Final Results

NMC Health Plc

FINANCIAL REPORT: Full year ended 31 December 2015

London, 14 March 2016: NMC Health Plc (LSE:NMC) ('NMC'), the leading integrated private healthcare provider operating across the United Arab Emirates ('UAE') and one of the top global providers of fertility treatments through its Spanish subsidiary Clinica Eugin, announces its results for the full year ended 31 December 2015.

Financial summary and highlights

Notes:

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

· Proforma numbers include consolidation of the acquired assets from the 'Locked-box' arrangement date and one off management fees treated as part of purchase consideration as per IFRS

· 'Locked-box' arrangement date is the date from which the acquirer obtains the economic ownership of the targeted business, before it legally controls that business. Locked -box date details given in operational review section

· EBITDA equals Profit from operations before depreciation, amortization and one off items as shown in the Consolidated Income statement.

FY2015 Financial Highlights

· Group reported revenues increased by 36.8% to US$880.9m. Proforma revenues increased by 45.8% to US$938.7m

· Healthcare division revenue increased by 55.7% to US$517.1m1. Proforma healthcare revenues increased by 73.1% to US$575.0m

· Distribution division revenue grew by 16.1% to US$393.4m2

· Reported EBITDA increased by 46.7% to US$150.3m. Proforma EBITDA increased by 61.2% to US$165.2m

· Reported EBITDA margin expanded by 116bps to 17.1%. Proforma EBITDA margins improved by 169bps to 17.6%

· Net profit increased by 10.6% to US$85.8m. Proforma net profit increased by 27.4% to US$98.8m

· Net profit margin declined by 230bps to 9.7% as a result of the accelerated ramp up of new openings leading to higher depreciation as well as the acquisition related amortisations. Proforma net profit margin decreased by 152bps to 10.5%

· Adjusted net profit increased by 21.2% to US$93.9m. Proforma adjusted net profit increased by 42.5% to US$110.5m

· Earnings per share (EPS) amounted to US$0.443 (FY 2014: US$0.412)

· Adjusted earnings per share amounted to US$0.506 (FY 2014: US$0.412)

· Proposed dividend pay-out ratio is maintained at 20% of profit after tax, amounting to GBP3 6.2 pence per share

FY2015 Business Highlights - A year on year (YOY) comparison

· Healthcare division's patients increased by 34.3% to 3.2m. Proforma patient numbers increased by 47.3% to 3.5m

· Adjusted healthcare EBITDA4 was US$140.1m. Adjusted Proforma healthcare EBITDA increased by 73.7% to US$154.9m.

· Adjusted healthcare EBITDA margins 27.1%, adjusted pro-forma healthcare EBITDA margins 26.9%. (FY2014 healthcare margins 26.8%)

· Revenue per patient from healthcare services increased by 20.0% to reach US$137.4. Proforma per patient revenues increased by 22.3% to US$140.1

· Hospital bed occupancy rates reached 73.5%, an improvement of 216bps; Proforma bed occupancy rate was 74.6%

· Operational beds increased from 287 beds to 537 beds, 87.1% increase

· Doctors' employed reached 817, an increase of 35.5%

· Distribution division increased its product portfolio by 6.8% to 89,294 stock keeping units (SKUs)

· Sales and marketing personnel at the Distribution division grew 7.9% to 693

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1 Before intra-group elimination

2 Before intra-group elimination

3 British Pound

4Adjusted healthcare EBITDA is unaudited and refers to the healthcare EBITDA adjusted for one off expenses to the tune of US$3.1m incurred during the year

Dr B.R. Shetty, Chief Executive Officer, commented:

"2015 was a transformative year for NMC Health, signalling the approaching completion of our capital development programme initiated by our listing on the London Stock Exchange in 2012, and marking the beginning of the next phase of our growth. During our forty year history of operating in the United Arab Emirates, we have achieved countless milestones in the development of NMC's healthcare delivery platform. However, our rapid expansion both organically and through acquisitions, during 2015 accelerated our growth and widened our offering of high quality healthcare services in an unprecedented manner to the benefit of UAE residents and citizens."

Outlook

Rapid expansion, as we have experienced this year, always presents its challenges and I would like to thank my fellow members of the Board of Directors, the senior management team and our shareholders for their continued support and dedication throughout the year. Most importantly, I would like to thank the employees of NMC and its newly acquired local and international healthcare assets for their tireless efforts to provide the United Arab Emirates' and the region's growing population with increased access domestically to quality healthcare services and products, as we have done so for the last four decades.

Our transformation from a small pharmacy and clinic over 40 years ago into an internationally recognised provider of healthcare services could not have been possible without the unparalleled support of the UAE government and its residents and I extend my sincerest thanks to you for your encouragement.

We expect a good year for the UAE economy in 2016 supported by a reasonable GDP growth of around 3% despite the lower oil prices, based on forecasts by leading rating agencies. However, for the local healthcare sector the key accelerating driver of growth will be the on-going adoption of mandatory healthcare insurance in Dubai and the expected increase in covered patient rising from 1m to 3m according to Dubai Healthcare Authority (DHA). Most specifically for NMC, we expect strong growth coming from our enlarged network, its growing specialisms and the introduction of higher value added services especially through our single specialty verticals.

Analyst and investor conference call

A conference call and webcast for analysts and investors will take place today, Monday 14 March 2016 at 14:00 GMT/ 18:00 UAE / 10:00 EST.

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

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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 this preliminary announcement of annual results with Ernst & Young LLP. The financial information presented in this preliminary announcement was authorised for issue by the Board of Directors on 23 February 2015. 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 2015 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

13 March 2016

About NMC

NMC Health plc group is the leading private sector healthcare operator in the United Arab Emirates, with a nation-wide network of hospitals and operations in the country since 1975. The Group currently operates or manages eight hospitals, two day-care patient centres, nine medical centres and fifteen pharmacies. In addition, the Group owns and operates Clinica Eugin in Barcelona, Spain - one of the leading fertility treatment centres globally. In addition, NMC acquired a 51% shareholding in Fakih IVF Group, the Middle East market leader for in-vitro fertilisation ('IVF') services. NMC also owns and operates Americare Group, the leading home care provider in the UAE as well as ProVita, the pioneering provider of long-term medical care, also in the UAE. The enlarged company received almost 3.2m patients in 2015. 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. NMC Health plc group reported revenues of US$880.9m in 2015.

In April 2012 NMC Health plc was listed on the Premium Segment of the London Stock Exchange. NMC Health plc is a constituent of the FTSE 250 Index.

Business and Financial Review

BUSINESS OVERVIEW

OPERATIONAL REVIEW

NMC Health's business extends across the UAE through its healthcare and distribution divisions. NMC also owns and operates Spain based Clinica Eugin. The Group reported consolidated revenues of US$880.9m in FY2015 (+36.8% YoY) with approximately 56.8% (FY2014: 49.5%) coming from its healthcare division and 43.2% (FY2014: 50.5%) from the distribution division, marking the first year in the Group's recent history that healthcare revenues have accounted for a greater proportion of revenues than the distribution division.

The healthcare division accounted for 75.9% (FY2014: 72%) of Group EBITDA with the balance of 24.1% (FY2014: 28%) coming from the distribution division.

Consolidated group EBITDA reached US$150.3m with a year on year growth of 46.7%. On a unaudited proforma basis, group EBITDA was US$165.2m, up 61.2% year on year, with a proforma EBITDA margin of 17.6% (FY2014: 15.9%). The unaudited proforma numbers include the economic benefit to NMC had the consolidation of the acquired assets during 2015 started from the date of the 'locked box' arrangement rather than the date of effective control. The locked box date is the date from which the acquirer obtains the economic ownership of the targeted business, before it legally controls that business.

Important acquisition dates

HEALTHCARE DIVISION

Our healthcare division operates in the major emirates and cities of the UAE including Abu Dhabi, Al Ain, Dubai, Sharjah and Umm Al Quwain. Together these Emirates and cities account for nearly 85% of UAE residents. With a total licensed capacity of 885 beds, we operate seven hospitals, eleven day surgeries and medical centres and fifteen in-hospital pharmacies. In addition, the Group operates an eighth hospital on behalf of the UAE Ministry of Presidential Affairs, the 205 bed Sheikh Khalifa General Hospital in Umm Al Quwain, under an operations and management contract initiated in Q4 2012 with five year duration. Furthermore, NMC owns Clinica Eugin - a leading fertility services provider based in Spain.

The healthcare division reported revenues of US$517.1m in FY2015 (+55.7% YoY), including US$441.3m from healthcare services, US$69.8m from hospital pharmacies and US$6m from the operation and management of third-party healthcare assets. A total of 3.2m patients visited NMC's healthcare network in FY 2015, an increase of 34.3% compared to FY 2014. Average revenue per patient from healthcare services in FY 2015 was US$137.4, 20% growth over FY 2014; this has seen major increase due to higher revenue per patient in our newly acquired entity ProVita.

Although we continue to operate healthcare services as a division of our business, we are increasingly grouping our asset portfolio into specialist verticals based on strategic ambition and outlook as oppose to current operational reality. However, NMC might consider converting these strategic verticals in the future, specific operational structures and thus revenue segments.

Multi-specialty

NMC and Dr Sunny branded healthcare hospitals, day-surgeries, medical centres and pharmacies together form our major strategic vertical - multi-specialty.

The total combined revenue of the healthcare division assets bundled in this strategic vertical was US$428.5m, with year on year growth of 31.6% and 31.7% growth in total patients compared to 2014 and with the total number of patients at 3.1m.

Revenue per patient was US$136.5. The occupancy rate was 73% during the year compared to 71.3% in 2014.

The FY 2014 comparative figure excludes Dr Sunny numbers for each parameter mentioned above.

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While revenue growth was strong across the portfolio, Dubai Specialty Hospital and NMC General Hospital in Dubai Investment Park (DIP) exceeded expectations on the back of an accelerated adoption of mandatory medical insurance in Dubai.

On 1 September 2015, NMC partially opened the outpatient services at the new super speciality hospital, NMC Royal Hospital, in the Khalifa area of Abu Dhabi City. On 7 March 2016 NMC commenced inpatient services at the hospital with 75 beds operational out of a total licensed capacity of 250 beds. The balance of inoperative beds is available for phased market introduction in future periods. NMC Royal Hospital is NMC's largest integrated speciality hospital facility in the UAE, alongside its speciality hospitals in Abu Dhabi, Dubai and Al Ain. It will act as the central hospital within NMC's hub-and-spoke healthcare platform and will be a regional referral point for best-in-class medical treatment to the growing population of the UAE. It will also serve patients in the growing residential and commercial areas in its immediate proximity.

While the revenue contribution of this facility was not material in 2015 given its opening in September 2015 of initial basic outpatient services, expenses associated with the opening were in-line with guidance. Inpatient operations started on 7 March 2016 with 75 beds out of the total licensed capacity of 250 beds. This hospital is expected to deliver considerable growth in future periods as patients grow and operations ramp up.

Maternity & fertility

NMC's maternity and fertility focused healthcare assets within the healthcare division, reported revenues at US$51.4m in 2015, with the total number of patients at 0.065m and Revenue per patient at US$784.5.

The comparative number under this vertical are not shown, as in Brightpoint Royal Women's Hospital only outpatient services started in FY 2014 and Luarmia was acquired in FY 2015.

Brightpoint Royal Women's Hospital which started its initial outpatient operations in July 2014, commenced inpatient services in May 2015 with 60 beds out of the total licensed bed capacity of 100. The bed occupancy achieved during this start-up period was 58%. The hospital ramp-up accelerated post the initiation of inpatient services and has by the year-end led us to open all 100 beds.

Clinica Eugin, which NMC acquired on 24 February 2015 with no 'locked-box' date arrangement, was consolidated from 1 March 2015. However, the revenue contribution to NMC from the acquisition relates only to approximately 10 months or 83.5% of the year.

As for Fakih IVF, which is also part of this strategic vertical, here too NMC had no 'locked-box' arrangement and its consolidation will be effective from 31 January 2016.

The locked box date is the date from which the acquirer obtains the economic ownership of the targeted business, before it legally controls that business.

Long-term & home care

NMC's long-term and home care focused healthcare assets within the healthcare division, reported combined revenues of US$31.1m in 2015, with total number of patients at 7,045 and Revenue per patient at US$4420.

The bed occupancy rate was 91.4% during the year. ProVita progressed with its 30 bed expansion during 2015 and the facility subsequently commenced operations on 1 March 2016.

A year-on-year comparison is not presented above for this vertical, as the entities were acquired in FY 2015.

ProVita, which was acquired with a 'locked-box date' set to be 1 April 2015, was consolidated from 1 September 2015. For Americare the 'locked-box' date set to be 1 January 2015 and it was consolidated from 1 May 2015.

Operation & management

NMC Health continued to operate and manage the 205-bed Sheikh Khalifa General Hospital in Umm al-Quwain on behalf of the UAE Ministry of Presidential Affairs since Q4 2012.

NMC has a five year contract to operate this hospital in return for an annual management fee based on qualitative metrics. This is the first such contract to manage a large Government healthcare facility awarded by a Government Department to a local UAE business, demonstrating confidence in NMC's significant healthcare experience and capabilities.

The total revenue contribution from this contract reached US$6m in 2015, with year on year growth of 5%.

Distribution Division

Over the past 40 years, NMC has developed one of the largest product portfolios in the UAE with around 90,000 SKUs, and is the exclusive wholesaler of mainly globally established and branded healthcare products and equipment. Our distribution division operates across the entire UAE through a network of five warehouses and three sales and marketing offices strategically located in the major cities and a fleet of 221 vehicles ensuring timely distribution.

Division revenues were US$393.4m in 2015, up 16.1% year on year. Meanwhile, EBITDA increased by 26.4% to US$43.5m, resulting in an EBITDA margin of 11.1% (2014: 10.2%).

The FMCG segment (+13.6% year on year) remained the largest contributor to the distribution division, however, the fastest growth came from the Education material (+29.2% year on year) and Scientific (+18.0% year on year) segments. Pharmaceutical revenue increased by 24.1%, in contrast, Veterinary segment declined by 5.9%.

Recent distribution agreements added to our portfolio are agreements with HBG General Trading LLC, Lotus Herbals Middle East (FZE), Nestle UAE LLC (only infant products), Otometrics A/S, SCA Hygiene Products AB, SCHILLER AG

IT

As previously announced, NMC Health is implementing a capital investment programme in two new primary IT systems which will enhance the Group's ability to plan, manage, monitor and report on its operations and financials:

A. Hospital Information System (HIS)

Continuing developments in the regulatory framework in the UAE healthcare system, as well as additional monitoring and reporting requirements which the Group requires as the business grows, led to NMC's decision to implement a new HIS.

NMC is implementing a third party system which is already operating successfully within the UAE regulatory structure. Following a successful pilot phase, the new system is being rolled out in the major UAE based facilities and roll out across the Group is expected to be completed by end of Q2 FY 2017.

B. Enterprise Resources Planning (ERP) financial system

Management have taken time to ensure that all previous business processes are captured within the new IT systems. The roll out of the new ERP system into the Healthcare division, whilst delayed during the initial execution of the Group's strategic growth plan due to the challenges faced by the group during initial testing phase, however now the same is well underway across the Group and the final testing phase is in progress. In addition to the growing nature and structure of the Group, there have also been challenges in relation to the roll out of the ERP system into the Distribution division as a result of the volume and types of transactions to be captured. The Group has now finalised a time schedule for final roll out of the ERP system for both healthcare and Distribution division. This schedule indicates the commencement of final roll out across the Group beginning in Q3 2016, and given the number of business units involved, is due for completion in Q2 2017.

The investment in new information technology will help to reduce an element of manual intervention and improve reporting, and therefore will further enhance the company's internal control environment.

The company has spent a total amount of US$4.5m as of 31 December 2015 on the Hospital Information System (HIS) and the Enterprise Resources Planning (ERP) financial system

Financial Review

FY 2015 was a transformational year for NMC Health Plc. with the new facilities opened during FY 2014 continuing to ramp up well and the Group embarking on acquisitions in the key verticals within the healthcare space, both within UAE as well as overseas.

The Group delivered a robust performance in 2015 both at the overall and at the divisional level primarily due to strong inpatient and outpatient performance at our existing hospitals and medical centres including the new ones commissioned during the previous years.

The acquired assets over the fertility and mother care space, homecare and long term care segments as well as the chains of clinics and pharmacies in the emirate of Sharjah delivered performance in line with expectation.

Consolidated Group Revenues increased from US$643.9m in FY2014 to US$880.9m in FY2015, a growth of 36.8% of which 24% was achieved organically with the remaining 12.8% growth resulting from the transformation strategy of the group through acquisitions.

After elimination of US$29.7m of intra-group revenues, Consolidated Group EBITDA improved from US$102.5m in FY2014 to US$150.3m in FY2015, a growth of 46.7%.

Group Net profit reached US$85.8m in FY2015, yielding Earnings per share (EPS) of US$0.443 compared to US$0.412 for the same period in 2014. Adjusted earnings per share were US$0.506 compared to US$0.412 for the same period in FY 2014.

 Healthcare division

Revenue in the Healthcare division continued to witness improved performance from US$332.2m in FY2014 to US$517.1m in FY2015, a growth of 55.7% of which 30.9% was achieved organically with the remaining 24.8% of growth coming from acquired assets. 

EBITDA improved from US$89.1m in FY2014 to US$137.0m in FY2015 recording a growth of 53.7%. EBITDA margins were at 26.5% (26.8% in FY 2014). The proforma EBITDA of the acquired assets would have been US$14.8m higher had we consolidated these assets from the date of the 'locked box' arrangement rather than the date of effective control. The locked box date is the date from which the acquirer obtains the economic ownership of the targeted business, before it legally controls that business.

Newly commissioned facilities, Brightpoint Royal Women's Hospital, NMC General Hospital LLC, Dubai Investment Park and NMC Day Surgery Centre LLC, Mohammed Bin Zayed City performed above expectation in terms of revenues, EBITDA and cash flows.

During the year, the Group acquired Luarmia, Americare, Dr Sunny Healthcare Group and ProVita as part of its new Growth Strategy to grow an integrated multi-vertical and multi-brand healthcare network across several geographies.

All the above acquisitions have a positive impact on the group revenue, EBITDA and cash flow.

Distribution division

Within the Distribution division, revenues increased from US$338.9m in FY2014 to US$393.4m in FY2015, a growth of 16.1%. EBITDA increased from US$34.4m in FY2014 to US$43.5m in FY2015, a growth of 26.4%. EBITDA margins grew by 90bps, 11.1% in FY2015 (10.2% in FY2014).

The positive macro-economic environment in the country coupled with new agencies, customer tie-ups and cost efficient operations contributed to better performance in terms of revenue and margins.

Capital Expenditure

Capital expenditure incurred for the year was US$81.7m (FY2014: US$112.3m). This encompassed US$63.7m on the Group's capital projects. The Group also incurred US$18m on equipment required across the existing operations.

The Company was able to capitalise certain expenses, in accordance with IFRS and the Company's accounting policies. We expect this to continue in relation to costs (for example lease costs) arising during the construction of future projects. Although pre-operating expenses were nil in the year to 31 December 2015, we expect a small level of pre-operating costs which will be expensed in the 2016 financial year as a result of the opening of our new facility, NMC Royal Hospital, Khalifa City.

As a result of the delays in the opening of certain facilities, additional costs in respect of loan interest and leases have been capitalised. Had these facilities opened in line with original plan these costs would have been expensed. Other than these items the delays have not resulted in an increase in budgeted capital costs.

A table outlining original estimated capital expenditure and other budgeted costs for each of our capital expenditure projects is set out below.

Notes

1: Prior to commencement of development of the existing four capital projects, management had an expectation that there would be an element of expense incurred before the new facilities were opened which would be written off through the Income Statement. Following a review certain of these costs have been capitalised in line with the Company's accounting policies (for example lease rent paid and finance costs).

2: The lease in respect of Brightpoint contains a rent free period as well as specified rent increases. In line with IFRS and the Company's accounting policies, the rental cost of the lease has been adjusted to appropriately account for these items over the length of the lease. Accounting policies stipulate that the total lease value for the full lease period is divided evenly over the years.

Acquisitions:

During the year we completed and announced a number of transactions, some of which had a material impact on our results during the period. These transactions reflect our focused expansion strategy and total consideration paid for all the acquisitions was US$429m.

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

Cash

Net cash inflow from operating activities for the 2015 financial year was US$84.1m, compared with US$85.7m for the comparative period in 2014. This was mainly due to the increase of working capital requirements on account of newly started facilities despite an increase in the revenues.

Including funds held on deposit, cash as at 31 December 2015 amounted to US$177.4m compared to US$263.2m at the end of FY2014. The company had allocated the funds raised through the IPO as well as through the syndicated loan against the capital cost of the five expansion projects announced during the IPO. The Company has completed four of these capital expenditure programmes as at 31 December 2015. The last of the capital expenditure program, NMC Royal Hospital in Khalifa City, Abu Dhabi commenced partial out-patient operations in September 2015 and initiated full services in March 2016.

As expected, the Group had a net debt position of US$553m at 31 December 2015 compared with US$113.0m at 31 December 2014. As the Group completed its capital project development program and embarked on acquisitions, the group utilized the new syndicated loan facility during the year and hence the level of net debt has increased during FY2015.

The company has assessed all significant capital expenditure projects including NMC Royal Hospital, Khalifa City for indicators of impairment and have concluded that the projects have sufficient headroom and that none of the assets are impaired

Movement in net debt

The movement in cash and the level of capital expenditure have had a significant effect on the movement in net debt during the 2015 financial year. A summary of the principal drivers is shown as follows:

Working Capital

Working capital for our two operating business divisions is funded differently due to the nature of their business models. The Group is able 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 2016 financial year.

In relation to our 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.

Long term debt facilities

In 2015, the Group concluded an agreement for a new 5 year syndicated loan facility. The US$825m facility was structured in two tranches: 1) US$350m of term debt, this was utilised to refinance the existing higher cost debt; and 2) US$475m delayed drawdown acquisition facility to support NMC's capabilities focused strategy in making accretive acquisitions. NMC expects to achieve an aggregated saving of US$10m in respect of finance costs during this loan tenure. A total of US$513.7m has been drawn down from this facility as at 31 December 2015.

The total debt of the Group, excluding accounts payable and accruals, was US$730m as at 31 December 2015 compared to US$376m as at 31 December 2014.

Finance costs and income

Total finance costs for 2015 were US$23.8m compared to US$14.5m in 2014. This was mainly on account of the higher facility amount availed to refinance the existing debts as well as to finance the acquisitions. Though the new facilities carried a relatively lower finance charge as the same was secured on better terms compared to the earlier facility, the increase in the quantum of the funds drawn resulted in higher finance costs.

As part of the Group's capital expenditure programme, borrowing costs of US$1.7m (2014: US$4.1m) have been capitalised during the year. The rate used to determine the amount of borrowing costs eligible for capitalisation was 2.1% (2014: 3.15%) 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 6.2 pence per share be paid in cash in respect of the year ended 31 December 2015 (FY2014: 5.4 pence per share).

Subject to approval of the shareholders at the company's annual general meeting on 03 June 2016, the dividend timetable is as follows:

Ex-dividend date - 19 May 2016

Record date - 20 May 2016

Payment date - 20 June 2016

Consolidated financial statements

Year ended 31 December 2015

One off items includes transaction costs in respect of business combinations (US$4.1m), unamortised fees written off (US$2.6m), amortisation of acquired intangibles (US$5.0m).

CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME

For the year ended 31 December 2015

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 39 form part of the consolidated financial statements.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 December 2015

The consolidated financial statements were authorised for issue by the board of directors on 13 March 2016 and were signed

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2015

The attached notes 1 to 39 form part of the consolidated financial statements

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 December 2015

The attached notes 1 to 39 form part of the consolidated financial statement

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

At 31 December 2015

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"), Spain, Colombia and Italy. 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 one is a director 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 2015 were authorised for issue by the board of directors on 13 March 2016 and the consolidated statement of financial position was signed on the Board's behalf by Dr BR Shetty and Mr Suresh Krishnamoorthy.

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 2015 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. From period ended 30 June 2015 onwards, the Group elected to present the consolidated income statement and consolidated statement of other comprehensive income separately, whereas in the financial statements for year ended 31 December 2014 and prior to that, a single consolidated statement of comprehensive income was 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 in Spain and Italy is the Euro. 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.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

At 31 December 2015

2.1 BASIS OF PREPARATION continued

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 2015. Both the Healthcare and Distribution divisions have continued their positive growth in revenue during 2015. Net profit and EBITDA of both healthcare and distribution divisions have increased in 2015. EBITDA margin of Distribution is almost same as last year whereas for Healthcare it decreased slightly which is due to opening of new facilities during the year. The directors have reviewed the business plan for 2016 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 2015. 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:

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 2015 was US$136,176,000 (2014: US$111,597,000) and the provision for old and obsolete items at 31 December 2015 was US$1,388,000 (2014: US$1,388,000) (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, 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 2015 were US$255,038,000 (2014: US$177,203,000) and the provision for doubtful debts at 31 December 2015 was US$13,022,000 (2014: US$8,996,000) (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 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$3,991,000 (2014:US$4,216,000). This amount is included in capital work in progress in property, plant and equipment and in software in intangible assets (note 17 and note 18). Management believes this amount is fully recoverable.

Valuation of intangibles assets

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

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 following 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 2015, 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:

The impact of the re-assessment of useful economic lives and depreciation method is an increase in reported profit of US$1,944,000 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:

Brand names - 5-20 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

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

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 and call options were issued as part of the Luarmia SL acquisition. 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 13.6% non-controlling interest (NCI) 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. This means that the full 13.6% NCI is recognised as part of the Luarmia acquisition, a financial liability for the redemption value of the options was recognised at US$24,496,000 as at the date of acquisition, and an equal amount was set against other equity. As at 31 December 2015, the present value of the redemption liability is US$25,084,000 (note 5 and 37)

Functional currency

The UAE Dirham is determined to be the functional currency of the Company.

Judgement has been used to determine the functional currency of the Company that most appropriately represents the economic effects of the Company's transactions, events and conditions.

The primary economic environment influencing the Company's income (dividends) is the UAE and the effect of the Companies local environment is limited to expenses incurred within the UK. The ability of the Company to meet its obligations and pay dividends to its shareholders is dependent on the economy of, and the operation of its subsidiaries in, the UAE.

Assets held in the name of the previous shareholder

In accordance with 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. As at 31 December 2015 certain land and buildings with a carrying amount of US$4,144,000 (2014: US$9,321,000) are held in the name of a previous shareholder for the beneficial interest of the Group. As the beneficial interest of such land and buildings resides with the Group, these assets are recorded within land and buildings in the Group 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 (note 17). 

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 2015, 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$778,000 (2014: US$1,105,000) included within property, and equipment as at 31 December 2015 (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 40 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 15 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.

2.4 CHANGES IN ACCOUNTING POLICIES

New and amended standards and interpretations:

The Group applied for the first time certain standards and amendments which are effective for annual periods beginning on or after 1 January 2015.

The amendments to IFRS, which are effective as of 1 January 2015 and are listed below, have no impact on the Group.

· Amendments to IAS 19 Defined Benefit Plans: Employee Contributions

· Annual Improvements 2010-2012 Cycle

o IFRS 2 Share-based Payment

o IFRS 3 Business Combinations

o IFRS 8 Operating Segments

o IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets

o IAS 24 Related Party Disclosures

· Annual Improvements 2011-2013 Cycle

o IFRS 3 Business Combinations

o IFRS 13 Fair Value Measurement

o IAS 40 Investment Property

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 doctor. 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 an 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 clinic service, homecare and long term care revenues from patients' private /medical insurance schemes. Clinic, home care and long term 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. 25% of revenue is booked in the first stage (at the beginning of the treatment), 50% 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 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 2014.

· 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 interests 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.

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:

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 - 5-20 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.

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.

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 (other reserves). 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.

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.

Translation of foreign operations continued

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.

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

IFRS 15 was issued in May 2014 and establishes a new five-step model that will apply to revenue arising from contracts with customers. Under IFRS 15 revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The principles in IFRS 15 provide a more structured approach to measuring and recognising revenue. The new revenue standard is applicable to all entities and will supersede all current revenue recognition requirements under IFRS. Either a full or modified retrospective application is required for annual periods beginning on or after 1 January 2018 with early adoption permitted. The Group is currently assessing the impact of IFRS 15 and plans to adopt the new standard on the required effective date.

IFRS 16 Leases

IFRS 16 was issued in January 2016, and specifies how an IFRS reporter 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:

· IFRS 9 Financial Instruments

· IFRS 14 Regulatory Deferral Accounts

· Amendments to IFRS 11 Joint Arrangements: Accounting for Acquisitions of Interests

· Amendments to IAS 16 and IAS 38: Clarification of Acceptable Methods of Depreciation and Amortisation

· Amendments to IAS 16 and IAS 41 Agriculture: Bearer Plants

· Amendments to IAS 27: Equity Method in Separate Financial Statements

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

· Annual improvements 2012-2014 Cycle:

§ IFRS 5 Non-current Assets Held for Sale and Discontinued Operations

§ IFRS 7 Financial Instruments: Disclosures

§ IAS 19 Employee Benefits

§ IAS 34 Interim Financial Reporting

§ Amendments to IAS 1 Disclosure Initiative

§ Amendments to IFRS 10, IFRS 12 and IAS 28 Investment Entities: Applying the Consolidation Exception

5 BUSINESS COMBINATIONS

The fair value of the identifiable assets and liabilities of entities acquired as at the date of acquisition are as follows: