Integrated Diagnostics Holdings plc (IDHC) Earnings Call Transcript & Summary

Hello, everyone. This is Hatem Alaa from EFG Hermes, and welcome to Integrated Diagnostics Holdings Third Quarter '21 Results Conference Call. I am pleased to have on the call today Dr. Hend El Sherbini, the company's CEO; Omar Bedewy, CFO; and Nancy Fahmy, Investor Relations Director. We'll start off by some presentation from management, and then we'll open the floor for Q&A. Just as an initial reminder to register your question, you can either type it in the Q&A chat or click on the raise hand button. Dr. Hend, please go ahead.

Hello. Good afternoon, ladies and gentlemen. And thank you for joining our analyst call for the third quarter of 2021. I'm Dr. Hend El Sherbini, Chief Executive Officer of IDH. With me today are Omar Bedewy, our CFO; and Nancy Fahmy, our Director of Investor Relations. I will begin today's call with a quick summary of the key financial and operational highlights for the 9-month period and quarter ended 30th of September 2021. I will then discuss key strategic developments for the period, before handing the call over to Omar, who will run you through our consolidated financials in more detail. We'll then open the floor to your questions. Ladies and gentlemen, as we near the end of what is shaping to be another record-breaking year for IDH, I am delighted to present you a new set of impressive financial and operational results. Our revenues for the 9-month period more than doubled year-on-year to reach EGP 3.8 billion, while our net profit more than tripled to reach EGP 1.1 billion, both of which are record high for IDH. More specifically, we recorded our highest ever revenue, EBITDA and net profit figures for the quarter of the year, building on an already remarkable first half of the year. The impressive growth comes as patients served and tests performed expanded 56% and 33% year-on-year, respectively. This was further supported by improved pricing and increase in the optimized service mix. Overall, in the 9-month period, we conducted 25 million tests while serving 7.5 million patients through our 507 branches. Our outstanding performance was supported by growing demand across IDH entire offering. While our COVID-19 related portfolio continued to make a significant contribution to consolidated revenue, I'm happy to report that we continue to witness robust growth in our core conventional test offering for the third quarter in a row. This segment has sustained recovery even as COVID-19 related volumes begin to taper off. Revenue from conventional testing grew year-on-year by 19% in the third quarter and by an impressive 30% on a year-to-date basis. More importantly, our core convention test volumes not only surpassed last year's level, but also are 3% higher than the 9 months of 2019, pre-COVID era. This is after adjusting for the impact of the 100 million Healthy Lives Campaign. The sustained recovery in test volume over the course 2021 reflects our ability to adapt to changing market dynamics and consistently cater to the evolving needs of our growing patient base. Throughout the year, we leveraged an expanded branch network, ramp-up house call service and a growing digital presence to make our services increasingly accessible and our payment methods increasingly convenient. On a geographic level, I'm pleased to note that Egypt, Jordan and Nigeria continued to report strong revenue growth in the first 9 months of the year. In Egypt, revenues for the 9-month period expanded 122% year-on-year supported by both COVID-19 related and conventional tests. Controlling for COVID-19 related contributions, the revenue for the 9-month period would increase 30% year-on-year, driven by a 21% increase in the convention tests performed versus last year. Revenue growth in our home market was further bolstered by the group's house call service, which contributed 23% of Egypt's top line versus 20% this time last year. Here it is worth noting that through our house call service, we are able to carry out more tests per patient than our traditional branches. And this enables us to deliver on an important pillar of our long-term growth strategy and further emphasizes the significant potential offered by the service well beyond the end of the COVID pandemic. Over the course of the year, we also secured multiple partnerships with international air carriers and regional health care providers. Most notably, we partnered with NAS and Pure Health UAE to conduct PCR testing for passengers traveling from Egypt to other regional destinations. We also offered PCR testing to passengers on a walk-in basis, and we were the first lab in Egypt to provide QR codes on travel certificates. This enabled us not only to pay an important role in supporting the recovery of international travelers, but also ensured that we successfully captured a leading market share of the service. Highlights from the first 9 months of the year also included the outstanding growth of Al-Borg Scan, and the continued ramp-up of our AI-focus subsidiary, Wayak. During the period, Al-Borg Scan reported year-on-year revenue growth of 92%, supported by a 75% year-on-year rise in tests performed. In parallel, we successfully rolled out the venture's third branch located in the strategic East Cairo neighborhood of Heliopolis. The launch comes as part of a wider ramp-up strategy, which in the coming 6 months will see us roll out at least 2 additional branches. Meanwhile, operations at Wayak continue to be ramped up effectively, with the venture's stand-alone EBITDA losses narrowing to EGP 1.1 million from EGP 6.4 million last year. This was supported by strong top line growth and management cost optimization strategy. In Jordan, revenue for the 9-month period expanded 172% year-on-year. Similar to the trend we are witnessing in Egypt, Jordan's revenue growth has been supported by COVID testing, coupled with a strong recovery in conventional testing. Our multiple revenue sharing agreements with Queen Alia International Airport, King Hussein International Airport and Aqaba Port made a noteworthy 24% contribution to the country's top line for the period. We expect the positive impact on Biolab's top line to continue in the coming months as international travel recovers further. In Nigeria, we continue to witness sustained revenue growth with the country's top line expanding 62% year-on-year in the 9-month period. This supported a further narrowing of EBITDA losses, excluding a onetime adjustment for the period. Revenue at Echo-Lab has been consistently growing quarter-on-quarter throughout 2021. And when combined with the stellar work being done by the company's new management team to streamline operations should see the venture turn EBITDA positive early next year. Finally, in Sudan, our results continued to be heavily impacted by the Sudanese pound devaluation from earlier in the year. However, in local currency terms, revenue was up solid 169% year-on-year for the 9-month period. Moreover, we're continuing to monitor the mounting political and social unrest across the country. And our management team on the ground is well prepared to take the necessary measures to protect our patients, staff and operations. Further down the income statement, we continue to record strong growth with record high margins at all levels of profitability, supported by our strong top line and the subsequent dilution of the company's fixed costs. IDH recorded substantial gross profit and EBITDA growth during the 9-month period with margin expansion of 8 points to 58% of gross profit margin and 10 percentage points to 53% for EBITDA margin. Consequently, IDH bottom line grew more than threefold with a margin of 30% versus 22% in the comparable period of 20 points. Looking ahead, our strategic priorities remain unchanged as we continue assisting local authorities in their battle against COVID-19, while simultaneously pressing forward with our post-pandemic strategy and set the foundations for a new chapter of sustainable growth. During the quarter, we launched our new loyalty program, specifically aimed at retaining the new patients acquired since the start of the pandemic. At the same time, we rolled out an additional 12 branches during the third quarter and thus remain on track to reach our target of 30 to 35 new branch rollouts in 2021. Our ability to consistently rollout new branches sees us operating the largest network of branches amongst private players in the country maintaining our leadership position in the market. We're also continuing to assess potential value-accretive acquisition opportunities in new markets across Africa, Middle East and Asia, geographies where we feel our business model is well suited to capitalize on health care and consumer trends similar to those in our current markets. Finally, while the ongoing global supply chain disruptions have had little to no impact on our operations, we are keeping a close eye on the evolving situation and have taken proactive steps to build up our inventory to shield from any potential disruptions. Important to note that our test cases are purchased on fixed price contracts with tenors ranging from 5 to 7 years, providing effective protection from short-term price fluctuations. With all this in mind, I'm happy to confirm that IDH is on track to meet the high range of previously stated guidance with full year revenue growth of around 80% to circa EGP 4.9 billion in 2021, and a normalized EBITDA margin in the 50% range. This paves the way for a healthy dividend distribution in line with our historical levels. With that, I will conclude my remarks for today and pass the call over to Omar. Thank you.

Thank you, Dr. Hend. Good afternoon, ladies and gentlemen. Thank you for dialing in. First, let me walk you through Q3 results, and I will then switch to the 9-month performance in details before finally opening the floor to your questions. During the first quarter of 2021, IDH continued its strong momentum by delivering a 27% increase in revenues over an already strong second quarter for the year, and we reached a new record high top line of almost EGP 1.5 billion. Of course, COVID-19 service offering continued to fuel the top line, contributing 54% of our consolidated revenues in Q3 versus a 49% contribution in the second quarter of 2021. And here, let me remind you that we do aggregate, in this figure, two categories of tests; the first one is purely COVID, which is namely PCR, antigen and antibody; and the second one is routine tests such as CBC, ferritin, D-dimer, which we opt to include subjectively in this classification due to the rise in the demand of those tests following the outbreak of COVID. The first category contributed around 51% to our top line figure in Q3 and the remaining balance of 3% is contributed by the second category. And the increase from 49% last quarter to 54% was mainly due to the international travel, which helped IDH record growing demand for PCR tests from travelers. In terms of volumes, we have conducted a total of 8.6 million tests during the third quarter, out of which around 876,000 are PCR, antigen and antibody, those who fall under the first category, as I just mentioned. And Egypt and Jordan, they contributed 50-50 on a split of those tests. And this compares to some 386,000 tests during Q2. On a quarterly basis, I am happy to say that excluding all COVID tests, IDH core revenue and volume are in the right trajectory and continue to build growth momentum with a growth of 14% in revenue and 8% in volume. If we move to profitability, the strong growth in consolidated top line supported a 29% Q-on-Q increase in gross profits and the group reached a gross profit margin of 58% compared to 57% in Q2. Same applies to EBITDA, which reached an all-time high of EGP 790 million, with an uptick of 31% compared to Q2 and with EBITDA margin standing at 54% compared to 52% during Q2. The bottom line, IDH consolidated bottom line reached EGP 480 million with a margin of 33%, up from 28% in Q2. If we now switch to the year-on-year comparison, our consolidated revenues for the first 9 months of 2021 grew by an impressive 126% versus last year. And this was driven by a 33% increase in volume along with improved pricing on account of the higher value of COVID-19 testing. And the 9 months performance was also supported by a consistent recovery in our conventional business with revenue from non-COVID-19 testing growing 30% year-on-year over the back of a 20% growth in conventional test volume. And as Dr. Hend mentioned, even if we compare our core business results with the first 9 months of 2019, the growth will be 16% in value and 3% in volume, which gives us a comfort on our core business growth even after COVID contribution subsides. The 9-month performance was all supported by a growing contribution of our house call service, which continues its promising trajectory witnessed during 2020, as revenue from this service contributed around 20% to our top line during the first 9 months of the year with an amount of EGP 770 million compared to only EGP 313 million generated during the same period last year. So overall, the volume served under the service almost doubled to 944,000 patients. If we move to the regional level, so we'll start with Egypt, which contributed the lion's share of revenues at 83% and, of course, followed by Jordan of around 16%, while Nigeria contributed 1%, and Sudan made up a small fraction of less than 0.5% driven by the devaluation of the Sudanese pound. And if -- we'll start with Egypt, our home market, where revenue recorded a 122% year-on-year increase, of which conventional revenue growth accounted for 30% with a 21% increase in core volume. Moving to Jordan, Biolab delivered an impressive 172% year-on-year growth supported by the substantial number of PCR tests, which the company has been offering since the start of the crisis. COVID-19 testing in Jordan made up around 62% to the Jordanian subsidiaries' revenue during the first 9 months of the year, and this was bolstered by the agreements with Amman Queen Alia International Airport and Aqaba King Hussein International Airport, which generated an aggregate of EGP 141 million during the first 9 months of the year, and contributed around 24% of Jordan top line figures. Having said that, on a year-on-year basis, Biolab revenue from conventional tests grew by 35% with its core volume growing by almost 32%, which gives us an indication that the Biolab market share is gaining strong momentum. Moving to Nigeria. The momentum and the growth continues and its top line increased by 65% in local currency terms and 62% in Egyptian pound on a year-on-year basis. And for Sudan, revenue grew 169% in local currency terms. However, when translated to Egyptian pound, revenue declined by 41% due to the devaluation of the Sudanese pound. And it's important to note that our branches are fully operational, even following the recent unrest in Sudan. As for Al-Borg Scan, I'm delighted to say that we have integrated the third branch at the end of September 2021, and the total revenue generated from this venture increased by 92% year-on-year and that was supported by a 75% increase in the number of tests performed. And we're planning to open 2 additional branches over the next 6 months to reach a total of 5 radiology centers. Moving to profitability. IDH consolidated gross profit grew by 161%, with a 58% gross profit margin compared to 50% in the same period last year. And the margin expansion was driven by economies of scale on the back of the dilution of salaries and wages and other fixed costs. Same applies to EBITDA, and our normalized EBITDA expanded by an impressive 180% year-on-year with a margin of 53% compared to 43% last year. And we have reached an all-time high EBITDA of EGP 1.9 billion compared to EGP 710 million last year. And this growth was duly driven by Egypt and Jordan along with the company's remarkable top line growth and the subsequent dilution of its fixed costs. And here I would like to shed light on Nigeria EBITDA, which recorded a loss of EGP 5.2 million, but as Dr. Hend mentioned, it -- this amount has embedded in its EGP 4.4 million related to previous year. Hence, on a normalized basis, Nigeria EBITDA losses would narrow to EGP 0.8 million compared to EGP 3.7 million last year. Our bottom line was up 206% year-on-year to EGP 1.15 billion with a profit margin of 30% and this despite booking dual listing fees of EGP 29 million along with a EGP 14.6 million fees and expense related to the IFC loan. IDH capital expenditure during the first 9 months reached 8% of consolidated revenues, which is slightly above our normal rate, and this was mainly driven by Al-Borg Scan new branches along with the Mega Lab new equipment installed. And it's important to note here that despite the fact that the Mega Lab equipment is procured on a reagent deal basis, i.e., there is no cash component, we do book those assets as property, plant and equipment in our balance sheet. As at the 30th of September 2021, accounts receivable days on hand stood at 107 days compared to 144 days at the end of last year. And we have booked a provision for doubtful accounts of EGP 18 million compared to EGP 36 million booked last year. We continue to enjoy a very liquid balance sheet with the group total cash balance standing at around EGP 1.8 billion. And this is a 106% increase to -- compared to our closing balance in 2020. And as for our interest-bearing debt balance, IDH has on its books, we have 2 medium-term loans with a total balance of EGP 103 million, split between 2 banks; the first one amounts to EGP 27 million, which will be fully repaid next April and the 7 -- and the other one amounts to EGP 76 million, which is related to our radiology expansion. Finally, based on our Q3 results, we are confident to say that we will post a record-breaking year-on-year top line of approximately EGP 5 billion and with a normalized EBITDA of around EGP 2.4 billion and an ending cash balance hovering around EGP 2.3 billion, which will allow us to maintain our historical dividend payout ratio above the level of 90%. With that, I'll conclude my remarks and open the floor to your questions. Thank you.

[Operator Instructions] We'll take the first question from the line of Belal Sabbah from Jadwa.

Congratulations on a spectacular set of results. I have 2 questions, please. I'll start with the first one. Given that the company now has a very meaningful cash balance and you've been discussing previously potential for acquisitions, I'm wondering if there's any update on that and whether we should think about this in terms of is it only going to be acquisitions within pathology or are you also considering expansions in polyclinics and hospitals as well?

So let me take this question. We are open to acquisitions in pathology as well as in other healthcare services. So we're looking at acquisition opportunities in Egypt and outside Egypt as I mentioned before.

Okay. Thank you. And regarding the guidance for the fourth quarter, please correct me if I'm wrong, are you expecting EBITDA to be lower Q-over-Q? So in the fourth quarter, it should be a bit lower than Q3, and that would be reflecting some normalization in PCR testing?

Can you hear me?

Yes.

Yes. For the guidance, as Dr. Hend and Omar noted in the beginning of the call, we are confirming the guidance that we've given last quarter. It's actually on the higher end of what we've given last quarter, which is a revenue figure of EGP 4.9 billion for the full year with an EBITDA margin of 50%. And your question on the full year guidance?

Sure. Yes, I was just double checking that. That would imply the fourth quarter EBITDA would be lower compared with the third quarter and if that implies that you're starting to see PCR tests normalizing, and the growth on Q-over-Q starting to normalize?

Yes. Well, the fourth quarter is not as high as the third quarter. I'm sure you've seen the trend. The third quarter has been an all-time high for IDH. However, the reason behind that was the travel and there is cyclicality in that front. So that's why the fourth quarter will not be at the same level of the third quarter because of the cyclicality of travel of the fourth versus the third.

We will take a question from the chat from Khaldun Andrawis from Ajlan Group. He has 2 questions. The first question is, after excluding all COVID-related tests, what is the net profit margin for 9 months 2021? And second question is, how many quarters do you think COVID-related operations level will last? And how much do you think of the current COVID-related tests could stay on in the long term?

Let me answer the first question. We don't do the analysis. We don't have 2 separate income statements for -- one for COVID and one for non-COVID because they are pretty much interrelated. So we don't have a net profit excluding COVID and net profit with COVID. We don't do that. It's on the top line figure only. The second question was...

Second question was, how many quarters do you think the current COVID level of the tests basically will last? And how much of the current COVID-related tests you expect to stay in the long run?

That's -- Omar, let me get this. So we expect that the COVID testing will definitely decrease with the increase in the vaccination rate. And this is happening all over the world. However, we cannot really predict when it's going to -- when COVID testing is going to end. But I think for the next year, we're going to still see COVID testing.

We'll take a question from the line of Junaid Farooq from FIM Partners.

This is Junaid from FIM Partners. I have 2 questions. First, on the COVID tests. would you be able to give some color on has there been any price changes with respect to COVID testing compared to the third quarter? The impression that we got that prices have been revised down. And my second question is, when we look at your core revenue profile in the third quarter compared to the third quarter pre-COVID, which is 2019, there has been growth in the revenue. What I want to understand is how does the patient and the test excluding COVID compare? And if you can compare -- if you can comment on the tests per patient, excluding the COVID test and the evolution, that would be very helpful.

Regarding your first question, there has been some sort of revision of pricing. But this is -- this happened from the very first beginning. I'm going to give you an example of PCR. We started at the very first beginning of the crisis with a walk-in price of EGP 3,000 that went down to EGP 2,500 and then EGP 2,000 and then EGP 1,500, so in addition to other participants or other competition, who's doing the tests as well with lower prices. So yes, there is a continuous revision of PCR test pricing that started actually back in June 2020.

Would you be able to give some color since the end of third quarter to date, what has been the magnitude of downward revision in PCR test pricing?

So we have revised our pricing by around EGP 500 for the walk-in tests, PCR.

It's down from EGP 1,500 to EGP 1,000?

From EGP 2000 to EGP 1,500.

We'll take the next question from the line of [ Brook Cody from Ultima ].

Congratulations on the outstanding numbers. I had 3 questions. One -- the first 1 is, how much of the home services are related to COVID tests today? And I'm trying to get a sense of what you think is a good contribution -- I'm sorry, of home services going forward as a percent of total revenue. I know that's kind of probably hard to predict, but I'd be curious to hear your latest thoughts. And also if home services continues to grow, does this impact your C Lab strategy, the design and costs for how you roll out labs, because say more people will be using home services and not needing to go to a C Lab? Does it impact that? The other 2 questions I had. One was just to get -- I know it's a small number, but what was the one-off in Nigeria, the EGP 4.4 million that you mentioned? And then lastly, on Wayak. I noticed a small amount of revenue there. I was curious what the revenue model there could be? Is this something that we should expect will scale significantly or how to think about that? Or does the benefit of Wayak show up in your regular pathology testing, for example, revenue?

So Brook, let us take your question one by one. You asked about the one-off in Nigeria, right? And sorry, the second one was Wayak, right? The revenue -- like the nature of the revenues or...

Yes, we saw some revenues, very small numbers, but I'm just curious is that something that's -- I wasn't expecting the impact to show up on the revenue in your pathology business, not in a separate segment. And I'm just trying to understand how the expectations we should have...

Sure. And your third question was on house calls, right? Is that...

Yes, in house calls, there have been a big, massive increase in house calls today. How much we -- how much of that is related to people doing COVID testing alone versus non-COVID tests? And how should we think about the contribution of house tests -- home services and ultimately, does it change how you think about your C Lab strategy?

Sure. So on the...

So the one-off in Nigeria is mainly related to inventory and comps, so it -- and some other expenses, but mainly related to inventory, because let me tell you something that given that Nigeria is a small component of our balance sheet and income statement, it's usually their other financial statements come a bit later. So we relied on the management accounts when we have our consolidated financials and closing balances, so there were some sort of adjustments on the inventory balances. So it led to an increase in COGS by around EGP 4.4 million.

Yes. On Wayak, as you mentioned, yes, there has been very strong growth. You know that the operation or the start-up has been operating for less than 2 years now. It's very close to a positive EBITDA. The first -- or the aim for Wayak was to provide sort of a 360 service to chronic patients. And they established this relationship using IDH's database of 13 million patients. And their start was through the drug delivery. That was sort of their access to the patients. So, so far, the nature of the revenues that you're seeing from Wayak is purely related to drug delivery as a first step, and then they're moving to more services like they're building online consultation. They're also giving discounts in other labs, et cetera. So that's the nature of revenue stream now. The old...

Yes. Yes. But again, it's not -- the revenue that you see on their income statement is not the price of the drugs. This is the drug delivery.

Exactly. So, so far, the -- like year-to-date, they have done over 70,000 orders. They have served over 25,000 patients. So I think their run rate is very good on a monthly basis like there's an increase of roughly 12% to 15% month-on-month in their orders. So they have been doing well, and they have been growing well.

That's great color. Sounds exciting. So the last question was really related to home services. And if you -- the super success you've had there, how much of that is driven by COVID versus conventional? And does this impact your long-term strategy for what a C Lab could look like in your cost structure, et cetera?

We don't have this very specific breakdown of COVID versus non-COVID. It's very hard to dissect it in this manner. But COVID helped in the sense that people, especially at the beginning of the pandemic were just scared to visit labs, were scared to get out of their houses. So it encouraged a larger segment of our patients to try the service. You're aware that we always had the service. We've always offered it, but COVID helped in the sense that more people tried it, more people experienced the convenience of it. So yes, it's currently -- for Egypt, it's over 20%. We don't think it will revert back to the 10% level, historical levels because, as I said, more people tried the service.

And let me shed some light as well on the tests per patient for house call. It's way higher than our conventional tests per patient. So our tests per patient for the house call service, it ranges between 5.5 to 6.6 throughout the last 2 years, meaning from 2020 and 2021, and this to be compared to a high of 4 tests per patients within all IDH.

It is also important to note that the contribution of the house call revenue last year was 20%. However, this year is 23% of the total revenue in Egypt. So this means that people are finding the service to be attractive and are using it more and more. And I think this trend will continue in the future.

We'll take the next question from the line of [ Peru Mia from All Africa Partners ].

I have 3 questions. I'll ask them one at a time. First question is very simply just on market share. Given your very strong numbers, could you comment on market share changes and what these -- what you estimate what these are at the moment?

So we are conducting -- to know the proper market share, you have to conduct research -- quantitative research to look at the -- at our market share versus competitors. And so we're doing research. This year, it's going to end by December where we will know exactly our market share. However, we get -- all the time, we get our market share through our corporate sides -- our corporate clients. So we know that we are increasing our market share in the corporates. However, the whole -- for the market share in the whole country, this is going to be known by the quantitative research by December.

Okay. Second question is just on volume. And so given that volumes have been, I assume, much higher than expected, does this give you any extra leverage when it comes to renegotiations -- any negotiations you're having with the suppliers on the testing kits? I know you mentioned these are 5- to 7-year relationship. But if there's a renegotiation happening at the moment, would that give you more leverage on the terms?

Yes. I know we have -- of course, when you increase your volume, you're able to negotiate prices. And we have done that with the PCR testing because of our large volumes. So it really depends on what type of tests. So there are tests related to a contract that is, as you said, 5 to 7 years contract. So if we finish the volumes required by the contract, then we can renegotiate the prices. Others that are not related to these kind of contracts, then we are able to negotiate the prices given the higher volumes.

Okay. And final question is, in terms of the COVID tests you're doing, can you share with us what percentage of these are coming back as a positive? Is this a good proxy for how the COVID testing as a part of your business will trend? So for example, if the positive test are lower and lower, this should be a guide that COVID tests are going to disappear in a quarter or 2 and vice versa. Is that a fair way of looking at it?

No, I don't think so. It's because -- we are biased because people who come to us are usually -- they are not usually -- there are always symptomatic people, symptomatic patients. So you cannot really you judge by our percentage it is always going to be biased towards positivity because patients who come or people who come to test for COVID are either travelers and those are just doing it routinely or they are symptomatic patients, so they have fever and so on and so they most probably be positive. However, you can -- I mean it's really related to the vaccination rate in the country, and this is seen everywhere in the world, as you increase the vaccination, then the cases drop.

Okay. I'll try and just squeeze one more in, please, if I can. The high dividend payout is obviously appreciated. But does that also signal that you have not many options for reinvestment. I mean I would draw that you keep the money and reinvest it on my behalf within IDH, and I continue getting the high returns and the IDH gives me. But given the fact that you pay most of it out, is that a reflection that there's not many M&A options out there at a good value or other big kind of ways to spend the money in a good way?

Actually, no, because there are 2 buckets here. The first one is that, first, we have already secured a facility from the IFC, which we will use it for potential acquisitions, this is number one. And we already have secured a balance that will not affect this year's dividends for potential acquisitions. So no, even if we pay 100% of -- our 100% payout ratio, it will -- it does not affect the potential acquisitions in place.

We will take the next question from the line of Sergey Dubin from Harding Loevner.

Congratulations for the excellent results. Actually, I just asked my questions in the box, but I'm just going to read them off. So the first one is regarding the pricing. Can you remind me what -- is there any cap on COVID pricing in Jordan? And also, do you see any risk of price caps being imposed in Egypt?

Yes, there is a cap in Jordan. Prices are regulated in Jordan since a very long time ago. So it's -- there is a cap, and it has always been like this since the start of the pandemic. The government -- the Jordanian government decides at what price the PCR is sold. Regarding question in Egypt, no, of course, not, we don't have any price cap.

Okay. And then the second question. With regard to the acceleration that you've seen in Q3, which -- the vaccination rate in Egypt has actually increased even though it's still pretty low. But is that -- I think, as Dr. Hend just mentioned, is that just a result of increased demand for travel-related PCR test? Is that why it kind of hit high records despite increasing in -- I'm sorry, accelerating vaccination rate?

Vaccination rate, as you said, is still very low. So the thing is, we saw an increase in demand in the COVID testing because of traveling. So there were a lot of travelers demanding the COVID tests and also we had cases, so both increase in the demand for COVID testing. But the vaccination is really quite low.

Right. Is it something like 17% right now? Is that -- that's kind of the number that I saw. Does that sound right?

Yes, 14 -- in the range of 14%, 17%, yes.

Okay. Got it. And then another question regarding your conventional tests, which grew -- by my calculation grew, I believe, it was like 80% -- I'm sorry, 80% pricing and 20% volume year-on-year or something like that. Do you see patients that -- now that they're a little bit more comfortable getting out of their house and also the fact that perhaps the health awareness has increased in the wake of this pandemic. Do you see potential acceleration in non-COVID testing going forward?

I think what you said is absolutely true. People are becoming more health aware and health conscious and trying to be proactive about their health. So I think we're going to see an increase in the conventional testing for chronic patients, specifically for chronic patients like diabetics and renal and liver patients and so on as well as health checkups. And as you said, people are getting more comfortable going to doctors. So doing the things that they postponed doing during the COVID peaks like going to doctors or doing surgeries or anything that they needed to do that they postponed, any operations or any visits -- doctor's visits that they needed to go to. So they started doing it right now, and I think we're going to see an increase in the conventional testing.

Okay. Great. That's what I figured. And then just last quick question, just a clarification, I guess. When you spoke about Wayak, you mentioned that these -- the revenue that they generated is from drug delivery. Are you talking about kind of like a physical drug delivery? Or are you talking more about data that they provide to drug companies and basically help identify chronic patients and then the drug deliveries -- sorry, drug companies or whatever through distributors, they deliver drugs and then they just give Wayak a cut of the revenue?

No. It's physical drug delivery. It has nothing to do with the pharmaceutical companies.

Okay. So they're actually performing drug delivery to chronic patients, who are like unable to get out of the house and get the drugs themselves. Is that right?

Correct. But for a delivery charge, not for -- the revenue that you're seeing in their income statement is related to the delivery charge that they do charge the patient, not the price for the medication.

Yes, yes, I got that part. Okay. And then what's the angle for IDH? I mean it's kind of like -- I mean, obviously, you can make some money doing this drug delivery to patients. But I guess there's a bigger game here for IDH. So what is it that you guys are trying to ultimately get out of this?

We are trying to increase the value given to the patients. So we're giving value to our chronic patients in the form of drug delivery in the form of discounts and other health care services and so on and so forth. So we're trying to increase the services and the value we're giving to our chronic patients to increase their loyalty and increase our share of wallet from those patients.

Okay. And do they get -- when you mentioned discounts, do they get discounts like because of the bulk -- some kind of a bulk buying or something that you guys are able to do or like how do all this...

Yes, through it, yes.

Correct.

We'll take the question from the line of Julie Simmonds.

Just a question on the travel trends that you're seeing from Jordan, you talked about it being seasonal, the COVID testing you're getting there. So I was just wondering how you expect Q4 to bet with Q3 and into 2022? Because obviously, there's a general improvement in the amount of travel that we're expecting. But is there some seasonality within that as well?

So you're talking about Queen Alia agreement?

Yes, yes.

So as we have previously mentioned during the Q2 call that they have signed an agreement with Queen Alia International Airport, where they do conduct PCR for travelers coming to Jordan. And the quantum that we have shared is around JOD 7 million for the whole contract, which will last till Feb 2022. And the revenue is still more or less the same as Q3.

Okay. And just in Nigeria, clearly, you're beginning to see -- well, you're seeing a continuing improvement there. Are you looking to start to roll out new sites there yet or all of the sort of 30 to 35 that you're looking at putting in this year going to be in Egypt?

So yes, as you said, there is a significant improvement in our top line figure, and there is a narrowing of losses on the EBITDA. And we have set some boxes that need to be ticked before we invest more, and we're pretty much there. So starting next year, we will start our rollout plan. Our initial rollout plan of having more and more branches in Nigeria, when all the boxes are ticked. So all shareholders, we will inject more money in the business to have the previously agreed 40, 45 branches in Nigeria.

And how long do you expect that to take to get to that number?

Around 2.5 years, 2.5 to 3 years.

I'll move to the chat, take a few questions. A follow-up, just from Halina Hashimi. She's asking if you can repeat the part where you mentioned that -- regarding the Al-Borg Scan equipment? And how do you book it?

Al-Borg Scan equipment are booked. And again, we buy Al-Borg Scan equipment and they are booked as any other property, plant and equipment. The other one is the Mega Lab equipment. And it's -- the Mega Lab equipment is based on reagent deal. And what this means is that the supplier, whether Siemens, Roche or Sysmex, they do procure the equipment for free, and we book it as an asset and the other side is a liability, even if we do not pay cash in return for a pre-agreed number of kits, both from the supplier over a period of 5 to 7 years. So we book it as assets and there is a depreciation on these assets and the other side is the liability, whereas it is -- there is some sort of interest expense on this liability, whereas it is reduced by the number of kits or the payment of kits that we do buy each and every year. So there is no cash component on the equipment procured on the Mega Lab. That's why we always say that it's an asset-light business.

Question from Florian from LGM. Are non-COVID test volumes still restrained by the overall situation, no interventional surgeries, patients afraid of moving outside the house, et cetera?

Can you repeat this question again, please?

The question is are non-COVID test volumes still restrained by people not doing a lot of surgeries, fearing to move around, limited consultant visits, et cetera, or they've normalized?

I think they haven't normalized yet. They are picking up, as we said before, and they will increase in the future, definitely.

Okay. Question from Kane Slutzkin. How do we start thinking about the performance of IDH in a post-COVID world? Assuming a clean year, what sort of growth rate do you anticipate reverting to, would have been close to historic rates?

I think it's very difficult to predict the future, given the uncertainties that we are seeing. However, the pre-COVID we're increasing at around 20% top line. And I mean, this was before COVID. I think we still have COVID testing for the coming year. Rates will definitely decrease, but we'll still have COVID testing, but it's very difficult to predict the volume of COVID testing next year.

Question from [ Swexia Pantha ]. Could you give us a sense of where do you see the average price per test normalizing in Egypt in the medium term in 2022 and beyond?

Again, as Dr. Hend mentioned, it's pretty difficult to anticipate when exactly COVID will completely subside, and we do expect that COVID will prevail for quite some time, given the necessity of doing PCR tests for travelers. So it's a hard question to answer for now.

A follow-up from Belal, asking for guidance on lab openings for next year?

Same rate, 30 to 35.

The same rate as 30, 35 branches.

I have question from the line of Prashant Kumar.

Of the 7.5 million patients we have served in the 9 months, how many of those would be first time or new patients to IDH? And you talked about the loyalty program. Can you just build on that? And how are we able to keep them in our ecosystem and keep them coming back? Hello? You guys there?

Would you like to take that one? Okay. So the recurring patients or the new patients, if you will, that we've seen in our lab post the COVID are at least between 20% to 25%. That's according to our internal estimates. And as Dr. Hend mentioned in her opening speech that we are -- we have started actually a loyalty program to make sure that -- having those new patients as recurring patients. We're building a new program where that patients obtained bonus points, the more they use the service, and they can redeem it at certain levels with different magnitude. So we have constructed a big program to make sure that patients remain loyal, patients are enticed to use more of our services going forward to capitalize on those new patient base.

Understood. And so are we -- what -- are we able to...

And -- sorry, I...

Yes. Go ahead.

I would also like to add that this is not the only thing that we've been doing. Because internally, we've been also dissecting all the segments based on their profile, and see how we can benefit each profile based on the testing needs. So this is also something else that we have been working on internally. So we've been working in different tracks, dissecting patients based on tests, based on their needs and then catering further for them.

Understood. And so is this like a loyalty card? Or are you making them -- the new patients, are you asking them to download an app? How is the mechanics of that? And I guess the follow-up to that is what -- is providing test results on an app allowed in Egypt and -- or online allowed in Egypt? And if so, what percentage of our patients access our -- the test results digitally?

We have been already having apps for a few years now. So app is not a new thing we're providing patients. However, we add services to the app, so patients can actually access their results on the app. They also receive the results on their phones via messages or SMSs. So the patients -- and online as well. So patients, in general, have different access points to receive the results or to access the results. And through all those access points, they can see their current results, they can see their historic results. This is the same across all access points.

And so is that number a very high number of the tests we do? What percentage of those results are accessed digitally?

All the results.

All the results are...

All the results. Okay. Understood. So we have a lot of information on these patients.

Yes. Of course. This is through the LMI access system in the Mega Lab. It sends directly the result after being conducted in the Mega Lab directly to the patient, so it's a centralized system.

A follow-up on [ Peru ]. What is the revenue and EBITDA guidance for 2022?

What's the -- sorry, the EBITDA guidance?

Revenue and EBITDA guidance for 2022?

No. I think it's a bit early to give like exact guidance for 2022. Because as we've been saying since -- since the start of the call, next year is -- there's a lot of moving parts. However, what we are comfortable with is that our non-COVID or our core testing or conventional testing has been growing very, very well, has been recovering. As we noted, they're already back -- the volumes are already back to pre-pandemic levels, actually 3% ahead of pre-pandemic levels, so this is something. We don't expect COVID to vanish completely, of course, next year, because next year is just a few weeks around the corner. So we expect to see some COVID testing as well, be it through more infections or travel PCR. So we believe that this will still be around for some time, maybe at lower levels than this year, but we believe that there will be still COVID testing for next year.

Question from [ Dunatas ]. Could you please comment on the competitive environment in Egypt? Are you seeing anyone becoming more aggressive in the market in terms of expansion or pricing?

We're seeing competition as we usually do. But this year, there are a number of small players that have started operating, trying to take advantage of the increased demand in the COVID testing. And of course, these small players are always decreasing their prices in order to compete with the larger chains.

We will take a question from the line of Neil Cooper.

Well, congratulations again. Brilliant, fantastic set of results, well done. So 2 questions. The first one is a general question on the operational side. You are clearly running at very good volumes at the moment. Operationally, I presume you're running 24 hours. Can you kind of talk us through generally what you see as the weak points on the capacity for growth? Is it equipment? Is it staff? Just generally, how do you see things being on the operational growth side?

So you're asking about the weak points in operation -- in the operation that will hinder our growth. Is this the question?

Correct. Correct. Yes.

We still have a lot of capacity in the Mega Lab in order to -- that will help us grow and increase our volumes. And just to let you know what happens with the deal that we have with the suppliers is that when we increase our volumes, they get us new machines, and this is the case with all the suppliers because they are taking their money out of the kits. So they always deliver the machines for free, as you know, and then we consume kits. So it's for their advantage to always provide us with more machines if needed, and if our volumes are increasing and we need more machines. So we don't have a constraint really in terms of capacity.

Okay. Fine. All right. And the second question, forgive me, I need to remind myself for the Biolab in Jordan, IDH owns 60%. That's correct, isn't it?

Correct.

Yes.

Yes. And so the outstanding 40% or so, I understand there's an option to buy back. Is that a 2-sided option because from the owner of the 40% perspective now would be a good time for him to exercise that 40% option because he will have benefited from the COVID contribution to the EBITDA for Jordan? Or is it also the option of IDH to also exercise the option?

It's a good question, and there are 2 buckets here. So the substance of this option is, it has been there since 2016. So Dr. Amid has the option to put his shares to IDH so IDH can buy him out and this started back in 2016. And he could have exercised this option over the past 5 years. And it's calculated based on 7x LTM EBITDA minus debt, of course. So this is the first bucket. Dr. Amid sees the growth potential, again, in this company. This -- Biolab has been always increasing its top line figure and EBITDA throughout the past 6, 7 years. So each and every year, there is a growth. And Dr. Amid sees the potential of this company to grow more and more. And of course, this year, it has witnessed a substantial growth like Egypt and the other countries as well in which we do operate. But in -- I had a conversation with Dr. Amid, and he always says that there is more and more in Jordan to come. So there is no need to exercise the put option. Having said that, of course, from an accounting perspective, we do have a liability on our current liability given it -- this put option can be exercised anytime hypothetically. We are having a liability on our balance sheet in case he wants to exercise his put option. But as per Dr. Amid, it's not currently on the table.

Okay. That's clear. And do you think that there -- because of the exceptional year, you don't think there is a temptation for him maybe to sell 20% of his 40% because of the EBITDA and then carry other 20% forward? There has been a discussion...

No, it's an all or nothing. He cannot just present...

All or nothing. Okay. Okay. But you believe he is in for the long term, even though it could benefit right now very highly from that COVID contribution.

Because it's not a one-off. It's not going to be a one-off. It -- there will always be a growth more and more in Jordan than in Egypt. It's not just something -- so it will continue to grow. And if you see -- again, if you just decompose the growth of Jordan, yes, there is a substantial increase in COVID, and COVID and the COVID-related tests constitute a big portion of top line figure. However, the core business itself grew tremendously in terms of volume and value. And even this -- and this indicates the growth momentum in Biolab market share, given that it's already present everywhere in the country. When you go to the airport, there is Biolab in Queen Alia, even King Hussein Airport in Aqaba. So Biolab is everywhere, gaining more and more market share, and its core volume increased by more than 30%. So it's not rationale for him now to sell it.

Very good. Thank you, Oma. Sounds very good. So just a small follow-up question. The prices in Jordan have been fixed since 2008, I think. Is there any chance for the Jordan government to relax those -- relax that state of pricing?

It's highly unlikely, I think, for them.

We'll take the last question from the line of [ Ahmad ].

I just have a question. It's something I started to note that in October granting discounts to Bank Master and credit cardholders. So can you just walk us through this business? I mean, is there a certain threshold that you set with banks to decide, which part you will bear that discount? And also, do you consider that flow as part of corporate business or it's a part of the loyalty program for walk-in?

We do have several programs. So if you take Misr Bank as an example, it's -- again, it's more or less dependent on the volume itself. So we do have a deal with Misr Bank, given it's -- the large number of employees, whereas we give them this discount compared to walk-ins and they do pay on credit. So consequently, it's part of the corporate business. Did I answer your question?

Yes. Yes. But my question about others, do you consider it as a walk-in?

What do you mean others?

I mean for others, I start to see there other corporates, I mean. So if I'm a client, a patient and I come to your lab, and I got this 10% discount, okay? So -- and do you -- I also will be considered as a walk-in?

10% discount -- yes, 10% discount is a walk-in. As long as you pay cash and the discount is 20% less, then you're a walk-in patient.

Thank you. I think I'll hand it over to you, the management, if they have any concluding remarks.

Thank you very much, everyone, for joining us today. Thank you.

Thank you, everyone, for joining. Enjoy the rest of the day. Thank you.