Half-year Report

Integrated Diagnostics Holdings Plc

1H 2024 Results

Wednesday, 28 August 2024

Integrated Diagnostics Holdings plc delivers strong 33% year-on-year revenue growth in 1H 2024

(Cairo and London) - Integrated Diagnostics Holdings ("IDH," "the Group," or "the Company"), a leading provider of diagnostic services with operations in Egypt, Jordan, Nigeria, Sudan and Saudi Arabia, announced today its unaudited financial statements for the six-month period ended 30 June 2024. IDH recorded revenues of EGP 2,498 million, a 33% increase year-on-year driven by higher test volumes and increased average revenues per test. Strong revenue performance, combined with IDH's ongoing cost optimization efforts, has improved profitability across the board. The Group posted an EBITDA of EGP 668 million, up 45% year-on-year, with an increased EBITDA margin of 27% compared to 25% in 1H 2023. Additionally, the company saw significant net profit growth of 127% year-on-year, reaching EGP 480 million and achieving an expanded net profit margin (NPM) of 19%.

On a quarterly basis, revenues reached EGP 1,327 million in Q2 2024, representing a 39% increase year-on-year. Net profit saw substantial growth, rising 84% year-on-year to total EGP 78 million.

Financial Results (IFRS)

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

Key Operational Indicators[3]

Introduction

i.    Financial Highlights

·      IDH recorded consolidated revenues of EGP 2,498 million in the first half of 2024, increasing 33% year-on-year from EGP 1,872 million in 1H 2023. Growth was supported by an 8% year-on-year rise in test volumes and a 23% year-on-year increase in average revenue per test. On a three-month basis, IDH's consolidated revenues grew 39% year-on-year to EGP 1,327 million.

·      Gross profit for the six-month period recorded EGP 925 million, reflecting a 41% increase from EGP 658 million in 1H 2023. The gross profit margin stood at 37% in 1H 2024, up from 35% in the same period last year, underscoring the effectiveness of IDH's cost optimization efforts. On a quarterly basis, gross profit recorded EGP 497 million, up 49% year-on-year, with a higher margin of 37% versus 35% in Q2 2023.

·      EBITDA[5] recorded EGP 668 million in the first half of 2024, up 45% from EGP 462 million in the same period last year. The EBITDA margin improved to 27% from 25% in 1H 2023. Higher EBITDA profitability was driven by revenue growth that outpaced the rise in costs and SG&A expenses. Moreover, IDH continues to implement cost optimization efforts amid inflationary pressures, which reflect positively on margins. In Q2 2024, EBITDA came in at EGP 338 million, up 44% year-on-year with a stable margin of 25%.

·      Net profit for 1H 2024 reached EGP 480 million, representing a notable 127% year-on-year increase from 1H 2023. The Net Profit Margin (NPM) expanded to 19%, up 8 percentage points from the 11% recorded in 1H 2023. On a quarterly basis, net profit grew 84% year-on-year to EGP 78 million, with an associated net profit margin of 6%, up from 4% in the same period of the previous year.

ii.  Operational Highlights

·      At the end of 1H 2024, IDH's branch network stood at 591 branches, up by 3 branches compared to 1H 2023. In the first half of the year, IDH launched 20 new branches in Egypt and two inaugural branches in Saudi Arabia. During the same period, IDH closed one of its branches in Jordan located in Jordan's airport due to a decrease in testing following the COVID-19 pandemic, as well as all 18 branches in Sudan due to the ongoing conflict.

·      During the first half of the year, IDH conducted 17.8 million tests across its geographies, reflecting an 8% year-on-year increase from 16.5 million tests in 1H 2023.

·      The average revenue per test reached EGP 140 in 1H 2024, up 23% compared to EGP 114 in 1H 2023. This increase was largely attributed to strategic price increases introduced by IDH to address inflationary pressures in its primary markets, including Egypt and Nigeria.

·      During the first half of 2024, IDH served 4.1 million patients, up 5% year-on-year, with the average number of tests per patient reaching a record-high of 4.3, highlighting the success of IDH's strategies to attract and retain patients while promoting increased testing. The continued rise in average tests per patient underscores the effectiveness of IDH's initiatives, including its loyalty program introduced in FY 2021, which remains a key driver in enhancing patient testing.

iii. Updates by Geography

·      In Egypt (82.8% of total revenues in 1H 2024), IDH saw significant growth during the first half of 2024, generating EGP 2,069 million in revenues, up 37% year-on-year. Revenue growth was primarily fuelled by a 25% year-on-year rise in the average revenue per test, reaching EGP 125 in 1H 2024, and further strengthened by a 10% year-on-year expansion in test volumes, with IDH conducting 16.5 million tests in the first half of the year. On a quarterly basis, IDH's Egyptian operations recorded revenues of EGP 1,080 million in Q2 2024, an increase of 38% year-on-year.

·      IDH's Jordanian subsidiary (15.4% of total revenues in 1H 2024), Biolab, recorded revenues of JOD 6.5 million, down 4% year-on-year, largely attributed to a 2% reduction in test volumes during 1H 2024 as a result of the ongoing geopolitical situation in the region. The average revenue per test in Jordan declined a marginal 2% year-on-year during the period due to stringent pricing regulations imposed on Jordan's health sector. In EGP terms, operations in Jordan reported revenues of EGP 386 million, representing a 33% year-on-year increase due to the translation effect from a weakened EGP.

·      In Nigeria (1.5% of total revenues in 1H 2024), Echo-Lab achieved a 37% year-on-year growth in revenues in local currency, reaching NGN 1,284 million during the first half of 2024, driven by a 65% year-on-year increase in the average revenue per test. However, test volumes in Nigeria recorded 113 thousand in 1H 2024, down 17% year-on-year due to the continued impact of inflationary pressures affecting patients' purchasing power. In EGP terms, revenues in Nigeria recorded EGP 39 million, down 33% year-on-year, impacted by both lower test volumes and average revenues per test due to the devaluation of the Nigerian Naira.

·      Biolab KSA, IDH's newest venture in Saudi Arabia (0.2% of total revenues in 1H 2024) began operations in Q1 2024 with one branch opening in January and another in March. The company generated revenues of SAR 339 thousand in 1H 2024, performing 7 thousand tests in 1H 2024 with an average revenue per test of SAR 46. The company continues to run targeted campaigns to attract patients, which is evident through its impressive quarterly results. In Q2 2024, the company's revenue reached SAR 281 thousand, compared to SAR 58 thousand in the first quarter of the year, driven by more than a threefold increase in the number of patients as well as a higher average revenue per test. IDH sees significant potential in the Saudi market and continues to actively expand in this region. In EGP terms, Saudi operations reported revenues of EGP 4 million, with an average revenue per test of EGP 579 during the six-month period.

·      In Q1 2024, IDH decided to suspend all operations indefinitely in Sudan due to the ongoing conflict, leading to the closure of its 18 branches in the country.

iv. Management Commentary

Commenting on the Group's performance, IDH Chief Executive Officer Dr. Hend El-Sherbini said: "I am pleased to report that IDH has successfully built on a strong start to the year, delivering an impressive performance characterized by substantial consolidated revenue growth and improved profitability. This continued upward trajectory highlights the resilience of IDH's business model amid various economic and regional challenges, underscoring our ability to achieve consistent results and capitalize on opportunities for future growth.

During the first half of 2024, IDH achieved a robust 33% year-on-year revenue increase, driven by a combination of higher test volumes and effective pricing strategies yielding higher average revenues per test. This strong top-line growth, coupled with disciplined cost management, has been pivotal in our solid financial performance across the income statement. Notably, our success in managing SG&A expenses, which decreased as a share of revenue, underscores our commitment to optimizing costs and enhancing operational efficiency. Consequently, our EBITDA grew by 45% year-on-year, with the margin expanding to 27%, up from 25% last year, highlighting the resilience of our business model in adapting to changing economic conditions.

Breaking down our results by regions, our core market in Egypt displayed remarkable resilience, achieving a 37% year-on-year revenue growth. Despite the challenges of rising inflation and its impact on patients' purchasing power, we saw a growing demand for our services, with test volumes expanding 10% year-on-year and average revenue per test rising 25% year-on-year. We have continued to solidify our market leadership by expanding our service offerings and extending our reach into underpenetrated areas, adding 20 new branches since the beginning of 2024. We are particularly delighted with the progress of our radiology venture, Al-Borg Scan, which remains a central focus of our growth strategy. The expansion of Al-Borg Scan reflects our commitment to enhancing our service offerings in this critical area and aligns with our diversification strategy. These initiatives are yielding tangible results, with the radiology sector now contributing 5.0% to Egyptian revenues, up from 4.2% last year.

In Jordan, geopolitical instability impacted our performance in the first half of the year, resulting in a slight decline in revenue in local currency terms, primarily due to its effect on medical tourism and reduced test volumes. On the other hand, Nigeria saw a robust 37% year-on-year increase in revenue in local currency terms, driven by higher revenue per test. This growth reflects our revenue mix optimization strategy, which has focused on higher-priced tests, along with annual price increases we have implemented to counteract the effects of record-high inflation in the country. However, it is important to note that multiple devaluations of the Nigerian naira over the past two years, coupled with the removal of diesel subsidies, have significantly strained our patients' purchasing power, resulting in decreased test volumes and lower revenues in EGP terms.

Turning to Saudi Arabia, where we officially commenced operations in Q1 2024 with the opening of two branches in Riyadh, our growth has been encouraging. We are excited about expanding in this market, given its favourable demographics, growing population, and rising demand for healthcare services. The diagnostics sector remains fragmented, with no dominant players, presenting IDH with an excellent environment to implement our proven business model. We are confident that Saudi Arabia will quickly become a key market for IDH. Since our launch, our comprehensive branding strategy, which included outdoor advertising, social media campaigns, community event sponsorships, and partnerships with local healthcare providers, has yielded strong results. In Q2 2024, our revenue in Saudi Arabia surged to SAR 281 thousand, up from SAR 58 thousand in Q1 2024, driven by a significant increase in patient numbers and higher revenue per test.

Looking ahead, our strategic focus remains steadfast. In Egypt, we expect continued growth driven by recent economic reforms and a gradual improvement in purchasing power. With over four decades of experience in the diagnostics sector, we are particularly excited about the significant potential in our radiology venture. As the economy stabilizes, we see a tremendous opportunity to further capitalize on this growth area, leveraging our enhanced capabilities to deliver even greater value across the region. In Saudi Arabia, we are intensifying our efforts to fully capitalize on the market's potential, with plans to expand our network of branches across the Kingdom. While we remain mindful of the challenges ahead, particularly in navigating currency fluctuations and inflationary pressures in some of our key markets, our proactive risk management strategies, including price adjustments and cost control measures, have so far mitigated these impacts, and we are confident in our ability to sustain our growth trajectory. As such, we are reaffirming our guidance of approximately 30% revenue growth in FY 2024, with an expected EBITDA margin of around 30% for the year, excluding non-recurring expenses and results from our newly inaugurated venture in Saudi Arabia.

Following up on our OTP from the EGX, IDH has received preliminary approval to proceed with the delisting of its shares. IDH and the EGX coordinated the process, with the Special Operations Market (OPR) operating from August 18th to August 22nd. During this period, 18,673,728 shares were subscribed. IDH then purchased these shares on August 26th, and the buyback settlement is to be completed by August 28th. Afterwards, IDH will transfer its shares from the EGX to the London Stock Exchange (LSE).

To conclude, our commitment remains unchanged in prioritizing the well-being of our patients and stakeholders, as we continue to deliver exceptional quality care to our growing patient base across Egypt, Jordan, Nigeria, and Saudi Arabia.

- End -

Analyst and Investor Call Details

An analyst and investor call will be hosted at 1pm (UK) | 3pm (Egypt) on Monday, 2 September 2024. You can learn more details and register for the call by clicking on this link.

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

About Integrated Diagnostics Holdings (IDH)

IDH is a leading diagnostics services provider in the Middle East and Africa offering a broad range of clinical pathology and radiology tests to patients in Egypt, Jordan, Nigeria, Sudan, and Saudi Arabia. The Group's core brands include Al Borg, Al Borg Scan and Al Mokhtabar in Egypt, as well as Biolab (Jordan), Echo-Lab (Nigeria), Ultralab and Al Mokhtabar Sudan (both in Sudan), and Biolab KSA (Saudi Arabia). With over 40 years of experience, a long track record for quality and safety has earned the Company a trusted reputation, as well as internationally recognised accreditations for its portfolio of over 3,000 diagnostics tests. From its base of 601 branches as of 31 December 2023, IDH served over 8.5 million patients and performed more than 36.1 million tests in 2023. IDH will continue to add laboratories through a Hub, Spoke and Spike business model that provides a scalable platform for efficient expansion. Beyond organic growth, the Group targets expansion in appealing markets, including acquisitions in the Middle Eastern, African, and East Asian markets where its model is well-suited to capitalise on similar healthcare and consumer trends and capture a significant share of fragmented markets. IDH has been a Jersey-registered entity (i) whose shares are admitted to the equity shares (transition) category (previously, the standard listing segment) of the Official List of the UK Financial Conduct Authority and admitted to trading on the main market for listed securities of the London Stock Exchange (ticker: IDHC) since May 2015, and (ii) with a secondary listing on the Egyptian Exchange since May 2021 (ticker: IDHC.CA).

Shareholder Information

LSE: IDHC.L

EGX: IDHC.CA

Bloomberg: IDHC:LN

Listed on LSE: May 2015

Listed on EGX: May 2021

Shares Outstanding: 600 million

Contact

Tarek Yehia

Investor Relations Director

T: +20 (0)2 3332 1126 | M: +20 10 6882 6678 | [email protected]

Forward-Looking Statements

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

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

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

Group Operational & Financial Review

i.    Revenue and Cost Analysis

Detailed Segment Performance Breakdown

▲37%

Nigeria (1.5% of Group revenue in 1H 2024) Echo-Lab, IDH's Nigerian subsidiary, posted a 37% year-on-year growth in revenues in local currency, reaching NGN 1,284 million during the first half of 2024. Growth was driven by a 65% increase in the average revenue per test. Meanwhile, test volumes in Nigeria were down 17% year-on-year, booking 113 thousand for 1H 2024, as inflationary pressures continued to significantly impact the population's purchasing power. In EGP terms, Echo-Lab booked EGP 39 million in revenues during 1H 2024, down 33% year-on-year. In addition to declining test volumes at the market, average revenue per test declined to EGP 341 during the six-month period, reflecting the translation effect from multiple devaluations of the Naira over the past year.   Quarterly operations in Nigeria generated NGN 682 million, marking a 45% increase compared to the previous year. In EGP terms, it amounted to EGP 23 million, reflecting a 15% decrease year-on-year.     Saudi Arabia (0.2% of Group revenue in 1H 2024) IDH expanded its footprint into Saudi Arabia in the first quarter of 2024, launching two Biolab KSA locations in Riyadh, the capital. The first branch opened in January, and the second followed in March 2024. Saudi Arabia's promising demographics, rapidly expanding economy, and a fragmented diagnostics sector present considerable opportunity for IDH. The goal of this expansion is to become a comprehensive provider of clinical pathology diagnostic services, with a widespread network of branches across the Kingdom.   In its first operational half of the year, Biolab KSA posted revenues of SAR 339 thousand, performing 7 thousand tests and booking an average revenue per test of SAR 46. In Q2 2024 alone, the company's revenue reached SAR 281 thousand compared to SAR 58 thousand in the first quarter, driven by more than a threefold increase in the number of patients as well as a higher revenue per test.   Sudan Due to the ongoing situation in Sudan, which started with the eruption of violent conflict in April 2023, IDH has decided to halt all operations in the country starting in Q1 2024. All 18 of IDH's branches in the country have now been indefinitely shut down.

Revenue Contribution by Country

Average Exchange Rate

Patients Served and Tests Performed by Country

Branches by Country

ii.  Balance Sheet Analysis

Consolidated statement of financial position as at 30 June 2024

Consolidated income statement for the quarter ended 30 June 2024

Consolidated statement of comprehensive income for the quarter ended 30 June 2024

Consolidated statement of cash flows for the quarter ended 30 June 2024