Apr 2, 2012 - We have a dedicated, in-house information technology (âITâ) services team, ...... clients include the Imperial College London Diabetes Centre, ...
PROSPECTUS This document (the “Prospectus”), which comprises a prospectus relating to NMC Health plc (the “Issuer”) prepared in accordance with the Prospectus Rules of the Financial Services Authority (“FSA”) made under section 73A of the Financial Services and Markets Act 2000, as amended (“FSMA”) (the “Prospectus Rules”), has been approved by the FSA under section 87A of the FSMA and filed with the FSA and made available to the public as required by section 3.2 of the Prospectus Rules. Application has been made to the FSA and the London Stock Exchange plc (the “London Stock Exchange”) for the entire issued ordinary share capital of the Issuer to be admitted to the premium listing segment of the Official List of the UK Listing Authority (the “Official List”) and to be admitted to trading on the London Stock Exchange’s main market for listed securities respectively (together, “Admission”). No application has been made or is currently intended to be made for the Shares (as defined below) to be admitted to listing or dealt on any other exchange. Conditional dealings in the Shares are expected to commence on the London Stock Exchange at 8.00 a.m. (London time) on 2 April 2012. It is expected that Admission will become effective, and that unconditional dealings in the Shares on the London Stock Exchange will commence at 8.00 a.m. (London time) on 5 April 2012 (the “Closing Date”). Dealings on the London Stock Exchange before Admission will be conditional upon Admission taking place and will only be settled if Admission takes place. All dealings before the commencement of unconditional dealings will be of no effect if Admission does not take place and such dealings will be at the sole risk of the parties concerned. The Issuer and the Directors (whose names appear on page 65 of this Prospectus) (the “Directors”) accept responsibility for the information contained in this Prospectus. To the best of the knowledge of the Issuer and the Directors (who have taken all reasonable care to ensure that such is the case), the information contained in this Prospectus is in accordance with the facts and contains no omissions likely to affect the import of such information. Prospective investors should read the whole of this Prospectus, including the section entitled “Part II—Risk Factors” beginning on page 8 for a discussion of certain risks and other factors that should be considered in connection with an investment in the Shares. The Shares are only being offered, and this Prospectus is only being distributed, to those eligible investors who are permitted to subscribe for, or purchase, Shares under applicable law as set out in “Part XVI—The Global Offering—Selling and Transfer Restrictions”. Prospective investors should consult a legal adviser, an independent financial adviser or a tax adviser for legal, financial or tax advice.
NMC Health plc
(incorporated and registered in England and Wales under Companies Act 2006, registered number 7712220)
Global Offering of 55,714,286 Shares (subject to an over-allotment option in respect of up to 8,357,142 additional Shares)
Admission to the premium listing segment of the Official List and to trading on the main market of the London Stock Exchange Sole Global Co-ordinator, Sole Sponsor and Sole Bookrunner
Deutsche Bank Joint Lead Managers
Numis Securities Limited
SHUAA Capital Financial Advisers
One Financial Markets
Deloitte Corporate Finance This Prospectus is dated 2 April 2012
Up to 64,071,428 ordinary shares with a nominal value of 10 pence each of NMC Health plc, a company incorporated and registered in England and Wales, are being offered in this global offering (the “Global Offering”). The Global Offering includes 55,714,286 new ordinary shares to be issued by us (the “New Shares”) and, if the Over-allotment Option (as defined below) is exercised, up to 8,357,142 existing ordinary shares to be sold by our selling shareholders named herein (the “Over-allotment Shareholders”) (the “Existing Shares” and, together with the New Shares, the “Shares”). We will not receive any of the proceeds from the sale of the Existing Shares, all of which will be paid to the Over-allotment Shareholders or to such third parties as they may direct on their behalf. The Global Offering comprises an offering of Shares in the United States to “qualified institutional buyers” (each a “QIB”) as defined in, and in reliance on, Rule 144A (“Rule 144A”) under the US Securities Act of 1933, as amended (the “Securities Act”), and outside the United States in offshore transactions in reliance on Regulation S (“Regulation S”) under the Securities Act (together, the “International Offering”). The Global Offering also includes an offering of New Shares (up to a maximum amount of US$5,000,000 at the Offer Price) to be offered, on the terms of the NMC Health plc Doctors and Key Individuals IPO Participation Plan (the “IPP”), to doctors and certain other key individuals employed by the Group in the UAE (the “Doctor Offering”). For a description of the IPP, see “Part XVII—Additional Information—12. Doctors and Key Individuals IPO Participation Plan”. The Over-allotment Shareholders have granted Deutsche Bank AG, London Branch (the “Stabilisation Manager”), an over-allotment option (the “Overallotment Option”) to purchase up to an additional 8,357,142 Existing Shares within 30 days from the date of commencement of conditional trading on the London Stock Exchange at the initial offering price (the “Offer Price”) to cover over-allotments, if any, made in connection with the Global Offering and to cover any short positions resulting from stabilisation transactions.
Offer Price: 210 pence per Share The Shares have not been and will not be registered under the Securities Act and may not be offered or sold within the United States except in transactions exempt from or not subject to the registration requirements of the Securities Act. The Shares are being offered and sold outside the United States in offshore transactions in reliance on Regulation S and within the United States only to QIBs in transactions exempt from the registration requirements of the Securities Act in reliance on Rule 144A. Prospective purchasers are hereby notified that the sellers of the Shares may be relying on the exemption from Section 5 of the Securities Act provided by Rule 144A. For a description of these and certain further restrictions on offers, sales and transfers of the Shares and the distribution of this Prospectus, see “Part XVI—The Global Offering”. The New Shares to be issued pursuant to the Global Offering will, following Admission, rank pari passu in all respects with the Existing Shares and will rank in full for all dividends and other distributions declared.
The distribution of this Prospectus and the offering and sale of the Shares are restricted by law in certain jurisdictions, and this Prospectus does not constitute, and may not be used in connection with, any offer or solicitation in any such jurisdiction or to any person to whom it is unlawful to make such offer or solicitation. No action has been or will be taken in any jurisdiction by the Issuer, the Over-allotment Shareholders or any of Deutsche Bank AG, London Branch, Numis Securities Limited or SHUAA Capital PSC (together, the “Underwriters”) that would permit a public offering of the Shares or possession or distribution of a prospectus in any jurisdiction where action for that purpose would be required. Persons into whose possession this Prospectus may come are required by the Issuer, the Over-allotment Shareholders and the Underwriters to inform themselves about and to observe the restrictions contained in this Prospectus. None of the Issuer, the Over-allotment Shareholders, nor any of the Underwriters accept any responsibility for any violation by any person, whether or not it is a prospective subscriber or purchaser of the Shares, of any of these restrictions. This Prospectus does not constitute or form part of an offer to sell, or the solicitation of an offer to buy, Shares to any person in any jurisdiction to whom or in which such offer or solicitation is unlawful. No representation or warranty, express or implied, is made by the Underwriters named herein as to the accuracy or completeness of information contained in this Prospectus, and nothing in this Prospectus is, or shall be relied upon as, a promise or representation by the Underwriters. NOTICE TO UK INVESTORS This Prospectus is being distributed in the United Kingdom only to and is directed only at (i) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the “Order”); (ii) high net worth entities falling within Article 49(2)(a) to (d) of the Order and to (iii) persons to whom it would otherwise be lawful to distribute it (all such persons together being referred to as “relevant persons”). The Shares are available only to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire the Shares will be engaged in only with, relevant persons. Any person who is within the United Kingdom and not a relevant person should not act or rely on this Prospectus or any of its contents. NOTICE TO EUROPEAN ECONOMIC AREA INVESTORS This Prospectus and the Global Offering are only addressed to and directed at persons in member states of the European Economic Area (“EEA”) that are “qualified investors” as defined under the Prospectus Directive (2003/71/EC) and amendments thereto, including Directive 2010/73/EU (the “2010 PD Amending Directive”) to the extent implemented in the relevant member state (the “Prospectus Directive”). Any person in any member state of the EEA who is not such a qualified investor should not act or rely on this Prospectus or any of its contents. This Prospectus has been prepared on the basis that all offers of the Shares will be made pursuant to an exemption under the Prospectus Directive from the requirement to produce a prospectus for offers of Shares. Accordingly, any person making or intending to make any offer within the EEA of the Shares which are the subject of the Global Offering should only do so in circumstances in which no obligation arises for the Company or any of the Underwriters or any of the Over-allotment Shareholders to produce a prospectus for such offer. Neither the Company nor any of the Underwriters or any of the Over-allotment Shareholders have authorised, nor do we authorise, the making of any offer of the Shares through any financial intermediary, other than offers made by the Underwriters which constitute the final placement of the Shares contemplated in this Prospectus. NOTICE TO PROSPECTIVE INVESTORS IN THE UNITED STATES The Shares offered pursuant to the Global Offering have not been and will not be registered under the Securities Act or with any securities regulatory authority of any state or other jurisdiction of the United States and may not be offered or sold except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in compliance with any applicable state securities laws. Prospective investors are hereby notified that sales of Shares may be made in reliance on an exemption from the provisions of Section 5 of the Securities Act. The Underwriters, through their respective selling agents, may arrange for the Global Offering and resale of the Shares in the United States only to persons reasonably believed to be QIBs in reliance on Rule 144A or another exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in offshore transactions outside the United States in reliance on Regulation S. Any offer i
or sale of Shares in reliance on Rule 144A will be made by broker-dealers who are registered as such under the US Securities and Exchange Act of 1934, as amended (the “Exchange Act”). This Prospectus is being furnished by the Company in connection with an offering exempt from the registration requirements of the Securities Act, solely for the purpose of enabling a prospective investor to consider the subscription for or acquisition of Shares described herein. The information contained in this Prospectus has been provided by the Company and other sources identified herein or therein. This Prospectus is being furnished on a confidential basis only to persons reasonably believed to be QIBs in the United States. Any reproduction or distribution of this Prospectus, in whole or in part, in the United States and any disclosure of its contents or use of any information herein in the United States for any purpose, other than in considering an investment by the recipient in the Shares offered hereby or thereby, is prohibited. Each potential investor in the Shares, by accepting delivery of this Prospectus agrees to the foregoing. THE SHARES OFFERED BY THIS PROSPECTUS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE US SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION IN THE UNITED STATES OR ANY OTHER US REGULATORY AUTHORITY, NOR HAVE SUCH AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THE OFFERING OF SHARES OR THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENCE IN THE UNITED STATES. NOTICE TO NEW HAMPSHIRE RESIDENTS ONLY NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENCE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED STATUTES (“RSA 421-B”) WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE OF THE STATE OF NEW HAMPSHIRE THAT ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT ANY EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE OF THE STATE OF NEW HAMPSHIRE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL, TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT, ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH. For a description of these and certain further restrictions on the offer, sale and transfer of the Shares and distribution of this Prospectus, see “Part XVI—The Global Offering—Selling and Transfer Restrictions”. Please note that by receiving this Prospectus, purchasers shall be deemed to have made certain representations, acknowledgements and agreements set out herein including, without limitation, those set out in “Part XVI—The Global Offering”.
NOTICE TO KINGDOM OF SAUDI ARABIA RESIDENTS This Prospectus may not be distributed in the Kingdom of Saudi Arabia (“KSA”) except to such persons as are permitted under the Offers of Securities Regulations issued by the Capital Market Authority of the KSA (the “Capital Market Authority”). The Capital Market Authority does not make any representations as to the accuracy or completeness of this Prospectus, and expressly disclaims any liability whatsoever for any loss arising from, or incurred in reliance upon, any part of this Prospectus. Prospective purchasers of the Shares should conduct their own due diligence on the accuracy of the information relating to the Shares. If a prospective purchaser does not understand the contents of this Prospectus he or she should consult an authorised financial adviser.
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CONTENTS
PART I: SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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PART II: RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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PART III: IMPORTANT INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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PART IV: DIRECTORS, SECRETARY, REGISTERED OFFICE AND ADVISERS . . . . . . . . . . . . . . . . . .
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PART V: EXPECTED TIMETABLE AND GLOBAL OFFER STATISTICS . . . . . . . . . . . . . . . . . . . . . . . .
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PART VI: OVERVIEW OF THE INDUSTRY AND REGULATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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PART VII: BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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PART VIII: MANAGEMENT AND CORPORATE GOVERNANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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PART IX: USE OF PROCEEDS AND DIVIDEND POLICY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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PART X: SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . .
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PART XI: OPERATING AND FINANCIAL REVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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PART XII: CAPITALISATION AND INDEBTEDNESS STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . .
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PART XIII: HISTORICAL FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 SECTION A: ACCOUNTANT’S REPORT ON HISTORICAL FINANCIAL INFORMATION ON NMC HEALTHCARE LLC AND ITS SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 SECTION B: HISTORICAL FINANCIAL INFORMATION ON NMC HEALTHCARE LLC AND ITS SUBSIDIARIES FOR THE THREE YEARS ENDED 31 DECEMBER 2011 . . . . . . . . . . . . . . 103 PART XIV: UNAUDITED PRO FORMA FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . 130 SECTION A: REPORT ON UNAUDITED PRO FORMA FINANCIAL INFORMATION . . . . . . . . . 130 SECTION B: UNAUDITED PRO FORMA STATEMENT OF FINANCIAL POSITION . . . . . . . . . . 132 PART XV: TAXATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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PART XVI: THE GLOBAL OFFERING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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PART XVII: ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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PART XVIII: DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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PART I: SUMMARY The following information should be read as an introduction to this document. Any decision to invest in the Shares should be based on consideration of this document as a whole and not just this summary. Where a claim relating to the information contained in this document is brought before a court, the plaintiff investor might, under the national legislation of the EEA Member States, have to bear the costs of translating this document before legal proceedings are initiated. Civil liability attaches to those persons who are responsible for this summary, including any translation of this summary, but only if this summary is misleading, inaccurate or inconsistent when read together with the other parts of this document. OVERVIEW We are a leading integrated healthcare provider in the fast-growing UAE market and are one of the largest private sector healthcare providers in the UAE in terms of average daily patient numbers. During the fiscal year ended 31 December 2011, we treated approximately 4,700 patients at our facilities on an average daily basis. As at 31 December 2011, we operated 230 beds and have a broad and diverse network of facilities including hospitals, a day patient medical centre, pharmacies and distribution facilities across the UAE, which we believe makes us one of the largest integrated private sector healthcare companies in the region. We have over 37 years of experience operating an integrated healthcare platform within the UAE, and we believe we were the first company in the UAE to provide private healthcare services. We believe we have a strong track record of deliberate, profitable and well-executed organic growth since commencing operations in 1975 and are currently the only private sector healthcare company with a broad UAE presence. This growth has centred on the addition of new hospitals, capacity expansion within existing facilities, a focus on increasing the number of highvalue specialty procedures we offer and the introduction of state-of-the-art testing equipment, coupled with continuous improvement to service and quality and the addition of pharmacy and distribution businesses to our portfolio. We currently serve the UAE market for self- and privately-insured patients. In 2010, healthcare expenditures in the UAE healthcare market were estimated at approximately US$6.6 billion and forecast to grow to US$10.9 billion by 2013, representing a CAGR of 16.6% (RNCOS, UAE Healthcare Sector Forecast to 2012). We believe that the private healthcare market in the UAE is attractive due to the relatively high barriers to entry in the private hospital sector, a growing privately-insured population following actual and proposed regulatory changes in the UAE, a rising incidence of lifestyle diseases, increased healthcare awareness and strong population growth. We seek to be at the forefront of the healthcare industry in the UAE by introducing advanced technologies and new services and providing specialised healthcare models to provide world-class healthcare services, becoming a pre-eminent emerging markets healthcare provider. OUR STRENGTHS We believe the following competitive strengths distinguish us from our competitors: • we operate in the fast-growing UAE healthcare market, which is supported by favourable demographics; • the UAE has a favourable regulatory environment for independent healthcare operators; • we are a high-quality healthcare provider with superior key performance indicators, or “KPIs”, and a network of diverse high-quality facilities; • our profitable distribution and services segment has a strong distribution network, an efficient logistics infrastructure and provides interrelated services to our healthcare segment; • we have strong brand recognition across the UAE with established relationships with insurance providers; • we have an experienced, long-standing and committed management team; • we have a track record of successfully managing strong, profitable growth; and • we have an experienced and well-trained workforce and strong relationships with doctors.
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OUR STRATEGY Our aim is to become the leading integrated healthcare provider within the UAE and the broader Gulf Cooperation Council (“GCC”) region while continuing to provide high-quality healthcare and distribution and services. We intend to achieve this aim through the implementation of the following key strategies: • maintaining our commitment to a world-class integrated healthcare platform and continuing to enhance growth and operational efficiencies; • maximising the potential of our existing healthcare facilities by increasing productivity, occupancy and capacity and by focussing on providing secondary and tertiary healthcare; • expanding the breadth of our healthcare facilities, pharmacy network and services within the UAE; • expanding the geographic coverage of our services outside of the UAE; • increasing our market share, through dynamic marketing, of the growing distribution market, which has strong fundamentals and is supported by population growth, long-term rising disposable incomes, strong marketing capabilities and brand strength; and • expanding our distribution client base and product offerings. INFORMATION ABOUT THE GLOBAL OFFERING 55,714,286 Shares are being offered in the Global Offering (or 64,071,428 Shares, assuming the Over-allotment Option is exercised in full), assuming the Over-allotment Option is exercised in full, up to 8,357,142 Existing Shares being sold by the Over-allotment Shareholders. The Shares are being offered outside the United States in reliance on Regulation S and within the United States to QIBs only in reliance on Rule 144A. Conditional dealings in the Shares are expected to commence on the London Stock Exchange at 8.00 a.m. (London time) on 2 April 2012. It is expected that Admission will become effective, and that unconditional dealings in the Shares on the London Stock Exchange will commence, at 8.00 a.m. (London time) on 5 April 2012. REASONS FOR THE GLOBAL OFFERING AND USE OF PROCEEDS The net proceeds (after deducting underwriting commissions and other estimated offering-related fees and expenses of approximately US$20.0 million) from the Global Offering will be approximately US$166.3 million. We intend to use the net proceeds of the Global Offering to finance principally our current expansion plans and to fund further future growth opportunities. Based on our current plans, we estimate that capital expenditures necessary to implement our current growth plans will be in the range of US$100 million to US$135 million. See “Part IX—Use of Proceeds and Dividend Policy”. Any remaining net proceeds will be used to fund further growth opportunities. Future growth is likely to include the development or acquisition of businesses and/or facilities in the UAE and elsewhere in the Middle East and North Africa (“MENA”) region. See “Part XI—Operating and Financial Review—Liquidity and Capital Resources—Capital Expenditures”.
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SUMMARY HISTORICAL FINANCIAL INFORMATION The tables below set out summary financial information of NMC Healthcare LLC and its subsidiaries (the “Oldco Group”) for the three years ended 31 December 2009, 2010 and 2011 (the “Historical Financial Information”) and have been extracted without material adjustment from the financial information contained in Section B of “Part XIII—Historical Financial Information”. Consolidated Statement of Comprehensive Income Data Year ended 31 December 2009 2010 2011 (US$ millions)
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 338.9 386.5 Direct costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (236.3) (267.8) GROSS PROFIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102.6 118.7 General and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (61.5) (62.6) Finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4 3.4 Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.9 0.3 PROFIT FROM OPERATIONS BEFORE DEPRECIATION AND FINANCE CHARGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44.3 59.8 Finance charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (16.5) (17.3) Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (15.3) (13.6) PROFIT FROM OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.4 28.9 Pre-operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7.5) (1.8) Rental income from investment properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.0 3.3 Gain (loss) on revaluation of investment properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5 (5.8) (Loss) on investments carried at fair value through profit or loss . . . . . . . . . . . . . . . . . . . . . . . . . . . (1.9) (0.6) Change in fair value of derivative financial instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.4) (0.2) PROFIT FOR THE YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.2 23.8 Other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TOTAL COMPREHENSIVE INCOME FOR THE YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Profit and total comprehensive income attributable to: Equity holders of the parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Earnings per share for profit attributable to the equity holders of the parent: Basic and diluted (USD) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3
443.7 (306.4) 137.4 (68.2) 1.1 1.3 71.6 (17.0) (12.0) 42.5 — 1.2 — — 0.1 43.8
— 8.2
— 23.8
— 43.8
7.6 0.6 8.2
21.1 2.7 23.8
43.0 0.8 43.8
76
211
430
Certain Adjusted EBITDA Data(1)
Year ended 31 December 2009 2010 2011 (US$ millions)
Abu Dhabi Specialty Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dubai Specialty Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Al-Ain Specialty Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dubai General Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sharjah Day Patient Medical Centre . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pharmacies—New Pharmacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pharmacies—Bait Al Shifaa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjusted EBITDA for Healthcare segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . New Medical Centre Trading LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reliance Infotech LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjusted EBITDA for Distribution segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjusted EBITDA for Head Office and eliminations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23.7 4.9 0.2 1.5 0.7 3.6 0.6 35.1 11.5 0.2 11.7 (4.8) 42.0
27.8 32.8 6.0 8.5 5.0 8.7 0.8 1.3 (0.6) 0.4 2.7 4.0 0.5 0.6 42.2 56.2 19.7 24.8 0.2 0.0 19.9 24.8 (5.6) (10.5) 56.4 70.5
Note: (1) For a reconciliation of Adjusted EBITDA, see “Part X—Selected Historical Consolidated Financial Data”.
Consolidated Statement of Financial Position Data As at 31 December 2009 2010 2011 (US$ millions)
ASSETS Non-current assets Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116.8 Investment properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51.5 Long term advances to related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.9 171.2 Current assets Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50.2 Investments carried at fair value through profit or loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.5 Accounts receivable and prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94.0 Amounts due from related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53.0 Bank balances and cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.5 213.1 TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 384.3 EQUITY AND LIABILITIES Equity Share capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shareholders’ account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Statutory reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity attributable to the equity holders of the Parent . . . . . . . . . . . . . . . . . . . . . . . . . Non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-current liabilities Term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Employees’ end of service benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Current liabilities Accounts payable and accruals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amounts due to related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bank overdrafts and other short term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TOTAL EQUITY AND LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
116.3 45.7 2.9 164.9
88.4 — — 88.4
48.8 54.2 4.9 — 110.2 158.6 73.6 — 15.5 54.1 253.0 266.8 417.9 355.2
27.2 27.2 27.2 53.4 43.8 — 4.7 7.7 10.3 4.6 22.7 61.8 89.9 101.4 99.3 1.0 1.6 1.1 90.9 103.0 100.3 66.9 6.6 73.6
20.2 7.5 27.8
35.5 8.9 44.3
70.7 0.1 79.1 70.0 219.8 293.4 384.3
69.9 6.0 105.2 106.1 287.2 314.9 417.9
62.6 1.2 101.3 45.4 210.6 254.9 355.2
Year ended 31 December 2009 2010 2011 (US$ millions)
Consolidated cash flow data: Net cash from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash (used in) from investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash (used in) financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
60.6 35.7 71.4 (33.9) (17.7) 22.1 (27.4) (27.7) (57.4)
(Decrease) increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents at the beginning of the year . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents at the end of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(0.7) (9.7) 36.2 (1.4) (2.1) (11.7) (2.1) (11.7) 24.4
CURRENT TRADING AND PROSPECTS Prospects/Outlook Overall, we have made a positive start to the year with a strong performance in both our healthcare and distribution and services segments. The business is continuing to perform in line with our own expectations with revenue, profitability and margins also increasing in line with our own expectations, and the Directors view the outlook for the current financial year with confidence. Healthcare Suites and Maternity Hospital We have agreed to acquire an operating day patient medical centre in Dubai known as Healthcare Suites from our Chief Executive Officer (“CEO”) and founder, Dr. B.R. Shetty for a consideration of US$9.0 million. We expect to complete this acquisition on or about 1 July 2012. Thereafter, we expect to spend approximately US$5.0 million in additional capital expenditure on equipment and refurbishment for the facility. Healthcare Suites is a high-end specialty day patient medical centre in Dubai Healthcare City that opened in March 2011. In addition, we have commenced refurbishment and development activities to convert an existing building into a new hospital focused on maternity, paediatric care and in-vitro fertilisation located in Abu Dhabi, next to the Al Jazira Club. We expect it to begin operations during the second half of 2012 with 50 beds at opening, with the possibility of later expanding to 100 beds. See “Part VII—Business—Healthcare—Hospitals and Day Patient Medical Centres—Our Expansion Plans”. New Facility On 8 March 2012 our subsidiary NMC Healthcare LLC (the “Borrower”) entered into a new credit facility with a syndicate of lenders led by J.P. Morgan Chase Bank, N.A. for a committed amount of up to US$120 million (the “New Facility”). The New Facility constitutes first priority senior secured indebtedness of the Borrower, ranking pari passu with other existing senior secured obligations of the Borrower. The proceeds from the New Facility will be used in conjunction with the proceeds of the Global Offering to fund our expansion plans. The New Facility provides for two drawdown advances to be made within a period of 30 days from the signing of the New Facility with any undrawn amount to be automatically cancelled. At the date hereof, US$50 million had been drawn down under the New Facility and we have requested the drawdown of the additional US$70 million, which we expect to receive at or prior to Admission. For more information regarding the New Facility, see “Part IX—Use of Proceeds and Dividend Policy”, “Part XI—Operating and Financial Review—Liquidity and Capital Resources—Liabilities and Indebtedness” and “Part II—Risk Factors—Construction of our new hospital at Khalifa City may be delayed if our New Facility becomes repayable as a result of events relating to the guarantors of the New Facility and our financing costs may increase”. DIVIDEND POLICY The Directors intend to adopt a progressive dividend policy while maintaining an appropriate level of dividend cover. This dividend policy will reflect the strong cash flow characteristics and long-term earnings potential of the Issuer and will allow us to retain sufficient capital to fund ongoing operating requirements and continued investment for long-term growth. From 2012 onwards, it is the intention of the Board to target a payout ratio of between 20% and 30% of profit after tax.
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SUMMARY OF RISK FACTORS Prior to investing in the Shares, investors should consider carefully the risks associated with an investment in us, the industry in which we operate, the Shares and the Global Offering, any of which could materially adversely affect our business, financial condition, results of operations, prospects and/or our Share price. Such risks include, but are not limited to, the following: Risks Relating to the UAE and to the MENA Region • While we have approval for more than 49% of our shares to be held by non-UAE or GCC persons, this approval may be revoked or subject to challenge. • Continued instability and unrest in the MENA region may adversely affect the economies in which we do business. • We are subject to the economic and political conditions of operating in emerging markets such as the UAE. Risks Relating to Our Business • Our performance depends on our ability to recruit and retain quality doctors and other healthcare professionals, such as nurses and technicians. • We depend on payments from a relatively small number of insurance providers. If our relationship with these insurance companies deteriorates, if we are unable to negotiate and retain similar fee arrangements, or if these insurance providers are unable to make payments to us, our business may be materially adversely affected. • Our revenue is almost entirely dependent on our operations in the UAE. • Our distribution and services segment is dependent upon exclusive distribution arrangements, the loss of which could have a material adverse effect on our results of operations. • We operate in a regulated sector. Changes in UAE healthcare laws and regulations may materially adversely affect our business. • The implementation of a mandatory health insurance system or similar policy across the UAE may have a material adverse effect on our business. • Challenges that affect the UAE healthcare industry and other external factors also have an effect on our operations. • Hospital groups such as ours are often the subject of litigation by patients, and it is possible that some of these cases will be adversely determined against us; if we are exposed to claims exceeding the scope of our insurance coverage or that are not covered by our insurance policies or if our insurance costs increase, our business, financial condition and results of operations may be materially adversely affected. • We do not have direct licensing rights to operate our medical facilities and pharmacies. • We face competition from other hospitals, retail pharmacies and healthcare providers, which may result in a decline in our revenues, profitability and market share. • Our business may be materially adversely affected if the US dollar/UAE dirham-tied exchange rate were to be removed or adjusted. • We may be unable to manage our growth effectively. • Our growth strategy depends primarily on the construction or development of new hospitals and day patient medical centres, which may be subject to delays. • Construction of our new hospital at Khalifa City may be delayed if our New Facility becomes repayable as a result of events relating to the guarantors of the New Facility and our financing costs may increase. • If we are unable to identify other expansion or investment opportunities in the UAE or other markets or experience delays or other problems in pursuing these opportunities, our business, financial condition and results of operations could be adversely affected.
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• We are subject to risks associated with expansion into new markets. • We may not be able to integrate successfully businesses that we may acquire in the future, and we may not be able to realise the anticipated cost savings, revenue enhancements or other synergies from such acquisitions. • We depend heavily on key personnel, and loss of the services of one or more of our key executives or a significant portion of our management personnel could weaken our management team and materially adversely affect our business, financial condition and prospects. • If we do not continually enhance our facilities with the most recent technological advances in diagnostic and surgical equipment, it could affect our prospects for growth and our reputation. • A failure to maintain the quality of services provided at our facilities may negatively impact our reputation. • Our operations could be impaired by a failure of our information systems. • Leases for buildings and land on which our hospitals are located may not be renewed, and we may lose possession of the leased properties and related buildings and other improvements. • Because of the risks typically closely associated with the operation of medical care facilities, patients may contract serious communicable infections or diseases at our facilities. • Failures in cooling systems at our facilities could have an impact on our operations. • Our distribution and services segment is exposed to the risk of adverse developments and conditions in the markets that produce the products we distribute. • We may suffer the loss of one or more of our significant customers in our distribution and services segment. • We are dependent on a limited number of suppliers to provide products to our distribution and services segment. • Our ability to effectively provide the services we offer or manage our margins for our healthcare segment could be negatively affected by increases in costs or disruptions in the availability of supplies. • We are dependent on the frequency and rate of the introduction of generic drugs and brand name prescription products. • Our distribution and services segment is potentially subject to price competition from illegally imported counterfeit products. • We are dependent on third-party suppliers and sub-contractors. • Changes in tax laws or their application could materially adversely affect our business, financial condition and results of operations. Risks Relating to the Global Offering and to the Shares • After the Global Offering, certain shareholders will continue to be able to exercise significant influence over us, our management and our operations. • Substantial sales of Shares by significant shareholders could depress the price of our Shares. • The Global Offering may not result in an active or liquid market for the Shares. • We may not pay cash dividends on our Shares. Consequently, you may not receive any return on investment unless you sell your Shares for a price greater than that which you paid for it. • We could undertake future equity issues, which could have an adverse effect on the market price of the Shares and dilute ownership. In addition, non-UK persons may not be able to exercise pre-emptive rights with respect to their Shares. • Our stock price may change significantly following the Global Offering, and you could lose all or part of your investment as a result. • The market price of the Shares may be affected by fluctuations in exchange rates. • It may be difficult for shareholders to enforce judgments against our assets held in the UAE, or against our Directors and Senior Management.
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PART II: RISK FACTORS Investing in and holding the Shares involves financial risk. Investors in the Shares should carefully review all of the information contained in this Prospectus and should pay particular attention to the following risks associated with an investment in us and the Shares which should be considered together with all other information contained in this Prospectus. If one or more of the following risks were to arise, our business, financial condition, results of operations, prospects and/or our share price could be materially and adversely affected and investors could lose all or part of their investment. The risks set out below may not be exhaustive and do not necessarily comprise all of the risks associated with an investment in us and the Shares. Additional risks and uncertainties not currently known to us or which we currently deem immaterial may arise or become material in the future and may have a material adverse effect on our business, results of operations, financial condition, prospects and/or share price. You should consult a legal adviser, an independent financial adviser or a tax adviser for legal, financial or tax advice if you do not understand this Prospectus. Risks Relating to the UAE and to the MENA Region While we have approval for more than 49% of our shares to be held by non-UAE or GCC persons, this approval may be revoked or subject to challenge. The Commercial Companies Law of the UAE (the “UAE Companies Law”), together with related UAE regulations and policies, provides that every company incorporated in the UAE must have one or more shareholders who are UAE nationals or entities (or nationals or entities of other states of the GCC) who hold not less than 51% of that company’s share capital. As a result, a foreign person or entity may only own up to 49% of the shares of a company incorporated under the UAE Companies Law (the “Ownership Restriction”). NMC Holdings LLC (“NMC Holdings”), our intermediate holding company which holds, directly or indirectly, all of our operating assets, is wholly-owned by the Issuer and NMC Health Holdco Limited, which are both companies incorporated in England and Wales. The constitutional documents of NMC Holdings have, with the approval of the Ministry of Economy, the competent authority in respect of NMC Holdings, been amended such that: •
the objects of NMC Holdings have been extended to include certain activities that it does not currently perform with the result that it is no longer a company to which the UAE Companies Law applies to the extent provided in its constitutional documents; and
•
the constitutional documents of NMC Holdings expressly provide that the shares held by UAE nationals or entities in NMC Holdings may be less than 51% (the “Foreign Ownership Approval”).
As a result, the Ownership Restriction does not currently apply to NMC Holdings. There is a risk that the Foreign Ownership Approval may be revoked or revised by the Ministry of Economy or challenged in the courts of the UAE by a third party. While we believe that the Foreign Ownership Approval is valid, the laws of Abu Dhabi and the federal laws of the UAE are not capable of conclusive interpretation and, as no general system of binding judicial precedent exists in the UAE, the interpretation of UAE law may not follow prior judicial decisions. If the Foreign Ownership Approval were to be revoked or disapplied by a UAE court, NMC Holdings would be in breach of the Ownership Restriction. This could subject us to sanctions from the UAE authorities that could require the Issuer to dispose of a majority stake in NMC Holdings. In such circumstances, the Directors would seek to mitigate the effect on us by implementing a structure whereby a majority stake in NMC Holdings would be held by a UAE national, but the economic benefit and control attaching to those shares would be retained by us. If the Directors were not able to mitigate the effect on us, this could have a material adverse effect on our business, financial condition and results of operations and could materially and adversely affect the market price of the Shares. Continued instability and unrest in the MENA region may adversely affect the economies in which we do business. Since late 2010, there have been significant civil disturbances and political turmoil affecting several countries in the MENA region, which to date have led to the collapse of the political regimes of Tunisia, Egypt and Libya. Syria is currently experiencing significant nationwide protests and violence, and there are ongoing protests in other countries in the MENA region, including strikes, demonstrations, marches and rallies. In addition, since 8
late 2011, tensions between western nations and Iran in respect of Iran’s nuclear programme have escalated, with Iran threatening to block the Strait of Hormuz and western nations implementing more severe economic sanctions against Iran. Such continuing instability and unrest in the MENA region may significantly impact the economies in which we do business, including both the financial markets and the real economy. Such impacts could occur through a lower flow of foreign direct investment into the region, capital outflows or increased volatility in the global and regional financial markets. Although the UAE has not been directly impacted by the unrest in the broader region to date, it is unclear what impact this unrest may have on the UAE or any of the countries in which we do business in the future. Our business, financial condition and results of operations may be materially adversely affected if and to the extent this regional volatility leads to an outflow of expatriate residents or capital, or to potential instability or government change in the UAE. See “—Risks Relating to Our Business—Our revenue is almost entirely dependent on our operations in the UAE”. We are subject to the economic and political conditions of operating in emerging markets such as the UAE. We operate predominantly in the UAE, which is generally viewed as a jurisdiction with a developing economy. Some countries in which we do business do not have firmly established legal and regulatory systems, and some of them, from time to time, have experienced economic, social or political instability. Some of these countries are in the process of transitioning to a market economy and, as a result, are experiencing changes in their economies and their government policies that can affect our business in these countries. Specific country risks that may have a material adverse effect on our business, financial condition and results of operations include, among other things: • political instability, riots or other forms of civil disturbance or violence; • war, terrorism, invasion, rebellion or revolution; • government interventions, including expropriation or nationalisation of assets, increased protectionism and the introduction of tariffs or subsidies; • changing fiscal and regulatory regimes; • arbitrary or inconsistent government action; • inflation in local economies; • cancellation, nullification or unenforceability of contractual rights; and • underdeveloped industrial and economic infrastructure. In particular, political instability continued throughout 2011 in a number of countries in the MENA region, such as Bahrain, Egypt, Jordan, Libya, Oman, Tunisia and Yemen. Unrest in those countries may also have implications for the wider global economy and may negatively affect market sentiment towards other countries in the region, including the countries in which we operate, and towards securities issued by companies in the region, including those in the UAE. Additionally, changes in investment policies or shifts in the prevailing political climate in any of the countries in which we operate, or seek to operate, could result in the introduction of increased government regulations with respect to, among other things: • price controls; • export and import controls; • income and other taxes; • foreign ownership restrictions; • foreign exchange and currency controls; and • labour and welfare benefit policies. Any unexpected changes in the political, social, economic or other conditions in such countries, or in neighbouring countries, could have a material adverse effect on our business, financial condition and results of operations. 9
Risks Relating to Our Business Our performance depends on our ability to recruit and retain quality doctors and other healthcare professionals, such as nurses and technicians. Our operations depend on the number, efforts, ability and experience of the doctors and other healthcare professionals at our hospitals. We compete with other healthcare providers, including those located in North America, India, the European Union (“EU”) and Egypt to recruit and retain qualified doctors and other healthcare professionals. In some cases, doctor recruitment and retention is affected by a shortage of doctors in certain specialties. The reputation, expertise and demeanour of the doctors and other medical professionals who provide medical services at our hospitals are instrumental to our ability to attract patients. The success of our hospitals depends, therefore, in part on the number and quality of the doctors on the medical staffs of our hospitals, the admitting practices of those doctors and our maintaining good relations with those doctors. The factors that doctors consider important in deciding where they will work include compensation package, reputation of hospital, quality of equipment and facilities, quality and number of supporting staff and market leadership of the hospital. We may not be able to compete with other healthcare providers on all these factors. In addition, we have experienced and expect to continue to experience significant wage and benefit pressures created by a current global shortage of healthcare professionals. We expect this global shortage to continue, and we may be required to enhance wages and benefits to recruit and retain healthcare professionals in the face of increasing opportunities for our healthcare professionals to work in other jurisdictions, such as North America, India, the EU and Egypt. Moreover, since the ability to attract, hire, relocate and retain medical personnel from abroad is an important element of our human resource planning, local immigration and medical licensing requirements significantly affect our staffing requirements. Immigration and medical licensing applications for medical personnel may take several months or more to be finalised. If we are unable to complete the requisite licence and visa applications, either as a result of changing requirements or otherwise, our ability to implement successfully our business strategy could suffer, which may have a material adverse effect on our business, financial condition and results of operations. Furthermore, the loss of a significant number of our doctors or other healthcare professionals, or the inability to attract or retain sufficient numbers of qualified doctors and other healthcare professionals, could have a material adverse effect on our business, financial condition and results of operations. We depend on payments from a relatively small number of insurance providers. If our relationship with these insurance companies deteriorates, if we are unable to negotiate and retain similar fee arrangements, or if these insurance providers are unable to make payments to us, our business may be materially adversely affected. Over the last few years, an increasing proportion of our revenues has been received from public and private health insurance companies. For the three fiscal years ended 31 December 2009, 2010 and 2011, revenue from insurance companies represented 75.4%, 78.6% and 80.5% of our total healthcare revenues, respectively. Of our total revenues from our healthcare segment, in the fiscal year ended 31 December 2011, 56.3% was derived from five insurance companies. We generally negotiate on an annual basis with insurance companies regarding the fees or pricing arrangements to be paid to us for services provided at our facilities. Recently, some of these insurance companies have joined third-party administration (“TPA”) organisations, which insurers use to control costs by centralising back office functions, processing claims and negotiating fees and pricing arrangements with hospitals. We may face downward pressure on some of the payment rates from these insurers and TPAs, particularly if there is further consolidation of insurance companies into TPAs, which may strengthen their bargaining position and result in less favourable pricing and other terms for us. We may also be unable to pass on effectively any increases in our cost base to the tariffs paid by insurers. Our future success will depend, in part, on our ability to maintain good relationships with insurance providers. Competition from other hospital groups and healthcare providers in the region may also impact our relationships 10
with, or ability to negotiate fee increases or other favourable terms from, insurance providers. If our relationship with insurers deteriorates, we may be unable to negotiate favourable fee arrangements and/or our business may otherwise be adversely affected. We are also exposed to the risk that insurance companies may reject, delay or fail to make payment for claims we submit for medical services rendered to patients claiming coverage under such schemes. Such risk may arise from human or computer error, gaps in system and process compatibility between us and the insurance companies, or financial difficulties such as liquidity constraints and insolvency experienced by the insurance companies. An increase in claims rejections or significant failures by insurance companies to make payments could have a material adverse effect on our business, financial condition and results of operations. Our revenue is almost entirely dependent on our operations in the UAE. Our operations are principally located in the UAE, where we generated almost all of our revenue in the three fiscal years ended 31 December 2009, 2010 and 2011. Our results of operations are, and are expected to continue to be, significantly affected by financial, economic and political developments in or affecting the UAE and, in particular, by the level of economic activity in the UAE. The UAE economy is heavily dependent on expatriate workers and consumers, with the expatriate community representing approximately 87% of the UAE population as at 31 December 2010, according to the Health Authority of Abu Dhabi (“HAAD”). Any significant reduction in the number of expatriates in the UAE could lead to a reduction in the number of patients at our facilities. Although the UAE economy has grown significantly over the past decade, the global economic crisis that commenced in the latter half of 2007 (the “Financial Crisis”) had a significant adverse impact on the country. While the central bank of the UAE introduced various measures in response to the crisis, including measures to support liquidity and inject capital into certain sectors, the Financial Crisis has had an adverse effect on our business. There can be no assurance that economic growth or performance in the UAE can or will be sustained. Furthermore, the UAE economy, like those of many emerging markets, has been characterised by significant government investment or involvement and extensive regulation in areas such as foreign investment, foreign trade and financial services. See “—Risks Relating to the UAE and to the MENA Region—We are subject to the economic and political conditions of operating in emerging markets such as the UAE”. If the UAE economy suffers another decline, or if government intervention in the UAE economy restricts or limits economic growth, this could have a material adverse effect on our business, financial condition and results of operations. Our distribution and services segment is dependent upon exclusive distribution arrangements, the loss of which could have a material adverse effect on our results of operations. Our distribution and services segment constituted 55.9%, 55.6%, and 53.7% of our revenue (including intragroup sales) and 25.1%, 32.0%, and 30.5% of our total segmental Adjusted EBITDA in the three fiscal years ended 31 December 2009, 2010 and 2011, respectively, and depends on exclusivity arrangements with our suppliers. We have historically not faced significant competition in the products we distribute because of these exclusivity arrangements. Under UAE law, agency agreements, such as our exclusivity arrangements, must be registered with the Ministry of Economy in order to be enforceable. While we believe our exclusivity arrangements are properly registered, if we were to lose our exclusivity arrangements with our suppliers, or if our exclusivity arrangements were determined to be unenforceable under UAE law, we could face increased competition from new and existing distributors in the markets in which we distribute our products. This increased competition could reduce prices for the products we distribute and could lead to lower profits for our distribution and services segment in the future, which would have a material adverse effect on our business, financial condition and results of operations. We operate in a regulated sector. Changes in UAE healthcare laws and regulations may materially adversely affect our business. The healthcare industry is subject to laws, rules and regulations in the regions where we currently conduct our business or to which we intend to expand our operations. The UAE healthcare industry, in particular (including the regulations that affect the healthcare-related aspects of our distribution and services segment, such as the importation and sale of pharmaceutical products) is heavily regulated. We believe that the healthcare industry in 11
the UAE is one of the fastest-growing sectors in the country and one in which the UAE, in particular the governments of Abu Dhabi and Dubai, continues to commit large investment in the development and improved regulation of the industry. In the UAE, our hospitals, our day patient medical centre and our pharmacies are regulated by various bodies, including HAAD, Dubai Health Authority (“DHA”) and the UAE Ministry of Health (“MoH”). We are subject to extensive international and local regulation relating, among other things, to: • pricing of services; • conduct of operations; • addition of facilities and services; • adequacy of medical care, including required ratios of nurses to hospital beds; • quality of medical equipment and services; • qualifications of medical and support personnel; • confidentiality, maintenance and security issues associated with health-related information and medical records; • the screening, stabilisation and transfer of patients who have emergency medical conditions; and • the handling and disposal of medical waste. In 2011, HAAD instituted a new pricing structure for healthcare services called Diagnostic Related Groupings (“DRG”), which consolidated procedures and placed treatments into packages for which flat fees are charged. There can be no assurance that future regulatory changes in respect of pricing will not have a material adverse effect on our business, financial condition and results of operations in the future. In addition, safety, health and environmental laws and regulations in the UAE have been increasing in stringency in recent years and it is possible that they will become significantly more stringent in the future. To comply with these requirements, we may have to incur substantial operating costs and/or capital expenditure in the future. Further, if a determination is made that we were in material violation of such laws, rules or regulations, our business, financial condition and results of operations could be materially adversely affected. In addition, regulation in the healthcare industry is constantly changing, and we are unable to predict the future course of international and local regulation. Further changes in the regulatory framework affecting healthcare providers could have a material adverse effect on our business, financial condition and results of operations. The implementation of a mandatory health insurance system or similar policy across the UAE may have a material adverse effect on our business. Following the introduction of a mandatory health insurance plan to all residents and expatriates in Abu Dhabi in 2007, all the emirates in the UAE are in the process of widening affordable access to healthcare services through similar schemes. In line with trends in Abu Dhabi, we expect that government-backed insurance companies will provide the largest proportion of mandatory health insurance in the UAE. See “Part VI—Overview of the Industry and Regulation”. An expansion in the government’s role in the UAE healthcare industry may lower reimbursement rates for our services and facilities, thus affecting profitability. These reforms might also reduce patient volumes at private hospitals by requiring patients with basic insurance plans to use government hospitals, change the nature of our patient base, affect our relationship with doctors or medical schemes, or impose other requirements or restrictions on us. Any of these factors could have a material adverse effect on our business, financial condition and results of operations. Challenges that affect the UAE healthcare industry and other external factors also have an effect on our operations. We are impacted by the challenges currently facing the healthcare industry as a whole. We believe that the key ongoing industry-wide challenges are providing quality patient care in a competitive environment and managing costs. In particular, the patient volumes and net operating revenues at our hospitals and related healthcare facilities are subject to economic and seasonal variations caused by a number of factors, including, but not limited to: • unemployment levels; 12
• the business environment of local communities; • the requirements of medical insurance and the extent of patients’ insurance coverage; • seasonal cycles of illness; • climate and weather conditions; • vacation patterns and religious observance of both patients and doctors; • healthcare competitors; and • other factors relating to the timing of elective procedures. If we fail to face these challenges effectively, this could have a material adverse effect on our business, financial condition and results of operations. Hospital groups such as ours are often the subject of litigation by patients, and it is possible that some of these cases will be adversely determined against us; if we are exposed to claims exceeding the scope of our insurance coverage or that are not covered by our insurance policies or if our insurance costs increase, our business, financial condition and results of operations may be materially adversely affected. In recent years, plaintiffs have brought actions against hospitals and other healthcare providers in the UAE, including against our hospitals, alleging malpractice, product liability or other legal claims. To date, none of the actions against our hospitals has involved large claims or significant defence costs, although there can be no assurance that we will not face significant claims in the future. Although we maintain professional liability and general liability insurance coverage to cover claims arising out of the operations of our hospitals, which have been adequate in the past, there can be no assurance that our insurance coverage will be sufficient to cover all future claims. Consequently, while we will continue to defend ourselves vigorously against claims and lawsuits, these matters could: • require us to pay substantial damages or amounts in judgments or settlements which, individually or in the aggregate, could exceed amounts, if any, that may be recovered under our insurance policies where coverage applies and is available; • harm our reputation and the goodwill associated with our brand; • cause us to incur substantial expenses and/or substantial increases in our insurance premiums; • require significant time and attention from our management; and • require us to incur debt to finance any judgment or settlement. In addition, some doctors in the UAE, including those who practise at some of our hospitals, could face increases in malpractice insurance premiums or limitations on availability of insurance coverage. If any of our doctors were unable to obtain appropriate insurance coverage, the affected doctors would be unable to practise, and this, in turn, could result in lower admissions to our hospitals. All reinsurance and any excess insurance purchased by us are subject to policy aggregate limitations. Should such policy aggregates be partially or fully exhausted in the future or if actual payments of claims materially exceed projected estimates of claims, our business, financial condition and results of operations could be materially adversely affected. We do not have direct licensing rights to operate our medical facilities and pharmacies. Under UAE law and regulations, licences for the operation of medical facilities and pharmacies are issued to “persons”, which has been interpreted by HAAD and DHA as natural persons only, rather than corporate bodies. UAE corporate entities cannot hold medical facility or pharmacy licences in their own name. Consequently, in common with other hospitals and pharmacies operating in the UAE who are subject to the same law and regulation all of our medical facilities and pharmacies operate under licences issued in the name of individuals who are UAE nationals. A list of these licences is set out in “Part VI—Overview of the Industry and Regulation”. In our case, all of the licences to operate our medical facilities and pharmacies are issued in the names of either H.E. Mr. Saeed Bin Butti or Mr. Khalifa Bin Butti, who are both significant shareholders, members of the Board and also UAE nationals (other than two pharmacy licences which are in the process of being transferred from the previous shareholder, which transfer is expected to be completed prior to Admission). It is not clear whether a UAE court would consider any third-party challenges to our ability to operate medical facilities and pharmacies through licences issued in the name of individuals rather than in our own name. Although we are not aware of any such challenge, our ownership and operational rights in respect of our medical facilities and pharmacies may 13
not be immune to any such challenge. The Directors are not aware of any hospital or pharmacy in the UAE that has been unable to operate continuously or been subject to regulatory or third-party challenge, as a result of the licence being held by an individual rather than the relevant corporate entity that owned the hospital or pharmacy. In addition, the licensing structure adopted by the Company has been accepted by the relevant regulatory authorities in the emirates in which it operates. Moreover, there can be no assurance that if these direct or indirect shareholders ceased to be our shareholders (through, for example, the death of one of them), or if there were a deterioration in our relationship with those licence holders, our ability to continue to operate the affected medical facility or pharmacy would remain unimpaired. If there were a successful challenge to the operation of our medical facilities or pharmacies, we would cease to be able to operate those medical facilities or pharmacies, and it is likely that we would need to dispose of those medical facilities or pharmacies, which would have a material adverse effect on our business, financial condition and results of operations. If the relevant licence holder died or otherwise ceased to be able or willing to let us operate the relevant medical facility or pharmacy, we would need to obtain new licences in the name of a different licence holder who was willing to act in that capacity. The process of changing the identity of the licence holder of record is an administrative one involving the submission of certain documentation with the relevant authorities. The relationship agreement between H.E. Mr. Saeed Bin Butti, Dr. B.R. Shetty, Mr. Khalifa Bin Butti and Infinite Investment LLC, which is owned by H.E. Mr. Saeed Bin Butti and Mr. Khalifa Bin Butti (the “Existing Shareholders”) and the Company (the “Relationship Agreement”) to regulate the relationship after Admission, provides that the existing licenceholders must cooperate and provide assistance to the Company in connection with obtaining such new licences. There are no specific requirements for the identity of the licence holder (other than that they are a UAE national with an ownership interest in the Company) since these licences are not related to the accreditation process for healthcare facilities. In our experience, it usually takes between one and two weeks for such new licences to be obtained. There can be no assurance, however, that we will be able to obtain such new licences in a timely manner, on acceptable terms or at all. Any delay in identifying such a new licence holder or obtaining a new licence could have a material adverse effect on our business, financial condition and results of operations. We face competition from other hospitals, retail pharmacies and healthcare providers, which may result in a decline in our revenues, profitability and market share. The healthcare business in the UAE, including hospital and retail pharmacy businesses, is competitive, and competition among hospitals, retail pharmacies and other healthcare providers for patients and customers has intensified in recent years. Hospitals compete on factors such as reputation, clinical excellence and patient satisfaction. In some cases, competing hospitals in Dubai and Abu Dhabi are more established than our hospitals. We also face competition from other providers such as stand-alone laboratories, orthopaedic, oncology, radiology and imaging centres. We may face further competition from international healthcare companies with resources substantially greater than ours, which may begin providing services in the UAE in the future. State-owned hospitals and day patient medical centres may have substantially greater resources than we do, and although the current policy of the government of Abu Dhabi is to allow the private sector a greater role in healthcare by allowing UAE nationals to use their medical insurance coverage in private hospitals, there can be no guarantee that this policy will continue. In recent years, the government of Abu Dhabi has invited and allowed certain international hospital operators to enter into management, co-operation and/or co-branding arrangements with large, state-owned hospitals in Abu Dhabi. In addition, the three year UAE Federal Government Strategy of 2007 encouraged the signing of participation and co-operation agreements between government hospitals across the UAE and internationally recognised healthcare providers. The international reputation of these operators and their ability to draw resources, including medical staff from their home markets, may constitute attractive features for many patients, thus increasing our competition. It is also possible that there will be significant consolidation in the medical industry. Our competitors may develop alliances, and these alliances may acquire significant market share. Concentration within the sector, or other potential moves by our competitors, could improve their competitive position and market share. In addition, it is possible that government healthcare facilities in Abu Dhabi and/or across the MENA region could be privatised, which could significantly increase competition in the private hospital market. In addition, hospitals and day patient medical centres that focus on one or only a few medical specialities continue to operate and are currently being developed such as the Al Ain Cromwell Hospital, a specialty hospital focussed on women and children which is currently under development and is expected to open in 2012. If the number of such hospitals and day patient medical centres increases over time, they may attract patients for their respective specialities who might otherwise go to our hospitals for the same specialities, causing increased competition for our business, which could, in turn, negatively affect our patient volumes and overall market share. 14
Should we fail to compete effectively with other healthcare providers, retail pharmacies and other firms generally, our business, financial condition and results of operations could be materially adversely affected. Our business may be materially adversely affected if the US dollar/UAE dirham-tied exchange rate were to be removed or adjusted. Almost all of our current revenues derive from our operations in the UAE. However, while our functional currency is UAE dirhams, our financial reporting is in US dollars. Although the US dollar/UAE dirham exchange rate is currently fixed, it may not be so in the future. Alternatively, the existing fixed rate may be adjusted in a manner that increases the costs of purchasing hospital and medical supplies used in our business or increases our repayment obligations under any of our indebtedness that is denominated in US dollars or negatively impacts the valuation of our international investments. Any removal or adjustment of the fixed rate could cause our operations and reported results of operations and financial condition to fluctuate due to currency translation effects, which could have a material adverse effect on our business, financial condition and results of operations. We may be unable to manage our growth effectively. We intend, both through organic growth and acquisitions, to continue to grow our existing business in the UAE by increasing capacity at our existing hospitals and facilities and opening new hospitals and facilities. In the short-term, we are developing a maternity hospital in Abu Dhabi which we expect to open in the second half of 2012, and we expect to complete our acquisition of an operating day patient medical centre in Dubai known as Healthcare Suites on or about 1 July 2012. In addition, we plan to develop day patient medical centres at Dubai Investment Park, a suburban industrial zone near Dubai, and in Mussafah, a suburb of Abu Dhabi. We are also exploring the feasibility of developing a day patient medical centre on Sheikh Zayed Road in Dubai. Assuming the New Facility is available to us, we also intend to develop, in a number of phases, a 250-bed hospital at Khalifa City. In the long-term, we intend to continue to expand in the UAE and to expand into new geographic areas. Our growth is expected to place significant demands on our management and operational resources. In order to manage growth effectively, we must implement and improve operational systems, procedures and internal controls on a timely basis. If we fail to do so, or if there are any present or future weaknesses in our internal control and monitoring systems, we may not be able to service our patients’ needs, hire and retain new employees, pursue new business, effectively manage new hospital construction, properly budget costs, accurately estimate operational costs or otherwise operate our business effectively. Our inability to manage our planned business expansion effectively could have a material adverse effect on our business, financial condition and results of operations. Our growth strategy depends primarily on the construction or development of new hospitals and day patient medical centres, which may be subject to delays. Construction of the Khalifa City hospital and any other facilities we develop in connection with our growth strategy will require significant design, construction and development work. This includes a number of critical activities before and during construction that are beyond our control or the control of our contractors. For example, obtaining required governmental approvals and permits may take substantially more time and resources than anticipated or construction projects may not be completed on schedule and within budget. In addition, the time and the costs involved with completing the development and construction of hospital projects can be adversely affected by many factors, including: • shortages of materials, equipment and labour; • adverse weather conditions; • natural disasters; • labour disputes with contractors or subcontractors; • accidents; • changes in laws or government priorities; • our ability to secure appropriate contracts with reliable contractors to complete projects; • the ability of contractors to complete projects in a timely manner and on budget; and • other events that we cannot anticipate. The occurrence of any of these factors may have a material adverse effect on our growth strategy and therefore on our business, financial condition and results of operations. 15
In addition, our projects may incur significant cost overruns and may not be completed on time or at all. New hospital projects are characterised by development periods and substantial capital expenditures. We may not achieve the operating levels that we expect from future projects, and we may not be able to achieve our targeted return on investment on, or intended benefits or operating synergies from, these projects. In view of the highly competitive nature of the industry in which we operate, we may have to revise our management estimates from time to time and, consequently, our funding requirements may also change. This may result in the rescheduling of our proposed project expenditures and an increase or decrease in our proposed expenditures for a particular project. Any unanticipated increase in the cost of expansion could adversely affect our estimates of the cost and ability to implement our plans as proposed. This could have a material adverse effect on our business, financial condition and results of operations. Construction of our new hospital at Khalifa City may be delayed if our New Facility becomes repayable as a result of events relating to the guarantors of the New Facility and our financing costs may increase. Our New Facility contains mandatory repayment provisions unrelated to our financial performance that permit the majority lenders under the New Facility to declare all outstanding amounts due and payable in certain circumstances. These circumstances include the death, loss of capacity or the bankruptcy of any of the personal guarantors of the New Facility, including our CEO Dr. B.R. Shetty. If our New Facility becomes due and if it is made repayable, we may be unable to arrange alternative financing on acceptable terms when required, or at all. In those circumstances, we would delay the construction of our new hospital in Khalifa City, Abu Dhabi, which we would otherwise plan to commence by the end of 2012, until such time as we decide that we have sufficient funding available to commence construction. In the event that we are able to arrange alternative financing, our interest expense associated with the financing may increase, which could have a material adverse effect on our business, financial condition and results of operations. See “Part XI—Operating and Financial Review— Liquidity and Capital Resources—Capital Expenditures”. If we are unable to identify other expansion or investment opportunities in the UAE or in other markets or experience delays or other problems in pursuing those opportunities, our business, financial condition and results of operations could be adversely affected. Our growth also depends on, among other things, our ability to expand by investing in additional hospitals in the UAE or in other markets. Although we continuously evaluate investment opportunities, we may not be able to identify suitable sites for new hospitals or hospital management opportunities or negotiate attractive terms for such acquisitions or investments. The number of attractive expansion opportunities may be limited and may command high valuations. In addition, we may be unable to secure the necessary financing to implement expansion projects. If we cannot identify suitable expansion opportunities or secure financing for our expansion plans, our business, financial condition and results of operations could be adversely affected. We are subject to risks associated with expansion into new markets. We currently operate hospitals in the UAE, with all of our hospitals located in Abu Dhabi, Dubai and Al-Ain and our day patient medical centre located in Sharjah. As part of our growth strategy, we are exploring opportunities to open hospitals outside the UAE in countries such as Egypt, Qatar and Saudi Arabia. Expansion into new markets will subject us to various challenges, including those relating to our lack of familiarity with the culture and economic conditions of these new countries, language barriers, difficulties in staffing and managing such operations, and lack of brand recognition and reputation in such markets. The costs involved in entering new markets and expanding operations may be higher than expected, and we may face significant competition. With our expansion into new markets, we could be subject to additional risks associated with establishing and conducting operations outside of the UAE, including: • currency fluctuations; • compliance with a wide range of laws, regulations and practices, including uncertainties associated with changes in laws, regulations and practices and their interpretation; • trade restrictions, exchange controls and currency restrictions; • exposure to expropriation or other government actions; and • political, economic and social instability. 16
Since our experience in operating hospitals outside of the UAE is limited, we may not be successful in operating hospitals outside this market and it may be more difficult for us to integrate such hospitals or capitalise on our brand recognition with respect to such hospitals. This could have a material adverse effect on our business, financial condition and results of operations. We may not be able to integrate successfully businesses that we may acquire in the future, and we may not be able to realise the anticipated cost savings, revenue enhancements or other synergies from such acquisitions. Part of our growth strategy in our healthcare and distribution and services segments involves potential acquisitions. The process of integrating such acquired businesses involves risks. These risks include, but are not limited to: • demands on management related to integration processes; • diversion of management’s attention from the management of daily operations to the integration of newly acquired operations; • difficulties in the assimilation of different corporate cultures, practices and sales and distribution methodologies; • difficulties in conforming the acquired company’s accounting, book and records, internal accounting controls, and procedures and policies to ours; • retaining the loyalty and business of the customers of acquired businesses; • retaining employees who may be vital to the integration of the acquired business or to the future prospects of the combined businesses; • difficulties and unanticipated expenses integrating technologies and maintaining uniform standards, such as internal accounting controls, procedures and policies; and • unanticipated costs and expenses associated with any undisclosed or potential liabilities. Failure to transfer business operations successfully and to otherwise integrate the former operations of any acquired businesses may result in lower levels of revenue, earnings or operating efficiency than those we have achieved or might have achieved if we had not acquired such businesses, and the loss of customers of the acquired businesses. Furthermore, even if we are able to integrate the former operations of acquired businesses successfully, we may not be able to realise the potential cost savings, synergies and revenue enhancements that were anticipated from the integration, either in the amount or within the time frame that we expect, and the costs of achieving these benefits may be higher than, and the timing may differ from, what we expect. Our ability to realise anticipated cost savings, synergies and revenue enhancements may be affected by a number of factors, including, but not limited to, the following: • the use of more cash or other financial resources on integration and implementation activities than we expect; • increases in other expenses unrelated to the acquisitions, which may offset the cost savings and other synergies from the acquisitions; • our ability to eliminate duplicative back-office overhead and overlapping and redundant selling, general and administrative functions; and • our ability to avoid labour disruptions in connection with any integration, particularly in connection with any headcount reduction. If we fail to realise anticipated cost savings, synergies or revenue enhancements, our financial results may be materially adversely affected, and we may not generate the cash flow from operations that we anticipated. We depend heavily on key personnel, and loss of the services of one or more of our key executives or a significant portion of our management personnel could weaken our management team and materially adversely affect our business, financial condition and prospects. Our success largely depends on the skills, experience and efforts of our senior management team (whose names appear on page 67 of this Prospectus) (“Senior Management”) and on the efforts, ability and experience of key members of our management staff. Our Senior Management has extensive experience in the private hospitals industry and has skills that are critical to the operation of our business. 17
Individuals with industry-specific experience are scarce, and the market for such individuals is highly competitive. As a result, we may not be able to attract and retain qualified personnel to replace or succeed members of our senior management or other key employees, should the need arise. None of our directors or executive officers is covered by key man life insurance policies. The loss of services of one or more members of our senior management or of a significant portion of any of our management staff could weaken significantly our management expertise and our ability to deliver healthcare services efficiently. This could have a material adverse effect on our business, financial condition and results of operations. If we do not continually enhance our facilities with the most recent technological advances in diagnostic and surgical equipment, it could affect our prospects for growth and our reputation. Technological advances in the medical field continue to evolve rapidly. In order to compete with other healthcare providers for doctors and patients, we must continually assess our equipment needs at our facilities and upgrade equipment as a result of technological improvements. Such equipment costs represent significant capital expenditure. If we are unable to purchase new technology, such that medical practitioners are unable to provide required services and either do not provide the relevant treatment or elect to leave our hospitals, then it could have a material adverse effect on our business, financial condition and results of operations. Rapid technological advances could also, at times, lead to earlier-than-planned redundancy of equipment and result in asset impairment charges, which may materially adversely affect our results of operations. We may from time to time incur impairment charges, which may materially adversely affect our business, financial condition and results of operations. A failure to maintain the quality of services provided at our facilities may negatively impact our reputation. Our business model is dependent on providing quality services and maintaining quality facilities. Quality of service includes factors such as quality of care, friendliness of staff, waiting times and ease of making appointments. Any failure of doctors to maintain the quality of care provided or to otherwise adhere to certain general operating procedures or any damage to the reputation of a significant number of the doctors at our facilities could materially adversely affect our reputation or subject us to liability. If our hospitals are unable to provide quality services to patients, or fail to maintain standards of customer satisfaction or clinical outcomes, our business could be materially adversely impacted. Such damage to our reputation or patient satisfaction levels could have a material adverse effect on our business, financial condition and results of operations. Our operations could be impaired by a failure of our information systems. Our information systems are essential to a number of critical areas of our business operations. Any system failure that causes an interruption in service or availability of our systems could materially adversely affect operations or delay the collection of revenue. Although we have implemented network security measures, our servers are potentially vulnerable to computer viruses, break-ins and similar disruptions from unauthorised tampering. The occurrence of any of these events could result in interruptions, delays, the loss or corruption of data, or cessations in the availability of systems, any of which could have a material adverse effect on our business, financial condition and results of operations. In addition, we may be subject to liability as a result of any theft or misuse of personal information stored in our systems. In addition, we are currently in the process of centralising our information systems. The centralisation of our information systems requires migration of certain data from our existing systems. There can be no assurance that we will not encounter data migration or other errors, which could result in the loss of important data, interruptions, delays or cessations in the availability of our systems, any of which could have a material adverse effect on our business, financial condition and results of operations. Leases for buildings and land on which our hospitals are located may not be renewed, and we may lose possession of the leased properties and related buildings and other improvements. Generally, our hospitals, our day patient medical centre and our hospital projects under development are located on land and in buildings which are leased from government authorities or certain private parties. While most of our leases are for periods greater than ten years, our lease for our New Medical Centre Hospital LLC in Dubai was renewed in March 2012 and is renewable annually from April 2013. Moreover, the lessors under such leases may terminate the leases in the event of breach of certain terms of the lease agreements. If any of such leases is terminated or expires and is not renewed, we could lose our investments, including the hospital buildings located on the leased sites. This could have a material adverse effect on our business, financial condition and results of operations. 18
Because of the risks typically closely associated with the operation of medical care facilities, patients may contract serious communicable infections or diseases at our facilities. Our operations involve the treatment of patients with a variety of infectious diseases. Previously healthy or uninfected people may contract serious communicable diseases such as influenza, novo viruses and salmonella in connection with their stay or visit at our facilities. This could result in significant claims for damages against us and, as a result of reports and press coverage, to a corresponding loss of reputation. For example, although not currently prevalent in the UAE, diseases or infections such as Methicillin-resistant Staphylococcus Aureus, or MRSA, and legionella bacteria may pose risks in the future. Furthermore, these germs or infections could also infect employees and thus significantly reduce the treatment and care capacity at our medical facilities in the short-, medium- and long-term. In addition to claims for damages, any of these events may lead directly to limitations on the activities of our hospitals as a result of regulatory restrictions on, or the withdrawal of, permits and authorisations, and it may indirectly result, through a loss of reputation, in reduced utilisation of our hospitals. Any of these factors could have a material adverse effect on our business, financial condition and results of operations. Failures in cooling systems at our facilities could have an impact on our operations. The UAE is in a climate zone that has relatively high temperatures during approximately three-quarters of the year, requiring cooling systems to operate continuously during at least three-quarters of the year. Health services are particularly dependent on the proper operation of cooling systems in hot climate zones such as the UAE because patients are, in general, particularly vulnerable to extreme weather conditions such as high temperatures. For example, in the months between May and September, average temperatures in Abu Dhabi from 2003 to 2010 have been 33.5 degrees Celsius, according to the UAE’s National Centre of Meteorology and Seismology. Although we have back-up generators, the failure of cooling systems during hot days could lead to discomfort in patients and medical staff, a disruption in operations and, in some cases, to dehydration or heatstroke which would have a disproportionately negative effect on the infirm. Moreover, if our facilities were affected uniquely by failures in the cooling systems, this could have a detrimental impact on our reputation. Any such failures could have a material adverse effect on our business, financial condition and results of operations. Our distribution and services segment is exposed to the risk of adverse developments and conditions in the markets that produce the products we distribute. Governments in the markets that produce the products we distribute sometimes impose measures to control factors affecting their economies such as inflation, and to advance their domestic and foreign policies and interests. Such measures can include wage and price controls, limits on imports, tariffs, exchange controls and tax policies. Further, many of the markets that produce the products we distribute have legal systems that are still developing and are untested. The outcome of proceedings with government agencies and regulators and claims brought before courts in these jurisdictions is therefore often uncertain and may limit the legal protection available to foreign entities sourcing products from those jurisdictions, including us. Such markets may also see rising labour activism which may lead to labour or workforce unrest, which could cause supply chain interruptions. The impact on us of such risks may be increased if we are not able to locate, or if we encounter difficulties in sourcing products from, new sourcing markets. This could have a material adverse effect on our business, financial condition and results of operations. We may suffer the loss of one or more of our significant customers in our distribution and services segment. A significant portion of our revenue in our distribution and services segment is concentrated in a relatively small number of customers. The percentage of the distribution and services segment’s total revenue generated by the top five customers of that segment was 26.3% for the fiscal year ended 31 December 2011. The loss of any customer or customers that in the aggregate represent a significant portion of our revenue could have a material adverse effect on our operating results and cash flows. Furthermore, we could be adversely affected if any significant customer reacts unfavourably to the pricing of our products or decides to deemphasise or reduce their product offerings in the categories with which we supply them. Any such event would have a material adverse effect on our business, financial condition and results of operations. We are dependent on a limited number of suppliers to provide products to our distribution and services segment. Any significant disruption or other adverse event affecting our relationship with any of our major suppliers could have a material adverse effect on the results of our financial condition and our operations. The percentage of the 19
distribution and services segment’s total revenue generated by sales of products supplied by the top five suppliers to that segment accounted for 46.7% for the fiscal year ended 31 December 2011. If we need to replace any of our major suppliers, we may face risks and costs associated with a transfer of operations. In addition, a failure to replace any of our major suppliers on commercially reasonable terms, or at all, could have a material adverse effect on our results of operations and financial condition. These suppliers may be unwilling to provide us with merchandise if we do not place orders at an internationally competitive order level or at a level competitive with large volume customers. If one or more of our major suppliers stops or substantially reduces providing us with merchandise or experiences operational difficulties, we may be unable to secure alternative sources in a timely manner or on commercially beneficial terms. In those circumstances, we may experience inventory shortages or other adverse effects to our business, financial condition and results of operations. Our ability to effectively provide the services we offer or manage our margins for our healthcare segment could be negatively affected by increases in costs or disruptions in the availability of supplies. Because we often rely on third-party providers for pharmaceuticals, surgical supplies and medical equipment, supplier bottlenecks, quality problems or the disruption of the business relationships with these providers could lead to disruptions or deterioration in the care provided at our facilities. If we are not able to access high-quality products on a cost-effective basis or if suppliers are not able to fulfil our requirements for such products, we could face a decline in patient volumes or disruption in our relationships with doctors. In addition, we may face increases in the cost of supplies that we are unable to pass through fully to increases in our tariffs. If we are unable to obtain adequate quantities or manage the costs of our supplies, this could have a material adverse effect on our business, financial condition and results of operations. We are dependent on the frequency and rate of the introduction of generic drugs and brand name prescription products. The profitability of our retail pharmacy business is dependent upon the utilisation of prescription drug products. Utilisation trends are affected by, among other factors, the introduction of new and successful prescription pharmaceuticals as well as lower-priced generic alternatives to existing brand name products. Accordingly, a slowdown in the introduction of new and successful prescription pharmaceuticals, the sale of which normally yields higher gross profit margins than generic equivalents, or generic alternatives, for which we can generate higher sales volumes, could materially adversely affect our business, financial condition and results of operations. In 2013, we expect a number of generic products to enter the market, although there can be no assurance that this will occur. Our distribution and services segment is potentially subject to price competition from illegally imported counterfeit products. Our distribution and services segment’s margins depend on our exclusive rights to distribute our products in the markets where we operate because our exclusivity enables us to distribute products at a premium. See “Part VII—Business—Our Competitive Strengths—Our profitable distribution and services segment has a strong distribution network, an efficient logistics infrastructure and provides interrelated services to our healthcare segment”. As a large-scale port, Dubai, and to a lesser extent Abu Dhabi, attracts imports of parallel or counterfeit products that compete with the branded and generic products we sell. If the rate of such parallel or counterfeit products imported into the markets where our distribution and services segment operates significantly increases, prices and margins we receive for our products could decline. Significant declines could reduce our profits and cause increased competition for, and a loss of, customers, which would have a material adverse effect on our business, financial condition and results of operations. We are dependent on third-party suppliers and sub-contractors. We source the majority of our medical supplies, pharmaceuticals and equipment from third-party suppliers. We also outsource various activities, such as cleaning and maintenance services, to sub-contractors. The use of thirdparty suppliers and sub-contractors exposes us to potential liabilities that may arise in cases where such thirdparty suppliers and sub-contractors fail to meet their commitments. To the extent that we are unable to rely on these third-party suppliers and sub-contractors, either due to an adverse change in relationships with them, increases in the cost of their goods and services or a supplier’s or sub-contractor’s inability to provide us with supplies or services in a timely manner or of the necessary quality, our business could be materially adversely affected through higher costs or the resulting potential inability to service our customers. 20
A supplier may fail to: • launch itself successfully in the relevant market; • launch successfully a new product (either pharmaceutical or otherwise); • manufacture sufficient quantity or quality of its product; or • deliver products to us on time and in accordance with supply schedules. Any of these supplier failures may have a material adverse effect on our business, financial condition, results of operations and our ability to grow and expand in the manner contemplated at the time of entry into such purchase contracts. Changes in tax laws or their application could materially adversely affect our business, financial condition and results of operations. Other than in certain sectors, such as oil and gas and financial services, corporate and income tax rates in the UAE are nil. For the three fiscal years ended 31 December 2009, 2010 and 2011, our profits were subject to an effective tax rate of zero. Any change in UAE tax laws or a significant increase in tax rates may reduce our net profits. Currently, no taxes are being charged on our operations in the UAE. Profits arising from our operations in the UAE might change should the tax laws of the UAE, or their current application by the UAE tax authorities, change. Profits derived from any future operations outside the UAE may be subject to taxes. The Issuer and NMC Health Holdco Limited are incorporated and currently resident for tax purposes in the UK. Accordingly, they will each be subject to UK corporation tax on their taxable profits and chargeable gains. However, we intend that the business of both the Issuer and NMC Health Holdco Limited will be limited to acting as a holding company and on this basis do not anticipate (on the basis of current law) that either the Issuer or NMC Health Holdco Limited will be subject to a material level of taxation in the UK. Tax regimes can be subject to differing interpretations and are often subject to legislative change and changes in administrative interpretation. Our interpretation of relevant UK tax law may not coincide with that of HM Revenue & Customs. Changes in UK taxation rates, law or administrative interpretation, or misinterpretation of the law, or any failure to manage tax risks adequately could result in increased UK tax charges, including penalties. Prospective investors who are resident in the UK for tax purposes are referred to “Part XV—Taxation” for further description of certain aspects of UK tax law which may be relevant to such investors. Risks Relating to the Global Offering and to the Shares After the Global Offering, certain shareholders will continue to be able to exercise significant influence over us, our management and our operations. As at the date of this Prospectus, we are controlled by H.E. Mr. Saeed Bin Butti, Dr. B.R. Shetty, Mr. Khalifa Bin Butti and Infinite Investment LLC, which is owned by certain of the Existing Shareholders, who together hold 100% of our issued share capital. Immediately following the Global Offering, and assuming the Over-allotment Option is not exercised, the Existing Shareholders will hold 30.1%, 21.0%, 10.5% and 8.4% of our share capital, respectively. Although the Existing Shareholders have entered into the Relationship Agreement with the Company to govern their relationship with the Company after Admission, the Existing Shareholders, to the extent they elect to act together, will be able to exercise control over our management and operations and over our shareholders’ meetings, such as in relation to the payment of dividends and the appointment of the majority of the Directors to our Board of Directors. There can be no assurance that the interests of the Existing Shareholders will coincide with the interests of purchasers of the Shares. See “Part XVI—The Global Offering—Controlling Shareholders”. Substantial sales of Shares by significant shareholders could depress the price of our Shares. Subsequent sales by the Existing Shareholders (or any other substantial shareholders) of a substantial number of Shares may significantly reduce our share price. The Existing Shareholders have agreed in the Underwriting Agreement to certain restrictions on their ability to sell, transfer and otherwise deal in their Shares for a period of 540 days from the Closing Date unless otherwise consented to in writing by Deutsche Bank (such consent not to be unreasonably withheld or delayed) (see “Part XVI—The Global Offering—Lock-up Arrangements”), and we 21
will make a market announcement once such lock-up period has ended. Nevertheless, we are unable to predict whether substantial amounts of Shares (in addition to those which will be available in the Global Offering) will be sold in the open market following the termination of the lock-up arrangements. Any sales of substantial amounts of Shares in the public market, or the perception that such sales might occur, could materially and adversely affect the market price of the Shares. The Global Offering may not result in an active or liquid market for the Shares. Prior to the Global Offering, there has been no public trading market for the Shares. The Offer Price has been agreed upon among the Underwriters, the Company and H.E. Mr. Saeed Bin Butti, Mr. Khalifa Bin Butti, Dr. B.R. Shetty and Infinite Investment LLC (the “Over-allotment Shareholders”), and may not be indicative of the market price for the Shares following Admission. We cannot guarantee that an active trading market will develop or be sustained following the completion of the Global Offering, or that the market price of the Shares will not decline thereafter below the Offer Price. The trading price of the Shares may be subject to wide fluctuations in response to many factors as well as stock market fluctuations and general economic conditions or changes in political sentiment that may adversely affect the market price of the Shares, regardless of our actual performance or conditions in our key markets. We may not pay cash dividends on our Shares. Consequently, you may not receive any return on investment unless you sell your Shares for a price greater than that which you paid for it. While our directors intend to adopt a progressive dividend policy that maintains an appropriate level of dividend cover, there can be no assurance that we will pay dividends in the future. Any decision to declare and pay dividends in the future will be made at the discretion of our Board of Directors and will depend on, among other things, applicable law, regulations, restrictions, our results of operations, financial condition, cash requirements, contractual restrictions, our future projects and plans and other factors that our Board of Directors may deem relevant. In addition, the Issuer’s ability to pay dividends depends significantly on the extent to which it receives dividends from its subsidiaries and there can be no assurance that its subsidiaries will pay dividends. We can give no assurance that we will pay any dividends in the future. As a result, you may not receive any return on an investment in our Shares unless you sell our Shares for a price greater than that which you paid for it. We could undertake future equity issues, which could have an adverse effect on the market price of the Shares and dilute ownership. In addition, non-UK persons may not be able to exercise pre-emptive rights with respect to their Shares. We could undertake future equity issues which could have an adverse effect on the market price of the Shares and may reduce the percentage ownership and voting interests of shareholders. Moreover, we may issue new shares that have rights, preferences or privileges senior to those of the Shares. In addition, US shareholders may not be entitled to exercise these rights unless the rights, and the Shares issued pursuant to such rights, are registered under the Securities Act or an exemption from the registration requirements of the Securities Act is available. We have no current intention to seek such registration and would evaluate, at the time of any rights issue, whether the offer would qualify for an exemption, as well as the indirect benefits to us of enabling US shareholders to exercise rights and any other factors that we consider to be appropriate at the time, prior to making a decision on whether to utilise an exemption, if available, from the registration requirements of the Securities Act. Similar issues may arise in relation to other overseas jurisdictions. Our stock price may change significantly following the Global Offering, and you could lose all or part of your investment as a result. The market price of securities can and does fluctuate, and it is impossible to predict whether the price of the Shares will rise or fall. An individual security may experience upward or downward movements, and may even lose all of its value. There is an inherent risk that losses may be incurred rather than profit made as a result of buying and selling securities. There may be a substantial difference between the buying price and the selling price of such securities. You may not be able to resell your Shares at or above the initial public offering price due to a number of factors such as those listed in “—Risks Relating to Our Business” and the following, some of which are beyond our control: • quarterly variations in our results of operations; • results of operations that vary from the expectations of securities analysts and investors; • results of operations that vary from those of our competitors; 22
• changes in expectations as to our future financial performance, including financial estimates by securities analysts and investors; • announcements by us, our competitors or our vendors of significant contracts, acquisitions, joint marketing relationships, joint ventures or capital commitments; • announcements by third parties or governmental entities of significant claims or proceedings against us; • new laws and governmental regulations applicable to the healthcare industry; • a default under the agreements governing our indebtedness; • future sales of our common stock by us, directors, executives and significant stockholders; and • changes in domestic and international economic and political conditions and regionally in our markets. The market price of the Shares may be affected by fluctuations in exchange rates. We report our results of operations and financial condition in US dollars. Following Admission, our share price will be quoted on the London Stock Exchange in pound sterling. As a consequence, shareholders may experience fluctuation in the market price of the Shares as a result of, among other factors, movements in the exchange rate between pound sterling and US dollars. It may be difficult for shareholders to enforce judgments against our assets held in the UAE, or against our Directors and Senior Management. Our company has its headquarters in Abu Dhabi in the UAE and its operating assets are held by companies incorporated in, and governed by, the laws of the UAE. All of our assets are located in jurisdictions outside the European Union and the United States. In addition, certain of our directors and senior management reside in the UAE and all or a portion of their personal assets may be located in the UAE and/or other jurisdictions outside the European Union and the United States. As such, it may be difficult or impossible to effect service of process within the United States or any jurisdiction in the European Union upon us or those persons, or to recover on judgments of courts of Member States or US courts against us or them, including judgments predicated upon civil liability provisions of US federal securities laws or European Union laws, as the case may be. There can be no assurance that investors would have recourse to the courts of Dubai or Abu Dhabi or to the federal courts of the UAE.
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PART III: IMPORTANT INFORMATION CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS This Prospectus includes forward-looking statements. All statements in this Prospectus that do not relate to historical facts and events are “forward-looking statements”. In some cases, it is possible to identify such statements by words such as “anticipate”, “believe”, “expect”, “plan”, “intend”, “targets”, “aims”, “estimate”, “project”, “will”, “would”, “may”, “could”, “continue” and similar expressions and the negative of such terms. These forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance or achievements, or industry results, to be materially different from those expressed or implied by these forward-looking statements. These forward-looking statements are based on numerous assumptions regarding our present and future business strategies and the environment in which we expect to operate in the future. Important factors that could cause our actual results, performance or achievements to differ materially from those in the forward-looking statements include, but are not limited to: • our ability to recruit and retain quality doctors and other healthcare professionals, such as nurses and technicians; • our relationship with insurance companies and our ability to negotiate and retain fee arrangements; • our ability to maintain exclusive distribution arrangements with suppliers to our distribution and services segment; • changes in UAE healthcare laws and regulations; • implementation of a mandatory health insurance system or similar policy across the UAE; • exposure to litigation by patients and claims exceeding the scope of our insurance coverage or that are not covered by our insurance policies; • lack of direct licensing rights to operate our medical facilities and pharmacies; • competition from other hospitals, retail pharmacies and healthcare providers; • removal or adjustment of the US dollar/UAE dirham tied exchange rate; • our ability to identify expansion opportunities in the UAE; • delays or other problems in implementing expansion projects; • our ability to successfully integrate businesses that we may acquire in the future, and our ability to realise anticipated cost savings, revenue enhancements or other synergies from such acquisitions; • loss of the services of one or more of our key executives or a significant portion of our management personnel; and • our ability to enhance our facilities with the most recent technological advances in diagnostic and surgical equipment. Additional factors that could cause actual results, performance or achievements to differ materially include, but are not limited to, those discussed under “Part II—Risk Factors”. Forward-looking statements speak only as of the date of this Prospectus or, if obtained from third-party studies or reports, the date of such study or report and are expressly qualified in their entirety by the cautionary statements in this Prospectus. Given the uncertainties of forward-looking statements, we cannot assure you that projected results or events will be achieved and we caution you not to place undue reliance on these statements. Unless otherwise required by the Prospectus Rules, the Disclosure Rules and Transparency Rules issued by the FSA (the “Disclosure and Transparency Rules”) and/or the Listing Rules issued by the FSA (the “Listing Rules”), the Company undertakes no obligation to update the forward-looking statements to reflect actual results or any change in events, conditions or assumptions or other factors. Investors should note that the contents of these paragraphs relating to forward-looking statements are not intended to qualify the statements made as to sufficiency of working capital in this Prospectus.
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NOTICE TO INVESTORS In this Prospectus: “NMC”, the “Issuer”, the “Company”, “we”, “our” and “us” mean “NMC Health plc”, together with its consolidated subsidiaries and jointly-controlled entities and associates, as well as their respective predecessor companies or entities. This Prospectus is not a prospectus for purposes of Section 12(a)(2) or any other provision of, or rule under, the Securities Act. UNDERWRITERS Each of Deutsche Bank AG, London Branch and Numis Securities Limited is authorised and regulated in the United Kingdom by the FSA and SHUAA Capital is regulated by the UAE Central Bank. Each of the foregoing as well as Deloitte Corporate Finance and One Financial Markets is acting exclusively for the Company and no one else in connection with the Global Offering. Deloitte Corporate Finance is a division of Deloitte LLP which is authorised and regulated in the United Kingdom by the FSA in respect of regulated activities. None of the Underwriters will regard any other person (whether or not a recipient of this Prospectus) as a client in relation to the Global Offering and will not be responsible to anyone other than the Company for providing the protections afforded to their respective clients or for the giving of advice in relation to the Global Offering or any transaction, matter or arrangement referred to in this Prospectus. Apart from the responsibilities and liabilities, if any, which may be imposed on the Underwriters by FSMA or the regulatory regime established thereunder, each of the Underwriters accepts no responsibility whatsoever for the contents of this Prospectus, including its accuracy, completeness or for any other statement made or purported to be made by it, or on its behalf, in connection with the Company, the Shares or the Global Offering. Each of the Underwriters accordingly disclaims all and any liability whether arising in tort, contract or otherwise (save as referred to above) which it might otherwise have in respect of this Prospectus or any such statement. The Underwriters and any of their respective affiliates may have engaged in transactions with, and provided various investment banking, financial advisory and other services for the Company for which they would have received customary fees. The Underwriters and any of their respective affiliates may provide such services to the Company and any of their respective affiliates in the future. In making an investment decision, prospective investors must rely upon their own examination of us and the terms of the Global Offering set out in this Prospectus, including the merits and risks involved. Prospective investors should exclusively rely on the information contained in this Prospectus. None of the Issuer, the Existing Shareholders nor any of the Underwriters has authorised anyone to provide prospective investors with information different from that contained in this Prospectus. The Underwriters make no representation or warranty, express or implied, as to the accuracy or completeness of the information contained in this Prospectus, and nothing contained in this Prospectus is, or shall be relied upon as, a promise or representation by the Underwriters or their respective affiliates or advisers. You agree to the foregoing by accepting delivery of this Prospectus. The information contained in this Prospectus is accurate only as of the date of this Prospectus, regardless of the time of delivery of this Prospectus or of any sale of the Shares. The Global Offering may be withdrawn at any time and Deutsche Bank reserves the right to reject any offer to purchase the Shares in whole or in part, and to sell any prospective investor less than the full amount of the Shares sought by such investor. None of us, the Existing Shareholders, the Underwriters, nor any of our or their respective representatives, make any representation to any purchaser of the Shares offered hereby regarding the legality of an investment by such purchaser under appropriate legal investment or similar laws. Each purchaser should consult with its own advisers as to the legal, tax, business, financial and other relevant implications of the purchase of the Shares. This Prospectus has been prepared by us in connection with the Global Offering solely for the purpose of enabling a prospective investor to consider the purchase of the Shares. Reproduction and distribution of this Prospectus or disclosure or use of the information contained herein for any purpose other than considering an investment in the Shares is prohibited.
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STABILISATION In connection with the Global Offering, the Stabilisation Manager (or any of its agents), may (but will be under no obligation), to the extent permitted by applicable law and for stabilisation purposes, effect transactions with a view to supporting the market price of the Shares at a level higher than that which might otherwise prevail in the open market including over-alloting Shares up to a maximum of 15% of the total number of Shares comprised in the Global Offering. There is no assurance, however, that the Stabilisation Manager, or any of its agents, will undertake stabilisation action. Any such stabilisation may be conducted on the London Stock Exchange in the open market, on over-the-counter markets or otherwise in accordance with the relevant rules. Such stabilisation activities may be undertaken at any time during the period commencing on the date that conditional trading begins and ending no later than 30 days thereafter. Such stabilisation, if commenced, may be discontinued at any time without prior notice. In no event will measures be taken to stabilise the market price of the Shares above the Offer Price. Except as required by applicable law or other regulation, neither the Stabilisation Manager nor any of its agents intends to disclose the extent of any over-allotments and/or stabilisation transactions conducted in relation to the Global Offering. PRESENTATION OF CERTAIN FINANCIAL AND OTHER INFORMATION General The financial information in this Prospectus, including the financial information set forth in “Part XIII—Historical Financial Information”, relates to the Oldco Group, comprising NMC Healthcare LLC and its subsidiaries. In connection with the Global Offering, the Existing Shareholders elected to implement a new holding company structure for the Oldco Group which was effected in several steps. First, the Existing Shareholders incorporated the Issuer, NMC Holding LLC and NMC Health Holdco Limited (the sole shareholder in which is the Issuer) (together, the “New Holding Companies”) in 2011 to serve as the New Holding Companies of NMC Healthcare LLC and its subsidiaries. Second, on 28 March 2012, NMC Holding LLC agreed to acquire the entire share capital (less one share) of NMC Healthcare LLC, and NMC Health Holdco Limited (a wholly owned subsidiary of the Issuer) agreed to acquire the remainder of the share capital of NMC Healthcare LLC. Finally, on 28 March 2012, the Issuer agreed to acquire the entire share capital of NMC Holding LLC (less one share), and NMC Health Holdco Limited agreed to acquire the remainder of the share capital of NMC Holding LLC. The New Holding Companies have not engaged in any trading activity or other operations since their incorporation, other than the entry into agreements for the acquisitions described above and matters relating to the issue of Shares and the Global Offering. Following Admission, our future financial statements will present the consolidated results of operations and financial position of the Issuer and its subsidiaries as if the Issuer had always been the parent company of NMC Healthcare LLC and its subsidiaries and will be prepared in accordance with International Financial Reporting Standards as adopted by the EU (“IFRS”). Unless otherwise specified or the context otherwise requires, all references to “$”, “US$”, “USD”, “dollars” and “US dollars” are to US dollars, the lawful currency of the United States of America, and all references to “dirhams” and “AED” are to UAE dirhams, the lawful currency of the UAE. All references to “£”, “pound sterling” or “GBP” are to the lawful currency of the United Kingdom. The Offer Price will be stated in pound sterling. Solely for the convenience of the reader, this Prospectus contains translations of certain pound sterling amounts into US dollars at the Bloomberg Closing Mid-Point Rate on 29 March 2012 of £1 = US$1.592. These translations should not be construed as representations that the pound amounts actually represent such US dollar amounts or could be converted into US dollars at the rate indicated. Certain financial and statistical amounts included in this Prospectus are approximations or have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be exact arithmetic aggregations of the figures that precede them. Percentage movements have been calculated on rounded USD million amounts. Non-IFRS Measures This Prospectus includes references to Adjusted EBITDA and Adjusted operating cash flow. Adjusted EBITDA and Adjusted operating cash flow are not measurements of performance under IFRS and you should not consider Adjusted EBITDA or Adjusted operating cash flow as alternatives to: • operating income or net income (as determined in accordance with IFRS) as a measure of our operating performance; • cash flows from ongoing operations, investing and financing activities (as determined in accordance with IFRS) as a measure of our ability to meet cash needs; or • any other measures of performance under IFRS. 26
We use these management measures to evaluate our performance, and we have presented this additional financial information in this Prospectus because we believe Adjusted EBITDA and Adjusted operating cash flow may assist investors in the understanding of our results of operations. This information is not prepared in accordance with IFRS and should be viewed as supplemental to our Historical Financial Information. We believe that Adjusted EBITDA and Adjusted operating cash flow are measures commonly reported and widely used by investors and other interested parties in comparing performance on a consistent basis without regard to interest, income taxes, depreciation, and amortisation, which can vary significantly depending upon accounting methods (particularly when acquisitions are involved) or non-operating factors (such as historical cost and financing structure). Accordingly, this information has been disclosed in this Prospectus to permit a more complete and comprehensive analysis of our operating performance relative to other companies and our debt servicing ability. Investors are cautioned not to place undue reliance on this information and should note that other companies in our industry may calculate Adjusted EBITDA and Adjusted operating cash flow differently or may use it for different purposes than we do, limiting its usefulness as a comparative measure.
PRESENTATION OF MARKET SHARE, INDUSTRY AND OTHER DATA We confirm that the information contained in this Prospectus sourced from all third parties, including Espicom Business Intelligence (“Espicom”), the World Health Organisation (“WHO”), the United Health Group, Business Monitor International Limited (“BMI”), RNCOS Industry Research Solutions (“RNCOS”), the government of Abu Dhabi, IHS Global Insight (“IHS”), HAAD, the Economist Intelligence Unit (“EIU”), the International Monetary Fund (“IMF”) and the United Nations Conference on Trade and Development (“UNCTD”), has been accurately reproduced and that as far as we are aware and are able to ascertain from information published by that third party, no facts have been omitted which would render the reproduced information inaccurate or misleading. Where third party information has been used in this Prospectus, the source of such information has been identified. Neither Espicom, the WHO, the United Health Group, BMI, RNCOS, the government of Abu Dhabi, IHS, HAAD, the EIU, the IMF nor the UNCTD has made any representation, express or implied, and has not accepted any responsibility, with respect to the accuracy or completeness of any of the information contained in this Prospectus. None of Espicom, the WHO, the United Health Group, BMI, RNCOS, the government of Abu Dhabi, IHS, HAAD, the EIU, the IMF, the UNCTD or any of their affiliates, subsidiary companies, shareholders, directors or any of their relatives hold any shareholding or interest whatsoever in the Company. AVAILABLE INFORMATION We have agreed that, for so long as any of the Shares are “restricted securities” as defined in Rule 144(a)(3) under the Securities Act, we will during any period that we are neither subject to Section 13 or 15(d) of the Exchange Act, nor exempt from reporting pursuant to Rule 12g3-2(b) thereunder, furnish, upon request, to any holder or beneficial owner of the Shares or any prospective purchaser designated by any such holder or beneficial owner, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
ENFORCEMENT OF FOREIGN JUDGMENTS The Issuer is incorporated and registered in England and Wales. NMC Holding LLC is a company incorporated in, and under the laws issued by, the Emirate of Abu Dhabi in the UAE. NMC Healthcare LLC is a company incorporated in, and under the laws issued by, the Emirate of Dubai in the UAE. Our headquarters are located in Abu Dhabi in the UAE. All of our assets are located in jurisdictions outside the European Union and the United States. In addition, certain members of the Board of Directors and senior management reside in the UAE and all or a portion of their personal assets may be located in the UAE and/or other jurisdictions outside the European Union and the United States. As a result, prospective investors may have difficulties effecting service of process in the European Union or the United States upon us or members of our Board of Directors or senior management in connection with any lawsuits related to the Shares, including actions arising under the laws of the European Union or the federal securities laws of the United States. In the absence of any bilateral treaty for the reciprocal enforcement of foreign judgments, UAE law sets out a procedure whereby the judiciary of the UAE is able to ratify judgments, orders or awards of other jurisdictions. Such judgments, orders or awards which are ratified by the UAE court may be enforced within the UAE in the manner prescribed by the Civil Procedure Code of the UAE. 27
PART IV: DIRECTORS, SECRETARY, REGISTERED OFFICE AND ADVISERS Directors
Mr. H.J. Mark Tompkins, Independent Non-Executive Chairman Mr. Khalifa Bin Butti, Executive Vice Chairman Dr. B.R Shetty, CEO H.E. Mr. Saeed Bin Butti, Non-Executive Director Mr. Justin A.S. Jewitt, Independent Non-Executive Director Mrs. Heather Lawrence OBE, Independent Non-Executive Director Mr. Patrick James Meade, Independent Non-Executive Director
Secretary
Mr. Prasanth Manghat
Each of the Directors’ business address is:
c/o NMC Healthcare LLC P.O. Box 46222 Level-1, Sama Towers Near NMC Spl. Hospital Electra Street Abu Dhabi United Arab Emirates
Registered Office
20-22 Bedford Row London WC1R 4JS United Kingdom
Sole Global Co-ordinator, Sole Sponsor and Sole Bookrunner
Deutsche Bank AG, London Branch Winchester House 1 Great Winchester Street London EC2N 2DB United Kingdom
Joint Lead Managers
Numis Securities Limited The London Stock Exchange Building 10 Paternoster Square London EC4M 7LT United Kingdom SHUAA Capital psc Level 28, Emirates Towers Sheikh Zayed Road P.O. Box 31045 Dubai United Arab Emirates
Financial Advisers
One Financial Markets 20 Savile Row London W1S 3PR United Kingdom Deloitte Corporate Finance Deloitte LLP 2 New Street Square London EC4A 3BZ United Kingdom
Auditors to NMC Health plc
Ernst & Young LLP 1 More London Place London SE1 2AF United Kingdom
Reporting Accountants
Ernst & Young 11th Floor, Al Ghaith Tower Hamdan Street Abu Dhabi United Arab Emirates 28
Legal advisers to the Company as to English and US federal law
Allen & Overy LLP One Bishops Square London E1 6AD United Kingdom
Legal advisers to the Company as to the laws of the UAE
Allen & Overy LLP 5th Floor, Al Mamoura B Building Muroor Road P.O. Box 7907 Abu Dhabi United Arab Emirates
Legal advisers to the Underwriters as to English and US law
Clifford Chance LLP 10 Upper Bank Street London E14 5JJ United Kingdom
Legal advisers to the Underwriters as to the laws of the UAE
Clifford Chance LLP Building 6, Level 2, The Gate Precinct Dubai International Financial Centre P.O. Box 9380 Dubai United Arab Emirates
Registrar to the Company
Capita Registrars Limited The Registry, 34 Beckenham Road Beckenham, Kent BR3 4TU United Kingdom
29
PART V: EXPECTED TIMETABLE AND GLOBAL OFFER STATISTICS Each of the times and dates in the table below is indicative only and may be subject to change without further notice. References to time and date are to time and date in London, United Kingdom unless otherwise stated. Expected timetable of principal events(1) Event Announcement of the Offer Price and allocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Commencement of conditional dealing in Shares on the London Stock Exchange . . . Admission and commencement of unconditional dealings in Shares on the London Stock Exchange(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Crediting of Shares to CREST accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Time and date 2 April 2012 8.00 a.m. on 2 April 2012 8.00 a.m. on 5 April 2012 8.00 a.m. on 5 April 2012
(1) These dates are indicative only and may, at the discretion of the Sole Global Co-ordinator (with the agreement of the Company), be subject to change. (2) Or as soon as practicable thereafter.
Each of the times and dates in the above timetable is subject to change without further notice. References to time are to London time unless otherwise stated. It should be noted that if Admission does not occur, all conditional dealings will be of no effect and any such dealings will be at the sole risk of the parties concerned. Temporary documents of title will not be issued. Offer statistics Offer Price (per Share) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210 pence Number of New Shares being offered in the Global Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,714,286 Percentage of the issued Share capital being offered in the Global Offering . . . . . . . . . . . . . . . . . . 30.0% Number of Existing Shares subject to the Over-allotment Option . . . . . . . . . . . . . . . . . . . . . . . . . . 8,357,142 Number of Shares in issue following the Global Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185,714,286 Expected market capitalisation of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . £390,000,000 Estimated net proceeds of the Global Offering receivable by the Company after expenses(1) . . . . . £104,437,186 (1) The estimated net proceeds receivable by the Company are stated after deduction of the estimated underwriting commissions and estimated expenses of the Global Offering (including applicable VAT) payable by the Company, which are currently expected to be approximately US$20.0 million or £12.5 million, and assumes that the Over-allotment Option is not exercised.
30
PART VI: OVERVIEW OF THE INDUSTRY AND REGULATION The information in this section, unless otherwise indicated, has been derived from reports by Espicom, the WHO, the United Health Group, BMI, RNCOS, the government of Abu Dhabi, IHS, HAAD, the EIU, the IMF and UNCTD, as well as from other publicly available information sources. Such reports were neither prepared nor independently verified by us. The information may be inconsistent with other information compiled within or outside the UAE. Much of the information set out in this section is based on estimates made by Espicom, the WHO, the United Health Group, BMI, RNCOS, the government of Abu Dhabi, IHS, HAAD, the EIU, the IMF and UNCTD and should therefore be regarded as indicative only and treated with appropriate caution. While we accept responsibility for accurately summarising the information from these external sources and, as far as we are aware and able to ascertain, no facts have been omitted which would render this information inaccurate or misleading, we accept no further responsibility in respect of such information. The UAE Healthcare Industry Overview The UAE is comprised of seven emirates: Abu Dhabi, Ajman, Dubai, Fujairah, Ras al-Khaimah, Sharjah and Umm al-Quwain. According to RNCOS’s UAE Healthcare Sector Forecast to 2012, the UAE has one of the highest per capita healthcare spending rates in the GCC region, with a strong demand for modern advanced healthcare. The UAE healthcare market has grown rapidly in the past few years due to a rising population and changing demographics, an increasing GDP, a favourable regulatory environment, an increasing incidence of lifestyle and chronic diseases, an increased awareness of healthcare issues, a reduction in overseas referrals and the spread of communicable diseases. The UAE’s healthcare market is expected to grow at a CAGR of 16.6% from US$5.9 billion in 2009 to US$10.9 billion in 2013 according to RNCOS, UAE Healthcare Sector Forecast to 2012. This is illustrated by the following graph: Market Size 10.9
2009 - 2013 CAGR 16.6%
US$ billion
9.0 7.5
6.6
5.9
2009E
2010E
2011E
2012E
2013E
Source: RNCOS Industry Research Report, UAE Healthcare Sector Forecast to 2012
According to Espicom, in 2009, the UAE’s per capita healthcare expenditure was US$1,076, while per capita healthcare expenditure was US$8,058 in the US, US$5,108 in France, US$4,673 in Germany, US$3,600 in the UK, US$694 in Saudi Arabia and US$415 in Oman. This is illustrated by the following graph: Per Capita Healthcare Expenditure (2010) 7,794
US$
4,870
4,580 3,380 1,145
USA
France Germany
UK
UAE
752
477
208
122
56
Saudi Arabia
Oman
China
Egypt
India
Source: Espicom, The World Medical Markets Fact Book 2011
31
UAE Biostatistics The population of the UAE continues to grow, and the increased focus on healthcare within the region has demonstrated a marked improvement in biostatistics. The following table sets forth certain biostatistics for the UAE for the years indicated:
Population (thousand) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Birth rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Death rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Infant mortality rate (/1,000 live births) . . . . . . . . . . . . . . . . . . . . . . . . Life expectancy at birth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2000
2003
2005
2008
2011
3,030 16.7 2.4 17.0 74.1
3,400 16.4 2.3 15.0 74.8
4,070 16.2 2.2 14.0 75.3
6,210 16.1 2.1 13.0 75.9
7,890 15.9 2.1 12.0 76.5
Source: Datamonitor country statistics, as accessed at 23 February 2012; IHS, UAE Population Data, as accessed in February 2012
Growth Drivers for the UAE Healthcare Market Rising Population and Changing Demographics According to IHS, the working age population of the UAE increased from 3.7 million in 2006 to 4.9 million in 2008 and to 6.0 million in 2010. According to IHS, the UAE’s working age population is expected to further increase to 6.4 million in 2012 and 6.5 million in 2014, reaching 6.7 million by 2016. This is illustrated by the following graph: UAE Working Age Population
6.0
6.4
6.5
6.7
2012
2014
2016
million
4.9 3.7
2006
2008
2010
Source: IHS, UAE Population Data as accessed in February 2012
According to IHS Global Insight, the percentage of the UAE population over 65 years of age is expected to increase from 1.0% as of 2011 to 3.4% by 2026, and the percentage of the population under 14 years of age is expected to decrease from 19.6% in 2011 to 17.8% in 2026, as illustrated in the following graph: Population Breakdown 30%
% of total population
25% 20% 15% 10% 5% 0% 2001
2006
2011
2016
2021
UAE over 65s
2026
2031
2036
UAE under 14s
Source: IHS, UAE Population Data, as accessed in February 2012
32
2041
Increasing GDP The UAE’s GDP has been increasing in recent years. In 2011, GDP per capita in the UAE was estimated to be US$66,625. (Source: IMF’s World Electronic Outlook (“WEO”) database, last updated 20 September 2011). According to the WEO database, the UAE’s GDP per capita is expected to increase to US$69,507 in 2013 and US$74,726 in 2016. Potential for Bed Count Increase Bed count per 1,000 people in the UAE increased from 1.9 beds in 2006 to 2.1 in 2010. By comparison, in 2010, the bed count per 1,000 people was 6.9 in France, 3.1 in the US, 2.1 in Saudi Arabia and 1.5 in Egypt. This is illustrated by the following graph: Bed Count per 1,000 Population (2010) 6.9 6.1
3.3
3.1 2.1
2.2
2.1
1.8
1.5 0.7
France Germany
UK
USA
UAE
Saudi Arabia
China
Oman
Egypt
India
Source: Espicom, The World Medical Markets Fact Book 2011
Despite the fact that the UAE has a relatively high GDP per capita, beds per 1,000 people in the UAE remains low compared with other developed countries, highlighting an opportunity for growth. The following graph shows beds per 1,000 people relative to GDP per capita for the above countries in 2010: GDP per capita v. Beds per 1,000 8 Beds per 1,000
France
6
Germany
4
UK China Egypt India
2
Saudi Arabia Oman
USA
UAE
0 $0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
GDP per capita Source: Hospital beds - Espicom, The World Medical Markets Fact Book 2011; Population/GDP per capita—WEO database, last updated 20 September 2011
Favourable Regulatory Environment • Mandatory Health Insurance According to BMI’s UAE Pharmaceuticals and Healthcare Report for the first quarter of 2012 (the “BMI Report for Q1 2012”), UAE authorities intend to introduce comprehensive health insurance throughout the country, which could lead to businesses being forced to provide health cover for employees. At the end of April 2008, following the introduction of mandatory general health insurance in 2007, Abu Dhabi unveiled a new free health insurance scheme administered by HAAD, Daman (an insurance company) and the Abu Dhabi Health Services Company (“SEHA”). Under this scheme, all Abu Dhabi citizens will be eligible for free treatment at public and private facilities in Abu Dhabi as well as for emergency treatment abroad, according to BMI’s UAE Pharmaceuticals and Healthcare Report for the second quarter of 2011 (the “BMI Report for Q2 2011”). While the scheme has not yet come into effect for Abu Dhabi nationals, the BMI Report for Q1 2012 indicates that laws requiring health insurance for expatriates have come into effect in Abu Dhabi. 33
In June 2008, the DHA announced plans to offer a universal health insurance scheme for citizens and expatriates in Dubai. According to the BMI Report for Q1 2012, the DHA envisages that healthcare coverage will ensure basic healthcare to two million people. We believe that universal mandatory health insurance plans such as these are likely to result in a higher proportion of insured patients, as well as an increase in low-fee procedures which the BMI Report for Q2 2011 forecasts will be a major driver of pharmaceutical and healthcare expenditure in the short-to-medium term. • Supportive Regulatory Landscape Given the robust growth in demand for healthcare services, governments in the GCC are actively looking for ways to boost private sector participation in the provision of healthcare services. For example, in August 2007 the MoH announced details of the “2008–10 Strategic Framework”, which would concentrate on improving regulatory practices, improving the skills of scientific, technical and administrative personnel and upgrading healthcare facilities. • Direct Incentives The UAE government has provided direct incentives to establish hospitals, such as giving land and licences to existing operators in the private sector. • Other Supportive Government Initiatives In 2008, a new electronic health insurance claim system was set up in Abu Dhabi under new legislation introduced by HAAD. This e-claim system, aimed at cutting down on time-consuming paperwork, improving the processing of insurance information and increasing HAAD’s ability to track changes in health trends, was officially launched in September 2008. Reportedly, since its implementation, the eclaims system has streamlined hospital visits for patients, as patients spend less time filling out paperwork during hospital visits. We believe that the e-claims system has reduced our costs relating to claims processing and improved our claims processing time. In June 2011, HAAD also announced that it would begin the process of sharing health-related data with the healthcare community for the first time, which is expected to improve healthcare spending by the government and also assist healthcare providers in improving their services. The initiative, instituted in early 2010, is expected to spur improvements and innovation in healthcare in Abu Dhabi. In early 2012, the DHA announced the implementation of an e-claims system for the Government of Dubai Employee Health Insurance programme. This e-claims procedure will allow government employees to file their insurance claims electronically and expedite the claims process. This e-claims system will also allow the Dubai government to monitor for potentially fraudulent claims and to gather data regarding health-related spending. The DHA announced that it intends to provide all healthcare providers with training in order to properly utilise the system. The e-claims system is expected to launch shortly. Lifestyle Diseases One of the major factors driving healthcare expenditure in the UAE is the increasing incidence of lifestyle and chronic diseases such as diabetes, cancer, hypertension and cardiovascular diseases. In particular, strong economic growth, rapid urbanisation, lack of physical activity, unhealthy diets, smoking and increasingly sedentary lifestyles are leading to a high prevalence of chronic conditions in the country. According to the BMI Report for Q2 2011, the UAE’s type 2 diabetes rate is among the top five in the world, with about 13% of the population aged between 20 and 79 years being diabetic. This is more than double the global average, which, as of the second quarter of 2011, was 6.4%. The BMI Report for Q1 2012 projects that diabetes will affect 25% of the UAE’s population by 2012, with the annual medical costs associated with the disease projected to rise to US$1.4 billion by 2020. According to the WHO’s Global Health Observatory Data Repository, as accessed in February 2012, 71% of adult women and men in the UAE are overweight. Dubai also has the highest number of diabetics in the GCC and the third highest in the world. Obesity is considered one of the primary risk factors for type 2 diabetes. Increased Healthcare Awareness Rising levels of literacy as well as higher education in the UAE have raised health awareness. According to the UAE Embassy in Washington, DC, in 1975, the rate of adult literacy was 54% among men and 31% among women. Today, literacy rates for both genders, cumulatively, are nearly 90%. In addition, both government and 34
private institutions have run health initiatives to improve health awareness through education. For example, the Gulf Medical University established an e-learning portal in its Information and Learning Centre to provide online courses for people to enhance health awareness. We believe that increased health awareness, coupled with improving healthcare outcomes such as falling infant mortality rates and rising life expectancy, are increasing expectations regarding the level of healthcare provided. Communicable Diseases Communicable diseases such as pneumonia, influenza and other systemic infections account for a large proportion of hospital admissions and outpatient visits. According to HAAD, in 2010, there were 7,429 people suffering from chickenpox and 1,415 people suffering from malaria in Abu Dhabi. The majority of the population in the UAE live in vertical residential units with a centralised air conditioning system, which can assist the spread of airborne pathogens. The incidence of communicable diseases is expected to remain stable in the near term, as a result of high population turnover. Barriers to Entry The key barriers to entry in the UAE healthcare sector include: (i) strict facility licensing approvals and accreditation process; (ii) the time required to hire and obtain the requisite licences and qualifications for doctors and other medical staff in sufficient numbers (which may take up to five years in the case of a specialty hospital); (iii) the cost of land and buildings; and (iv) the time required to achieve economies of scale and to build efficient operating structures. Regulatory Bodies Ministry of Health The two primary federal laws governing the licensing of pharmacies, pharmacists and private hospitals are Federal Law Number 2 of 1996 concerning private health establishments (the “Hospital Law”) and Federal Law Number 4 of 1983 concerning pharmaceutical professions and institutions (the “Pharmacy Law”). These laws govern the following: • Licensing of private hospitals: The Hospital Law applies to all private health establishments (“PHE”) operating in the UAE. A PHE is any place that examines patients, diagnoses diseases, treats them, nurses them, provides convalescence residence or does any act related to treatment or rehabilitation. Appropriate authorisation is required to establish, manage or operate a PHE. Non-UAE citizens are not allowed to establish or operate public clinics, multi-specialised clinics or hospitals. Generally, the manager of a PHE must be a doctor licensed to practise in the UAE. However, management of hospitals and multispecialised clinics may be undertaken by a person who is not a doctor if that person specialises in this form of management. • Licensing of pharmacists and pharmacies: The Pharmacy Law provides the criteria for the licensing of pharmacists and assistant pharmacists. Licensing of pharmacies is overseen by a licence committee established by the MoH. Non-UAE citizens are not allowed to establish pharmacies. In addition, pharmacies in the UAE must be managed by licensed pharmacists. • Licensing of medical stores: A medical store is an entity that imports, stores or distributes medicine. A medical store licence is required to import medicines, chemicals or medicinal preparations in the UAE. Only UAE citizens are allowed to obtain licenses to open medical stores. • Licensing of healthcare practitioners: In addition to federal laws, the MoH has issued an evaluation manual for physicians, pharmacists and healthcare professionals. The MoH has established an evaluation committee to evaluate and approve the qualifications of physicians, pharmacists and healthcare professionals practising in the UAE. The manual sets out the basic educational qualifications and the required documents to be submitted for review by various levels of seniority of physicians, pharmacists and healthcare professionals. Health Authority of Abu Dhabi In addition to the federal licensing system operated by the MoH, Abu Dhabi has a separate regulatory authority, HAAD, which regulates the provision of healthcare services in Abu Dhabi. HAAD prepares and administers a regulatory framework for healthcare facilities, professionals and medical insurance providers through the issuance of policy statements and circulars and also regulates licensing procedures through its health regulation division. 35
HAAD allows separate legal entities to operate hospitals as long as the licence for the relevant facility is issued in the name of a UAE national and that UAE national has some ownership interest in the entity that actually owns and runs the licensed facility. Healthcare facilities, healthcare practitioners, individuals employed at such facilities and health insurance providers are each subject to separate licensing requirements. Healthcare facilities are licensed by HAAD according to the type and breadth of specialisations offered. Healthcare facilities broadly fall into three main categories: hospitals, clinics and pharmacies. All of NMC’s hospitals operating in Abu Dhabi fall within the general hospital categorisation set by HAAD. Each hospital requires a separate licence. Various NMC entities are also classified as pharmacies by HAAD. The types of pharmacies licensed by HAAD and operated by NMC in Abu Dhabi include: out-patient pharmacies located outside hospitals, in-patient pharmacies, pharmacies providing services to patients who reside in hospitals and to drug stores and facilities that import, store and distribute medicine as wholesalers. Licensing for healthcare professionals requires medical practitioners and other medical and support staff to meet minimum qualification requirements. These requirements are based on where the individual concerned is qualified to practise, the type of qualification held in that individual’s home country and post-qualification experience. Licensing extends to medical and dental professionals including consultant and specialist physicians, nurses, midwives and clinical support staff such as radiology and laboratory technicians, pharmacists and clinical scientists. Dubai Health Authority The DHA was established as part of Dubai’s Strategic Plan 2015 to facilitate the growth and development of Dubai. The DHA performs a number of functions including the licensing of private healthcare institutions and their personnel in Dubai. Any person or entity wishing to operate a health establishment in Dubai must obtain a licence from the DHA. Unlike under UAE federal law, any individual, corporation, partnership limited liability company or other form of business entity recognised under the laws of Dubai may apply to operate a health facility. Hospitals, but not pharmacies, are covered in the definition of a health establishment. To establish a health facility in Dubai, the application must initially be made by a UAE citizen. The DHA permits the establishment and operation of a hospital with a foreign partner. The licence issued by the DHA may, in such instances, be issued in the name of the company operating the hospital. Although the DHA health facility licensing regulations provide that pharmacies are governed by the DHA, in practice pharmacies opening in Dubai are governed by the MoH. The DHA also sets out the eligibility requirements for physicians, nurses and other healthcare professionals in Dubai. The eligibility criteria are, as in the case of HAAD, based in part on where the individual is qualified to practise, the type of qualification held in that individual’s home country and post-qualification experience. The DHA also provides requirements (including requirements for continuing practice development) for licence renewal. Hospital and Pharmacy Licenses NMC currently has the following hospital and pharmacy licences. Facility
Type of License
Abu Dhabi Speciality Hospital . . . . . . .
Licence to operate as a medical facility and licence to operate as a pharmacy Dubai General Hospital . . . . . . . . . . . . Licence to operate as a healthcare facility and licence to operate as a pharmacy Dubai Speciality Hospital . . . . . . . . . . . Licence to operate as a healthcare facility and licence to operate as a pharmacy Sharjah Day Patient Medical Centre . . . Licence to operate as a private medical institute Al-Ain Speciality Hospital . . . . . . . . . . Licence to operate as a medical facility New Pharmacy (Abu Dhabi) . . . . . . . . . Licence to operate as a pharmacy Bait Al Shifaa Pharmacy (Dubai) . . . . . Licence to operate as a pharmacy 36
In each case, the individual licence holders are H.E. Mr. Saeed Bin Butti or Mr. Khalifa Bin Butti (other than two pharmacy licences which are in the process of being transferred from the previous shareholder, which transfer is expected to be completed prior to Admission). Commercial Licences In addition to the specific hospital and pharmacy licences required under the Hospital and Pharmacy Laws each company incorporated in the UAE needs to apply for an annual commercial licence from the relevant ministry in the emirate in which it is incorporated, for instance in Abu Dhabi commercial licences are granted by the Department of Economic Development. Without a commercial licence a company is not permitted to operate in the UAE. The commercial licence is renewed on an annual basis, and the renewal of the licence is at the discretion of the relevant ministry. In practice, however, non-renewal would only occur in the context of delinquent companies. Competitive Hospital Landscape Official statistics regarding hospitals and medical facilities in the UAE are relatively dated and, accordingly, may not reflect the current state of the market. The information set forth below represents the most recent data that we have been able to obtain. Overview The hospital services market in the UAE is one of the most advanced in the GCC region. It is the main component of the healthcare delivery system, offering a wide range of primary, secondary and tertiary care. The UAE had around 85 hospitals in 2007, which increased to approximately 90 in 2008. An extensive range of public health facilities are operated by the MoH, including hospitals, school health, primary healthcare centres and maternity and child health units. Moreover, there are facilities operated by other public sector bodies, including the police and armed forces. The private sector is far more active in providing primary care than hospital services. Nonetheless, 64% of the hospitals in the UAE were run by the private sector in 2008. Private sector participation in the UAE healthcare system has increased during the past few years. The following table sets forth certain data for public hospitals managed by the MoH, by district, as of 2008: District(1)
Number of Hospitals
Number of Beds
Number of Admissions
Number of Outpatients
Number of Doctors
Number of Nurses
2 5 1 1 3 2 14
227 731 189 165 487 317 2,116
6,159 43,034 10,693 5,416 22,508 13,190 101,000
109,867 854,777 218,916 153,349 444,581 368,767 2,150,257
115 338 93 67 168 139 920
275 980 248 154 532 337 2,526
Dubai . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sharjah . . . . . . . . . . . . . . . . . . . . . . . . . . . Ajman . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.A.Q. . . . . . . . . . . . . . . . . . . . . . . . . . . . . R.A.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fujairah . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Source: UAE Ministry of Health, “Hospitals by Speciality & District”, 2008 Note: (1) Official statistics are unavailable for Abu Dhabi.
The following table sets forth certain data for public hospitals managed by other government entities, in Abu Dhabi and Dubai, as of 2008: Supervised by
Number of Hospitals
Number of Beds
Number of Admissions
Ministry of Defence or HAAD DHA N/A
14 4 18
2,984 1,523 4,507
106,200 57,804 164,004
District
Abu Dhabi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dubai . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Source: UAE Ministry of Health, “Hospital Services for Government Hospital by Medical District”, 2008
37
The following table sets forth certain data for private hospitals, by district, as of 2008: District(2)
Abu Dhabi . . . . . . . . . . . . . . . . . . . . Dubai . . . . . . . . . . . . . . . . . . . . . . . . . Sharjah . . . . . . . . . . . . . . . . . . . . . . . Ajman . . . . . . . . . . . . . . . . . . . . . . . . R.A.K. . . . . . . . . . . . . . . . . . . . . . . . . Fujairah . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . .
Supervised by
Number of Hospitals
HAAD DHA or DHCC MoH MoH MoH MoH N/A
Number of Beds(1)
Number of Admissions(1)
Number of Doctors
Number of Nurses
25
523
65,300
946
691
19 10 1 2 2 59
867 255 108 85 26 1,864
65,667 22,506 8,605 1,078 1,401 164,557
789 356 56 49 18 2,214
2,012 577 49 108 36 3,473
Source: UAE Ministry of Health and RNCOS, UAE Healthcare Sector Forecast to 2012 Note: (1) 2007 figures. (2) Official statistics are not available for U.A.Q.
Total bed capacity in the UAE was estimated to have been approximately 11,000 beds in 2010, up by about 2% from the previous year. According to the BMI Report for Q1 2012, the UAE is currently facing a shortage of approximately 2,000 beds. We believe that a shortage of hospital beds will continue to exist and represents an investment opportunity in the UAE’s healthcare sector. Competition The competitive landscape for healthcare services in the UAE is divided between public hospitals managed either by the MoH or other government entities and privately owned and managed hospitals. Competition is based on factors such as reputation, quality of practising doctors, range of medical services offered, technology, quality and efficiency of care, pricing and geographical convenience.
38
The following table sets forth the hospitals in the UAE, by district, as of 2008:
District
Total Number of Hospitals
Abu Dhabi
39
Dubai
25
Hospitals Public, Managed by Other Government Entities
Public, Managed by the MoH
Zayed Military; Al Ain Military; Sheikh Khalifa Medical City; Defence; Al Mafraq; Al Rahba; Madinat Zayed; Ghayathi; Marfa; Al Sila; Delma; Al Ain; Tawam; Al Wagan
Al Baraha; Al Amal
Rashid; Dubai; Al Wasl; Al Maktoum(1)
Private
Al Ahalia; Al Noor; Al Reef International; Al Salama; Al Mazroui Medical Centre; CosmeSurge & Emirates; Dar Al Shifa; Emirates French; General Medical Centre; Gulf Medical Centre; Lifeline; Magrabi Specialised; NMC; National; Samaya Medical Centre; Obagi Specialised; Al Noor—Airport Road; Oasis; Emirates International; Specialised Medical Care; Al Ruwais Welcare; American; NMC Specialty; Zulekha; International Modern; Belhoul Specialty; Neuro Spinal; New Medical Centre; International Private; Belhoul European; Emirates; Cedars Jebel Ali International; Canadian Specialist; Gulf Specialty; Al Rafa; Jebel Ali; Iranian; City; American Academy of Cosmetic Surgery Central; Al Zahra; Zulekha; Enjab Medical Centre; Royal; W. Wilson Specialised; Dar El Oyoun Specialised Centre; Al Corniche Medical Centre; Conceive; Al Melouk Specialised
Sharjah
15
Kuwaiti; Khorfakkan; Kalba; Al Zaid; Al Qassimi
Ajman
2
Khalifah
U.A.Q.
1
UAQ
R.A.K.
5
Saqr; Shaam; Ibrahim Obaid Allah
Al Zahrawi; RAK
Fujairah
4
Fujairah; Deba
Maternity; GMC
GMC
Source: UAE Ministry of Health, 2008 Statistics Note: (1) Al Maktoum Hospital was closed in September 2008.
39
In 2009, the private sector accounted for 27% of the number of beds in the UAE, while the government accounted for 73%. Split by Number of Beds (2009) Private 27%
Government 73%
Source: UAE National Bureau of Statistics, “Health Statistics for 2007–2009”
In terms of the number of outpatient clinics, in the same year the private sector accounted for 88%, while the government accounted for 12%. Split by Number of Outpatient Clinics (2009) Government 12%
Private 88%
Source: UAE National Bureau of Statistics, “Health Statistics for 2007–2009”
It is expected that private sector financing in the healthcare sector will increase from 27.1% in 2006 to approximately 35.0% in 2012. Forecast Healthcare Expenditure Split 21.4%
27.1%
32.9%
35.0%
78.6%
72.9%
67.1%
65.0%
2008 2012E Private Sector Expenditure
2000 2006 General Government Expenditure
Source: RNCOS, UAE Healthcare Sector Forecast to 2012, and WHO, “World Health Statistics 2011”
The UAE Pharmaceutical Industry In 2010, according to the BMI Report for Q2 2011, the UAE pharmaceutical market reached a value of US$1.45 billion. According to this BMI report, the UAE’s pharmaceutical market experienced year-on-year growth of 14.7% in 2010. By 2015, it is expected that drug expenditure will reach a value of US$1.84 billion, with a CAGR of 4.9%. The key regulatory authority in the UAE pharmaceutical sector is the Pharmaceutical and Medicine Control Department of the MoH. All products must be registered with the MoH, which regulates the supply of all drugs to public sector hospitals. Fees for product registration in the UAE are relatively low, amounting to US$135 as of the second quarter of 2011, which reflects the import-reliant nature of the market. Drug registration procedures are stringent, and it is difficult for companies without a US FDA or European manufacturing licence to gain entry into the market. In June 2010, the MoH registered 110 new medical products, including 26 innovative products, 12 biological medicines, two hormonal drugs and 66 derived medical drugs. 40
Due to large-scale ports such as Dubai, the UAE remains a hub for counterfeit drugs in the region. The majority of fake drugs are for conditions that carry social stigma, such as obesity or erectile dysfunction. The MoH is responsible for setting medicine prices in the UAE and will set exchange rates for a stipulated period, normally six months. Despite near-zero trade tariffs within the GCC trade bloc, drug prices in the UAE have often been twice the level in other GCC states, mainly due to the country’s wealth and small pharmaceutical base. An additional issue is the fact that the local currency is only pegged to the US dollar. This means that the UAE dirham is still susceptible to fluctuations in the exchange rates of other currencies, which could distort the prices of products sourced from overseas in currencies other than the US dollar. Competitive Landscape for Distribution Competition in the distribution industry is based on long-term relationships with suppliers and customers, bargaining power, strong distribution and logistics infrastructure, efficient management and operations and a diversified and strong brand portfolio. The major distributors of fast-moving consumer goods (“FMCG”), pharmaceutical products, scientific products and veterinary products in the UAE include: Name
Distributed products
NMC Trading
Cosmetic / Educational / FMCG / Medical / Pharmaceutical / Scientific / Veterinary
Abu Dhabi Maritime and Mercantile International Company
FMCG
Al Maya Trading
FMCG
Al Seer (Spinneys Group)
FMCG
Al Seirra Trading (Choithram Group)
FMCG
Allieds
FMCG
Ashraf & Partners
FMCG
Baqer Moheibi Establishment
FMCG
Gulf International
FMCG
New National Marketing & Trading
FMCG
The National Trading and Development Establishment
FMCG
Modern Pharmacy
FMCG / Pharmaceutical
Alphamed Group
FMCG / Pharmaceutical / Scientific
City Pharmacy
FMCG / Pharmaceutical / Scientific
Al Hayat Pharmaceuticals
Pharmaceutical / Scientific
Al Mazroui Medical
Pharmaceutical / Scientific
BDH Middle East
Pharmaceutical / Scientific
Gulf & World Traders
Pharmaceutical / Scientific
Gulf Drug Corporation
Pharmaceutical / Scientific
Pharma Trade
Pharmaceutical / Scientific
Al Hayath
Scientific
AMICO
Scientific
EMITEC
Scientific
Gulf Drug Establishment
Scientific
Metromed
Scientific
Al Awani Group
Veterinary
Al Maqqam Traders
Veterinary
Gulf Rider
Veterinary
Source: NMC
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PART VII: BUSINESS Overview We are a leading integrated healthcare provider in the fast-growing UAE market and are one of the largest private sector healthcare providers in the UAE in terms of average daily patient numbers. During the fiscal year ended 31 December 2011, we treated approximately 4,700 patients at our facilities on an average daily basis. As at 31 December 2011, we operated 230 beds and have a broad and diverse network of facilities including hospitals, a day patient medical centre, pharmacies and distribution facilities across the UAE, which we believe makes us one of the largest integrated private sector healthcare companies in the region. We have over 37 years of experience operating an integrated healthcare platform within the UAE and we believe we were the first company in the UAE to provide private healthcare services. We believe we have a strong track record of deliberate, profitable and well-executed organic growth since commencing operations in 1975 and are currently the only private sector healthcare company with a broad UAE presence. This growth has centred on the addition of new hospitals, capacity expansion within existing facilities, a focus on increasing the number of highvalue specialty procedures we offer and the introduction of state-of-the-art testing equipment, coupled with continuous improvement to service and quality and the addition of pharmacy and distribution businesses to our portfolio. We currently serve the UAE market for self- and privately-insured patients. In 2010, healthcare expenditures in the UAE healthcare market were estimated at approximately US$6.6 billion and forecast to grow to US$10.9 billion by 2013, representing a CAGR of 16.6% (RNCOS, UAE Healthcare Sector Forecast to 2012). We believe that the private healthcare market in the UAE is attractive due to the relatively high barriers to entry in the private hospital sector, a growing privately-insured population following actual and proposed regulatory changes in the UAE, a rising incidence of lifestyle diseases, increased healthcare awareness and strong population growth. We seek to be at the forefront of the healthcare industry in the UAE by introducing advanced technologies and new services and providing specialised healthcare models to provide world-class healthcare services, becoming a pre-eminent emerging markets healthcare provider. Our integrated and diversified business is organised into two segments: healthcare, and distribution and services.
Healthcare Hospitals & Day Patient Medical Centres Specialty hospitals (3) General hospitals (1) Medical centre (1)(1) Maternity hospital (1)(2)
Distribution and Services Pharmacies
Distribution Pharmaceuticals FMCG Food Scientific and medical equipment Educational and veterinary products
Pharmacies (8)
Services IT
Notes: (1) In addition, we expect to complete our acquisition of Healthcare Suites from Dr. B.R. Shetty on or about 1 July 2012. (2) Expected to open in the second half of 2012.
Healthcare Our healthcare segment represented 44.1%, 44.4% and 46.3% of our revenues (including intra-group sales) and 74.9%, 68.0% and 69.5% of our total segmental Adjusted EBITDA for the fiscal years ended 31 December 2009, 2010 and 2011, respectively, and includes two primary divisions: • hospitals and day patient medical centres; and • pharmacies. Hospitals and Day Patient Medical Centres Our hospitals comprise three Joint Commission International (“JCI”) accredited specialty hospitals in Abu Dhabi, Dubai and Al-Ain and a general hospital in Dubai. In addition, we operate a day patient medical centre in 42
Sharjah. We also agreed in 2012 to acquire an operating day patient medical centre in Dubai known as Healthcare Suites from our CEO and founder, Dr. B.R. Shetty and we expect to complete this acquisition on or about 1 July 2012. In addition, we are developing a maternity hospital in Abu Dhabi that is expected to open in the second half of 2012. Our hospitals provide an integrated range of healthcare services, from outpatient services to tertiary care services. Our tertiary care services provide advanced levels of care in over 30 medical departments, including “super-specialty” services such as cardiology, cardiothoracic surgery, endocrinology, gastroenterology, in-vitro fertilisation, nephrology and dialysis, neurology and neurosurgery, oncology, paediatrics and neonatology, pulmonology and urology. We have an established track record of being a leader in introducing new services and technologies in the UAE market. We believe that: • we were the first company in the UAE to open a private medical clinic, in 1976; • we were the first company to offer a CT scanner in Abu Dhabi, in 1982; • we own the first private hospital to have a 1.5 Tesla magnetic resonance imaging, or MRI, machine in Abu Dhabi, in 2006; • we were the first private sector group in the UAE to introduce a picture archiving communication system, or PACS, on a pay-per-usage basis in the radiology department, in 2007; • we were the first private hospital provider to offer vitreo-retinal surgeries in Abu Dhabi, in 2007, and Al-Ain, in 2009; • we were the first and only hospital in the private sector to offer a complete suite of neonatology services in Abu Dhabi, which commenced in 2010; • we operate the hospital in which the first open-heart surgery in Al-Ain was performed, in 2010; and • we expect to be the first operator to open a dedicated private maternity hospital in the UAE in the second half of 2012. In addition: • we received the Specialist Achievement Award (Imaging and Diagnostics) award by the Middle East Arab Health Organisation in 2008; and • Dr. B.R. Shetty, our CEO, Managing Director (“MD”) and founder, was the first person to receive the “Order of Abu Dhabi” for development of the community and cause of the emirate, in 2005 and was named Healthcare CEO of the Year by CEO Middle East magazine in February 2012. Including revenues from our three pharmacies situated inside our hospitals, our hospitals and day patient medical centres division represented 74.9%, 78.0% and 79.0% of the healthcare segment’s revenue for the three fiscal years ended 31 December 2009, 2010 and 2011, respectively. Pharmacies Our healthcare segment also includes a chain of eight pharmacies, five of which are conveniently located near our hospitals and three of which are located within our hospitals. Distribution and Services Distribution and services represented 55.9%, 55.6% and 53.7% of our revenue (including intra-group sales) and 25.1%, 32.0% and 30.5% of our total segmental Adjusted EBITDA for the three fiscal years ended 31 December 2009, 2010 and 2011, respectively. We believe that we are one of the leading distributors in the UAE of pharmaceutical products, FMCGs (which include both food and non-food items), educational supplies, cosmetic products, medical and scientific equipment and veterinary products, distributing over 50,000 products from leading brands. We have particular strength in pharmaceutical products, FMCGs, medical equipment and educational supplies. Our distribution and services segment is vertically integrated and supplies all of our hospitals, our day patient medical centre and our pharmacies. In addition, it supplies a broad platform of other hospitals, pharmacies, laboratories, government institutions (such as the MoH) and retail outlets in the UAE (such as Boots and Carrefour) as well as distributors in other countries outside the UAE. The percentage of the distribution and services segment’s total revenue generated by the top five customers of that segment was 26.3% for the fiscal year ended 31 December 2011. See “Part II—Risk Factors—Risks Relating to our Business—We may suffer the loss of one or more of our significant customers in our distribution and services segment”. 43
We have a dedicated, in-house information technology (“IT”) services team, which provides hardware, software and networking solutions to our healthcare and distribution and services segments as well as to a limited number of external clients. Our strong IT infrastructure ensures our healthcare and distribution and services segments continuously enhance operational efficiencies and offer value added services such as the recent introduction of e-claims, which expedites payments from insurers. Financial Performance We have a long track record of strong operational and financial results. During the three fiscal years ended 31 December 2009, 2010 and 2011, we recorded occupancy rates of 46.4%, 45.4% and 53.0%, an average daily census of 85.0, 94.4 and 121.9 patients, and revenue per patient of US$79.13, US$87.75 and US$100.49, respectively. During the three fiscal years ended 31 December 2009, 2010 and 2011, we recorded revenue of US$338.9 million, US$386.5 million, and US$443.7 million, respectively, with a CAGR over the period of 14.4%. During the three fiscal years ended 31 December 2009, 2010 and 2011, we recorded Adjusted EBITDA of US$42.0 million, US$56.4 million, and US$70.5 million, respectively, with a CAGR over the period of 29.6%. During the year ended 31 December 2011, US$268.9 million of our revenues (including intra-group sales) and US$59.8 million of our total segmental Adjusted EBITDA were generated by our activities in Abu Dhabi. We are headquartered in Abu Dhabi, UAE, and had approximately 4,200 employees as of 31 December 2011. History We have provided healthcare services in the UAE for more than 37 years. We currently operate four hospitals, one day patient medical centre and eight pharmacies, all located in the UAE. We believe we were the first group to offer private healthcare in the UAE and have always differentiated ourselves by our clinical quality. Important events in our history include: • In 1975, Dr. B.R. Shetty (our founder, MD and CEO) founded New Medical Centre Group as a single pharmacy, which made a profit of AED72,000 in its first year of operation. • In 1976, we opened our first medical clinic which gradually evolved into what is known today as NMC Specialty Hospital LLC—Abu Dhabi. • In 1981, we commenced pharmaceutical distribution activities. • In 1989, we diversified into distribution of consumer goods. • In 1996, we opened New Medical Centre LLC—Sharjah. • In 1999, we expanded our operations outside Abu Dhabi with the opening of New Medical Centre Hospital LLC—Dubai. • In 2004, we opened NMC Specialty Hospital—Dubai. • In 2008, we opened New Medical Centre Specialty Hospital LLC—Al-Ain. • In 2009, we reorganised our business and formed NMC Healthcare LLC as a new holding company to hold our hospital, pharmacy, distribution and IT services businesses as our subsidiaries. • In 2011, we incorporated NMC Health plc in England and Wales to act as our holding company. Our Competitive Strengths We believe the following competitive strengths distinguish us from our competitors: We operate in the fast-growing UAE healthcare market, which is supported by favourable demographics We are an integrated healthcare organisation with a comprehensive range of healthcare capabilities enabling us to provide end-to-end services to patients, doctors, and healthcare providers. According to RNCOS’s UAE Healthcare Sector Forecast to 2012, the UAE healthcare market is expected to grow by more than 16.6% per year from US$5.9 billion in 2009 to US$10.9 billion in 2013. We expect this growth to be driven by increased health awareness as literacy rates increase, an ageing population, a reduction in the number of domestic UAE patients seeking treatment overseas, the rising incidence of lifestyle diseases such as diabetes, increasing medical tourism and strong government support for increased private sector participation. 44
The UAE has a favourable regulatory environment for independent healthcare operators There is a growing trend towards widening access to affordable healthcare services in the UAE through the introduction of mandatory health insurance. In 2007, health insurance plans were extended to all residents and expatriates in Abu Dhabi resulting in an increased volume of high- and low-fee procedures. We expect similar schemes to be introduced in other emirates in the future. In addition, in its 2008—2010 Strategic Framework, the MoH placed strong emphasis on upgrading healthcare facilities to improve services as well as enhancing its role as regulator. In addition to this trend towards mandatory health insurance, certain governments in the GCC including the UAE are also actively looking at ways to boost private sector participation in the provision of healthcare services to address the strong increasing demand from patients. For example, the Abu Dhabi government has provided us with certain direct incentives such as a grant of land, under which we are required to pay a nominal annual fee, on which to build a new hospital in Khalifa City, Abu Dhabi. See “—Healthcare—Hospitals and Day Patient Medical Centres—Our Expansion Plans—Proposed Khalifa City Hospital”. In addition, we believe the UAE has strict licensing standards and accreditation processes that provide key barriers to entry for potential competitors. We are a high-quality healthcare provider with superior key performance indicators, or “KPIs”, and a network of diverse high-quality facilities Our emphasis on quality and our patient-centred approach has improved our operational and clinical efficiency and led to recognition of the high quality of care we provide. We operate a diverse portfolio of facilities and offer a diverse range of specialities in Abu Dhabi, Dubai, Sharjah and Al-Ain, with further facilities in development in Abu Dhabi and Dubai. We have JCI accreditation for each of our specialty hospitals and work closely with local regulators such as the MoH to maintain the highest standards of governance, clinical excellence and credentials for our diverse portfolio of assets. We believe we were the first private healthcare provider in the UAE to achieve JCI accreditation and the first to offer CT scans. We have also received numerous awards, including the Best Radiology Department in the Middle East, awarded by Arab Health in 2007. Our diversified network of four hospitals, one day patient medical centre and eight pharmacies offer a comprehensive range of healthcare services, from outpatient services to secondary and tertiary care services. We have a strong track record of growth and driving value in each of our facilities, as demonstrated by continuing improvement in the KPIs we use to measure our performance, including occupancy rates, average daily census, outpatient volume and revenue per patient. See “Part X—Selected Historical Consolidated Financial Data—Other Financial, Operating and As Adjusted Data”. Our profitable distribution and services segment has a strong distribution network, an efficient logistics infrastructure and provides interrelated services to our healthcare segment We believe that our distribution and services segment is one of the leading distributors of pharmaceutical products, medical equipment and supplies, veterinary products, FMCGs and cosmetic products in the UAE. As at 31 December 2011, we had six offices across the UAE and 530,274 square feet of warehousing space, with an additional 37,226 square feet expected to be completed in the first half of 2012. In addition, we manage our supply chain using a state-of-the-art IT network. We believe the favourable competitive and regulatory environment in the UAE enables us to fix higher margins in our markets than comparable publicly-traded western peers who are not able to fix margins. In the three fiscal years ended 31 December 2009, 2010 and 2011, our distribution and services segment recorded Adjusted EBITDA margins of 5.8%, 8.7% and 9.8%, respectively. Our distribution and services segment markets and distributes a wide range of over 50,000 products. We distribute products to hospitals, pharmacies and government healthcare institutions, including our own portfolio of hospitals, day patient medical centre and pharmacies, providing the benefits of an inter-related service to our healthcare segment. We enjoy long-term contracts with both the MoH and Ministry of Education, and we believe our size and scale give us strong bargaining power. We have strong brand recognition across the UAE with established relationships with insurance providers We believe that our focus on the provision of high-quality healthcare and the introduction of the latest medical technologies has resulted in strong brand recognition across the UAE. We have established strong relationships with all of the major national insurance companies as well as a number of leading international insurance companies, and we have direct billing links with these leading insurance companies. In addition, our Abu Dhabi Specialty Hospital and Al-Ain Specialty Hospital ranked among the top three hospitals in Abu Dhabi for inpatient care, and our Al-Ain Specialty Hospital was ranked the top hospital in Abu Dhabi for outpatient care in a patient satisfaction survey conducted by HAAD in 2010. Through our existing market position, reputation and 45
clinical know-how and our high-level of patient satisfaction as demonstrated by the above-mentioned HAAD survey, we believe we are well-positioned to capitalise on the strong expected growth in demand for healthcare services in the UAE and in the broader GCC region. Our distribution and services segment also has a long-standing market presence, having commenced operations in 1981. We believe we are a vendor of choice in the UAE, enjoying exclusive rights to engage in the importing, marketing and distribution of over 50,000 diverse products from leading brands. We have an experienced, long-standing and committed management team We have an experienced and dedicated senior management team. Our senior managers have on average approximately 18 years of experience with NMC. Our CEO, Dr. Shetty, founded NMC in 1975 and has driven the strong growth of the business from a single clinic in Abu Dhabi to being a regional leader that the business has become today. Dr. Shetty is supported by a management team with significant and relevant experience. We have a track record of successfully managing strong, profitable growth We have grown our business from a pharmacy opened in 1975 and a single clinic opened in 1976 to our current portfolio of five healthcare facilities operating 230 beds while showing consistent profitability. We have successfully managed our growth through capacity expansion within existing facilities, the development and construction of new facilities and the addition of new complementary lines of care and business. We have adopted different growth strategies over our history in order to address the clinical needs of the populations which we serve and to build an integrated healthcare leader in the UAE. Throughout our growth history, we have achieved our expansion while maintaining a strong focus on profitability as well as operational and clinical excellence. This is demonstrated by our CAGR of 29.6% in Adjusted EBITDA between 2009 and 2011. We will continue to focus on profitability as we implement our current expansion plans. We have an experienced and well-trained workforce and strong relationships with doctors We believe that one of the key drivers of our success is our large talent pool of approximately 382 doctors across approximately 30 specialties, as of 31 December 2011. Our doctors were supported by 773 nurses and 237 technicians as of the same date. Many of our doctors have received qualifications and training in Europe (such as the United Kingdom and Germany) and the United States. We believe that we have been able to build a broad base of skilled medical professionals and reduce attrition by a number of strategies, including a continuous training programme, our high-quality facilities, a broad range of specialty care provision and participation in knowledge sharing programmes. This has resulted in an attrition rate which ranged from 9.9% to 13.1% over the last three years which is lower than the average attrition rate of 16% for doctors in the UAE during the same period (Source: RNCOS, UAE Healthcare Sector Forecast to 2012). Our Business Strategy Our aim is to become the leading integrated healthcare provider within the UAE and the broader GCC region while continuing to provide high quality healthcare and distribution and services. We intend to achieve this aim through the implementation of the following key strategies: Maintain our commitment to a world-class integrated healthcare platform and continue to enhance growth and operational efficiencies We believe that we deliver high-quality healthcare services in all our facilities through the utilisation of our modern facilities, equipment and trained staff. We believe that this is demonstrated by the JCI accreditation of our specialty hospitals. We aim to maintain this commitment to world-class healthcare by continued improvements in quality benchmarks and clinical governance, continued investment in the latest technologies and medical know-how and focusing on clinical outcomes and patient satisfaction. We will continue also to focus on the improved operation of our facilities and to leverage our fixed cost base to grow our profitability and margins as we continue to grow our patient volumes and optimise our fee tariff structure. Further, we will continue to focus on maximising the value of our integrated healthcare platform by growing the synergies between our healthcare and distribution and services segments.
46
Maximise the potential of our existing healthcare facilities by increasing productivity, occupancy and capacity and by focussing on providing secondary and tertiary healthcare We have built up a diversified portfolio of high-quality facilities within our group. We intend to maximise the potential of these facilities and grow revenue and margins by: (i) increasing the proportion of revenues from in-patient services through increased utilisation of wards and occupancy (our group occupancy has improved from 46.4% to 53.0% between 2009 and 2011) and increasing volumes through a focus on minimal invasive and day patient procedures as well as secondary and tertiary services; (ii) expanding the inpatient and outpatient capacity of our existing facilities; (iii) improving revenue per bed through operational and clinical improvements; (iv) developing “Centres of Excellence” at certain of our hospitals that focus the care we provide on selected higher-value secondary and tertiary services and differentiate us in selected fields, such as cardiology, gynaecology and ophthalmology, allowing for margin optimisation and increased referrals to our specialists from general practice clinics that we may establish (as discussed in more detail below) in a “hub-and-spoke” arrangement and by local clinics; (v) expanding the services that we offer in both secondary and tertiary care, such as additional diagnostic services, imaging services, radiology and other new services; and (vi) continuing to build a reputation for clinical and medical excellence through investment in new medical technologies, such as cutting edge diagnostic tests and IT initiatives including e-claims. Specifically, we intend to drive growth and utilisation of our most recently opened facilities, such as the Al-Ain Specialty Hospital. Expand the breadth of our healthcare facilities, pharmacy network and services within the UAE We intend to build on our strong track record of growing and expanding our portfolio of facilities in the UAE. We recently agreed to acquire Healthcare Suites, a day patient medical centre with 25 beds in Dubai, which we expect to complete on or about 1 July 2012. In addition, in the second half of 2012, we intend to open a new maternity hospital in Abu Dhabi with 50 beds at opening, with the possibility of later expanding to 100 beds. We also plan to develop new day patient medical centres in Mussafah, a suburb of Abu Dhabi, as well as in Dubai Investment Park, a suburban industrial zone near Dubai, both of which we expect to open in late 2012. We expect these two new facilities to provide general medical services (such as pathology, basic radiology services, inhospital community pharmacy, minor outpatient treatment and day surgery facilities) and to serve as a “hub-andspoke” arrangement to refer patients to our specialty hospitals. We also plan to continue to expand our coverage within the UAE to meet the growing demand for private healthcare in the country. For example, we are evaluating the feasibility of developing a new day patient medical centre on Sheikh Zayed Road in Dubai. We are currently negotiating a lease in respect of the potential Sheikh Zayed Road day patient medical centre, and if successful, we expect this facility to open in 2013. Moreover, we intend to grow our pharmacy business income by including pharmacies in our new hospitals and certain of our day patient medical centres. In addition to growing the number of hospitals and pharmacies, we are also exploring outsourcing opportunities such as managing healthcare facilities for government entities, oil and gas companies and construction companies. For a discussion of how we intend to finance our expansion plans, see “Part XI—Operating and Financial Review— Liquidity and Capital Resources—Capital Expenditures”. In addition, assuming the New Facility is available to us, we also plan to develop, in a number of phases, a 250-bed hospital in Khalifa City in Abu Dhabi on land provided by the Abu Dhabi Government, which we would expect to open in 2014. See “Part II—Risk Factors—Construction of our new hospital at Khalifa City may be delayed if our New Facility becomes repayable as a result of events relating to the guarantors of the New Facility and our financing costs may increase”. Expand the geographic coverage of our services outside the UAE Since our inception in 1975 in Abu Dhabi, we have expanded our presence throughout the UAE and currently have a presence in three emirates. We intend to leverage our strong brand recognition and reputation for medical excellence to continue this geographic expansion through the broader GCC region. Our aim is to focus on those geographies that share similar characteristics to the UAE and where we can apply our managerial skills, systems and experience. We intend to achieve this through both organic expansion and potential acquisitions. We are currently assessing expansion opportunities in Egypt, Saudi Arabia and Qatar. We believe we will be able to leverage our capabilities within the UAE and replicate our model outside of the UAE as there are numerous similarities in the markets where we plan to expand. In addition, our distribution and services segment has “super-agency” distribution agreements with a number of companies and products, allowing us to sub-license our distribution rights to other distributors in selected countries. Increase our market share, through dynamic marketing, of the growing distribution market, which has strong fundamentals and is supported by population growth, long-term rising disposable incomes, strong marketing capabilities and brand strength We have developed our distribution and services segment into one of the leading distribution businesses within the region that markets and distributes a wide range of over 50,000 products. We intend to continue to grow this 47
business through a number of actions, including: (i) building on the synergies between our healthcare division and our pharmaceutical, IT and distribution activities; (ii) continuing to expand the services we provide to our key clients such as arranging product licence applications and helping them gain local regulatory approvals; (iii) expanding the number of clients and geographical regions in the UAE for whom we provide services; (iv) growing the geographic breadth of our re-export business; and (v) further strengthening existing logistics and distribution infrastructure to increase our capacity to meet expected increased volumes, through initiatives such as our recent commissioning of a state-of-the-art warehouse in the Dubai Investment Park. We are currently evaluating the opportunities to expand some of our distribution agreements into geographies, such as Saudi Arabia, through establishing a physical presence in such countries focussed principally on marketing activities. We do not intend to act as a distributor outside the UAE but instead intend to appoint local distributors for products where we have obtained exclusivity in the relevant country, which we refer to as “super-agency” status. Finally, we plan to look for opportunities to grow our distribution and services segment by acquiring additional distribution businesses in the UAE to increase our scale within the region. Expand our distribution client base and product offerings We currently have approximately 500 suppliers and over 50,000 stock keeping units (“SKUs”) in our product portfolio. We plan to expand our portfolio of offerings by adding additional suppliers to our network and additional SKUs to our product mix, expanding the depth and breadth of products we are able to distribute. All of our agency contracts for distribution in the UAE provide us with exclusive rights to distribute directly throughout the country. In addition, we have “super-agency” arrangements with suppliers in certain other countries outside the UAE that allow us to distribute their products exclusively in these countries via our own locally appointed distribution network. We are confident we will continue to grow our portfolio of agency and “super-agency” contracts. In particular, we intend to focus on adding new exclusive suppliers to our food, education, veterinary and scientific divisions. We also plan to expand our customer base by participating in tenders for governmental and quasigovernmental institutional sales, direct sales to small and medium food stores and re-exports via local distributors. Healthcare Hospitals and Day Patient Medical Centres Overview Our hospitals and day patient medical centre seek to provide a comprehensive range of modern, high-quality healthcare services, supported by experienced, world-class medical professionals across various disciplines and specialities, spanning a wide spectrum of medical diagnoses and treatments. We believe that our hospitals benefit from a strong clinical reputation, and we pride ourselves on superior quality standards and our strong brand recognition in the UAE. In addition, all of our specialty hospitals are JCI-accredited. Our facilities include three specialty hospitals in Abu Dhabi, Dubai and Al-Ain and a general hospital in Dubai. In addition, we operate a day patient medical centre in Sharjah. We have significant growth plans to expand the number of our hospitals and day patient medical centres in the UAE as discussed below. See “—Our Expansion Plans”. Our hospitals provide an integrated range of healthcare services, from outpatient services to tertiary care services. Our tertiary care services consist of advanced levels of care in over 30 medical departments, including “superspecialty” services such as cardiology, cardiothoracic surgery, endocrinology, gastroenterology, in-vitro fertilisation, nephrology and dialysis, neurology and neurosurgery, oncology, paediatrics and neonatology, pulmonology and urology. Our facilities primarily serve the self- and private medically insured market. Each hospital and day patient medical centre within our healthcare segment is managed by a medical director with assistance from a hospital administrator. The medical director of each hospital and day patient medical centre reports directly to the Group Medical Director, Dr. C. R. Shetty, who in turn reports to the CEO. See “Part VIII—Management and Corporate Governance” for further details. Each medical director manages daily operations at the relevant facility, overseeing a wide range of functions including licensing, regulatory compliance, staffing, customer service, local procurement, insurance, marketing, housekeeping, security, biomedical, food service, invoicing and accounting. Including revenues from our three pharmacies situated inside our hospitals, for the three fiscal years ended 31 December 2009, 2010 and 2011, our hospitals and day patient medical centres division generated revenues of US$118.6 million, US$142.3 million and US$172.7 million, respectively. 48
Our Hospitals and Day Patient Medical Centre NMC Specialty Hospital LLC—Abu Dhabi (“Abu Dhabi Specialty Hospital”) Established in 1976, Abu Dhabi Specialty Hospital is located in the Madinat Zayed district of Abu Dhabi, a highly populated area located in the heart of Abu Dhabi city. Abu Dhabi Specialty Hospital serves the residents of Abu Dhabi, Musaffah, Khalifah City and the western region of Abu Dhabi. Abu Dhabi Specialty Hospital’s inpatient facilities comprise 100 patient beds, which includes 68 single room patient beds, 20 general ward beds, 11 Intensive Care Unit (“ICU”) beds, one Neonatal ICU (“NICU”) bed as well as six operation theatres. Abu Dhabi Specialty Hospital’s 68 single room patient beds are situated in 43 regular rooms, 15 deluxe rooms, five super deluxe rooms four Very Important Person (“VIP”) suites and one Very Very Important Person (“VVIP”) suite. In addition, Abu Dhabi Specialty Hospital has a catheterisation laboratory, a clinical laboratory, a radiology centre and a beauty clinic. As at 31 December 2011, Abu Dhabi Specialty Hospital employed 955 staff. Abu Dhabi Specialty Hospital was the first and remains the only hospital in the private sector in Abu Dhabi to have fully-fledged neonatology services and was the first hospital to introduce both capsule endoscopy and vitreo-retinal surgeries in Abu Dhabi. The hospital offers a Siemens MRI machine with wide bore and a 1.5 Tesla Mannetom Espree, as well as a Siemens Lithoskop, providing a point of differentiation from its peers. It has also been recognised for its pioneering approach to health care through the Philips Pioneer award received in 2004. It was JCI accredited in May 2010. Abu Dhabi Specialty Hospital operates out of four buildings (within walking distance of each other) with a total floor area of approximately 39,414 square metres. The table below shows Abu Dhabi Specialty Hospital’s historical number of patients treated, broken down by type of treatment rendered for the years indicated: Year ended 31 December 2009 2010 2011
Patients Outpatient . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 525,877 503,153 545,564 Inpatient . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,407 19,927 17,623 Radiology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88,569 90,883 82,641 Pathology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133,485 135,000 136,062 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,125 37,019 35,552 Total Patient Count . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
804,463
785,982
817,442
The table below shows certain of Abu Dhabi Specialty Hospital’s operational data as of and for the years indicated: Year ended 31 December 2009 2010 2011
Operational data Number of beds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bed occupancy(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
96 55.4%
100 54.6%
100 60.4%
Note: (1) Calculated as inpatient admissions multiplied by average length of stay, divided by number of beds and multiplied by 365.
Since 2009, we have been executing our strategy to increase our revenue per patient in Abu Dhabi Specialty Hospital and maximise the value of the facility. To achieve this we have initiated a strategy to drive growth and maximise the value of the hospital and its services by focusing on being a “Centre of Excellence” and concentrating on higher-value services and differentiated quality of care, which resulted in a moderate increase in patient count from 804,463 in 2009 to 817,442 in 2011 but resulted in a 30.9% increase in revenue and a 29.2% increase in revenue per patient. In addition, between 2009 and 2011 we increased our number of beds from 96 to 100 and increased occupancy rates from 55.4% to 60.4%, demonstrating our ability to drive growth through occupancy rates while continuing to increase the number of beds and boost margins. 49
NMC Specialty Hospital LLC—Dubai (“Dubai Specialty Hospital”) Established in 2004, Dubai Specialty Hospital is located in the Al Nahda district of Dubai, strategically situated on the Dubai-Sharjah border, an area that has been experiencing significant population growth over the last four years. This location allows Dubai Specialty Hospital to serve the residents of Dubai, Sharjah and the Northern Emirates and also acts as a referral centre to which patients are sent from our Dubai General Hospital and Sharjah Day Patient Medical Centre (each as defined below) for complex procedures and surgeries. Dubai Specialty Hospital was awarded the Specialist Achievement Award – Imaging and Diagnostics for the Middle East at the Arab Health Awards in 2008. Dubai Specialty Hospital operates out of a single building with a floor area of approximately 17,000 square metres. Its inpatient facilities comprise 75 patient beds, which include 55 single room patient beds, three general ward beds, nine ICU beds, eight NICU beds as well as five operation theatres. Dubai Specialty Hospital’s 55 single room patient beds comprise 49 regular rooms, three VIP suites and three VVIP suites. As at 31 December 2011, Dubai Specialty Hospital employed 622 staff. Dubai Specialty Hospital was the first hospital to offer neo-natal services and private healthcare in the UAE. The hospital offers a Somatom Definition, 64-slice dual source machine, providing a point of differentiation from its peers. It has also been recognised for imaging and diagnostics through the Specialist Achievement Award for the Middle East received in 2008. It was JCI accredited in 2009. The table below shows Dubai Specialty Hospital’s historical numbers of patients treated, broken down by type of treatment rendered for the years indicated: Year ended 31 December 2009 2010 2011
Patients Outpatient . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164,883 197,671 193,861 Inpatient . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,311 5,335 6,998 Radiology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,447 31,121 31,795 Pathology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,476 62,046 51,364 Other(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 816 10,233 Total Patient Count . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
254,117
296,989
294,251
Note: (1) Dubai Specialty Hospital’s physiotherapy department opened in the third quarter of 2010.
The table below shows certain of Dubai Specialty Hospital’s operational data as of and for the years indicated: Year ended 31 December 2009 2010 2011
Operational data Number of beds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bed occupancy(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
65 36.3%
75 39.0%
75 51.1%
Note: (1) Calculated as inpatient admissions multiplied by average length of stay, divided by number of beds and multiplied by 365.
We have increased our number of beds in this hospital from 65 as of 31 December 2009 to 75 as of 31 December 2011, while simultaneously increasing occupancy rates from 36.3% to 51.1% during the years then ended, demonstrating our ability to drive growth through occupancy rates while continuing to increase the number of beds. New Medical Centre Specialty Hospital LLC—Al-Ain (“Al-Ain Specialty Hospital”) Established in 2008, Al-Ain Specialty Hospital is a specialty hospital centrally located in the heart of Al-Ain, in the Al-Mutaredh district. Al-Ain Specialty Hospital serves the residents of Al-Ain, which has a population of approximately 374,000, as well as Buraimi and Sohar, which are located in Oman. Al-Ain is one of the younger assets in our portfolio and is currently focussed on capacity expansion and growth. Al-Ain Specialty Hospital operates out of two buildings with a total floor area of approximately 20,000 square metres. 50
Al-Ain Specialty Hospital’s inpatient facilities comprise 45 patient beds, which include 22 single room patient beds, 19 general ward beds and four ICU beds. In addition, Al-Ain Speciality Hospital has five operation theatres. Although there are currently 45 patient beds, the Al-Ain Specialty Hospital has the physical capacity for, and is licensed to have, 100 patient beds, allowing significant expansion capacity without the need for an additional building. As at 31 December 2011, Al-Ain Specialty Hospital employed 467 staff. Al-Ain Specialty Hospital was the first private hospital to conduct open heart surgery and the first hospital to introduce both capsule endoscopy and vitreo-retinal surgeries in Al-Ain. It was JCI accredited in 2009. The table below shows Al-Ain Specialty Hospital’s historical number of patients treated, broken down by type of treatment rendered for the years indicated: Year ended 31 December 2009 2010 2011
Patients Outpatient . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inpatient . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Radiology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pathology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
90,423 1,765 20,309 22,701 4,303
174,040 219,345 2,870 4,915 28,730 34,622 42,492 52,063 9,086 11,825
Total Patient Count . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
139,501
257,218 322,770
The table below shows certain of Al-Ain Specialty Hospital’s operational data as of and for the years indicated: Year ended 31 December 2009 2010 2011
Operational data Number of beds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bed occupancy(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12 45 45 40.3% 34.1% 44.9%
Note: (1) Calculated as inpatient admissions multiplied by average length of stay, divided by number of beds and multiplied by 365.
The total licensed capacity of the hospital is 100 beds, but we have adopted a strategy of adding beds based on occupancy, and this gradual incremental increase will help us function efficiently. In 2011, while our number of beds remained constant at 45, our occupancy rate increased from 34.1% to 44.9%. New Medical Centre Hospital LLC—Dubai (“Dubai General Hospital”) Established in 1999, Dubai General Hospital is located in the Deira district of Dubai. Deira has a relatively high population density along with a large immigrant population. Dubai General Hospital operates out of one floor located within the New Al Safiya Building, with a total floor area of approximately 2,400 square metres. Dubai General Hospital’s inpatient facilities comprise ten patient beds, which include nine single room patient beds and one ICU bed as well as two operation theatres. As at 31 December 2011, Dubai General Hospital employed 244 staff. The table below shows Dubai General Hospital’s historical number of patients treated, broken down by type of treatment rendered for the years indicated: Year ended 31 December 2009 2010 2011
Patients Outpatient . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123,422 117,959 119,957 Inpatient . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,225 980 1,108 Radiology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,877 17,852 17,052 Pathology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,247 36,415 32,322 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,031 7,536 7,566 Total Patient Count . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
190,802
180,742
178,005
The table below shows certain of Dubai General Hospital’s operational data as of and for the years indicated: Year ended 31 December 2009 2010 2011
Operational data Number of beds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bed occupancy(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10 33.6%
10 26.8%
10 30.4%
Note: (1) Calculated as inpatient admissions multiplied by average length of stay, divided by number of beds and multiplied by 365.
The Dubai General Hospital primarily focuses on outpatient services, and thus the number of beds has remained constant at ten. Meanwhile, occupancy decreased from 33.6% in 2009 to 26.8% in 2010, due primarily to the construction of the Abu Hail metro station outside the entrance of the Dubai General Hospital and corresponding obstruction of the hospital’s car park in connection with the construction. In 2011, while our number of beds remained constant at ten, our occupancy rate increased from 26.8% to 30.4%. New Medical Centre LLC—Sharjah (“Sharjah Day Patient Medical Centre”) Established in 1996, Sharjah Day Patient Medical Centre (formerly the Sharjah Clinic) is a specialty day patient medical centre located in the Corniche district of Sharjah. Sharjah Day Patient Medical Centre serves the residents of Sharjah and Ajman. Sharjah Day Patient Medical Centre operates out of two floors located in the Bel Rasheed Building, with a total floor area of approximately 3,000 square metres. As at 31 December 2011, Sharjah Day Patient Medical Centre employed 154 staff. The Sharjah Clinic closed in May 2010 and moved to new larger premises to open the Sharjah Day Patient Medical Centre and expanded its range of services in January 2011 to include a pharmacy and imaging and maternity services. The table below shows Sharjah Day Patient Medical Centre’s historical number of patients treated, broken down by type of treatment rendered for the years indicated: Year ended 31 December 2009 2010 2011
Patients Outpatient . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inpatient . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Radiology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pathology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total Patient Count . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
74,878 73,028 N/A N/A 6,096 6,400 18,216 16,858 — —
76,162 N/A 6,320 16,703 —
99,190
99,185
96,286
The decline in patient count that occurred in 2010 was due to closing the old Sharjah Clinic and moving to new premises in order to open the new Sharjah Day Patient Medical Centre, which took approximately one month to complete fully and led to minor disruption to patient services. This was a temporary decline and it did not affect NMC’s overall performance in 2010. Outpatients per day at Sharjah Day Patient Medical Centre increased in 2011. During the three fiscal years ended 31 December 2009, 2010 and 2011, outpatients per day at the Sharjah Day Patient Medical Centre were 205.1, 200.1, and 208.7, respectively. Our Expansion Plans Healthcare Suites Healthcare Suites is a high-end specialty day patient medical centre in Dubai Healthcare City. It opened in March 2011, and we have agreed to acquire it from our CEO Dr. B.R. Shetty. We expect to complete this acquisition on or about 1 July 2012 and expect to spend approximately an additional US$5.0 million in capital expenditures principally for additional equipment and refurbishment for this facility. The cost of this acquisition and capital expenditure will be funded using part of the proceeds from the Global Offering. See “Part IX—Use of Proceeds and Dividend Policy”. Healthcare Suites is specifically designed to attract highly-experienced, specialised 52
doctors from around the world. Its facilities include 21 fully-equipped suites with doctors’ offices, examination rooms, state-of-the-art diagnostics including imaging, electroencephalography, electrocardiography, stress test and echocardiography and four operating theatres designed to provide minimally invasive surgery and other procedures as well as anaesthesiology, orthopaedic surgery, cardio-thoracic surgeries and paediatrics. Healthcare Suites has 25 beds including ten recovery beds and eight patient rooms, and we expect it to have 35 employees, excluding doctors hired on an assignment basis, after the acquisition is complete. Maternity Hospital We are currently developing a specialty hospital focused on maternity, paediatric care and in-vitro fertilisation located in Abu Dhabi, next to the Al Jazira Club. We expect it to begin operations in the second half of 2012, with 50 beds at opening, with the possibility of later expanding to 100 beds. We expect the maternity hospital to have approximately 250 employees after a full year of operation. Following the introduction of mandatory health insurance in Abu Dhabi, patients have been seeking high-fee high-complexity procedures, such as those for obstetric care. Consequently, there has been an increase in the number of deliveries at Abu Dhabi Specialty Hospital. In 2007, the number of deliveries at Abu Dhabi Specialty Hospital increased by six times compared with the previous year. This trend has continued since, with a 59% CAGR increase in delivery volume between 2007 and 2010. We expect that our new maternity hospital will cater to the anticipated demand in the UAE healthcare market for a dedicated maternity care hospital. Additional Day Patient Medical Centres We also intend to develop two new day patient medical centres at Dubai Investment Park, a suburban industrial zone near Dubai, and in Mussafah, a suburb of Abu Dhabi, both of which we expect to commence operations in late 2012, each opening with 45 employees. The Mussafah facility will also include a pharmacy. Each of these facilities will comprise two floors and serve as a general practice day patient medical centre that will serve as a “hub-and-spoke” referral clinic to our specialty hospitals. However, we expect the Dubai Investment Park facility will later be expanded into a full-service hospital and pharmacy. Possible Sheikh Zayed Road Day Patient Medical Centre In addition, we are considering the feasibility of developing a day patient medical centre on Sheikh Zayed Road in Dubai. We are currently in the process of negotiating the lease for the Sheikh Zayed Road facility. If we finalise that lease, we plan to develop and open this day patient medical centre in 2013. We intend for this facility to serve as a general practice day patient medical centre that will serve as a “hub-and-spoke” referral clinic to our specialty hospitals. Proposed Khalifa City Hospital In addition, assuming the New Facility is available to us, we are planning to develop a new hospital in Khalifa City, Abu Dhabi. The land for the Khalifa City Hospital has been allotted to us by the Abu Dhabi Municipality under a grant, pursuant to which we are required to pay a nominal annual fee. We currently anticipate that the construction work on the hospital will commence by the end of 2012 and that the hospital would open in the first half of 2014. Khalifa City Hospital would cater to the growing population of Abu Dhabi’s suburbs, such as Mussafah, Baniyas and Shahama, which have increased in population in recent years due to cheaper rents, availability of schools and proximity to the industrial areas. According to Sheikh Mohammed’s vision 2030 document, these suburbs are expected to house around one-fifth of the total population of the Abu Dhabi emirate by 2030. The hospital is planned to be commissioned in two phases. During the first phase, we expect the Khalifa City Hospital to open with 100 beds but then expand by another 100 beds to a total of 200 beds. During this first phase, Khalifa City Hospital will focus on four “super-specialities”: paediatrics, endocrinology, oncology and cardiology, as well as an array of other specialities. During the second phase, we expect to broaden the offering of “super-specialty” services at Khalifa City Hospital and expand the number of beds by 50 to a total of 250 beds. In certain limited circumstances, unrelated to the financial performance of the Group, all outstanding amounts under the New Facility may become due and payable prior to its final repayment date of 31 March 2017. In these circumstances, we would delay the construction of our Khalifa City hospital. See “Part XI—Operating and Financial Review—Liquidity and Capital Resources—Liabilities and Indebtedness”, “Part IX—Use of Proceeds and Dividend Policy” and “Part II—Risk Factors—Construction of our new hospital at Khalifa City may be delayed if our New Facility becomes repayable as a result of events relating to the guarantors of the New Facility and our financing costs may increase”. 53
Construction and development of our proposed new hospitals and day patient medical centres, and any other hospitals and healthcare facilities we may construct or develop, is subject to the risks and uncertainties inherent in construction and development projects. See “Part II—Risk Factors—Our growth strategy depends primarily on the construction and development of new hospitals and day patient medical centres, which may be subject to delays”. For a discussion of how we intend to finance our expansion plans, see “Part XI—Operating and Financial Review—Liquidity and Capital Resources—Capital Expenditures”. Summary of Specialties The following table sets forth a summary of the various specialties offered at our hospitals and day patient medical centres:
Specialisation(1)(2)(3)
General Practice . . . . . . . . . . . . . . . . . . Gynaecology and Obstetrics . . . . . . . . Internal Medicine . . . . . . . . . . . . . . . . . Paediatrics and Neonatology* . . . . . . . Pathology . . . . . . . . . . . . . . . . . . . . . . . Radiology . . . . . . . . . . . . . . . . . . . . . . . Anaesthesiology . . . . . . . . . . . . . . . . . . Non-Interventional Cardiology* . . . . . Dentistry . . . . . . . . . . . . . . . . . . . . . . . . Dermatology . . . . . . . . . . . . . . . . . . . . Ear, Nose and Throat (ENT) . . . . . . . . Endocrinology* . . . . . . . . . . . . . . . . . . Gastroenterology* . . . . . . . . . . . . . . . . Neurology . . . . . . . . . . . . . . . . . . . . . . Orthopaedics . . . . . . . . . . . . . . . . . . . . Urology* . . . . . . . . . . . . . . . . . . . . . . . Audiology . . . . . . . . . . . . . . . . . . . . . . Emergency Medicine . . . . . . . . . . . . . . General and Laparoscopy Surgery . . . . In-Vitro Fertilisation* . . . . . . . . . . . . . Ophthalmology . . . . . . . . . . . . . . . . . . Physical Medicine and Rehabilitation . . . . . . . . . . . . . . . . . . Psychiatry . . . . . . . . . . . . . . . . . . . . . . . Dietetics and Nutrition . . . . . . . . . . . . . Reconstructive and Plastic Surgery . . . Allergy . . . . . . . . . . . . . . . . . . . . . . . . . Interventional Cardiology . . . . . . . . . . Cardiothoracic Surgery* . . . . . . . . . . . Nephrology and Dialysis* . . . . . . . . . . Neurosurgery* . . . . . . . . . . . . . . . . . . . Oncology (Clinical and Surgical)* . . . Pulmonology* . . . . . . . . . . . . . . . . . . .
Abu Dhabi Specialty Hospital
Dubai Specialty Hospital
Al-Ain Specialty Hospital
X X X X X X X X X X X X X X X X X X X ★ X
X X X X X X X X X X X ★ X X X X X X X ★ X
X X X ★ X X X X X X X X X X X X X X X ★ X
X X X X(5) X X X X X X X ★ ★ X X X ★ X X X
X
X X X X X X X ★ X X X
X X X X X X X X X X(4) X
X ★ X ★ ★ X X ★ X ★ ★
X X
★ ★
Notes: (1) Specialties considered “super-specialties” in the UAE are denoted by *. (2) Existing specialisation is denoted by X. (3) Specialisation expected to be introduced during 2012 is denoted by ★.
54
Dubai General Hospital
Sharjah Day Patient Medical Centre
X X X X(5) X X X X X X ★ ★ ★ X ★ ★
Dubai Healthcare Suites(6)
X X X X X X X X X X X X X X X X
Proposed Abu Dhabi Maternity Hospital(7)
X X X X X X X
X X X
X
X X
(4) Surgical Oncology only. (5) Paediatrics only. (6) Acquisition expected to be completed on or about 1 July 2012. (7) Expected to be operational in the second half of 2012.
Customers/Relationships with Insurance Companies Historically, our hospitals business mainly treated cash-paying patients. However, credit patients who are covered either by health insurance or by corporate medical packages have formed an increasing percentage of our revenue over the past few years. For the three fiscal years ended 31 December 2009, 2010 and 2011, the revenue from credit patients accounted for 75.4%, 78.6% and 80.5%, respectively, of our total healthcare segment revenue. In these cases, we recover the service charges directly from the insurance companies or companies with whom we have pre-agreed arrangements. We have successfully negotiated fee rate increases for many of our high-volume procedures over the past decade while continuing to limit our reimbursement claim rejection rates to approximately 2%. The terms of contracts with insurance companies are generally standardised, such as in Abu Dhabi where the terms are set by HAAD, and cover matters such as pricing, payment terms, method of prior approval and termination. Our hospitals and day patient medical centre are affiliated with all major national as well as international insurance companies and have direct billing links with the insurance companies listed below: Insurance Company
Abu Dhabi National Insurance Company (ADNIC) Ace Life(1) Al-Ain Ahlia Insurance Al-Buhaira National Insurance (Al-Buhaira) Al-Khazna National Insurance American Life Insurance Company (ALICO) AXA Insurance BUPA (Middle East) Daman National Health Insurance (Daman) Dubai Insurance Company Globemed Gulf(1)
Goodhealth Lebanese Insurance Mednet Mussalla Net(1) NAS(1) National General Insurance (HealthNet) Neuron(1) Nextcare(1) Oman Insurance Saudi Arabian Cooperative Insurance Co. (SAICO)
Note: (1) Third-party administrator.
We enter into contracts with insurance companies on both a long-term basis and a short-term basis in relation to specific procedures, such as employee medical exams or immunisations. For long-term contracts, invoices are generated monthly. Contracts for specific procedures are invoiced immediately after the service is provided or at the end of the month. Payment is made by the insurance companies by cheque or bank transfer. Payment terms range between 30 and 90 days, depending upon the terms of the contract. Of our total revenues from the healthcare segment in fiscal year 2011, 56.3% was derived from five insurance companies—Daman, NAS, ADNIC, Oman and Nextcare. This was an increase from 52.1% in 2009. Since the introduction of compulsory insurance in Abu Dhabi in 2007 and wider use of health insurance in the rest of the UAE, the ratio of cash patients to credit patients has dropped significantly. We also receive cash payments directly from individuals. Such payments are mainly dependent upon the patient’s insurance policy, which often stipulates a high excess or sets limits on the amounts that an insurance company will reimburse for particular procedures. In addition, a small proportion of income received from individuals relates to non-insurance customers who settle amounts owed entirely in cash. Cash payments are made by an individual immediately following treatment or after an invoice is sent. Suppliers We seek to maintain high service standards by sourcing most of our medical and non-medical supplies and equipment from leading international suppliers with international reputations for high quality products. Our hospitals and day patient medical centre are equipped with modern medical and diagnostic equipment manufactured by leading international companies and multinational conglomerates located in the USA, the UK, Germany, Japan, Belgium and Switzerland, such as Siemens, Somatom and Dräger. Our hospitals and day patient medical centre procure equipment, instruments and consumables from a wide range of local distributors of major 55
international medical and scientific equipment manufacturers. These local suppliers, based in the UAE, constituted approximately 80% of our healthcare segment’s purchases (other than capital expenditure) for fiscal year 2011. In addition, our distribution and services segment supplies all of our hospitals, our day patient medical centre and our pharmacies. We maintain strong relationships with a wide range of our suppliers. As a large hospital network with centralised procurement, we believe we are able to negotiate favourable terms and priority payment terms with many of these suppliers and third-party service providers. Pharmacies Overview We operate our own chain of eight pharmacies that support our hospitals. We believe our pharmacies offer one of the broadest selections of pharmaceutical products in the UAE, supplying approximately 6,000 pharmaceutical products registered for sale in the UAE as at 31 December 2011. We also believe that they offer a high degree of customer convenience given their close proximity to our hospitals and day patient medical centre. We operate five stand-alone pharmacies under two brand names: New Pharmacy in Abu Dhabi and Bait Al Shifaa in Dubai. The pharmacies located within our Dubai Specialty Hospital, Al-Ain Specialty Hospital and Sharjah Day Patient Medical Centre, as well as our non-hospital pharmacies, operate as pharmacies, serving patients from our hospitals as well as external customers. Our pharmacies stock pharmaceutical products from various multinational companies. We source our pharmaceutical products from leading suppliers such as Pfizer, GlaxoSmithKline and AstraZeneca. In addition to prescription drugs, our pharmacies maintain a selection of over-the-counter non-prescriptive medications such as analgesics, cough and cold products, vitamins, herbal products and beauty, health and personal care products. Our selection of branded personal care products includes Bella, Dial, Duo, Eucerin, Fem, Neocare, Nivea, Onagrine, Pears, Visage and other global brands. Our pharmacies also sell a diverse range of medical equipment, diagnostic products, opticals, rehabilitation equipment and lab apparatus from reputed companies such as 3M Gulf, 3M Nexcare, Affasco, Genemax Medical Products, Hico Medical Co. and Siemens Audiologische Technik GmbH. Each pharmacy is managed by a pharmacist-in-charge who is responsible for managing the daily operations of the pharmacy including licensing, customer service, inventory management, staffing and regulatory compliance. Each pharmacist-in-charge reports to the Medical Director, Hospitals. Excluding revenues from our three pharmacies situated inside our hospitals, for the three fiscal years ended 31 December 2009, 2010 and 2011, our pharmacies division had revenues of US$39.8 million, US$40.2 million and US$46.0 million, and Adjusted EBITDA of US$4.2 million, US$3.2 million and US$4.6 million, respectively. New Pharmacy—Abu Dhabi New Pharmacy—Abu Dhabi was established in 1976, and is situated adjacent to Abu Dhabi Specialty Hospital. It consists of four pharmacy outlets, an optical centre and two medical equipment outlets, which comprises a total floor area of approximately 585 square metres. The New Pharmacy adjacent to the Abu Dhabi Speciality Hospital operates 24-hours a day, seven days a week. New Pharmacy—Abu Dhabi’s service offering includes: • Inpatient prescriptions; • Outpatient prescriptions; • Over-the-counter non-prescription medicines; • Advice on correct usage of medication; • Cytotoxic reconstitution; • Drug information and patient advice; and • Medical equipment (such as wheelchairs). Bait Al Shifaa Bait Al Shifaa was established in 1991, and is situated adjacent to the Dubai General Hospital. It operates 24-hours per day, seven days per week and comprises a total floor area of approximately 163 square metres. Bait Al Shifaa’s service offering includes: • Inpatient prescriptions; 56
• Outpatient prescriptions; • Over-the-counter non-prescription medicines; • Advice on correct usage of medication; and • Drug information and patient advice. Customers Our pharmacies accept prescriptions from cash-paying patients as well as patients covered under our approved health insurance companies. In addition to serving hospitals and outside patients, our pharmacies supply pharmaceuticals and first-aid-related supplies to oil and gas companies, government departments, embassies, schools, hotels, banks, ships and other private companies. Distribution and Services Overview Our distribution and services segment was first established to support our hospitals and pharmacies and has subsequently expanded to serve other customers. Through our distribution and services segment, we have exclusive rights to engage in the importing, marketing and distribution of over 50,000 products from leading brands including FMCGs, which include both food and non-food items, educational supplies, cosmetic products, medical and scientific equipment and veterinary and pharmaceutical products. It is the only distribution company with locations across the UAE, including Abu Dhabi, Al-Ain, Dubai, Fujairah, Ras Al-Khaimah and Sharjah, across all eight divisions. These eight divisions are: • Pharmaceutical Division: imports, markets and distributes over 40 brands of pharmaceutical products including conventional and herbal medicines as well as food and nutritional supplements. The pharmaceutical division distributes products to hospitals, pharmacies and government healthcare institutions including our hospitals, day patient medical centre and pharmacies; • Scientific Division: imports, markets and distributes over 50 brands of rehabilitative, physiotherapy, diabetes, primary care, critical care, medical and dental consumables, medical disposables as well as laboratory solutions and products to third parties and our own hospitals, medical centres and pharmacies. Its clients include the Imperial College London Diabetes Centre, Al Nash’s Al Saleh School and the New National Medical Center. The scientific division also provides biomedical engineering services to its clients; • NMC Veterinary Medicine & Trading: solely engages in the distribution of veterinary products. We import, market and distribute a complete range of over 30 brands of veterinary care products and services including feeds, medicines, nutraceuticals, vaccines and equipment and distribute to stables, veterinary hospitals, farms, reserves and government institutions; • FMCG Division: imports and distributes within the UAE over 50 brands of consumer products to hypermarkets and supermarkets, grocery stores, hotels and other wholesalers; • BCTC (Beiersdorf Cosmetics Trading LLC): is solely dedicated to distributing brand portfolios of Beiersdorf, a German company manufacturing cosmetics, as well as skin and beauty care products to customers such as the Al Safeer Group, the Abu Dhabi Union Co-operation Society, and KM Trading. We act as Beiersdorf’s exclusive agent and distributor in the UAE. We began our relationship with Beiersdorf in 1989 and have been awarded Beiersdorf’s most prestigious Partner of the Year eight times since the inception of the award in 1988; • NMTC (New Marketing & Trading): is solely dedicated to the distribution of food products to customers such as the Al Safeer Group and the Abu Dhabi Co-operative Society and is involved in the distribution of over 30 food brands. We have our own brand of food products such as cereals, canned vegetables, honey and preserves under the private-label brand name “Tasty” from global suppliers from countries such as Kuwait, Oman, the UAE and the USA. Our NMTC division also includes a catering business that arranges distribution of food products for industrial canteens directly from suppliers; • Educational Division: distributes products and resources to educational institutions, analytical laboratories, oil and gas companies and environment and safety departments of government entities. The educational division trades products and resources including teaching materials, laboratory supplies, safety glasses, safety gloves and chemicals, and supplies products from ten international companies; and • Re-export Division: re-exports products from the FMCG Division covered by our “super-agency” contracts to local distributors in Bahrain, Egypt, Kuwait, Jordan, Oman, Qatar, Sudan and Yemen such as 57
Muscat Pharmacy & Stores LLC (Oman), Abdulally General Trading Company (Yemen) and Elite Care (Egypt). Some of the brands that are re-exported include Dial, Mysore Sandal, Neo Care, Pears and Shahnaz Fair One. We commenced distribution operations in 1981, and we believe we are currently one of the top three distribution companies in the UAE in terms of revenue and number of agencies handled. Our distribution and services segment is supported by a dedicated team of sales and marketing professionals, strategically located warehousing facilities, a robust sales and distribution network and a fully computerised inventory management system. We have a flexible distribution model, which allows us to effectively organise separate sales, marketing and delivery teams to manage separately the distribution of products of competing suppliers. For example, we can offer solely distribution, distribution and partial marketing, or distribution and complete marketing. We also have many valuable agency agreements, which are exclusive distribution agreements for specific companies. In addition, we have a number of “super-agency” distribution agreements, which authorise us to appoint distributors in various countries outside the UAE such as Bahrain, Egypt, Kuwait, Jordan, Oman, Qatar, Sudan and Yemen. Our role under the “super-agency” distribution agreements is to ensure the appointed distributors have a good track record in distribution in their respective markets, are financially strong and have a skilled sales force. We believe the favourable competitive and regulatory environment in the UAE enables us to fix higher margins than comparable publicly-traded western peers who are not able to fix margins. Our distribution and services segment also has a dedicated, in-house IT services team, which provides hardware, software and networking solutions to our healthcare and distribution and services segments as well as to a limited number of external clients. The trading business is managed by the Chief Operating Officer of NMC Trading (Dr. Vijayan Nambiar), who reports directly to the CEO of the Company. As at 31 December 2011, our distribution and services segment had approximately 530,274 square feet of dedicated warehousing space in Abu Dhabi, Ajman, Al-Ain and Dubai. By the end of the first half of 2012, we expect this space will increase to 567,500 square feet. For the fiscal years ended 31 December 2009, 2010 and 2011, our distribution and services segment generated revenues of US$201.0 million, US$228.6 million and US$253.4 million, and Adjusted EBITDA of US$11.7 million, US$19.9 million and US$24.8 million, respectively. Sales and Marketing NMC has well-trained and highly-experienced sales, business development and marketing teams in its distribution business: • Sales Team: The sales team works closely with customers to understand their needs and key market trends. Sales managers plan and devise strategies for marketing products across customer categories and identify the market potential for new products. The product management team within each division is responsible for various aspects including product life-cycle, phasing-in, phasing-out, new product introductions, inventory optimisation and procurement management. • Business Development Team: The business development team performs in-depth studies assessing consumer needs and matching them with suitable products that meet those identified needs. Once product requirements are determined, suitable products are located and supply agreements are concluded with relevant suppliers. • Marketing Team: The marketing team manages products through different life-cycle stages (focussing principally on medical, veterinary and pharmaceutical products). Distribution Process We are the exclusive regional distributor of leading brands such as Dial, 3M, McCormick and Nivea in the UAE. We offer the following services to our distribution customers: • Inbound Logistics: Purchases from suppliers arrive in containers at land, air or sea ports. • Freight Forwarding and Clearing: The containers are cleared with customs authorities, and any required clearances are sought from respective government bodies. • Primary Transport: The containers are transported from the ports to warehouses. • Warehousing: The products are stored in the warehouses. • Invoicing: Purchase orders are processed, and invoices are issued to customers. 58
• Secondary Transport: Ordered goods are transported from the warehouses to customers’ premises. • Availability, Visibility and Promotion: Our distribution and services segment’s sales and marketing professionals ensure that the products are displayed optimally for retail sale. Moreover, product promotion support is provided. • After Sales Support and Reverse Logistics: Customer feedback and product returns are handled. Suppliers We source our products from approximately 500 suppliers, and 98% of our products are imported from countries outside of the UAE. The selection of suppliers is determined by our senior management, which considers multiple selection criteria including consumer demand, quality of products, profitability, company history, service levels and cost-effectiveness. Our top five suppliers by value of goods purchased for the fiscal year ended 31 December 2011 are shown in the table below:
Supplier
Beiersdorf . . . . . . . . . . . . . . . . . . . . . Pfizer . . . . . . . . . . . . . . . . . . . . . . . . . Jamjoom . . . . . . . . . . . . . . . . . . . . . . . Himalaya . . . . . . . . . . . . . . . . . . . . . . Unza . . . . . . . . . . . . . . . . . . . . . . . . . .
Segment
FMCG—Cosmetics Pharmaceuticals Pharmaceuticals FMCG FMCG
Value of goods purchased for the fiscal year ended 31 December 2011 (US$ millions)
45.7 30.0 10.3 9.3 8.4
We have entered into long-term agency and distribution agreements with our key suppliers that set forth the specific distribution services that we will provide to them. Our suppliers vary on whether they utilise our promotion and after-sales support services. Most of these agreements are periodically renewable and contain termination clauses subject to a specific notice period. All of our agency contracts for distribution in the UAE provide us with exclusive rights to distribute directly throughout the country. In addition, we have “super-agency” arrangements with certain suppliers that allow us to distribute their products in the UAE as well as certain other countries via our own locally appointed distribution network. The percentage of the distribution and services segment’s total revenue generated by sales of products supplied by the top five suppliers of that segment was 46.7% for the fiscal year ended 31 December 2011. See “Part II—Risk Factors—Risks Relating to our Business—We are dependent on a limited number of suppliers to provide products to our distribution and services segment”. IT Services We have an in-house IT organisation that provides hardware, software and networking solutions to our healthcare and distribution and services segments. Our in-house IT function provides the following hardware solutions for our businesses: communication lines, a data centre, desktop computers, a local area network, a Microsoft Exchange email system and network storage servers. The primary IT systems supporting our healthcare segment comprise: • a document management system, which digitises patient records and other related documents and also routes insurance approvals to doctors’ workstations; • a financial accounting system, which handles all accounting transactions and major modules including accounts payable, accounts receivable and general ledger; • a hospital information system, which facilitates patient registering, billing, insurance contract management, doctor and resource scheduling, patient appointments, laboratory and radiology investigations and generation of transaction and management information system reports; • enhanced insurance company diagnostic coding capabilities; • an invoice management system, which enables invoice generation in various formats based on rules and discount patterns of various insurance companies/third-party administrators and statutory mandates; • a Philips picture archiving and communications system, which is used by the radiology departments across the hospitals and day patient medical centre utilising a picture archiving and communications system to facilitate instant availability of radiology images and examination reports to referring clinicians; 59
• our Reliance business software solutions, which is used primarily in the pharmacies, contains point-of-sales features and keeps track of sales and stock-related transactions, such as goods received, goods returned, delivery notes and stock transfers; and • an IT system which is currently in the process of being centralised to reduce costs and increase the availability of patient data across our healthcare facilities. The principal IT systems supporting our distribution and services segment include: • a financial accounting system, which records all accounting transactions and the major modules including accounts payable, accounts receivable and general ledger; and • an inventory management system, which tracks and records sales and stock-related transactions such as goods receipts, goods returns, delivery notes and stock transfers. To diversify our revenue stream, we are currently pursuing a number of minor IT projects for external clients in collaboration with Wipro Systems, a multinational IT services company. However, in the future, we would like to expand the scale of the IT projects that we perform for external clients. Properties We believe our headquarters, hospitals and other facilities are suitable for their respective uses and are, in general, adequate for our present needs. Our properties are subject to various national and local statutes and ordinances regulating their operation. Management does not believe that compliance with such statutes and ordinances will materially affect our financial position or results of operations. Healthcare As at 31 December 2011, most of our healthcare-related real estate (hospitals, day patient medical centre and pharmacies) was leased on a long-term basis as summarised below: Approximate floor space (square metres)
Location
Abu Dhabi Specialty Hospital . . . . . . . . . . . . Dubai Specialty Hospital . . . . . . . . . . . . . . . . Al-Ain Specialty Hospital . . . . . . . . . . . . . . . Dubai General Hospital . . . . . . . . . . . . . . . . . Sharjah Day Patient Medical Centre . . . . . . . New Pharmacy (part of Abu Dhabi Specialty Hospital) . . . . . . . . . . . . . . . . . . . . . . . . . . . Bait Al Shifaa (part of Dubai General Hospital) . . . . . . . . . . . . . . . . . . . . . . . . . . .
39,414 17,000 20,043 2,400 3,000
Owned or leased (scheduled expiry date)
Beds
100 75 45(2) 10 —
Leased (expires 2026) Owned (both land and building)(1) Leased (expires 2026) Leased (expires 2013)(3) Leased (expires 2016)
585
N/A
Leased (expires 2026)
163
N/A
Leased (expires 2012)
Notes: (1) Held in the name of H.E. Mr. Saeed Bin Butti for the beneficial ownership of the Oldco Group. (2) Licence for 100 beds. (3) The lease for Dubai General Hospital is renewed annually. As these premises have specifically been customised for NMC operations, NMC believes that it would be relatively difficult for the landlord to lease these premises for any other commercial use. Although we believe we maintain good relationships with our landlords, non-renewal of this or other leases could have a material adverse effect on our business. For further discussion, see “Part II—Risk Factors— Risks Relating to our Business—Leases for buildings and land on which our hospitals are located may not be renewed, and we may lose possession of the leased properties and related buildings and other improvements”.
Distribution We lease five fully air-conditioned warehouses in four locations in the UAE that we use for our distribution and services segment. These warehouses are used to store dry, chilled and frozen products. The following table sets forth certain information in respect of our warehouses as at 31 December 2011: Facility
Location
Warehouse 1 Warehouse 2 Warehouse 3 Warehouse 4 Warehouse 5 Warehouse 6
Mina, Abu Dhabi . . . . . . . . . . . . . . . . . . . . . . . . . Al Zara, Ajman . . . . . . . . . . . . . . . . . . . . . . . . . . Sanaya, Al-Ain . . . . . . . . . . . . . . . . . . . . . . . . . . . Al Quoz, Dubai . . . . . . . . . . . . . . . . . . . . . . . . . . Dubai Industrial City, Dubai . . . . . . . . . . . . . . . . Dubai Investment Park (in progress) . . . . . . . . . . TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Area (square feet)
Originally Built
Last Renovation
33,870 161,035 65,935 68,000 155,010 46,424 530,274
1989 2004 2005 2002 2008 —
2008 2011 2008 2005 — —
We are currently constructing a new state-of-the-art warehouse with a total built-up area of 83,650 square feet on a 100,000-square feet plot of land in Dubai Investment Park that will accommodate storage of chilled, frozen and dry goods under a single roof, with an additional 37,226 square feet of built-up space, expected to be completed in the first half of 2012, remaining to be constructed. Competition Healthcare The competitive landscape for healthcare services in the UAE is divided between public hospitals, either managed by the MoH or other government entities such as the Ministry of Defence and HAAD, and privately owned and managed hospitals competing for patients, doctors, nurses and pharmacists. We believe we are the only provider of healthcare services with a broad UAE presence. However, our competition is regionally based. According to the UAE National Bureau of Statistics’s “Health Statistics for 2007-2009”, in 2009, private hospitals made up 27% of total capacity based on number of beds and 88% of total capacity based on total number of outpatient clinics, with public hospitals accounting for the balance. We believe that competition in the UAE is based on many factors such as reputation, quality of practising doctors, range of medical services offered, technology, quality and efficiency of care, pricing and geographical convenience. In general, the private sector hospitals differentiate themselves from their public sector peers by delivering higher-quality service with a greater focus on clinical excellence. See “Part II—Risk Factors—Risks relating to our business—We face competition from other hospitals, retail pharmacies and healthcare providers which may result in a decline in our revenues, profitability and market share”. Our principal competitors include: Name
Al Noor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ahalia Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lifeline Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dar Al Shiffa Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Al Noor Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Oasis Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Emirates International Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cromwell Hospital (to be opened during 2012) . . . . . . . . . . . . . . . . . . . . . . . . . . American Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Welcare Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . International Modern Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Canadian Specialist Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . New Canadian Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Central Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Al Zara Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Zulaikha Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Location
Number of Hospitals
Abu Dhabi Abu Dhabi Abu Dhabi Abu Dhabi Al-Ain Al-Ain Al-Ain Al-Ain Dubai Dubai Dubai Dubai Dubai Sharjah Sharjah Sharjah
2 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1
Distribution We distribute throughout the UAE, and we believe we have a leading position across all categories in which we operate. We offer products across a range of categories, including pharmaceutical, FMCG, scientific, food, educational, veterinary and other. Our competition is regionally based and is mostly focussed on single product categories. Although we have competitors in each category of products that we offer, none is dominant. Our key competitors in the distribution division include: Abu Dhabi Maritime and Mercantile International Company, Al Maya Trading, Al Seer (Spinneys Group), Modern Pharmacy, Alphamed Group, City Pharmacy, Al Hayath, AMICO, Al Awani Group, Al Maqqam Traders and Gulf Rider. Competition is based on long-term relationships with suppliers and customers, bargaining power, strong distribution and logistics infrastructure, efficient management and operations, and a diversified and strong brand portfolio. We believe we have a competitive advantage over our peers given our scale and market share. See “Part II—Risk Factors—Risks relating to our business—We face competition from other hospitals, retail pharmacies and healthcare providers which may result in a decline in our revenues, profitability and market share”. 61
Employees and Medical Staff As at 31 December 2011, we had approximately 4,200 employees of which approximately 1,500 were medical professionals, including doctors, nurses and pharmacists. We believe our success is closely linked to our ability to attract, develop and retain highly-skilled doctors, nurses, technicians, pharmacists and managerial staff. Our workforce is multinational and includes employees from the UAE, India, Oman, the Philippines, Bangladesh, Pakistan, Jordan, Syria, Egypt, China, the EU and North America. Our medical professionals are selected through a recruitment process based on criteria such as educational background, clinical experience, research work and professional traits. Employees are mandated to undergo periodic training programmes and workshops in order to upgrade their skills. The table below shows the number of employees and medical staff for our hospitals and day patient medical centre as at 31 December 2009, 2010 and 2011: As of 31 December 2009 2010 2011
Position
Healthcare Doctors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 345 375 382 Nurses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 606 726 773 Technicians . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 216 226 237 99 102 115 Pharmacists and assistant pharmacists(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Administration and others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,080 1,126 1,097 Distribution Sales and marketing personnel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 795 869 825 Support personnel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 257 257 260 Administration personnel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 439 429 360 IT Software engineers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 15 15 Hardware engineers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 13 15 Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 6 3 Head office Human resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 21 24 Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 57 60 Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 52 61 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,005
4,274
4,227
Note: (1) Pharmacists and assistant pharmacists include both in-hospital and stand-alone pharmacies.
Employee Retention Our doctors comprise 17 nationalities. We attach critical importance to the retention of doctors and other staff at all levels. Our attrition rate ranged from 9.9% to 13.1% over the last three years, which was lower than the average attrition rate of 16% for doctors in the UAE during the same period (Source: RNCOS, UAE Healthcare Sector Forecast to 2012). Our doctors have served with us for an average tenure of 5.6 years. We believe that we have been able to control attrition rates by implementing competitive compensation and benefit schemes, providing a comfortable work environment and developing appropriate training and skill enhancement programmes. Employee Compensation Scheme Our compensation structure consists primarily of salaries, housing allowances, statutory end of service benefits, airfare and insurance coverage. Remuneration is negotiated on an individual basis within a framework of pre-set criteria, depending on the specific job category in the sector in which the employee works. Our employees serve on a full-time fixed salary contract basis. Employee compensation forms the largest component of our direct expenses. Compensation for an individual doctor or a medical professional can vary quite substantially based on seniority, specialty, reputation and work experience. In order to promote ethical medical practices, we provide fixed monthly salaries to doctors with annual increments without any incentives or commissions. The annual increments are tied to multiple assessment factors including number of patients treated, patient satisfaction, patient complaints and quality of medical care delivered. 62
We expect employee salaries to increase in the future in absolute terms, as a result of upward pressure on wages for healthcare professionals, especially doctors and nurses. We carefully monitor and regulate this expense to ensure that capacity utilisation and productivity are maintained at the desired levels. Doctor Performance Incentive Scheme Our doctors benefit from an incentive scheme which is in addition to the existing fixed remuneration structure. It is designed to motivate doctors to improve their performance, productivity and commitment to their work. Incentive payments are calculated on a monthly basis and paid out at the beginning of each quarter. Various factors are taken into consideration when calculating the incentive payment, and these include: doctors’ collections; doctors’ salaries and benefits; the cost of the support staff such as nurses and technicians and medicines used by a doctor; insurance company discounts; and doctors’ integrity. Equity Incentive Plans We have introduced certain equity incentive plans in order to incentivise selected eligible employees and align their interests with those of shareholders by permitting them to acquire Shares subject to the terms and conditions of such equity incentive plans. The Doctors and Key Individuals IPO Participation Plan (see “Part XVII— Additional Information—12. Doctors and Key Individuals IPO Participation Plan”) is intended to be operated once, immediately prior to and conditional upon Admission, and offers our doctors and other key employees the opportunity to subscribe for New Shares at the Offer Price (up to a maximum amount of US$5,000,000) with the aid of an interest free loan from NMC Healthcare LLC. The Performance Share Plan (as defined in “Part XVII— Additional Information—10. Performance Share Plan 2012”), and Share Option Plan (as defined in “Part XVII— Additional Information—11. Share Option Plan 2012”) are executive plans intended to be operated to incentivise employees going forward. There is no intention to grant awards under these plans on or immediately following Admission. Employee Development Programmes We attach a high priority to employee development through ongoing training programmes, seminars and workshops. All doctors undergo Continued Medical Education (“CME”) professional development programmes designed to keep up with advances in medicine and changes in the delivery of care on a regular basis. Furthermore, our doctors also attend international conferences on diverse medical topics in the UAE and abroad. Nurses also undergo CME sessions on a regular basis. We conduct periodic training programmes for nurses, receptionists, accounts staff and insurance through internal staff as well as through outside consultants continuously to improve the customer service and quality of healthcare delivered. Outsourced Staff Positions We outsource a number of non-core functions such as housekeeping, security, laundry, equipment maintenance, cafeteria and valet parking services. The vendors for these tasks are selected through a detailed evaluation process, and their performance is monitored at regular intervals in terms of quality and other service parameters. Although we are not directly involved in the hiring of such individuals, our outsourcing partners are required to comply with hiring criteria that we specify. At times, we also provide extensive training to such individuals so that they can perform their designated roles without causing disruption to the operations of the unit. Union Representation and Labour Relations None of our employees currently belongs to a trade union. We have not experienced any work stoppages as a result of labour disagreements at any of our facilities. Intellectual Property We have applied to register various word and image trade marks in the UAE and the UK, including the trade marks “NMC Healthcare” and “NMC Health”. Except for these trade marks, we are not dependent on any patents or intellectual property licences for our operations. We have also registered the internet domains www.nmc.ae, www.nmcgroup.net, www.nmchealthcare.ae, www.nmchealthcare.com and www.nmchospital.com, as well as a number of internet domain names for individual hospitals. The information on our websites is not incorporated by reference into, and does not constitute part of this Prospectus. 63
Insurance We maintain liability insurance for our hospitals in amounts that we believe are appropriate for our operations. We maintain the required professional and general liability insurance coverage for doctors, nurses, paramedical staff and pharmacists. We also provide insurance for employees against work-related injuries, general life insurance and medical treatment for employees and their families. In addition, we maintain policies covering risks related to loss of profit, fire and special perils, burglary and theft, legal liability to third parties, damage to medical equipment, machinery breakdown, fidelity insurance and other losses in amounts we believe are sufficient. The cost and availability of insurance coverage has varied in recent years and may continue to vary in the future. While we believe that our insurance policies are adequate in amount and coverage for our operations, we may experience unanticipated issues or incur liabilities beyond our current coverage and we may be unable to obtain similar coverage in the future. Environment, Health and Safety Our hospitals, day patient medical centre, pharmacies and distribution and services segment are regulated by HAAD, Dubai Health Authority, MoH and various municipal environmental, health and safety regulators. Our business does not generate environmentally hazardous waste other than medical waste such as needles, syringes, scalpels, lancets and blood. We have implemented internationally practised policies and procedures across our facilities to minimise the risk posed by medical waste to the staff, patients, visitors and waste disposal staff. Medical waste generated at the hospitals and day patient medical centre is collected in specifically marked yellow bags, referred to as vacutainers. Waste is then stored in a specifically designated and secured area. The disposal of medical waste at these healthcare facilities is outsourced to waste disposal companies licensed by the relevant municipality: Condor for Abu Dhabi Specialty Hospital, Star for Al-Ain Specialty Hospital, Trashco for Dubai General Hospital, Eko Tech for Dubai Specialty Hospital and Wekaya for Sharjah Day Patient Medical Centre. We are also proactively pursuing “Go Green” initiatives such as: • installing solar water heaters; • reducing power usage through installation of fluorescent lamps with occupancy sensors; and • minimising paper consumption through the usage of electronic insurance approval process and electronic medical records. Quality Standards and Accreditation We have pursued accreditation from international bodies such as JCI and the International Organisation for Standardisation (“ISO”). Since 2001, Abu Dhabi Specialty Hospital has been consistently awarded ISO 9000 and currently it is certified with ISO 9001:2008 from Certified International—UKAS. JCI accreditation indicates delivery of healthcare services to international standards and adoption of global best practices. JCI accreditation is built around healthcare quality and patient safety, with specific emphasis on infection control, medication safety, facility safety and quality of medical service. Dubai Specialty Hospital and Al-Ain Specialty Hospital were accredited by JCI in 2009 and Abu Dhabi Specialty Hospital was accredited in May 2010. As a part of the JCI accreditation process, clinical practices at our hospitals have been standardised to be in line with global best practices and are audited on a regular basis to ensure achievement of specific goals. In addition, KPIs have been developed for various processes and monitored on a periodic basis to optimise resources. Various hospital committees regularly update policies and procedures and ensure compliance monitoring. We are currently implementing similar quality protocols in Dubai General Hospital and Sharjah Day Patient Medical Centre to improve quality standards and patient safety. Our distribution and services segment won the Findel Education Distributor of the Year award in 2009, the Emami Certificate of Excellence in 2009, the 3M Country Performance Award in 2008, the Sheikh Khalifa Excellence Award—Quality Appreciation Certificate in 2007 and has won the Beiersdorf Middle East Partner of the Year Award eight times. 64
PART VIII: MANAGEMENT AND CORPORATE GOVERNANCE Board of Directors Our Board currently consists of seven members. Under our Articles, the Board must consist of at least two directors. All directors must retire from office at each annual general shareholders’ meeting. The Board meets upon the request of the chairman of the Board or any other director. The Board has broad powers to manage the Company in accordance with our Articles, including, without limitation, the power to borrow money (subject to the borrowings limits set out in the Articles), to grant security interests, to establish committees and to delegate to committees certain of the powers, authorities and discretions vested in the board of directors. The following table sets forth, as at the date hereof, the members of the Board, their ages and their positions (including whether they are deemed to be independent): Name
Executive Directors Dr. B.R. Shetty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mr. Khalifa Bin Butti . . . . . . . . . . . . . . . . . . . . . . . . . Non-Executive Directors Mr. H. J. Mark Tompkins . . . . . . . . . . . . . . . . . . . . . . H.E. Mr. Saeed Bin Butti . . . . . . . . . . . . . . . . . . . . . . Mr. Justin A. S. Jewitt . . . . . . . . . . . . . . . . . . . . . . . . . Mrs. Heather Lawrence OBE . . . . . . . . . . . . . . . . . . . Mr. Patrick James Meade . . . . . . . . . . . . . . . . . . . . . .
Age
Position
69 32
Chief Executive Officer Executive Vice-Chairman
71 43 57 62 51
Independent Non-Executive Chairman Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director
Executive Directors Dr. B.R. Shetty is the founding partner of NMC. He received the Order of Abu Dhabi in 2005, the highest civilian award for contribution to the development of the community and the cause of the emirate, as well as the Padma Shri Award from the government of India in January 2009. He is a member of the Advisory Board of the Financial Sector of the Dubai Economic Department, the Chairman of the Abu Dhabi Indian School, the Founder and Vice President of the Swiss Business Council, the Founder of the Australian Business Council, the Canadian Business Council, the Netherlands Business Group and the Philippines Business Council. He is also a member of the Executive Panel of Dubai’s Pharmaceutical and Health Equipment Trading Business Group under the Dubai Chamber of Commerce and Industry, the ex-President of the Abu Dhabi Cricket Council and was the Managing Director of the Abu Dhabi Cricket Club since its inception in 1989 until 2006. He received a Doctorate degree from Georgia State University, Atlanta, USA and was invited by the Harvard Business School to attend its Owner/President Management programme. He holds a controlling interest in the Alexandria New Medical Centre in Egypt. Mr. Khalifa Bin Butti is the first son of Butti Bin Omeir whose father, Omeir Bin Yousef was one of the first well-known businessmen in Abu Dhabi. Mr. Khalifa Bin Butti’s father, Butti Bin Omeir, is a Director of Omeir Bin Yousef Group. The family is one of the most affluent and prominent in Abu Dhabi, with very close links to the royal family of Abu Dhabi and high-level governmental and top tier business interests in the UAE. He was educated in England and went on to study business administration in the US, graduating with a concentration in finance from Suffolk University in Boston. He joined the Abu Dhabi National Oil Corporation (ADNOC) in 2003, working in the financial department. In 2004 he established KBBO Group as a trading house, which has now grown into a diversified real estate development, oil refinement and processing, technology and investment company. Mr. Khalifa Bin Butti is a majority beneficial shareholder and Chairman of the FSA-registered One Financial Markets in the UK. Since 2006, he has served as Chairman of Brokerage House Securities LLC, a Middle Eastern brokerage group focused on high-net worth individuals, and previously served as Chairman and CEO. Non-Executive Directors Mr. H. J. Mark Tompkins is NMC’s Independent Non-Executive Chairman. Mr. Tompkins has served as NonExecutive Chairman of Allied Healthcare International Inc. (NASDAQ: AHCI) one of the UK’s leading providers of domiciliary care and healthcare staffing services, from 2007 to 2009 and served as a Director since 2005. He has also served as Non-Executive Chairman of Healthcare Enterprise Group Plc (AIM: HCEG) an international healthcare products company from 2005 to 2008, when he resigned as both Chairman and Non-Executive Director, and its Non-Executive Director until 2008. Mr. Tomkins currently serves as Conseiller Special aupres du Conseil D’Administration of Sodexo S.A. (“Sodexo”) after serving as a Non-Executive 65
Director of Sodexo from 2002 to 2010 and a member of its Audit Committee for six of those eight years. Sodexo is engaged in food service provision and facilities management, including to the healthcare sector, to which it provides catering, facilities management and sterilisation services. During his career, Mr. Tompkins has served on a total of 11 publicly listed company boards, including five NYSE, NASDAQ or junior market U.S. exchange boards and four London Stock Exchange or AIM boards. These directorships have included serving as a Director of Abbey Healthcare Group Inc. (NASDAQ: ABBY), and Apria Healthcare Group Inc. (NYSE: AHG). Prior to his non-executive director roles, Mr. Tompkins has also served as the Chief Executive Officer of Compagnie Financiere Haussmann, a publicly listed company in France involved in property development, investment and management. Mr. Tompkins began his career in investment banking in 1964 with Samuel Montagu & Company (now HSBC). From 1965 to 1971, he was a Management Consultant with Booz Allen Hamilton, Inc., working on assignments in the UK, continental Europe and the U.S. Mr. Tompkins returned to investment banking joining Slater Walker Securities group from 1972 to 1974. He subsequently entered into international real-estate development from 1974 to 1993 investing in both residential and commercial assets across the Middle East, the United States and Europe (France, Germany and Spain). Mr. Tompkins holds a Masters Degree in Natural Sciences and Economics from Cambridge University and a Masters Degree in Business Administration (MBA) from Institut Européen d’Administration des Affaires (INSEAD). His Excellency, Mr. Saeed Bin Butti is a Non-Executive Director. Mr. Bin Butti is founder, Chairman and sole owner and investing principal of Centurion Investments, a private equity firm based in Abu Dhabi. Mr. Bin Butti is also the founder and Chairman of Infinite Investment LLC, which is among the Over-Allotment Shareholders. In 2001 Mr. Bin Butti was appointed as Administrative Supervisor of The Ministry of Presidential Affairs which combined both the Office of His Royal Highness the President and the Presidential Court. Mr. Bin Butti’s portfolio of assets include significant real estate holdings in London and Monaco. He is also currently a member of the board of directors of Tasameem, a real estate firm based in Abu Dhabi, that owns and manages substantial investments in real estate throughout the world. Mr. Bin Butti is extensively involved in charitable and philanthropic activities in the areas of heritage and culture where he participates in initiatives to establish closer ties and bridge divides between the western and Islamic communities by personally funding centres of global studies and research in universities in the Middle East, as well as centres of Islamic studies in western universities. Mr. Bin Butti graduated from the American University of Switzerland in 1995. Mr. Justin A.S. Jewitt is an Independent Non-Executive Director. Mr. Jewitt was employed by Nestor Healthcare Group plc (London: NSR), which was a FTSE-250 listed company and one of the largest publicly listed private healthcare service companies in the UK, from 1994 to 2004, during which he served as a board member from 1996 and as CEO from 1998. Nestor is the UK’s largest independent provider of managed services to the UK health and social care market. Mr. Jewitt began his career as a non-executive director in 2002 when he joined the board of South Staffs Water Company Plc and served as a Non-Executive Director on the board of HomeServe PLC (London: HSV), a FTSE 250 company, from 2003 to 2007. Since 2005, Mr. Jewitt’s experience has included a non-executive directorship with NHS Shared Business Services Ltd, the largest provider of back office services to the NHS and membership in the NHS East of England SHA Innovations board. Mr. Jewitt received a B.A. (Hons.) from Leicester University, and he currently serves as a visiting professor at the Welsh Institute for Health and Social Care at the University of Glamorgan. Mrs. Heather Lawrence OBE is an Independent Non-Executive Director. Mrs. Lawrence has over 20 years’ experience as a Chief Executive Officer in the hospital and healthcare sector, serving as CEO of the Chelsea and Westminster Hospital, which gained NHS Foundation Trust status in 2006, since 2000, and as CEO of North Hertfordshire NHS trust from 1996 to 2000 and Hounslow and Spelthorne Community and Mental Health Trust from 1989 to 1996. Ms. Lawrence also chaired the UK-wide negotiations for the Staff and Associate Specialists (SAS) Doctors contract during 2004 to 2006 and chaired the “Agenda for Change” three-year pay deal for nonmedical staff on behalf of NHS employers during 2006 to 2009. She has also served as a Commissioner for UK Prime Minister David Cameron’s Commission for the Future of Nursing and Midwifery and was a Founding Member of the Dr. Foster Global Comparators Founders Board, which is an initiative to share comparative health data with other leading medical institutions in various countries to improve clinical quality. Mrs. Lawrence was awarded an OBE in the 2010 New Year Honours List for her services to healthcare. Mr. Patrick James Meade, 8th Earl of Clanwilliam (formerly Lord Gillford) is an Independent Non-Executive Director. Mr. Meade is an international businessman and high-level government and financial communications specialist possessing over 30 years of business and political experience across a broad range of sectors, including mining, drilling, oilfield services and operational management and consultancy. During his career, Mr. Meade has established an extensive network of senior level governmental and institutional contacts across the Middle East, the United Kingdom and Eastern Europe. He is currently Chairman of Eurasia Drilling Company (London: 66
EDCL) (a drilling and work-over company operating in Eurasia with a market capitalisation of US$3.5 billion) and Non-Executive Director of Polyus Gold OJSC (London: OPYGY) (a Russian gold mining company with a market capitalisation of US$10.5 billion) as well as the Founding Partner and Chairman of Gardant Communications Limited, a political, strategic, financial and litigation communications company based in London. He is also Senior Adviser to Milio International Limited, a British owned and operated commodities and logistics company. Mr. Meade graduated from The Royal Military Academy, Sandhurst in 1979 (followed by four years with the 1st Battalion Coldstream Guards), and graduated from Eton College in 1978. All of the Non-Executive Directors have entered into letters of appointment with the Company, conditional on Admission. Each appointment is for an initial term ending on the date of the next annual general meeting, subject to early termination by the Company or the Director on three months’ written notice. See “Additional Information—9. Directors’ Service Agreements and Terms of Appointment”. Senior Management We are managed by our Chief Executive Officer, together with the other Executive Director and our Senior Management. Our Chief Executive Officer is responsible for the formulation and supervision of the implementation of our overall business strategy. He is in charge of our business development and supervises the identification and further development of new business opportunities. Our Chief Executive Officer also reviews and validates our global budget, which is approved by our Board of Directors. Our management adopts a collective approach to key decision-making and to the formulation of our procedures and strategies. Members of the management team meet on a regular basis to share information on our activities and collectively participate in key decisions relating to the implementation of our strategy. The following table sets forth, as at the date hereof, our Senior Management, their ages, the year they joined and their principal responsibilities: Name
Age
Joined
Principal Responsibilities
Mr. Prasanth Manghat . . . . . . . . . . . . . . . . . . . . . .
37
2011
Chief Financial Officer
Dr. Vijayan Nambiar . . . . . . . . . . . . . . . . . . . . . . .
48
1988
Chief Operating Officer of Distribution and Services
Dr. C.R. Shetty . . . . . . . . . . . . . . . . . . . . . . . . . . .
69
1979
Medical Director, Hospitals
Mr. Binay Shetty . . . . . . . . . . . . . . . . . . . . . . . . . .
28
2004
Chief Operating Officer of Healthcare
Mr. Raveendra Rai . . . . . . . . . . . . . . . . . . . . . . . .
50
1994
VP of Human Resources and Administration
Mr. Nirman Shetty . . . . . . . . . . . . . . . . . . . . . . . .
31
2010
President of Corporate Affairs
Mr. Santosh Seva Namiraja . . . . . . . . . . . . . . . . .
48
1996
AVP of Projects and Maintenance
Mr. Prasanth Manghat is the Chief Financial Officer of NMC. He has primary responsibility for running the Company’s finance function including treasury, corporate finance and accounting. Prior to joining NMC, he was CFO of a UAE based pharmaceutical company from 2003 and the head of Credit and Operations at Kotak Mahindra Finance, one of the leading non-banking financial institutions in India. Mr. Manghat is a Fellow of the Institute of Chartered Accountants of India and holds a BSc from MG University in Kerala, India. Dr. Vijayan Nambiar is the Chief Operating Officer (“COO”) of the distribution and services segment. Dr. Nambiar joined NMC in 1988, prior to which he worked at Rallis India and Alembic Chemicals India. Dr. Nambiar is responsible for overall management of the distribution and services business including sales, marketing, human resources, supply chain, business development and quality functions. Dr. Nambiar recently received a Doctorate in Business Administration from the University of Phoenix, USA. Dr. C.R. Shetty is the Medical Director of all the hospitals under NMC. She has been associated with NMC from the very beginning and has been instrumental in its success. Prior to joining NMC, she worked as General Practitioner at Urban Family Welfare Planning Centre, Bangalore, from 1974 to 1978. Mr. Binay Shetty is COO of the healthcare division. Prior to holding this position, he was an Executive Director of NMC with responsibility for strategic planning and governance and the management of new projects. He holds a Bachelor of Science in Business Administration with specialisations in Finance and Entrepreneurship from Boston University, USA. 67
Mr. Raveendra Rai is the Vice President of Human Resources and Administration of NMC. Mr. Rai joined NMC in 1994, prior to which he worked as Chief Accountant at Keltron Electronics, India, for five years. He holds an Advanced Diploma in Management (2009) and an MBA in Human Resources (2010) from the Institute of Chartered Financial Analysts, India, and a Bachelors in Commerce (1982) from Mysore University, India. Mr. Nirman Shetty is the President of Corporate Affairs of NMC. Prior to joining NMC, he worked as Senior Strategist for three years at Lodha Group, one of the leading Property Developers in India. Mr. Shetty graduated with a degree in engineering (2003) from RV College of Engineering, Mumbai, India, and thereafter did his MBA (2008) at the premier institute, Indian School of Business, Hyderabad, India. Mr. Santosh Seva Namiraja is the Associate Vice President of Projects and Maintenance of NMC. Prior to joining NMC, he worked as a Civil Engineer at Mohammed Jassem Badr Constructions, Bahrain. He holds a Bachelor of Engineering from Karnataka University, India. Shares Held by Directors and Senior Management Certain of our directors have an indirect interest in Shares in our share capital. As part of the Doctor Offering, certain of our senior managers may purchase Shares under the IPP. The IPP is described further in “Part XVII— Additional Information—12. Doctors and Key Individuals IPO Participation Plan”. Compensation The remuneration of each member of Senior Management for the fiscal year ended 31 December 2011 is set out as follows: Salary and benefits(1) (USD per annum)
Senior Manager
Mr. Prasanth Manghat . . . . . . . . . . . . . . . . . . . . . . . . . . . Mr. Binay Shetty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dr. Vijayan Nambiar . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mr. Nirman Shetty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dr. C.R. Shetty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mr. Raveendra Rai . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mr. Santosh Seva Namiraja . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
280,480 228,696 156,275 100,868 230,128 90,743 109,286 1,196,476
(1) Includes amounts for employment benefits comprising costs for housing accommodation and air travel tickets paid for by the Company during the fiscal year ended 31 December 2011.
As part of their compensation the senior managers will also be entitled to participate in the performance share plan and share option plan which we intend to introduce once we become a public company. See “Part XVII— Additional Information—10. Performance Share Plan 2012 and —11. Share Option Plan 2012”. H.E. Mr. Saeed Bin Butti, Dr. B.R. Shetty and Mr. Khalifa Bin Butti (together, the “Significant Shareholders”) have entered into the Relationship Agreement with the Company to regulate their relationship with the Company. The Relationship Agreement ceases to be binding on each Significant Shareholder in most respects when the Significant Shareholder owns, directly or indirectly, less than 15% of the entire issued share capital of the Company. See “Part XVII—Additional Information—13. Material Contracts—13.4 Relationship Agreement”. Pensions There are three UAE nationals employed by NMC. NMC is obliged to pay pension contributions in respect of these employees. The resulting pensions are payable by the Abu Dhabi Government. The total amount contributed by NMC in the financial year ended 31 December 2011 was US$14,803. NMC is obliged to pay all expatriate employees end of service benefits. NMC accounts and provides for these end of service benefits in accordance with UAE labour law. As at 31 December 2011 NMC had accrued US$8,863,552 in respect of these end of service obligations.
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Litigation Statement about Directors and Officers As at the date of this Prospectus, none of the members of our administrative, management or supervisory bodies; or the senior managers relevant to establishing that we have the appropriate expertise and experience for the management of our business by statutory or regulatory authorities (including designated professional bodies), has at any time in the five years preceding the date of this Prospectus: • had any convictions in relation to fraudulent offences (whether spent or unspent); • been adjudged bankrupt or entered into an individual voluntary arrangement; • been a director of any company that has entered into receivership, compulsory liquidation, creditors’ voluntary liquidation, administration, company voluntary arrangement or any composition or arrangement with that company’s creditors generally or with any class of its creditors; • been a partner or senior manager in any partnership that has entered into any compulsory liquidation, administration or partnership voluntary arrangement of such partnership; • owned any assets which have formed the subject of any receivership or has been a partner of a partnership that has had any assets thereof being the subject of a receivership; • been subject to any official public incrimination and/or sanctions by any statutory or regulatory authority (including any designated professional body); or • ever been disqualified by a court from acting as a director or as a member of the administrative, management or supervisory bodies of a company or from acting in the management or conduct of the affairs of any company. Corporate Governance In anticipation of Admission, the Board has implemented a number of changes to its governance arrangements to give further assurance to Shareholders that the Board is committed to the highest standards of corporate governance. From the date of Admission, the Company will apply the principles and comply with the provisions of the UK Corporate Governance Code. Our Board has established a Remuneration Committee, an Audit Committee and a Nomination Committee, with formally delegated duties and responsibilities and with written terms of reference. A Risk Committee is also in the process of being established to review the scope and conclusions from the internal audit. From time to time, separate committees may be set up by the Board to consider specific issues when the need arises. All of the committees will perform their duties on behalf of the Board and the Board will be responsible for constituting, assigning, co-opting and fixing the terms of service for the committee members, which function may be delegated by the Board to the Nomination Committee. Audit Committee The Audit Committee will assist the Board in discharging its responsibilities with regard to financial reporting, external and internal audits and controls, including reviewing the Company’s annual financial statements, reviewing and monitoring the extent of the non-audit work undertaken by external auditors, advising on the appointment of external auditors and reviewing the effectiveness of the Company’s internal audit activities, legal and regulatory compliance, internal policies and controls and risk management systems. In addition, the Audit Committee will be required to prepare an annual report to the Board of directors which sets out its findings on the above, including recommendations for the selection of the external auditor, results of its risk management, internal compliance and control systems review and a summary of any complaints managed in the past year. The ultimate responsibility for reviewing and approving the accounts and the half yearly reports will remain with the Board. Upon Admission, the Audit Committee will initially comprise four members, Mr. Jewitt (chairman), Mr. Meade, Mrs. Lawrence and Mr. Tompkins. The Audit Committee will meet formally at least three times a year and otherwise as requested by any member of the Audit Committee. 69
Remuneration Committee The Remuneration Committee will assist the Board in determining its responsibilities in relation to remuneration, including making recommendations to the Board on the Company’s policy on remuneration, executive options, share grants and determining the individual remuneration and benefits package for each of the Non-Executive Directors and Executive Directors, and making recommendations to the Board on the individual remuneration and benefits package for members of senior management. The Remuneration Committee will also review human resources policies for employees who are below senior management level, at least once every three years. No committee member will be allowed to participate in any discussion or decision regarding his/her own remuneration and the Chief Executive Officer is not to be present when the Remuneration Committee discusses issues relating to his remuneration. All other recommendations must be referred to the Board for approval. The duties and activities of the Remuneration Committee during the year will be disclosed in the Company’s accounts. Upon Admission, the Remuneration Committee will initially comprise four members, Mr. Meade (chairman), Mr. Jewitt, Mr. Tompkins and Mrs. Lawrence. Nomination Committee The Nomination Committee will assist the Board in discharging its responsibilities relating to the composition of the Board, performance of Board members, induction of new directors, appointment of committee members and succession planning for senior management. The Nomination Committee will be responsible for determining the appropriate skills and characteristics required of our directors and directors of our subsidiaries. In particular, the Nomination Committee will assist in: (i) identifying individuals qualified to become Board members; (ii) recommending individuals to be considered for election at the next Annual General Meeting of the Company or to fill vacancies; (iii) preparing a description of the role and capabilities required for a particular appointment; and (iv) developing and recommending to the Board appropriate corporate governance guidelines. The Nomination Committee will also undertake annual reviews in light of the current composition of the Board and assess various attributes of each Board member, including the value of their contributions to the business community, leadership, character, judgement, expertise, independence and competency. The duties and activities of the Nomination Committee during the year will be disclosed in the Company’s accounts. Upon Admission, the Nomination Committee will initially comprise four members, Mr. Tompkins (chairman), Mr. Jewitt, Mrs. Lawrence and Mr. Meade. The Nomination Committee will meet formally at least once a year and otherwise as requested by the Chair of the Nomination Committee. Model Code From Admission, the Company shall require the Directors and other persons discharging managerial responsibilities in respect of the Company to comply with the Model Code as published in the Listing Rules, and shall take all proper and reasonable steps to secure their compliance.
70
PART IX: USE OF PROCEEDS AND DIVIDEND POLICY USE OF PROCEEDS The net proceeds (after deducting underwriting commissions and other estimated offering-related fees and expenses of approximately US$20.0 million) from the Global Offering will be approximately US$166.3 million. We intend to use the net proceeds of the Global Offering primarily to finance our current expansion plans and to fund further future growth opportunities. See “Part XI—Operating and Financial Review—Liquidity and Capital Resources—Capital Expenditures”. Our current expansion plans include: • the acquisition and refurbishing of Healthcare Suites from Dr. B.R. Shetty on or about 1 July 2012 and certain capital expenditures relating thereto; • the continued development of a maternity hospital in Abu Dhabi which we expect to open in the second half of 2012; • the development of a day patient medical centre at Dubai Investment Park, which we expect to expand to include a pharmacy and further expand into a hospital in the future; and • the development of a day patient medical centre and pharmacy at Mussafah, in Abu Dhabi. In addition, we are exploring the feasibility of developing a day patient medical centre on Sheikh Zayed Road in Dubai, possibly in 2013. We estimate the total cost of the above will be between US$100 million to US$135 million. Any remaining 2012 Proceeds will be used to fund further growth opportunities. Future growth is likely to include the development or acquisition of businesses and/or facilities in the UAE and elsewhere in the MENA region, see “Part VII—Business—Our Business Strategy—Expand the geographic coverage of our services outside of the UAE”, as well as to repay existing indebtedness. In addition, assuming the New Facility is available to us, we plan to construct and develop, in a number of phases, a hospital at Khalifa City, Abu Dhabi by 2014, which we estimate would cost between US$150 million to US$200 million. In certain limited circumstances, unrelated to the financial performance of the Group, all outstanding amounts under the New Facility may become due and payable prior to its final payment date of 31 March 2017. In those circumstances, we would delay the construction of our new hospital in Khalifa City, Abu Dhabi, which we would otherwise plan to commence by the end of 2012, until such time as we decide that we have sufficient funding available to commence construction. See “Part II—Risk Factors—Our growth strategy depends primarily on the construction and development of new hospitals and day patient medical centres, which may be subject to delays” and “Part II—Risk Factors—Construction of our new hospital at Khalifa City may be delayed if our New Facility becomes repayable as a result of events relating to the guarantors of the New Facility and our financing costs may increase”.
DIVIDEND POLICY The Directors intend to adopt a progressive dividend policy while maintaining an appropriate level of dividend cover. This dividend policy will reflect the strong cash flow characteristics and long-term earnings potential of NMC Health plc and will allow it to retain sufficient capital to fund ongoing operating requirements and continued investment for long-term growth. From 2012 onwards, it is the Board’s intention to target a payout ratio of between 20 to 30% of profit after tax.
71
PART X: SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA The tables below set out certain selected historical consolidated financial information for the Oldco Group for the three years ended 31 December 2009, 2010 and 2011 and have been extracted without adjustment from the Historical Financial Information. The selected historical consolidated financial data set forth below should be read in conjunction with, and is qualified by reference to, the section entitled “Part XI—Operating and Financial Review” and the Historical Financial Information including the notes thereto. The results of operations for any year are not necessarily indicative of the results to be expected for any future year. As the selected historical consolidated financial data set forth below is only a summary of certain historical financial information, investors are advised to read the whole of this Prospectus and not rely solely on the information set out in this Part X. Consolidated Statement of Comprehensive Income Data Year ended 31 December 2009 2010 2011 (US$ millions)
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 338.9 386.5 443.7 Direct costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (236.3) (267.8) (306.4) GROSS PROFIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
102.6
118.7
137.4
General and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(61.5) 2.4 0.9
(62.6) 3.4 0.3
(68.2) 1.1 1.3
PROFIT FROM OPERATIONS BEFORE DEPRECIATION AND FINANCE CHARGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Finance charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
44.3 (16.5) (15.3)
59.8 (17.3) (13.6)
71.6 (17.0) (12.0)
PROFIT FROM OPERATIONS Pre-operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rental income from investment properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gain (loss) on revaluation of investment properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss on investments carried at fair value through profit or loss . . . . . . . . . . . . . . . . . . . Change in fair value of derivative financial instruments . . . . . . . . . . . . . . . . . . . . . . . . .
12.4 (7.5) 2.0 3.5 (1.9) (0.4)
28.9 (1.8) 3.3 (5.8) (0.6) (0.2)
42.5 — 1.2 — — 0.1
PROFIT FOR THE YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.2
23.8
43.8
Other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
TOTAL COMPREHENSIVE INCOME FOR THE YEAR . . . . . . . . . . . . . . . . . . .
8.2
23.8
43.8
Profit and total compreherensive income attributable to: Equity holders of the parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.6 0.6
21.1 2.7
43.0 0.8
8.2
23.8
43.8
76
211
430
Earnings per share for profit attributable to the equity holders of the parent: Basic and diluted (USD) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
72
Consolidated Statement of Financial Position Data As at 31 December 2009 2010 2011 (US$ millions)
ASSETS Non-current assets Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116.8 Investment properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51.5 Long term advances to related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.9 171.2 Current assets Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50.2 Investments carried at fair value through profit or loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.5 Accounts receivable and prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94.0 Amounts due from related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53.0 Bank balances and cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.5 213.1 TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 384.3 EQUITY AND LIABILITIES Equity Share capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shareholders’ accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Statutory reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity attributable to the equity holders of the Parent . . . . . . . . . . . . . . . . . . . . . . . . . Non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-current liabilities Term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Employees’ end of service benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Current liabilities Accounts payable and accruals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amounts due to related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bank overdrafts and other short term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TOTAL EQUITY AND LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
116.3 45.7 2.9 164.9
88.4 — — 88.4
48.8 54.2 4.9 — 110.2 158.6 73.6 — 15.5 54.1 253.0 266.8 417.9 355.2
27.2 27.2 27.2 53.4 43.8 — 4.7 7.7 10.3 4.6 22.7 61.8 89.9 101.4 99.3 1.0 1.6 1.1 90.9 103.0 100.3 66.9 6.6 73.6
20.2 7.5 27.8
35.5 8.9 44.3
70.7 0.1 79.1 70.0 219.8 293.4 384.3
69.9 6.0 105.2 106.1 287.2 314.9 417.9
62.6 1.2 101.3 45.4 210.6 254.9 355.2
Selected Consolidated Cash Flow Data Year ended 31 December 2009 2010 2011 (US$ millions)
Consolidated Cash Flow Data Net cash from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60.6 35.7 71.4 Net cash (used in) from investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (33.9) (17.7) 22.1 Net cash (used in) financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (27.4) (27.7) (57.4) (Decrease) increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents at the beginning of the year . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents at the end of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
73
(0.7) (9.7) 36.2 (1.4) (2.1) (11.7) (2.1) (11.7) 24.4
Other Financial, Operating and As Adjusted Data Year ended 31 December 2009 2010 2011 (US$ millions, except ratios)
Revenue from Segment Healthcare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158.4 182.5 218.7 Distribution and services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201.0 228.6 253.4 Group eliminations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (20.6) (24.5) (28.4) Revenue by Emirate(1) Abu Dhabi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181.9 223.8 268.9 Dubai and other emirates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177.6 187.2 203.2 Other Financial Data Inventory recognised as expenses (included in direct costs) . . . . . . . . . . . . . . . . . . . . . . (184.0) (206.0) (232.7) 42.0 56.4 70.5 Adjusted EBITDA(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjusted EBITDA margin(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.4% 14.6% 15.9% Adjusted operating cash flow(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19.1 23.2 (5.9) Year ended 31 December 2009 2010 2011 (US$ millions)
Certain Adjusted EBITDA Data Abu Dhabi Specialty Hospital(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dubai Specialty Hospital(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Al-Ain Specialty Hospital(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dubai General Hospital(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sharjah Day Patient Medical Centre(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pharmacies—New Pharmacy(10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pharmacies—Bait Al Shifaa(11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23.7 4.9 0.2 1.5 0.7 3.6 0.6
27.8 6.0 5.0 0.8 (0.6) 2.7 0.5
32.8 8.5 8.7 1.3 0.4 4.0 0.6
Adjusted EBITDA for Healthcare segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
35.1
42.2
56.2
New Medical Centre Trading LLC(12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reliance Infotech LLC(13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11.5 0.2
19.7 0.2
24.8 0.0
Adjusted EBITDA for Distribution segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjusted EBITDA for Head office and eliminations(14) . . . . . . . . . . . . . . . . . . . . . . . . . . .
11.7 (4.8)
19.9 (5.6)
24.8 (10.5)
Total Adjusted EBITDA(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
42.0
56.4
70.5
Year ended 31 December 2009 2010 2011
Certain Operating Data Occupancy Rates (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46.4 45.4 53.0 Average Daily Census(14) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85.0 94.4 121.9 Outpatient Volume . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 979,483 1,065,851 1,154,889 Revenue per Patient (US$) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79.13 87.75 100.49 Radiology and Pathology Volumes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 433,423 467,797 460,944 Outpatients per Doctor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,839 2,842 3,023 Inpatients per Doctor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 103 111 Wage cost inflation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.7% 6.3% 16.1% Notes: (1) Includes intra-group sales. (2) We define Adjusted EBITDA as profit for the year before finance income, finance charges, taxes, depreciation and amortisation as well as the following: pre-operating expenses; rental income from investment properties; gains and losses on revaluation of investment properties; gains and losses on investments carried at fair value; and changes in fair value of derivative financial instruments. We are currently not subject to corporate income tax. During 2011, we sold our investment properties and our investments which were carried at fair value. Accordingly, in the future, we expect to include only pre-operating expenses (if any), changes in fair value of derivative financial instruments and any future exceptional income or expenses in determining Adjusted EBITDA. Pre-operating expenses relate to certain expenses incurred prior to the start of operations of our hospitals or day patient medical centre which are expensed as incurred. Changes in fair value of derivative financial instruments relate to certain of our interest rate swap transactions which do not qualify for hedge accounting under IFRS. In evaluating Adjusted EBITDA, investors should be aware that, as an analytical tool, Adjusted EBITDA is subject to certain limitations. See “Part III—Other Important Information—Presentation of Certain Financial and Other Information—Non-IFRS Financial Measures”. Adjusted EBITDA is not a measure of performance under IFRS and investors should not consider Adjusted EBITDA as an alternative to (a) gross profit or profit for the year as a measure of our operating performance, (b) cash flows from operating, investing and financing activities as a measure of our ability to meet our cash needs or (c) any other measures of performance under IFRS.
74
The following table provides a reconciliation of profit for the year to Adjusted EBITDA for the years indicated. The profit for the year and all reconciling items are as disclosed in “Part XIII—Historical Financial Information”.
Profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Finance charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pre-operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rental income from investment properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (Gain) loss on revaluation of investment properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss on investments carried at fair value through profit or loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in fair value of derivative financial instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year ended 31 December 2009 2010 2011 (US$ millions) 8.2 23.8 43.8 (2.4) (3.4) (1.1) 16.5 17.3 17.0 15.3 13.6 12.0 7.5 1.8 — (2.0) (3.3) (1.2) (3.5) 5.8 — 1.9 0.6 — 0.4 0.2 (0.1)
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
42.0
56.4
70.5
(3) Adjusted EBITDA margin is defined as Adjusted EBITDA divided by revenue. (4) We define Adjusted operating cash flow as Adjusted EBITDA less changes in working capital less capital expenditure plus adjustment for end of service benefits provision less end of service benefits paid. Adjusted operating cash flow is not a measure of performance under IFRS and investors should not consider Adjusted operating cash flow as an alternative to (a) gross profit or profit for the year as a measure of our operating performance, (b) cash flows from operating, investing, and financing activities as a measure of our ability to meet our cash needs or (c) any other measures of performance under IFRS. Investors should evaluate each adjustment and the reasons we consider it appropriate as a method of supplemental analysis. In evaluating Adjusted operating cash flow, investors should be aware that, as an analytical tool, Adjusted operating cash flow is subject to certain limitations. Please see “Part III—Other Important Information—Presentation of Certain Financial and Other Information—Non-IFRS Measures”. In addition, investors should be aware that we are likely to incur expenses similar to the adjustments in this presentation in the future and that certain of these items could be considered recurring in nature. Our presentation of Adjusted operating cash flow should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. For further information, please see the discussions on exceptional items in Historical Financial Information included elsewhere in this Prospectus. The following table provides a reconciliation of Adjusted EBITDA to adjusted operating cash flow for the years indicated:
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capital expenditure(i) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Working capital changes: Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts receivable and prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts payable and accruals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provision for employees’ end of service benefits(ii), net of write backs . . . . . . . . . . . . . . . . . . . . . . . Employees’ end of service benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjusted operating cash flow
Year ended 31 December 2009 2010 2011 (US$ millions) 42.0 56.4 70.5 (37.1) (17.8) (20.4) 4.1 (7.0) 16.0 1.4 (0.3)
1.4 (16.2) (1.5) 1.4 (0.5)
(5.4) (45.1) (6.8) 1.8 (0.5)
19.1
23.2
(5.9)
(i) Capital expenditure for these purposes is defined as cash payments for the purchase of property, plant and equipment and for 2009 includes cash payments for investment properties. (ii) End of service benefit payments are made to certain employees when they cease to be employed by us. (5) The following table provides a reconciliation of profit for the year to Adjusted EBITDA for Abu Dhabi Specialty Hospital for the years indicated:
Profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Management charges* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year ended 31 December 2009 2010 2011 (US$ millions) 13.5 17.6 30.1 6.1 6.9 — 4.1 3.3 2.7
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23.7
*
27.8
32.8
Management charges were levied by the Group’s head office at the rate of 10% of revenue in 2009 and 2010. These charges ceased in 2011.
75
(6) The following table provides a reconciliation of profit for the year to Adjusted EBITDA for Dubai Specialty Hospital for the years indicated:
Profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Finance charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year ended 31 December 2009 2010 2011 (US$ millions) (1.3) 0.0 5.1 2.7 2.8 0.5 3.5 3.3 2.9 4.9
6.0
8.5
(7) The following table provides a reconciliation of profit for the year to Adjusted EBITDA for Al-Ain Specialty Hospital for the years indicated:
Profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Finance charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pre-operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year ended 31 December 2009 2010 2011 (US$ millions) (14.9) (1.9) 5.4 2.5 2.8 — 5.1 4.1 3.3 7.5 — — 0.2
5.0
8.7
(8) The following table provides a reconciliation of profit for the year to Adjusted EBITDA for Dubai General Hospital for the years indicated:
Profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Finance charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year ended 31 December 2009 2010 2011 (US$ millions) 1.2 0.5 0.7 0.0 0.0 0.0 0.2 0.3 0.5 1.5
0.8
1.3
(9) The following table provides a reconciliation of profit for the year to Adjusted EBITDA for Sharjah Day Patient Medical Centre for the years indicated:
Profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Finance charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pre-operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year ended 31 December 2009 2010 2011 (US$ millions) 0.1 (2.9) (0.4) 0.5 — 0.0 0.1 0.5 0.7 — 1.8 — 0.7
(0.6)
0.4
(10) The following tables provide a reconciliation of profit for the year to Adjusted EBITDA for New Pharmacy—Abu Dhabi for the years indicated:
Profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Management charges* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
Year ended 31 December 2009 2010 2011 (US$ millions) 1.9 1.0 3.9 1.6 1.6 — 0.0 0.0 0.0 3.6
2.7
4.0
Management charges were levied by the Group’s head office at the rate of 5% of revenue in 2009 and 2010. These charges ceased in 2011.
(11) The following tables provide a reconciliation of profit for the year to Adjusted EBITDA for Bait Al Shifaa Pharmacy—Dubai for the years indicated: Year ended 31 December 2009 Profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2010 2011 (US$ millions) 0.6 0.5 0.6 0.0 0.0 0.0
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.6
76
0.5
0.6
(12) The following tables provide a reconciliation of profit for the year to Adjusted EBITDA for New Medical Centre Trading LLC for the years indicated:
Profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Management charges* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year ended 31 December 2009 2010 2011 (US$ millions) 4.1 11.7 23.4 2.0 2.3 — 4.0 4.2 — 1.4 1.5 1.4
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11.5
*
19.7
24.8
Management charges were levied by the Group’s head office at the rate of 1% of revenue in 2009 and 2010. These charges ceased in 2011.
(13) The following tables provide a reconciliation of profit for the year to Adjusted EBITDA for Reliance Infotech LLC for the years indicated:
Profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year ended 31 December 2009 2010 2011 (US$ millions) 0.2 0.2 (0.0) 0.0 0.0 0.0 0.2
0.2
(0.0)
(14) The following table provides a reconciliation of profit for the period to Adjusted EBITDA for Head Office and Eliminations for the years indicated:
Profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Management charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rental income from investment properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (Loss) gain on revaluation of investment properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (Loss) gain on investments carried at fair value through profit or loss . . . . . . . . . . . . . . . . . . . . . . . . . Change in fair value of derivative financial instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (15) Calculated as inpatient days divided by 365.
77
Year ended 31 December 2009 2010 2011 (US$ millions) 2.7 (3.0) (25.1) (9.7) (10.8) — (2.4) (3.4) (1.1) 6.9 7.5 16.5 0.9 0.6 0.5 (2.0) (3.3) (1.2) (3.5) 5.8 — 1.9 0.6 — 0.4 0.2 (0.1) (4.8)
(5.6)
(10.5)
PART XI: OPERATING AND FINANCIAL REVIEW The following discussion of our financial condition and results of operations should be read in conjunction with the Historical Financial Information and the information relating to our business included elsewhere in this Prospectus. The discussion includes forward-looking statements that reflect the current view of our management and involve risks and uncertainties. Our actual results could differ materially from those contained in any forward-looking statements as a result of factors discussed below and elsewhere in this Prospectus, particularly in “Risk Factors”. Investors should read the whole of this Prospectus and not just rely upon summarised information. Overview We are a leading integrated healthcare provider in the fast-growing UAE market and are one of the largest private sector healthcare providers in the UAE in terms of average daily patient numbers. During the fiscal year ended 31 December 2011, we treated approximately 4,700 patients at our facilities on an average daily basis. As at 31 December 2011, we operated 230 beds and have a broad and diverse network of facilities including hospitals, a day patient medical centre, pharmacies and distribution facilities across the UAE, which we believe makes us one of the largest integrated private sector healthcare companies in the region. Our integrated and diversified business is organised into two segments: healthcare and distribution and services. Our healthcare segment consists of: • three JCI-accredited specialty hospitals in Abu Dhabi, Dubai and Al-Ain; • a general hospital in Dubai; • a day patient medical centre in Sharjah; and • a chain of eight pharmacies, comprising five stand-alone pharmacies and three in-hospital pharmacies. Our distribution and services segment distributes over 50,000 products from leading brands in the UAE and to distributors in a number of other countries. These products include: • pharmaceutical products; • medical and scientific equipment; • veterinary products; • FMCGs, which include both food and non-food items; • cosmetic products; and • educational supplies Key Factors Affecting Results of Operations Our results of operations are affected by a variety of factors. Set out below is a discussion of the most significant factors that have affected our results in the past and which we expect to affect our financial results in the future. Factors other than those set forth below could also have a significant impact on our results of operations and financial condition in the future. Key Factors Affecting our Healthcare Segment Increasing Patient Capacity and Volumes Our healthcare segment’s revenues depend largely on the number of inpatients we admit and outpatients we register at our hospitals and day patient medical centre. We have increased both our inpatient and outpatient capacity primarily through our opening of the Al-Ain Specialty Hospital to our portfolio in 2009 and the expansion of our Abu Dhabi Specialty Hospital, our Dubai Specialty Hospital and Sharjah Day Patient Medical Centre in 2010. The following table sets forth the number of available beds at our facilities, the number of inpatient admissions and the number of outpatient registrations during the three fiscal years ended 31 December 2009, 2010 and 2011: 78
Year Ended 31 December 2009 2010 2011
Number of beds in use at each year(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inpatient admissions(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Outpatient registrations and Radiology and Pathology(3) . . . . . . . . . . . . . . . .
183 26,708 1,412,906
230 29,112 1,533,648
230 30,644 1,615,833
Notes: (1) Represents inpatient beds. Excludes beds in emergency rooms, beds used for dialysis treatments and other outpatient treatments. (2) Represents the total number of patients admitted (in the facility for a period in excess of 23 hours) to our hospitals and is used by management and certain investors as a general measure of inpatient volume. (3) A registration occurs for each individual billable event.
During the years under review, the number of beds, inpatient admissions and outpatient registrations all increased. These increases were primarily attributable to: • population growth in the UAE, including fewer expatriates leaving the UAE; • an increase in the incidence of lifestyle diseases in the UAE; • the introduction of mandatory health insurance in Abu Dhabi; and • increased referrals from local third-party clinics. However, as a result of the implementation of our “Centres of Excellence” strategy at our Abu Dhabi Specialty Hospital to focus on lower volume but higher margin specialty procedures, total patient count decreased from 804,463 in 2009 to 785,982 in 2010 in that hospital, although total revenues increased reflecting a higher average revenue per patient. Total patient count subsequently rebounded to 817,442 in 2011 while average revenue per patient continued to grow. In addition, total patient count at the Dubai General Hospital has decreased from 190,802 in 2009 to 178,005 in 2011, due to the construction of the Abu Hail metro station opposite the entrance to Dubai General Hospital that was completed in November 2011, along with a corresponding obstruction of the hospital’s car park in connection with the construction, that made direct access to the Dubai General Hospital more difficult for prospective patients, as well as to a disruption caused by reduced availibility of laboratory resources due to routine accreditation process and refurbishments of the outpatient department and upgrading of the pathology laboratory that took place during 2011. In addition, in 2010, our Sharjah clinic closed temporarily and moved to larger premises as part of its upgrade to a day patient medical centre. This resulted in a decline in total patient count at the Sharjah Day Patient Medical Centre from 99,190 in 2009 to 96,286 in 2010. See “Part VII—Business—Healthcare—Hospitals and Day Patient Medical Centres” and “—Results of Operations”. Fees and Reimbursement Rates Fees for inpatient and outpatient services vary significantly depending on the type of service we provide to patients, such as preventative care, medical, surgical or intensive care. Beginning in 2009, we increased our focus on our “Centres of Excellence” strategy at our Abu Dhabi Specialty Hospital and Al-Ain Specialty Hospital to increase average revenue per patient. Our “Centres of Excellence” focus the care we provide on selected higher-value secondary and tertiary services. These differentiate us in selected fields, such as cardiology and gynaecology, allowing for margin optimisation. Average revenue per patient has increased during each year under review, and in particular, has increased by approximately 14.5% to US$100.49 during 2011 from US$87.75 during the previous year, which was primarily attributable to an increase in highly specialised services such as cardiology, gynaecology and neo-natology at the Abu Dhabi Specialty Hospital and the Dubai Specialty Hospital, and the opening of the new pharmacy at the Sharjah Day Patient Medical Centre. Our revenues also depend upon reimbursements we receive from insurance companies. For the three fiscal years ended 31 December 2009, 2010 and 2011, revenue generated from insurance companies accounted for 75.4%, 78.6% and 80.5%, respectively, of our total healthcare revenue. We recover the fees for inpatient and outpatient services directly from the insurance companies or companies with whom we have pre-agreed arrangements. The key drivers of reimbursement rates are the rates we agree with insurance companies and the extent to which reimbursement claims are rejected by the insurance companies. We have successfully negotiated fee rate increases for many of our high-volume procedures over the past decade while continuing to limit our reimbursement claim rejection rates to approximately 2%. The balance of our revenue consists of cash payments made by individuals. Such payments are mainly dependent upon the insurance policy that a patient holds, which often stipulates a high excess or sets limits on the amounts 79
that an insurance company will reimburse for particular procedures. As a result, these cash payments are directly linked to the revenue derived from insurance companies. In addition, a small proportion of income received from individuals relates to non-insurance customers who settle amounts owed entirely in cash. Staff Costs Salaries and other staff costs for our doctors and other healthcare professionals, which include transportation and certain other benefits, comprise the largest proportion of our operating expenditure, representing 38.2% of the total of direct costs and general and administrative expenses for our healthcare division in the fiscal year ended 31 December 2011. In line with our “Centres of Excellence” strategy and our overall strategy of focusing on providing higher-value secondary and tertiary services, we commenced a recruitment drive in late 2009 to attract more specialist doctors. During the three fiscal years ended 31 December 2009, 2010 and 2011, we had 345, 375 and 382 doctors, respectively. Most of our new specialist doctors and healthcare professionals hired in 2010 were hired in the fourth quarter of that year. As a result, the full-year effect of the additional associated staff costs was not realised until the 2011 financial year. In addition, staff costs for existing staff have also increased principally due to inflation, as well as by competitive pressures. However, despite our recent recruitment efforts, our average salary cost per employee has grown only modestly, with a CAGR of 11.1% from 2009 to 2011. Rent Rent also represents a substantial proportion of our costs, and relates to lease payments on Abu Dhabi Specialty Hospital, Al-Ain Specialty Hospital, Dubai General Hospital, Sharjah Day Patient Medical Centre and five stand-alone pharmacies as well as rent on buildings which accommodate our healthcare professionals. For the fiscal year ended 31 December 2011, rent constituted 8.4% of the total direct costs and general and administrative expenses for our healthcare division, which was a decrease from 9.6% in the fiscal year ended 31 December 2010. In addition, for the fiscal year ended 31 December 2011 rent for our healthcare division was US$13.6 million, which was equal to 6.2% of that division’s sales for the same year. Annual rent increases in Abu Dhabi are subject to an annual cap, the level of which is set regularly by the Executive Council (and is currently 5%). In Dubai the annual rent cap varies depending on the extent to which the current rent being paid is below market rent (as determined by reference to the registration system operated by the Dubai Real Estate Regulatory Authority). Sharjah does not currently have a rent cap as such but there is a prohibition on increasing the rent during the first three years of a lease term although in practice we understand enforcement of this is not universal. Introduction of Mandatory Insurance In 2007, health insurance plans were extended to all residents and expatriates in Abu Dhabi resulting in an increased volume of high- and low-fee procedures. The introduction of mandatory insurance has had a significant positive impact on the volume of both low value procedures and high value procedures that we performed. Between 2006 and 2007, the volume of low fee procedures, meaning those costing less than AED250, rose by over 3,200% while the volume of high fee procedures, meaning those costing greater than AED250, also rose by over 150%. Since 2007, both low fee and high procedure volumes have continued to rise, with each category of procedure increasing at a CAGR of 8.3% and 8.6% CAGR, respectively, from the fiscal year ended 31 December 2007 through the fiscal year ended 31 December 2010. In June 2008, the DHA announced plans to offer a universal health insurance scheme for citizens and expatriates in Dubai, but to date this scheme has not been implemented in Dubai. We expect similar schemes to be introduced in other emirates in the future. Key Factors Affecting our Distribution Segment Products, Pricing and Distribution Network Revenues from our distribution and services segment are principally driven by the portfolio of products that we have the rights to distribute, the effectiveness of our distribution network and external factors which influence the success of these products in the geographical markets that we distribute into, principally the UAE. We have supplier agreements with approximately 500 suppliers which give us the exclusive rights to distribute approximately 50,000 products. The quality of the products for which we have exclusive rights to distribute, and therefore the demand for the products, directly impact the margins and revenues that we can achieve. Pricing and margin decisions are made on a product-by-product basis taking into account retail outlet and supplier feedback on the expected success of each product in the market. Pricing is regularly reviewed to take into account market activity such as the entrance of competitor products. New products to the UAE are often subject to special supplier terms or promotions when first introduced which often leads to our generating increased margins until 80
the product is better established. Recently, pharmacists in the UAE have been given the discretion to fill prescriptions with either generic or innovator drugs, which puts pressure on margins for innovator products. In addition, suppliers of both generic and innovator drugs have recently started to offer higher promotions on their products, which we are able to pass on to our customers at our discretion. Our extensive distribution network gives us wide access to potential customers and is, therefore, key to ensuring that we generate maximum returns from each product for which we have distribution rights. During the years under review, revenue from our distribution and services segment increased as we added new products to our distribution portfolio and increased sales of our existing products. These increases were driven by population growth and increasing incomes in the UAE and were partially offset by the effects of the Financial Crisis. Cost Base The most significant element of the distribution and services segment’s cost base is costs of goods, which represented 83.3% of the total of direct costs and general and administrative expenses for the segment in the fiscal year ended 31 December 2011. The other main element of the cost base is staff costs, which represented a further 10.2% of the total of direct costs and general and administrative expenses in the fiscal year ended 31 December 2011. Although the distribution and services segment has approximately 1,400 employees, these are lower skilled roles, which lead to lower average costs per employee. The remaining costs within the distribution and services segment are principally a combination of rent for our warehouses and staff accommodation, plus the cost of sales promotions for those products for which we have responsibility for brand marketing in the UAE. Where we enter into distribution agreements that require such promotional activity, we demand a higher gross margin share for the particular product to compensate for these marketing costs. For the fiscal year ended 31 December 2011 rent and the cost of sales promotion for our distribution and services segment was US$7.7 million, which was equal to 3.0% of that segment’s sales for the same year. Rental costs in this segment are expected to increase in 2012 when our new distribution warehouse in Dubai Investment Park becomes operational. See “Part VII—Business—Properties—Distribution”. Basis of Preparation Basis of Accounting Our consolidated financial information has been prepared in accordance with IFRS as adopted by the European Union and presented in USD, while our functional currency is AED. The consolidated financial information is prepared under the historical cost convention, except for investments carried at fair value through profit or loss, investment properties and derivative financial instruments, which have been measured at fair value. Basis of Consolidation Our consolidated financial information includes the financial information of NMC and the subsidiaries listed below: Percentage of holding As at 31 December 2011
New Pharmacy Company Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . New Medical Centre Hospital LLC—Dubai . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NMC Specialty Hospital LLC—Abu Dhabi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NMC Specialty Hospital LLC—Dubai . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . New Medical Centre Trading LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bait Al Shifaa Pharmacy LLC—Dubai . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . New Medical Centre LLC—Sharjah . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . New Medical Centre Specialty Hospital LLC—Al-Ain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reliance Information Technology LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . All of the above subsidiaries are incorporated in the UAE. 81
99% 99% 99% 99% 99% 99% 99% 99% 99%
Subsidiaries are fully consolidated from the date of acquisition, being the date on which we obtain control, and continue to be consolidated until the date when such control ceases. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. All intragroup balances, transactions, unrealised gains and losses resulting from intra-group transactions and dividends are eliminated in full. Non-controlling interests principally represent the interest in subsidiaries not held by us and are presented separately in the consolidated statement of comprehensive income and within equity in the consolidated statement of financial position, separately from parent shareholders’ equity. Description of Certain Income Statement Line Items Revenue Revenue includes income from our healthcare segment as well as from our distribution and services segment. Revenue from our healthcare segment includes revenue from our hospitals and day patient medical centre as well as from our pharmacies. Hospital revenue derives primarily from: (i) the provision of inpatient and outpatient hospital services; (ii) the provision of medical services; (iii) the provision of food and beverages for patients; (iv) in-hospital pharmacy revenue; and (v) room charges. Hospital revenue is recorded during the year in which the healthcare services are provided, and adjusted, if applicable, for any discretionary discounts on our regular rates and charges. Pharmacy revenues are derived from pharmacy sales, which we recognise at the point of sale, less any discounts, and we adjust for sales returns during the year from stand-alone pharmacies in which returns occur. Income from our distribution and services segment relates to the distribution of a wide range of products throughout the UAE and in certain other countries through our re-export division relating to pharmaceutical, medical and scientific, veterinary, FMCGs, cosmetic and educational products. Direct Costs Direct costs relate primarily to payments to and provisions for employees, operating expenses, rental costs and administrative and other expenses. Payments to and provisions for employees consist primarily of salaries, wages and benefits for medical staff and staff education and training. Operating expenses consist primarily of materials consumed (including customs duty and freight charges), insurance, utility charges and housekeeping expenses. Rental costs consist primarily of rent payable on hospitals and accommodation for our medical staff. General and Administrative Expenses General and administrative expenses principally include salaries in relation to administrative and financial functions and all distribution and services segment staff, rent payable on buildings other than hospitals, including warehouses, head office buildings and accommodation for distribution and services staff, bank charges, communication expenses, charitable donations and certain other one-off discounts and write-offs. Net Finance Charges Net finance charges include primarily interest payable on bank borrowings less interest receivable on cash balances and loans to affiliates. Interest payable takes into account certain derivative instruments we have entered into. Before February 2011, we had outstanding loans to affiliates that generated interest income. These loans were repaid in the six months ended 30 June 2011. Depreciation Depreciation reflects depreciation on property and equipment. We use a reducing balance method of depreciation, which results in higher charges in the first years of asset ownership. However, we are considering decreasing the rate of depreciation for certain assets due to reassessing their useful life beginning in the second half of 2012. Prior to the fiscal year ended 31 December 2011, we carried certain investment properties that were valued on an annual basis by an external, independent valuer in line with standards set by the International Valuation Standards Council. 82
Profit from Operations Profit from operations represents our earnings from ongoing operations before deductions or additions for pre-operating expenses, rental income from investment properties, (loss)/gain on revaluation of investment properties, (loss)/gain on investments carried at fair value through profit or loss and change in fair value of derivative financial instruments. Pre-operating Expenses Pre-operating expenses are the expenses incurred prior to the start of operation of a new hospital, medical facility or distribution facility, which are expensed as incurred. Rental Income from Investment Properties Before fiscal year 2011, we generated income from investment properties comprising certain residential properties in which certain of our medical staff are housed. We disposed of all of these properties in the first half of 2011. Loss on Investments Carried at Fair Value Through Profit or Loss We held certain marketable securities prior to January 2011, which were carried at fair value. We disposed of these marketable securities in January 2011. Change in Fair Value of Derivative Financial Instruments We have entered into interest rate swap arrangements to hedge the interest cash flow on term loans. As certain of these swaps do not qualify for hedge accounting in accordance with IAS 39, the movement in fair values of these swap arrangements are charged to our consolidated statement of comprehensive income. Results of Operations This section reviews the operational and financial performance of the Oldco Group over the past three years. Year ended 31 December 2009 2010 2011 (US$ millions)
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 338.9 386.5 443.7 Direct costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (236.3) (267.8) (306.4) GROSS PROFIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . General and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Finance charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
102.6 (61.5) 2.4 0.9 (16.5) (15.3)
118.7 (62.6) 3.4 0.3 (17.3) (13.6)
137.4 (68.2) 1.1 1.3 (17.0) (12.0)
PROFIT FROM OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pre-operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rental income from investment properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gain (loss) on revaluation of investment properties(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . (Loss) on investments carried at fair value through profit or loss(2) . . . . . . . . . . . . . . . . Change in fair value of derivative financial instruments . . . . . . . . . . . . . . . . . . . . . . . . .
12.4 (7.5) 2.0 3.5 (1.9) (0.4)
28.9 (1.8) 3.3 (5.8) (0.6) (0.2)
42.5 — 1.2 — — 0.1
PROFIT FOR THE YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.2
23.8
43.8
Notes: (1) Investment properties were disposed of in May 2011. (2) Investments carried at fair value were disposed of in January 2011.
83
Revenue by Facility(1) The following table sets forth our revenue by facility for the years indicated: Year ended 31 December 2009 2010 2011 (US$ millions)
Abu Dhabi Specialty Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dubai Specialty Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Al-Ain Specialty Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dubai General Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sharjah Day Patient Medical Center . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pharmacies—New Pharmacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pharmacies—Bait Al Shifaa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
60.9 32.5 11.6 10.0 3.6 32.4 7.4
68.6 37.1 23.0 9.7 3.9 32.8 7.5
79.7 43.2 31.8 10.8 7.3 39.0 7.0
Total Healthcare segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
158.4
182.5
218.7
Note: (1) Includes intra-company revenue and excludes stand-alone pharmacies and distribution and services revenues.
Current trading and prospects Prospects/Outlook Overall, we have made a positive start to the year with a strong performance in both our healthcare and distribution and services segments. The business is continuing to perform in line with our own expectations with revenue, profitability and margins also increasing in line with our own expectations, and the Directors view the outlook for the current financial year with confidence. Healthcare Suites and Maternity Hospital We have agreed to acquire an operating day patient medical centre in Dubai known as Healthcare Suites from our CEO and founder, Dr. B.R. Shetty for a consideration of US$9.0 million. We expect to complete this acquisition on or about 1 July 2012. Thereafter, we expect to spend approximately US$5.0 million in additional capital expenditure on equipment and refurbishment for the facility. Healthcare Suites is a high-end specialty day patient medical centre in Dubai Healthcare City that opened in March 2011. In addition, we have commenced refurbishment and development activities to convert an existing building into a new hospital focused on maternity, paediatric care and in-vitro fertilisation located in Abu Dhabi, next to the Al Jazira Club. We expect it to begin operations during the second half of 2012 with 50 beds at opening, with the possibility of later expanding to 100 beds. See “Part VII—Business—Healthcare—Hospitals and Day Patient Medical Centres—Our Expansion Plans”. New Facility On 8 March 2012, our subsidiary NMC Healthcare LLC entered into the New Facility with a syndicate of lenders led by J.P. Morgan Chase Bank, N.A. for a committed amount of up to US$120 million. The New Facility constitutes first priority senior secured indebtedness of the Borrower, ranking pari passu with other existing senior secured obligations of the Borrower. The proceeds from the New Facility will be used in conjunction with the proceeds of the Global Offering to fund our expansion plans. The New Facility provides for two drawdown advances to be made within a period of 30 days from the signing of the New Facility with any undrawn amount to be automatically cancelled. At the date hereof, US$50 million had been drawn down under the New Facility, and we have requested the drawdown of the additional US$70 million, which we expect to receive at or prior to Admission. For more information regarding the New Facility, see “Part IX—Use of Proceeds and Dividend Policy”, “Part XI—Operating and Financial Review—Liquidity and Capital Resources—Liabilities and Indebtedness” and “Part II—Risk Factors—Construction of our new hospital at Khalifa City may be delayed if our New Facility becomes repayable as a result of events relating to the guarantors of the New Facility and our financing costs may increase”. Following the completion of the Global Offering, we plan to explore the consolidation of our existing facilities into a single syndicated facility, to reduce overall interest costs, optimise cash management and release the personal guarantees provided by the Existing Shareholders. 84
Fiscal Year ended 31 December 2011 Compared to the Year ended 31 December 2010 Revenue Revenue during the fiscal year ended 31 December 2011 was US$443.7 million, representing a 14.8% increase from US$386.5 million during the fiscal year ended 31 December 2010, principally due to increases in revenues from our healthcare segment as well as increases in revenues from our distribution and services segment. The following table sets forth our revenue by segment: Year ended 31 December 2010 2011
% Change
(US$ millions, except percentages)
Revenue Healthcare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Distribution and services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjustments and eliminations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
182.5 228.6 (24.5)
218.7 253.4 (28.4)
19.8% 10.8% 15.9%
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
386.5
443.7
14.8%
Healthcare The year-on-year increase in the healthcare segment was primarily attributable to our strategy of increasing patient numbers at Al-Ain Specialty Hospital as well as an increase in our revenue per patient in connection with our “Centres of Excellence” strategy. In addition, we increased tariffs for certain of our healthcare services during the year. Average revenue per patient increased by 14.5% from US$87.75 in the fiscal year ended 31 December 2010 to US$100.49 in the fiscal year ended 31 December 2011. Abu Dhabi Specialty Hospital’s revenue increased by 16.2% from US$68.6 million in the fiscal year ended 31 December 2010 to US$79.7 million in the fiscal year ended 31 December 2011. This was primarily attributable to a 4.0% increase in patient count from 785,982 in 2010 to 817,442 in 2011, as well as an increase in revenue per patient in connection with the continued addition of specialist doctors in line with our “Centres of Excellence” strategy, which resulted in an increase in more complex dental procedures such as maxillofacial surgeries, as well an increase in high-value super-specialty inpatient procedures in both cardiology and ophthalmology, including cataract surgeries and vitreo-retinal surgeries. The hospital also benefitted from a decrease in the proportion of certain lower-value outpatient procedures during the year. Revenue at Dubai Specialty Hospital increased by 16.4% from US$37.1 million in the fiscal year ended 31 December 2010 to US$43.2 million in the fiscal year ended 31 December 2011. Although total patient count decreased from 296,989 to 294,251 over the same period, the increase in revenue was primarily attributable to an increase in higher-value specialist inpatient procedures, including ophthalmology and cardiology, following the move to a “Centres of Excellence” strategy in 2010, with inpatient admissions rising from 5,335 to 6,998. This also resulted in a strong increase in pharmacy revenue due to demand for high-value medicines relating to inpatient treatments as well as an increase in radiology and pathology revenues due to more complex tests carried out in relation to inpatients. Revenue at Al-Ain Specialty Hospital increased by 38.3% from US$23.0 million during the fiscal year ended 31 December 2010 to US$31.8 million during the fiscal year ended 31 December 2011. This was primarily attributable to continuing growth in total patient count from 257,218 to 322,770 over the two years and an increase in revenue per patient resulting from an increase in fee rates for a number of key procedures from a major insurer. Revenue at Dubai General Hospital increased by 11.3% from US$9.7 million in the fiscal year ended 31 December 2010 to US$10.8 million in the fiscal year ended 31 December 2011. However, total patient count declined due to the disruption caused by the construction work on the Abu Hail metro station outside the entrance to Dubai General Hospital, which ended in November 2011, as well as disruption caused by reduced availability of laboratory resources due to a routine accreditation process and to refurbishments of the outpatient department and upgrading of the pathology laboratory that took place during the year. This decline was more than offset by an increase in revenue per patient as a result of a stronger mix of higher-value procedures being undertaken due to several specialist doctors joining the hospital and the purchase of a number of new machines. Revenue at Sharjah Day Patient Medical Centre increased by 87.2% from US$3.9 million in the fiscal year ended 31 December 2010 to US$7.3 million in the fiscal year ended 31 December 2011. This was primarily attributable 85
to the opening of the new pharmacy in January 2011, which contributed US$2.6 million to revenue in the year ended 31 December 2011, a 3.0% increase in patient count from 96,286 in the fiscal year ended 31 December 2010 to 99,185 in the fiscal year ended 31 December 2011, as well as an increase in revenue per patient due to increases in fees negotiated with insurers and the addition of several specialist doctors. Pharmacy revenue from our stand-alone pharmacies increased by 14.4% from US$40.2 million in the fiscal year ended 31 December 2010 to US$46.0 million in the fiscal year ended 31 December 2011, reflecting increased patient count of our hospitals located near our stand-alone pharmacies. In addition, the increases we experienced in high-value specialty and “super-specialty” services at our hospitals resulted in an increase in prescriptions for higher-value medications which also benefited our stand-alone pharmacies located near our hospitals. Distribution and Services The increase in distribution and services revenue was due primarily to a growing market for our products in both Abu Dhabi and Dubai as well as increased market share in Abu Dhabi arising from increased marketing activities, and a significant increase in revenue from the NMTC division in the second half of 2011. Direct Costs Direct costs during the fiscal year ended 31 December 2011 were US$306.4 million, representing a 14.4% increase from US$267.8 million during the fiscal year ended 31 December 2010. The increase was primarily attributable to an increase in cost of goods sold, reflecting increased costs in our distribution and services segment, and an increase in staff and associated costs resulting from an increase in specialist doctors and other healthcare professionals hired during the fourth quarter of 2010, which included an increase in salaries and other employee benefits, such as housing. General and Administrative Expenses General and administrative expenses during the fiscal year ended 31 December 2011 were US$68.2 million, representing a 8.9% increase from US$62.6 million during the fiscal year ended 31 December 2010. The increase was primarily attributable to an increase in staff accommodation costs in connection with the increase in the number of specialist doctors in the fourth quarter of 2010, as well as to increased headcount resulting from the opening of the pharmacy at the Sharjah Day Patient Medical Centre and additional staff necessary to support increased sales in the distribution and services segment during the year. Finance Charges Finance charges during the fiscal year ended 31 December 2011 were US$17.0 million, representing a 1.7% decrease from US$17.3 million during the fiscal year ended 31 December 2010. The decrease was primarily attributable to a net decrease of US$36.6 million in the principal amount of our borrowings as well as decreased interest rates during the year. This was off-set by a 67.6% decrease in finance income from US$3.4 million in 2010 to US$1.1 million in 2011 resulting from the repayment of certain shareholder loans in 2011. Depreciation Depreciation during the fiscal year ended 31 December 2011 was US$12.0 million, representing a 11.8% decrease from US$13.6 million during the fiscal year ended 31 December 2010. The decrease was primarily attributable to a decrease in the acquisition of new fixed assets during the period relative to assets reaching the end of their useful economic lives. Profit from Operations For the reasons described above, profit from operations increased by 47.1% from US$28.9 million during the fiscal year ended 31 December 2010 to US$42.5 million during the fiscal year ended 31 December 2011. The increase was due primarily to revenue growing more quickly than direct costs and general and administrative expenses, and reduced depreciation and finance charges. Rental Income from Investment Properties Rental income from investment properties during the fiscal year ended 31 December 2011 was US$1.2 million, representing a 63.6% decrease from US$3.3 million during the fiscal year ended 31 December 2010. The decrease was primarily attributable to our disposal of all investment properties during the first half of 2011, which reduced the aggregate amount of rent we collected in the year compared with 2010. 86
Change in Fair Value of Derivative Financial Instruments The Group recognised changes in fair value of derivative financial instruments of positive US$0.1 million and negative US$0.2 million during the fiscal years ended 31 December 2011 and 31 December 2010, respectively. In each case, the change reflected movements in interest rates during the relevant year, which affected the value of our interest rate swaps. Pre-operating expenses We recorded no pre-operating expenses during the fiscal year ended 31 December 2011. However, we expect to recognise significant pre-operating expenses in the fiscal year ending 31 December 2012 in connection with the opening of our maternity hospital in Abu Dhabi and day patient medical centres at Mussafah and Dubai Investment Park. See “—Liquidity and Capital Resources—Capital Expenditures”. Profit for the Year For the reasons described above, profit for the fiscal year ended 31 December 2011 was US$43.8 million, representing a 84.0% increase from US$23.8 million during the fiscal year ended 31 December 2010. The following table sets forth our profit by segment: Year ended 31 December 2010 2011 (US$ millions)
% Change
Profit Healthcare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Distribution and services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjustments and eliminations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
30.1 18.6 (24.9)
46.3 23.6 (26.0)
53.8% 26.9% 4.4%
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23.8
43.8
84.0%
Healthcare The significant increase in healthcare segment profit during 2011 was principally due to our strategy of increasing more specialised treatments to secondary and tertiary services in certain hospitals, leading to higher revenues and increased overall margins. Abu Dhabi Specialty Hospital’s profit increased by 71.0% from US$17.6 million to US$30.1 million and Adjusted EBITDA for the year increased by 18.0% from US$27.8 million to US$32.8 million in the fiscal year ended 31 December 2011 compared with the fiscal year ended 31 December 2010. These increases were primarily attributable to strong increases in higher-value specialised treatments to secondary and tertiary services, leading to higher revenues and increased overall margins. Over the same period, profit margin increased from 25.7% to 37.8% and Adjusted EBITDA margin increased from 40.6% to 41.2%. These increases were primarily attributable to the same factors impacting profit and Adjusted EBITDA and, for profit margin, the head office ceasing to levy a management charge to the hospital as well as a lower depreciation charge. Dubai Specialty Hospital’s profit increased from nil to US$5.1 million and Adjusted EBITDA for the year increased by 41.7% from US$6.0 million to US$8.5 million in the fiscal year ended 31 December 2011 compared with the fiscal year ended 31 December 2010. These increases were primarily attributable to the increase in higher-value specialist inpatient procedures following the move to the “Centres of Excellence” strategy in 2010. The relatively large increase in profit compared to Adjusted EBITDA was due to finance charges in 2011 being accounted for at the Group level as opposed to being recharged to hospital operating entity level. Over the same year, profit margin increased from 0.0% to 11.8% and Adjusted EBITDA margin increased from 16.2% to 19.6%. This was primarily attributable to the slow growth in overall costs, despite an increase in salaries due to the net addition of two new doctors during the year. Al-Ain Specialty Hospital’s profit increased from negative US$1.9 million to positive US$5.4 million and Adjusted EBITDA for the year increased by 74.0% from US$5.0 million to US$8.7 million in the fiscal year ended 31 December 2011 compared with the fiscal year ended 31 December 2010. These increases were primarily attributable to growth in patient count, which increased by 25.5%, and an increase in the fee rates for a number of procedures from a major insurer. The relatively large increase in profit compared to Adjusted EBITDA was due to finance charges in 2011 being accounted for at the Group level as opposed to being 87
recharged to hospital operating entity level. Over the same period, profit margin increased from negative 8.1% to positive 17.1% and Adjusted EBITDA margin increased from 21.7% to 27.4%. This was primarily attributable to the slow growth in overall costs, despite an increase in salaries due to the net addition of eight new doctors over the same period. Dubai General Hospital’s profit increased by 40.0% from US$0.5 million to US$0.7 million and Adjusted EBITDA for the year increased by 62.5% from US$0.8 million to US$1.3 million in the fiscal year ended 31 December 2011 compared with the fiscal year ended 31 December 2010. These increases were primarily attributable to a change in the mix toward higher value, higher margin procedures which more than offset a decline in total patient count. Over the same period, profit margin increased from 5.1% to 6.8% and Adjusted EBITDA margin increased from 8.3% to 11.9%. The Sharjah Day Patient Medical Centre’s loss decreased from US$2.9 million to a loss of US$0.4 million and Adjusted EBITDA for the year increased from negative US$0.6 million to positive US$0.4 million in the fiscal year ended 31 December 2011 compared with the fiscal year ended 31 December 2010. The decreased loss and the increase in Adjusted EBITDA primarily reflected the increase in patient count, as new doctors hired in 2010 built up the number of their procedures to more normal levels in 2011 as well as the opening of a new pharmacy in 2011. Over the same period profit margin increased from negative 74.6% to negative 4.9% and Adjusted EBITDA margin increased from negative 15.6% to positive 5.3%. Margins for the fiscal year ended 31 December 2011 and 31 December 2010 have remained low and not reached the levels of 2008 and 2009, which was primarily attributable to the move to new premises in April 2010, which led to a considerable increase in fixed costs in the fiscal year ended 31 December 2010, as well as to the patient count in the fiscal year ended 31 December 2011 of 99,185 still not exceeding the 2009 level of 99,190 as the Sharjah Day Patient Medical Centre continued to re-build its patient base following the move. Distribution and Services Profit for our distribution and services segment increased by 26.9% in the fiscal year ended 31 December 2011, while Adjusted EBITDA increased by 24.6%, profit margin increased from 8.1% to 9.3% and Adjusted EBITDA margin increased from 8.7% to 9.8% respectively, in the fiscal year ended 31 December 2010 as compared to fiscal year ended 31 December 2011. These increases reflected the improvements in revenues discussed above which was offset by relatively stable costs (other than cost of goods sold). Fiscal Year ended 31 December 2010 Compared to the Year ended 31 December 2009 Revenue Revenue during the fiscal year ended 31 December 2010 was US$386.5 million, representing a 14.0% increase from US$338.9 million during the fiscal year ended 31 December 2009, reflecting increases in both the healthcare segment and the distribution and services segment. The following table sets forth our revenue by segment: Year ended 31 December 2009 2010 (US$ millions)
Revenue Healthcare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Distribution and services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjustments and eliminations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
158.4 201.0 (20.6) 338.9
182.5 228.6 (24.5) 386.5
% Change
15.2% 13.7% 18.9% 14.0%
Healthcare The year-on-year increase in the healthcare segment was primarily attributable to our strategy of increasing more specialised treatments to secondary and tertiary services in certain hospitals and our strategy of growing patient numbers in others. Average revenue per patient increased by 10.9% from US$79.13 to US$87.75 during the year. Abu Dhabi Specialty Hospital’s revenue increased by 12.6% from US$60.9 million in the fiscal year ended 31 December 2009 to US$68.6 million in the fiscal year ended 31 December 2010. This was primarily attributable to an increase in revenue per patient by 15.8% as a result of the implementation of the “Centres of Excellence” strategy to focus on high-value procedures, as well as the addition of four new beds, which was offset by a decrease in patient count from 804,463 in 2009 to 785,982 in 2010. 88
Revenue at Dubai Specialty Hospital increased by 14.2% from US$32.5 million in the fiscal year ended 31 December 2009 to US$37.1 million in the fiscal year ended 31 December 2010. This was primarily attributable to the addition of ten new beds, an increase in occupancy rates from 36.3% to 39.0% and an increase in outpatient volumes from 164,883 to 197,671 over the year. Revenue at Al-Ain Specialty Hospital increased by 98.3% from US$11.6 million during the fiscal year ended 31 December 2009 to US$23.0 million during the fiscal year ended 31 December 2010. This was primarily attributable to 2010 being the first full year that the Al-Ain Specialty Hospital was in operation, having commenced operations in early 2009, as well as the addition of 33 new beds during 2010. Total patient numbers increased from approximately 140,000 patients in 2009 to approximately 257,000 patients in 2010. Average revenue per patient at Al-Ain Specialty Hospital also increased by 7.3% during the year, which was largely attributable to a 232.4% increase in patient numbers who attended the surgical clinic from approximately 3,088 patients to 10,264 patients. Revenue at Dubai General Hospital decreased by 3.0% from US$10.0 million in the fiscal year ended 31 December 2009 to US$9.7 million in the fiscal year ended 31 December 2010. This was primarily attributable to construction of the Abu Hail metro station outside the entrance to the Dubai General Hospital during 2010, which made direct access to the hospital more difficult for prospective patients and resulted in a decrease in patient numbers in 2010. Revenue at Sharjah Day Patient Medical Centre increased by 8.3% from US$3.6 million in the fiscal year ended 31 December 2009 to US$3.9 million in the fiscal year ended 31 December 2010. This was primarily attributable to an increase in outpatient revenues as a result of the relocation to a larger and better equipped facility and the addition of new doctors. Pharmacy revenues from stand-alone community pharmacies remained relatively consistent year on year. Distribution and Services The increase in distribution and services revenue of 13.7% was due primarily to organic growth, reflecting population growth in the UAE, supported by higher long-term disposable incomes. Revenue in our distribution and services segment also benefited from an increased marketing campaign, the addition of new products to our food division and the full year effect in 2010 of our new veterinary division which was launched in 2009. Direct Costs Direct costs during the fiscal year ended 31 December 2010 were US$267.8 million, representing a 13.3% increase from US$236.3 million during the fiscal year ended 31 December 2009. The increase was primarily attributable to an increase in cost of goods sold, reflecting improved sales in our distribution and services segment, and an increase in staff and associated costs resulting from an increase in specialist doctors and other healthcare professionals during 2010, as well as an increase in salaries and other employee benefits such as housing. General and Administrative Expenses General and administrative expenses during the fiscal year ended 31 December 2010 were US$62.6 million, representing a 1.8% increase from US$61.5 million during the fiscal year ended 31 December 2009. The increase was primarily attributable to costs associated with a small increase in staff numbers. Net Finance Charges Net finance charges during the fiscal year ended 31 December 2010 were US$17.3 million, representing a 4.8% increase from US$16.5 million during the fiscal year ended 31 December 2009. The increase was primarily attributable to the increased level of borrowings held during the course of the year. Depreciation Depreciation during the fiscal year ended 31 December 2010 was US$13.6 million, representing an 11.1% decrease from US$15.3 million during the fiscal year ended 31 December 2009. The decrease was primarily attributable to the effect of certain disposals during 2009 and 2010 as well as a decrease in equipment acquisitions in 2010 relative to assets reaching the end of their useful economic lives. 89
Profit from Operations For the reasons described above, profit from operations increased by 133.1% from US$12.4 million during the fiscal year ended 31 December 2009 to US$28.9 million during the fiscal year ended 31 December 2010. The increase was due primarily to higher revenue from both our healthcare and distribution and services segments, combined with a lower rate of growth in general and administrative expenses and depreciation relative to the rate of revenue growth. Pre-operating Expenses Pre-operating expenses during the fiscal year ended 31 December 2010 were US$1.8 million, relating to the preoperating costs incurred prior to the opening of the new Sharjah Day Patient Medical Centre in 2010. Pre-operating expenses of US$7.5 million during the fiscal year ended 31 December 2009 related to costs incurred prior to the start of operations of Al-Ain Speciality Hospital. Rental Income from Investment Properties Rental income from investment properties during the fiscal year ended 31 December 2010 was US$3.3 million, representing a 65.0% increase from US$2.0 million during the fiscal year ended 31 December 2009. The increase was primarily attributable to the completion of a new residential property in Sharjah in 2009, which generated additional rental income. (Loss) Gain on Revaluation of Investment Properties Loss on revaluation of investment properties during the fiscal year ended 31 December 2010 was US$5.8 million compared to a gain of US$3.5 million for the fiscal year ended 31 December 2009. This change in each year was a result of revaluations of our investment properties, which were valued on an annual basis by an external, independent valuer in line with standards set by the International Valuation Standards Council. Loss on Investments Carried at Fair Value Through Profit or Loss Loss on investments carried at fair value through profit or loss was US$0.6 million and US$1.9 million during the fiscal year ended 31 December 2010 and 31 December 2009, respectively. These investments were carried at fair value based on the quoted values of the investments and the loans in each year reflected declines in the value of these investments. Change in Fair Value of Derivative Financial Instruments The Group recognised negative changes in fair value of derivative financial instruments of US$0.2 million and US$0.4 million during the fiscal years ended 31 December 2010 and 31 December 2009, respectively. In each case, the loss reflected adverse interest rate movements during the relevant year. Profit for the Year For the reasons described above, profit for the fiscal year ended 31 December 2010 was US$23.8 million, representing a 190.2% increase from US$8.2 million during the fiscal year ended 31 December 2009. The following table sets forth our profit by segment: Year ended 31 December 2009 2010 (US$ millions)
% Change
Profit Healthcare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Distribution and services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjustments and eliminations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14.7 10.7 (17.2)
30.1 18.6 (24.9)
104.8% 73.8% 44.8%
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.2
23.8
190.2%
Healthcare The significant increase in healthcare segment profit during 2010 was principally due to our strategy of increasing more specialised treatments to secondary and tertiary services in certain hospitals, leading to higher revenues and increased overall margins. 90
Abu Dhabi Specialty Hospital’s profit increased by 30.4% from US$13.5 million to US$17.6 million and Adjusted EBITDA for the year increased by 17.3% from US$23.7 million to US$27.8 million in the fiscal year ended 31 December 2010 compared with the fiscal year ended 31 December 2009. These increases were primarily attributable to implementation of the “Centres of Excellence” strategy, whereby total patient count decreased from 804,463 in 2009 to 785,982 in the fiscal year ended 31 December 2010, while over the same period profit margin increased from 22.2% to 25.7% and Adjusted EBITDA margin increased from 38.9% to 40.6% for the same reason. The “Centres of Excellence” strategy led to a change in mix towards higher margin procedures. Dubai Specialty Hospital’s profit was nil compared to a loss of US$1.3 million and Adjusted EBITDA for the year increased by 22.4% from US$4.9 million to US$6.0 million in the fiscal year ended 31 December 2010 compared with the fiscal year ended 31 December 2009. The increase was primarily attributable to the addition of ten new beds, an increase in occupancy rates from 36.3% to 39.0% and an increase in outpatient volumes from 164,883 to 197,671 over the same period. Over the same period profit margin improved from negative 4.0% to 0.0% and Adjusted EBITDA margin increased from 15.0% to 16.2%. These increases were primarily attributable to an increase in revenue coupled with the largely fixed nature of the cost base. Al-Ain Specialty Hospital’s loss decreased from US$14.9 million to US$1.9 million and Adjusted EBITDA for the year increased substantially from US$0.2 million to US$5.0 million in the fiscal year ended 31 December 2010 compared with the fiscal year ended 31 December 2009. These increases were primarily attributable to 2010 being the first full year that the hospital was in operation, having commenced operations in early 2009. Over the same period profit margin improved from negative 128.7% to negative 8.1% and Adjusted EBITDA margin increased from 1.4% to 21.7%. These increases were primarily attributable to the second half of 2009 being the first year that the Al-Ain Specialty Hospital was in operation and the time it took for revenues to build up to cover the levels of fixed costs in the hospital. Dubai General Hospital’s profit decreased by 58.3% from US$1.2 million to US$0.5 million and Adjusted EBITDA for the year decreased by 46.7% from US$1.5 million to US$0.8 million in the fiscal year ended 31 December 2010 compared with the fiscal year ended 31 December 2009. These decreases were primarily attributable to the construction of the Abu Hail metro station outside the hospital in 2010 which made access to the hospital more difficult, which in turn resulted in a decrease in patient numbers in 2010. Over the same period profit margin decreased from 12.3% to 5.1% and Adjusted EBITDA margin decreased from 15.0% to 8.3%. These decreases were primarily attributable to the relatively high level of fixed costs and the decrease in revenue over the same period. The Sharjah Day Patient Medical Centre’s profit decreased from US$0.1 million to a loss of US$2.9 million and Adjusted EBITDA for the year decreased from US$0.7 million to a loss of US$0.6 million in the fiscal year ended 31 December 2010 compared with the fiscal year ended 31 December 2009. Over the same period profit margin decreased from 2.1% to negative 74.6% and Adjusted EBITDA margin decreased from 18.1% to negative 15.6%. These decreases were primarily attributable to the closure of the old Sharjah clinic and moving to new premises in order to open the new Sharjah Day Patient Medical Centre in 2010. This led to a disruption to patient services as this relocation took approximately one month to complete as well as a significant increase in costs reflecting the higher cost base of the larger facilities. Distribution and Services Profit for our distribution and services segment increased by 73.8% in the fiscal year ended 31 December 2010, while Adjusted EBITDA increased by 70.1%. Profit margin increased from 5.3% to 8.1% and Adjusted EBITDA margin increased from 5.8% to 8.7%, respectively in the fiscal year ended 31 December 2009 as compared to the fiscal year ended 31 December 2010. These increases were primarily attributable to higher revenues coupled with an increase in margin due to reduced promotional and related activity as a consequence of an improvement in the markets in which the segment operates during 2010. Liquidity and Capital Resources Our primary source of liquidity for our operations is cash provided by our operating activities, although we also partially fund our operations from third-party debt.
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Net Cash Flows The following table sets forth information regarding our statement of cash flows for the years presented: Year ended 31 December 2009 2010 2011 (US$ millions)
Consolidated cash flow data: Net cash from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash (used in) from investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash (used in) financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
60.6 35.7 71.4 (33.9) (17.7) 22.1 (27.4) (27.7) (57.4)
(Decrease) increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents at the beginning of the year . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents at the end of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(0.7) (9.7) 36.2 (1.4) (2.1) (11.7) (2.1) (11.7) 24.4
Net Cash from Operating Activities Our net cash from operating activities consists of profit for the year, adjusted for finance income and expense as well as non-cash movements such as depreciation, revaluation of investment properties and derivative financial instruments as well as provisions for employees’ end of service benefits and working capital movements. In 2011, our net cash from operating activities was US$71.4 million, an increase of 100.0% from US$35.7 million during 2010. This increase was primarily attributable to higher cash generated from operating activities and repayment of amounts due from related parties. Despite an increase in cash from operating activities before changes in working capital in the fiscal year ended 31 December 2011 of US$12.4 million compared to the fiscal year ended 31 December 2010, there were negative net working capital changes of US$1.5 million in the year, which related primarily to consolidation of distribution customers leading to longer collection periods, as well as to certain other events including: (i) an administrative delay in processing receivables in connection with the implementation of separate accounts for each of our business divisions’ receivables and (ii) a delay in payments from two insurance companies that has since been resolved. In 2010, our net cash from operating activities was US$35.7 million, a decrease of 41.1% from US$60.6 million in 2009. Despite an increase in cash from operating activities before changes in working capital in the fiscal year ended 31 December 2010 of US$23.5 million compared to the fiscal year ended 31 December 2009, there were negative net working capital changes of US$24.9 million in the year (which related primarily to a US$16.2 million increase in accounts receivable and prepayments due to the first year of operation Al-Ain Specialty Hospital) and a negative movement on balances with related parties of US$8.6 million. In 2009, our net cash from operating activities was US$60.6 million. This primarily comprised an increase in cash operating profits as well as positive net working capital changes of US$23.3 million, resulting from better inventory controls that resulted in overall lower inventory levels during the year despite the growth in the turnover, which improved the cash position. We also benefitted from longer-than-normal settlement cycles for trade payments that we negotiated in the wake of the Financial Crisis in 2008, which was in turn in response to slower collections of receivables during the year. This enabled us to pass on the impact of the slower collection of receivables in the settlement of our trade payments, which minimised the impact on the cash position. Net Cash (Used in) from Investing Activities Our net cash used in investing activities consists of capital investment in hospitals including setting up new hospitals, buying new equipment and maintenance. In 2011, our net cash received from investing activities was US$22.1 million, consisting primarily of the proceeds from disposal of investment properties of US$36.8 million and proceeds from the disposal of investments of US$4.9 million offset in part by the purchase of property, plant and equipment of US$20.4 million. In 2010, our net cash used in investing activities was US$17.7 million, consisting of costs associated with the development of the new Sharjah Day Patient Medical Centre and purchase of new equipment primarily for Dubai General Hospital and Sharjah Day Patient Medical Centre.
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In 2009, our net cash used in investing activities was US$33.9 million, consisting of purchases of property and equipment of US$21.5 million relating primarily to the setting up of the Al-Ain Specialty Hospital, the acquisition of new land for the Dubai Specialty Hospital, the purchase of new equipment for the Abu Dhabi and Dubai Specialty Hospitals and other hospitals, and the purchase of additional investment properties in Sharjah amounting to US$ 15.7 million. Net Cash Used in Financing Activities Our net cash used in financing activities consists of external loan repayments and drawdowns and interest payments thereon as well as movements on shareholders accounts. In 2011, our net cash used in financing activities was US$57.4 million. This was almost entirely a result of the net repayment of term loans to third-party lenders which related partly to loans secured on our portfolio of investment properties which we disposed of during the year. In 2010, our net cash used in financing activities was US$27.7 million. This consisted of net repayments of term loans of US$10.6 million, interest paid of US$16.8 million and a net movement on shareholders’ current accounts of US$11.7 million, offset by additional borrowings in relation to imports of US$11.4 million. In 2009, our net cash used in financing activities was US$27.4 million, consisting primarily of net repayments of term loans of US$15.4 million and interest payments of US$17.0 million, offset by additional borrowings in relation to imports of US$4.4 million. Liabilities and Indebtedness We have entered into a total of 21 committed facility agreements with different international commercial banks. These facilities include both working capital facilities and term loans. As at 31 December 2011, our working capital facilities totalled approximately US$178.8 million, of which US$101.3 million had been utilised and US$77.5 million remained available to be drawn, subject to satisfaction of customary conditions precedent. The working capital facilities are annually renewable and are repayable upon demand and include overdrafts, trust receipts, invoice discounting and other facilities of a working capital nature. As at 31 December 2011, we also had US$80.9 million of term loans outstanding, of which approximately US$45.4 million were current and due within one year and approximately US$35.4 million were non-current. All of the facilities are guaranteed by our CEO Dr. B.R. Shetty and some of the facilities are also guaranteed by the other Existing Shareholders and certain of the our subsidiaries. Most of the facilities are secured against certain of our assets, including mortgaged real property, assigned receivables and insurance proceeds, pledged instruments, and charges over accounts and inventory. In the fiscal year ended 31 December 2011, we repaid US$36.6 million of total net borrowings. On 8 March 2012 we entered into the New Facility with a syndicate of lenders led by J.P. Morgan Chase Bank, N.A. for a committed amount of up to US$120 million. At the date hereof, US$50 million had been drawn down under the New Facility, and we have requested the drawdown of the additional US$70 million, which we expect to receive at or prior to Admission. The New Facility was entered into by NMC Healthcare LLC as the Borrower. The proceeds from the New Facility will be used in conjunction with the proceeds of the Global Offering to fund our expansion plans as well as to repay certain of our existing debt facilities upon their maturity. See “Part IX— Use of Proceeds and Dividend Policy”. The New Facility is guaranteed by corporate guarantees provided by all operating subsidiaries of the Borrower and personal guarantees provided by each of the Existing Shareholders, other than Infinite Investment LLC. The New Facility is secured against a collateral package consisting of: (i) an assignment of Daman and Abu Dhabi National Insurance health insurance receivables and their proceeds by the Borrower; (ii) a pledge over the accounts of the Borrower; (iii) an account cash sweep (Borrower accounts only); and (iv) mortgage security over the real estate of NMC Specialty Hospital in Dubai. The obligations of the Borrower and guarantors under the New Facility will rank at least pari passu in right of priority and payment with the claims of all other unsecured and unsubordinated creditors of the Borrower and guarantors. The New Facility will be repaid in 59 equal monthly instalments of principal commencing in 31 May 2012 with the final instalment due 31 March 2017. Interest payable on the New Facility is the aggregate of the applicable, (i) 1 month USD Libor, (ii) the margin rate of 3.5% per annum and (iii) mandatory costs, if any, and will be paid each month. The New Facility matures five years after its signing date.
93
The New Facility contains certain mandatory repayment and cancellation provisions, voluntary prepayment and cancellation provisions, coverage ratio requirements, various conditions to drawdown, restrictive and financial covenants, events of default, as well as informational and general undertakings of the Borrower, including an undertaking restricting the payment of dividends to shareholders to a maximum of 35% of the Borrower’s profit in any financial year. The New Facility also contains change of control provisions that permit the majority lenders under the New Facility to declare all outstanding amounts due and payable in the following circumstances: (i) the Existing Shareholders cease together to hold directly or indirectly more than 50% of the issued share capital of the Borrower, or the right to determine the composition of the majority of the board of the Borrower, or Dr. Shetty ceases to hold directly or indirectly 20% of the issued share capital of the Borrower; (ii) if Dr. Shetty resigns or ceases to be employed as Chief Executive Officer of the Borrower and his proposed successor is not satisfactory to the majority lenders (acting reasonably); or (iii) if any of the personal guarantors dies, loses their capacity or becomes bankrupt. See “Part II—Risk Factors—Construction of our new hospital at Khalifa City may be delayed if our New Facility becomes repayable as a result of events relating to the guarantors of the New Facility and our financing costs may increase”. The New Facility and obligations arising out of it are governed by English law. Following the completion of the Global Offering, we plan to explore the consolidation of our existing facilities into a single syndicated facility, to reduce overall interest costs, optimise cash management and release the personal guarantees provided by the Existing Shareholders. Capital Expenditure Historically, our healthcare segment has required substantial capital investment and expenditure to build or refurbish our hospitals and day patient medical centre and to buy and maintain expensive medical equipment. The complex nature of the procedures we perform at our hospitals requires us to invest in technologically sophisticated equipment, such as radiology equipment and scopes used in minimally invasive surgeries. This equipment is generally very expensive and forms a major component of our annual capital expenditure budget. In addition, because we are committed to maintaining the highest standards of care, we are continuously upgrading and replacing this equipment as new technologies become available. This could make our existing equipment obsolete more quickly than anticipated. The table below sets out our capital expenditure for 2009, 2010 and 2011. Year ended 31 December
Expenditure (US$ millions)
2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
37.1 17.8 20.4
In 2011, we incurred capital expenditure primarily for new equipment and the capital work in progress for the maternity hospital in Abu Dhabi. Of the US$20.4 million incurred for 2011, US$12 million related to advances for civil contractors, equipment, and suppliers toward construction of the maternity hospital. See “Part VII— Business—Healthcare—Hospitals and Day Patient Medical Centres—Our Expansion Plans”. In 2010, our capital expenditures primarily related to the refurbishment of the Sharjah Day Patient Medical Centre and the purchase of new equipment in the Dubai General Hospital and Sharjah Day Patient Medical Centre. In 2009, our capital expenditures primarily related to the completion of the new Al-Ain Specialty Hospital and a purchase of land for the Dubai Specialty Hospital as well as the purchase of new equipment for the Abu Dhabi and Dubai Specialty Hospitals. We anticipate that our most significant capital expenditure requirements will relate to the implementation of our growth strategy. Based on our current plans, we estimate that capital expenditures necessary to implement our current growth plans will be in the range of US$100 million to US$135 million. Our current growth plan includes: the acquisition of Healthcare Suites in Dubai from Dr. B.R. Shetty for US$9.0 million, which we expect to complete on or about 1 July 2012 and the purchase of additional plant and equipment and refurbishment for Healthcare Suites of approximately US$5.0 million; the development and fitout of the maternity hospital in Abu Dhabi for approximately US$40 million to US$55 million (excluding 94
approximately US$12 million already spent in 2011), which we expect to open in the second half of 2012; and the development and subsequent upgrades of day patient medical centres in Dubai Investment Park, a suburban industrial zone near Dubai, and a day patient medical centre and pharmacy in Mussafah, a suburb of Abu Dhabi, for approximately US$40 to US$55 million (including the costs of expanding the Dubai Investment Park facility into a hospital in the future). In addition, we are exploring the feasibility of developing a new day patient medical centre on Sheikh Zayed Road in Dubai. We expect to fund these capital expenditures from the net proceeds from the Global Offering. In addition, assuming the New Facility is available to us, we intend to construct and develop, in a number of phases, a new hospital in Khalifa City, Abu Dhabi, which will be our largest and first purpose-built hospital in Abu Dhabi. We envision that this hospital will initially specialise in paediatrics, endocrinology, oncology and cardiology but will later expand into other “super-specialities”. We currently anticipate that this project would cost approximately US$150 million to US$200 million to complete and expect to open the first part of the hospital in 2014. See “Part VII—Business—Healthcare—Hospitals and Day Patient Medical Centres—Our Expansion Plans—Proposed Khalifa City Hospital”. In certain limited circumstances, unrelated to the financial performance of the Group such as the death, loss of capacity or the bankruptcy of any of the personal guarantors of the New Facility, all outstanding amounts under the New Facility may become due and payable prior to its final repayment date of 31 March 2017. See “Part XI—Operating and Financial Review—Liquidity and Capital Resources—Liabilities and Indebtedness”, “Part IX—Use of Proceeds and Dividend Policy” and “Part II—Risk Factors—Construction of our new hospital at Khalifa City may be delayed if our New Facility becomes repayable as a result of events relating to the guarantors of the New Facility and our financing costs may increase”. The Directors believe that if this occurred it should, in most circumstances, be possible either to negotiate with the lenders under the New Facility to transfer any of the personal guarantees to the successors of the relevant personal guarantors or to arrange new loan facilities or other financing to replace most if not all of the amount drawn down under the New Facility. If the amount drawn down under the New Facility became repayable during the implementation of our expansion plans and it was not possible to arrange new loan facilities or other financing to replace the New Facility and other sources of funding were not available, then we might have to delay the construction of our new hospital in Khalifa City, Abu Dhabi, which we would otherwise plan to commence by the end of 2012, until such time as we decide that we have sufficient funding available to commence construction. Alternatively, we might be able to rely on other sources of funding such as our cash flows. We might also consider reducing or ceasing dividend payments for a period. Construction and/or development of the above-mentioned new hospitals and facilities is subject to uncertainties, including planning approvals, the exact specification of the work and the term of the long-term lease or grant of the land upon which the hospital or facility is planned to be constructed. The actual costs of these projects may exceed these anticipated costs. Accordingly, see “Part II—Risk Factors—Our growth strategy depends primarily on the construction and development of new hospitals and day patient medical centres, which may be subject to delays”. We are also evaluating other opportunities to construct, develop or acquire facilities and/or other healthcare assets or businesses in the UAE and elsewhere in the MENA region. Our decision to proceed with the timing of these projects will depend, in part, on the availability of funding including any remaining net proceeds of the Global Offering and the New Facility. For more information, see “Part VII—Business—Our Business Strategy— Expand the geographic coverage of our services outside of the UAE”. We intend to subject these future investment and expansion opportunities to the approval of the Board of Directors, strict capital budgeting, healthy internal competition ensuring capital is allocated appropriately, in-house feasibility studies using qualitative and quantitative controls including on such factors as return on invested capital (ROIC) targets and potential for bed capacity and occupancy rates of medical facilities. We may also, from time to time, seek additional sources of funding for investment, which may include debt or equity financings depending on our financing needs and market conditions.
95
Contractual Obligations and Commitments The following table sets forth our contractual obligations and commitments as of 31 December 2011:
Total
Contractual Obligations and Commitments Payments Due by Period (US$ millions) Year Year Two years ending ending ending After 31 December 31 December 31 December 31 December 2012 2013 2015 2015
Interest bearing loans and borrowings (Term Loans) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80.9 Bank overdrafts and other short term borrowing(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101.3 Trade payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62.6 Other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2 Employees’ end of service benefits(2) . . . . . . . . . . . 8.9 Capital commitments(3) . . . . . . . . . . . . . . . . . . . . . . 32.4 Operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . 75.0
45.4
18.4
17.1
—
101.3 62.6 1.2 — 32.4 3.5
— — — — — 3.7
— — — — — 7.9
— — — — — 60.0
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
246.4
22.1
25.0
60.0
362.3
Notes: (1) Bank overdrafts and trust receipts are secured by assets up to the amount of the overdrafts and personal guarantees of the shareholders and carry interest at EIBOR plus margin rates and are subject to annual renewal. (2) The amount and timing of commitment is not ascertainable as it only becomes payable on an employee ceasing to be employed. (3) Relates to the completion of ongoing capital projects at 31 December 2011, principally relating to the construction of the warehouse in Dubai Investment Park and the refurbishment of the maternity hospital in Abu Dhabi which will be completed in 2012. See “Part VII— Business—Properties—Distribution”.
As of 31 December 2011, there is no known event that will trigger a direct or contingent financial obligation that is material to us, including any default or acceleration of an obligation. Contingent Liabilities We had contingent liabilities in respect of bank and other guarantees and other matters arising in the ordinary course of business from which it is anticipated that no material liabilities will arise. Off-Balance Sheet Arrangements As of 31 December 2011, we were not a financial guarantor of obligations of any unconsolidated entity, and we were not a party to any off-balance sheet obligations or arrangements. Seasonality Our results of operations are not significantly affected by cyclical fluctuations from year to year. However, our results of operations for our healthcare segment are affected by seasonality within the financial year, in connection with summer holidays, which fall in the second half of the year, and the month of Ramadan, which in recent years has fallen within the second half of the year, as people are less likely to seek medical treatment except where necessary during such holiday periods and a large number of doctors have historically taken holidays. However, the decrease in revenues from the healthcare segment in the second half of the year are generally off-set by an increase in sales from our distribution and services segment due to the UAE’s large expatriate Indian population buying large quantities of retail products for export prior to the Indian holiday season, which falls in the second half of the year. Market Risk Disclosures Our principal financial liabilities, other than derivatives, comprise loans and borrowings, and trade and other payables. The main purpose of these financial liabilities is to finance our operations and to provide guarantees to support our operations. We have loan and other receivables, trade and other receivables, and cash and short-term deposits that arrive directly from our operations. We are exposed to interest rate risk, credit risk, liquidity risk, foreign currency risk and equity price risk. 96
Our senior management oversees the management of these risks. Our Board of Directors reviews and agrees policies for managing interest rate risk, credit risk and liquidity risk, each of which is summarised below. Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. We are exposed to interest rate risk on our interest bearing assets and liabilities (bank balances and short-term deposits, bank overdrafts, term loans and trust receipts). Management has sought to limit its exposure to any adverse future movements in interest rates by entering into interest rate swap arrangements, which are accounted for on a mark-to-market basis. Management is therefore of the opinion that our exposure to interest rate risk is limited. The following table demonstrates the sensitivity of the statement of comprehensive income to reasonably possible changes in interest rates with all other variables held constant. The sensitivity of the statement of comprehensive income is the effect of the assumed changes in interest rates on our profit for one year, taking into account interest rate swap arrangements, based on the floating rate financial assets and financial liabilities held at 31 December 2011.
USD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . USD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase/decrease in basis points
Effect on profit at 31 December 2011 USD ’000
+100 -100
(1,466) 1,466
Credit risk Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. We seek to limit the credit risk with respect to customers by setting credit limits for individual customers and monitoring outstanding receivables. We limit our credit risk with regard to bank deposits by only dealing with banks we believe to be reputable. With respect to credit risk arising from our other financial assets, including cash and cash equivalents, and derivative instruments with positive values, our exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments. We limit our credit risk with regard to other financial instruments by only dealing with banks we believe to be reputable. Liquidity risk Our objective is to maintain a balance between continuity of funding and flexibility through the use of banking facilities. We limit our liquidity risk by ensuring that bank facilities and shareholders’ financial support are available. Trade payables are normally settled within 90 to 120 days of the date of purchase. Recent and Prospective Changes in Accounting Policies To the best of our knowledge, there are no material accounting standards applicable to us that will require a prospective change in any of our accounting policies. We expect no material impact from the adoption of the amendments on the financial position or performance. Critical Accounting Policies Critical accounting policies are those that both (i) are relevant to the presentation of our financial condition and results of operations and (ii) require management’s most difficult, subjective or complex judgements, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. As the number of variables and assumptions affecting the possible future resolution of the uncertainties increases, those judgements become even more subjective and complex. In order to provide an understanding of how our management forms its judgements about future events, including the variables and assumptions underlying its estimates, and the sensitivity of those judgements to different circumstances, we have identified the critical accounting policies discussed below. While we believe that all aspects of our financial statements should be studied and understood in assessing our current and expected financial condition and results of operations, we believe that the following critical accounting policies warrant particular attention. For more information, see Note 2 to our historical financial information included in “Part XIII—Historical Financial Information”. 97
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 our policy for inventory provisioning. 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. As at 31 December 2011 gross trade accounts receivable were US$138.5 million, and the provision for doubtful debts was US$5.2 million. Any difference between the amounts actually collected in future periods and the amounts expected will be recognised in the consolidated statement of comprehensive income. Revaluation of investment properties As at 31 December 2011 we owned no investment properties. However, in previous years, we carried our investment properties at fair value, with changes in fair value being recognised in the statement of comprehensive income. We engaged independent valuation specialists to determine fair value as at 31 December 2009 and 2010. The valuations were conducted in accordance with the Royal Institution of Chartered Surveyors Appraisal and Valuation Standards (6th Edition) and the relevant statements of the International Valuation Standards (8th Edition).
98
PART XII: CAPITALISATION AND INDEBTEDNESS STATEMENT The following table sets forth the capitalisation and indebtedness of the Oldco Group as at 31 December 2011. The following table should be read together with “Part X—Selected Historical Consolidated Financial Data”, “Part XI—Operating and Financial Review” and has been extracted without material adjustment from “Part XIII – Historical Financial Information”. As at 31 December 2011 US$ millions
Current debt Guaranteed(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Secured and guaranteed(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unguaranteed/unsecured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
45.4 101.3 —
Total current debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
146.7
Non current debt (excluding current portion of the long term debt) Guaranteed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Secured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unguaranteed/unsecured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
35.5 — —
Total non-current debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
35.5
Shareholders equity Share capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Statutory reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
27.2 10.3
Total Shareholder’s equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
37.5
Total capitalisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
219.7
Notes: (1) The Oldco Group has entered into a number of committed facility agreements with different international commercial banks as described in “Part XI—Operating and Financial Review—Liquidity and Capital Resources—Liabilities and Indebtedness”. All of the facilities are guaranteed by our CEO Dr. B. R. Shetty and some of the facilities are also guaranteed by the other Existing Shareholders and certain of the our subsidiaries. (2) Most of the facilities are secured against certain of our assets, including mortgaged real property, assigned receivables and insurance proceeds, pledged instruments, and charges over accounts and inventory. The amount due under each facility is set out in “Part XIII— Historical Financial Information—17. Term Loans”. On 8 March 2012 we entered into the New Facility with a syndicate of lenders led by J.P. Morgan Chase Bank, N.A. for a committed amount of up to US$120 million, the terms of which are set out in “Part XI—Operating and Financial Review—Liquidity and Capital Resources—Liabilities and Indebtedness”. The New Facility provides for two drawdown advances to be made within a period of 30 days from the signing of the New Facility with any undrawn amount to be automatically cancelled. As of the date hereof, US$50 million had been drawn down under the New Facility, and we have requested the drawdown of the additional US$70 million, which we expect to receive at or prior to Admission. The New Facility is guaranteed by corporate guarantees provided by all operating subsidiaries of the Borrower and personal guarantees provided by each of the Existing Shareholders, other than Infinite Investment LLC. The New Facility is secured against a collateral package consisting of: (i) an assignment of Daman and Abu Dhabi National Insurance health insurance receivables and their proceeds by the Borrower; (ii) a pledge over the accounts of the Borrower; (iii) an account cash sweep (Borrower accounts only); and (iv) mortgage security over the real estate of the Dubai Speciality Hospital. The obligations of the Borrower and guarantors under the New Facility will rank at least pari passu in right of priority and payment with the claims of all other unsecured and unsubordinated creditors of the Borrower and guarantors.
Other than in connection with the New Facility, there has been no material change in the capitalisation of the Oldco Group since 31 December 2011.
99
The following table sets forth the net indebtedness of the Oldco Group as at 29 February 2012: As at 29 February 2012 US$ millions
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(42.4)
Total liquidity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Current bank debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Current portion of term loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(42.4) 101.7 45.0
Current financial indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net current financial indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-current portion of term loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-current financial debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
146.7 104.3 30.4 30.4
Net financial indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
134.7
The information as at 29 February 2012 is unaudited. The statement of indebtedness has been extracted from management accounts that have been prepared under EU IFRS using policies that are consistent with those used in preparing the Oldco Group’s historical financial information for the year ended 31 December 2011. The information as at 29 February 2012 does not reflect the proceeds of the New Facility. As at 29 February 2012, Oldco Group had no contingent or indirect indebtedness.
100
PART XIII: HISTORICAL FINANCIAL INFORMATION Section A: Accountant’s Report on Historical Financial Information on NMC Healthcare LLC and its subsidiaries
P.O. Box 136 11th Floor – Al Ghaith Tower Hamdan Street Abu Dhabi, United Arab Emirates Tel: +971 2 417 4400 +971 2 627 7522 Fax: +971 2 627 3383 www.ey.com/me
The Directors NMC Health plc 20-22 Bedford Row London WC1R 4JS
2 April 2012
Dear Sirs NMC Healthcare LLC We report on the financial information on NMC Healthcare LLC and its subsidiaries (the “Oldco Group”) set out in Part XIII Section B Historical Financial Information (the “Historical Financial Information”) of the prospectus dated 2 April 2012 of NMC Health plc (the “Company”) (the “Prospectus”). This Historical Financial Information has been prepared for inclusion in the Prospectus on the basis of the accounting policies set out in notes 2.1 to 2.4 in the Notes to the Historical Financial Information. This report is required by item 20.1 of Annex I of Commission Regulation (EC) 809/2004 and is given for the purpose of complying with that item and for no other purpose. Save for any responsibility arising under Prospectus Rule 5.5.3R (2)(f) to any person as and to the extent there provided, to the fullest extent permitted by law we do not assume any responsibility and will not accept any liability to any other person for any loss suffered by any such other person as a result of, arising out of, or in connection with this report or our statement, required by and given solely for the purposes of complying with item 23.1 of Annex I to Commission Regulation (EC) 809/2004, consenting to its inclusion in the Prospectus. Responsibilities The Directors of NMC Health plc are responsible for preparing the Historical Financial Information in accordance with International Financial Reporting Standards as adopted by the European Union. It is our responsibility to form an opinion on the Historical Financial Information and to report our opinion to you. Basis of opinion We conducted our work in accordance with Standards for Investment Reporting issued by the Auditing Practices Board in the United Kingdom. Our work included an assessment of evidence relevant to the amounts and disclosures in the Historical Financial Information. It also included an assessment of significant estimates and judgments made by those responsible for the preparation of the Historical Financial Information and whether the accounting policies are appropriate to the entity’s circumstances, consistently applied and adequately disclosed. We planned and performed our work so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the Historical Financial Information is free from material misstatement whether caused by fraud or other irregularity or error. Our work has not been carried out in accordance with auditing or other standards and practices generally accepted in other jurisdictions and accordingly should not be relied upon as if it had been carried out in accordance with those standards and practices. 101
Opinion In our opinion, the Historical Financial Information gives, for the purposes of the Prospectus dated 2 April 2012, a true and fair view of the state of affairs of the Oldco Group as at the dates stated and of its profits, cash flows and changes in equity for the periods then ended in accordance with International Financial Reporting Standards as adopted by the European Union. Declaration For the purposes of Prospectus Rule 5.5.3R (2)(f) we are responsible for this report as part of the Prospectus and declare that we have taken all reasonable care to ensure that the information contained in this report is, to the best of our knowledge, in accordance with the facts and contains no omission likely to affect its import. This declaration is included in the Prospectus in compliance with item 1.2 of Annex I and item 1.2 of Annex III of Commission Regulation (EC) 809/2004. Yours faithfully
Ernst & Young
102
Section B: Historical Financial Information on NMC Healthcare LLC and its Subsidiaries CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Notes
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Direct costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
GROSS PROFIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . General and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . Finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PROFIT FROM OPERATIONS BEFORE DEPRECIATION AND FINANCE CHARGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Finance charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5
6 8
PROFIT FROM OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year ended 31 December 2009 2010 2011 USD ’000 USD ’000 USD ’000
338,853 386,519 443,747 (236,302) (267,825) (306,388) 102,551
118,694
137,359
(61,547) 2,385 873
(62,580) 3,398 294
(68,161) 1,113 1,252
44,262 (16,542) (15,302)
59,806 (17,292) (13,620)
71,563 (17,008) (12,041)
12,418
28,894
42,514
Pre-operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rental income from investment properties . . . . . . . . . . . . . . . . . . . . . . . . Gain (loss) on revaluation of investment properties . . . . . . . . . . . . . . . . . Loss on investments carried at fair value through profit or loss . . . . . . . Change in fair value of derivative financial instruments . . . . . . . . . . . . .
6 9 9 11 24
(7,513) 2,009 3,533 (1,895) (386)
(1,769) 3,261 (5,772) (616) (232)
— 1,193 — — 65
PROFIT FOR THE YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6
8,166
23,766
43,772
Other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
TOTAL COMPREHENSIVE INCOME FOR THE YEAR . . . . . . .
8,166
23,766
43,772
Profit and total comprehensive income attributable to: Equity holders of the Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,621 545
21,091 2,675
42,988 784
8,166
23,766
43,772
76
211
430
Earnings per share for profit attributable to the equity holders of the Parent: Basic and diluted (USD) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The attached notes 1 to 25 form part of the Historical Financial Information 103
7
CONSOLIDATED STATEMENT OF FINANCIAL POSITION 31 December 2010 2011 USD ’000 USD ’000
Notes
2009 USD ’000
8 9 20
116,813 51,457 2,895
116,318 45,685 2,934
88,434 — —
171,165
164,937
88,434
50,238 5,509 93,956 52,957 10,462
48,798 4,894 110,153 73,614 15,513
54,178 — 158,550 — 54,073
213,122
252,972
266,801
384,287
417,909
355,235
27,226 53,354 4,691 4,594
27,226 43,761 7,722 22,654
27,226 — 10,260 61,801
Equity attributable to equity holders of the Parent . . . . . . . . . . . . . . . . Non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
89,865 1,021
101,363 1,617
99,287 1,059
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
90,886
102,980
100,346
66,940 6,641
20,243 7,532
35,454 8,864
73,581
27,775
44,318
70,653 127 79,064 69,976
69,892 6,025 105,172 106,065
62,617 1,245 101,275 45,434
219,820
287,154
210,571
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
293,401
314,929
254,889
TOTAL EQUITY AND LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . .
384,287
417,909
355,235
ASSETS Non-current assets Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investment properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long term advances to related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Current assets Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investments carried at fair value through profit or loss . . . . . . . . . . . . . . . . Accounts receivable and prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amounts due from related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bank balances and cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10 11 12 20 13
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EQUITY AND LIABILITIES Equity Share capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shareholders’ accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Statutory reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-current liabilities Term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Employees’ end of service benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Current liabilities Accounts payable and accruals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amounts due to related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bank overdrafts and other short term borrowings . . . . . . . . . . . . . . . . . . . . Term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The attached notes 1 to 25 form part of the Historical Financial Information 104
14 15 16
17 18
19 20 13 17
105
27,226 — — — — 27,226 — — — — — 27,226
Balance as at 31 December 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total comprehensive income for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Transfer to statutory reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dividend paid to non-controlling interests (note 13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net movement in shareholders’ accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance as at 31 December 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total comprehensive income for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Transfer to statutory reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Transfer of advances for property and equipment (note 8 & 20) . . . . . . . . . . . . . . . . . . . . . . . Settlement of related party debtor balances (note 20) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acquisition of non controlling interest (note 2.2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance as at 31 December 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The attached notes 1 to 25 form part of the Historical Financial Information
16,335 — — 10,891 — — —
—
43,761 — — (35,844) (10,562) 2,645
53,354 — — — (9,593)
67,847 — — (10,891) — (1,535) (2,067)
10,260
7,722 — 2,538 — — —
4,691 — 3,031 — —
1,664 — 3,027 — — — — 89,865 21,091 — — (9,593)
85,846 7,621 — — — (1,535) (2,067)
61,801
99,287
22,654 101,363 42,988 42,988 (2,538) — — (35,844) — (10,562) (1,303) 1,342
4,594 21,091 (3,031) — —
— 7,621 (3,027) — — — —
Attributable to the equity holders of the Parent Shareholders’ Statutory Retained Share capital accounts reserves earnings Total USD ’000 USD ’000 USD ’000 USD ’000 USD ’000
Balance as at 31 December 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total comprehensive income for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Transfer to statutory reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Increase in share capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dividend paid to non-controlling interests (note 13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Share capital contributed by non controlling-interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net movement in shareholders’ accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
1,059
1,617 784 — — — (1,342)
1,021 2,675 — (2,079) —
964 545 — — (2,023) 1,535 —
Non-controlling interests USD ’000
Total
100,346
102,980 43,772 — (35,844) (10,562) —
90,886 23,766 — (2,079) (9,593)
86,810 8,166 — — (2,023) — (2,067)
USD ’000
CONSOLIDATED STATEMENT OF CASH FLOWS
Notes
OPERATING ACTIVITIES Profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjustments for: Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provision for employees’ end of service benefits, net of write backs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Finance charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss (gain) on revaluation of investment properties . . . . . . . . . . . . . Property and equipment written off . . . . . . . . . . . . . . . . . . . . . . . . . . Loss (gain) on disposal of property and equipment . . . . . . . . . . . . . . Change in fair value of derivative financial instruments . . . . . . . . . . Loss on revaluation of investments carried at fair value through profit or loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,166
23,766
43,772
8
15,302
13,620
12,041
18 5 6 9
24
1,444 (2,385) 16,542 (3,533) — (220) 386
1,351 (3,398) 17,292 5,772 1,769 68 232
1,821 (1,113) 17,008 — — (11) (65)
11
1,895
616
—
37,597
61,088
73,453
4,103 (6,984) 12,165 15,974 (1,946)
1,440 (16,197) (14,533) (1,506) 5,897
(5,380) (45,133) 60,577 (6,760) (4,780)
60,909 (310)
36,189 (463)
71,977 (531)
60,599
35,726
71,446
(21,452) 3,191 (15,684) —
(17,755) 39 — —
(20,393) 403 — 36,815
Working capital changes: Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts receivable and prepayments . . . . . . . . . . . . . . . . . . . . . . . . Amounts due from related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts payable and accruals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amounts due to related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Employees’ end of service benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . .
18
Net cash from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . INVESTING ACTIVITIES Purchase of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from disposal of property and equipment . . . . . . . . . . . . . . . . . Purchase of investment properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from disposal of investment properties . . . . . . . . . . . . . . . . . . . Proceeds from sale of investments carried at fair value through profit or loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year ended 31 December 2009 2010 2011 USD ’000 USD ’000 USD ’000
9 9
— 25
— 30 (17,686)
4,894 366
Net cash (used in) from investing activities . . . . . . . . . . . . . . . . . . . . . . .
(33,920)
22,085
FINANCING ACTIVITIES New term loans and draw-downs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Repayment of term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Finance expenses paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (Repayment) receipts of short term borrowings- net . . . . . . . . . . . . . . . . . Movement in shareholders’ accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net movement in long term advances to related parties . . . . . . . . . . . . . .
30,024 119,316 130,012 (45,460) (129,923) (166,562) (16,996) (16,779) (17,458) 4,377 11,388 (6,294) 821 (11,672) — (117) (39) 2,934
Net cash used in financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(27,351)
(27,709)
(57,368)
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents at 1 January . . . . . . . . . . . . . . . . . . . . . . . . . . .
13
(672) (1,397)
(9,669) (2,069)
36,163 (11,738)
CASH AND CASH EQUIVALENTS AT 31 DECEMBER . . . . . . . . .
13
(2,069)
(11,738)
24,425
The attached notes 1 to 25 form part of the Historical Financial Information. 106
NOTES TO THE HISTORICAL FINANCIAL INFORMATION 1
ACTIVITIES
NMC Healthcare LLC (“Oldco” or the “Parent”) is registered in Dubai as a Limited Liability Company. The registered office of Oldco is at P O Box 172747, Dubai, United Arab Emirates (UAE). The equity share capital of Oldco is owned as follows: • • • •
H E Saeed Bin Butti Dr B R Shetty Khalifa Bin Butti Infinite Investment LLC
43% 30% 15% 12%
Oldco and its subsidiaries (collectively “Oldco Group”) are engaged in providing professional medical services, wholesale of pharmaceutical goods, medical equipment, cosmetics, food and IT products and services. The historical financial information comprises the financial statements of Oldco Group. As of 31 December 2011, Oldco owns 99% of the share capital of its subsidiaries and the remaining 1% is owned by HE Saeed Bin Butti. NMC Health Plc (“Issuer”) was incorporated on 20 July 2011 to serve as the new holding company of Oldco Group and became the ultimate parent company effective 1 April 2012. This was effected in several steps, as part of the implementation of a new holding company structure. First, the existing shareholders incorporated the Issuer, NMC Holding LLC and NMC Health Holdco Limited (together, the “New Holding Companies”) in 2011. Second, on 28 March 2012, NMC Holding LLC agreed to acquire the entire share capital (less one share) of NMC Healthcare LLC and NMC Health Holdco Limited (a wholly owned subsidiary of the Issuer) agreed to acquire the remainder of the share capital of NMC Healthcare LLC. Finally, on 28 March 2012, the Issuer agreed to acquire of the entire share capital (less one share) of NMC Holding LLC, and NMC Health Holdco Limited agreed to acquire the remainder of the share capital of NMC Holding LLC. The New Holding Companies have not engaged in any trading activity or other operations since their incorporation, other than entry into agreements for the acquisitions described above and matters relating to the issue of shares and the Global Offering. The Issuer is planning a fully underwritten Global Offering of its shares. The net proceeds from the Global Offering will be approximately $166.3 million. The net proceeds of the Global Offering are intended to be used to finance current expansion plans and fund further future growth through organic expansion and acquisitions. Current expansion plans include the acquisition of Healthcare Suites, the development of a maternity hospital in Abu Dhabi and the development of Khalifa City Hospital. 2 2.1
BASIS OF PREPARATION AND ACCOUNTING POLICIES BASIS OF PREPARATION
The historical financial information has been prepared for inclusion in the prospectus of NMC Health plc dated 2 April 2012 in compliance with item 20.1 of Annex I to the Commission Regulation (EC) No 809/2004 and in accordance with International Financial Reporting Standards as adopted by the European Union. The historical financial information has been presented in United States of America Dollars (USD), the presentational currency. All values are rounded to the nearest thousand (USD ‘000) except when otherwise indicated. The functional currency of Oldco and its subsidiaries is UAE Dirhams. The historical financial information is prepared under the historical cost convention, except for investments carried at fair value through profit or loss, investment properties and derivative financial instruments that have been measured at fair value. The principal accounting policies adopted in the preparation of this historical financial information are set out below. These policies have been consistently applied to all periods presented. Statement of compliance The historical financial information has been prepared in accordance with International Financial Reporting Standards as adopted by the European Union. Functional and reporting currency The functional currency of Oldco and its subsidiaries is UAE Dirham. The reporting currency of Oldco Group is United States of America Dollar (USD). The UAE Dirham is pegged against the US Dollar at a rate of 3.673 per US Dollar. 107
2.2
BASIS OF CONSOLIDATION
The historical financial information includes the financial statements of Oldco and its subsidiaries listed below: Percentage of holdings 31 December 2009 2010 2011
New Pharmacy Company Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . New Medical Centre Hospital LLC—Dubai . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NMC Specialty Hospital LLC—Abu Dhabi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NMC Specialty Hospital LLC—Dubai . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . New Medical Centre Trading LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bait Al Shifaa Pharmacy LLC—Dubai . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . New Medical Centre LLC—Sharjah . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . New Medical Centre Specialty Hospital LLC-Al Ain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reliance Information Technology LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
90% 90% 90% 90% 90% 90% 90% 90% 90%
90% 90% 90% 90% 90% 90% 90% 90% 90%
99% 99% 99% 99% 99% 99% 99% 99% 99%
All of the above subsidiaries are incorporated in the UAE. The historical financial information comprises the financial statements of Oldco Group for the three years ended 31 December 2011. Subsidiaries are fully consolidated from the date of acquisition, being the date on which Oldco Group obtains control, and continue to be consolidated until the date when such control ceases. The financial statements of the subsidiaries are prepared for the same reporting period as the Parent Company, using consistent accounting policies. All intra-group balances, transactions, unrealised gains and losses resulting from intra-group transactions and dividends are eliminated in full. Total comprehensive income within a subsidiary is attributed to the non-controlling interest even if that results in a deficit balance. 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: • Derecognizes the assets and liabilities of the subsidiary • Derecognizes the carrying amount of any non controlling interest • Derecognizes the cumulative translation differences recorded in equity • Recognizes the fair value of the consideration received • Recognizes the fair value of any investment retained • Recognizes any surplus or deficit in profit or loss • Reclassifies the parents share of components previously recognized in other comprehensive income to profit or loss or retained earnings as appropriate. During the year ended 31 December 2011, the Company acquired an additional 9% shareholding in each subsidiary from the non-controlling interests for an amount of USD 2.64 million. The share of net assets acquired amount to USD 1.34 million. 2.3
SIGNIFICANT ACCOUNTING ESTIMATES
Estimation uncertainty The key assumptions concerning the future and other key sources of estimation uncertainty at the statement of financial position 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: 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 108
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 Oldco Group’s policy for inventory provisioning. The gross carrying amount of inventories at 31 December 2009 was USD 50,764 thousand, 31 December 2010 was USD 49,324 thousand and 31 December 2011 was USD 54,294 thousand and the provision for old and obsolete items at 31 December 2009 was USD 526 thousand, 31 December 2010 was USD 526 thousand and 31 December 2011 was USD 116 thousand. 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. Gross trade accounts receivable at 31 December 2009 were USD 78,094 thousand, 31 December 2010 were USD 100,545 thousand and 31 December 2011 were USD 138,502 thousand, and the provision for doubtful debts at 31 December 2009 was USD 1,929 thousand, 31 December 2010 was USD 2,318 thousand and 31 December 2011 was USD 5,153 thousand. Any difference between the amounts actually collected in future periods and the amounts expected will be recognised in the consolidated statement of comprehensive income. Revaluation of investment properties Oldco Group carried its investment properties at fair value, with changes in fair value being recognised in the statement of comprehensive income. Oldco Group engaged independent valuation specialists to determine the valuation as at 31 December 2009 and 2010. The valuations were conducted in accordance with the Royal Institution of Chartered Surveyors Appraisal and Valuation Standards and the relevant statements of the International Valuation Standards. Fair value as at 31 December 2009 and 2010 was determined by reference to market based evidence. The valuations performed by the valuer were based on active market prices, adjusted for any difference in the nature, location or condition of the specific property. 2.4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to Oldco 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, taking into account contractually defined terms of payment and excluding taxes or duty. Oldco Group assesses its revenue arrangements against specific criteria in order to determine if it is acting as principal or agent. Oldco Group has concluded that it is acting as a principal in all of its revenue arrangements. The following specific recognition criteria must also be met before revenue is recognised: Sale of goods Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer, usually on delivery of the goods. Clinic revenues Clinic revenues represent the invoiced value of services provided and goods supplied during the year. Interest income For all financial instruments measured at amortised cost and interest bearing financial assets classified as available for sale, 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 statement of comprehensive income. Dividends Revenue is recognised when Oldco Group’s right to receive the payment is established. 109
Rental income Rental income arising from operating leases on investment properties is accounted for on a straight-line basis over the lease terms and included in revenue due to its operating nature. 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 the reducing balance method over its expected useful life: Hospital building Buildings Leasehold improvements Motor vehicles Furniture, fixtures and fittings Medical equipment
12% 15% 40% 40% 25% - 40% 25%
The carrying amounts of property and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets are written down to their recoverable amount, being the higher of their fair value less cost to sell and their value in use. Capital work in progress is stated at cost and is not depreciated. When commissioned, capital work in progress is transferred to the appropriate property and equipment asset category and depreciated in accordance with Oldco Group’s policies 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. Borrowing costs Borrowing costs that are directly attributable to the acquisition or construction of an asset are capitalised as part of the cost of the asset until the asset is commissioned for use. Borrowing costs in respect of completed assets or not attributable to assets are expensed in the period in which they are incurred. Pre- operating expenses Pre-operating expenses are the expenses incurred prior to start of operations of a new business unit. These are recognised in statement of comprehensive income in the year in which they occur. Investment properties Investment properties are measured initially at cost, including transaction costs. The carrying amount includes the cost of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met and excludes the costs of day-to-day servicing of an investment property. Subsequent to initial recognition, investment properties are stated at fair value, which reflects market conditions at the reporting date. Gains or losses arising from changes in the fair values of investment properties are included in the consolidated statement of comprehensive income in the period in which they arise. Fair values are evaluated annually by an accredited external, independent valuer, applying a valuation model recommended by the International Valuation Standards Committee. Investment properties are derecognised when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognised in the consolidated statement of comprehensive income in the period of derecognition. 110
Transfers are made to or from investment property only when there is a change in use. For a transfer from investment property to owner-occupied property, the deemed cost for subsequent accounting is the fair value at the date of change in use. If owner-occupied property becomes an investment property, Oldco Group accounts for such property in accordance with the policy stated under property, plant and equipment up to the date of change in use. Investments carried at fair value through profit or loss Investments are classified as fair value through profit or loss if the fair value of the investments can be reliably measured and the classification as fair value through profit or loss is as per the documented strategy of Oldco Group. Investments classified as “investments carried at fair value through profit or loss” upon initial recognition are remeasured at fair value with all changes in fair value being recorded within profit or loss in the consolidated statement of comprehensive income. Inventories Inventories are valued at the lower of cost and net realisable value after making due allowance for any obsolete or slow moving items. Costs are those expenses incurred in bringing each product to its present location and condition and are determined on a weighted average basis. Net realisable value is based on estimated selling price less any further costs expected to be incurred to disposal. Accounts receivable Accounts receivable are stated at original invoice amount less a provision for any uncollectible amounts. 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. 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. Provisions Provisions are recognised when Oldco 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. 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”. Employees’ end of service benefits Oldco Group provides end of service benefits to its expatriate employees. The entitlement to these benefits is usually based upon the employees’ final salary and length of service, subject to the completion of a minimum service period. The expected costs of these benefits are accrued over the period of employment. With respect to its national employees, Oldco 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. 111
Foreign currencies Transactions in foreign currencies are recorded in UAE Dirham 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 statement of comprehensive income. Derivative financial instruments Oldco Group uses derivative financial instruments such as interest rate swaps and caps to hedge its risks associated with interest rate fluctuations. Such derivative financial instruments are stated at fair value. The fair value of interest rate swap and cap contracts is determined by reference to market values for similar instruments. Derivatives with positive market values (unrealised gains) are included in other assets and derivatives with negative market values (unrealised losses) are included in other liabilities in the consolidated statement of financial position. Any gains or losses arising from changes in fair value on derivatives during the year that do not qualify for hedge accounting are taken directly to the statement of comprehensive income. Financial instruments Financial instruments comprise cash and bank balances, investments carried at fair value through profit or loss, receivables, payables, bank overdrafts, term loans and certain other assets and liabilities. The fair value of these financial instruments are based on estimated fair values calculated using methods such as the quoted market prices and net present value of future cash flows. The fair value of interest bearing items is estimated based on discounted cash flows using interest rates for items with similar terms and characteristics. The fair value of investments traded in organised markets is determined by reference to quoted market bid prices. Impairment and uncollectability 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 statement of comprehensive income. 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 statement of comprehensive income on the basis of actual cost incurred. 3
ACCOUNTING STANDARDS AND INTERPRETATIONS ISSUED BUT NOT EFFECTIVE
Standards issued but not yet effective up to the date of issuance of the historical financial information are listed below. Oldco Group intends to adopt those standards when they become effective. • IAS 1 Financial Statements Presentation-Presentation of Items of Other Comprehensive Income • IAS12 Income Taxes-Recovery of Underlying Assets • IAS19 Employees Benefits(Amendment) • IAS 27 Separate Financial Statements (as revised in 2011) • IAS 28 Investments in Associates and Joint Ventures(as revised in 2011) • IFRS 7 Financial Instruments: Disclosures-Enhanced De recognition Disclosure Requirements • IFRS 9 Financial Instruments: Classification and Measurement • IFRS 10 Consolidated Financial Statements 112
• IFRS 11 Joint Arrangements • IFRS 12 Disclosures of Interests in Other Entities • IFRS 13 Fair Value Measurement Oldco Group, however, expects no significant impact from the adoption of the standards and interpretations on its financial position or performance. 4
SEGMENT INFORMATION
For management purposes, Oldco Group is organised into business units based on their products and services and has two reportable segments as follows: • The distribution & services segment is engaged in wholesale trading of pharmaceutical goods, medical equipment, cosmetics and food. • The healthcare segment is engaged in providing professional medical services. No operating segments have been aggregated to form the above reportable operating segments. Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on profit or loss and is measured consistently with profit or loss in the historical financial information. However, group financing and investments (including finance costs and finance income) are managed on a group basis and are not allocated to operating segments. Transfer prices between operating segments are on an arm’s length basis in a manner similar to transactions with third parties. Healthcare USD ’000
Total segments USD ’000
Adjustments and elimination USD ’000
184,602 16,418
154,251 4,179
338,853 20,597
— (20,597)
338,853 —
201,020
158,430
359,450
(20,597)
338,853
(12,978) 14,714
(14,406) 25,396
(896) (17,230)
(15,302) 8,166
Distribution and services USD ’000
Year ended 31 December 2009 Revenue External customers . . . . . . . . . . . . . . . . . . . . . . . . . Inter segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Results Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Segment profit . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,428) 10,682
Consolidated USD ’000
Segment assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
105,946
103,050
208,996
175,291
384,287
Segment liabilities . . . . . . . . . . . . . . . . . . . . . . . . .
41,638
32,115
73,753
219,648
293,401
Other disclosures Capital expenditure . . . . . . . . . . . . . . . . . . . . . . . . .
5,727
15,087
20,814
16,322
37,136
Year ended 31 December 2010 Revenue External customers . . . . . . . . . . . . . . . . . . . . . . . . . Inter segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
207,302 21,260
179,217 3,264
386,519 24,524
— (24,524)
386,519 —
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
228,562
182,481
411,043
(24,524)
386,519
(11,521) 30,058
(12,985) 48,618
(635) (24,852)
(13,620) 23,766
Results Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Segment profit . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,464) 18,560
Segment assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
106,558
118,143
224,701
193,208
417,909
Segment liabilities . . . . . . . . . . . . . . . . . . . . . . . . .
40,763
31,438
72,201
242,728
314,929
Other disclosures Capital expenditure . . . . . . . . . . . . . . . . . . . . . . . . .
1,258
16,235
17,493
262
17,755
113
Year ended 31 December 2011 Revenue External customers . . . . . . . . . . . . . . . . . . . . . . . . . Inter segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total Results Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Segment profit . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution and services USD ’000
229,111 24,314 253,425
Healthcare USD ’000
Total segments USD ’000
Adjustments and elimination USD ’000
214,636 4,054 218,690
443,747 28,368 472,115
— (28,368) (28,368)
443,747 — 443,747
(10,151) 46,257
(11,524) 69,813
(517) (26,041)
(12,041) 43,772
(1,373) 23,556
Consolidated USD ’000
Segment assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
124,571
132,942
257,513
97,722
355,235
Segment liabilities . . . . . . . . . . . . . . . . . . . . . . . . .
28,008
29,510
57,518
197,371
254,889
Other disclosures Capital expenditure . . . . . . . . . . . . . . . . . . . . . . . . .
4,426
15,103
19,529
864
20,393
Inter-segment revenues are eliminated upon consolidation and reflected in the ‘adjustments and eliminations’ column. All other adjustments and eliminations are part of detailed reconciliations presented further below. Analysis of total revenue by facility for the Healthcare segment Year ended 31 December 2009 2010 2011 USD ’000 USD ’000 USD ’000
Abu Dhabi Specialty Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dubai Specialty Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Al Ain Specialty Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dubai General Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sharjah Day Patient Medical Centre . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . New Pharmacy, Abu Dhabi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bait Al Shifaa Pharmacy, Dubai . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
60,891 32,477 11,603 10,032 3,606 32,382 7,439 158,430
68,551 37,095 23,008 9,744 3,871 32,760 7,452 182,481
79,688 43,164 31,766 10,751 7,317 39,013 6,991 218,690
Adjustments and eliminations Finance income and expenses, group overheads, fair value gains and losses on financial assets and investment properties are not allocated to individual segments as the underlying instruments are managed on a group basis. Investment properties, long term advances to related parties, investments carried at fair value through profit or loss, term loans, bank overdraft and trust receipts and certain other assets and liabilities are substantially not allocated to segments as they are also managed on a group basis. Capital expenditure consists of additions of property and equipment, advances for property and equipment and additions to investment properties. Reconciliation of Group profit Year ended 31 December 2009 2010 2011 USD ’000 USD ’000 USD ’000
Segment profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gain (loss) on revaluation of investment properties . . . . . . . . . . . . . . . . . . . . Finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss on investments carried at fair value through profit or loss . . . . . . . . . . . Change in fair value of derivative financial instruments . . . . . . . . . . . . . . . . . Unallocated finance charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unallocated group administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . Unallocated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rental income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Group profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
25,396 48,618 69,813 3,533 (5,772) — 2,385 3,398 1,113 (1,895) (616) — (386) (232) 65 (15,678) (16,494) (16,478) (7,136) (7,904) (11,875) (896) (635) (517) 2,009 3,261 1,193 834 142 458 8,166 23,766 43,772
Reconciliation of Group assets 2009 USD ’000
31 December 2010 2011 USD ’000 USD ’000
Segment assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unallocated property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investment properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long term advances to related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unallocated inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investments carried at fair value through profit or loss . . . . . . . . . . . . . . . . . . Unallocated accounts receivable and prepayments . . . . . . . . . . . . . . . . . . . . . Unallocated amounts due from related parties . . . . . . . . . . . . . . . . . . . . . . . . . Unallocated bank balances and cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
208,996 51,015 51,457 2,895 26 5,509 5,670 48,412 10,307
224,701 52,933 45,685 2,934 26 4,894 2,091 69,301 15,344
257,513 35,772 — — 31 — 8,145 — 53,774
Group assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
384,287
417,909
355,235
Reconciliation of Group liabilities 2009 USD ’000
31 December 2010 2011 USD ’000 USD ’000
Segment liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unallocated term loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unallocated employees’ end of service benefits . . . . . . . . . . . . . . . . . . . . . . . Unallocated accounts payable and accruals . . . . . . . . . . . . . . . . . . . . . . . . . . . Unallocated bank overdraft and other short term borrowings . . . . . . . . . . . . . Unallocated amounts due to related parties . . . . . . . . . . . . . . . . . . . . . . . . . . .
73,753 129,430 358 11,900 77,960 —
72,201 122,224 399 11,508 102,761 5,836
57,518 80,207 597 16,607 98,715 1,245
Group liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
293,401
314,929
254,889
Other information The following table provides information relating to Oldco Group’s major customers who contribute more than 10% towards Oldco Group’s revenues: Health care USD ’000
Distribution and services USD ’000
Total USD ’000
Year end 31 December 2009 Customer 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
33,605
—
33,605
Year ended 31 December 2010 Customer 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
36,519
—
36,519
Year ended 31 December 2011 Customer 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Customer 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
45,068 28,697
— —
45,068 28,697
Geographical information Oldco Group has only one geographical segment – United Arab Emirates. 5
FINANCE INCOME Year ended 31 December 2009 2010 2011
Interest charged to related parties (notes 13 & 20) . . . . . . . . . . . . . . . . . . . . . . . . . Bank and other interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
115
USD ’000
USD ’000
2,360 25
3,368 30
USD ’000
747 366
2,385
3,398
1,113
6
PROFIT FOR THE YEAR
The profit for the year is stated after charging (crediting): Year ended 31 December 2009 2010 2011 USD ’000 USD ’000 USD ’000
Staff costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
67,654
74,781
89,871
Cost of inventories recognised as an expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
184,038
205,988
232,658
Cost of inventories written off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,804
2,247
1,708
Minimum lease payments recognised as operating lease expense . . . . . . . . . . . . .
17,052
18,294
18,796
Impairment of trade accounts receivable (note 12) . . . . . . . . . . . . . . . . . . . . . . . . .
394
389
2,923
Net foreign exchange (gain) loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(74)
1,001
1,884
14,179 2,363
14,969 2,323
15,120 1,888
16,542
17,292
17,008
7,513
1,769
—
Finance charges for the year comprise the following: Bank interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bank charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pre operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pre-operating expenses in 2009 represent costs incurred prior to start of operations of New Medical Centre Specialty Hospital LLC-Al Ain. Pre operating expenses in 2010 represent costs incurred prior to start of operations of New Medical Centre LLC—Sharjah at a new location. 7
EARNINGS PER SHARE
Basic and diluted earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary equity holders of the Parent Company by the weighted average number of ordinary shares outstanding during the year. The following reflects the income and share data used in the basic and diluted earnings per share computations: Year ended 31 December 2009 2010 2011
Profit attributable to equity holders of the Parent (USD ‘000) . . . . . . . . . . . . . . . . . . . . 7,621 21,091 42,988 Weighted average number of ordinary shares in issue (thousands) . . . . . . . . . . . . . . . . . 100 100 100 Basic and diluted earnings per share (USD) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 211 430 The weighted average number of shares for the year ended 31 December 2009 has been adjusted for the effect of increase in share capital as a result of transfer from shareholders’ accounts. 8
PROPERTY AND EQUIPMENT
Property and equipment at year end consists of the following: 2009 USD ’000
Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Advances for purchase of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . .
116
31 December 2010 2011 USD ’000 USD ’000
80,202 36,611
76,189 40,129
76,683 11,751
116,813
116,318
88,434
Furniture, fixtures and fittings and Capital Freehold Hospital Leasehold Motor medical work in land building Buildings improvements vehicles equipment progress Total USD ’000 USD ’000 USD ’000 USD ’000 USD ’000 USD ’000 USD ’000 USD ’000
31 December 2009 Cost: At 1 January 2009 . . . . . Additions . . . . . . . . . . . . Disposals . . . . . . . . . . . . Transfer . . . . . . . . . . . . . Transfer from (to) related parties . . . . . . .
5,577 7,694 — —
12,343 — — —
—
—
—
48
—
74
At 31 December 2009 . . 13,271
12,343
8,357
8,822
5,909
81,351
— —
4,771 909
3,707 713
4,518 1,579
4,082 778
36,232 11,323
— —
53,310 15,302
— —
— —
63 (3,219)
— —
110 (3,555)
—
5,680
4,326
6,144
4,618
44,399
—
65,167
Net carrying amount: At 31 December 2009 . . 13,271
6,663
4,031
2,678
1,291
36,952
15,316
80,202
31 December 2010 Cost: At 1 January 2010 . . . . . 13,271 Additions . . . . . . . . . . . . 5,935 Disposals . . . . . . . . . . . . — Written off . . . . . . . . . . . — Transfer . . . . . . . . . . . . . — Transfer to related parties (note 20) . . . . . —
12,343 — — — —
8,357 — — — 3,603
8,822 661 — (163) 979
5,909 138 (565) (320) —
81,351 6,646 (636) (892) 960
15,316 145,369 857 14,237 — (1,201) (1,769) (3,144) (5,542) —
(10)
(26)
(531)
At 31 December 2010 . . 19,206
12,343
6,900
— — —
5,680 800 —
4,326 565 —
— —
— —
—
6,480
2,142
7,345
4,270
Net carrying amount: At 31 December 2010 . . 19,206
5,863
4,758
2,944
866
Depreciation: At 1 January 2009 . . . . . Charge for the year . . . . Transfer (to) from related parties . . . . . . . Relating to disposals . . . At 31 December 2009 . .
Depreciation: At 1 January 2010 . . . . . Charge for the year . . . . Written off . . . . . . . . . . . Transfer to related parties (note 20) . . . . . Relating to disposals . . . At 31 December 2010 . .
—
10,909 — (2,552) —
— (94)
(5,060)
(2,749) —
117
6,515 422 — 1,837
47 —
10,289
5,600 467 (292) 134
— (242)
62,586 3,965 (3,682) 18,408
59,530 163,060 5,738 18,286 — (6,526) (20,379) — (29,573) (29,451) 15,316 145,369
—
(5,627)
5,136
86,898
8,862 149,634
6,144 1,368 (163)
4,618 551 (320)
44,399 10,336 (892)
— — —
65,167 13,620 (1,375)
(4) —
(25) (554)
(95) (540)
— —
(2,873) (1,094)
53,208
—
73,445
33,690
8,862
76,189
Furniture, fixtures and fittings and Capital Freehold Hospital Leasehold Motor medical work in land building Buildings improvements vehicles equipment progress Total USD ’000 USD ’000 USD ’000 USD ’000 USD ’000 USD ’000 USD ’000 USD ’000
31 December 2011 Cost: At 1 January 2011 . . . . . 19,206 Additions . . . . . . . . . . . . — Disposals . . . . . . . . . . . . —
12,343 — —
6,900 — (371)
10,289 266 (57)
5,136 185 (88)
86,898 4,964 (513)
At 31 December 2011 . . 19,206
12,343
6,529
10,498
5,233
91,349
8,862 149,634 7,512 12,927 — (1,029) 16,374 161,532
Depreciation: At 1 January 2011 . . . . . Charge for the year . . . . Relating to disposals . . .
— — —
6,480 704 —
2,142 685 (178)
7,345 1,157 (54)
4,270 378 (87)
53,208 9,117 (318)
— — —
73,445 12,041 (637)
At 31 December 2011 . .
—
7,184
2,649
8,448
4,561
62,007
—
84,849
Net carrying amount: At 31 December 2011 . . 19,206
5,159
3,880
2,050
672
29,342
16,374
76,683
Land and buildings are primarily held in the name of a UAE national shareholder for beneficial interest of Oldco Group. Certain land and building are held in the name of a previous shareholder for the beneficial interest of the Oldco Group. Legalities for transferring title to a current UAE National shareholder are on-going. Buildings are constructed on land leased from third parties. Management is of the opinion that the leases will be renewed for periods in excess of the remaining useful lives of the buildings. Property and equipment with a net carrying amount of USD 1.6 million at 31 December 2009, USD nil at 31 December 2010 and USD 8.3 million at 31 December 2011 were pledged as security against term loans. Advances amounting to USD 36.6 million at 31 December 2009, USD 40.1 million at 31 December 2010 and USD 11.8 million at 31 December 2011 are for the purchase of property and equipment. During the year ended 31 December 2011, the shareholders acquired advances from Oldco with a carrying amount of USD 35.8 million (note 20). 9
INVESTMENT PROPERTIES
2009 USD ’000
31 December 2010 2011 USD ’000 USD ’000
Land and buildings Balance at 1 January . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additions (disposal) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gain (loss) on revaluation of investment properties . . . . . . . . . . . . . . . . . . . . . . . .
32,240 15,684 3,533
51,457 — (5,772)
Balance at 31 December . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
51,457
45,685
45,685 (45,685) — —
In May 2011, the investment properties were sold to shareholders for an amount of USD 45,685 thousand, which approximates to fair value at that date. Settlement was made partially in cash of USD 36,815 thousand and transfer of related term loans of USD 8,870 thousand (note 17). Investment properties as at 31 December 2009 and 2010 are stated at fair value, which was determined based on valuations performed by a third party, an industry specialist in valuing these types of investment properties. Fair value was determined by reference to market based evidence. The valuation performed by the valuer was based on active market prices, adjusted for any difference in the nature, location or condition of the specific property. Freehold land with a fair value at 31 December 2009: USD 8.7 million, 31 December 2010: USD 7.6 million and 31 December 2011: USD Nil were pledged as security against a bank loan taken by one of the previous shareholders on behalf of Oldco Group. 118
Rental income from investment properties for the year ended 31 December 2009 amounted to USD 2,009 thousand, year ended 31 December 2010 amounted to USD 3,261 thousand and year ended 31 December 2011 amounted to USD 1,193 thousand. 10
INVENTORIES 2009 USD ’000
31 December 2010 2011 USD ’000 USD ’000
Pharmaceuticals and cosmetics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Scientific equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consumer products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Food . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Telecommunication equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consumables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Opticals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Goods in transit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16,777 3,157 20,348 2,073 141 2,577 452 5,088 151
15,134 3,535 21,871 1,601 87 2,601 435 3,921 139
21,191 4,809 18,945 3,766 112 1,504 346 3,412 209
Less: Provisions for slow moving and obsolete inventories . . . . . . . . . . . . . . . . . .
50,764 (526)
49,324 (526)
54,294 (116)
50,238
48,798
54,178
The amount of write down of inventories recognised as an expense for the year ended 31 December 2009 is USD 1,804 thousand, year ended 31 December 2010 is USD 2,247 thousand, and year ended 31 December 2011 is USD 1,708 thousand. This is recognised in direct costs. Trust receipts issued by banks amounting to USD 3,164 thousand at 31 December 2009, amounting to USD 3,984 thousand at 31 December 2010 and amounting to USD 8,253 thousand at 31 December 2011 were secured against the goods received. 11
INVESTMENTS CARRIED AT FAIR VALUE THROUGH PROFIT OR LOSS 2009 USD ’000
Quoted investments at market value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,509
31 December 2010 2011 USD ’000 USD ’000
4,894
—
Quoted investments were sold to shareholders in January 2011 for a cash consideration of USD 4,894 thousand, equating to the fair value at the date of disposal. The loss on revaluation of investments carried at fair value through profit or loss for the year ended 31 December 2009 amounted to USD 1,895 thousand, year ended 31 December 2010 amounted to USD 616 thousand and year ended 31 December 2011 amounted to USD nil. 12
ACCOUNTS RECEIVABLE AND PREPAYMENTS 2009 USD ’000
Trade accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepaid expenses and deferred costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trade accounts receivable are non interest bearing.
119
31 December 2010 2011 USD ’000 USD ’000
76,165 5,022 12,769
98,227 10,179 1,747
133,349 17,820 7,381
93,956
110,153
158,550
Trade accounts receivable of an initial value at 31 December 2009: USD 1,929 thousand, 31 December 2010: USD 2,318 thousand and 31 December 2011: USD 5,153 thousand were impaired and fully provided for. Movements in the allowance for impairment of trade accounts receivable were as follows: 2009 USD ’000
At 1 January . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Written off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Charge for the year (note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
31 December 2010 2011 USD ’000 USD ’000
1,535 — 394
1,929 — 389
2,318 (88) 2,923
1,929
2,318
5,153
The ageing of unimpaired trade accounts receivable is as follows:
Total USD ’000
Neither past due nor impaired USD ’000
Past due but not impaired 91 –180 181 –365 < 90 days days days >365 days USD ’000 USD ’000 USD ’000 USD ’000
31 December 2009 Trade accounts receivable . . . . . . . . . . . . . . . .
76,165
57,923
10,678
2,573
2,624
2,367
31 December 2010 Trade accounts receivable . . . . . . . . . . . . . . . .
98,227
73,456
13,419
4,918
3,713
2,721
31 December 2011 Trade accounts receivable . . . . . . . . . . . . . . . .
133,349
87,799
32,355
7,063
5,065
1,067
Unimpaired receivables are expected, on the basis of past experience, to be fully recoverable. It is not the practice of Oldco Group to obtain collateral over receivables and are, therefore, unsecured. 13
CASH AND CASH EQUIVALENTS
Cash and cash equivalents included in the consolidated statement of cash flows comprise of the following statement of financial position amounts: 2009 USD ’000
31 December 2010 2011 USD ’000 USD ’000
Bank balances and cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bank overdrafts and other short term borrowings . . . . . . . . . . . . . . . . . . . . . . . . .
10,462 15,513 54,073 (79,064) (105,172) (101,275)
Less: Short term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(68,602) 66,533
(89,659) 77,921
(47,202) 71,627
(2,069)
(11,738)
24,425
Included in bank balances and cash at 31 December 2009 are short term deposits of USD 1,426 thousand, 31 December 2010: USD 14,346 thousand and 31 December 2011: USD 11,072 thousand with commercial banks in the United Arab Emirates. These are mainly denominated in the UAE Dirhams and earn interest at the respective short term deposit rates. Short term borrowings include trust receipts and invoice discounting facilities. Trust receipts are short term borrowings to finance imports. The bank overdrafts and short term borrowings are secured by assets of Oldco Group up to the amount of the respective borrowings and personal/corporate guarantees of the shareholders and carry interest at EIBOR plus margin rates. At 31 December 2009, Oldco Group had available USD 9,373 thousand, 31 December 2010: USD 3,865 thousand and 31 December 2011: USD 1,341 thousand of undrawn bank overdraft facilities, which are renewable annually.
120
Non-cash transactions which have been excluded from the consolidated statement of cash flows are as follows:
Transfer of property and equipment to a related party (note 8) . . . . . . . . . . . . . . . . Interest charged to related parties (note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Transfer of employees end of service benefits from related parties (note 18) . . . . Sale of investments at fair value through profit or loss to Shareholders Settlement of related party debtor balances by shareholders (note 20) . . . . . . . . . . Transfer of related party receivable balances to trade accounts receivable (note 20) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sale of advance against properties and equipment to shareholders (note 8) . . . . . . Term loans transferred to shareholders (note 9 & 17) . . . . . . . . . . . . . . . . . . . . . . . Dividend paid to non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2009
31 December 2010
2011
USD ’000
USD ’000
USD ’000
29,561 2,360 36 4,911 —
2,754 3,368 3 — —
— 747 42 — 10,562
— — — (2,023)
— — — (2,079)
(3,264) 35,844 (8,870) —
SHARE CAPITAL Authorised, issued and fully paid 31 December 2009 2010 2011 USD ’000 USD ’000 USD ’000
HE Saeed Bin Butti . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dr B R Shetty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Khalifa Bin Butti . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Infinite Investment LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . HE Abdulla Humaid Al Mazrouie . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Marwan Mazrouie . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Binay Shetty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— 10,619 — — 16,063 272 272
— 10,619 — — 16,063 272 272
11,707 8,168 4,084 3,267 — — —
27,226
27,226
27,226
Share capital at 31 December 2009, 2010 and 2011 comprises 100,000 ordinary shares of USD 272.26 each. 15
SHAREHOLDERS’ ACCOUNTS 2009 USD ’000
HE Abdulla Humaid Al Mazrouie . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dr B R Shetty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
31 December 2010 2011 USD ’000 USD ’000
32,012 21,342
26,257 17,504
— —
53,354
43,761
—
During 2008, the legal status of Oldco was changed to a limited liability company from that of an establishment (a partnership). In addition, the legal status of three subsidiaries that were establishments was also changed to limited liability companies. The remaining four subsidiaries were limited liability companies from inception. In addition, the shareholders decided to transfer retained earnings as of 31 December 2008 to the shareholders’ accounts. Shareholders’ accounts were interest free and had no specified repayment terms. During the year ended 31 December 2011, several transactions have occurred which have fully utilised the shareholders’ accounts balance as at 31 December 2011 (note 20). 16
STATUTORY RESERVE
As required by the UAE Commercial Companies Law of 1984 (as amended) and the Articles of Association of Oldco and its subsidiaries, 10% of the profit of Oldco and its subsidiaries reported profit for the year has been transferred to the statutory reserve. Oldco and its subsidiaries may resolve to discontinue such annual transfers when the reserves equal to 50% of the paid up share capital. The statutory reserve is not available for distribution. 121
17
TERM LOANS 2009 USD ’000
Current portion Term Loan 1 Term Loan 2 Term Loan 3 Term Loan 4 Term Loan 5 Term Loan 6 Term Loan 7 Term Loan 8 Term Loan 9 Term Loan 10 Term Loan 11 Term Loan 12 Term Loan 13 Term Loan 14 Term Loan 15 Term Loan 16 Term Loan 17 Term Loan 18 Term Loan 19 Term Loan 20 Term Loan 21 Term Loan 22 Term Loan 23 Term Loan 24 Term Loan 25 Term Loan 26 Term Loan 27 Non-current Term Loan 1 Term Loan 2 Term Loan 3 Term Loan 4 Term Loan 5 Term Loan 6 Term Loan 7 Term Loan 8 Term Loan 9 Term Loan 10 Term Loan 11 Term Loan 12 Term Loan 13 Term Loan 14 Term Loan 15 Term Loan 16 Term Loan 17 Term Loan 18 Term Loan 19 Term Loan 20 Term Loan 21 Term Loan 22 Term Loan 23 Term Loan 24 Term Loan 25 Term Loan 26 Term Loan 27
Repayment terms 12 quarterly instalments March 2010 March 2010 14 quarterly instalments 20 quarterly instalments On demand 36 monthly instalments 36 monthly instalments 36 monthly instalments 36 monthly instalments 36 monthly instalments 36 monthly instalments 16 quarterly instalments 36 monthly instalments 12 quarterly instalments 12 quarterly instalments 36 monthly instalments 36 monthly instalments 36 monthly instalments 36 monthly instalments On demand 16 quarterly instalments On demand 13 quarterly instalments 12 monthly instalments 36 monthly instalments 13 quarterly instalments Repayment terms 12 quarterly instalments March 2010 March 2010 14 quarterly instalments 20 quarterly instalments On demand 36 monthly instalments 36 monthly instalments 36 monthly instalments 36 monthly instalments 36 monthly instalments 36 monthly instalments 16 quarterly instalments 36 monthly instalments 12 quarterly instalments 12 quarterly instalments 36 monthly instalments 36 monthly instalments On demand 36 monthly instalments On demand 16 quarterly instalments On demand 13 quarterly instalments 12 monthly instalments 36 monthly instalments 13 quarterly instalments
122
31 December 2010 2011 USD ’000 USD ’000
545 545 817 7 1,013 1,815 4,995 7,391 545 2,450 1,089 6,672 1,089 — 33,320 3,430 — — — — — — — 4,253 — — —
— — — — 673 1,815 5,290 8,123 363 2,450 — 15,357 327 1,225 16,674 3,430 4,538 1,724 7,514 907 10,890 1,361 19,998 3,406 — — —
— — — — — — 1,366 15,690 — 545 — 3,852 — — — — 4,538 1,456 — 906 — — — 681 1,815 6,806 7,779
69,976
106,065
45,434
— — — 136 — — — — — 3,017 — 35,645 272 3,675 16,674 4,285 — — — — — — — 3,236 — — —
— — — — — — — — — 545 — — — 1,733 — 3,281 6,050 3,449 — 1,781 — 2,723 — 681 — — —
— — — — — — — — — — — — — — — — 1,513 2,328 — 798 — — — — 11,911 18,904
66,940
20,243
35,454
The term loans primarily carry interest at EIBOR / LIBOR plus margin. The term loans are secured by the personal/corporate guarantees of shareholders and related parties, issuance of security cheques and assignment of income in favour of banks. During the year ended 31 December 2011, term loans amounting to USD 8,870 thousand were transferred to shareholders as part consideration for the sale of investment properties (note 9). Amounts are repayable as follows:
2009 USD ’000
Within 1 year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Between 1 – 2 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Between 2 – 3 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
31 December 2010 2011 USD ’000 USD ’000
69,976 55,960 10,980
106,065 14,267 5,976
45,434 18,351 17,103
136,916
126,308
80,888
69,976 66,940
106,065 20,243
45,434 35,454
136,916
126,308
80,888
In March 2012, a new term loan facility for a committed amount of up to USD 120m was entered into for the purposes of financing future capital expenditure. The loan bears interest at LIBOR plus a margin and is repayable in equal monthly instalments over a period of 5 years. The loan is secured by certain customer receivables which are pledged as collateral, a mortgage over the land and buildings of NMC Specialty Hospital LLC, Dubai, corporate guarantees of all operating subsidiaries of Oldco and personal guarantees of certain shareholders. The new facility also includes certain financial covenants, limitation on the payment of dividends to 35% of profits and change of control provisions that permit the majority of lenders to declare all outstanding amounts due and payable in certain circumstances. 18
EMPLOYEES’ END OF SERVICE BENEFITS
Movements in the provision recognised in the consolidated statement of financial position are as follows:
2009 USD ’000
Balance at 1 January . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provided during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net transferred from related parties (note 13 & 20) . . . . . . . . . . . . . . . . . . . . . . . . Provision written back . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Employees’ end of service benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
19
31 December 2010 2011 USD ’000 USD ’000
5,471 1,473 36 (29) (310)
6,641 1,402 3 (51) (463)
7,532 2,172 42 (351) (531)
6,641
7,532
8,864
ACCOUNTS PAYABLE AND ACCRUALS
2009 USD ’000
Trade accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
31 December 2010 2011 USD ’000 USD ’000
60,330 4,227 673 5,423
59,063 3,645 1,184 6,000
53,331 6,277 734 2,275
70,653
69,892
62,617
Trade and other payables are non-interest bearing and are normally settled on 90-120 day terms. 123
20
RELATED PARTY TRANSACTIONS
These represent transactions with related parties, i.e. shareholders and senior management of Oldco Group, and entities controlled, jointly controlled or significantly influenced by such parties. Pricing policies and terms of all transactions are approved by the management of Oldco Group. Transactions with related parties included in the consolidated statement of comprehensive income are as follows: Year ended 31 December 2009 2010 2011 USD ’000 USD ’000 USD ’000
Entities significantly influenced by a shareholder: Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Management fee income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest charged to related parties (note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,048 33 2,360
8,326 33 3,368
6,405 — 747
Transactions with related parties included in the consolidated statement of financial position are as follows: Year ended 31 December 2009 2010 2011 USD ’000 USD ’000 USD ’000
Shareholders: Sale of property and equipment (note 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sale on investments at fair value through profit or loss (note 11) . . . . . . . . . . . . . . Sale of advance for property and equipment (note 8) . . . . . . . . . . . . . . . . . . . . . . . Sale of investment properties (note 9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Term loan transferred (note 17) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Settlement of related party debtor balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
29,561 4,911 — — — —
2,754 — — — — —
Entities significantly influenced by a shareholder: Transfer of employees’ end of service benefits (note 18) . . . . . . . . . . . . . . . . . . . .
36
3
— 4,894 35,844 45,685 (8,870) 10,562 42
At 31 December 2009 the shareholders’ accounts included in equity amounted to USD 53,354 thousand, 31 December 2010: USD 43,761 thousand and 31 December 2011: USD nil. As noted above, a number of transactions with the shareholders have taken effect in the year to 31 December 2011. Some assets were sold to the shareholders for cash consideration, whilst others were settled by utilisation of shareholders’ accounts within equity. Amounts due to related parties and long term advances to related parties disclosed in the consolidated statement of financial position are as follows:. 2009 USD ’000
Entities significantly influenced by a shareholder: Amounts due to related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long term advances to related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
127 2,895
31 December 2010 2011 USD ’000 USD ’000
6,025 2,934
1,245 —
Long term advances to related parties were interest free with no specified repayment terms. The difference between the carrying amount and their fair value were not significant and the balances have been settled as at 31 December 2011.
124
Amounts due from related parties with an initial value at 31 December 2009: USD 1,498 thousand, 31 December 2010: USD 1,498 thousand and 31 December 2011: USD nil were impaired. Unimpaired amounts due from related parties and an analysis of their aging is as follows: Past due but not impaired 30 – 60 60 – 90 < 30 days days days >90 days USD ’000 USD ’000 USD ’000 USD ’000
Total USD ’000
Neither past due nor impaired USD ’000
Entities significantly influenced by a shareholder: 31 December 2009 Amounts due from related parties . . . . . . . . . . .
52,957
2,170
—
—
1,532
49,255
31 December 2010 Amounts due from related parties . . . . . . . . . . .
73,614
2,217
—
—
1,429
69,968
31 December 2011 Amounts due from related parties . . . . . . . . . . .
—
—
—
—
—
—
Oldco Group provided support / management services to the related parties and made payments for the majority of purchases of the related parties. Outstanding balances at 31 December 2009, 31 December 2010 and 31 December 2011 were unsecured and carried interest at 8 % (31 December 2010: 8% and 31 December 2011: 8%) per annum and settlement occurred in cash. During the year ended 31 December 2011, related party receivable balances with a carrying amount of USD 3,264 thousand have been reclassified to trade accounts receivable as a result of changes in the share ownership of the Parent company (note 13). The credit facilities provided by the bankers to Oldco Group are secured by joint and several personal/corporate guarantees of the Shareholders and other related parties. Compensation of key management personnel Year ended 31 December 2009 2010 2011 USD ’000 USD ’000 USD ’000
Short term benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Employees’ end of service benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,217 16
1,417 35
1,551 266
1,233
1,452
1,817
The spouse and non-dependent son of one of the shareholders are employed by the Group. Total compensation for employment received by the spouse and non-dependent son in the year ended 31 December 2009 amounts to USD 242 thousand, year ended 31 December 2010 AED 196 thousand, year ended 31 December 2011 USD 474 thousand. 21
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
Oldco Group’s principal financial liabilities, other than derivatives, comprise loans and borrowings and trade and other payables. The main purpose of these financial liabilities is to finance Oldco Group’s operations and to provide guarantees to support its operations. Oldco Group has loan and other receivables, trade and other receivables, and cash and short-term deposits that arise directly from its operations. Oldco Group is exposed to interest rate risk, credit risk, liquidity risk, foreign currency risk and equity price risk. Oldco Group’s senior management oversees the management of these risks. The Board of Directors reviews and agrees policies for managing each of these risks which are summarized below. Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Oldco Group is exposed to interest rate risk on its interest bearing assets and 125
liabilities (bank balances and short term deposits, bank overdrafts, term loans and trust receipts). Management has sought to limit the exposure of Oldco Group to any adverse future movements in interest rates by entering into interest rate swap arrangements. Management is therefore of the opinion that Oldco Group’s exposure to interest rate risk is limited. The following table demonstrates the sensitivity of the statement of comprehensive income to reasonably possible changes in interest rates, with all other variables held constant. The sensitivity of the statement of comprehensive income is the effect of the assumed changes in interest rates on Oldco Group’s profit for the year, taking into account interest rate swap arrangements, based on the floating rate financial assets and financial liabilities as of the respective year end. Increase/ decrease in basis points
Effect on profit at 31 December 2009 USD ’000
Effect on profit at 31 December 2010 USD ’000
Effect on profit at 31 December 2011 USD ’000
100 (100)
(1,901) 1,901
(2,005) 2,005
(1,466) 1,466
Credit risk Credit risk is the risk that a counter party will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. Oldco Group seeks to limit its credit risk with respect to customers by setting credit limits for individual customers and monitoring outstanding receivables. Oldco Group limits its credit risk with regard to bank deposits by only dealing with reputable banks. With respect to credit risk arising from cash and cash equivalents. Oldco Group’s exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments. Liquidity risk Oldco Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of banking facilities. Oldco Group limits its liquidity risk by ensuring bank facilities and shareholders’ financial support is available. Trade payables are normally settled within 90 – 120 days of the date of purchase. The table below summarises the maturities of Oldco Group’s undiscounted financial liabilities, based on contractual payment dates and current market interest rates. On demand USD ’000
Less than 3 months USD ’000
3 to 12 months USD ’000
At 31 December 2009 Trade accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amounts due to related parties . . . . . . . . . . . . . . . . . . . . . . Other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bank overdrafts and other short term borrowings . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— — — — 12,531 12,531
60,330 — — 28,897 67,669 156,896
At 31 December 2010 Trade accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amounts due to related parties . . . . . . . . . . . . . . . . . . . . . . Other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bank overdrafts and other short term borrowings . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— — — — 27,251 27,251
59,063 — — 915 79,383 139,361
At 31 December 2011 Trade accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amounts due to related parties . . . . . . . . . . . . . . . . . . . . . . Other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bank overdrafts and other short term borrowings . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— — — — 29,648 29,648
53,331 1,245 — 5,145 72,728 132,449
126
1 to 5 years USD ’000
Total USD ’000
— 127 4,227 45,096 — 49,450
— — — 71,538 — 71,538
60,330 127 4,227 145,531 80,200 290,415
— 6,025 3,645 107,505 — 117,175
— — — 23,430 — 23,430
59,063 6,025 3,645 131,850 106,634 307,217
6,277 42,463 — 48,740
— — — 37,670 — 37,670
53,331 1,245 6,277 85,278 102,376 248,507
Foreign currency risk Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Foreign currency risk comprises of transaction and statement of financial position risk. Transaction risk relates to Oldco Group’s cash flow being adversely affected by a change in the exchange rates of foreign currencies against UAE Dirhams. Statement of financial position risk relates to the risk of Oldco Group’s monetary assets and liabilities in foreign currencies acquiring a lower or higher value, when translated into UAE Dirhams, as a result of currency movements. Oldco Group is exposed to currency risk on its trade accounts payable and amounts due to a related party denominated in foreign currencies, mainly in Euros, Swiss Francs and Pound Sterling. Foreign currency payable balances included in the consolidated statement of financial position are as follows: 2009 USD ’000
EUR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CHF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . GBP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . KWD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . JPY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . AUD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15,243 1,167 1,128 112 11 —
31 December 2010 2011 USD ’000 USD ’000
7,440 3,755 1,163 648 57 40
4,785 1,299 656 124 — 4
The table below indicates Oldco Group’s foreign currency exposure at 31 December, as a result of its monetary liabilities. As the US Dollar is pegged to the UAE Dirham, balances in US Dollars are not considered to represent significant currency risk. The analysis calculates the effect of a reasonably possible movement of the USD currency rate against the foreign currencies, with all other variables held constant, on the statement of comprehensive income (due to the fair value of currency sensitive monetary liabilities).
Euros
Assumed change from year end exchange rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 December 2009 . . . . . . . . . . . . . . . . . . . . . . . 31 December 2010 . . . . . . . . . . . . . . . . . . . . . . . 31 December 2011 . . . . . . . . . . . . . . . . . . . . . . . Assumed change from year end exchange rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 December 2009 . . . . . . . . . . . . . . . . . . . . . . . 31 December 2010 . . . . . . . . . . . . . . . . . . . . . . . 31 December 2011 . . . . . . . . . . . . . . . . . . . . . . .
Swiss francs
British Pound
+5% +5% +5% (762) (58) (56) (372) (188) (58) (239) (65) (33) -5% -5% 762 58 372 188 239 65
-5% 56 58 33
Australian Dollar
Effect on profit and equity
Kuwait Dinar
Japanese yen
+5% (6) (32) (6)
+5% (1) (3) —
+5% — (2) —
(883) (655) (343)
-5% 6 32 6
-5% 1 3 —
-5% — 2 —
883 655 343
The effect of decreases in currency rates is expected to be equal and opposite to the effect of the increases shown. Equity price risk Oldco Group disposed of its listed equity securities during 2011. Oldco Group’s listed equity securities were susceptible to market price risk arising from uncertainties about future values of the investment securities. Oldco Group managed the equity price risk through diversification and placing limits on individual and total equity instruments. Reports on the equity portfolio were submitted to Oldco Group’s senior management on a regular basis. Oldco Group’s Board of Directors review and approve all equity investment decisions. The exposure to listed equity securities at fair value at 31 December 2009 was USD 5,509 thousand, 31 December 2010: USD 4,894 thousand and 31 December 2011: USD nil. A decrease of 10% on the respective market indexes could have an impact of approximately USD 551 thousand for the year ended 31 December 2009, year ended 31 December 2010: USD 490 thousand and year ended 31 December 2011: USD nil on the income attributable to Oldco Group.
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Capital management The primary objective of Oldco Group’s capital management is to ensure that it maintains healthy capital ratios in order to support its business and maximize shareholders’ value. Oldco Group manages its capital structure and makes adjustments to it in light of changes in business conditions. No changes were made in the objectives, policies or processes during the three years ended 31 December 2011. Capital comprises share capital, statutory reserve, shareholders’ accounts and retained earnings and is measured at USD 89,865 thousand as at 31 December 2009, 31 December 2010: USD 101,363 thousand and 31 December 2011: USD 99,287 thousand. Oldco Group monitors capital using a gearing ratio, which is net debt divided by capital plus net debt. Oldco Group includes within net debt, interest bearing loans and borrowings, accounts payable and accruals, less bank balances and cash. 2009 USD ’000
31 December 2010 USD ’000
2011 USD ’000
Interest bearing loans and borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts payable and accruals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less: bank balances and cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
215,980 70,653 (10,462)
231,480 69,892 (15,513)
182,163 62,617 (54,073)
Net debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
276,171 89,865
285,859 101,363
190,707 99,287
Capital and net debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
366,036
387,222
289,994
Gearing ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
75%
74%
66%
CONTINGENT LIABILITIES
Oldco Group had contingent liabilities in respect of bank and other guarantees and other matters arising in the ordinary course of business from which it is anticipated that no material liabilities will arise at 31 December 2009: USD 6,028 thousand, 31 December 2010: USD 6,193 thousand and 31 December 2011: USD 8,017 thousand. 23
COMMITMENTS
Capital commitments Oldco Group had future capital commitments at 31 December 2009: USD 42,098 thousand, 31 December 2010: USD 36,943 thousand and 31 December 2011: USD 32,383 thousand principally relating to the completion of ongoing capital projects at year end. Other commitments 2009 USD ’000
Future minimum rentals payable under non-cancellable operating leases Within one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . After one year but not more than five years . . . . . . . . . . . . . . . . . . . . . . . . . . More than five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
128
31 December 2010 2011 USD ’000 USD ’000
3,199 14,311 64,027
3,357 14,976 60,004
3,475 15,726 55,780
81,537
78,337
74,981
24
DERIVATIVE FINANCIAL INSTRUMENTS
Oldco Group has entered into the following interest rate swaps to manage its interest rate exposure: Negative fair value USD ’000
Notional amount USD ’000
Maturity Profile
At 31 December 2009 Interest rate swap USD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,043)
24,503
Feb-14
At 31 December 2010 Interest rate swap USD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,275)
24,503
Feb-14
At 31 December 2011 Interest rate swap USD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,210)
24,503
Feb-14
The interest rate swaps were contracted to hedge the interest cash flows on term loans. As these swaps do not qualify for hedge accounting in accordance with International Accounting Standard 39, the movement in fair value for the year ended 31 December 2009: USD 386 thousand loss, year ended 31 December 2010: USD 232 thousand loss and year ended 31 December 2011: USD 65 thousand gain has been charged to the consolidated statement of comprehensive income. The notional amounts indicate the volume of transactions outstanding at year end and are neither indicative of the market risk nor credit risk. The negative fair value of interest rate swaps is included within “other payables” (note 19). 25
FAIR VALUES OF FINANCIAL INSTRUMENTS
The fair values of Oldco Group’s financial instruments are not materially different from their carrying values at the statement of financial position date. Oldco Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique: Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities. Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly. Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data. Assets (liabilities) measured at fair value: Level 1 USD ’000
Level 2 USD ’000
Level 3 USD ’000
Total fair value USD ’000
31 December 2009 Investment in quoted equities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest rate swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,509 —
— (1,043)
— —
5,509 (1,043)
31 December 2010 Investment in quoted equities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest rate swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,894 —
— (1,275)
— —
4,894 (1,275)
31 December 2011 Interest rate swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
(1,210)
—
(1,210)
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PART XIV: UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP Section A: Report on Unaudited Pro Forma Financial Information
P.O. Box 136 11th Floor – Al Ghaith Tower Hamdan Street Abu Dhabi, United Arab Emirates Tel: +971 2 417 4400 +971 2 627 7522 Fax: +971 2 627 3383 www.ey.com/me
The Directors 2 April 2012 NMC Health plc 20-22 Bedford Row London WC1R 4JS Dear Sirs We report on the pro forma financial information (the “Pro Forma Financial Information”) set out in Part XIV Section B of the prospectus dated 2 April 2012 (the “Prospectus”), which has been prepared on the basis described in the notes for illustrative purposes only, to provide information about how the Global Offering and the acquisition of NMC Healthcare LLC might have affected the financial information presented on the basis of the accounting policies of NMC Health plc being those adopted in preparing the NMC Healthcare LLC historical financial information for the period ending 31 December 2011 included in the Prospectus. This report is required by item 20.2 of Annex I of Commission Regulation (EC) 809/2004 and is given for the purpose of complying with that item and for no other purpose. Save for any responsibility arising under Prospectus Rule 5.5.3R (2)(f) to any person as and to the extent there provided, to the fullest extent permitted by law we do not assume any responsibility and will not accept any liability to any other person for any loss suffered by any such other person as a result of, arising out of, or in connection with this report or our statement, required by and given solely for the purposes of complying with item 23.1 of Annex I to Commission Regulation (EC) 809/2004, consenting to its inclusion in the Prospectus. Responsibilities It is the responsibility of the directors of NMC Health plc to prepare the Pro Forma Financial Information in accordance with item 20.2 of Annex I of Commission Regulation (EC) 809/2004. It is our responsibility to form an opinion, as required by item 7 of Annex II of Commission Regulation (EC) 809/2004, as to the proper compilation of the Pro Forma Financial Information and to report that opinion to you. In providing this opinion we are not updating or refreshing any reports or opinions previously made by us on any financial information used in the compilation of the Pro Forma Financial Information, nor do we accept responsibility for such reports or opinions beyond that owed to those to whom those reports or opinions were addressed by us at the dates of their issue. Basis of opinion We conducted our work in accordance with the Standards for Investment Reporting issued by the Auditing Practices Board in the United Kingdom. The work that we performed for the purpose of making this report, which involved no independent examination of any of the underlying financial information, consisted primarily of comparing the unadjusted financial information with the source documents, considering the evidence supporting the adjustments and discussing the Pro Forma Financial Information with the directors of NMC Health plc. We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with reasonable assurance that the Pro Forma Financial Information has been properly compiled on the basis stated and that such basis is consistent with the accounting policies of NMC Health plc. Our work has not been carried out in accordance with auditing or other standards and practices generally accepted in other jurisdictions and accordingly should not be relied upon as if it had been carried out in accordance with those standards and practices. Opinion In our opinion: • the Pro Forma Financial Information has been properly compiled on the basis stated; and • such basis is consistent with the accounting policies of NMC Health plc. 130
Declaration For the purposes of Prospectus Rule 5.5.3R (2)(f) we are responsible for this report as part of the Prospectus and declare that we have taken all reasonable care to ensure that the information contained in this report is, to the best of our knowledge, in accordance with the facts and contains no omission likely to affect its import. This declaration is included in the Prospectus in compliance with item 1.2 of Annex I and item 1.2 of Annex III of Commission Regulation (EC) 809/2004. Yours faithfully
Ernst & Young
131
Section B: Unaudited Pro Forma Statement of Financial Position The unaudited pro forma statement of financial position of NMC Health plc at 31 December 2011 set out below has been prepared to illustrate the effect of the Global Offering and the acquisition of NMC Healthcare LLC (“Oldco”) on the statement of financial position of NMC Healthcare LLC and its subsidiaries (“Oldco Group”) as if the Global Offering and the acquisition of NMC Healthcare LLC had taken place on 31 December 2011. The unaudited pro forma statement of financial position is based on the audited historical financial information of the Oldco Group for the year ended 31 December 2011 contained in Part XIII of this Prospectus. The unaudited pro forma statement of financial position has been presented under the accounting policies of NMC Health plc. The unaudited pro forma statement of financial position has been prepared for illustrative purposes only, and because of its nature addresses a hypothetical situation and, therefore, does not reflect the Group’s actual financial position or results. The unaudited pro forma statement of financial position has been prepared on the basis set out in the notes below and in accordance with the requirements of item 20.2 of Annex I and items 1 to 6 of Annex II of Commission Regulation (EC) 809/2004. Oldco Group Adjustments: Pro forma Group statement of Adjustments: The acquisition statement of financial position Net proceeds of NMC financial position as at from the Global Healthcare LLC as at 31 December 2011 Offering 31 December 2011 31 December 2011 (note 1) (note 2) (note 3) (notes 3,4) USD ’000 USD ’000 USD ’000 USD ’000
ASSETS Non-current assets Property and equipment . . . . . . . . . . . . . . . . . . . . . . . Current assets Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts receivable and prepayments . . . . . . . . . . . . Bank balances and cash . . . . . . . . . . . . . . . . . . . . . . .
88,434
—
—
88,434
88,434
—
—
88,434
54,178 158,550 54,073
— (4,597) 167,679
— — —
54,178 153,953 221,752
266,801
163,083
—
429,883
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . .
355,235
163,083
—
518,317
EQUITY AND LIABILITIES Equity Share capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Share Premium Account . . . . . . . . . . . . . . . . . . . . . . . Statutory and other reserves . . . . . . . . . . . . . . . . . . . . Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . .
27,226 — 10,260 61,801
8,870 162,235 — (4,242)
Equity attributable to equity holders of the Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-controlling interests . . . . . . . . . . . . . . . . . . . . . .
99,287 1,059
166,863 —
— —
266,150 1,059
TOTAL EQUITY / NET ASSETS . . . . . . . . . . . . . .
100,346
166,863
—
267,209
Non-current liabilities Term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Employees’ end of service benefits . . . . . . . . . . . . . .
35,454 8,864
— —
— —
35,454 8,864
44,318
—
—
44,318
Current liabilities Accounts payable and accruals . . . . . . . . . . . . . . . . . . Amounts due to related parties . . . . . . . . . . . . . . . . . . Bank overdrafts and trust receipts . . . . . . . . . . . . . . . . Term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
29,566 162,235 16,790 57,559
62,617 1,245 101,275 45,434
(3,780) — — —
— — — —
58,837 1,245 101,275 45,434
210,571
(3,780)
—
206,791
(3,780)
—
251,109
—
518,317
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
254,889
TOTAL EQUITY AND LIABILITIES . . . . . . . . .
355,235
1.
(6,530) — 6,530 —
163,083
The financial information of Oldco Group has been extracted, without material adjustment, from the consolidated statement of financial position of Oldco Group as at 31 December 2011 included in “Part XIII—“Historical Financial Information”.
132
2.
The exchange rate used is £1: USD 1.592. The gross proceeds of the Global Offering are based on 55,714,286 new ordinary shares being issued by the Company at an Offer Price of 210 pence based on a nominal value of 10 pence and a premium of 200 pence. The net proceeds of the Global Offering receivable by the Company, of US$166.3 million, are calculated based on the gross proceeds of the subscription of New Shares of US$186.3 million, less offer expenses, being underwriting commission and other estimated offering related fees and expenses of the Global Offering and Admission of approximately US$20.0 million as described in Part XVI of this Prospectus. US$5.2 million of these offer expenses had been incurred by Oldco Group in the fiscal year ended 31 December 2011. Of this amount, US$4.6 million had been included within accounts receivable and prepayments and the remaining US$0.6 million had been expensed in the income statement. In addition, of the US$5.2 million of offer expenses incurred, US$1.4 million had been paid by Oldco Group as at 31 December 2011 and US$3.8 million was included within accounts payable and accruals. An adjustment has been made to reduce accounts payable and accruals by US$3.8 million as settlement of such amounts due and to reduce accounts receivable and prepayments by US$4.6 million to account for such costs as described below. The net adjustment to bank balances and cash in respect of the Global Offering is set out below:
Gross proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
USD ‘000 186,264 (20,000)
Net proceeds of the offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expenses paid in the fiscal year ended 31 December 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
166,264 1,415
Net impact on bank balances and cash as at 31 December 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
167,679
In accordance with the Group’s accounting policies certain elements of the offer expenses totalling US$15.2 million are accounted for as a deduction from share premium with the remaining US$4.8 million expensed in the income statement with a consequent reduction of retained earnings. The impact on retained earnings is as follows:
Total offer expenses to be charged to the income statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less amounts already expensed in the fiscal year ended 31 December 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
USD ‘000 4,841 (599)
Net adjustment to retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,242
The impact on share capital and share premium of the Global Offering is set out below.
Increase in share capital due to the issue of 55,714,286 Ordinary Shares with a nominal value of 10 pence . . . . . . .
USD ‘000 8,870
Increase in share premium due to the issue of 55,714,286 shares with a premium of 200 pence . . . . . . . . . . . . . . . . Less offer expenses to be accounted for as a deduction from share premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
177,394 (15,159)
Net adjustment to share premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
162,235
Offer expenses have been extracted from paragraph 18 of “Part XVII—Additional Information”. 3.
The Issuer will acquire the entire share capital (less one share) of NMC Holding LLC, and the Issuer’s wholly-owned subsidiary, NMC Health Holdco Limited, will acquire the remainder of the share capital of NMC Holding LLC. NMC Holding LLC will acquire the entire share capital (less one share) of NMC Healthcare LLC. As a result of these transactions, new ordinary shares were issued to Existing Shareholders in exchange for the entire share capital of Oldco. The effect on the share capital and other reserves of the Company is as follows:
Nominal value of new ordinary shares issued to Existing Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less nominal value of share capital of Oldco as at 31 December 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
USD ‘000 20,696 (27,226)
Adjustment to share capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6,530)
An offsetting adjustment is made to other reserves. 4.
No adjustment has been made to reflect any trading or other transactions undertaken by the Company or NMC Healthcare LLC Group since 31 December 2011.
Impact on earnings If the Global Offering and the acquisition of NMC Healthcare LLC had occurred prior to 1 January 2011, the consolidated statement of comprehensive income of the Oldco Group would have been affected. Earnings for the year ended 31 December 2011 would have increased as a result of a reduction in finance charges caused by holding a portion of the net proceeds of the Global Offering in bank accounts offsetting overdrafts and trust receipts prior to the use of these proceeds for capital expenditure and acquisitions. Additional finance income would also have been generated from interest earned on increased cash deposits arising from any unutilised net offer proceeds.
133
PART XV: TAXATION The following is a general summary of certain tax consequences of the acquisition, ownership and disposition of the Shares based upon the tax laws of the United Kingdom and the United States as in effect on the date of this Prospectus, and is subject to changes in the tax laws of the United Kingdom or the United States, including changes that could have a retroactive effect. It is not a complete analysis of all the potential tax effects relevant to a decision to invest in the Shares. The following discussion does not take into account or discuss the tax laws of any jurisdiction other than the United Kingdom and the United States, nor does it take into account investors’ individual circumstances. Investors are advised to consult their own tax advisers as to United Kingdom, United States or other tax consequences of the acquisition, ownership and disposition of the Shares. UK Taxation The following statements are intended to apply only as a general guide to current UK tax law and to the current published practice of HM Revenue and Customs (“HMRC”) as at the date of this Prospectus, both of which are subject to change, possibly with retrospective effect. They relate only to certain limited aspects of the UK taxation treatment of holders of Shares and (except to the extent stated otherwise) are intended to apply only to shareholders who are resident (and, in the case of individual shareholders, ordinarily resident and domiciled) in and only in the UK for UK tax purposes, who hold the Shares as investments (other than under an individual savings account) and who are the absolute beneficial owners of the Shares. The statements may not apply to certain classes of shareholders, such as (but not limited to) traders, dealers in securities, insurance companies, collective investment schemes, persons connected with depositary arrangements and clearance services and persons who have (or are deemed to have) acquired the Shares by reason of an office or employment. Prospective subscribers for or purchasers of Shares who are in any doubt as to their tax position regarding the acquisition, ownership and disposition of the Shares or who are subject to tax in a jurisdiction other than the UK should consult their own tax advisers. Dividends Withholding for or on Account of UK Tax The Company will not be required to withhold UK tax at source from dividend payments it makes. Individuals An individual shareholder who receives a dividend from the Company will generally be entitled to a tax credit which may be set off against his total income tax liability on the dividend. Such an individual shareholder’s liability to income tax is calculated on the aggregate of the dividend and the tax credit (the “gross dividend”) which will be regarded as the top slice of the individual’s income. The tax credit will be equal to 10% of the “gross dividend” (i.e. the tax credit will be one-ninth of the amount of the net cash dividend received). An individual shareholder who is not liable to income tax in respect of the gross dividend will not be entitled to reclaim any part of the tax credit. An individual shareholder who is liable to income tax at the basic rate will be subject to income tax on the gross dividend at the rate of 10% of the gross dividend so that the tax credit will satisfy in full such shareholder’s liability to income tax on the dividend. An individual shareholder liable to income tax at the higher rate will be subject to income tax on the gross dividend at 32.5% but will be able to set the tax credit off against part of this liability. The effect of that set off of the tax credit is that such a shareholder will have to account for additional tax equal to one quarter of the net cash dividend received. An individual shareholder liable to income tax at the additional rate will be subject to income tax on the gross dividend at the rate of 42.5% of the gross dividend but will be able to set the tax credit off against part of this liability. The effect of that set off of the tax credit is that such a shareholder will have to account for additional tax equal to approximately 36.1% of the net cash dividend received. The UK Government has announced that the dividend additional rate will be reduced from 42.5% to 37.5%, with effect on and after 6 April 2013. Provided that legislation is enacted as announced, from 6 April 2013 onwards, an individual shareholder liable to income tax at the additional rate will be subject to income tax on the gross dividend at the rate of 37.5% but will be able to set the tax credit off against part of this liability. The effect of that set off of the tax credit will be that such a shareholder will have to account for additional tax equal to approximately 30.6% of the net cash dividend received. Companies Shareholders within the charge to UK corporation tax which are “small companies” (for the purposes of Chapter 3 of Part 9A of the Corporation Tax Act 2009 (“CTA 2009”)) will not generally be subject to UK corporation tax on any dividend received from the Company. 134
Other shareholders within the charge to UK corporation tax will not be subject to UK tax on dividends received from the Company so long as the dividends fall within an exempt class and certain conditions are met. For example, dividends paid on shares that are “ordinary shares” and are not “redeemable” (as those terms are used in Chapter 3 of Part 9A CTA 2009) and dividends paid to a person holding less than 10% of the issued share capital of the payer (or any class of that share capital) should generally fall within an exempt class. The exemptions are not comprehensive and are subject to anti-avoidance rules. If the conditions for exemption are not or cease to be satisfied, or such a shareholder elects for an otherwise exempt dividend to be taxable, the shareholder will be subject to UK corporation tax on dividends received from the Company. Corporation tax is charged on dividends at the rate applicable to that company. No Payment of Tax Credit UK resident shareholders who are not liable to tax on dividends paid by the Company, including UK pension funds, will not be entitled to reclaim the tax credit attaching to any dividend paid by the Company. Non-UK Resident Shareholders The right of a shareholder who is not resident in the UK (for tax purposes) to a tax credit in respect of a dividend received from the Company will generally depend upon the existence and terms of any double tax treaty between the UK and the country in which that person is resident. Such shareholders should note, however, that in practice most shareholders will not be able to claim repayment in respect of tax credits or will be entitled to only a minimal repayment. Persons who are not solely resident in the UK should consult their own tax advisers concerning their tax liabilities (in the UK and any other country) on dividends received, whether they are entitled to claim any part of the tax credit and, if so, the procedure for doing so, and whether any double taxation relief is due in any country in which they are subject to tax. Capital Gains A disposal or deemed disposal of Shares by a shareholder may, depending on the shareholder’s circumstances and subject to any available exemptions and reliefs, give rise to a chargeable gain or an allowable loss for the purposes of the taxation of capital gains. Individuals For individual shareholders, the principal factors that will determine the capital gains tax position on a disposal or deemed disposal of the Shares are the extent to which the shareholder realises any other capital gains in the tax year in which the disposal is made, the extent to which the holder has incurred capital losses in that or earlier tax years and the level of the annual allowance of tax-free gains in that tax year (the “annual exemption”). The annual exemption for the 2011/2012 tax year is £10,600 (and the UK Government has announced that the annual exemption will be held at this level for the tax year 2012/2013). If, after all allowable deductions, an individual shareholder’s taxable income for the year exceeds the basic rate income tax limit, a taxable chargeable gain accruing on a disposal or deemed disposal of Shares would be taxed at 28%. Otherwise, such a gain may be taxed at 18% or 28% or a combination of both rates. Individuals who are temporarily non-UK resident may, in certain circumstances, be subject to tax in respect of gains realised while they are not resident in the UK. Companies A disposal or deemed disposal of Shares by a shareholder within the charge to UK corporation tax may give rise to a chargeable gain (or allowable loss) for the purposes of UK corporation tax, depending on the circumstances and subject to any available exemptions or reliefs. Corporation tax is charged on chargeable gains at the rate applicable to that company. Shareholders within the charge to UK corporation tax will, for the purposes of computing gains but not losses, be allowed to claim an indexation allowance which applies to reduce capital gains to the extent that such gains arise due to inflation.
135
Close companies The Company may be a close company within the meaning of Part 10 of the Corporation Tax Act 2010 both prior to and following the Global Offering. It is possible that non-UK resident members of the Group are companies which would, if they were UK resident, be close companies. As a result, certain transactions entered into by the Company or other members of the Group may have tax implications for Shareholders (including, but not limited to, implications in relation to UK inheritance tax in certain circumstances). Shareholders should consult their own professional advisors on the potential impact of the close company rules. Inheritance tax The Shares will be assets situated in the UK for the purposes of UK inheritance tax. A gift of such assets by, or the death of, an individual holder of such assets may (subject to certain exemptions and reliefs) give rise to a liability to UK inheritance tax even if the holder is neither domiciled in the UK nor deemed to be domiciled there under certain rules relating to long residence or previous domicile. For inheritance tax purposes, a transfer of assets at less than full market value may be treated as a gift and particular rules apply to gifts where the donor reserves or retains some benefit. Special rules also apply to close companies and to trustees of settlements who hold Shares, bringing them within the charge to inheritance tax. Shareholders should consult an appropriate professional advisor if they make a gift of any kind or transfer at less than market value or intend to hold any Shares through trust arrangements. Stamp Duty and Stamp Duty Reserve Tax (“SDRT”) In relation to the New Shares being issued by the Company and, except as described below, no liability to stamp duty or stamp duty reserve tax will arise on the issue of, or on the issue of definitive share certificates in respect of, such shares by the Company. Subject to an exemption for certain low value transactions, the conveyance or transfer on sale of Shares outside the CREST system will generally be subject to ad valorem stamp duty on the instrument of transfer at the rate of 0.5% of the amount or value of the consideration given (rounded up to the nearest £5). Stamp duty is normally the liability of the purchaser or transferee of the Shares. An unconditional agreement to transfer Shares will normally give rise to a charge to SDRT at the rate of 0.5% of the amount or value of the consideration for the Shares. However, where within six years of the date of the agreement, an instrument of transfer is executed and duly stamped, the SDRT liability will be cancelled and any SDRT which has been paid will be repaid. SDRT is normally the liability of the purchaser or transferee of the Shares. Under the CREST system for paperless share transfers, deposits of Shares into CREST will generally not be subject to stamp duty or SDRT unless such a transfer is made for a consideration in money or money’s worth, in which case a liability to SDRT will arise usually at the rate of 0.5% of the amount or value of the consideration. Paperless transfers of Shares within CREST are generally liable to SDRT, rather than stamp duty, at the rate of 0.5% of the amount or value of the consideration. CREST is obliged to collect SDRT from the purchaser of the Shares on relevant transactions settled within the system. The sale of Existing Shares by the Over-allotment Shareholders under the Global Offering will give rise to a liability to stamp duty and/or SDRT as explained above. However, notwithstanding that stamp duty or SDRT may technically be payable, separate arrangements have been made, and shareholders other than persons providing clearance services or issuing depositary receipts (or in either case, their nominee or agent) should have no liability in this regard. The above statements are intended as a general guide to the current position and apply to holders of Shares irrespective of their residence. Certain categories of person, including intermediaries, brokers, dealers and persons connected with depositary arrangements and clearance services, may not be liable to stamp duty or SDRT or may be liable at a higher rate or may, although not primarily liable for tax, be required to notify and account for it under the Stamp Duty Reserve Tax Regulations 1986. US Federal Income Taxation TO ENSURE COMPLIANCE WITH INTERNAL REVENUE SERVICE (“IRS”) CIRCULAR 230, EACH TAXPAYER IS HEREBY NOTIFIED THAT: (A) ANY TAX DISCUSSION HEREIN IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED BY THE TAXPAYER FOR THE 136
PURPOSE OF AVOIDING US FEDERAL INCOME TAX PENALTIES THAT MAY BE IMPOSED ON THE TAXPAYER; (B) ANY SUCH TAX DISCUSSION WAS WRITTEN TO SUPPORT THE PROMOTION OR MARKETING OF THE TRANSACTIONS OR MATTERS ADDRESSED HEREIN; AND (C) THE TAXPAYER SHOULD SEEK ADVICE BASED ON THE TAXPAYER’S PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISER. The following is a summary of certain US federal income tax considerations relevant to US Holders (as defined below) acquiring, holding and disposing of Shares. This summary is based on the US Internal Revenue Code of 1986 (the “Code”), final, temporary and proposed US Treasury regulations, and administrative and judicial interpretations, all of which are subject to change, possibly with retroactive effect, as well as on the income tax treaty between the United States and the UK as currently in force (the “Treaty”). This summary does not discuss all aspects of US federal income taxation that may be relevant to investors in light of their particular circumstances, such as investors subject to special tax rules (including, without limitation: (i) financial institutions; (ii) insurance companies; (iii) dealers in stocks, securities, or currencies or notional principal contracts; (iv) regulated investment companies; (v) real estate investment trusts; (vi) tax-exempt organisations; (vii) partnerships, pass-through entities, or persons that hold Shares through pass-through entities; (viii) holders that own (directly, indirectly or constructively) 10% or more of the voting stock of the Company; (ix) investors that hold Shares as part of a straddle, hedge, conversion, constructive sale or other integrated transaction for US federal income tax purposes; (x) investors that have a functional currency other than the US dollar; and (xi) US expatriates and former long-term residents of the United States), all of whom may be subject to tax rules that differ significantly from those summarised below. This summary does not address tax consequences applicable to holders of equity interests in a holder of the Shares, US federal estate, gift or alternative minimum tax considerations, or non-US, state or local tax considerations. This summary only addresses investors that will acquire Shares in the Global Offering, and it assumes that investors will hold their Shares as capital assets (generally, property held for investment). For the purposes of this summary, a “US Holder” is a beneficial owner of Shares that is for US federal income tax purposes (i) an individual who is a citizen or resident of the United States, (ii) a corporation created in, or organised under the laws of, the United States or any state thereof, including the District of Columbia, (iii) an estate the income of which is includible in gross income for US federal income tax purposes regardless of its source or (iv) a trust that is subject to US tax on its worldwide income regardless of its source. Dividends Subject to the passive foreign investment company (“PFIC”) rules discussed below, a distribution made by the Company on the Shares generally will be treated as a dividend includible in the gross income of a US Holder as ordinary income. Such dividends will not be eligible for the dividends received deduction allowed to corporations. “Qualified dividend income” received by individual and certain other non-corporate US Holders in tax years beginning before 1 January 2013, will be subject to a maximum US federal income tax rate of 15% if (i) the Company is a “qualified foreign corporation” (as defined below) and (ii) such dividend is paid on Shares that have been held by such US Holder for at least 61 days during the 121-day period beginning 60 days before the ex-dividend date. The Company generally will be a “qualified foreign corporation” if (1) it is either (a) eligible for the benefits of the Treaty, or (b) if the stock with respect to which such dividend is paid is readily tradable on an established securities market in the United States, and (2) it is not a PFIC in the taxable year of the distribution or the immediately preceding taxable year. The Company expects to be eligible for the benefits of the Treaty. In addition, as discussed below under “Passive Foreign Investment Company Rules”, the Company does not believe it was a PFIC for the taxable year ending 31 December 2011 and does not expect to be a PFIC for the current year or for any future years. Dividends on the Shares generally will constitute income from sources outside the United States for foreign tax credit limitation purposes. The amount of any distribution of property other than cash will be the fair market value of the property on the date of the distribution. The US dollar value of any distribution made by the Company in foreign currency must be calculated by reference to the exchange rate in effect on the date of receipt of such distribution by the US Holder, regardless of whether the foreign currency is in fact converted into US dollars. If the foreign currency so received is converted into US dollars on the date of receipt, such US Holder generally will not recognise foreign currency gain or loss on such conversion. If the foreign currency so received is not converted into US dollars on the date of receipt, such US Holder will have a basis in 137
the foreign currency equal to its US dollar value on the date of receipt. Any gain on a subsequent conversion or other disposition of the foreign currency generally will be treated as ordinary income or loss to such US Holder and generally will be income or loss from sources within the United States for foreign tax credit limitation purposes. Sale or Other Disposition Subject to the PFIC rules discussed below, a US Holder generally will recognise gain or loss for US federal income tax purposes upon a sale or other disposition of its Shares in an amount equal to the difference between the amount realised from such sale or disposition and the US Holder’s adjusted tax basis in such Shares, as determined in US dollars. Such gain or loss will be capital gain or loss and will be long-term capital gain (taxable at a reduced rate for non-corporate US Holders, such as individuals) or loss if, on the date of sale or disposition, such Shares were held by such US Holder for more than one year. The deductibility of capital loss is subject to significant limitations. Such gain or loss realised generally will be treated as derived from US sources. A US Holder that receives foreign currency from a sale or disposition of Shares generally will realise an amount equal to the US dollar value of the foreign currency on the date of sale or disposition or, if such US Holder is a cash basis or electing accrual basis taxpayer and the Shares are treated as being traded on an “established securities market” for this purpose, the settlement date. If the Shares are so treated and the foreign currency received is converted into US dollars on the settlement date, a cash basis or electing accrual basis US Holder generally will not recognise foreign currency gain or loss on the conversion. If the foreign currency received is not converted into US dollars on the settlement date, the US Holder will have a basis in the foreign currency equal to the US dollar value on the settlement date. Any gain or loss on a subsequent conversion or other disposition of the foreign currency generally will be treated as ordinary income or loss to such US Holder and generally will be income or loss from sources within the United States for foreign tax credit limitation purposes. Passive Foreign Investment Company Rules In general, a corporation organised or incorporated outside the United States is a PFIC in any taxable year in which, after taking into account the income and assets of certain subsidiaries, either (i) at least 75% of its gross income is classified as “passive income” or (ii) at least 50% of the average quarterly value attributable to its assets produce or are held for the production of passive income. Passive income for this purpose generally includes dividends, interest, royalties, rents and gains from commodities and securities transactions. Based on the present nature of its activities, including the planned Global Offering, and the present composition of its assets and sources of income, the Company believes that it was not a PFIC for the fiscal year ended on 31 December 2011 and does not expect to become a PFIC for the current year or for any future taxable year. There can be no assurances, however, that the Company will not be considered to be a PFIC for any particular year because PFIC status is factual in nature, generally cannot be determined until the close of the taxable year in question, and is determined annually. If the Company is classified as a PFIC in any year that a US Holder is a shareholder, the Company generally will continue to be treated as a PFIC for that US Holder in all succeeding years, regardless of whether the Company continues to meet the income or asset test described above. If the Company were a PFIC in any taxable year, materially adverse US federal income tax consequences could result for US Holders. US Information Reporting and Backup Withholding Tax A US Holder may be subject to information reporting unless it establishes that payments to it are exempt from these rules. Payments that are subject to information reporting may be subject to backup withholding if a US Holder does not provide its taxpayer identification number, or certification of exempt status, and otherwise comply with the backup withholding rules. Backup withholding is not an additional tax. Amounts withheld under the backup withholding rules are available to be credited against a US Holder’s US federal income tax liability and may be refunded to the extent they exceed such liability, provided the required information is timely provided to the IRS. Under US federal income tax law and regulations, certain categories of US persons must file information returns with respect to their investment in the equity interests of a foreign corporation. A US person that purchases Shares for cash will be required to file IRS Form 926 or similar form if the transfer, when aggregated with all transfers made by such person (or any related person) within the preceding 12 month period, exceeds US$100,000. In the event a US Holder fails to file any such required form, the US Holder could be required to pay a penalty equal to 10% of the gross amount paid for such Shares up to a maximum penalty of US$100,000. Recently enacted legislation may require individual US Holders to report to the IRS certain information with respect to their beneficial ownership of the Shares not held through an account with a financial institution. Investors who fail to report required information could be subject to substantial penalties. 138
PART XVI: THE GLOBAL OFFERING Overview of the Global Offering Pursuant to the Global Offering, we will issue 55,714,286 New Shares (representing 30.0% of the issued share capital of the Issuer immediately following Admission). Up to a further 8,357,142 Existing Shares (representing 15% of the total number of New Shares comprised in the Global Offering) may be made available in the Global Offering by certain shareholders pursuant to the Over-allotment Option described below. The Global Offering also includes an offering of New Shares (up to a maximum amount of US$ 5,000,000 at the Offer Price) to be offered, on the terms of the NMC Health plc Doctors and Key Individuals IPO Participation Plan (the “IPP”), to doctors and certain other key individuals employed by the Group in the UAE (the “Doctor Offering”). For a description of the IPP, see “Part XVII—Additional Information—12. Doctors and Key Individuals IPO Participation Plan”. The Shares to be sold under the Global Offering are expected to represent 30.0% of the expected issued ordinary share capital of the Issuer immediately following Admission assuming no exercise of the Over-allotment Option and 34.5% of the expected issued ordinary share capital of the Issuer immediately following Admission assuming full exercise of the Over-allotment Option. All Shares will be issued or sold at the Offer Price. The Offer Price per share under the Global Offering is expected to be announced via the RNS provided by the London Stock Exchange at http://www.londonstockexchange.com/rns on or around 2 April 2012. The Global Offering is being made by way of an offering of Shares to qualified investors in certain EEA member states, including to institutional investors in the UK, and to certain other investors outside the United States in offshore transactions in reliance on Regulation S and within the United States only to QIBs in reliance on Rule 144A or another exemption from, or transaction not subject to, the registration requirements of the Securities Act. Certain restrictions that apply to the distribution of this Prospectus and the Shares being issued or sold under the Global Offering in jurisdictions outside the UK are described below. The Global Offering is fully underwritten by the Underwriters in accordance with, and subject to, the terms of the Underwriting Agreement, including the satisfaction of the conditions set out therein, including Admission becoming effective by no later than 8.00 a.m. (London time) on 5 April 2012 or such later time or date (not later than 8.00 a.m. (London time) on 16 April 2012) as we may agree with the Global Coordinator. The Shares to be made available pursuant to the Global Offering will, following Admission, rank pari passu in all respects with the other Shares and will carry the right to receive all dividends and other distributions thereafter declared, made or paid on the ordinary share capital of the Issuer. Immediately following Admission, it is expected that approximately 30.0% of the Issuer’s issued ordinary share capital will be held in public hands (within the meaning of paragraph 6.1.19R of the Listing Rules) assuming that the Over-allotment Option is not exercised and 34.5% if the Over-allotment Option is exercised in full. Dealings and Admission The Global Offering is subject to the satisfaction of certain conditions contained in the Underwriting Agreement, which are typical for an agreement of this nature. Certain conditions are related to events which are outside the control of the Company, the Directors and the Underwriters. For information on the Underwriting Agreement, see “ —Underwriting Agreement”. Application has been made to the FSA for the Shares to be admitted to the premium listing segment of the Official List and to the London Stock Exchange for such Shares to be admitted to trading on the London Stock Exchange’s main market for listed securities. Prior to Admission it is expected that dealings in the Shares will commence on a conditional basis on the London Stock Exchange at 8.00 a.m. on 2 April 2012 (London time). All dealings between the commencement of conditional dealings and the commencement of unconditional dealings will be on a “when issued basis” and at the risk of the parties concerned. If the Global Offering does not become unconditional, these dealings will be of no effect. 139
Admission is expected to take place and unconditional dealings in the Shares are expected to commence on the London Stock Exchange at 8.00 a.m. on 5 April 2012 (London time). This date and time may change. When admitted to trading on the London Stock Exchange, the Shares will be registered with ISIN GB00B7FC0762 and SEDOL number B7FC076. It is expected that Shares allocated to investors in the Global Offering will be delivered in uncertificated form and settlement will take place through CREST on Admission. If applicable, definitive share certificates will be despatched from Capita Registrars. No temporary documents of title will be issued. Dealings in advance of crediting of the relevant CREST stock account(s) shall be at the sole risk of the persons concerned. The share register will be held in electronic format at Allen & Overy’s offices in London. Controlling Shareholders The following table sets forth the number of Shares held by the Existing Shareholders and the number of Shares being sold by each of the Over-allotment Shareholders.
Shareholder
Shares owned prior to the Global Offering No. %
Shares to be sold if Shares owned after the Overthe Global Offering allotment assuming no exercise of the Option is Over-allotment exercised Option in full No. % No.
Shares owned after the Global Offering if the Over-allotment Option is exercised in full No. %
H.E. Mr. Saeed Bin Butti
55,900,000
43% 55,900,000
30.1% 3,593,571
52,306,429
28.2%
Dr. B.R. Shetty
39,000,000
30% 39,000,000
21.0% 1,857,141
37,142,859
20.0%
Mr. Khalifa Bin Butti
19,500,000
15% 19,500,000
10.5% 650,000
18,850,000
10.1%
Infinite Investment LLC
15,600,000
12% 15,600,000
8.4% 2,256,430
13,343,570
7.2%
Stabilisation and over-allotment In connection with the Global Offering, Deutsche Bank, as Stabilisation Manager, or any of its agents, may (but will be under no obligation to), to the extent permitted by applicable law, over-allot up to a maximum of 15% of the Shares comprised in the Global Offering or effect other stabilisation transactions with a view to supporting the market price of the Shares at a higher level than that which might otherwise prevail in the open market. The Stabilisation Manager is not required to enter into such transactions and such stabilisation transactions may be effected on any securities market, over-the-counter market, stock exchange or otherwise and may be undertaken at any time during the period commencing on the date of the commencement of conditional dealings in the Shares on the London Stock Exchange and ending no later than 30 calendar days thereafter. However, there will be no obligation on the Stabilisation Manager or any of its agents to effect stabilising transactions and there is no assurance that stabilising transactions will be undertaken. Such stabilisation, if commenced, may be discontinued at any time without prior notice. In no event will measures be taken to stabilise the market price of the Shares above the Offer Price. Except as required by law or regulation, neither the Stabilisation Manager nor any of its agents intends to disclose the extent of any over-allotments made and/or stabilisation transactions conducted in relation to the Global Offering. For the purposes of allowing the Stabilisation Manager to cover short positions resulting from any such overallotments and/or from sales of Shares effected by it during the stabilising period described above, the Overallotment Shareholders have granted to it the Over-allotment Option, pursuant to which the Stabilisation Manager may purchase or procure purchasers for additional Shares up to a maximum of 15% of the total number of New Shares comprised in the Global Offering at the Offer Price. The Over-allotment Option is exercisable in whole or in part, upon notice by the Stabilisation Manager, at any time on or before 4:00 p.m. on the 30th calendar day after the commencement of conditional dealings. Any Over-allotment Shares made available pursuant to the Over-allotment Option will rank pari passu in all respects with the Shares, including for all dividends and other distributions declared, made or paid on the Shares, will be purchased on the same terms and conditions as the Shares being issued or sold in the Global Offering and will form a single class for all purposes with the other Shares. It is expected that the sale of additional Shares by Over-allotment Shareholders to the Stabilisation Manager and/or any purchasers procured by it pursuant to the exercise of the Over-allotment Option will be effected by means of an ‘on-exchange’ transaction for the purposes of the rules of the London Stock Exchange. 140
Any profits realised by the Stabilisation Manager as a result of stabilising transactions carried out by it during the stabilisation period will be retained by the Stabilisation Manager. Underwriting Agreement The Issuer, the Directors, the Existing Shareholders and the Over-allotment Shareholders have entered into the Underwriting Agreement. Pursuant to the Underwriting Agreement, each of the Underwriters has severally agreed, subject to certain conditions, to seek subscribers and purchasers for the Shares and each of the Underwriters has severally agreed, subject to certain conditions, to the extent that the Underwriters fail to procure subscribers or purchasers for all of the New Shares, to subscribe for or purchase, as the case may be, its agreed proportion of such unplaced Shares. All such subscriptions or purchases will be at the Offer Price. The Underwriting Agreement contains provisions entitling the Underwriters to terminate the Global Offering (and the arrangements associated with it) at any time prior to Admission in certain circumstances. If this right is exercised, the Global Offering and these arrangements will lapse and any moneys received in respect of the Global Offering will be returned to applicants without interest. The Underwriting Agreement provides for the Underwriters to be paid commissions in respect of the Shares sold and any Over-allotment Shares sold following exercise of the Over-allotment Option. The Underwriting Agreement also provides for incentive commissions to be paid by the Company and the Over-allotment Shareholders to some or all of the Underwriters in the absolute discretion of the Company and the Over-allotment Shareholders, respectively. Any commissions received by the Underwriters may be retained, and any Shares acquired by them may be retained or dealt in by them, for their own benefit. The Global Offering is conditional upon Admission becoming effective and the Underwriting Agreement becoming unconditional in accordance with its terms. Each of the Issuer, the Directors and the Existing Shareholders has given certain representations, warranties and undertakings to the Underwriters. In addition, the Issuer has given an indemnity to the Underwriters in a form that is typical for an agreement of this nature. Allocation and pricing Allocations under the Global Offering will be determined by the Sole Global Coordinator in consultation with the Company. All Shares sold pursuant to the Global Offering will be sold, payable in full, at the Offer Price. Liability for stamp duty reserve tax is described in “Part XV—Taxation”. Subject to the determination of allocations, there is no minimum or maximum number of Shares which may be applied for. Upon accepting any allocation, prospective investors are contractually committed to acquire the number of Shares allocated to them at the Offer Price and, to the fullest extent permitted by law, are deemed to have agreed not to exercise any rights to rescind or terminate, or withdraw from, such commitment. A number of factors will be considered in determining the Offer Price and basis of allocation, including the level and nature of demand for Shares and the objective of establishing an orderly after market in the Shares. Settlement The Issuer will apply for the Shares to be admitted to CREST with effect from Admission. With effect from Admission, the Articles of Association will permit the holding of Ordinary Shares in CREST. Accordingly, settlement of transactions in the Shares following Admission may take place within the CREST system. CREST is a paperless settlement procedure enabling securities to be evidenced otherwise than by a share certificate and transferred without executing written stock transfer forms. The system is designed to reduce the costs of settlement and facilitate the processing of settlements and the updating of registers through the introduction of an electronic settlement system. Shares will be held in electronic form and evidence of title to Shares will be established on an electronic register maintained by the Registrar, which can only be altered by an electronic instruction sent through CREST. CREST is a voluntary system and holders of Shares who wish to receive and retain share certificates will be able to do so. Temporary documents of title will not be issued. Lock-up arrangements The Issuer, the Directors and the Existing Shareholders have agreed to certain lock-up arrangements pursuant to the Underwriting Agreement. 141
The Issuer has agreed that, subject to certain exceptions, during the period of 365 days from the date of Admission, it will not, without the prior written consent of the Underwriters, directly or indirectly, offer, issue, lend, sell or contract to sell, issue options in respect of, or otherwise dispose of, directly or indirectly, or announce an offering or issue of, any Shares (or any interest therein or in respect thereof) or any other securities exchangeable for or convertible into, or substantially similar to, Shares or enter into any transaction with the same economic effect as, or agree to do, any of the foregoing. Each of the Directors, other than those that are also Existing Shareholders, has agreed that, subject to certain exceptions, during the period of 365 days from the date of Admission, it will not, without the prior written consent of the Underwriters, directly or indirectly, offer, lend, sell or contract to sell, issue options in respect of, or otherwise dispose of, directly or indirectly, or announce an offering of, any Shares (or any interest therein or in respect thereof) or any other securities exchangeable for or convertible into, or substantially similar to, Shares or enter into any transaction with the same economic effect as, or agree to do, any of the foregoing. Each of the Existing Shareholders has agreed that, subject to certain exceptions, during the period of 540 days from the date of Admission, it will not, without the prior written consent of the Underwriters, directly or indirectly, offer, lend, sell or contract to sell, issue options in respect of, or otherwise dispose of, directly or indirectly, or announce an offering of, any Shares (or any interest therein or in respect thereof) or any other securities exchangeable for or convertible into, or substantially similar to, Shares or enter into any transaction with the same economic effect as, or agree to do, any of the foregoing. Selling and Transfer Restrictions The distribution of this Prospectus and the offer of Shares in certain jurisdictions may be restricted by law and therefore persons into whose possession this Prospectus comes should inform themselves about and observe any such restrictions, including those in the paragraphs that follow. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction. No action has been taken or will be taken in any jurisdiction that would permit a public offering or sale of the Shares, or possession or distribution of this Prospectus (or any other offering or publicity material relating to the Shares), in any country or jurisdiction where action for that purpose is required or doing so may be restricted by law. None of the Shares may be offered for subscription, sale or purchase or be delivered, and this Prospectus and any other offering material in relation to the Shares may not be circulated, in any jurisdiction where to do so would breach any securities laws or regulations of any such jurisdiction or give rise to an obligation to obtain any consent, approval or permission or to make any application, filing or registration. No Shares have been marketed to, nor are available for purchase in whole or in part by, the public in the UK or elsewhere in conjunction with the Global Offering. This Prospectus does not constitute a public offer or the solicitation of a public offer in the UK to subscribe for or buy any securities in the Issuer or any other entity. US selling restrictions The Shares have not been, and will not be, registered under the Securities Act or with any securities regulatory authority of any state or other jurisdiction of the United States and may not be offered or sold within the United States except in transactions exempt from or not subject to the registration requirements of the Securities Act. Accordingly, the Underwriters may offer Shares (1) in the United States only through their US registered broker affiliates to persons reasonably believed to be QIBs in reliance on Rule 144A or pursuant to another exemption from, or in a transaction not subject to, the registration requirements of the Securities Act or (2) outside the United States in offshore transactions in reliance on Regulation S under the Securities Act. In addition, until 40 days after the commencement of the Global Offering, any offer or sale of Shares within the United States by a dealer (whether or not participating in the Global Offering) may violate the registration requirements of the Securities Act if such offer or sale is made otherwise than in accordance with Rule 144A or another available exemption from registration under the Securities Act.
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Due to the foregoing restrictions, purchasers of Shares in the United States are advised to consult legal counsel prior to making any offer for or any resale, pledge or other transfer of the Shares. Rule 144A transfer restrictions Each purchaser in the United States of the Shares offered hereby will be deemed to have represented and agreed that it has received a copy of this Prospectus and such other information as it deems necessary to make an investment decision and that: (a) it is (i) a QIB, (ii) acquiring such Shares for its own account or for the account of one or more QIBs with respect to whom it has the authority to make, and does make, the representations and warranties set forth in this paragraph, (iii) not acquiring the Shares with a view to further distribution of such Shares and (iv) aware, and each beneficial owner of such Shares has been advised, that the sale of Shares to it is being made in reliance on Rule 144A or another exemption from, or transaction not subject to, the registration requirements of the Securities Act; (b) it understands and agrees that the Shares have not been and will not be registered under the Securities Act or with any securities regulatory authority of any state or other jurisdiction of the United States and may not be offered, resold, pledged or otherwise transferred except (A) (i) to a person whom the purchaser and any person acting on its behalf reasonably believes is a QIB purchasing for its own account or for the account of a QIB in a transaction meeting the requirements of Rule 144A, (ii) in an offshore transaction in accordance with Rule 903 or Rule 904 of Regulation S, (iii) pursuant to an exemption from the registration requirements of the Securities Act provided by Rule 144 thereunder (if available) or (iv) pursuant to an effective registration statement under the Securities Act and (B) in accordance with all applicable securities laws of any state or other jurisdiction of the United States; (c) it acknowledges that the Shares (whether in physical, certificated form or in uncertificated form held in CREST) and any Depository Interests representing them are “restricted securities” within the meaning of Rule 144(a)(3) under the Securities Act, that the Shares are being offered and sold in a transaction not involving any public offering in the United States within the meaning of the Securities Act and that no representation is made as to the availability of the exemption provided by Rule 144 for resales of Shares; (d) it understands that any offer, sale, pledge or other transfer of the Shares made other than in compliance with the above-stated restrictions may not be recognised by the Issuer; (e) the Shares (to the extent they are in certificated form), unless otherwise determined by the Issuer in accordance with applicable law, will bear a legend substantially to the following effect: THE SECURITY EVIDENCED HEREBY HAS NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR WITH ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES AND MAY NOT BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) TO A PERSON THAT THE HOLDER AND ANY PERSON ACTING ON ITS BEHALF REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (B) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (C) PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT PROVIDED BY RULE 144 (IF AVAILABLE) OR (D) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES. NO REPRESENTATION CAN BE MADE AS TO THE AVAILABILITY OF THE EXEMPTION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT FOR RESALES OF THIS SECURITY. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER AND EACH PURCHASER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS REFERRED TO ABOVE. EACH HOLDER, BY ITS ACCEPTANCE OF THIS SECURITY, REPRESENTS THAT IT UNDERSTANDS AND AGREES TO THE FOREGOING RESTRICTIONS; 143
(f)
notwithstanding anything to the contrary in the foregoing, it understands that Shares may not be deposited into an unrestricted depository receipt facility in respect of Shares established or maintained by a depository bank unless and until such time as such Shares are no longer “restricted securities” within the meaning of Rule 144(a)(3) under the Securities Act;
(g) it acknowledges that the Issuer, the Underwriters and others will rely upon the truth and accuracy of the foregoing acknowledgements, representations and agreements and agrees that, if any of such acknowledgements, representations or agreements deemed to have been made by virtue of its acquisition of Shares are no longer accurate, it will promptly notify the Issuer, and if it is acquiring any Shares as a fiduciary or agent for one or more QIBs, it represents that it has sole investment discretion with respect to each such account and that it has full power to make the foregoing acknowledgements, representations and agreements on behalf of each such account; and (h) it agrees that it will give to each person to whom it transfers Shares notice of any restrictions on transfer of such Shares. Prospective purchasers are hereby notified that the Issuer and the sellers of the Shares may be relying on the exemption from the provisions of Section 5 of the Securities Act provided for by Rule 144A or another exception from the registration requirements of the Securities Act. Regulation S transfer restrictions Each purchaser of Shares offered outside the United States in accordance with Regulation S will be deemed to have represented, agreed and acknowledged that it has received a copy of this Prospectus, and such other information, as it deems necessary to make an investment decision and that: (a) it is authorised to consummate the purchase of the Shares in compliance with all applicable laws and regulations; (b) it acknowledges (or if it is a broker-dealer acting on behalf of a customer, its customer has confirmed to it that such customer acknowledges) that the Shares have not been, and will not be, registered under the Securities Act or with any securities regulatory authority of any state or other jurisdiction of the United States; (c) it and the person, if any, for whose account or benefit the purchaser is acquiring the Shares is purchasing the Shares in an offshore transaction meeting the requirements of Regulation S; and (d) the Issuer, the Underwriters and others will rely upon the truth and accuracy of the foregoing acknowledgements, representations and agreements and agrees that, if any of such acknowledgements, representations or agreements deemed to have been made by virtue of its purchase of Shares are no longer accurate, it will promptly notify the Issuer, and if it is acquiring any Shares as a fiduciary or agent for one or more accounts, it represents that it has sole investment discretion with respect to each such account and that it has full power to make the foregoing acknowledgements, representations and agreements on behalf of each such account. European Economic Area Each of the Underwriters has represented and agreed that in relation to each Member State of the EEA which has implemented the Prospectus Directive (each, a “Relevant Member State”), with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the “Relevant Implementation Date”), it has not made and will not make an offer of Shares to the public in that Relevant Member State prior to the publication of a prospectus in relation to the Shares which has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the Prospectus Directive, except that it may, with effect from and including the Relevant Implementation Date, make an offer of Shares to the public in that Relevant Member State at any time: • to legal entities which are qualified investors as defined under the Prospectus Directive; • to fewer than 100, or, if the Relevant Member State has implemented the relevant provisions of the 2010 PD Amending Directive, 150, natural or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of Deutsche Bank for any such offer; or • in any other circumstances falling within Article 3(2) of the Prospectus Directive,
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in each case provided that no such offer of Shares shall result in a requirement for the Company or any Underwriter to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive or any measure implementing the Prospectus Directive in a Relevant Member State and each person who initially acquires any Shares to whom any offer is made under the Global Offering will be deemed to have represented, warranted, acknowledged and agreed with each Underwriter and the Company that it is a “qualified investor” within the meaning of Article 2(1)(e) of the Prospectus Directive. Notwithstanding the above, a person who is not a qualified investor who has notified Deutsche Bank of such fact in writing may, with the consent of Deutsche Bank be permitted to subscribe for or purchase Shares in the Global Offering. For the purposes of this provision, the expression an “offer of any Shares to the public” in relation to any Shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any Shares to be offered so as to enable an investor to decide to purchase any Shares, as the same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State, the expression “Prospectus Directive” means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in each Relevant Member State and the expression “2010 PD Amending Directive” means Directive 2010/73/EU. UAE This Prospectus is strictly private and confidential and is being distributed to a limited number of selected institutional and other sophisticated investors and must not be provided to any person other than the original recipient, and may not be reproduced or used for any other purpose. By receiving this Prospectus, the person or entity to whom it has been issued understands, acknowledges and agrees that neither the Shares nor this Prospectus have been approved by or filed with the UAE Central Bank, the UAE Securities and Commodities Authority (“SCA”) or any other authorities in the UAE, nor has the placement agent, if any, received authorisation or licensing from the UAE Central Bank, SCA or any other authorities in the UAE to market or sell securities or other investments within the UAE. No marketing of any financial products or services has been or will be made from within the UAE other than in compliance with the laws of the UAE and no subscription to any securities or other investments may or will be consummated within the UAE. It should not be assumed that the placement agent, if any, is a licensed broker, dealer or investment advisor under the laws applicable in the UAE, or that it advises individuals resident in the UAE as to the appropriateness of investing in or purchasing or selling securities or other financial products. The Shares may not be offered or sold directly or indirectly to the public in the UAE. This does not constitute a public offer of securities in the UAE in accordance with the Commercial Companies Law, Federal Law No. 8 of 1984 (as amended) or otherwise. Nothing contained in this Prospectus is intended to constitute investment, legal, tax, accounting or other professional advice. This Prospectus is for your information only and nothing in this Prospectus is intended to endorse or recommend a particular course of action. Any person considering acquiring securities should consult with an appropriate professional for specific advice rendered on the basis of their respective situation. Dubai International Financial Centre This Prospectus relates to an Exempt Offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority. This Prospectus is intended for distribution only to persons of a type specified in those rules. It must not be delivered to, or relied on by, any other person. The Dubai Financial Services Authority has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The Dubai Financial Services Authority has not approved the Shares or this Prospectus nor taken steps to verify the information set out in the Prospectus, and has no responsibility for it. The Shares and interests therein to which this Prospectus relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the Shares and interests therein should conduct their own due diligence on the Shares. If you do not understand the contents of this Prospectus you should consult an authorised financial adviser. In relation to its use in the DIFC, this Prospectus is strictly private and confidential and is being distributed to a limited number of investors and must not be provided to any person other than the original recipient, and may not be reproduced or used for any other purpose. The interests in the Shares may not be offered or sold directly or indirectly to the public in the DIFC. 145
Kingdom of Saudi Arabia This Prospectus may not be distributed in the KSA except to such persons as are permitted under the Offers of Securities Regulations issued by the Capital Market Authority (the “Saudi Regulations”). The Capital Market Authority does not make any representation as to the accuracy or completeness of this Prospectus, and expressly disclaims any liability whatsoever from any loss arising from, or incurred in reliance upon, any part of this Prospectus. Prospective purchasers of the Shares should conduct their own due diligence on the accuracy of the information relating to such securities. If you do not understand the contents of this Prospectus, you should consult an authorised financial adviser. The Shares must not be advertised, offered or sold and no memorandum, information circular, brochure or any similar document has or will be distributed, directly or indirectly, to any person in the KSA other than to Sophisticated Investors ( ) within the meaning of Article 10 of the Saudi Regulations. The offer of Shares in the KSA shall not therefore constitute a “public offer” pursuant to the Saudi Regulations. Prospective investors are informed that Article 17 of the Saudi Regulations places restrictions on secondary market activity with respect to the Shares. Any resale or other transfer, or attempted resale or other transfer, made other than in compliance with the above stated restrictions shall not be recognised by us. Japan The Shares offered by this Prospectus have not been and will not be registered under the Financial Instruments and Exchange Law of Japan (the “Financial Instruments and Exchange Law”). Accordingly, Shares may not be offered or sold, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (including Japanese corporations), or to others for reoffering or resale, directly or indirectly, in Japan or to, or for the benefit of, any resident in Japan (including Japanese corporations) except with the prior approval of the Banks and pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Law and relevant regulations of Japan. Australia This Prospectus does not constitute a disclosure Prospectus under Part 6D.2 of the Corporations Act 2001 of the Commonwealth of Australia (the “Corporations Act”) and will not be lodged with the Australian Securities and Investment Commission. The Shares will be offered to persons who receive offers in Australia only to the extent that such offers of shares for issue or sale do not need disclosure to investors under Part 6D.2 of the Corporations Act. Any offer of shares received in Australia is void to the extent that it needs disclosure to investors under the Corporations Act. In particular, offers for the issue or sale of Shares will only be made in Australia in reliance on various exemptions from such disclosure to investors provided by Section 708 of the Corporations Act. Any person to whom Shares are issued or sold pursuant to an exemption provided by Section 708 of the Corporations Act must not within 12 months after the issue or sale of those Shares offered for sale in Australia unless that offer is itself made in reliance on an exemption from disclosure provided by that section. Canada The Shares may not, directly or indirectly, be offered, sold or distributed within Canada, or to, or for the benefit or account of, any resident of Canada, except in compliance with all applicable securities laws, regulations or rules of the provinces and territories of Canada and with the prior approval of Deutsche Bank. This Prospectus, or any other material relating to the Shares, may not be distributed or delivered in Canada except in compliance with all applicable securities laws, regulations or rules of the provinces and territories of Canada. Singapore This Prospectus or any other material relating to the Shares has not been and will not be registered as a prospectus with the monetary authority of Singapore. Accordingly, this Prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase of our shares may not be circulated or distributed, nor may any shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to any person in Singapore other than: (a) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289, of Singapore (the “Securities and Futures Act”); 146
(b) to a relevant person or any pursuant to Section 275(1A) of the Securities and Futures Act, and in accordance with the conditions specified in Section 275 of the Securities and Futures Act; or (c) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the Securities and Futures Act. Where Shares are subscribed for or purchased under Section 275 by a relevant person which is: (a) a corporation (which is not an accredited investor) (as defined in Section 4A of the Securities and Futures Act) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or (b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor, Shares (as defined in Section 239(1) of the Securities and Futures Act) of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the Shares pursuant to an offer made under Section 275 except to an institutional investor or to a relevant person as defined in Section 275(2) of the Securities and Futures Act, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the Securities and Futures Act: (i)
where no consideration is or will be given for the transfer;
(ii) where the transfer is by operation of law; or (iii) as specified in Section 276(7) of the Securities and Futures Act. Hong Kong No Shares have been offered or sold or will be offered or sold in Hong Kong, by means of any document, other than (a) to “professional investors” as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong (the “Securities and Futures Ordinance”) and any rules made under that Ordinance; or (b) in other circumstances which do not result in the document being a “prospectus” as defined in the Companies Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of that Ordinance. No advertisement, invitation or document relating to the Shares has been issued or has been in the possession of any person for the purposes of issue, nor will any such advertisement, invitation or document be issued or be in the possession of any person for the purpose of issue, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to Shares which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” as defined in the Securities and Future Ordinance and any rules made under the Securities and Future Ordinance. Kuwait This Prospectus is not for general circulation to the public in Kuwait. The Shares have not been licensed for offering in Kuwait by the Kuwait Capital Markets Authority or the Central Bank of Kuwait or any other relevant Kuwaiti government agency. The offering of the Shares in Kuwait on the basis of a private placement or public offering is, therefore, restricted in accordance with Decree Law No. 31 of 1990 and the implementing regulations thereto (as amended) and Law No. 7 of 2010 and the bylaws thereto (as amended). No private or public offering of the Shares is being made in Kuwait, and no agreement relating to the sale of the Shares will be concluded in Kuwait. No marketing or solicitation or inducement activities are being used to offer or market the Shares in Kuwait. Qatar The Shares have not been offered, sold or delivered, and will not be offered, sold or delivered at any time, directly or indirectly, in the state of Qatar in a manner that would constitute a public offering. This Prospectus has not been reviewed or registered with or approved by the Qatari government authorities or any other relevant Qatar regulatory body, whether under law no. 25 (2002) concerning investment funds, Central Bank Resolution no. 15 (1997), as amended, or any associated regulations. Therefore, this Prospectus is strictly private and confidential, and is being issued to a limited number of sophisticated investors, and may not be reproduced or used for any other purpose, nor provided to any person other than the recipient thereof. No general offering of the Shares has been or will be made in Qatar and the Shares may only be offered, distributed or sold in Qatar to a limited number of investors. 147
Switzerland The Shares may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange (the “SIX”) or on any other stock exchange or regulated trading facility in Switzerland. This Prospectus has been prepared without regard to the disclosure standards for the issuance of prospectuses under Article 652a or Article 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under Article 27ff of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this Prospectus nor any other offering or marketing material relating to the Shares or the offering may be publicly distributed or otherwise made publicly available in Switzerland. Neither this Prospectus nor any other offering or marketing material relating to the offering, the Company or the Shares have been or will be filed with or approved by any Swiss regulatory authority. In particular, this Prospectus will not be filed with, and the offer of Shares will not be supervised by, the Swiss Financial Market Supervisory Authority (“FINMA”), and the offer of Shares has not been and will not be authorised under the Swiss Federal Act on Collective Investment Schemes (the “CISA”). The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of Shares.
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PART XVII: ADDITIONAL INFORMATION 1.
Responsibility The Directors, whose names are set out in “Part VIII—Management and Corporate Governance—Board of Directors”, and the Company accept responsibility for the information contained in this Prospectus. To the best of the knowledge of the Directors and the Company (each of whom has taken all reasonable care to ensure that such is the case), the information contained in this Prospectus is in accordance with the facts and contains no omissions likely to affect its import.
2.
Incorporation, registered office and activity In connection with the Global Offering, the Existing Shareholders elected to implement a new holding company structure for the Oldco Group which was effected in several steps. First, the Existing Shareholders incorporated the Issuer and the New Holding Companies, NMC Holding LLC and NMC Health Holdco Limited (the sole shareholder in which is the issuer), in 2011 to serve as the new holding companies of NMC Healthcare LLC and its subsidiaries. Second, on 28 March 2012, NMC Holding LLC agreed to acquire the entire share capital of NMC Healthcare LLC (less one share), and NMC Health Holdco Limited (a wholly owned subsidiary of the Issuer) agreed to acquire the remainder of the share capital of NMC Healthcare LLC. Finally, on 28 March 2012, the Issuer agreed to acquire the entire share capital of NMC Holding LLC (less one share), and NMC Health Holdco Limited agreed to acquire the remainder of the share capital of NMC Holding LLC. The New Holding Companies have not engaged in any trading activity or other operations since their incorporation, other than the entry into agreements for the acquisitions described above and matters relating to the issue of Shares and the Global Offering.
3.
Share Capital
3.1 The Shares are denominated in pound sterling. Each Share will, on Admission, have a nominal value of 10 pence. The Shares are governed by the laws of England and Wales. The Offer Price of 210 pence per Share represents a premium of 2,000% to the nominal value of the Shares. Purchasers of Shares will not be required to pay any expenses incurred in connection with the Global Offering. 3.2 On incorporation on 20 July 2011, our initial registered paid up capital was £100 divided into 100 ordinary shares of 100 pence each. Our initial paid up capital was subscribed to by Dr. B.R. Shetty, Mr. Khalifa Bin Butti, H.E. Mr. Saeed Bin Butti and Infinite Investment LLC. 3.3 By a resolution of the Company passed on 28 March 2012: (a) the Company adopted the new articles of association of the Company as described in “Part XVII—Additional Information—4.Our Articles”; (b) each of the existing ordinary shares of £1 were sub-divided into 10 ordinary shares of 10 pence each; (c) the Directors were generally authorised, in accordance with section 551 of the Companies Act 2006, to exercise all powers of the Company to allot shares in the Company or grant rights to subscribe for, or convert any security into, shares in the Company, this authority being limited to: (i)
up to a maximum nominal amount of £18,571,328.60 in respect of: (A) the proposed allotment to the Existing Shareholders of 129,999,000 Shares in consideration for the transfer to the Company (and/or its nominee) of the entire issued share capital of NMC Holding LLC; and (B) the proposed allotment, on the recommendation of the directors, of 55,714,286 Shares in connection with the Global Offer;
(ii) up to a maximum nominal amount of £6,190,476.20 (such amount to be reduced by the nominal amount of any equity securities (as defined in section 560 of the Companies Act 2006) allotted under paragraph (iii) below in excess of £6,190,476.20); and (iii) comprising equity securities (as defined in section 560 of the Companies Act 2006) up to a maximum nominal amount of £12,380,952.40 (such amount to be reduced by any shares allotted or rights granted under paragraph (ii) above) in connection with an offer by way of a rights issue: (A) to holders of ordinary shares in proportion (as nearly as may be practicable) to their existing holdings; and (B) to holders of other equity securities if this is required by the rights of those securities or, if the directors consider it necessary, as permitted by the rights of those securities; 149
and so that the directors may make such exclusions or other arrangements as they consider expedient in relation to treasury shares, fractional entitlements, record dates, shares represented by depositary receipts, legal or practical problems under the laws in any territory or the requirements of any relevant regulatory body or stock exchange or any other matter, and such authority to expire at the conclusion of the next annual general meeting of the Company after the passing of this resolution or, if earlier, at the close of business on 30 June 2013; and (d) the Directors were given power to allot equity securities (as defined in section 560 of the Companies Act 2006) for cash pursuant to the authority referred to in sub-paragraph (b) above under section 551 of the Companies Act 2006 and to allot equity securities (as defined in section 560(3) of the Companies Act 2006, in either case as if section 561 of the Companies Act 2006 did not apply to the allotment, but this power, which expires at the conclusion of the next annual general meeting of the Company after the passing of this resolution or, if earlier, at the close of business on 30 June 2013, was limited to: (i)
to the allotment of equity securities in connection with an offer or issue of equity securities (but in the case of the authority granted under paragraph (c)(iii) above, by way of a rights issue only) to or in favour of: (A) holders of ordinary shares in proportion (as nearly as may be practicable) to their existing holdings; and (B) holders of other equity securities if this is required by the rights of those securities or, if the directors consider it necessary, as permitted by the rights of those securities; and so that the directors may make such exclusions or other arrangements as they consider expedient in relation to treasury shares, fractional entitlements, record dates, shares represented by depositary receipts, legal or practical problems under the laws in any territory or the requirements of any relevant regulatory body or stock exchange or any other matter;
(ii) to the proposed allotment to the Existing Shareholders of 129,999,000 Shares in consideration for the transfer to the Company (and/or its nominee) of the entire issued share capital of NMC Holding LLC; (iii) to the proposed allotment, on the recommendation of the directors, of 55,714,286 ordinary shares of 10 pence each in the Company in connection with the Global Offer; and (iv) to the allotment of equity securities pursuant to the authority granted under paragraph (c) above and/or by virtue of section 560(3) of the Companies Act 2006 (in each case other than under paragraphs (i), (ii) and (iii) above) up to a maximum nominal amount of £928,571.43. 3.4 On 28 March 2012, the share capital of the Company was increased to £13,000,000 by the issue of 129,999,000 ordinary shares of 10 pence each to the Existing Shareholders in consideration for the transfer to the Issuer of NMC Holding LLC. 3.5 Section 561 of the Companies Act 2006 confers on shareholders certain rights of pre-emption in respect of the allotment of equity securities which are, or are to be, paid up in cash other than by way of allotment to employees under an employee’s share scheme as defined in section 1166 of the Companies Act 2006. Following Admission, the Company will be subject to the continuing obligations of the Listing Rules with regard to the issue of securities for cash and the statutory rights of pre-emption in section 561 of the Companies Act 2006. The statutory rights of pre-emption apply to the issue of new shares of the Company which is not the subject of the disapplication referred to in paragraph 3.3(d) above or reserved for issue in connection with share options and schemes (and other arrangements). The statutory rights of pre-emption have been disapplied as set out in paragraph 3.3 to: (a) permit the Directors to allot the Shares under the Global Offer; (b) allow the Company to conduct a rights issue or open offer; and (c) permit the Directors to allot Shares for cash following the Global Offer having a nominal value of up to 5% of the issued ordinary share capital following Admission. 3.6 Other than as disclosed in “Part VIII—Management and Corporate Governance—Compensation”, as at the date of this Prospectus: • there are no acquisition rights and/or obligations over Shares in the capital of the Company and the Company has given no undertaking to allot Shares in the capital of the Company; and • no capital of any of the Company or its subsidiaries is under option or is agreed, conditionally or unconditionally, to be put under option. 150
3.7 The Shares in issue on Admission will be in registered form and, following Admission, will be capable of being held in uncertificated form. None of the Shares are being marketed or made available in whole or in part to the public in conjunction with the applications for Admission other than pursuant to the Global Offering. 3.8 It is anticipated that, where appropriate, share certificates will be despatched by first class post by 13 April 2012. Temporary documents of title will not be issued. Prior to the despatch of definitive share certificates, transfers will be certified against the register. 3.9 The legislation under which the Shares have been created is English Law. 3.10 The Shares will, on Admission, rank pari passu in all respects and will rank in full for all dividends and other distributions thereafter declared, made or paid on the ordinary share capital of the Company. 4.
Our Articles The articles of association of the Company, which have been adopted prior to Admission, include provisions to the following effect: (a) Objects The objects of the Company, in accordance with section 31(1) of the Act, are unrestricted. (b) Limited liability The liability of the members is limited to the amount, if any, unpaid on the shares in the Company respectively held by them. (c) Rights attaching to ordinary shares (i)
Voting rights of members—subject to disenfranchisement in the event of (A) non-payment of any call or other sum payable in respect of any share or (B) any non-compliance with any statutory notice requiring disclosure of the beneficial ownership of any shares and subject to any special rights or restrictions as to voting for the time being attached to any shares (as to which there are none at present). On a show of hands, every member or authorised corporate representative present has one vote and every proxy present has one vote except if the proxy has been duly appointed by more than one member and has been instructed by (or exercises his discretion given by) one or more of those members to vote for the resolution and has been instructed by (or exercises his discretion given by) one or more other of those members to vote against it, in which case a proxy has one vote for and one vote against the resolution. On a poll, every member present in person or by proxy has one vote for every share of which he is a holder. In the case of joint holders, the vote of the person whose name stands first in the register of members and who tenders a vote is accepted to the exclusion of any votes tendered by any other joint holders.
(ii) Dividends—subject to the rights attached to any shares issued on any special terms and conditions (as to which there are none at present), dividends shall be declared and paid according to the amounts paid up on the shares in respect of which the dividend is paid, but no amount paid up on a share in advance of calls should be treated for these purposes as paid up on the share. (iii) Return of capital—if the Company is in liquidation, the liquidator may, with the sanction of a special resolution of the Company and any other authority required by any applicable statutory provision (A) divide among the members in specie the whole or any part of the assets of the Company; or (B) vest the whole or any part of the assets in trustees on such trusts for the benefit of members as the liquidator shall think fit, but no member shall be compelled to accept any assets upon which there is any liability. (iv) Capitalisation of reserves—the Board may, with the authority of an ordinary resolution of the Company (A) resolve to capitalise any sum standing to the credit of any reserve account of the Company (including share premium account and capital redemption reserve) or any sum standing to the credit of profit and loss account not required for the payment of any preferential dividend (whether or not it is available for distribution); and (B) appropriate that sum as capital to the holders of ordinary shares in proportion to the nominal amount of the ordinary share capital held by them respectively and apply that sum on their behalf in paying up in full any shares or debentures of the Company of a nominal amount equal to that sum and allot the shares or debentures credited as fully paid to those members, or as they may direct, in those proportions or in paying up the whole or part of any amounts which are unpaid in respect of any issued shares in the Company held by them respectively, or otherwise deal with such sum as directed by the 151
resolution provided that the share premium account and the capital redemption reserve, and any sum not available for distribution in accordance with the statutes may only be applied in paying up unissued shares to be allotted credited as fully paid up. (d) Transfer of shares A member may transfer all or any of his shares in any manner which is permitted by any applicable statutory provision and is approved by the Board. The Company shall maintain a record of uncertificated shares in accordance with the relevant statutory provisions. A member may transfer all or any of his certificated shares by an instrument of transfer in any usual form, or in such other form as the Board may approve. The instrument of transfer shall be signed by or on behalf of the transferor and, except in the case of a fully paid share, by or on behalf of the transferee. The Board may, in its absolute discretion, refuse to register any instrument of transfer of any certificated share which is not fully paid up (but not so as to prevent dealings in listed shares from taking place on an open and proper basis) or on which the Company has a lien as a result of such share not being fully paid up. The Board may also refuse to register any instrument of transfer of a certificated share unless it is left at the registered office, or such other place as the Board may decide, for registration, accompanied by the certificate for the shares to be transferred and such other evidence (if any) as the Board may reasonably require to prove title of the intending transferor and it is in the respect of only one class of shares. If the Board refuses to register a transfer of a certificated share it shall, as soon as practicable and in any event within two months after the date on which the instrument of transfer was lodged, send to the transferee notice of the refusal together with its reasons for refusal. The Board must provide the transferee with such further information about the reasons for the refusal as the transferee may reasonably request. Unless otherwise agreed by the Board in any particular case, the maximum number of persons who may be entered on the register as joint holders of a share is four. (e) Alteration of share capital The Company may exercise the powers conferred by the applicable statutory provisions to: (i)
increase its share capital by allotting new shares;
(ii) reduce its share capital, any capital redemption reserve and any share premium account in any way; (iii) sub-divide or consolidate and divide all or any of its share capital; (iv) redenominate all or any of its shares and reduce its share capital in connection with such redenomination; (v) issue redeemable shares; and (vi) purchase all or any of its own shares including any redeemable shares. (f)
Authority to allot shares and grant rights and disapplication of pre-emption rights The Company may from time to time pass an ordinary resolution authorising, in accordance with section 551 of the Act, the Board to exercise all the powers of the Company to allot shares in the Company or to grant rights to subscribe for or to convert any security into shares in the Company up to the maximum nominal amount specified in the resolution. The authority shall expire on the day specified in the resolution (not being more than five years from the date on which the resolution is passed). Subject (other than in relation to the sale of treasury shares) to the Board being generally authorised to allot shares and grant rights to subscribe for or to convert any security into shares in the Company in accordance with section 551 of the Act, the Company may from time to time resolve, by special resolution, that the Board be given power to allot equity securities for cash as if section 561(1) of the Act did not apply to the allotment but that power shall be limited (A) to the allotment of equity securities in connection with a rights issue; and (B) to the allotment (other than in connection with a rights issue) of equity securities having a nominal amount not exceeding in aggregate the sum specified in the special resolution.
(g) Variation of rights Whenever the share capital of the Company is divided into different classes of shares (which it is not as at the date of this document), all or any of the rights for the time being attached to any class of shares may from time to time (whether or not the Company is being wound-up) be varied in such manner as those rights may provide or (if no such provision is made) either with the consent in writing of the 152
holders of three-fourths in nominal value of the issued shares of that class or with the authority of a special resolution passed at a separate general meeting of the holders of those shares. At any separate general meeting, the quorum is two members present in person or proxy holding at least one-third in nominal amount of the issued shares of the class in question (but at any adjourned meeting, the quorum is one member present in person or by proxy holding shares of the class). (h) Disclosure of interests in shares If the holder of, or any person appearing to be interested in, any share has been given a notice requiring any of the information mentioned in section 793 of the Companies Act 2006 (“section 793 notice”) and, in respect of that share (a “default share”), has been in default for a period of 14 days after the section 793 notice has been given in supplying to the Company the information required by the section 793 notice, the following restrictions shall apply: (A) if the default shares in which any one person is interested or appears to the Company to be interested represent less than 0.25% of the issued shares of the class, the holders of the default shares shall not be entitled, in respect of those shares, to attend or to vote, either personally or by proxy, at any general meeting of the Company; or (B) if the default shares in which any one person is interested or appears to the Company to be interested represent at least 0.25% of the issued shares of the class, the holders of the default shares shall not be entitled, in respect of those shares: (i)
to attend or to vote, either personally or by proxy, at any general meeting of the Company; or
(ii) to receive any dividend or other distribution; or (iii) to transfer or agree to transfer any of those shares or any rights to them. (i)
Uncertificated shares—general powers In relation to any uncertificated share, the Company may utilise the relevant system in which it is held to the fullest extent available from time to time in the exercise of any of its powers or functions under any applicable statutory provision or the articles of association or otherwise in effecting any action. Any provision in the articles of association in relation to uncertificated shares which is inconsistent with any applicable statutory provision shall not apply. The Company may, by notice to the holder of an uncertificated share, require the holder to change the form of that share to certificated form within such period as may be specified in the notice. For the purpose of effecting any action by the Company, the Board may determine that shares held by a person in uncertificated form and in certificated form shall be treated as separate holdings but they shall not be treated as separate classes of shares.
(j)
Directors (i)
The directors (other than alternate directors) shall not, unless otherwise determined by an ordinary resolution of the Company, be less than two nor more than eight in number.
(ii) A director need not be a member of the Company. (iii) At each annual general meeting each director then in office shall retire from office but he shall be eligible for re-election. (iv) The directors shall be paid such fees not exceeding in aggregate £1,000,000 per annum (or such larger sum as the Company may, by ordinary resolution, determine) as the directors may decide to be divided among them in such proportion and manner as they may agree, or failing agreement, equally. (v) The Board may grant special remuneration to any director who performs any special or extra services to or at the request of the Company. Such special remuneration may be paid by way of lump sum, salary, commission participation in profits or otherwise as the Board may decide in addition to his ordinary remuneration (if any) as a director. (vi) The directors shall also be paid out of the funds of the Company all expenses properly incurred by them in and about the discharge of their duties, including their expenses of travelling to and from the Board meetings, committee meetings and general meetings. (vii) The Board may exercise all the powers of the Company to: (A) pay, provide, arrange or procure the grant of pensions or other retirement benefits, and death, disability or sickness benefits, health, accident and other insurances or other such benefits, allowances, gratuities or insurances, including in relation to the termination of employment, to or for the benefit of any person who is or has been at any time a director of the Company or in the employment or service of the Company or of any body corporate which is or was 153
associated with the Company or of the predecessors in business of the Company or any such associated body corporate or the relatives or dependants of any such person. For that purpose the Board may procure the establishment and maintenance of, or participation in, or contribution to, any pension fund, scheme or arrangement or the payment of any insurance premiums; (B) establish, maintain, adopt and enable participation in any profit sharing or incentive scheme including shares, share options or cash or any similar schemes for the benefit of any director or employee of the Company or of any associated body corporate, and to lend money to any such director or employee or to trustees on their behalf to enable any such schemes to be established, maintained or adopted; and (C) support and subscribe to any institution or association which may be for the benefit of the Company or of any associated body corporate or any directors or employees of the Company or associated body corporate or their relatives or dependants or connected with any town or place where the Company or an associated body corporate carries on business, and to support and subscribe to any charitable or public object whatsoever. (viii)If a situation (a “Relevant Situation”) arises in which a director has, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the Company but which does not arise in relation to a transaction or arrangement with the Company, the director must declare the nature and extent of his interest to the other directors and the directors (other than the director, and any other director with a similar interest, who shall not be counted in the quorum at the meeting and shall not vote on the resolution) may (i) if the Relevant Situation arises from the appointment or proposed appointment of a person as a director of the Company, resolve to authorise the appointment of the director and the Relevant Situation on such terms as they may determine and (ii) if the Relevant Situation arises in other circumstances, resolve to authorise the Relevant Situation and the continuing performance by the director of his duties on such terms as they may determine. Any terms of such authorisation may be imposed at the time of the authorisation or may be imposed or varied subsequently and may include (without limitation): (A) whether the interested directors may vote (or be counted in the quorum at a meeting) in relation to any resolution relating to the Relevant Situation; (B) the exclusion of the interested directors from all information and discussion by the Company of the Relevant Situation; and (C) (without prejudice to the general obligations of confidentiality) the application to the interested directors of a strict duty of confidentiality to the Company for any confidential information of the Company in relation to the Relevant Situation. Any authorisation of a Relevant Situation may provide that, where the interested director obtains (other than through his position as a director of the Company) information that is confidential to a third party, he will not be obliged to disclose it to the Company or to use it in relation to the Company’s affairs in circumstances where to do so would amount to a breach of that confidence. (ix) If a director is in any way, directly or indirectly, interested in a proposed or an existing transaction or arrangement with the Company, he must declare the nature and extent of that interest to the other directors. (x) Subject to any applicable statutory provisions and to having declared his interest to the other directors, a director may: (i)
enter into or be interested in any transaction or arrangement with the Company, either with regard to his tenure of any office or position in the management, administration or conduct of the business of the Company, or as vendor, purchaser or otherwise;
(ii) hold and be remunerated in respect of any other office or place of profit with the Company (except that of auditor) in conjunction with his office of director; (iii) act by himself or his firm in a professional capacity for the Company (except as auditor) and be entitled to remuneration for professional services as if he were not a director; (iv) be or become a member or director of, or hold any other office or place of profit under, or otherwise be interested in, any holding company or subsidiary undertaking of that holding company or any other company in which the Company may be interested; and 154
(v) be or become a director of any other company in which the Company does not have an interest if that cannot reasonably be regarded as likely to give rise to a conflict of interest at the time of his appointment as a director of that other company. (xi) A director shall not vote (or be counted in the quorum at a meeting) in respect of any resolution concerning his own appointment (including fixing and varying its terms), or the termination of his own appointment, as the holder of any office or place of profit with the Company or any other company in which the Company is interested but, where proposals are under consideration concerning the appointment (including fixing or varying its terms), or the termination of the appointment, of two or more directors to offices or places of profit with the Company or any company in which the Company is interested, those proposals may be divided and considered in relation to each director separately; and in such case each of the directors concerned (if not otherwise debarred from voting under the articles of association) shall be entitled to vote (and be counted in the quorum) in respect of each resolution except that concerning his own appointment or the termination of his own appointment. (xii) A director shall not vote (or be counted in the quorum at a meeting) in respect of any transaction or arrangement with the Company in which he has an interest which may reasonably be regarded as likely to give rise to a conflict of interest. Notwithstanding the above, a director may vote (and be counted in the quorum) on: (A) any transaction or arrangement in which he is interested by virtue of an interest in shares, debentures or other securities of the Company or otherwise in or through the Company; (B) the giving of any guarantee, security or indemnity in respect of money lent or obligations incurred by him or by any other person at the request of, or for the benefit of, the Company or any of its subsidiary undertakings; or a debt or obligation of the Company or any of its subsidiary undertakings for which he himself has assumed responsibility in whole or in part (either alone or jointly with others) under a guarantee or indemnity or by the giving of security; (C) indemnification (including loans made in connection with it) by the Company in relation to the performance of his duties on behalf of the Company or of any of its subsidiary undertakings; (D) any issue or offer of shares, debentures or other securities of the Company or any of its subsidiary undertakings in respect of which he is or may be entitled to participate in his capacity as holder of any such securities or as an underwriter or sub-underwriter; (E) any transaction or arrangement concerning any other company in which he does not hold, directly or indirectly as shareholder, or through his direct or indirect holdings of financial instruments (within the meaning of Chapter 5 of the Disclosure and Transparency Rules) voting rights representing 1% or more of any class of shares in the capital of such company; (F) any arrangement for the benefit of employees of the Company or any of its subsidiary undertakings which does not accord to him any privilege or benefit not generally accorded to the employees to whom the arrangement relates; and (G) the purchase or maintenance of insurance for the benefit of directors or for the benefit of persons including directors. (k) General meetings An annual general meeting shall be held in accordance with the applicable statutory provisions at such place as may be determined by the Board. Other general meetings shall be held whenever the Board thinks fit or on the requisition of shareholders in accordance with the Act. Subject to the applicable statutory provisions, an annual general meeting shall be called by at least 21 days’ notice and all other general meetings shall be called by not less than 14 days’ notice or by not less than such minimum notice period as is permitted by the applicable statutory provisions. The requisite quorum for general meetings of the Company shall be two qualifying persons, representing different members and entitled to vote on the business to be transacted at the meeting. A qualifying person is an individual who is a member of the Company; a corporate representative; or a proxy. (l)
Borrowing powers The Board may exercise all the powers of the Company to borrow money (subject to the borrowing limits set out in the Articles) and to mortgage or charge all or any part of its undertaking, property and assets (both present and future) and uncalled capital and to issue debentures and other securities, whether outright or as collateral security for any debt, liability or obligations of the Company or of any third party.
(m) Change of name The Board may change the name of the Company. 155
(n) Dividends (i)
Declaration of dividends—the Company may, by ordinary resolution, declare a dividend to be paid to the members, according to their respective rights and interests in the profits, and may fix the time for payment of such dividend, but no dividend shall exceed the amount recommended by the Board.
(ii) Fixed and interim dividends—the Board may pay such interim dividends as appear to the Board to be justified by the financial position of the Company and may also pay any dividend payable at a fixed rate at intervals settled by the Board whenever the financial position of the Company, in the opinion of the Board, justifies its payment. If the Board acts in good faith, none of the directors shall incur any liability to the holders of shares conferring preferred rights for any loss such holders may suffer in consequence of the payment of an interim dividend on any shares having non-preferred or deferred rights. (iii) Calculation and currency of dividends—except insofar as the rights attaching to, or the terms of issue of, any share otherwise provide (A) all dividends shall be declared and paid according to the amounts paid up on the shares in respect of which the dividend is paid, but no amount paid up on a share in advance of calls shall be treated as paid up on the share; (B) all dividends shall be apportioned and paid pro rata according to the amounts paid up on the shares during any portion or portions of the period in respect of which the dividend is paid; and (C) dividends may be declared or paid in any currency and the Board may agree with any member that dividends which may at any time or from time to time be declared or become due on his shares in one currency shall be paid or satisfied in another, and may agree the basis of conversion to be applied and how and when the amount to be paid in the other currency shall be calculated and paid and for the Company or any other person to bear any costs involved. (iv) Dividends not to bear interest—no dividend or other moneys payable by the Company on or in respect of any share shall bear interest as against the Company unless otherwise provided by the rights attached to the share. (v) Calls or debts may be deducted from dividends—the Board may deduct from any dividend or other moneys payable to any person (either alone or jointly with another) on or in respect of a share all such sums as may be due from him (either alone or jointly with another) to the Company on account of calls or otherwise in relation to shares of the Company. (vi) Dividends in specie—with the authority of an ordinary resolution of the Company and on the recommendation of the Board, payment of any dividend may be satisfied wholly or in part by the distribution of specific assets and in particular of paid up shares or debentures of any other company. (vii) Scrip dividends—the Board may, with the authority of an ordinary resolution of the Company, offer any holders of any particular class of shares the right to elect to receive further shares of that class by way of scrip dividend instead of cash in respect of all (or some part) of any dividend specified by the ordinary resolution. (viii)Unclaimed dividends—any dividend unclaimed for a period of 12 years after having become due for payment shall be forfeited and cease to remain owing by the Company. (o) Forfeiture of shares If the whole or any part of any call or instalment remains unpaid on any share after the due date for payment, the Board may give a notice to the holder requiring him to pay so much of the call or instalment as remains unpaid, together with any accrued interest. If the requirements of a notice are not complied with, any share in respect of which it was given may (before the payment required by the notice is made) be forfeited by a resolution of the Board. The forfeiture shall include all dividends declared and other moneys payable in respect of the forfeited share and not actually paid before the forfeiture. Every share which is forfeited or surrendered shall become the property of the Company and (subject to the applicable statutory provisions) may be sold, re-allotted or otherwise disposed of, upon such terms and in such manner as the Board shall decide either to the person who was before the forfeiture the holder of the share or to any other person and whether with or without all or any part of the amount previously paid up on the share being credited as so paid up. 156
(p) Communications by the Company Subject to the applicable statutory provisions, a document or information may be sent or supplied by the Company to any member in electronic form to such address as may from time to time be authorised by the member concerned or by making it available on a website and notifying the member concerned (by post or other permitted means) of the presence of a document or information on the website. Before communicating with a member by means of its website, the Company must have asked each member, individually, to agree that the Company may send or supply documents or information to him by means of a website and the Company must either have received a positive response or received no response within the period of 28 days beginning with the date on which the Company’s request was sent. (q) Directors’ indemnity, insurance and defence As far as the applicable statutory provisions allow, the Company may: (i)
indemnify any director of the Company (or of an associated body corporate) against any liability;
(ii) indemnify a director of a company that is a trustee of an occupational pension scheme for employees (or former employees) of the Company (or of an associated body corporate) against liability incurred in connection with the company’s activities as trustee of the scheme; (iii) purchase and maintain insurance against any liability for any director referred to in (i) or (ii) above; and (iv) provide any director referred to in (i) or (ii) above with funds (whether by loan or otherwise) to meet expenditure incurred or to be incurred by him in defending any criminal, regulatory or civil proceedings or in connection with an application for relief (or to enable any such director to avoid incurring such expenditure). 5.
Ownership Restrictions under the UAE Companies Law The UAE Companies Law, together with related UAE regulations and policies, provides that every company incorporated in the UAE must have one or more shareholders who are UAE nationals or entities (or nationals or entities of other states of the GCC) who hold not less than 51% of that company’s share capital. As a result, a foreign person or entity may only own up to 49% of the shares of a company incorporated under the Ownership Restriction. NMC Holdings, our intermediate holding company which holds, directly or indirectly, all of our operating assets, is wholly-owned by the Issuer and NMC Health Holdco Limited, which are both companies incorporated in England and Wales. The constitutional documents of NMC Holdings have, with the approval of the Ministry of Economy, the competent authority in respect of NMC Holdings, been amended such that: • the objects of NMC Holdings have been extended to include certain activities that it does not currently perform with the result that it is no longer a company to which the UAE Companies Law applies to the extent provided in its constitutional documents; and • the constitutional documents of NMC Holdings expressly provide for a Foreign Ownership Approval stating that the shares held by UAE nationals or entities in NMC Holdings may be less than 51%. As a result, the Ownership Restriction does not currently apply to NMC Holdings. There is a risk that the Foreign Ownership Approval may be revoked or revised by the Ministry of Economy or challenged in the courts of the UAE by a third party. While we believe that the Foreign Ownership Approval is valid, the laws of Abu Dhabi and the federal laws of the UAE are not capable of conclusive interpretation and, as no general system of binding judicial precedent exists in the UAE, the interpretation of UAE law may not follow prior judicial decisions. If the Foreign Ownership Approval were to be revoked or disapplied by a UAE court, NMC Holdings would be in breach of the Ownership Restriction. This could subject us to sanctions from the UAE authorities that could require the Issuer to dispose of a majority stake in NMC Holdings. If the Directors were not able to mitigate the effect on us, this could have a material adverse effect on our business, financial condition and results of operations. In such circumstances, the Directors would seek to mitigate the effect on us by implementing a structure whereby a majority stake in NMC Holdings would be held by a UAE national, but the economic benefit and control attaching to those shares would be retained by us. 157
6.
Directors and Senior Management
6.1 The biographies of the Directors and Senior Management are set out in “Part VIII—Management and Corporate Governance”. 6.2 In addition to their directorships of the Issuer and or the Issuer’s subsidiaries, the Directors and Senior Management hold, or have held, the following directorships and are or were members of the following partnerships, within the past five years: Current or former directorships/partnerships
Name
H.E. Mr. Saeed Bin Butti H.E. Mr. Saeed Bin Butti Mr. Khalifa Bin Butti Mr. Khalifa Bin Butti Mr. Khalifa Bin Butti Mr. Khalifa Bin Butti Mr. Khalifa Bin Butti Mr. Khalifa Bin Butti Mr. H.J. Mark Tompkins Mr. H.J. Mark Tompkins Mr. H.J. Mark Tompkins Mr. H.J. Mark Tompkins Mr. H.J. Mark Tompkins Mr. H.J. Mark Tompkins Mr. Justin A.S. Jewitt Mr. Justin A.S. Jewitt Mr. Justin A.S. Jewitt Mr. Justin A.S. Jewitt Mr. Justin A.S. Jewitt Mr. Justin A.S. Jewitt Mr. Patrick James Meade Mr. Patrick James Meade Mr. Patrick James Meade Mr. Patrick James Meade Mr. Binay Shetty Mr. Binay Shetty Mr. Binay Shetty Mr. Binay Shetty Mr. Binay Shetty Mr. Binay Shetty Mr. Binay Shetty Mr. Binay Shetty Mr. Binay Shetty Mr. Binay Shetty Mr. Binay Shetty Mr. Binay Shetty Mr. Binay Shetty Mr. Binay Shetty Mr. Binay Shetty Mr. Binay Shetty Mr. Binay Shetty Mr. Binay Shetty Mr. Binay Shetty Mr. Binay Shetty Mr. Binay Shetty Mr. Binay Shetty Dr. B.R. Shetty Dr. B.R. Shetty Dr. B.R. Shetty Dr. B.R. Shetty
Centurion Investments Infinite Investment LLC BHS KBBO Group Capital Bank One Financial Markets Centurion Investments Infinite Investment LLC Sodexo S.A. Allied Healthcare International Healthcare Enterprise Group PLC Vialogy PLC Partners Holdings PLC Calcitech Ltd. Nestor Healthcare Group PLC South Staffs Water Company PLC HomeServe PLC Fionnel Group Pty Home Choice Care Ltd NHS SBS Ltd Eurasia Drilling Company Limited Polyus Gold OJSC Gardant Communications Limited Touchstone Limited UAE Exchange LLC UAE Exchange Centre LLC Fast Remit Sdn Bhd UAE Exchange UK Limited UAE Exchange Centre Co. Bahrain WLL Money Dart Global Services Inc UAE Exchange Japan KK UAE Exchange New Zealand Pty Ltd UAE Exchange Fiji Pty Ltd Jordan UAE Exchange Co. LLC UAE Exchange (Rwanda) Ltd UAE Exchange Forex Bureau (K) Ltd XM Services Botswana Bureau de Change Pty Ltd UAE Exchange (Seychelles) Ltd UAE Exchange Canada Inc. Xpress Money Services Inc. Xpress Money Services (Canada) Ltd XM Services (Mauritius) Pvt Ltd XM Software Solutions Pvt Ltd UAE Exchange Morocco SA NMC Alexandria Hospital Deira Private School UAE Exchange Centre LLC UAE Exchange Australia Pty Ltd UAE Exchange Hong Kong Ltd Fast Remit Sdn Bhd 158
Position still held (Y/N)
Y Y Y Y N Y Y Y Y(1) N N N N N N N N N Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y
Current or former directorships/partnerships
Name
Dr. B.R. Shetty Dr. B.R. Shetty Dr. B.R. Shetty Dr. B.R. Shetty Dr. B.R. Shetty Dr. B.R. Shetty Dr. B.R. Shetty Dr. B.R. Shetty Dr. B.R. Shetty Dr. B.R. Shetty Dr. B.R. Shetty Dr. B.R. Shetty Dr. B.R. Shetty Dr. B.R. Shetty Dr. B.R. Shetty Dr. B.R. Shetty Dr. B.R. Shetty Dr. B.R. Shetty Dr. B.R. Shetty Dr. B.R. Shetty Dr. B.R. Shetty Dr. B.R. Shetty Dr. B.R. Shetty Dr .B.R. Shetty Dr. B.R. Shetty Dr. B.R. Shetty Dr. B.R. Shetty Dr. B.R. Shetty Dr. B.R. Shetty Dr. B.R. Shetty Dr. B.R. Shetty Dr. B.R. Shetty Dr. B.R. Shetty Dr. B.R. Shetty Dr. B.R. Shetty Dr. B.R. Shetty Dr. C.R. Shetty Dr. C.R. Shetty Mrs. Heather Lawrence
UAE Exchange UK Limited UAE Exchange Centre Co. Bahrain WLL UAE Exchange Japan KK UAE Exchange New Zealand Ltd UAE Exchange Fiji Pty Ltd Jordan UAE Exchange Co. LLC Oman & UAE Exchange Centre Co. LLC UAE Exchange Centre WLL UAE Exchange (U) Ltd UAE Exchange (Rwanda) Ltd UAE Exchange Forex Bureau (K) Ltd XM Services Botswana Bureau de Change Pty Ltd UAE Exchange (Seychelles) Ltd UAE Exchange Canada Inc. UAE Exchange & Financial Services Ltd Xpress Money Services Ltd XM Services (Australia) Ptyt Ltd XM Services (Mauritius) Pvt Ltd UAE Exchange & Finance Ltd XM Software Solutions Pvt Ltd Kuwait National Exchange WLL Xpress Consulting Services Ltd UAE Exchange Morocco SA XM Software Solutions Pvt Ltd XM Services India Pvt Ltd B R Property Developers Pvt Ltd B R Motors Pvt Ltd NEOTEL HOTELS & RESORTS LIMITED SHETTY’S NEW MEDICAL CENTRE PVT LTD BRS EXIMS PRIVATE LIMITED NMC Alexandria Hospital NMC Healthcare LLC International Kindergarten School International Kindergarten School – Br. Nivea Haus LLC Deira Private School UAE Exchange & Financial Services, India UAE Exchange & Finance Limited Chelsea and Westminster Hospital NHS Foundation Trust
Position still held (Y/N)
Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y
Note: (1) In relation to Sodexo S.A., Mr. Tompkins was an non-executive director from 19 November 2001 until 31 October 2010 and is currently Conseiller Special aupres du Conseil D’Administration to the board.
6.3 At the date of this Prospectus, none of the Directors or members of Senior Management has at any time in the five years preceding the date of this Prospectus: 1.
save as disclosed in this paragraph 6, been a director or partner of any companies or partnerships; or
2.
had any convictions in relation to fraudulent offences (whether spent or unspent); or
3.
been adjudged bankrupt or entered into an individual voluntary arrangement; or
4.
been a director of any company that has entered into receivership, compulsory liquidation, creditors’ voluntary liquidation, administration, company voluntary arrangement or any composition or arrangement with that company’s creditors generally or with any class of its creditors; or
5.
been a partner or senior manager in any partnership that has entered into any compulsory liquidation, administration or partnership voluntary arrangement of such partnership; or
6.
owned any assets which have formed the subject of any receivership or has been a partner of a partnership that has had any assets thereof being the subject of a receivership; or 159
7.
7.
been subject to any official public incrimination and/or sanctions by any statutory or regulatory authority (including any designated professional body); or
8.
ever been disqualified by a court from acting as a director or as a member of the administrative, management or supervisory bodies of a company or from acting in the management or conduct of the affairs of any company.
Directors’ and Senior Management’s interests
7.1 The interests in the share capital of the Company of the Directors and Senior Management (held directly or indirectly) were as at 30 March 2012 (being the latest practicable date prior to the publication of this Prospectus) and are expected to be, immediately following Admission, as follows:
Name
Dr. B.R. Shetty Mr. Khalifa Bin Butti(3) H.E. Mr. Saeed Bin Butti(4) Mr. Prasanth Manghat(5) Dr. Vijayan Nambiar(5) Dr. C.R. Shetty(5) Mr. Binay Shetty(5) Mr. Raveendra Rai(5) Mr. Nirman Shetty(5) Mr. Santosh Seva Namiraja(5)
Number of Shares as at 30 March 2012
Percentage of issued share capital of the Company as at 30 March 2012
Number of Shares immediately following Admission(1)
Percentage of issued share capital of the Company immediately following Admission (1)
39,000,000 27,300,000 63,700,000 — — — — — — —
30 21 49 — — — — — — —
39,000,000 27,300,000 63,700,000 8,308 3,850 6,842 6,842 1,710 2,932 2,346
21.0 14.7 34.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Percentage of issued share capital of the Company immediately following Admission(2)
20.0 13.7 31.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0
(1) Assumes no exercise of the Over-allotment Option. (2) Assumes full exercise of the Over-allotment Option. (3) As at 30 March 2012, Mr. Khalifa Bin Butti holds 15% of the issued share capital of the Company directly. Infinite Investment LLC, a company owned equally by him and H.E. Mr. Saeed Bin Butti holds 12% of the issued share capital. (4) As at 30 March 2012, H.E. Mr. Saeed Bin Butti holds 43% of the issued share capital of the Company directly. Infinite Investment LLC, a company owned jointly by him and Mr. Khalifa Bin Butti holds 12% of the issued share capital. (5) Approximations based on exchange rates of £1=US$1.592, which was the Bloomberg Closing Mid-Point rate for 29 March 2012 and the officially pegged rate of US$1=AED3.6725. See “Part III—Important Information—Presentation of Financial and Certain Other Information”. Interests of Senior Management granted under the IPP will initially be placed in a nominee arrangement and will vest after a 12-month Restricted Period following Admission as described under “—12. Doctors and Key Individuals IPO Participation Plan”.
7.2 The interests of the Directors and Senior Management together represent 100% of the issued share capital of the Company as at 30 March 2012 (the latest practicable date prior to publication of this Prospectus) and are expected to represent approximately 70.0% of the issued share capital of the Company on Admission (assuming no exercise of the Over-allotment Option). 7.3 Save as set out in paragraphs 7.1 or 7.3, it is not expected that any Director or member of Senior Management will have any interest in the share capital of the Company on Admission and there is no person to whom any capital of any member of the Company is under option or agreed unconditionally to be put under option. 7.4 None of the Directors or members of Senior Management has or has had any interest in any transactions which are or were unusual in their nature or conditions or are or were significant to the business of the Company or any of its subsidiary undertakings and which were effected by the Company or any of its subsidiaries during the current or immediately preceding financial year or during an earlier financial year and which remain in any respect outstanding or unperformed. 7.5 There are no outstanding loans or guarantees granted or provided by any of the Issuer or its subsidiaries to or for the benefit of any of the Directors or members of Senior Management. 7.6 Save for the related party transactions set out in note 20 to the financial information contained in Section B of “Part XIII—Historical Financial Information” and the acquisition of Healthcare Suites as described in paragraph 13.2, there are no related party transactions that were entered into during the period covered by the Historical Financial Information and during the period from 1 January 2012 to 30 March 2012 (being the 160
latest practicable date prior to the publication of this Prospectus). The principal related party transaction reflected in note 20 to the financial information referred to above is a distribution agreement under which the Group is the exclusive distributor in the UAE of products manufactured by Neopharma, a pharmaceutical company in which Dr. B.R. Shetty has approximately a 25% interest. In addition, a daughter of Dr. B.R. Shetty is the owner of a restaurant that operates in the Dubai Specialty Hospital. The Company believes that the rent received for the use of these premises is set at the market rate. 7.7 None of the Directors nor any of the Senior Management has any potential conflicts of interest between his duties to the Company and his private interests or other duties and there are no arrangements or understandings with major shareholders, customers, suppliers or others pursuant to which any person was selected as a member of the administrative, management or supervisory bodies or as a member of senior management. 8.
Interests of major shareholders Save as disclosed in “Part XVI—The Global Offering—Controlling Shareholders”, the Directors are not aware of any holdings of voting rights (within the meaning of Chapter 5 of the Disclosure and Transparency Rules) which will represent 3% or more of the total voting rights in respect of the issued share capital of the Company following Admission, or of any other person who can, will or could, directly or indirectly, jointly or severally, exercise control over the Company.
9.
Directors’ Service Agreements and Terms of Appointment
9.1 The following Executive Directors have service agreements with NMC Healthcare LLC which are effective from Admission as follows: Dr. B.R. Shetty is employed by NMC Healthcare LLC pursuant to a service agreement dated 19 March 2012. The service agreement provides for an indefinite term of employment unless earlier terminated in accordance with the terms of the service agreement, and provides for a monthly salary of AED125,000. The service agreement may be terminated on twelve months’ prior written notice given by either Dr. B.R. Shetty or NMC Healthcare LLC. In accordance with UAE law, Dr. B.R. Shetty is entitled to an end of service gratuity payment in the event of termination of his employment and is also entitled to reimbursements of reasonable personal accommodation and travel costs. Mr. Khalifa Bin Butti is employed by NMC Healthcare LLC pursuant to a service agreement dated 19 March 2012. The service agreement provides for an indefinite term of employment unless earlier terminated in accordance with the terms of the service agreement, and provides for monthly salary of AED75,000. The service agreement may be terminated on twelve months’ prior written notice given by either Mr. Khalifa Bin Butti or NMC Healthcare LLC. In accordance with UAE law, Mr. Khalifa Bin Butti is entitled to an end of service gratuity payment in the event of termination of his employment. 9.2 The following Non-Executive Directors have agreed terms of appointment with the Company as follows: Mr. Tompkins was appointed as Independent Non-Executive Chairman pursuant to a letter of appointment between the Company and Mr. Tompkins dated 30 March 2012. The appointment is for an initial term to last until the first annual general meeting of the Company and provides for an annual salary of £170,000 per annum (less statutory deductions). The appointment may be terminated by Mr. Tompkins or by the Company at any time upon three months’ written notice. Mr. Jewitt was appointed as an Independent Non-Executive Director pursuant to a letter of appointment between the Company and Mr. Jewitt dated 30 March 2012. The appointment is for an initial term to last until the first annual general meeting of the Company and provides for an annual salary of £60,000 per annum (less statutory deductions). The appointment may be terminated by Mr. Jewitt or by the Company at any time upon three months’ written notice. Mrs. Lawrence was appointed as an Independent Non-Executive Director pursuant to a letter of appointment between the Company and Mrs. Lawrence dated 30 March 2012. The appointment is for an initial term to last until the first annual general meeting of the Company and provides for an annual salary of £50,000 per annum (less statutory deductions). The appointment may be terminated by Mrs. Lawrence or by the Company at any time upon three months written notice. Mr. Meade was appointed as an Independent Non-Executive Director pursuant to a letter of appointment between the Company and Mr. Meade dated 30 March 2012. The appointment is for an initial term to last until the first annual general meeting of the Company and provides for an annual salary of £50,000 per annum (less statutory deductions). The appointment may be terminated by Mr. Meade or by the Company at any time upon three months’ written notice. 161
Mr. Saeed Bin Butti was appointed as a Non-Executive Director pursuant to a letter of appointment between the Company and Mr. Saeed Bin Butti dated 1 April 2012. The appointment is for an initial term to last until the first annual general meeting of the Company and provides for an annual salary of £50,000 per annum (less statutory deductions). The appointment may be terminated by Mr. Saeed Bin Butti or by the Company at any time upon three months’ written notice. 10. Performance Share Plan 2012 The principal features of the NMC Health plc Performance Share Plan 2012 (“PSP”) are outlined below: 10.1 Operation The Board (or a duly authorised committee of the Board) will be responsible for the operation of the PSP. However, all major decisions relating to the PSP in respect of executive directors will be made by the Remuneration Committee of the Board (the “Committee”). In the remainder of this section 10, the term the “Committee” refers to the relevant administering body. 10.2 Eligibility Any person who is an employee of the Group (including an executive director) is eligible to be granted an award under the PSP (an “Award”). It is currently intended that Awards will not be granted to executive directors in 2012, other than in exceptional circumstances. However, the Company may make Awards to executive directors in the future, if the Committee considers it appropriate. 10.3 Form of Awards Awards may take the form of: • a conditional right to acquire Shares at nil cost (a “Conditional Award”); • an option to acquire Shares at nil cost (a “Nil-Cost Option”); • Shares at nil cost, that are forfeitable in the event that specified conditions are not met (“Restricted Share Award)”; or • a right to receive a cash amount which relates to the value of a certain number of notional Shares (a “Cash Award”). The form of Award will be determined by the Committee at the time of grant. 10.4 Grant of Awards Awards may only be granted in the six weeks following: •
Admission;
•
the announcement by the Company of its results for any period;
•
any day on which a restriction on the grant of Awards is lifted; or
•
any day on which the Committee determines that exceptional circumstances exist.
The grant of Awards will be subject to the Model Code on directors’ dealings in securities set out in the Listing Rules. No Awards may be granted later than ten years after the adoption of the PSP by the Company. Awards may be granted over newly issued Shares, treasury shares or Shares purchased in the market. No payment will be required for the grant of an Award and Awards are not transferable (other than on death). Awards will not be pensionable. 10.5 Individual limit No employee may be granted an Award under the PSP in any financial year over Shares worth more than 150% of annual salary, although in exceptional circumstances Awards may be made up to a limit of 200% of annual salary. 162
10.6 Limit on the issue of shares The PSP is subject to the following overall limits on the number of new Shares which may be subscribed: i)
in any ten-year period, not more than 10% of the issued ordinary share capital of the Company from time to time may be issued pursuant to rights acquired under the PSP and any other employees’ share plan (including the IPP and the SOP) adopted by the Company; and
ii)
in any ten-year period, not more than 5% of the issued ordinary share capital of the Company from time to time may be issued pursuant to rights acquired under the PSP and any other discretionary share plan (including the IPP and the SOP) adopted by the Company.
For the purpose of these limits, Awards or other rights to acquire Shares which lapse do not count. However, Shares subscribed by the trustee of an employee benefit trust to satisfy rights granted under the PSP, the IPP, the SOP or any employees’ share plans adopted by the Company do count towards these limits. In addition, Shares transferred from treasury will count for the purposes of these limits, unless the Committee determines that guidelines published by institutional investor representative bodies no longer require such shares to be counted. 10.7 Dividends and voting Participants will have no right to receive dividends or vote in relation to the Shares comprised in their Awards prior to the date on which those Shares are transferred or issued to them. However, except in the case of a Restricted Share Award, the Committee may decide to provide additional cash or Shares to a participant based on the value of some or all of the dividends paid on Shares in respect of which an Award vests from the grant date until the date of vesting. 10.8 Vesting of Awards The Committee will determine the vesting arrangements. For executive directors, the vesting of Awards will normally be subject to performance conditions having been satisfied over a period of at least three years. For all other participants, the vesting period will normally be three years and the Committee has discretion to apply performance conditions. Nil-Cost Options can be exercised no later than the tenth anniversary of the date of the Award (or such earlier date as determined by the Committee). Where a Conditional Award vests or a Nil-Cost Option is exercised, Shares will be issued or transferred to the participant within 30 days (subject to the Model Code on directors’ dealings in securities set out in the Listing Rules). Any cash due to a participant will be paid within 30 days of the vesting of a Cash Award. Where a Restricted Share Award vests, it will cease to be subject to forfeiture on vesting. The issue or transfer of Shares upon vesting and/or exercise of an Award (or the payment of cash pursuant to a Cash Award) will be subject to deductions of any applicable tax and social security contributions. 10.9 Performance conditions Awards may be subject to the satisfaction of performance conditions which will determine the proportion (if any) of the Awards which will vest at the end of the performance period. The Committee will ensure that performance conditions are both sufficiently stretching and challenging, and are appropriate for the Company and the prevailing market. To the extent that performance conditions are not met, the Awards will lapse. The conditions may be varied in certain circumstances following the grant of an Award if the Committee considers that amended performance conditions would be more appropriate, but not so as to make their achievement materially any less difficult. When determining the portion of the Award that vests the Committee will consider the underlying performance of the business to ensure the level of vesting is appropriate. There will be no provision for retesting of performance. 10.10 Clawback Awards can be reduced, extinguished or made subject to additional conditions before vesting in circumstances in which the Committee considers it appropriate, including (but not limited to): • a material misstatement of the Company’s audited results; • a material failure of risk management by the Company, a Group company or a relevant business unit; or 163
• serious reputational damage to the Company, a Group company or a relevant business unit as a result of the participant’s misconduct or otherwise. 10.11 Leaver provisions Unvested Awards granted under the PSP will normally lapse on cessation of employment. However, in the event of a participant’s death, an unvested Award will, unless the Committee determines otherwise, vest as soon as reasonably practicable after the participant’s death. The Award will vest to the extent that the Committee determines, taking into account the satisfaction of any performance conditions at the date of death and unless the Committee determines otherwise, the period of time that has elapsed since the Award was granted until the date of death. Vested Awards in the form of Nil Cost Options will normally remain exercisable for a period of 12 months from the date of death. In the event that a participant ceases employment as a result of ill-health, injury or disability, where the entity employing the participant ceases to be a member of the Group or for any other reason (except gross misconduct) determined by the Committee, a participant’s unvested Award will normally continue until the normal vesting date unless the Committee determines that the Award will vest as soon as reasonably practicable following the date on which the participant ceases to be employed by the Group. The Committee will decide the extent to which unvested Awards vest in these circumstances, taking account of the extent to which any performance conditions are satisfied on the normal vesting date, or as appropriate, at the date of cessation of employment. Unless the Committee determines otherwise, the period of time that has elapsed between the date of the Award and the date of cessation of employment will also be taken into account. Vested Awards in the form of Nil-Cost Options will normally remain exercisable for a period of six months from vesting. If a participant ceases employment in any other circumstances, all unvested Awards will lapse. 10.12 Corporate events In the event of a change of control of the Company, Awards will vest as determined by the Committee taking into account the extent to which any performance conditions have been satisfied at that time, the period which has elapsed between the date of grant and the relevant event and such other factors as it may consider appropriate. Alternatively, the Committee may permit or, in the case of an internal change of control, require, Awards to be exchanged for equivalent awards which relate to shares in another company. If other events occur such as a demerger, delisting, special dividend or other event which in the opinion of the Committee may affect the current or future value of Shares, the Committee may determine whether Awards will vest conditional on the event occurring, The proportion of an Award which vests will be determined by the Committee taking into account the extent to which any performance conditions have been satisfied at that time, the period which has elapsed between the date of Award and the date of the relevant event, and such other factors as it may consider appropriate. 10.13 Adjustments In the event of a variation of the Company’s share capital or a demerger, special dividend, delisting, rights issue or other similar event which may, in the Committee’s opinion, affect the current or future value of Shares, the number of Shares subject to an Award and/or any performance conditions may be adjusted. 10.14 Cash equivalent The Committee may, instead of delivering Shares to a participant in satisfaction of his Award, make a cash payment of equivalent economic value. 10.15 Amendment and termination The PSP may at any time be amended by the Committee in any respect. However, any alterations to the advantage of participants to the rules governing eligibility, limits, the basis for determining a participant’s entitlement to, and the terms of, the Shares or cash comprised in an Award and the impact of any variation of capital must be approved in advance by shareholders in general meeting. However, any minor amendment made to benefit administration, take into account legislative changes, or to obtain or maintain favourable tax, exchange control or regulatory treatment will not require shareholder approval. No amendment may be made to the material disadvantage of participants in the PSP unless consent has been sought from the affected participants and given by a simple majority of them. 164
No Awards may be made after the tenth anniversary of the adoption of the PSP. 10.16 Overseas employees The Committee has authority to adopt additional or modified provisions of the PSP which will modify certain rules of the PSP to take account of relevant overseas tax, securities or exchange control laws. 10.17 Governing law The PSP is to be governed in accordance with laws of England and Wales and the parties submit to the jurisdiction of the courts of England and Wales. 11. Share Option Plan 2012 The principal features of the NMC Health plc Share Option Plan 2012 (the “SOP”) are outlined below: 11.1 Operation The Board (or a duly authorised committee of the Board) will be responsible for the operation of the SOP. However, all major decisions relating to the SOP in respect of executive directors will be made by the Remuneration Committee of the Board (the “Committee). In the remainder of this section 11, the term “Committee” refers to the relevant administering body. 11.2 Eligibility Any person who is an employee of the Group (including an executive director) is eligible to be granted an option under the SOP (an “Option”). It is currently intended that Options will not be granted to executive directors in 2012, other than in exceptional circumstances. However, the Company may grant Options to executive directors in the future, if the Committee considers it appropriate. 11.3 Form of Options Options will take the form of an option to acquire Shares with an exercise price which is equal to the market value of a Share at the date of grant. 11.4 Grant of Options Options may normally only be granted in the six weeks following: • Admission; • the announcement by the Company of its results for any period; • any day on which a restriction on the grant of Options is lifted; or • any day on which the Committee determines that exceptional circumstances exist. The grant of Options will be subject to the Model Code on directors’ dealings in securities set out in the Listing Rules. No Options may be granted later than ten years after adoption of the SOP by the Company. Options may be granted over newly issued Shares, treasury shares or Shares purchased in the market. No payment will be required for the grant of an Option and Options are not transferable (other than on death). Options will not be pensionable. 11.5 Individual limit No employee may be granted an Option under the SOP in any financial year over Shares worth more than 150% of annual salary, although in exceptional circumstances Options may be granted up to a limit of 200% of annual salary. 11.6 Limit on the issue of Shares The SOP is subject to the following overall limits on the number of new Shares which may be subscribed: i)
in any ten-year period, not more than 10% of the issued ordinary share capital of the Company from time to time may be issued pursuant to rights acquired under the SOP and any other employees’ share plan (including the IPP and the SOP) adopted by the Company; and 165
ii)
in any ten-year period, not more than 5% of the issued ordinary share capital of the Company from time to time may be issued pursuant to rights acquired under the SOP and any other discretionary share plan (including the IPP and the SOP) adopted by the Company.
For the purpose of these limits, Options or other rights to acquire Shares which lapse do not count. However, Shares subscribed by the trustee of an employee benefit trust to satisfy rights granted under the SOP, the PSP, the IPP or any employees’ share plans adopted by the Company do count towards these limits. In addition, Shares transferred from treasury will count for the purposes of these limits unless the Committee determines that guidelines published by institutional investor representative bodies no longer require such shares to be counted. 11.7 Dividends and voting Participants will have no right to receive dividends or vote in relation to the Shares comprised in their Options prior to the date on which those Shares are transferred or issued to them. However, the Committee may decide to provide additional cash or Shares to a participant based on the value of some or all of the dividends paid on Shares in respect of which an Option vests from the grant date until the date of vesting. 11.8 Vesting of Options The Committee will determine the vesting arrangements. For executive directors, the vesting of Options will normally be subject to performance conditions having been satisfied over a period of at least three years. For all other participants, the vesting period will normally be three years and the Committee has discretion to apply performance conditions. Options can be exercised no later than the tenth anniversary of the date of the Option (or such earlier date as determined by the Committee). Shares will be issued or transferred to the participant within 30 days of exercise (subject to the Model Code on directors’ dealings in securities set out in the Listing Rules). The issue or transfer of Shares upon exercise of an Option will be subject to deductions of any relevant tax and social security contributions. 11.9 Performance conditions Options granted to executive directors may be subject to the satisfaction of performance conditions which will determine the proportion of the Options which will vest at the end of the performance period. The Committee will ensure that performance conditions are both sufficiently stretching and challenging, and are appropriate for the Company and the prevailing market. To the extent that performance conditions are not met, the Options will lapse. The conditions may be varied in certain circumstances following the grant of an Option if the Committee considers that amended performance conditions would be more appropriate, but not so as to make their achievement materially any less difficult. When determining the portion of the Option that vests the Committee will consider the underlying performance of the business to ensure the level of vesting is appropriate. There will be no provision for retesting of performance. 11.10 Clawback Options can be reduced, extinguished or made subject to additional conditions before vesting in circumstances in which the Committee considers it appropriate, including (but not limited to): • a material misstatement of the Company’s audited results; • a material failure of risk management by the Company, a Group company or a relevant business unit; or • serious reputational damage to the Company, a Group company or a relevant business unit as a result of the participant’s misconduct or otherwise. 11.11 Leaver provisions Unvested Options granted under the SOP will normally lapse on cessation of employment. However, in the event of a participant’s death, an unvested Option will, unless the Committee determines otherwise, vest as soon as reasonably practicable after the participant’s death. The Option will vest to the extent that the 166
Committee determines, taking into account the satisfaction of any performance conditions at the date of death and unless the Committee determines otherwise, the period of time that has elapsed since the Option was granted until the date of death. Vested Options will normally remain exercisable for a period of twelve months from the date of death. In the event that a participant ceases employment as a result of ill-health, injury or disability, where the entity employing the participant ceases to be a member of the Group or for any other reason (except gross misconduct) determined by the Committee, a participant’s unvested Option will normally continue until the normal vesting date unless the Committee determines that the Option will vest as soon as reasonably practicable following the date on which the participant ceases to be employed by the Group. The Committee will decide the extent to which unvested Options vest in these circumstances, taking account of the extent to which any performance conditions are satisfied on the normal vesting date, or as appropriate, at the date of cessation of employment. Unless the Committee determines otherwise, the period of time that has elapsed between the date of grant of the Option and the date of cessation of employment will also be taken into account. Vested Options will normally remain exercisable for a period of six months from vesting. If a participant ceases employment in any other circumstances, all unvested Options will lapse. 11.12 Corporate events In the event of a change of control of the Company, Options will vest as determined by the Committee taking into account the extent to which any performance conditions have been satisfied at that time, the period which has elapsed between the date of grant and the relevant event and such other factors as it may consider appropriate. Alternatively, the Committee may permit or, in the case of an internal change of control, require, Options to be exchanged for equivalent options which relate to shares in another company. If other events occur such as a demerger, delisting, special dividend or other event which in the opinion of the Committee may affect the current or future value of Shares, the Committee may determine whether Options will vest conditional on the event occurring. The proportion of an Option which vests will be determined by the Committee taking into account the extent to which any performance conditions have been satisfied at that time, the period which has elapsed between the date of grant of the Option and the date of the relevant event and such other factors as it may consider appropriate. 11.13 Adjustments In the event of a variation of the Company’s share capital or a demerger, special dividend, delisting, rights issue or other similar event which may, in the Committee’s opinion, affect the current or future value of Shares, the exercise price, number of Shares subject to an Option and/or any performance conditions may be adjusted. 11.14 Cash equivalent The Committee may, instead of delivering Shares to a participant in satisfaction of his Option, make a cash payment of equivalent economic value. 11.15 Amendment and Termination The SOP may at any time be amended by the Committee in any respect. However, any alterations to the advantage of participants to the rules governing eligibility, limits, the basis for determining a participant’s entitlement to, and the terms of, the Shares or cash comprised in an Option and the impact of any variation of capital must be approved in advance by shareholders in general meeting. However, any minor amendment made to benefit administration, take into account legislative changes, or to obtain or maintain favourable tax, exchange control or regulatory treatment will not require shareholder approval. No amendment may be made to the material disadvantage of participants in the SOP unless consent has been sought from the affected participants and given by a simple majority of them. No Options may be granted after the tenth anniversary of the adoption of the SOP. 167
11.16 Overseas employees The Committee has authority to adopt additional or modified provisions of the SOP which will modify certain rules of the SOP to take account of relevant overseas tax, securities or exchange control laws. 11.17 Governing law The SOP is to be governed in accordance with laws of England and Wales and the parties submit to the jurisdiction of the courts of England and Wales. 12. Doctors and Key Individuals IPO Participation Plan The principal features of the Doctors and key individuals IPO participation plan (“IPP”) are outlined below: 12.1 Operation All major decisions relating to the operation of the IPP will be made by the Board (or a duly authorised committee of the Board). 12.2 Eligibility Any person who is an employee of the Company or any other member of the Group (excluding executive directors) is eligible to be invited to participate in the IPP. It is currently intended that around 400 doctors and other key employees will be invited to participate in the IPP. Invitations to participate in the IPP are entirely at the discretion of the Board and will be offered only once, immediately prior to and conditional on Admission. 12.3 Subscription for New Shares Those employees invited to participate in the IPP will be offered the opportunity to enter into a Restricted Stock Agreement with the Company and the trustee of the employee benefit trust established by the Company (the “EBT”). Under the terms of the Restricted Stock Agreement, each participating employee will subscribe on Admission at the Offer Price for those New Shares allocated to them under the IPP. The subscription by a participating employee for New Shares will be funded by a loan to the participant as described in section 12.4 below. If valid applications to participate in the IPP are received for a total number of New Shares in excess of the maximum limit to be set by the Board (which will not be higher than New Shares with a value at the Offer Price of US$5 million), then the Board may scale down participation by reducing pro rata the number of New Shares which each participant may acquire or by such other method as it thinks fit. Rights arising under the IPP will not be pensionable. 12.4 Loan arrangements Where a participant enters into a Restricted Stock Agreement, the participant will also enter into an Employee Loan Agreement with the NMC Healthcare LLC under which, and conditional on Admission, NMC Healthcare LLC will provide an interest-free loan to the participant. The amount of the loan will be equal to the amount of the total subscription price the participant wishes to pay under the IPP. The participant will direct that the loan is paid to the Company to fund the cost of subscribing on his behalf for New Shares under the IPP. The loan amount may not be used for any other purposes. Subject to sections 12.8 and 12.9 below, the loan will be repayable by the participant over a 12 month period following Admission (the “Restricted Period”) by equal monthly instalments, deducted from the participant’s remuneration (to the extent permitted by local law). 12.5 Individual limit No individual employee may request an allocation of New Shares with a value (based on the Offer Price) of more than 10% of that employee’s basic salary.
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12.6 Dividends and voting Participants will have the right to receive dividends and vote in relation to the New Shares allocated to them under the IPP during the Restricted Period. 12.7 Vesting and release of New Shares New Shares allocated under the IPP will vest pro rata with each monthly repayment of the loan of the subscription price and New Shares are referred to as “Vested Shares” or “Unvested Shares” accordingly below. Participants will be required to have all New Shares in the nominee arrangement throughout the Restricted Period and may not sell, encumber or transfer those New Shares during that time (other than on death), without the consent of the Board. Subject to full repayment of the loan, Vested Shares will be released to the participant on expiry of the Restricted Period. 12.8 Leaver provisions 12.8.1 Leavers in “good leaver” circumstances If a participant leaves employment before the end of the Restricted Period as a result of death, illness, injury or disability or for any other reason (other than summary dismissal) determined by the Board or where the company or business in which the participant is employed ceases to be part of the Group, the following treatment will apply: 12.8.1.1 Vested Shares Vested Shares will be released immediately to the participant (the loan in respect of them having been repaid). 12.8.1.2 Unvested Shares The participant can elect either to: (i)
forfeit the remaining Unvested Shares at the time of cessation of employment. In this case, the participant will not be required to re-pay the outstanding loan and the Unvested Shares will, at the election of the Board, be retained by the trustee of the EBT as an asset of the EBT or sold and the proceeds remitted to NMC Healthcare LLC to the extent required to satisfy the outstanding loan with any excess being retained by the trustee of the EBT as an asset of the EBT; or
(ii) repay the outstanding loan (unless such loan is waived at the discretion of the Board), in which case the Unvested Shares will vest immediately and be released to the participant. 12.8.2 Leavers in “summary dismissal” circumstances If a participant leaves employment before the end of the Restricted Period as a result of summary dismissal (as determined by the Board) all Vested Shares and Unvested Shares will be forfeited at the time of cessation of employment. In respect of forfeited Unvested Shares, the treatment set out in sections 12.8.3.2 and 12.8.3.3 below will apply. In respect of forfeited Vested Shares, the Company will pay to the employee an amount equal to the lower of (i) the market value of the Vested Shares as at the date of cessation of employment; and (ii) the amount of the loan already repaid in respect of the Vested Shares. 12.8.3 Leavers in “other” circumstances If a participant leaves employment before the end of the Restricted Period in circumstances not falling within the good leaver or summary dismissal reasons mentioned above, the following treatment will apply: 12.8.3.1 Vested Shares Vested Shares will be released immediately to the participant. 12.8.3.2 Unvested Shares Unvested Shares will be forfeited and will, at the election of the Board, be retained by the trustee of the EBT as an asset of the EBT or sold and the proceeds remitted to NMC Healthcare LLC to the extent required to satisfy the outstanding loan with any assets being retained by the trustee of the EBT as an asset of the EBT. 169
12.8.3.3 Outstanding loan If the market value of Unvested Shares forfeited on cessation of employment is equal to or exceeds the outstanding balance of the loan, then no further payment will be required from the participant. If the market value of Unvested Shares forfeited on cessation of employment is less than the outstanding balance of the loan, then the participant will be required to repay to NMC Healthcare LLC the difference between the market value of the Unvested Shares on the date of cessation of employment and the outstanding balance of the loan, unless the Board determines otherwise. 12.9
Corporate events In the event of a change of control of the Company which is not an internal reorganisation, or in the event of a voluntary winding-up of the Company, Vested Shares will be released immediately to the participant. Unvested Shares shall vest and be released early, subject to repayment of the outstanding loan, unless the Board determines otherwise.
12.10 Rights attaching to New Shares New Shares allocated under the IPP will rank equally with all other Shares for the time being in issue. 12.11 Alterations and Termination The terms of the Restricted Stock Agreement and Loan Agreement may at any time be altered by the Board in any respect subject to the written agreement of the participant and, in the case of the Restricted Stock Agreement, the trustee. In addition, the Company has the right to terminate the IPP at any time before Admission if, in its absolute discretion, the Board considers that the IPP is no longer in the interests of the Company or the employees of the Group as a whole. 12.12 Governing law The IPP is governed in accordance with laws of England. 13. Material Contracts The following contracts, not being contracts entered into in the ordinary course of business, have been entered into by any of the Issuer or its subsidiaries within the two years immediately preceding the date of this Prospectus and are, or may be, material or contain provisions under which any of the Issuer or its subsidiaries has an obligation or entitlement which is, or may be, material to the Company as at the date of this Prospectus: 13.1 Underwriting Agreement For information on the Underwriting Agreement, see “Part XVI—The Global Offering—Underwriting Distribution”. 13.2 Healthcare Suites Acquisition Agreement NMC Healthcare LLC entered into an agreement with Dr. B.R. Shetty for the purchase of the entire issued share capital of BR Medical Suites FZ-LLC, a limited liability company established within the Dubai Healthcare City Free Zone in the Emirate of Dubai. The consideration for the shares is US$9 million. The sale shall be conditional upon our Admission taking place prior to 30 June 2012 (in the event that our Admission does not take place, this requirement will no longer be a condition precedent) and upon receipt of approval of the transfer from Dubai Healthcare City Authority. These conditions must be satisfied on or before 31 July 2012, however, the transfer is expected to take place on or about 1 July 2012. The transfer has been approved by the board of directors of NMC Healthcare LLC. The agreement provides for customary warranties to be given by Dr. B.R. Shetty and is governed by the laws of the UAE as applied in the Emirate of Dubai. 13.3 New Facility Agreement For more information on the New Facility Agreement, see “Part XI—Operating and Financial Review—Results of Operations—Liabilities and Indebtedness”. 170
13.4 Relationship Agreement We have entered into a Relationship Agreement with the Significant Shareholders, H.E. Mr. Saeed Bin Butti, Dr. B.R. Shetty and Mr. Khalifa Bin Butti dated 2 April 2012 to regulate the relationship between the Company and each of the Significant Shareholders after Admission. The Relationship Agreement will take effect on Admission and will be binding in most respects on each Significant Shareholder until the Significant Shareholder, together with his associates, ceases to be the legal or beneficial owner, directly or indirectly, of at least 15% of the entire issued share capital of the Company. The Relationship Agreement provides for the autonomous operation of the Company by the Board independently of the Significant Shareholders and in accordance with the Articles, the Listing Rules and applicable law. Each Significant Shareholder will (and, in relation to his associates, will procure that each of his associates will) conduct all transactions with the Group on an arm’s length basis and on a normal commercial basis and exercise his voting rights to ensure that the Company is capable of operating and making decisions for the benefit of the Shareholders as a whole and independently of the Significant Shareholders. Each of the Significant Shareholders has agreed for a period of two years from Admission to bring to give the Company a right of first refusal to invest in any new hospital, day care centre or pharmacy to be developed in the UAE where the opportunity to make such an investment has been offered to the Significant Shareholder. Each party to the Relationship Agreement will only enter into, amend, or terminate any transaction, agreement or relationship between the Significant Shareholders (or any of their respective associates) and any member of the Group with the prior approval of a majority of the independent Directors. Subject to the other provisions of the Relationship Agreement, each of the Significant Shareholders has the right to nominate (i) up to two persons to be members of the Board provided that the Significant Shareholder and his associates hold in aggregate 30% or more of the entire issue share capital of the Company, and (ii) one person to be a member of the Board provided that the Significant Shareholder and his associates hold in aggregate 15% or more, but less than 30%, of the entire issue share capital of the Company. 14. Material Litigation There are no governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Issuer is aware), during a period covering at least the previous 12 months proceeding the date of this Prospectus which may have, or have had in the recent past significant effects on the Issuer and/or the Group’s financial position or profitability.
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15. Significant Subsidiary Undertakings 15.1 The Issuer is the principal holding company of the Group. The significant subsidiary undertakings of the Company are as follows:
Name and country of incorporation/ residence
NMC Health Holdco Limited
Class of share capital (issued and fully paid, unless otherwise stated)
Proportion of capital held
Proportion of voting power held (if different from capital held)
Principal activity
Ordinary
100% - NMC Health plc
Holding company
Ordinary
100% (less one share) - NMC Health plc
Hospital/ medical services
(Incorporated in England and Wales) NMC Holding LLC (Incorporated in the Emirate of Abu Dhabi)
NMC Healthcare LLC
One share - NMC Health Holdco Limited Ordinary
(Incorporated in the Emirate of Dubai)
NMC Specialty Hospital LLC Abu Dhabi
Ordinary
Ordinary
(Incorporated in the Emirate of Dubai)
Hospital/ medical services
99% - NMC Healthcare LLC
Hospital/ medical services
1% - H.E. Mr. Saeed Bin Butti Ordinary
(Incorporated in the Emirate of Abu Dhabi) NMC Hospital LLC
99% - NMC Healthcare LLC 1% - H.E. Mr. Saeed Bin Butti
(Incorporated in the Emirate of Dubai) NMC Specialty Hospital LLC Al Ain
Holding company
One share - NMC Health Holdco Limited
(Incorporated in the Emirate of Abu Dhabi) NMC Specialty Hospital LLC Dubai
100% (less one share) - NMC Holding LLC
99% - NMC Healthcare LLC
Hospital/ medical services
1% - H.E. Mr. Saeed Bin Butti Ordinary
99% - NMC Healthcare LLC 1% - H.E. Mr. Saeed Bin Butti 172
Hospital/ medical services
Name and country of incorporation/ residence
New Medical Centre LLC
Class of share capital (issued and fully paid, unless otherwise stated)
Ordinary
(Incorporated in the Emirate of Sharjah) Reliance Infotech LLC
Ordinary
Ordinary
99% - NMC Healthcare LLC
99% - NMC Healthcare LLC
Ordinary
99% - NMC Healthcare LLC
Ordinary
99% - NMC Healthcare LLC 1% - H.E. Mr. Saeed Bin Butti
New Medical Centre Pharmacy LLC Sharjah
99% - NMC Healthcare LLC
(Incorporated in the Emirate of Sharjah)
1% - H.E. Mr. Saeed Bin Butti Ordinary
(Incorporated in the Emirate of Dubai) NMC Trading LLC
(Incorporated in the Emirate of Dubai)
Trading
Pharmacy
1% - H.E. Mr. Saeed Bin Butti
(Incorporated in the Emirate of Abu Dhabi)
Bait Al Shifaa Pharmacy LLC
Information Technology
1% - H.E. Mr. Saeed Bin Butti
(Incorporated in the Emirate of Abu Dhabi) New Medical Centre Pharmacy LLC Al Ain
Hospital/ medical services
1% - H.E. Mr. Saeed Bin Butti
(Incorporated in the Emirate of Abu Dhabi) New Pharmacy LLC
99% - NMC Healthcare LLC
Principal activity
1% - H.E. Mr. Saeed Bin Butti
(Incorporated in the Emirate of Abu Dhabi) New Medical Centre Trading LLC
Proportion of capital held
Proportion of voting power held (if different from capital held)
99% - NMC Healthcare LLC
Pharmacy
Pharmacy
Pharmacy
1% - H.E. Mr. Saeed Bin Butti Ordinary
99% - New Medical Centre Trading LLC 1% H.E. Mr. Saeed Bin Butti 173
Trading
Name and country of incorporation/ residence
New Medical Centre Ordinary Veterinary Medicine & Equipment Trading Co LLC
Class of share capital (issued and fully paid, unless otherwise stated)
Ordinary
(Incorporated in the Emirate of Dubai)
Beiersdorf Cosmetics Trading LLC
Proportion of capital held
99% New Medical Centre Trading LLC
Proportion of voting power held (if different from capital held)
Principal activity
Trading
1% - H.E. Mr. Saeed Bin Butti Ordinary
99% - New Medical Centre Trading LLC
Trading
1 % - H.E. Mr. Saeed Bin Butti New Medical Centre Trading (Store) LLC
Ordinary
99% - New Medical Centre Trading LLC
Trading
1 % - H.E. Mr. Saeed Bin Butti National Marketing & Trading Company LLC
Ordinary
99% - New Medical Centre Trading LLC
Trading
1 % - H.E. Mr. Saeed Bin Butti New Marketing & Trading Company LLC
Ordinary
99% - New Medical Centre Trading LLC
Trading
1 % - H.E. Mr. Saeed Bin Butti 16. Significant Change There has been no significant change in the financial or trading position of the Oldco Group since 31 December 2011, the date to which the financial information in Section B of “Part XIII—Historical Financial Information” was prepared. Since its incorporation on 20 July 2011, the Company has not traded, nor has there been any significant change in its financial or trading position other than entering into an agreement to acquire the Oldco Group on 28 March 2012 in advance of the Global Offering. 17. Working Capital Statement In the opinion of the Company taking into account the net proceeds of the Global Offering, it has sufficient working capital for the Group’s present requirements, that is, for at least the 12 months from the date of this Prospectus. 174
18. Costs and Expenses The total costs, expenses and commissions payable in relation to Admission and the Global Offering, including the listing fees of the FSA and the London Stock Exchange, professional fees and expenses and the costs of printing and distribution of documents, are estimated to be an amount of up to US$20.0 million and are payable by us. 19. Consents 19.1 Ernst & Young, Abu Dhabi, a branch of Ernst & Young Middle East is registered to carry out audit work by the Ministry of Economy of the United Arab Emirates, and has no material interest in the Company. 19.2 Ernst & Young, Abu Dhabi, a branch of Ernst & Young Middle East (“Ernst & Young”) has given and not withdrawn its written consent to the inclusion in this Prospectus of its reports set out in “Part XIII— Historical Financial Information” and in “ Part XIV—Unaudited Pro Forma Financial Information” in the form and context and in which they appear and has authorised the contents of those parts of the Prospectus which comprise its reports for the purposes of Rule 5.5.3R(2)(f) of the Prospectus Rules. 19.3 As the new Shares have not been and will not be registered under the Securities Act, Ernst & Young has not filed and will not be required to file a consent under the Securities Act. 20. Third Party Information We confirm that all third party information included in this Prospectus has been accurately reproduced and, so far as we are aware and have been able to ascertain from information published by such third parties, no facts have been omitted which would render the reproduced information inaccurate or misleading. 21. Documents Available for Inspection Copies of the following documents may be inspected at the offices of Allen & Overy LLP, One Bishops Square, London E1 6AD, United Kingdom, during usual business hours on any weekday (excluding Saturdays, Sundays and public holidays) for a period of twelve months from the date of publication of this Prospectus: (a) this Prospectus; (b) our Articles; (c) the reports by Ernst & Young, which are set out in “Part XIII—Historical Financial Information” and “Part XIV—Unaudited Pro Forma Financial Information”; and (d) our audited consolidated financial statements.
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PART XVIII: DEFINITIONS The following expressions and abbreviations have the following meanings in this Prospectus unless the context otherwise requires. 2010 PD Amending Directive
Directive 2010/73/EU
Admission
admission of the Shares to the premium listing segment of the Official List and to trading on the main market for listed securities of the London Stock Exchange
BMI
Business Monitor International Limited
BMI Report for Q1 2012
BMI’s UAE Pharmaceuticals and Healthcare Report for the first quarter of 2012
BMI Report for Q2 2012
BMI’s UAE Pharmaceuticals and Healthcare Report for the first quarter of 2012
Borrower
NMC Healthcare LLC
Board of Directors or Board
the board of Directors of the Issuer
CAGR
compound annual growth rate
Capital Market Authority
the Capital Market Authority of the KSA
CEO
Chief Executive Officer
CISA
the Swiss Federal Act on Collective Investment Schemes
Closing Date
8.00 a.m. (London time) on 5 April 2012
CME
Continued Medical Education
COO
Chief Operating Officer
Corporations Act
the Corporations Act 2001 of the Commonwealth of Australia
CREST
the system for the paperless settlement of trades in listed securities operated by CRESTCo
CRESTCo
CRESTCo Limited, the operator of CREST
Deutsche Bank
Deutsche Bank AG, London Branch, a company incorporated in Germany with branch registration in England and Wales
DFIC
Dubai International Financial Centre
DHA
Dubai Health Authority
Directors
directors of the issuer from time to time (who, at Admission will be the Executive Directors and Non-Executive Directors)
Disclosure and Transparency Rules
Disclosure and Transparency Rules issued by the FSA
Doctor Offering
the proposed offer of shares to doctors and certain other key individuals employed by the Group on the terms of the IPP
EEA
the European Economic Area 176
EIU
The Economist Intelligence Unit
ESCA
the Emirates Securities or Commodities Authority
Ernst & Young
Ernst & Young, Abu Dhabi, a branch of Ernst & Young Middle East
Espicom
Espicom Business Intelligence
EU
the European Union
Exchange Act
the US Securities and Exchange Act of 1934, as amended
Executive Directors
the executive directors of the company being, as at Admission, Dr. B.R. Shetty and Mr. Khalifa Bin Butti
Existing Shareholders
H.E. Mr. Saeed Bin Butti, Dr. B.R. Shetty, Mr. Khalifa Bin Butti and Infinite Investment LLC
Existing Shares
the Shares to be sold by the Over-allotment Shareholders, pursuant to the Global Offering, representing up to 15% of the number of New Shares
Financial Crisis
the global economic crisis that commenced in the latter half of 2007
Financial Instruments and Exchange Law
the Financial Instruments and Exchange Law of Japan
FINMA
the Swiss Financial Market Supervisory Authority
FMCG
fast-moving consumer goods
Foreign Ownership Approval
the constitutional documents of NMC Holdings expressly providing that the shares held by UAE nationals in NMC Holdings may be less than 51%
FSA
Financial Services Authority
FSMA
Financial Services and Markets Act 2000
GCC
the Gulf Co-operation Council, whose members comprise Bahrain, Kuwait, Oman, Qatar, the KSA and the UAE
Global Offering
the proposed offer of Shares to certain institutional and professional investors
Group
NMC Health plc together with its subsidiary undertakings
HAAD
Health Authority of Abu Dhabi
Historical Financial Information
the summary financial information of the Oldco Group for the three years ended 31 December 2009, 2010 and 2011
Hospital Law
Federal Law Number 2 of 1996 of the UAE
ICU
Intensive Care Unit
IFRS
International Financial Reporting Standards, as adopted by the EU
IHS
IHS Global Insight
IMF
International Monetary Fund 177
International Offering
an offering of Shares in the US to QIBs as defined in, and in reliance on, Rule 144A under the Securities Act, and outside the US in offshore transactions in reliance on Regulation S
IPP
the NMC Health plc Doctors and Key Individuals IPO Participation Plan
ISO
International Organisation for Standardisation
Issuer or the Company or NMC NMC Health plc IT
information technology
JCI
Joint Commission International
KSA
the Kingdom of Saudi Arabia
KPI
key performance indicator
London Stock Exchange
London Stock Exchange plc
MD
Managing Director
MENA
Middle East and North Africa
Ministry of Economy
Ministry of Economy of the UAE
MoH
Ministry of Health of the UAE
New Facility
the new facility dated 8 March 2012 and entered into between NMC Healthcare LLC and, amongst others, J.P. Morgan Chase Bank, N.A.
New Shares
new Shares to be issued by NMC pursuant to the Global Offering
NICU
Neonatal Intensive Care Unit
NMC Holdings
NMC Holdings LLC
NMC Trading
NMC Trading LLC
Non-Executive Direcors
the non-executive directors of the Company being, as at admission, Mr. H.J. Mark Tompkins, H.E. Mr. Saeed Bin Butti, Mr. Justin A.S. Jewitt, Heather lawrence OBE and Mr. Patrick James Meade
Numis
Numis Securities Limited
Official List
Official List of the UK Listing Authority
Oldco Group
NMC Healthcare LLC and its subsidiaries
Order
the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended
Over-allotment Option
the option to purchase up to 8,357,142 Existing Shares within 30 days from the date of Admission at the Offer Price
Over-allotment Shareholders
H.E. Mr. Saeed Bin Butti, Mr. Khalifa Bin Butti, Dr. B. R. Shetty and Infinite Investment LLC
Ownership Restriction
a foreign person or entity may only own up to 49% of the shares of a company incorporated under the UAE Companies Law
Pharmacy Law
Federal Law Number 4 of 1983 of the UAE 178
PHE
private health establishment
Prospectus
this prospectus
Prospectus Directive
Directive 2003/71/EC and amendments thereto (including Directive 2010/73/EU to the extent implemented in the relevant member state)
Prospectus Rules
the Prospectus Rules of the FSA made under section 73A of the FSMA, as amended
PSP
NMC Health plc Performance Share Plan 2012
QIB
qualified institutional buyer, as defined in Rule 144A
Qualified Investors
persons in member states of the EEA who are “qualified investors” within the meaning of Article 2(1)(e) of the Prospectus Directive
Regulation S
Regulation S under the Securities Act
Relationship Agreement
a relationship agreement between the Significant Shareholders and the Company to regulate their relationship with the Company
relevant persons
investment professionals falling within Article 19(5) of the Order, high net worth entities falling within Article 49 of the Order, and other persons to whom this document may otherwise lawfully be distributed
RNCOS
RNCOS Industry Research Solutions
RSA 421-B
Chapter 421-B of The New Hampshire Revised Statutes Annotated, 1955
Rule 144A
Rule 144A under the Securities Act
Saudi Regulations
Offers of Securities Regulations issued by the Capital Market Authority
Securities Act
the US Securities Act of 1933, as amended
Securities and Futures Act
Securities and Futures Act of Singapore
Securities and Futures Ordinance
Securities and Futures Ordinance (Cap. 571) of Hong Kong
SEHA
Abu Dhabi Health Services Company
Shares
ordinary shares of 10 pence each in the capital of NMC
SHUAA Capital
SHUAA Capital PSC
Significant Shareholders
H.E. Mr. Saeed Bin Butti, Dr. B.R. Shetty and Mr. Khalifa Bin Butti
SIX
the SIX Swiss Exchange
SKUs
stock keeping unit
Sodexo
Sodex S.A.
SOP
NMC Health plc Share Option Plan 2012
Stabilisation Manager
Deutsche Bank
TPA
third-party administration 179
UAE
the United Arab Emirates
UAE Companies Law
The Commercial Companies Law of the UAE
UK or United Kingdom
the United Kingdom of Great Britain and Northern Ireland
UK Listing Authority
the UK Listing Authority, being the FSA acting as the competent authority for the purposes of Part VI of the FSMA
UNCTD
United Nations Conference on Trade and Development
Underwriters
Deutsche Bank, Numis Securities Limited and SHUAA Capital
US or United States
the United States of America, its territories and possessions, any state of the United States of America and the District of Columbia
VIP
Very Important Person
VVIP
Very Very Important Person
WEO
IMF’s World Electronic Outlook
WHO
World Health Organisation
180
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