Integrated Diagnostics Holdings PLC 3rd Quarter Results (7868F)

TIDMIDHC

RNS Number : 7868F

Integrated Diagnostics Holdings PLC

19 November 2020

Integrated Diagnostics Holdings Plc

9M 2020 Results Update

Thursday, 19 November 2020

Integrated Diagnostics Holdings Plc delivers impressive top- and bottom-line growth in 3Q 2020 of 23% and 39%, respectively, supported by a broad-based recovery in the Group's operations

(London) Integrated Diagnostics Holdings ("IDH," "the Group," or "the Company"), a leading consumer healthcare company with operations in Egypt, Jordan, Sudan and Nigeria, released today unaudited highlights of its financial and operational performance for the quarter and nine-month periods ended 30 September 2020(1) , recording revenue of EGP 720 million and a net profit of EGP 201 million in 3Q 2020. On a year-to-date basis, revenue recorded EGP 1,670 million with a net profit of EGP 375 million for 9M 2020.

([1]) By the terms regulating the company's listing on the LSE, IDH is required to release its audited financials at the full-year mark. Management and the Board of Directors have committed to providing the company's reviewed financials at the half-year mark and performance updates in the first and third quarters as an outgrowth of the Company's commitment to transparency. All figures in this update are accordingly unaudited and provided from Management accounts.

Results*

(EGP mn)

 
                        9M2020   9M2019    change 
=====================  =======  =======  ======== 
 Revenues**              1,670    1,649        1% 
---------------------  -------  -------  -------- 
 Cost of Sales           (840)    (856)       -2% 
---------------------  -------  -------  -------- 
 Gross Profit              830      793        5% 
---------------------  -------  -------  -------- 
 Gross Profit Margin       50%      48%     2 pts 
---------------------  -------  -------  -------- 
 Operating Profit          575      573         - 
---------------------  -------  -------  -------- 
 EBITDA(2)                 710      686        4% 
---------------------  -------  -------  -------- 
 EBITDA Margin             43%      42%     1 pts 
---------------------  -------  -------  -------- 
 Net Profit                375      361        4% 
---------------------  -------  -------  -------- 
 Net Profit Margin         22%      22%         - 
---------------------  -------  -------  -------- 
 Cash Balance              465      432        8% 
---------------------  -------  -------  -------- 
 

*The results for 9M 2019 and 9M 2020 reflect the adoption of IFRS 16.

**Excluding the 100 Million Healthy Lives Campaign from 9M 2019 figures, consolidated revenues would have expanded 4% year-on-year. The 100 Million Healthy Lives campaign ran from November 2018 through June 2019. In the six months to 30 June 2019 IDH served 224 thousand patients under the campaign's umbrella and performed 2.4 million tests. Total campaign-related revenue in 9M 2019 reached EGP 47 million.

(2) EBITDA is calculated as operating profit plus depreciation and amortization.

Financial Highlights

-- Revenue for the third quarter of the year recorded EGP 720 million, up an impressive 23% versus 3Q 2019 and 60% versus 2Q 2020, with the Group recording one of the fastest year-on-year growth rates for a single quarter on record. Top-line growth was supported by the gradual lifting of restrictive measures, which saw the reopening of all branches during 3Q 2020, and IDH's ability to adapt its service offering to the changing dynamics by ramping up its house call service and offering Covid-19-related testing(3) in Egypt and Jordan. On a nine-month basis, revenue reached EGP 1,670 million, up 1% versus 9M 2019 (a 4% year-on-year rise when excluding contributions from the 100 Million Healthy Lives campaign ("the campaign") in 9M 2019).

-- Gross profit expanded 30% year-on-year in 3Q 2020 to EGP 384 million, with an associated margin of 53% versus 50% in 3Q 2019 and 45% in 2Q 2020. Gross profit growth for the quarter came on the back of the remarkable top-line growth recorded by the Group. In 9M 2020, gross profit expanded 5% year-on-year to EGP 830 million, with an associated margin of 50% versus 48% in 9M 2019. Gross profit growth was supported by lower raw material costs as well as lower wages and salaries for 9M 2020.

-- Operating profit expanded 45% year-on-year in 3Q 2020 to reach EGP 299 million. On a year-to-date basis, operating profit was largely unchanged versus 9M 2019 at EGP 575 million in 9M 2020, as IDH booked EGP 35 million in cautionary provisions to account for elongated cash collection cycles during the period. It is important to note that in 3Q 2020, IDH booked an additional EGP 7 million in provisions, compared to the EGP 28 million booked in the first half of the year as cash collection cycles improved.

-- EBITDA(2) in 3Q 2020 was up 40% year-on-year to EGP 343 million, supported by improved gross profitability for the quarter. EBITDA margin for the quarter stood at 48% versus 42% and 36% in 3Q 2019 and 2Q 2020, respectively. For 9M 2020, EBITDA recorded EGP 710 million, up 4% year-on-year with an associated margin of 43% compared to 42% in the same period last year, despite the higher provisions booked during the period.

-- Net profit expanded an impressive 39% year-on-year in 3Q 2020 to EGP 201 million, as revenue growth for the period trickled down to the Group's bottom-line. Net profit margin recorded 28% in the third quarter of the year compared to 25% in the same three months of last year. Net profit was up 4% year-on-year to EGP 375 million in 9M 2020, with a net profit margin of 22%, unchanged versus last year.

-- Net cash flow from operating activities was EGP 370 million in 9M 2020, with the Group's total cash balances decreasing to EGP 465 million as at 30 September 2020 from EGP 631 million as at year-end 2019, reflecting the distribution of USD 28 million (EGP 451 million) in dividends for FY 2019 paid in September of this year. The Group reported net cash(4) amounting to EGP 304 million as at 30 September 2020 compared to EGP 447 million at year-end 2019.

(3) Covid-19-related tests include PCR and antibody testing as well as a bundle of inflammatory and clotting markers such as Complete Blood Picture, ESR, D-Dimer, Ferritin and CRP, among others.

(4) Net debt is calculated as cash and cash equivalent balances less interest-bearing debt (medium term loans) and finance lease. Please note that the net debt calculation excludes liabilities due to IFRS 16).

Operational Highlights

-- IDH's branch network included 471 branches as at 30 September 2020, up from 452 branches as at 31 December 2019, as IDH resumed its branch rollout plan for the year. The Group added 9 branches to its Egyptian network during the third quarter of the year.

-- IDH served 4.8 million total patients in 9M 2020, a 14% year-on-year decline (down 11% excluding the campaign's contribution to 9M 2019) on the back of the impact of Covid-19 on operations during the months of March, April, and May. Total patients served in 3Q 2020 was largely in line with the figure recorded in the same quarter a year ago supported by a wide-spread recovery of activity across the Group's countries of operation. On a quarter-on-quarter basis, the number of patients served witnessed a recovery of 43% in 3Q 2020 versus the previous quarter.

-- Total number of tests performed was down 19% year-on-year (a 9% drop when factoring out the campaign's contribution to 9M 2019) to 18.8 million in 9M 2020 due to the impact of Covid-19 earlier in the year. However, during 3Q 2020 tests performed were up an impressive 46% quarter-on-quarter as operations continued their steady recovery across the Group's territories.

-- Average revenue per test expanded 25% year-on-year to EGP 89 for the nine-month period ended 30 September 2020, partially due to the low base effect of the campaign in 9M 2019. Controlling for the campaign's effect, average revenue per test would have still increased 15% year-on-year in 9M 2020, on the back of the annual price hikes at the start of the year combined with the generally higher-priced Covid-19-related tests offered by the Group during the period.

-- IDH's average test per patient declined 5% year-on-year to 3.9 in 9M 2020. However, excluding the campaign, average test per patient would have increased 2% versus the same nine-month period of 2019.

-- Following a wide-spread easing of restrictive measures across the Group's countries of operation during the third quarter of the year, IDH was able to reopen its entire branch network during the quarter and return to normal operating hours across all territories by late July of this year.

-- In Egypt volumes were supported by a ramp up of the house calls service (20% of Egypt's 9M 2020 revenue) and by increased demand for Covid-19-related testing (13% of total revenue for Egypt in 9M 2020).

-- In Jordan, the Group continued to be at the forefront of PCR testing for Covid-19 during the third quarter of 2020, with Covid-19 testing contributing to around 32% and 24% of IDH's revenue in Jordan during 3Q 2020 and 9M 2020, respectively. Starting in October, the government has reinstituted a night-time curfew from 10pm to 6am from Saturday to Thursday, with a full 24-hour lockdown on Fridays. This is, however, not expected to have material impacts on Biolab's operations. Thus far, all of Biolab's 19 branches are operating normally with the Company also providing a house call service for its patients.

-- In Nigeria, tests performed in 9M 2020 were up 26% versus 9M 2019 with revenue in local currency up 39% year-on-year as IDH continued to capitalize on the increased brand awareness and demand for Echo-Lab's high-quality services. During 3Q 2020, IDH's Nigerian operations turned EBITDA-positive supported by a strong ramp up in sales during the quarter.

-- Al-Borg Scan continues to ramp up its operations as revenues expanded 62% year-on-year in 9M 2020. In February 2020, the company launched a second branch in Cairo and is continuing to make good progress towards the launch of a third branch.

Commenting on the Group's performance for the nine-month period, IDH Chief Executive Officer Dr. Hend El-Sherbini said: "Throughout the third quarter of 2020, we observed a strong and broad-based recovery across our territories, with the Group posting one of its strongest year-on-year growth rates for a single quarter at 23%. The robust growth for the quarter filtered down to our bottom-line which expanded 39% year-on-year in the three months to 30 September 2020. Top-line growth for the quarter was supported by the gradual lifting of restrictive measures related to Covid-19, which allowed for the reopening of all our branches, combined with our continued ability to adapt our service offering to cater to patient needs during these uncertain times.

The impressive third quarter performance lessened the impact of the first half of the year and helped drive top- and bottom-line growth on a year-to-date basis as well, a commendable achievement in light of the unprecedented global crisis. The Group's revenue and net profit for the nine-month period ended 30 September 2020 expanded 1% and 4% year-on-year, respectively.

In our home market of Egypt, we continued to ramp up our house call services and in June began offering PCR testing for Covid-19, further expanding our roster of Covid-19 indicative tests. This helped IDH build on the upward momentum witnessed in June and supported the Group's third quarter performance. We also experienced robust contributions coming from Al Borg Scan, which now operates out of two branches having kicked off operations of its second branch in February of this year. Over the last nine months, our radiology venture reported an impressive 76% year-on-year rise in patients served and a 62% year-on-year increase in revenue. On this front, we are actively working towards the roll out of the venture's third branch, which we expect to launch in the first quarter of next year. We are also in the process of completing the necessary modules to obtain ACR (American College of Radiology) accreditation for Al Borg Scan's branches, a process we expect to conclude by next year.

In Nigeria, our operations turned EBITDA positive for the first time during the third quarter of the year, following a surge in sales for the period as we continued to capitalize on the increased brand awareness and demand for Echo-Lab's high-quality services. EBITDA for the quarter was supported by our cost control efforts and service mix optimisation strategy in the country, which has seen the Group focus increasingly on pushing its radiology and pathology services.

In Jordan, where Biolab has been at the forefront of PCR testing for Covid-19 since the very start of the crisis, we continued to record strong demand for both PCR testing and for all our services in general. This helped drive a 21% year-on-year revenue expansion in local currency terms for 9M 2020, with PCR testing making up nearly one fourth of the country's top-line for the nine-month period.

Finally, in Sudan, the progressive lifting of government-imposed restrictive measure during the third quarter of 2020, saw the reopening of all 21 branches in late July, with revenues in SDG terms expanding 8% year-on-year in the quarter. While high inflation and a weak SDG continue to pose challenges for the Group, the lifting of sanctions has opened up important growth opportunities for our operations in the coming years. With the country now open to international suppliers; the Group will be able to directly import test kits and in turn improve its operational efficiency and profitability.

While there is still no clear visibility on the magnitude of a second wave of Covid-19 infections in our countries of operation, management is confident that the Group has the adequate safety and business continuity safeguards in place to weather possible disruptions to operations while guaranteeing the safety of our staff and patients. Under the oversight of a dedicated team, the Group has implemented a strict health and safety protocol which can be further tightened were the number of daily new cases to increase over the coming weeks. With IDH now offering PCR testing for Covid-19 in both Egypt and Jordan, the Group is well positioned to help local authorities contain a possible second wave. IDH has also further improved its inventory management frameworks since the start of the crisis back in March, and now has measures in place to ensure an ample supply of kits at all times, shielding the Group from potential supply chain disruptions. On the collection front, despite the Group booking EGP 35 million in cautionary provisions to account for elongated cash collection cycles during the first nine months of the year, IDH enjoys a solid relationship with insurers and management expects cash collection cycles to normalise going forward.

Overall, our Group maintains a strong financial position, with a liquid balance sheet thanks to a strong cash generation profile and over EGP 304 million in net cash balances. The Group's confidence in the fundamental strength and sustainability of its financial position has seen IDH distribute USD 28 million in dividends in September of this year, an important accomplishment given the difficulties faced globally during 2020.

Heading into the final weeks of the year, we expect the robust recovery witnessed in the third quarter to carry through to the end of 2020. This leaves management confident that despite the unprecedented challenges presented by the global pandemic, and at a time when businesses across the world are facing existential threats, IDH will still be able to deliver full-year top line growth in 2020 with an EBITDA margin in excess of 40%."

Analyst and Investor Call Details

An analyst and investor call will be hosted at 1pm (UK) | 3pm (Egypt) on Thursday, 19 November 2020. You may register for the conference call at this link . Once the registration is complete, you will receive a confirmation email containing your personal Zoom meeting details.

If you experience any issues while registering for the call or connecting to it, please contact Anna Smirnova at [e-mail] .

About Integrated Diagnostics Holdings (IDH)

IDH is a leading consumer healthcare company in the Middle East and Africa with operations in Egypt, Jordan, Sudan and Nigeria. The Group's core brands include Al Borg, Al Borg Scan and Al Mokhtabar in Egypt, as well as Biolab (Jordan), Ultralab and Al Mokhtabar Sudan (both in Sudan) and Echo-Lab (Nigeria). A long track record for quality and safety has earned the Company a trusted reputation, as well as internationally recognised accreditations for its portfolio of over 1,400 diagnostics tests. From its base of 471 branches as of 30 September 2020, IDH will continue to add laboratories through a Hub, Spoke and Spike business model that provides a scalable platform for efficient expansion. Beyond organic growth, the Group's expansion plans include acquisitions in new Middle Eastern and African markets where its model is well-suited to capitalise on similar healthcare and consumer trends and capture a significant share of fragmented markets. IDH has been a Jersey-registered entity with a Standard Listing on the Main Market of the London Stock Exchange (ticker: IDHC) since May 2015.

IDH's forward-looking strategy rests on leveraging its established business model to achieve four key strategic goals, namely: (1) continue to expand customer reach; (2) increase the number of tests per patient; (3) expand into new geographic markets through selective, value-accretive acquisitions; and (4) introduce new medical services by leveraging the Group's network and reputable brand position. Learn more at idhcorp.com .

Shareholder Information

LSE: IDHC.L

Bloomberg: IDHC:LN

Listed: May 2015

Shares Outstanding: 150 million

Contact

Nancy Fahmy

Investor Relations Director

T: [phone] | M: [phone] | [e-mail]

Forward-Looking Statements

These results for the nine-month period ended 30 September 2020 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 nine-month results should not be relied upon by any other party or for any other reason. This communication contains certain forward-looking statements. A forward-looking statement is any statement that does not relate to historical facts and events, and can be identified by the use of such words and phrases as "according to estimates", "aims", "anticipates", "assumes", "believes", "could", "estimates", "expects", "forecasts", "intends", "is of the opinion", "may", "plans", "potential", "predicts", "projects", "should", "to the knowledge of", "will", "would" or, in each case their negatives or other similar expressions, which are intended to identify a statement as forward-looking. This applies, in particular, to statements containing information on future financial results, plans, or expectations regarding business and management, future growth or profitability and general economic and regulatory conditions and other matters affecting the Group .

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

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

Operational & Financial Review

 
 Revenue 
  IDH reported revenue of EGP 1,670 million in the first nine months of 
  the year, up 1% versus the same period of 2019. The year-to-date performance 
  was supported by a strong third quarter, which saw the Group close up 
  23% versus 3Q 2019, one of its strongest year-on-year revenue growth 
  rates for a single quarter. IDH's strong and broad-based recovery was 
  driven by the easing of Covid-19 containment measures across its territories, 
  the continued ramp up of its house call services in Egypt, and the increased 
  demand for Covid-19-related testing(5) in Egypt and Jordan. Covid-19-related 
  testing made up around 14% of consolidated revenue for the nine-month 
  period to 30 September 2020. 
  Controlling for the revenue generated by the campaign during the comparable 
  period of 2019, IDH would have recorded a 4% year-on-year expansion in 
  revenue for 9M 2020. 
  (5) Covid-19-related tests include PCR and antibody testing as well 
  as a bundle of inflammatory and clotting markers such as Complete Blood 
  Picture, ESR, D-Dimer, Ferritin and CRP, among others. 
  Revenue Analysis: Contribution by Patient Segment 
 
  Contract Segment 
  At the Group's contract segment, revenue declined 5% year-on-year in 
  9M 2020, with the segment contributing to 55% of consolidated revenue 
  versus 59% in the same period of last year. The year-on-year decline 
  came on the back of a 22% fall in tests performed versus 9M 2019. The 
  decrease in tests performed reflects the impact of Covid-19-related restrictions, 
  which weighed down on volumes during the second quarter of 2020, and 
  the normalisation in contract volumes following the end of the campaign 
  in Egypt. The campaign had contributed 224 thousand patients and 2.4 
  million tests to the contract segment during the comparable period of 
  last year. 
  Additionally, during 2019 management had analysed the segmentation of 
  Egypt's patient base leading to a reclassification between walk-ins and 
  contract volumes. Factoring out campaign-related tests from 9M 2019 figures 
  and controlling for the reclassification, contract revenue would record 
  a 9% year-on-year rise supported by Covid-19-related testing, which contributed 
  to around 15% of contract revenues for the period. 
  Walk-in Segment 
  Revenue from IDH's walk-in segment increased 10% year-on-year in 9M 2020, 
  contributing to 45% of IDH's consolidated top-line in 9M 2020 up from 
  the 41% contribution this time last year. When controlling for the 2019 
  reclassifications, walk-in revenue would record a marginal 1% year-on-year 
  decline in 9M 2020 owing to a 17% year-on-year decrease in tests performed. 
  It should be noted that Covid-19-related testing contributed to approximately 
  14% of walk-in revenues in 9M 2020. 
  Key Performance Indicators                       Contract Segment          Walk-in Segment                   Total 
  ================  =========================  =======================  =============================== 
                      9M20     9M19    Change   9M20    9M19    Change      9M20      9M19     Change 
  ================  =======  =======  =======  ======  ======  =======  ===========  =====  =========== 
   Revenue 
    (EGP mn)            921      968      -5%     749     681      10%    1,670      1,649           1% 
   % of Revenue         55%      59%              45%     41%              100%       100% 
   Patients ('000)    3,261    4,025     -19%   1,531   1,562      -2%    4,792      5,587         -14% 
   % of Patients        68%      72%              32%     28%              100%       100% 
   Revenue per 
    Patient 
    (EGP)               282      240      17%     489     436      12%      348        295          18% 
   Tests ('000)      13,780   17,780     -22%   4,984   5,298      -6%   18,765     23,078         -19% 
   % of Tests           73%      77%              27%     23%              100%       100% 
   Revenue per 
    Test 
    (EGP)                67       54      23%     150     129      17%       89         71          25% 
   Test per 
    Patient             4.2      4.4      -4%     3.3     3.4      -4%      3.9        4.1          -5% 
  ----------------  -------  -------  -------  ------  ------  -------  -------  ---------  ----------- 
                          KPIs Adjusted for the Campaign and Reclassifications* 
  ----------------------------------------------------------------------------------------------------- 
   Revenue 
    (EGP mn)            921      848       9%     749     754      -1%    1,670      1,602             4% 
   % of Revenue         55%      53%              45%     47%              100%       100% 
   Tests             13,780   14,636      -6%   4,984   6,000     -17%   18,765     20,635            -9% 
   % of Tests           73%      71%              27%     29%              100%       100% 
   Revenue per 
    Test 
    (EGP)                67       58      15%     150     126      20%       89         78            15% 
 
 
  * Adjustments related to the 100 Million Healthy Lives campaign include 
  subtracting 224 thousand patients, 2.4 million tests and revenue of EGP 
  47 million for the 9M 2019 contract segment's KPIs. Additionally, reclassification 
  adjustments include the transfer of 702 thousand tests in 9M 2019 and 
  associated revenue of EGP 73 million from the contact segment to walk-ins. 
  Revenue Analysis: Contribution by Geography 
  Egypt 
  Revenue from Egypt came in largely flat in 9M 2020 at EGP 1,407 million. 
  Controlling for the high base effect due to the campaign in 9M 2019 , 
  revenue from Egypt would have increased by 3% year-on-year in 9M 2020 
  supported by the ramp up of IDH's home call service and increased demand 
  for Covid-19-related testing, which helped offset a decline in branch 
  traffic earlier in the year. The performance was supported by a 21% year-on-year 
  rise in revenue during 3Q 2020. 
 
  In 9M 2020, IDH's house call service contributed to 20% of Egypt's revenues 
  versus just 10% in 9M 2019, while Covid-19-related testing made up around 
  13% of the country's revenue. Egypt's revenues were further supported 
  by contributions from Al-Borg Scan, IDH radiology venture, which generated 
  revenue of EGP 16 million in 9M 2020, up 62% year-on-year. Al Borg Scan's 
  two branches served 24 thousand patients in the first nine months of 
  the year, up 76% year-on-year, and performed more than 30 thousand tests 
  during the period, up 69% versus 9M 2019. 
 
  IDH served 4.3 million patients in Egypt and performed 17.0 million tests, 
  down by 16% and 20% year-on-year, respectively. When controlling for 
  the campaign, patients served and test performed in 9M 2020 would have 
  declined 12% and 10% year-on-year, respectively. During 3Q 2020, the 
  Group recorded a 42% and 46% quarter-on-quarter increase in patients 
  served and tests performed versus 2Q 2020, respectively. The recovery 
  in patients served and test performed witnessed since June has been supported 
  by the progressive lifting of restrictive measure and the subsequent 
  normalisation in activity across the country, combined with the ramp 
  up of the Group's house call services and Covid-19-related tests offering. 
  Jordan 
  In Jordan, revenue recorded EGP 218 million in 9M 2020, up 13% versus 
  the same period of last year and contributing to 13% of total consolidated 
  revenue for the period. In JOD terms, revenue expanded 21% year-on-year 
  in 9M 2020 as restrictive measures were progressively lifted and all 
  branches returned to normal operating hours starting in May of this year. 
  IDH's Jordanian operations recorded a 47% year-on-year revenue expansion 
  in JOD terms for 3Q 2020 as patients served increased 47% versus 3Q 2019. 
  Biolab has been administering PCR testing for Covid-19 in Jordan since 
  the onset of the outbreak, with Covid-19-related tests making up around 
  24% of total revenues generated by the Group's operations in Jordan in 
  the nine months to 30 September 2020. 
 
  Nigeria 
  At the Group's Nigerian subsidiary, revenue increased 18% year-on-year 
  to EGP 25 million in 9M 2020. Year-on-year revenue growth in local currency 
  terms came in at 39% for 9M 2020, supported by growing volumes as IDH 
  continues to leverage increased brand awareness and demand for its services. 
  In 9M 2020, patients served and tests performed were up 24% and 26% year-on-year, 
  respectively. This is especially impressive in light of the Covid-19-related 
  disruptions experienced earlier in the year, including a complete lockdown 
  and limited traffic as people adhered to shelter-in-place orders. In 
  3Q 2020, revenues in NGN terms witnessed a 58% increase versus 3Q 2019. 
 
  Sudan 
  The Group's Sudanese operations recorded a 17% year-on-year fall in revenue 
  to EGP 21 million in 9M 2020 largely due to SDG devaluation. However, 
  in SDG terms, revenue reported a 2% year-on-year rise in 9M 2020 despite 
  a 26% year-on-year decline in patients served during the period. During 
  the third quarter of 2020, government-imposed restrictions were progressively 
  lifted, with all 21 branches allowed to reopen in late July of this year. 
  This saw revenues in SDG terms expand 8% year-on-year in 3Q 2020, versus 
  the 61% year-on-year contraction recorded in 2Q 2020. 
 

  Revenue Contribution by Country                         9M 2020   9M 2019   Change 
  ======================  ========  ========  ======= 
   Egypt Revenue (EGP 
    mn)                      1,407     1,410      N/A 
   Egypt Contribution        84.2%     85.5% 
  ======================  ========  ========  ======= 
   Jordan Revenue (EGP 
    mn)                        218       193      13% 
   Jordan Revenue (JOD 
    mn)                        9.8       8.1      21% 
   Jordan Contribution       13.0%     11.7% 
  ======================  ========  ========  ======= 
   Nigeria Revenue (EGP 
    mn)                         25        21      18% 
   Nigeria Revenue (NGN 
    mn)                        620       446      39% 
   Nigeria Contribution       1.5%      1.3% 
   Sudan Revenue (EGP 
    mn)                         21        25     -17% 
   Sudan Revenue (SDG 
    mn)                         69        68       2% 
   Sudan Contribution         1.2%      1.5% 
  ======================  ========  ========  ======= 
 
  --- 
  Branches by Country                   30 September 2020   31 December 2019         Change 
  ================  ==================  =================  ============= 
   Egypt                           419                399             20 
  ================  ==================  =================  ============= 
   Jordan                           19                 19              - 
  ================  ==================  =================  ============= 
   Nigeria                          12                 13             -1 
  ================  ==================  =================  ============= 
   Sudan                            21                 21              - 
  ================  ==================  =================  ============= 
   Total Branches                  471                452             19 
  ================  ==================  =================  ============= 
 
 
  Cost of Goods Sold 
  IDH's cost of goods sold declined 2% year-on-year to EGP 840 million 
  in 9M 2020. Consequently, IDH's gross profit expanded 5% year-on-year 
  to EGP 830 million in 9M 2020, with an associated margin of 50% versus 
  48% in the same period a year ago. 
 
  COGS Breakdown as a Percentage of Revenue                                9M 2020   9M 2019 
  =============================  ========  ======== 
   Raw Materials                    16.4%     18.5% 
  =============================  ========  ======== 
   Wages & Salaries                 16.0%     17.7% 
  =============================  ========  ======== 
   Depreciation & Amortisation       7.1%      6.1% 
  =============================  ========  ======== 
   Other Expenses                   10.8%      9.6% 
  =============================  ========  ======== 
   Total                            50.3%     51.9% 
  =============================  ========  ======== 
 
  Raw material costs decreased 10% year-on-year to EGP 273 million in 9M 
  2020, reflecting a one-off discount granted by suppliers earlier in the 
  year. Raw material outlays as a percentage of sales declined to 16.4% 
  in 9M 2020 from last year's 18.5%, partially due to the impact of the 
  campaign on IDH's revenue per test during the comparable period of last 
  year. Raw material costs made up the largest share of total consolidated 
  COGS during the period at 32.5%. 
  Direct salaries and wages made up the second largest share of total COGS 
  in 9M 2020 at 31.8%, having declined 9% year-on-year to reach EGP 267 
  million for the period. Salaries and wages also declined as a percentage 
  of sales to 16.0% in the nine months to 30 September 2020 versus 17.7% 
  in the same period of 2019. The decline came on the back of the previous 
  recognition of EGP 20 million in profit shares during the comparable 
  period of 2019, and lower salaries in Nigeria following the restructuring 
  that took place during the second half of 2019. Additionally, IDH incurred 
  lower bonuses, incentive, and overtime payments during the curfew periods. 
  Direct depreciation and amortisation was up 18% year-on-year in 9M 2020 
  to EGP 119 million, largely due to a rise in depreciation following the 
  addition of new equipment at Al Borg-Scan and Nigeria, as well as the 
  incremental amortisation of additional branches (IFRS 16 right-of-use 
  assets). Direct depreciation and amortization as a percentage of revenues 
  increased to 7.1% in the first nine months of the year from 6.1% in 9M 
  2019. 
  EBITDA 
  IDH's consolidated EBITDA expanded 4% year-on-year to EGP 710 million 
  in 9M 2020, with an associated margin of 43% versus 42% in 9M 2019. EBITDA 
  growth was supported by stronger gross profit which offset higher SG&A 
  outlays for the period and a doubtful accounts provision of EGP 35 million 
  for elongated cash collection cycles booked in 9M 2020. It is important 
  to note that in 3Q 2020, IDH booked EGP 7 million in provisions compared 
  to the EGP 28 million booked in the first six months of the year, testament 
  to the steady normalisation in the Group's collection rates. In the third 
  quarter of the year, IDH recorded a 40% year-on-year expansion in EBITDA 
  to EGP 343 million, with an associated margin of 48% versus 42% in the 
  same quarter of 2019. 
  In Egypt, EBITDA recorded EGP 636 million in 9M 2020, flat versus the 
  same nine-month period of 2019. EBITDA margin stood unchanged at 45% 
  in 9M 2020 as lower salary expenses for the period and strong 3Q 2020 
  revenues offset the aforementioned doubtful accounts provision and the 
  impact of Covid-19 on the country's operations earlier in the year. 
  IDH's Jordanian operations recorded a 10% year-on-year rise in EBITDA 
  to EGP 77 million in 9M 2020, as operations in the country continued 
  to recover following the Covid-19-related disruptions earlier in the 
  year. In local currency terms, EBITDA grew 18% year-on-year during the 
  period. EBITDA margin recorded 35% in 9M 2020 versus 36% in the same 
  period of 2019. 
 
  In Nigeria, EBITDA losses continued to narrow to EGP 4 million in 9M 
  2020 from the negative EGP 26 million recorded in 9M 2019. Decreased 
  losses came on the back of an 18% year-on-year rise in revenues (39% 
  in NGN terms) and an 30% year-on-year decrease in salary expenses during 
  the period. 
  It is worth highlighting that IDH's Nigerian operations posted a positive 
  EBITDA during 3Q 2020 on the back of a solid ramp up in sales during 
  the period. 
  Finally, Sudan's EBITDA recorded EGP 1 million in 9M 2020, down 76% year-on-year 
  with an EBITDA margin of 6% compared to 22% in the same period of last 
  year. EBITDA was impacted by branch closures on account of Covid-19, 
  with most branches in the country only allowed to reopen in late July 
  of this year. 
  Regional EBITDA in Local Currency mn                 9M 2020   9M 2019   Change 
  -----------------  --------  --------  ------- 
   Egypt        EGP     636       636          - 
   Jordan       JOD     3.5       2.9        18% 
   Nigeria      NGN    (94)      (545)      -83% 
   Sudan        SDG      4        15        -70% 
 
  Interest Income / Expense 
  IDH recorded interest income of EGP 44 million in 9M 2020, up 55% year-on-year. 
  Interest income increased due to higher cash balances as the Group had 
  postponed to September 2020 the distribution of USD 28 million (EGP 451 
  million) in dividends for FY 2019. 
 
  Interest expense recorded EGP 53 million in 9M 2020 versus EGP 49 million 
  in the same period of 2019. The increase in interest expenses is due 
  to higher interest of right-of-use assets following the addition of new 
  branches. This offset the decrease in interest expenses on borrowings 
  which benefitted from the lower interest rate environment following a 
  cumulative 350 basis point cut in interest rates by the CBE between January 
  and September 2020. 
  Interest Expense Breakdown                               9M 2020   9M 2019   Change 
  ============================  ========  ========  ======= 
   Interest of 'Right-of-Use' 
    Assets (IFRS 16)                38.4      25.6      50% 
  ============================  ========  ========  ======= 
   Interest Expenses on 
    Borrowings(6)                   11.8      16.0     -26% 
  ============================  ========  ========  ======= 
   Interest Expenses on 
    Leases                           3.0       6.9     -57% 
  ============================  ========  ========  ======= 
   Total Interest Expense           53.1      48.5      10% 
  ============================  ========  ========  ======= 
 
  (6) Related to medium-terms loans for the Al Borg Scan expansion (EGP 
  4.5 million) and the Group's new headquarters in Cairo's Smart Village 
  (EGP 5.3 million). 
 
  Foreign Exchange 
  IDH recorded a net foreign exchange loss of EGP 10 million in 9M 2020 
  compared to EGP 13 million in the comparable period of 2019. The figure 
  is primarily related to FX losses on the back of the SDG devaluation 
  versus the EGP. 
 
  Taxation 
  Tax expenses recorded in the first nine months of the year were EGP 182 
  million compared to EGP 180 million in 9M 2019. The effective tax rate 
  stood unchanged at 33% in 9M 2020. There is no tax payable for IDH's 
  two companies at the holding level, while tax was paid on profits generated 
  by operating subsidiaries. 
  Net Profit 
  IDH's consolidated net profit was EGP 375 million in 9M 2020, up 4% year-on-year 
  as revenue growth for the period trickled down to the Group's bottom-line. 
  Net profit margin stood at 22% in 9M 2020, remaining stable from the 
  same period of last year. 
 
  Balance Sheet 
  On the assets side of the balance sheet, IDH held gross property, plant 
  and equipment (PPE) of EGP 1,232 million as at 30 September 2020, an 
  increase from EGP 1,181 million as at 31 December 2019. The increase 
  reflects regular CAPEX outlays during the period. 
  Accounts receivable recorded EGP 284 million as at 30 September 2020 
  compared to EGP 261 million at year-end 2019. Accounts receivables' Days 

  on Hand (DOH) stood at 147 days, versus 129 days as at 31 December 2019 
  due to lower collection in 2Q 2020 following the imposition of Covid-19-related 
  measures. It should be noted that accounts receivables DOH is calculated 
  based on credit revenues amounting to EGP 529 million in 9M 2020, representing 
  57% of contract revenues for the period. 
 
  The Group's Days Inventory Outstanding (DIO) increased to 97 days as 
  at 30 September 2020, up from 82 days as at 31 December 2019. The increase 
  follows the Group's strategy of increasing its inventory coverage period 
  to mitigate for potential supply disruptions due to Covid-19. More specifically, 
  during the period, IDH significantly increased its stock of PCR test 
  kits in anticipation of a rise in demand for PCR tests in the coming 
  months. However, this is down from the 130 days recorded as at the end 
  of the second quarter of 2020, reflecting a gradual normalisation in 
  the Group's inventory turnover cycle. 
  IDH's cash balances decreased to EGP 465 million as at 30 September 2020 
  compared to EGP 631 million as at 31 December 2019, reflecting the distribution 
  of EGP 451 million in dividends for FY 2019 paid in September 2020. As 
  at 30 September 2020, IDH recorded a net cash position(7) amounting to 
  EGP 304 million. 
  On the liabilities side, accounts payable stood at EGP 141 million at 
  30 September 2020 versus EGP 145 million at year-end 2019. The Group's 
  days payable outstanding (DPO) stood at 151 days compared to 141 days 
  at 31 December 2019. 
  (7) Net debt is calculated as cash and cash equivalent balances less 
  interest-bearing debt (medium term loans) and finance lease. Please note 
  that the net debt calculation excludes liabilities due to IFRS 16). 
 
 

- Ends --

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(END) Dow Jones Newswires

November 19, 2020 02:00 ET (07:00 GMT)