------

-----------------------

Accounting profit before tax from continuing operations (subject to tax)

17,767

11,981


==========

==========

 

Tax at the rate of 24.9% (2016: 25%)

4,416

2,995

Non-taxable dividend income

(1,880)

(1,774)

Tax saved on amortization of intangibles

(591)

(1,198)

Adjustment in respect of prior period income tax

-

(5)

Different tax rates on overseas earnings

(87)

233

Expenses not deductible for tax purposes and other permanent differences

-

72

Deductible expenses for tax purpose:



R&D and IT

Other deductible expenses

(543)

(382)

Other deductible expenses

(70)

233


-----------------------

-----------------------

Income tax charged reported in the income statement

1,245

174

 

The effective tax rate of the Group is 0.59% (2016: 0.11%).

 

Deferred tax assets and liabilities comprise of:

 

Deferred tax assets:

 


2017

2016


US$'000

US$'000

Tax credit for R&D expenses

1,226

1,126

Limit on tax deductibility of depreciation and amortisation

2,192

1,009


--------------------

-----------------------

Total deferred tax assets

3,418

2,135


=========

==========

 

Deferred tax liabilities:

 


2017

2016


US$'000

US$'000

Depreciation and amortization

 

9,693

8,245


-----------------------

-----------------------

Total deferred tax liabilities

9,693

8,245


==========

==========

 


2017

2016

 

Reconciliation of deferred tax liabilities, net

US$'000

US$'000

 




 

As of 1 January

6,110

8,445

 




 

Tax (credit) for the year

(2,361)

(2,127)

 

Adjustment to prior year business combination (note 5)

1,359

-

 

Foreign exchange adjustments

1,167

(208)

 


---------------------

-----------------------

 

As at 31 December

6,275

6,110


==========

==========

 

 

Deferred tax assets are recognised to the extent that it is probable as supported by forecasts that future taxable profits will be available against which the temporary differences can be utilised.

 

 

 

 

 

 

NMC Health plc

                                                                                                                                                                                                                                                                                                                       

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

At 31 December 2017

 

 

16         EARNINGS PER SHARE (EPS)

 

Basic EPS amounts are calculated by dividing net profit for the year attributable to ordinary equity holders of the Parent Company by the weighted average number of ordinary shares outstanding during the year.

 

Diluted EPS amounts are calculated by dividing the profit attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.

 

The following reflects the income and share data used in the basic and diluted earnings per share computations:

 


2017

2016




Profit attributable to equity holders of the Parent (US$'000)

185,970

132,689


==========

==========




Weighted average number of ordinary shares in issue ('000) for basic EPS

204,302

186,627

Effect of dilution from share based payments ('000)

1,538

922


-----------------------

-----------------------

Weighted average number of ordinary shares ('000) for diluted



EPS

205,840

187,549


==========

==========




Basic earnings per share (US$)

0.910

0.711




Diluted earnings per share (US$)

0.903

0.707

 

 

The table below reflects the income and share data used in the adjusted earnings per share computations. All one off expenses, transaction costs in respect of business combination, and amortisation of acquired intangible assets (net of tax) and impairment of assets, have been adjusted from the profit attributable to the equity holders of the parent to arrive at the adjusted earnings per share: 

 


2017

2016


US$'000

US$'000




Profit attributable to equity holders of the Parent

185,970

132,689

Unamortised finance fees written off

6,794

-

Transaction costs in respect of business combination

5,969

4,603

Amortisation of acquired intangible assets (net of tax)

11,606

7,819

Impairment of assets

3,010

1,376


-------------------

-----------------------

Adjusted profit attributable to equity holders of the Parent

213,349

146,487


=========

==========




Weighted average number of ordinary shares ('000)

205,840

187,549




Diluted adjusted earnings per share (US$)

1.036

0.781

 

Adjusted profit for the year of the Group is calculated as follows:

 


2017

2016


US$'000

US$'000




Profit for the year

209,181

151,402

Unamortised finance fees written off

6,794

-

Transaction costs in respect of business combination

5,969

4,603

Amortisation of acquired intangible assets (net of tax)

11,606

7,819

Impairment of assets

3,010

1,376


-----------------------

-----------------------

Adjusted profit

236,560

165,200


==========

==========

 

 

 

 

 

 

NMC Health plc

                                                                                                                                                                                                                                                                                                                       

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

At 31 December 2017

 

 

17         PROPERTY AND EQUIPMENT

 

Property and equipment consists of the following:


2017

2016


US$'000

US$'000




Property and equipment

607,092

459,338


-----------------------

-----------------------


607,092

459,338


==========

==========


Freehold land

Hospital building

Buildings

Leasehold improve-ments

Motor vehicles

Furniture, fixtures  fittings and medical equipment

Capital work in progress

Total


US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

31 December 2017








 

Cost:









 

At 1 January 2017

19,206

137,321

26,991

172,612

11,108

246,113

22,981

636,332

 

Additions

-

224

180

4,122

3,110

24,420

63,448

 

Relating to acquisition of subsidiaries

13,746

88,337

-

3,157

85

36,491

1,166

142,982

 

Transfer from CWIP

-

9,946

-

4,893

-

4,303

(19,142)

-

 

 Impairments 

-

-

-

-

-

-

(1,010)

 

 Exchange difference

-

(60)

-

-

-

1,401

1,398

 

 Disposals

-

-

-

(108)

(545)

(710)

(1,420)

 


-----------------------

-----------------------

-----------------------

-----------------------

-----------------------

-----------------------

-----------------------

-----------------------

 

  At 31 December 2017

32,952

235,768

27,171

184,676

13,758

312,018

841,730

 


-----------------------

-----------------------

-----------------------

-----------------------

-----------------------

-----------------------

-----------------------

 

Depreciation:








 

  At 1 January 2017

-

10,511

8,793

44,093

6,755

106,842

176,994

 

  Charge for the year

-

5,110

1,076

18,811

1,581

31,529

58,107

 

  Exchange difference

-

(8)

-

-

-

687

-

679

 

  Disposals

-

-

-

(45)

(511)

(586)

(1,142)

 


-----------------------

-----------------------

-----------------------

-----------------------

-----------------------

-----------------------

-----------------------

-----------------------

 

  At 31 December 2017

-

15,613

9,869

62,859

7,825

138,472

-

234,638

 

 

-----------------------

-----------------------

-----------------------

-----------------------

-----------------------

-----------------------

-----------------------

 

Net carrying amount:

32,952

220,155

17,302

121,817

5,933

173,546

35,387

607,092

 

  At 31 December 2017

=======

=======

=======

========

======

=========

=======

======

 










 










 

 

 


Freehold land

Hospital building

Buildings

Leasehold improve-ments

Motor vehicles

Furniture, fixtures  fittings and medical equipment

Capital work in progress

Total


US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

31 December 2016








 

Cost:









 

At 1 January 2016

19,206

12,343

26,300

157,888

9,322

180,342

161,744

567,145

 

Additions

-

970

-

4,072

1,751

21,190

66,932

 

Relating to acquisition of subsidiaries

-

-

-

2,228

35

5,222

     -

7,485

 

Disposals

-

-

-

(498)

 (370)

(2,239)

(3,107)

 

Transfer from CWIP

-

124,046

691

9,000

370

41,915

(176,022)

-

 

 Reclassification

-

-

-

(78)

-

78

-

 

Transfer to Intangible

-

-

-

-

-

-

(318)

(318)

 

 Impairments 

-

-

-

-

-

-

(1,376)

 

 Exchange difference

-

(38)

-

-

-

(395)

(429)

 


-----------------------

-----------------------

-----------------------

-----------------------

-----------------------

-----------------------

-----------------------

-----------------------

 

  At 31 December 2016

19,206

137,321

26,991

172,612

11,108

246,113

636,332

 


-----------------------

-----------------------

-----------------------

-----------------------

-----------------------

-----------------------

-----------------------

 

Depreciation:








 

  At 1 January 2016

-

8,424

7,339

26,784

5,779

85,295

133,621

 

  Charge for the year

-

2,032

1,454

17,429

1,345

22,750

45,010

 

  Reclassification

-

-

-

(40)

-

40


-

 

  Exchange difference

-

55

-

-

-

(190)

-

(135)

 

  Relating to disposals

-

-

-

(80)

(369)

(1,053)

 (1,502)

 


-----------------------

-----------------------

-----------------------

-----------------------

-----------------------

-----------------------

-----------------------

-----------------------

 

  At 31 December 2016

-

10,511

8,793

44,093

6,755

106,842

-

176,994

 

 

-----------------------

-----------------------

-----------------------

-----------------------

-----------------------

-----------------------

-----------------------

 

Net carrying amount:

19,206

126,810

18,198

128,519

4,353

139,271

22,981

459,338

 

  At 31 December 2016

=======

=======

=======

========

======

=========

=======

======

 

 

As part of the Group's capital expenditure programme, borrowing costs of US$ nil (2016: US$357,000) have been capitalised during the year. The rate used to determine the amount of borrowing costs eligible for capitalisation was NIL% (2016: 1.9%) which is the effective rate of the borrowings used to finance the capital expenditure. Companies in the UAE are not subject to taxation and as such there is no tax relief in respect of capitalised interest.

 

Total capital expenditure during the year ended 31 December 2017 was US$63,448,000 (2016: US$66,932,000). Of the total capital expenditure spend during the year, US$ 31,392,000 (2016: US$38,949,000) related to new capital projects and US$32,056,000 (2016: US$27,983,000) related to further capital investment in our existing facilities.

 

Generally hospital and distribution operations are carried out on land and buildings which are leased from Government authorities or certain private parties. The majority of the lease periods range from five to twenty seven years apart from New Medical Centre Hospital LLC-Dubai ("Dubai General Hospital"), and the warehouse facilities which have leases renewable on an annual basis (note 2.3). As at 31 December 2017 US$569,000 (2016: US$801,000) of the amounts included in property and equipment related to assets with annually renewable leases. 

 

In accordance with the local laws, except in some specific locations in the UAE the registered title of land and buildings must be held in the name of a UAE national. As a result, land and buildings of the Group are legally registered in the name of shareholders or previous shareholders of the Group. Land with a carrying amount of US$4,144,000 (31 December 2016: US$4,144,000) is held in the name of a previous shareholder for the beneficial interest of the Group. As the beneficial interest of such land resides with the Group, these assets are recorded within land in the Group's consolidated financial statements. The directors take into account this local legal registration requirement, the Group's entitlement to the beneficial interest arising from these assets, as well as other general business factors, when considering whether such assets are impaired.

 

 

 

 

 

18         INTANGIBLE ASSETS

 


Software

Brands

Patient

Relationship and Database

Goodwill

Others

Total

 


US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

 

31 December 2017







Cost:









 

 

At 1 January 2017

7,723

64,713

19,282

567,338

10,169

669,225

 

Additions

1,413

-

-

-

-

1,413

 

Relating to acquisition of subsidiaries

547

5,588

-

471,573

11,183

488,891

 

Reclassification

-

(5,056)

5,056

-

-

-

 

   Adjustment to prior year business







 

   Combinations (Note 5)

-

3,824


(693)

1,818

4,949

 

Exchange difference

276

3,965

1,269

19,547

1,231

26,288

 


 

 

 

 

 

 

 

At 31 December 2017

9,959

73,034

25,607

1,057,765

24,401

1,190,766

 


 

 

 

 

 

 

 








 

Amortisation:







 

At 1 January 2017

1,858

6,202

3,951

-

4,231

16,242

 

Charge for the year

1,044

5,353

2,698

-

3,681

12,776

 

Impairment

2,000

-

-

-

-

2,000

 

Exchange difference

48

2,183

-

-

613

2,844

 


 

 

 

 

 

 

 

At 31 December 2017

4,950

13,738

6,649

-

8,525

33,862

 


 

 

 

 

 

 

 

Net carrying amount:







 

At 31 December 2017

5,009

59,296

18,958

1,057,765

15,876

1,156,904

 


 

 

 

 

 

 

 








 

31 December 2016







 

Cost:

At 1 January 2016

6,841

40,129

19,638

341,420

10,475

418,503

 

Additions

473

-

-

-

-

473

 

Relating to acquisition of subsidiaries

258

25,214

-

233,906

2

259,380

 

Transfer from tangible

318

-

-

-

-

318

 

 PPA Adjustment Dr. Sunny (note 5)

-

-

-

(2,126)

-

(2,126)

 

Exchange difference

(167)

(630)

(356)

(5,862)

(308)

(7,323)

 


 

 

 

 

 

 

 

At 31 December 2016

7,723

64,713

19,282

567,338

10,169

669,225

 


 

 

 

 

 

 

 








 

Amortisation:







 

At 1 January 2016

1,078

1,588

1,270

-

1,508

5,444

 

Charge for the year

819

4,614

2,681

-

2,875

10,989

 

Exchange difference

(39)

-

-

-

(152)

(191)

 


 

 

 

 

 

 

 

At 31 December 2016

1,858

6,202

3,951

-

4,231

16,242

 


 

 

 

 

 

 

 

Net carrying amount:







 

At 31 December 2016

5,865

58,511

15,331

567,338

5,938

652,983

 


 

 

 

 

 

 

 

Others include intellectual property, rental contracts, private contracts and non-compete arrangements.

 

Reclassification of US$5,056,000 in 2017 represents transfer of patient relationship incorrectly classified under brands in 2016.

 

Goodwill

Additions to goodwill in the year relate to goodwill measured in respect of the acquisitions of  Al Zahra Private Hospital Company , As Salama Hospital LLC, Hamad Drug Store LLC, Atlas Healthcare, Al Qadi Speciality Hospital LLC and Fecunmed.

 

Goodwill is not amortised, but is reviewed annually for assessment of impairment in accordance with IAS 36. The Group performed its annual goodwill impairment test in December 2017 and 2016.  Goodwill acquired through business combinations is allocated to the following operating segments representing a group of cash generating units (CGUs), which are also operating and reportable segments, for impairment testing:

 

--Healthcare

--Distribution and services

 

The healthcare CGU has goodwill allocated to it of US$1,052,886,000 at the year-end (2016: US$562,459,000).  The distribution and services CGU has goodwill allocated to it of US$4,879,000 at the year-end (2016:US$4,879,000).   

 

The recoverable amounts for both CGUs are based on value in use, which has been calculated using cash flow projections from financial budgets approved by senior management covering a five year period.  Cash flows beyond the five-year period are extrapolated using a 3% growth rate (2016: 3%) which is significantly lower than the current annual growth rate of both CGUs.  The pre-tax discount rate applied to the cash flows of both CGUs is 8.23% (2016: 8.45%), which is based on the Group's weighted average cost of capital (WACC) and takes into account such measures as risk free rates of return, the Group's debt/equity ratio, cost of debt and local risk premiums specific to the CGUs. As a result of the analysis, there is headroom in both CGUs and no impairment has been identified.  Reasonable sensitivities have been applied to each CGU's cash flows and the discount rates used, and in all cases the value in use continues to exceed the carrying amount of CGU goodwill.

 

The key assumptions on which management has based its cash flow projections for the five year period covered by the most recent forecasts are those related to growth in available beds, patient numbers for the healthcare segment and revenue from the distribution of products for the distribution and services segment.  The assumptions made reflect past experience and are based on management's best estimate and judgment.

 

Other acquired intangible assets

 

Assets in this class are amortised over their estimated useful lives on a straight line basis. All amortisation charges for the year have been charged against operating profits.

 

Other than goodwill, the Group does not hold any intangible assets with an indefinite life.

 

Included in software are HIS and ERP projects amounting to US$1,783,000 (2016: US$3,349,000) which are work-in-progress as of year-end. As of 31 December 2017, the Group has recorded impairment of US$2,000,000 (2016:US$ nil) against this.

 

 

 

 

 

NMC Health plc

                                                                                                                                                                                                                                                                                                                       

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

At 31 December 2017

 

 

19         LOAN RECEIVABLE

 


2017

2016


US$'000

US$'000




Loan receivable

32,187

14,516


-----------------------

-----------------------


32,187

14,516


==========

==========

 

Classification of loan receivable into current and non-current is as follows:

 

Current

32,187

5,387

Non-current

-

9,129


-----------------------

-----------------------


32,187

14,516


==========

==========

 

In 2015, the Group entered into a loan arrangement, with a third party (Borrower), to finance certain payables in connection with a hospital facility, for an aggregate amount not to exceeding US $8,848,000 with the repayment of the first trance US$2,720,000 on 10 November 2016, second trance US $2,720,000 on 10 November 2017 and the remaining final trance payment by 10 November 2018. 

 

During the year ended 31 December 2017, the loan agreement was amended in respect of first trance and second trance repayment date and total loan facility amount.  First and second trance loan repayment date was revised as 31 March 2018 and the loan facility ceiling was increased to US$32,528,000.

 

The Group believes that the amount is fully recoverable. Loan is secured by obtaining personal guarantees of shareholders of borrower. The fair value of the loan receivable as on 31 December 2017 was US$32,187,000 (2016: US$ 14,516,000).

 

The loan is interest -free, however, any unpaid loan receivable as of due date shall bear commission at the rate of 15% per annum starting from due date till date of payment.

 

 

 

 

 

NMC Health plc

                                                                                                                                                                                                                                                                                                                       

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

At 31 December 2017

 

 

20         INVENTORIES


2017

2016


US$'000

US$'000




Pharmaceuticals and cosmetics

101,096

75,657

Scientific equipment

12,675

13,404

Consumer products

49,181

42,568

Food

9,632

7,087

Egg bank

5,083

2,656

Consumables

1,926

855

Opticals

294

309

Goods in transit

1,440

1,636

Other

1,222

1,393


---------------------

-----------------------


182,549

145,565

Less: provision for slow moving and obsolete inventories

(1,219)

(1,178)


----------------------

-----------------------


181,330

144,387


==========

==========

 

The amount of write down of inventories recognised as an expense for the year ended 31 December 2017 is US$ 2,346,000 (2016: US$1,869,000).  This is recognised in direct costs.

 

 

21         ACCOUNTS RECEIVABLE AND PREPAYMENTS


2017

2016


US$'000

US$'000




Accounts receivable

440,146

314,351

Receivable from suppliers for promotional expenses

14,235

13,164

Other receivables

43,568

27,179

Prepayments

20,893

19,763


----------------------

----------------------


518,842

374,457

 

 

==========

==========

 

Receivables from suppliers relate to advertising and promotional expenses incurred by the Group. Accounts receivable are stated net of provision for doubtful debts of US$15,747,000 (2016: US$12,129,000). Movements in the provision for doubtful debts are as follows:

 


2017

2016


US$'000

US$'000




At 1 January

12,129

13,022

Written off

(4,382)

(4,377)

Written back (note 12)

(2,056)

(1,843)

Charge for the year (note 12)

10,012

4,800

Addition from business combinations

-

549

Exchange difference

44

(22)


--------------------

---------------------

At 31 December

15,747

12,129


=========

=========

 

 

The ageing of unimpaired accounts receivable is as follows:




Past due but not impaired


Total

Neither past due nor impaired

< 90 days

91-180 days

181-365 days

>365 days


US$'000

US$'000

US$'000

US$'000

US$'000

US$'000








31 December 2017







  Accounts receivable

440,146

279,343

86,363

34,302

24,435

15,703








31 December 2016







  Accounts receivable

314,351

210,592

70,940

19,070

8,944

4,805








 

Unimpaired receivables are expected, on the basis of past experience, to be fully recoverable. It is not the practice of Group to obtain collateral over receivables and they are therefore unsecured. As at 31 December 2017 accounts receivables of US$15,747,000 (2016: US$12,129,000) were impaired and fully provided for.

 

Credit risk is managed through the Group's established policy, procedures and controls relating to credit risk management (note 33). A majority of the receivables that are past due but not impaired are from insurance companies and government-linked entities in the United Arab Emirates which are inherently slow payers due to their long invoice verification and approval of payment procedures. Payments continue to be received from these customers and accordingly the risk of non-recoverability is considered to be low.

 

Of the net trade receivables balance of US$440,146,000 (2016:US$314,351,000) amount of US$226,298,000 is receivables from five customers (2016: US$159,922,000 is receivables from five customers).

 

The Group's terms require receivables to be repaid within 90-120 days depending on the type of customer, which is in line with local practice in the UAE. Due to the long credit period offered to customers, a significant amount of trade accounts receivable are neither past due nor impaired. 

 

Amounts due from related parties amounting to US$ 1,776,000 (31 December 2016: US$3,628,000) as disclosed on the face of the consolidated statement of financial position are trading in nature and arise in the normal course of business.

 

Included in other receivables is an amount of US$5,245,000 (2016:US$7,679,000) receivable from entities owned by a non-controlling interest.

 

 

 

 

 

 

NMC Health plc

                                                                                                                                                                                                                                                                                                                       

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

At 31 December 2017

 

 

22         CASH AND CASH EQUIVALENTS

 

Cash and cash equivalents included in the consolidated statement of cash flows comprise of the following:

 


2017

2016


US$'000

US$'000




Bank deposits

185,611

137,900

Bank balances and cash

202,002

479,940

Bank overdrafts and other short term borrowings

(207,034)

(219,851)


-----------------------

-----------------------


180,579

397,989

Adjustments for:



Short term borrowings

139,086

160,628

Bank deposits maturing in over 3 months

(69,088)

(28,329)

Restricted cash

(44,115)

(96,885)


-----------------------

-----------------------

Cash and cash equivalents

206,462

433,403


=========

=========

 

Bank deposits of US$ 185,611,000 (2016: US$137,900,000) are with commercial banks in the United Arab Emirates and Spain. These are mainly denominated in the UAE Dirhams and Euro and earn interest at the respective deposit rates. These deposits have original maturity between 1 to 12 months (2016: 1 to 12 months). 

 

Short term borrowings include trust receipts and invoice discounting facilities which mature between 90 and 180 days. Trust receipts are short term borrowings to finance imports. The bank overdrafts and short-term borrowings are secured by the corporate guarantee of subsidiary companies and personal guarantees of the shareholders (H.E. Saeed Bin Butti, Dr BR Shetty and Mr Khalifa Bin Butti) and carry interest at EIBOR plus margin rates ranging from 1% to 4% (2016: 1% to 4%) per annum.

 

At 31 December 2017, the Group had US$34,928,000 (2016: US$59,715,000) of undrawn bank overdraft facilities, which are renewable annually.

 

Restricted cash mainly represents funds held by a bank in respect of upcoming loan repayment and payment for acquisitions.

 

 

 

 

 

 

NMC Health plc

                                                                                                                                                                                                                                                                                                                       

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

At 31 December 2017

 

 

23         SHARE CAPITAL

 

31 December 2017

 

 





Number of shares

Ordinary shares

Share premium

Total


(thousands)

US$'000

US$'000

US$'000






Issued and fully paid





(nominal value 10 pence sterling each)

 204,423

31,928

 492,634

 524,562


==========

==========

==========

==========

 

31 December  2016:





Number of shares

Ordinary shares

Share premium

Total


(thousands)

US$'000

US$'000

US$'000






Issued and fully paid





(nominal value 10 pence sterling each)

204,285

31,910

491,778

523,688


==========

==========

==========

==========

 

Issued share capital and share premium movement

 

 


Number

Ordinary

Share



of shares

shares

premium

Total


(thousands)

US$ '000

US$ '000

US$ '000

31 December 2017





At 1 January 2017

204,285

31,910

491,778

523,688

Exercise of stock option shares

       138

       18

       856

       874






At 31 December 2017

204,423

31,928

492,634

524,562






31 December 2016





At 1 January 2016

185,714

29,566

179,152

208,718

Issue of new shares - IPO

18,571

2,344

319,970

322,314

Share issue costs

            -

            -

(7,344)

(7,344)






At 31 December 2016

204,285

31,910

491,778

523,688

 

 

24         GROUP RESTRUCTURING RESERVE

 

The group restructuring reserve arises on consolidation under the pooling of interests method used for group restructuring, which took place on 28 March 2012 when the Company became the holding company of NMC Healthcare LLC through its wholly owned subsidiaries, NMC Holding LLC and NMC Health Holdco Limited. Under this method, the group is treated as a continuation of the NMC Healthcare LLC group. The difference between the share capital of NMC Healthcare LLC (US$27,226,000) and the carrying amount of the investment in that company (US$37,227,000), which equates to the net assets of

 

NMC Healthcare LLC at the date of reorganisation (28 March 2012), amounting to US$10,001,000(debit), is recorded on consolidation as a group restructuring reserve. This reserve is non-distributable.

 

 

 

 

 

 

NMC Health plc

                                                                                                                                                                                                                                                                                                                       

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

At 31 December 2017

 

 

25         RETAINED EARNINGS

 

As at 31 December 2017, retained earnings of US$18,423,000 (2016: US$18,009,000) are not distributable. This relates to a UAE Companies Law requirement to set aside 10% of annual profit of all UAE subsidiaries until their respective reserves equal 50% of their paid up share capital. The subsidiaries discontinue such annual transfers once this requirement has been met.

 

 

26         DIVIDEND  

 

In the AGM on 23 May 2017 the shareholders approved a dividend of 10.6 pence per share, amounting to GBP 21,753,000 (US$27,779,000) to be paid to shareholders on the Company's share register on 12 May 2017. The dividend `amount was paid to the shareholders on 1 June 2017 (30 June 2016: a dividend of GBP 11,514,000 equivalent to US$16,350,000 was approved on 3 June 2016 and paid on 14 June 2016).  No interim dividend was declared during the year. Subject to shareholder' approval at the Annual General Meeting on 28 June 2018, a final dividend of 13.0 pence per share, GBP26,952,000 (US$37,194,000) will be paid on 10 July 2018 to shareholders on the Company's share register on 15 June 2018.

 

An amount US$ 21,160,000 (2016: US$ 5,300,000) was declared as dividend to non-controlling interest during the year, out of that US$5,303,000 (2016: US$ nil) was adjusted against related party receivable balance, US$14,523,000 (2016: US$ 5,300,000) was paid as dividend during the year and US$1,334,000 (2016: US$ nil) remain unpaid  for the year ended 31 December 2017.

 

 

27         TERM LOANS  

 


2017

2016


US$'000

US$'000




Current portion

204,154

234,519

Non-current portion

987,840

594,780


 ---------------------

 ---------------------


1,191,994

829,299


=========

=========

Amounts are repayable as follows:






Within 1 year

204,154

234,519

Between 1 - 2 years

206,942

243,115

Between 2 - 6 years

780,898

351,665


---------------------

---------------------


1,191,994

829,299


==========

=========

 

During the year, the Group entered two syndicated facilities amounting to US$825m and US$250m. These syndicated facilities were used to settle an existing syndicated loan and for acquisition purposes. New facilities are repayable over 60 and 84 monthly instalments respectively with a grace period of twelve months. New facilities are guaranteed by corporate guarantees from NMC Health plc and operating subsidiaries of the Group. These loans are secured against a collateral package which includes assignment of some insurance company receivables and a pledge over certain bank accounts within the Group and shares of the entities acquired using the proceeds of the loan.

 

In addition to the above facilities, term loans also include other short term revolving loans which get drawn down and repaid over the year. The Group has charged an amount of US$6,794,000  to the consolidated income statement with respect to unamortised transaction costs of existing debts which have been settled using proceeds of new syndicate loan.

 

During the year ended 31 December 2017, the Group drew down term loans of US$671,353,000 (2016: US$631,548,000) and repaid term loans of US$319,111,000 (2016: US$378,660,000).

 

 

 

 

 

NMC Health plc

                                                                                                                                                                                                                                                                                                                       

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

At 31 December 2017

 

 

28         EMPLOYEES' END OF SERVICE BENEFITS

 

Movements in the provision recognised in the consolidated statement of financial position are as follows:

 


2017

2016


US$'000

US$'000




Balance at 1 January

30,208

22,490

Charge for the year

11,106

7,246

Actuarial (gain) / loss

(1)

147

Transfer from related party

180

4

Employees' end of service benefits paid

(3,447)

(1,546)

Addition from business combinations

10,233

1,867


-------------------

-----------------------

Balance at 31 December

48,279

30,208


=========

==========




Current

6,905

3,560

Non-current

41,374

26,648


-------------------

-----------------------

Balance at 31 December

48,279

30,208


========

==========

 

Charge for the year comprise of the following:

 

Current service cost

10,173

6,525

Interest cost

933

721


----------------

----------------

Balance at 31 December

11,106

7,246


=======

=======

 

In accordance with the provisions of IAS 19 'Employee Benefits', management has carried out an exercise to assess the present value of its obligation at 31 December 2017 and 2016, using the projected unit credit method, in respect of employees' end of service benefits payable under the UAE Labour Law.

 

During the current year, the Group has recognised an actuarial gain of US$1,000 (31 December 2016: loss of US$147,000) in other comprehensive income. Management has assumed an average length of service of 5 years (2016: 5 years) and increment/promotion costs of 1.5% (2016: 1.5%). The expected liability at the date of employees' leaving service has been discounted to its net present value using a discount rate of 2.5% (2016: 2.5%). Management also performed a sensitivity analysis for changes in discount rate and increment costs; the results of this analysis showed that none of the factors had any material impact on the actuarial valuation.

 

 

 

 

 

 

NMC Health plc

                                                                                                                                                                                                                                                                                                                       

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

At 31 December 2017

 

 

29         ACCOUNTS PAYABLE AND ACCRUALS


2017

2016


US$'000

US$'000




Trade accounts payable

152,811

108,202

Accrued interest

2,681

2,691

Accrued expenses

9,921

7,362

Others

44,057

40,557


--------------------

-----------------------


209,470

158,812


=========

=========

 

Trade and other payables are non-interest bearing and are normally settled on 50-60 day terms.

 

Included in others is an amount of US$17,596,000 (2016: US$22,822,000) in respect of lease payable

 

 

30         OTHER PAYABLES

 


2017

2016


US$'000

US$'000

Contingent consideration payable for acquisitions (note 36)

10,519

24,139

Deferred consideration payable for acquisitions

5,307

6,551

Other payable

41,268

36,929


-----------------------

-----------------------


57,094

67,619


==========

==========

Classification of other payables into current and non-current is as follows:

 

Current

18,110

26,827

Non-current

38,984

40,792


-----------------------

-----------------------


57,094

67,619


==========

==========

 

During 2016, the Group assumed a liability upon acquisition of Fakih IVF to deliver cash or another financial asset by issuing the Post-dated cheques (those were issued by a subsidiary prior to acquisition by NMC and not connected to the subsidiary acquired) and met the definition of financial liability, present value of such Post-dated cheques of US $38,029,000 was recorded as liability as of acquisition date.  Further, the Group has a contractual right to be compensated from the Seller by way of cash or other financial asset in case it suffers any loss on account of those Post-dated cheques as the Group is indemnified by the Seller for any loss that may arise on account of encashment of such issued Post-dated cheques before their replacement. Accordingly, a contra indemnity asset was recorded of the above same amount as of acquisition date.

 

As of 31 December 2017, present value of Post-dated cheques issued and corresponding receivable is US$ 40,068,000 (2016: US$36,929,000) and have been recorded under other payables and other assets. Current portion of other assets is recorded under other receivables included in accounts receivable and prepayment (note 21) and non-current portion is recorded under other non-current assets. Classification of financial asset is as follows:


2017

2016


US$'000

US$'000




Current

4,043

-

 

Non-current

36,025

36,929

 


-----------------------

-----------------------

 


40,068

36,929

 


==========

==========

 

NMC Health plc

                                                                                                                                                                                                                                                                                                                       

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

At 31 December 2017

 

 

31         RELATED PARTY TRANSACTIONS

 

These represent transactions with related parties, including major shareholders and senior management of the Group, and entities controlled, jointly controlled or significantly influenced by such parties, or where such parties are members of the key management personnel of the entities. Pricing policies and terms of all transactions are approved by the management of the Group.

 

The Company's immediate and ultimate controlling party is a group of three individuals (H.E. Saeed Bin Butti, Dr BR Shetty and Mr Khalifa Bin Butti) who are all shareholders and of whom two are directors of the Company and who together have the ability to control the company. As the immediate and ultimate controlling party is a group of individuals, it does not produce consolidated financial statements.

 

Relationship agreement

The Controlling Shareholders and the Company have entered into a relationship agreement, the principal purpose of which is to ensure that the Company is capable of carrying out its business independently of the Controlling Shareholders and that transactions and relationships with the Controlling Shareholders are at arm's length and on a normal commercial basis.

 

In accordance with the terms of the relationship agreement, the Controlling Shareholders have a collective right to appoint a number of Directors to the Board depending upon the level of their respective shareholdings. This entitlement reduces or is removed as the collective shareholdings reduce. The relationship agreement includes provisions to ensure that the Board remains independent.

 

Transactions with related parties included in the consolidated income statement are as follows:

 


2017

2016


US$'000

US$'000




Entities significantly influenced by a shareholder who is a key management personnel in NMC





  Sales

40

14

  Purchases

78,778

59,370

  Rent charged

353

451

  Other income

1,883

1,435




Entities where a shareholder of NMC is a key member of management personnel of such entity





  Management fees received from such entity by NMC

1,776

6,303

  Sales

-

296




Amounts due from and due to related parties disclosed in the consolidated statement of financial position are as follows:

 


2017

2016


US$'000

US$'000

Entities significantly influenced by a shareholder who is a key management personnel in NMC





  Amounts due to related parties

28,472

14,876

  Amounts due from related parties

1,776

-




Entities where a shareholder of NMC is a key member of management personnel of the entity



management personnel of such entity



  Amounts due from related parties

-

3,628




 

 

 

 

NMC Health plc

                                                                                                                                                                                                                                                                                                                       

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

At 31 December 2017

 

 

31         RELATED PARTY TRANSACTIONS continued

 

Outstanding balances with related parties at 31 December 2017 and 31 December 2016 were unsecured, payable on 50-60 days term and carried interest at 0% (31 December 2016: 0%) per annum. Settlement occurs in cash. As at 31 December 2017 US$ nil of the amounts due from related parties were past due but not impaired (31 December 2016: US$1,576,000). 

 

The bank overdrafts and short-term borrowings are secured by the corporate guarantee of subsidiary companies and personal guarantees of the shareholders (H.E. Saeed Bin Butti, Dr BR Shetty and Mr Khalifa Bin Butti).

 

Pharmacy licenses in UAE under which the Group sells its products, are granted to the shareholders or directors of the Company, who are UAE nationals. No payments are made in respect of these licenses to shareholders or directors.

 

Compensation of key management personnel

 


2017

2016


US$'000

US$'000




Short term benefits

 

15,142

10,236

Employees' end of service benefits

 

24

16


--------------------

----------------------


15,166

10,252


=========

==========

 

The key management personnel include all the Non-Executive Directors, the three (31 December 2016: two) Executive Directors and four (31 December 2016: four) senior management personnel.

 

During the year additional shares of 833,284 (2016: 451,868) were granted to Executive Directors and other senior management in the form of share options.

 

One individual (31 December 2016: One) who is a related party of one of the shareholders is employed by the Group. The total compensation for employment received by that related party in the year ended 31 December 2017 amounts to US$ 2,286,000 (2016: US$1,303,000). 

 

 

 

 

 

 

 

NMC Health plc

                                                                                                                                                                                                                                                                                                                       

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

At 31 December 2017

 

 

32         SHARE BASED PAYMENTS 

 

The Group currently operates two share option schemes:

 

Long term incentive plan (LTIP)

Options awarded under the LTIP are made annually to Executive Directors and other senior management.  The exercise prices are nil. Options have a life of ten years and a vesting period of three years.  The LTIP is subject to performance conditions which can be found in the Directors' Remuneration Report in the Annual Report. 

 

Short term incentive plan (STIP)

Options awarded under the STIP are made annually to Executive Directors and other senior management.  The exercise prices are nil. Options have a life of ten years and a vesting period of 3 years.

 

Fair values are determined using the Black-Scholes model. Expected volatility has been based on

historical volatility over the period since the Company's shares have been publically traded.

 

Administrative expenses include a charge of US$ 9,181,000 (2016: US$2,640,000) in respect of the cost of providing share options. The cost is calculated by estimating the fair value of the option at grant date and spreading that amount over the vesting period after adjusting for an expectation of non-vesting.

 

For options granted in the years ended 31 December 2016 and 2017, the fair value per option granted and the assumptions used in the calculation are as follows:

 


2017

2016


STIP

STIP




Share price at grant date

£20.740

£9.675

Fair value at measurement date

£20.425

£9.520

Exercise price

£nil

£nil

Expected volatility

40%

40%

Expected option life

2 years

3 years

Expected dividend yield

0.51%

0.54%

Risk free interest rate

1.57%

1.05%

 

 


2017

2017

2016


LTIP1

LTIP2

LTIP





Share price at grant date

£16.330

£27.390

£9.675

Fair value at measurement date

£16.082

£27.088

£9.520

Exercise price

£nil

£nil

£nil

Expected volatility

40%

40%

40%

Expected option life

3 years

3 years

3 years

Expected dividend yield

0.51%

0.37%

0.54%

Risk free interest rate

1.49%

1.38%

1.05%

 

 

LTIP represent long term incentive plans issued in January and September 2017.

 

The options existing at the year-end were as follows:

 



2017


2016



Number of shares

Exercise price

Number of shares

Exercise

price

Period when exercisable

Long term incentive plan (LTIP)






October 2014

60,292

£nil

160,778

£nil

29/10/17 to 28/10/24







Short term incentive plan (STIP)






October 2014

20,165

£nil

55,527

£nil

29/10/17 to 28/10/24







Long term incentive plan (LTIP)






February 2015

221,539

£nil

221,539

£nil

25/02/18 to 24/02/25







Short term incentive plan (STIP)






February 2015

74,801

£nil

74,801

£nil

25/02/18 to 24/02/25







Long term incentive plan (LTIP)






September 2015

49,309

£nil

49,309

£nil

09/09/18 to 08/09/25







Long term incentive plan (LTIP)






March 2016

383,717

£nil

383,717

£nil

15/03/19 to 14/03/26







Short term incentive plan (STIP)






March 2016

68,151

£nil

68,151

£nil

15/03/19 to 14/03/26

Long term incentive plan (LTIP)






January 2017

562,323

£nil

-

-

27/01/18 to 26/01/27

Short term incentive plan (STIP)






May 2017

150,435

£nil

-

-

09/05/18 to 08/05/27

Long term incentive plan (LTIP)






September 2017

120,526

£nil

-

-

07/09/18 to 06/09/27

Long term incentive plan (LTIP)







-----------------------


-----------------------



Total options subsisting on existing ordinary shares

1,711,258


1,013,822




-----------------------


-----------------------



Percentage of issued share capital

0.8%


0.5%




==========


==========



 

Movement of share options during the year is as follows:

 


2017

2016




At 1 January

1,013,822

561,954




Vested in lieu of dividend

2,290

-




Granted during the year

833,284

451,868




Exercised during the year

(138,138)

-


-----------------------

-----------------------

Outstanding at 31 December

1,711,258

1,013,822


==========

==========

No options expired or forfeited during the year (2016: nil).

 

 

 

 

 

NMC Health plc

                                                                                                                                                                                                                                                                                                                       

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

At 31 December 2017

 

 

33         FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

 

The Group's principal financial liabilities comprise loans and borrowings, contingent consideration on acquisition of subsidiaries, put option redemption liability and trade and other payables. The main purpose of these financial liabilities is to finance the Group's operations. The Group has accounts and other receivables, and cash and short-term deposits that arise directly from its operations.

 

The Group is exposed to interest rate risk, credit risk, liquidity risk and foreign currency risk. These risks and the Group's financial risk management objectives and policies are consistent with last year. The Group's exposure to foreign currency risk includes risk on the Group's net investment in foreign subsidiaries in Spain and certain other countries.

 

The Group's senior management oversees the management of these risks. The Board of Directors reviews and agrees policies for managing each of these risks which are summarised below.

 

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group is exposed to interest rate risk on its interest bearing assets and liabilities (bank deposits, bank overdrafts and other short term borrowings and term loans). Management is of the opinion that the Group's exposure to interest rate risk is limited.

 

The following table demonstrates the sensitivity of the consolidated income statement to reasonably possible changes in interest rates, with all other variables held constant. The sensitivity of the consolidated income statement is the effect of the assumed changes in interest rates on the Group's profit for the year based on the floating rate financial assets and financial liabilities as of the respective year end. 



Increase/

(decrease) in basis points

Effect on profit at 31 December 2017

Effect on profit at 31 December 2016

 


US$'000

US$'000

 




 

                  100

 

(12,134)

(9,112)

 

                (100)

 

              12,134

                 9,112

 

 

Credit risk

Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group limits its credit risk with respect to customers due to the nature of the customers that it has dealings with. Within the Healthcare business in the GCC, the majority of the Group's customers are insurance companies. The largest insurance company in GCC is fully backed by Sovereign wealth funding from Abu Dhabi. All other insurance companies in the GCC are required to be listed on a stock exchange and therefore are governed by the regulations of their respective markets. The Group limits its credit risk with respect to healthcare customers in markets other than GCC by requesting certain percentage of advance payments from customers and obtaining final payments before completion of treatment. Within the distribution business the Group deals primarily with large reputable multinational retail companies. The Group further seeks to limit its credit risk by setting credit limits for individual customers and monitoring outstanding receivables.

 

The Group limits its credit risk with regard to bank deposits by only dealing with reputable banks. The external credit ratings for the banks at which the bank deposits and cash at bank are held are as follows:

 


2017

2016


US$'000

US$'000




AA-/A-1/Aa3

-

11,903

A+/A1

-

5,494

A/A2

162

219,787

A+/A-1

33,188

4,273

A3/A-

2,258

5,865

A2

22,857

-

AAA/A-1+

95,859

6,164

A2/P-1

15,264

140

A3/P-2

11,465

19

B1

-

1,629

BB

1,505

4,196

BB+

1,404

562

Baa2

55

-

P-3

142,748

-

Baa3

-

163,491

BBB

6,878

1,938

BBB-

567

42,172

BBB+/Baa1/Baa1/P-2

499

120,627

Caa1/B3

2,198

-

Without external credit rating

49,199

28,633


---------------------

-----------------------

Total bank deposit and cash at bank

386,106

616,893


=========

=========

 

With respect to credit risk arising from cash and cash equivalents, the Group's exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments.

 

Liquidity risk

The Group's objective is to maintain a balance between continuity of funding and flexibility through the use of banking facilities. The Group limits its liquidity risk by raising funds from its operations and ensuring bank facilities are available. Trade payables are normally settled within 50-60 days of the date of purchase.

 

The table below summarises the maturities of the Group's undiscounted financial liabilities, based on contractual payment dates and current market interest rates.

 


On demand

Less than 3 months

3 to 12 months

1 to 6 years

Total


US$'000

US$'000

US$'000

US$'000

US$'000







At 31 December 2017






Trade accounts payable

-

152,811

-

-

152,811

Amounts due to related parties

-

28,472

-

-

28,472

Other payables

-

-

18,773

76,186

94,959

Option redemption payable

-

-

19,041

15,776

34,817

Terms loans

-

53,255

193,774

1,077,215

1,324,244

Bank overdrafts and other short term borrowings

68,948

73,079

69,726

-

211,753

Financial guarantees

18,209

-

-

-

18,209


-----------------------

-----------------------

-----------------------

-----------------------

-----------------------

Total

87,157

307,617

301,314

1,169,177

1,865,265


==========

==========

==========

==========

==========

 


On demand

Less than 3 months

3 to 12 months

1 to 6 years

Total


US$'000

US$'000

US$'000

US$'000

US$'000







At 31 December 2016






Trade accounts payable

-

108,202

-

-

108,202

Amounts due to related parties

-

14,876

-

-

14,876

Other payables

-

-

28,391

81,592

109,983

Option redemption payable

-

-

-

42,605

42,605

Terms loans

-

79,560

174,085

615,769

869,414

Bank overdrafts and other short term borrowings

60,154

107,170

56,957

-

224,281

Financial guarantees

11,764

-

-

-

11,764


-----------------------

-----------------------

-----------------------

-----------------------

-----------------------

Total

71,918

309,808

259,433

739,966

1,381,125


==========

==========

==========

==========

==========

 

The Group also has future capital commitments for the completion of ongoing capital projects of US$ 5,723,000 (2016: US$9,048,000) (note 35). These are to be financed from the fixed deposits held by the Group.

 

Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Foreign currency risk comprises of transaction risk, statement of financial position risk and the Group's net investment in foreign subsidiaries. Transaction risk relates to the Group's cash flow being adversely affected by a change in the exchange rates of foreign currencies against the UAE Dirham. Statement of financial position risk relates to the risk of the Group's monetary assets and liabilities in foreign currencies acquiring a lower or higher value, when translated into UAE Dirhams, as a result of currency movements.

 

The Group is exposed to currency risk on its trade accounts payable, put option redemption payable and certain other payables denominated in foreign currencies, mainly in Euros and Saudi Riyal. As the US Dollar is pegged to the UAE Dirham, balances in US Dollars are not considered to represent significant currency risk.

 

The table below indicates the impact of Group's foreign currency monetary liabilities and assets at 31 December, on its profit before tax.


2017

2016


US$'000

US$'000




+5%

(2,460)

(2,113)

-5%

2,460

2,113




 

The Group is exposed to foreign currency risk on net investment in foreign subsidiaries. During the year ended 31 December 2017 the Group has recorded a foreign currency exchange gain of US$15,304,000  (2016: loss of US$4,050,000) on the translation of foreign subsidiaries in other comprehensive income.

 

Capital management

The primary objective of the Group's capital management is to ensure that it maintains healthy capital ratios in order to support its business and maximise shareholders' value.

 

The Group manages its capital structure and makes adjustments to it in light of changes in business conditions. Capital comprises share capital, share premium, reserves and retained earnings is measured at US$1,089,716,000 as at 31 December 2017 (2016: US$906,869,000). In order to maintain or adjust the capital structure, the group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. Certain banking facilities may also impose covenant requirements on the Group with respect to capital management.

 

The Group monitors capital using a gearing ratio, which is net debt divided by capital plus net debt. The Group includes within net debt, interest bearing loans and borrowings, accounts payable and accruals and other payables less bank deposits and bank balances and cash. 

 


2017

2016


US$'000

US$'000




Interest bearing loans and borrowings

1,399,028

1,049,150

Accounts payable and accruals

209,470

158,812

Other payable

57,094

67,619

Option redemption payable

38,747

37,500

Less: bank deposits, ban