TIDMIDHC

RNS Number : 7623U

Integrated Diagnostics Holdings PLC

27 November 2019

Integrated Diagnostics Holdings Plc

9M2019 Results Update

Wednesday, 27 November 2019

Integrated Diagnostics Holdings Plc records strong revenue and test growth with solid margins in 9M 2019

(London) Integrated Diagnostics Holdings ("IDH," "the Group," or "the Company"), a leading consumer healthcare company with operations in Egypt, Jordan, Sudan and Nigeria, released today unaudited highlights of its financial and operational performance in the first nine months of 2019(1) , reporting total unaudited revenues of EGP 1,649 million and unaudited net profits of EGP 361 million.

Results

 
                                9M2019           9M2018    change 
=====================  ===============  ===============  ======== 
 Revenues                        1,649            1,377       20% 
---------------------  ---------------  ---------------  -------- 
 Cost of Sales                   (856)            (698)       23% 
---------------------  ---------------  ---------------  -------- 
 Gross Profit                      793              680       17% 
---------------------  ---------------  ---------------  -------- 
 Gross Profit Margin               48%              49%   (1 pts) 
---------------------  ---------------  ---------------  -------- 
 Operating Profit                  573              486       18% 
---------------------  ---------------  ---------------  -------- 
 EBITDA(2)                         686              540       27% 
---------------------  ---------------  ---------------  -------- 
 EBITDA Margin                     42%              39%     3 pts 
---------------------  ---------------  ---------------  -------- 
 Net Profit                        361              355        2% 
---------------------  ---------------  ---------------  -------- 
 Net Profit Margin                 22%              26%    (4pts) 
---------------------  ---------------  ---------------  -------- 
 Cash Balance                      432              541      -20% 
---------------------  ---------------  ---------------  -------- 
 

* Post IFRS 16

Financial Highlights

-- Revenue for the nine-month period increased 20% to EGP 1,649 million supported by strong growth in both the number of patients served and tests performed during the period, as well as improved pricing. Egypt continues to be the primary driver of total revenue, recording a 24% increase in revenue to EGP 1,410 million in 9M 2019

-- Gross profit reached EGP 793 million in 9M 2019, up 17% year-on-year, with a relatively stable margin compared to last year.

-- Operating profit increased 18% year-on-year to EGP 573 million in 9M 2019. It is worth noting that IDH launched its new healthcare management services under its Wayak subsidiary in 3Q2019, which drove higher SG&A expenses as the new service ramps up operations. Excluding Wayak, operating profit would have been EGP 576 million, up 19% year-on-year.

-- EBITDA(2) for 9M 2019 increased 27% year-on-year to EGP 686 million due to higher revenues and affected by the adoption of IFRS 16. EBITDA margin for the period was 42%, up from the 39% recorded in 9M 2018.

-- Normalised EBITDA for IFRS 16 and excluding Wayak's results was up 19% year-on-year to EGP 642 million for 9M 2019, with an unchanged margin of 39% for the period.

-- Net profit recorded a 2% year-on-year increase to EGP 361 million in 9M 2019. Excluding Wayak, net profit recorded a 3% increase to EGP 365 million. Net profit margin for the period contracted to 22% compared to 26% in the same period of 2018. Bottom-line profitability was affected by higher interest expenses related to the financing of the new headquarters and Al Borg Scan's expansion, lower interest income following the distribution of EGP 451 million in dividends for FY2018 and the effect of adopting IFRS 16. Normalising for the effect of IFRS 16 and excluding Wayak's results, net profit records EGP 377 million in 9M2019, up 6% year-on-year and with a margin of 23%.

-- Net cash flow from operating activities stood at EGP 442 million for 9M 2019 up from EGP 365 million recorded in 9M 2018. This continues to reflect IDH's strong cash-generating ability and indicating the non-cash nature of IFRS 16 related reclassifications.

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

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

Operational Highlights

-- IDH's branch network stood at 442 branches as of 30 September 2019, up from 414 branches as of 30 September 2018, having opened 32 new branches and closed 4 non-performing branches in Sudan.

-- Total patients served reached 5.6 million in 9M 2019, up 11% compared to the 5.0 million served in 9M 2018 supported by both rising walk in and contract patients.

-- Total number of tests performed increased 18% year-on-year to 23.1 million in 9M 2019 on the back of strong contract test volumes.

-- Average revenue per test came in at EGP 71 for 9M 2019, a 2% year-on-year rise. Excluding tests related to the 100 million Healthy Lives campaign, average revenue per test would have recorded an 11% year-on-year rise for the nine-month period. Meanwhile IDH's average revenue per patient was up 7.5%year-on-year during the period (8.8%excluding the campaign).

   --     IDH's average test per patient was up 6% year-on-year to 4.1 in 9M 2019. 

-- Continued operational progress with Nigeria expansion, with eight out of 12 branches renovated, including a new branch inaugurated in October 2019.

-- Good momentum with radiology unit, Al-Borg Scan, with the launch of its new Shubra Branch expected in the coming months.

-- Successful launch of new subsidiary Wayak, using data analytics to offer healthcare services to database of 13 million patients.

Commenting on the Group's performance for the nine-month period, IDH Chief Executive Officer Dr. Hend El-Sherbini said:

"IDH's growth during the nine-month period was driven by both higher patient and test volumes and an improvement in average pricing, with the conclusion of the state-sponsored 100 Million Healthy Lives campaign seeing average revenue per test normalising. Additionally, growth was also driven by increasing contribution from Al Borg Scan, which is delivering strong results and an upward trajectory in revenues and EBITDA. Meanwhile group profitability remained intact, with IDH's normalised EBITDA up 19% and with a stable 39% margin."

"We are also making headway with our strategic initiatives, including the continued rollout of new branches in Nigeria with a steady ramp-up in operations in this new geography that holds significant growth potential for the Group. The quarter just ended also saw us launch our new healthcare management services venture Wayak, which deploys data mining and artificial intelligence platforms to capitalise on our large database of over 13 million patients and create new revenue streams for IDH."

"Management remains confident as regards to its full-year targets and I look forward to reporting in the months ahead on yet another year of operational excellence and strong financial performance."

Analyst and Investor Call Details

An analyst and investor call will be hosted at 1pm GMT | 3pm EEST on Wednesday 27 November 2019. You may dial in using the conference call details below:

 
 Country                Dial In 
 UK                     0800-640-6441 
---------------------  ----------------- 
 UK (local)             020-3936-2999 
---------------------  ----------------- 
 Canada                 1-613-699-6539 
---------------------  ----------------- 
 Turkey                 0850-390-2046 
---------------------  ----------------- 
 UAE                    0800-0357-04553 
---------------------  ----------------- 
 All other locations    +44-20-3936-2999 
---------------------  ----------------- 
 

Access code: 423768

Participants can also join by web through www.incommuk.com/customers/online and entering the access code 423768. You will be prompted to enter your name and email address.

About Integrated Diagnostics Holdings (IDH)

IDH is a leading consumer healthcare company in the Middle East and Africa with operations in Egypt, Jordan, Sudan and Nigeria. The Group's core brands include Al Borg and Al Mokhtabar in Egypt, as well as Biolab (Jordan), Ultralab and Al Mokhtabar Sudan (both in Sudan) and Echo-Scan (Nigeria). A long track record for quality and safety has earned the Company a trusted reputation, as well as internationally recognised accreditations for its portfolio of over 1,400 diagnostics tests. From its base of 442 branches as of 30 September 2019, IDH will continue to add laboratories through a Hub, Spoke and Spike business model that provides a scalable platform for efficient expansion. Beyond organic growth, the Group's expansion plans include acquisitions in new Middle Eastern and African markets where its model is well-suited to capitalise on similar healthcare and consumer trends and capture a significant share of fragmented markets. IDH has been a Jersey-registered entity with a Standard Listing on the Main Market of the London Stock Exchange (ticker: IDHC) since May 2015.

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

Shareholder Information

LSE: IDHC.L

Bloomberg: IDHC:LN

Listed: May 2015

Shares Outstanding: 150 million

Contact

Mr. Sherif El-Ghamrawi

Investor Relations Director

T: +20 (0)2 3345 5530 | M: +20 (0)10 0447 8699 | sherif.elghamrawi@idhcorp.com

Hudson Sandler (International media relations)

Dan de Belder

Bertie Berger

T: +44 (0) 207 7964133 | idh@hudsonsandler.com

Forward-Looking Statements

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

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

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

Operational & Financial Review

IDH reported revenues for the first nine months of the year of EGP 1,649 million, increasing 20% year-on-year supported by strong growth in both the number of patients served and tests performed during the period, as well as an improvement in average revenue per test. Growth was more pronounced at the contract segment, which recorded a 22% year-on-year rise in revenues for the period that was largely volume-driven. Meanwhile, the walk-in segment recorded a 17% year-on-year increase in revenues driven primarily by the number of tests and higher pricing.

Revenue Growth Drivers

 
                                 9M2019   9M2018 
==============================  =======  ======= 
 Volume                             18%       4% 
==============================  =======  ======= 
 Price & Mix                         4%      22% 
==============================  =======  ======= 
 Foreign Currency Translation      (2%)     (1%) 
==============================  =======  ======= 
 Total                              20%      25% 
==============================  =======  ======= 
 

On a geographical basis, Egypt continued to be the main driver for total revenue growth, recording a 24% year-on-year rise in revenues. Growth in Egypt came on the back of rising test volumes across both the walk-in and contract segments, with the latter being supported by the 100 million Healthy Lives awareness campaign. Egypt's performance was further buoyed by the ramp up of operations at the new Al Borg Scan branch - the Group's radiology unit - which contributed c.3.7% to Egypt's total revenue growth in 9M2019.

Revenue Growth Drivers by Geography

 
            9M2019   9M2018 
=========  =======  ======= 
 Egypt         19%      22% 
=========  =======  ======= 
 Jordan       0.7%       2% 
=========  =======  ======= 
 Sudan      (0.3%)   (0.5%) 
=========  =======  ======= 
 Nigeria    (0.2%)     2.2% 
=========  =======  ======= 
 Total         20%      25% 
=========  =======  ======= 
 

IDH's cost of sales increased 23% year-on-year with the Group maintaining strong gross profitability of 48% (9M2018: 49%) despite the lower contribution margin from the 100 million Healthy Lives awareness campaign during the first half of the year. Additionally, lower SG&A as a percentage of revenue saw EBITDA margin reach 42% (stable at 39% when normalised for IFRS 16). Profitability was also supported by the strong improvement in Jordan where EBITDA grew 81% y-o-y in 9M2019 and EBITDA margin expanded 15 percentage points to 36%. Similarly, operations in Sudan generated a positive EBITDA in 9M2019 with a 22% margin versus a negative contribution in the same period last year.

On the operational front, IDH expanded its geographic footprint to 442 branches as at the end of September 2019 compared to the 414 operated as of 30 September 2018. The Group's expansion drive continues to be supported by its state-of-the-art Mega Lab which allows IDH to deploy its Hub, Spoke and Spike business model in Egypt to roll out capital-efficient "C" labs more rapidly. Over the last year, IDH has opened 30 labs in Egypt and two in Nigeria while closing four non-performing branches in Sudan.

Branches by Country

 
                   30 September 2019   30 September 2018         Change 
================  ==================  ==================  ============= 
 Egypt                           390                 360             8% 
================  ==================  ==================  ============= 
 Jordan                           19                  19              - 
================  ==================  ==================  ============= 
 Sudan                            21                  25          (16%) 
================  ==================  ==================  ============= 
 Nigeria                          12                  10            20% 
================  ==================  ==================  ============= 
 Total Branches                  442                 414             7% 
================  ==================  ==================  ============= 
 

Our Customers

IDH serves two principal types of clients: contract (corporate), including institutions such as unions, private insurance companies and corporations, and walk-in (individuals).

IDH served a total of 5.6 million patients between both segments, an increase of 11% compared to the same period of last year. Total tests performed were 23.1 million in 9M 2019, a 18% year-on-year rise.

The ratio of contract to walk-in patients during the nine-month period ended 30 September 2019 stood at 72:28 largely in line with the 71:29 ratio recorded in the same period of 2018. The increase in contract patients as a share of the total reflects an accelerated growth in contract volumes during the period on the back of the 100 million Healthy Lives awareness campaign in Egypt.

Key Performance Indicators

 
                          Contract Segment             Walk-in Segment                       Total 
==================  ===========================  ===========================  ================================== 
                     9M2018    9M2019    Change   9M2018    9M2019    Change    9M2018      9M2019       Change 
==================  ========  ========  =======  ========  ========  =======  =========  ============  ========= 
 Revenue (EGP 
  '000)              796,313   967,730    22%     581,037   680,645    17%      1,377,350      1,648,376    20% 
 % of Revenue          58%       59%                42%       41%                  100%          100% 
 Patients ('000)      3,553     4,025     13%      1,465     1,562      7%        5,018          5,587      11% 
 % of Patients         71%       72%                29%       28%                  100%          100% 
 Revenue per 
  Patient (EGP)        224       240       7%       397       436      10%         274            295        7% 
 Tests ('000)        14,703    17,780     21%      4,933     5,298      7%        19,636        23,078      18% 
 % of Tests            75%       77%                25%       23%                  100%          100% 
 Revenue per 
  Test (EGP)           54        54        -        118       128       9%          70            71         2% 
 Test per Patient      4.1       4.4       7%       3.4       3.4       1%         3.9            4.1        6% 
 
 

Revenue Analysis: Contribution by Patient Segment

The Group's contract segment witnessed an impressive 22% year-on-year rise in revenues for the period, making up 59% of total Group revenue and contributing 63% to total growth in 9M 2019. In the first nine months of the year, IDH served 4.0 million contract patients, a 13% y-o-y rise, and performed 17.8 million contract tests, a 21% y-o-y rise.

Average revenue per contract test came in flat compared to last year at EGP 54 for 9M 2019, marking a turning point after consecutive declines over the previous quarters on account of volumes generated from the awareness campaign. Meanwhile, average revenue per contract patient increased 7% year-on-year to EGP 240 in 9M 2019.

Revenues from IDH's walk-in segment made up 41% of IDH's total revenues in 9M 2019 at EGP 681 million, a 17% year-on-year rise. Segment growth was dual-driven by volume and price, with average revenues per walk-in test increasing 9% y-o-y to EGP 128, in line with inflationary pressures, while the total number of walk-in tests increased 7% y-o-y for the period to 5.3 million tests. Overall the walk-in segment contributed c.37% to IDH's consolidated revenue growth in 9M 2019.

The Group's overall average revenue per test increased 2% year-on-year to EGP 71 in 9M 2019. Factoring out the tests performed as part of the 100 million Healthy Lives awareness campaign, average revenue per test would have increased 11% year-on-year to EGP 78. On the other hand, IDH's blended average revenue per patients was up 7% year-on-year to EGP 295. Going forward, with the campaign having come to an end, management expects these key metrics to return to their previous levels.

Revenue Analysis: Contribution by Geography

Revenue Contribution by Country

 
            9M2019   9M2018 
=========  =======  ======= 
 Egypt       85.5%    82.9% 
=========  =======  ======= 
 Jordan      11.7%    13.3% 
=========  =======  ======= 
 Sudan        1.5%     2.1% 
=========  =======  ======= 
 Nigeria      1.3%     1.8% 
=========  =======  ======= 
 

In Egypt, IDH's home market, revenues came in at EGP 1,410 million in 9M 2019, a 24% year-on-year rise for the period largely supported by rising test volumes across both the walk-in and contract segments, with the latter being supported by the 100 million Healthy Lives awareness campaign. Total patients served increased 12% y-o-y to 5.2 million, with the total number of tests performed increasing 19% y-o-y to 21.2 million.

On a segment basis, contract patients in Egypt increased 13% y-o-y to 3.8 million for 9M 2019, while walk-in patients reached 1.3 million, up 10% compared to 9M 2018. The number of contract tests increased 21% y-o-y to 16.8 million in 9M 2019, with 2.4 million related to the 100 million Healthy Lives awareness campaign, while the number of walk-in tests increased 11% y-o-y to 4.4 million in the first nine months of the year. The contract segment saw its revenues rise 22% to EGP 871 million in 9M 2019, while the walk-in segment recorded revenues of EGP 539 million, up 25% y-o-y for the period.

The Group's Jordanian operations recorded a 5% y-o-y rise in revenues to EGP 193 million, (up 10% y-o-y in JOD terms) as Jordanian consumers began to adjust to new inflationary pressures following the government's austerity measures. Biolab, the Group's Jordanian subsidiary, reported a 10% y-o-y rise in patients served in 9M 2019, with the total number of tests performed increasing 9% y-o-y for the period.

In Sudan, results continue to be impacted by the devaluation of the Sudanese pound as revenues in EGP terms came in 12% below last year's figure at EGP 25 million for 9M 2019. On the other hand, in SDG terms, revenues were up 52% in the first nine months of the year as increasingly favourable pricing more than offset the lower test volumes on account of political unrest earlier this year. Growth in SGD terms was largely driven by the walk-in segment which saw a rise in revenue per test as the Group passed on price increases in step with currency devaluation. It should be noted that test volumes in Sudan started to pick up in September 2019 by c.25% compared to September 2018.

At the Group's Nigerian subsidiary, revenues recorded a 14% y-o-y fall to EGP 21 million as the Group's operations are still undergoing restructuring, however, in NGN terms revenue was up 6% y-o-y in 9M 2019. As of September 2019 the Group had renovated a total of eight out of 12 branches in the country, and later rolled out its new Akowonjo branch in October.

Cost of Sales

IDH's cost of sales increased to EGP 856 million in 9M 2019, a 23% y-o-y rise. The Group's gross profit was up 17% y-o-y to EGP 793 million in 9M 2019 with gross profit margin for the period decreasing one percentage point to 48%.

COGS Breakdown as a Percentage of Revenue

 
                     9M2019   9M2018 
==================  =======  ======= 
 Raw Materials        18.5%    18.7% 
==================  =======  ======= 
 Wages & Salaries     17.7%    16.7% 
==================  =======  ======= 
 Depreciation          6.1%     3.6% 
==================  =======  ======= 
 Other Expenses        9.6%    11.6% 
==================  =======  ======= 
 Total                51.9%    50.6% 
==================  =======  ======= 
 

Raw materials costs increased to EGP 305 million in 9M 2019, up 18% y-o-y and continuing to contribute the largest proportion of total consolidated COGS at 35.6%. The average raw material cost per test performed over the period stood at EGP 13.2 in 9M 2019, in line with last year despite the lower contribution margin of tests related to the 100 million Healthy Lives campaign. Raw materials as a percentage of sales stood at 18.5% compared to 18.7% in 9M 2018, in line with management's efficiency and cost-reduction initiatives. Moreover, factoring out the effect of the 100 million Healthy Lives campaign, raw materials as a percentage of sales was 17.9%.

Direct salaries and wages made up the second largest share of total COGS in the nine-month period to September 2019 at 34.1%, as they reached EGP 292 million for the period, up 27% y-o-y. As a percentage of sales, direct salaries and wages increased just one percentage point to 17.7% in 9M 2019.

Direct depreciation and amortisation increased to EGP 101 million, a 103% y-o-y increase in 9M 2019 driven by capitalised leases amounting to EGP 265 million (gross) related to the implementation of IFRS 16 (EGP 33 million). The increase in depreciation expense is also attributable to the addition of Al Borg-Scan's depreciation (EGP 5.7 million), which began operations with its first branch in October 2018. As a result, direct depreciation and amortisation as a percentage of sales rose to 6.1% in 9M 2019 compared to 3.6% in the same period of last year.

EBITDA

IDH's consolidated EBITDA recorded a 27% year-on-year expansion in 9M 2019 to EGP 686 million, with an EBITDA margin of 42%. Normalising for the IFRS effect and Wayak's results, EBITDA recorded EGP 642 million, up 19% y-o-y and with a stable 39% margin. It should be noted that Wayak's pre-operating and operational expenses reduced the Group's EBITDA by EGP 3.6 million.

In Egypt, EBITDA increased 24% y-o-y to EGP 636 million with a 45% margin and contributed the largest share to the Group consolidated EBITDA in 9M2019 (Egypt's EBITDA excluding Wayak recorded EGP 639 million). Jordan witnessed an 81% y-o-y rise in EBITDA for 9M 2019, with EBITDA margin increasing to 36% from the 21% figure recorded in 9M 2018. This was largely due to raw material cost optimization along with further cost savings attributable to salaries and the decrease in rent related to the training centre. Sudan's EBITDA for 9M 2019 was EGP 5.5 million, up from the negative EGP 3.5 million figure reported in the same period of last year. EBITDA margin was 22% compared to the negative 12% margin recorded in 9M 2018. Stronger EBITDA results were supported by a significant increase in 3Q 2019 revenues and a decrease in salaries as the Company replaced Egyptian expats with Sudanese employees. Lastly, in Nigeria, EBITDA losses increased to EGP 26 million up from the negative EGP 12 million EBITDA recorded in 9M 2018. As branch renovations are completed along with the installation of new state-of-the-art radiology equipment, Nigeria is expected to turn EBITDA positive during 2020.

IFRS 16 Effect on Regional EBITDA

 
            EBITDA Excluding   Margin   Rent Expense   EBITDA Including   Margin 
                     IFRS 16                                    IFRS 16 
=========  =================  =======  =============  =================  ======= 
 Egypt                   604      43%             32                636      45% 
=========  =================  =======  =============  =================  ======= 
 Jordan                   58      30%             12                 70      36% 
=========  =================  =======  =============  =================  ======= 
 Sudan                   4.0      16%              2                  6      22% 
=========  =================  =======  =============  =================  ======= 
 Nigeria                (27)        -              2               (26)        - 
=========  =================  =======  =============  =================  ======= 
 Total                   638      39%             48                686      42% 
=========  =================  =======  =============  =================  ======= 
 

Interest Income / Expense

IDH recorded interest income of EGP 29 million in 9M 2019, down 29% year-on-year compared to EGP 40 million in the same nine months of 2018. The decline comes on the back of rate cuts by the Central Bank of Egypt during 2019, along with the decrease in cash balances during 1H 2019 to secure the dividends' payment in June 2019.

Interest expense recorded EGP 49 million in 9M 2019 compared to EGP 10 million in the comparable period of 2018. The significant increase was driven by the implementation of IFRS 16 which added EGP 26 million to the period's interest expense. During the nine-month period, IDH also recorded EGP 16 million in borrowing costs related to medium term loans for the Al Borg Scan expansion (EGP 5 million) and the Group's new headquarters in Cairo's Smart Village (EGP 11 million ).

Foreign Exchange

IDH recorded a net foreign exchange loss of EGP 13 million in 9M 2019 compared to EGP 12 million in 9M 2018. The figure is primarily related to FX transactions related to secure liquidity for the June 2019 dividend distribution.

Taxation

Tax expenses recorded in 9M 2019 were EGP 180 million compared to EGP 148 million in the same period of last year. The effective tax rate was 33% compared to 29%. The increase in the Group's effective tax rate recorded in 9M 2019 is largely attributable to:

-- EGP 4.6 million related to the new tax law imposed by the Egyptian Government (0.25% of income);

   --     IFRS 16 effect is recorded on the consolidated level only and therefore not tax deductible; 
   --     Starting January 2019, the Jordanian corporate tax rate increased 1% to reach 21%. 

There is no tax payable for IDH's two companies at the holding level. Tax was paid on profits generated by operating companies in Egypt and Jordan.

Net Profit

IDH's consolidated net profit recorded a 2% y-o-y increase to EGP 361 million in 9M 2019. The Group's net profit margin for the period contracted to 22% compared to 26% in the same period of 2018, on the back of the adoption of IFRS 16, a year-on-year decrease in interest income, and an increase in net borrowing cost for the period. Normalising for IFRS 16 and Wayak's results (negative EGP 3.6 million), net profit came in at EGP 377 million, up 6% y-o-y and representing a 23% net profit margin.

Net Effect of IFRS 16 on Net Profit

 
            Depreciation   Interest    Rent   Net Effect 
=========  =============  =========  ======  =========== 
 Egypt            (21.8)     (19.6)    32.0        (9.3) 
=========  =============  =========  ======  =========== 
 Jordan           (11.2)      (5.0)    12.2        (4.0) 
=========  =============  =========  ======  =========== 
 Sudan             (0.9)      (1.0)     1.5        (0.4) 
=========  =============  =========  ======  =========== 
 Nigeria           (1.0)          -     1.8          0.8 
=========  =============  =========  ======  =========== 
 Total            (34.9)     (25.6)    47.5       (12.9) 
=========  =============  =========  ======  =========== 
 

Balance Sheet

On the assets side of the balance sheet, IDH held gross property, plant and equipment (PPE) of EGP 1,099 million as at 30 September 2019, an increase from EGP 982 million as of 31 December 2018. The increase reflects CAPEX outlays for the addition and renovation of branches totalling EGP 117 million, including the new Al Borg Scan branch, and reflects foreign currency translation adjustments of EGP 44 million.

Accounts receivable recorded EGP 263 million as at 30 September 2019 compared to EGP 220 million at year-end 2018. Accounts receivables' days-on-hand (DOH) normalised at 132 days following the increase witnessed at year-end 2018 on account of the 100 Million Healthy Lives Campaign. It is worth mentioning that the campaign's receivables balance was EGP 32 million at the close of 9M 2019. Excluding campaign-related receivables, DOH would decrease to 127 days.

The Group's "days inventory outstanding" decreased to 80 days at the close of the first nine months of the year compared to 82 days as at 31 December 2018.

IDH's cash balances decreased to EGP 432 million as at 30 September 2019 from EGP 665 million as at 31 December 2018, reflecting the distribution of EGP 451 million (US$ 26.4 million) in dividends for FY2018 paid in June 2019.

On the liabilities side, accounts payable stood at EGP 123 million at 30 September 2019 versus EGP 150 million at year end 2018. The Group's days payable outstanding (DPO) slightly decreased to 127 days from 138 days at 31 December 2018.

The adoption of IFRS 16 led to the addition of EGP 85 million in short-term lease liabilities and EGP 174 million in long-term lease liabilities as at 30 September 2019.

- Ends --

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END

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