Healthcare Transformed

HEALTHCARE TRANSFORMED

2018 ANNUAL REPORT Cleopatra Hospitals Group Cleopatra Hospitals Group

Table of Contents

CHG at a Glance 02 Note From Our CEO 04 A Message From Our Chairman 06 Overview of CHG 08 Healthcare in Emerging Markets 10 Our Facilities 16 Our Strategy 32 Looking Forward 40 2018 in Review 42 Operational Highlights 44 Management Discussion & Analysis 46 Our People 50 HR Strategy 52 Executive Management 54 Corporate Governance 62 Governance 64 Board Committees 69 Sustainability and Corporate Social Responsibility 70 Financial Statements 72 Auditor’s Report 74 Consolidated Statement of Financial Position 76 Consolidated Statement of Profit and Loss 77 Consolidated Statement of Comprehensive Income 78 Consolidated Statement of Changes in Equity 79 Consolidated Statement of Cash Flows 80 Notes to the Consolidated Financial Statements 81

Annual Report 2018 Annual Report 2018 Cleopatra Hospitals Group Cleopatra Hospitals Group

CHG at a Glance

Established in 2014 and listed on the Egyptian Stock Ex- standardizing service quality, integrating its new and exist- change in 2016, Cleopatra Hospitals Group (CHG) is Egypt’s ing facilities to achieve higher efficiencies, enhancing utilisa- largest private hospital group by number of hospital beds and tion and optimising existing capacity, continuing to expand number of operating hospitals. Over the last five years, the the geographical footprint and referral channels, venturing Group has revolutionized the Egyptian healthcare industry into new, high-potential segments of the market, strength- by bringing high quality, integrated healthcare solutions to ening the CHG brand as a healthcare leader, and developing a growing number of patients across a constantly expanding the centres-of-excellence model. CHG aims to become the geographical footprint, while simultaneously introducing, provider of choice for patients across Egypt as we work to for the first time in Egypt, a 360-degree approach to the run- transform the nation’s healthcare industry. ning of day-to-day operations at its hospitals. Since inception, CHG has been able to consistently evolve and adapt to changing market dynamics to remain at the industry’s forefront. The Group has expanded its asset base and product offering, integrated its platform to achieve higher efficiencies, and invested in medical CAPEX and quality-improving initia- Mission * ** tives, all while putting the patients’ and their families’ needs 5 + 1 1 + 1 +30 years first and consistently delivering improved patient outcomes.

The Group operates five of the nation’s leading hospitals Our purpose is to deliver the highest standard of health- operational hospitals across our platform polyclinics operated by CHG subsidiary track record alongside a newly inaugurated polyclinic. CHG is in the care services in a safe, reliable, and caring environment. final closing stage to take-over of operations at its sixth hospital, El Katib Hospital, and is expecting to launch its We keep patients and their families at the heart of our second polyclinic in West Cairo in the coming months. At strategic plans by developing an integrated platform *** all of CHG’s state-of-the-art facilities, patients have access equipped with highly trained healthcare providers, 690 + 89 2,400+ 924,904 to the finest quality of healthcare in Egypt, which highly state of the art facilities, and the latest instruments in total medical staff including c.1,000 trained and experienced medical staff delivers with the help medical technology. patient beds including c. 537 wards, 149 consultants, 650 resident doctors and cases served in FY18, up 6% y-o-y**** of the latest medical technology has to offer. Today, CHG’s ICU beds, and 4 Cath labs c.1,000 nursing staff hospitals enjoy a track record of success that exceeds 30 years and includes brand names such as Cleopatra Hospi- tal, Cairo Specialised Hospital, Nile Badrawi Hospital, and Al Shorouk Hospital, along with the two latest additions Vision of El Katib Hospital and Queens Hospital. CHG’s hospitals 4,348 EGP 1,456 MN EGP 405 MN and polyclinics offer a wide range of diagnostic, medical, employees (of which 40% are female, and surgical services across both inpatient and outpatient consolidated revenues in FY18, this excludes figures from newly added EBITDA in FY18 with a 28% margin settings, all tailored to the unique needs of each community Our aim is to be the leading healthcare group in Egypt. up 27% y-o-y polyclinics and Queens Hospital) where the Group operates. At all facilities, CHG has estab- We are working to achieve this through an integrated lished various Centres of Excellence (CoEs) which offer our platform of medical facilities that enables us to deliver patients the most up-to-date and highest quality care across world-class services to the effect of enhancing the qual- * Al Katib hospital acquisition is subject to final closing a wide-ranging spectrum of specialties including cardiology, ity of life made available to our patients. ** West Cairo Polyclinic is expected to come online in July 2019 radiology, orthopaedic, urology, and multiple others. *** Al Katib Hospital number of beds The Group’s strategy is focussed on improving and **** Cases served includes number of inpatients and outpatient visits, and ER visits. 02 Annual Report 2018 Annual Report 2018 03 Cleopatra Hospitals Group Cleopatra Hospitals Group

Note From Our CEO

Dear Shareholders,

2018 was a transformative year for Cleopatra Hospitals second, located in West Cairo, expected to come online in We enter 2019 perfectly positioned to record yet another Group which saw us deliver on all pillars of our all-encom- the second half of 2019. Thus far, we have recorded strong year of financial and operational growth. In the coming passing operational and financial strategy to deliver not patient demand at the newly inaugurated facility, which, year, the Group is committed to continue delivering on only exceptional value for shareholders but drive change combined with a new management team specifically its multi-pronged operational strategy aiming to further throughout the Egyptian healthcare industry. The year was selected to run the polyclinic arm of the Group, leaves expand its geographic reach and service offering while underpinned by a desire to play an active role in institution- us exceedingly confident in their success in the coming elevating the quality of care we strive to deliver. We will alizing the healthcare system throughout the country by years. The polyclinics will not only help extend our reach continue with the planned renovation works across our leveraging our on-the-ground expertise in the industry and in outpatient services and fill a supply gap in new subur- facilities, working closely with leading German multidis- our ability to deliver some of the highest quality healthcare ban areas but will also help drive higher volumes at the ciplinary engineering consultancy firm, Vital Konzept. We at expertly outfitted facilities with an expansive outreach. Group’s hospitals by referring patients to hospitals within are also actively exploring new, high-potential locations The year saw us deliver on this goal, with the group quickly the Cleopatra Group. for the polyclinics we aim to inaugurate in the year to expanding its geographic footprint and service offering come, which falls directly in line with our feeder network while continuing to deliver the highest quality care avail- Throughout the year, we also added to our service offer- strategy, which is set to see us launch two polyclinics per able in Egypt to a growing number of patients. ing while further strengthening our Centres of Excellence year for the next five years. (CoEs), adding new specialties to our already wide roster Throughout the year, we laid the groundwork to exten- and further improving the quality of existing ones. In As the Egyptian healthcare sector continues to develop, we sively expand our operations. In the first few months of line with our commitment to delivering the highest qual- aim to remain at its helm, not only by continuing to provide 2019, through a series of strategic take-overs, we success- ity care to all our patients across all our hospitals, we the kind of healthcare services our patients have come to fully added two new facilities, Queens Hospital and East began works to renovate and expand existing facilities, expect of us, but by venturing into new verticals to com- Cairo Polyclinic, to the Group’s network and will soon add introducing the latest technology available in the medical plement our existing business model. As such, in 2019, we two more — El Katib Hospital and West Cairo Polyclinic. field while ensuring we use existing capacity to its fullest will develop new initiatives covering facility management, Queens Hospital has added 50 new beds to the Group’s potential. We also successfully launched the new Clinisys long-term care, and home care aspects of the business as existing capacity and given us access to the facility’s top- HIS/ERP system at CSH and the polyclinics, which imme- we work to transform the healthcare industry. “2018 was a transformative of-the-line maternal care unit. In parallel, we are explor- diately helped improve the hospital’s data management year for Cleopatra Hospitals ing multiple opportunities to outfit the facility with the and backup framework while improving its back-office I would like to take this opportunity to thank all our staff capacity to offer additional specialties and services. We management. We are working towards Group-wide adop- for the crucial role each and every one of them has played Group which saw us deliver on all have also acquired the real estate assets of El Katib Hos- tion, which we expect to complete in 2020. in helping the Group achieve and surpass its operational pillars of our all-encompassing pital and are finalizing the business transfer agreement and financial targets over the last twelve months. I’m ex- operational and financial strategy with the operating company. El Katib Hospital will add 89 During 2018, in the midst of geographical and service ceptionally proud of the achievements we as a team have beds to our existing capacity and see us inaugurate a new expansion, CHG also delivered strong top- and bottom- obtained during 2018 and I look forward to delivering on to deliver not only exceptional urology centre of excellence. line results. The year saw the Group grow its top-line 29% the strategy we set out for 2019. value for shareholders but drive y-o-y to EGP 1,456.1 million which, when combined with change throughout the Egyptian I’m also proud to announce that the first of the two newly improved operational efficiency, helped drive a 167% y-o- established polyclinics, located in a strategic neighbour- y rise in net profit and a 12-percentage point expansion in Dr. Ahmed Ezz El-Din healthcare industry.” hood in East Cairo, is now fully operational with the our net profit margin to 22% for the year. Group Chief Executive Officer

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A Message From Our Chairman

Over the last 15 years, the healthcare industry has presented hospitals, all while developing an institutional manage- increasingly attractive investment opportunities in development team for the sector. Our plan was initially funded by ing markets. At the same time, investing in the development capital raised from the EBRD, PROPARCO, and DEG in ad- of a country’s healthcare sector allows for the opportunity dition to capital through private equity limited partnership to substantially impact patient care both in terms of service structures from developmental organisations such as the quality and outcomes. IFC, Islamic Development Bank, the Arab Fund, and commercial capital providers. In Egypt, the market’s attractiveness is underpinned by strong macroeconomic and demographic fundamentals. The land- Since 2014, we have invested over EGP 600 million in in- scape as it stands today is characterised by a fast-growing frastructure and medical technology upgrades to improve population, an increasing life expectancy, a rising incidence the quality of care, access to services, and patient experi- of chronic disease, a growing middle class, and an expanding ence. In just over five years, we have substantially changed insurance payor base. All these factors — coupled with the the Egyptian healthcare landscape. Today, Cleopatra Hos- inability of the predominantly publicly led healthcare system pitals Group is regarded as an industry trendsetter, a posi- to meet increasing demand — have opened up the door for tion we leveraged to drive change and progress across the private healthcare providers, like Cleopatra Hospitals Group, entire sector. Being the largest private healthcare provider to fill the shortfall, investing in medical technology and driv- in the country has allowed us to consistently attract the ing improvements in care and patient experience. best talent not only when it comes to our medical staff but also across the Group’s management roles. Currently, Historically, the healthcare sector in Egypt has been ex- CHG’s management team brings together decades of man- posed to relatively little private institutional capital activ- agerial expertise across multiple sectors. We employ an ity, with only a limited number of institutional investments integrated governance matrix, which, in turn, has allowed completed in the sector. In 2014, when we embarked on the us to take optimal decisions promptly while overseeing all journey to build the largest private hospital group in Egypt, medical and non-medical day-to-day operations. the country did not have established hospital groups serving the needs of the expanding local private healthcare mar- As we head into the sixth year of our journey together, I ket. The private facilities operating at the time employed would like to take this chance to thank all our doctors, small scale business models, which saw them achieve little consultants, nurses, management, and all our stakehold- growth and deliver limited scale benefits to their stakeholders for their continued hard work and efforts in delivering “Today, Cleopatra Hospitals Group is ers. Many did not adhere to modern governance structures on our shared vision. I am confident that we have built the regarded as an industry trendsetter, and invested little capital in medical technology and medi- foundations for another year of growth and development a position we leveraged to drive cal infrastructure. both operationally and financially as we transition to the next chapter of CHG’s story. change and progress across the As such, our vision was to radically revolutionise the in- entire sector.“ dustry by introducing a modern, integrated approach to medical and non-medical operational oversight, deliver the Ahmed Badreldin highest quality care in line with international best prac- Chairman of the Board tices, consistently invest in the latest medical technology, and work to attract the best-trained consultants to our

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Overview of CHG

Currently, Cleopatra Hospitals Group holds a majority stake in five of the top hospitals in Cairo, encompassing 690 total beds and over 50 specialities with over 1,500 resident doctors and consultants and 900 nursing staff. In recent years, the Group has taken active steps to standardize the quality of facilities and services at each of its hospitals, in addition to making significant investments in infrastructure and technology upgrades to integrate each of its assets under one platform Our Mission

To deliver the finest quality healthcare in Egypt in a safe, reliable, and caring environment that leverages our highly trained healthcare providers, state-of-the- art facilities, and the latest medical technology, always putting patients and their families first

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Overview of CHG

Healthcare in Emerging Markets

Healthcare systems in emerging markets fundamentally presenting a rapid growth opportunity in a healthcare sec- Egypt’s Healthcare Industry also one of the most underserved healthcare markets with differ from those in developed ones. According to a report tor that is both highly fragmented and under-penetrated. The healthcare market in Egypt is characterized by attrac- average government healthcare spending accounting for by the World Bank, private healthcare systems account The private healthcare sector in emerging markets therefore tive demographics, including a growing population with in- only 2.2% of GDP, compared to an average 6% globally. The for 60% of the total health spending in emerging markets. represents a key investment opportunity, with economic creased life expectancy, rising disposable income, low state sector is governed largely by the Ministry of Health and They exist in parallel to facilities and networks funded by growth in these markets being buoyed even further by fa- investment in public services, and a heavy reliance on out- Population, which is also responsible for establishing public the public sector, providing quality services where there vourable fundamentals and regulatory support. For groups of-pocket spending. This has resulted in both an increase in hospitals, which accounted for 75% of all available hospital exists a shortfall in quality and accessible care. In emerg- like CHG, investing in private facilities affords them the op- lifestyle-related diseases and in the willingness and ability beds in 2015. The management of these hospitals, however, is ing markets, patients have greater agency when it comes portunity to attract some of the top medical professionals of citizens to pay for higher quality healthcare. Moreover, overseen by the Ministry of Higher Education and the Minis- to making healthcare choices compared to those in insti- in the industry, and position themselves as concentrated the sector benefits from favourable regulation for private try of Social Affairs. tutionalized markets. centres of excellence where qualified experts are available service providers. directly to the public. These conditions are changing, however, under a series of Unlike in developed countries, where a visit to a general Egypt is the most populous country in the Arab World and reforms initiated by the government. The FY2017/18 budget practitioner is a necessary first step prior to accessing spe- Egypt: The Macro Picture the third most populous in Africa. According to a report by saw public healthcare expenditure increase to 2.5% of GDP cialist care, patients in emerging markets are able to di- As a result of multiple initiatives under a comprehensive the Oxford Business Group, the country’s current popula- along with an increased budget for university hospitals, as rectly access multiple specialist facilities. This freedom of economic reform programme, Egypt has emerged as an at- tion growth rate is c. 2.6% per annum, with the population cited in an Oxford Business Group report. Moreover, the choice further extends to the individual physician. Patients tractive market for investors looking for political and macro expected to hit 120 million by 2030. At the same time, life ex- government has shifted towards creating partnerships with in emerging markets are able to identify the exact physician stability. Since 2016, the government has taken on a num- pectancy is increasing, with Egyptians over age 65 expected private sector entities in order to expand the scope of ser- or specialist and will choose a hospital or facility based on ber of reforms aimed at promoting economic recovery and to increase to 5.6% of the population by 2022. However, it is vices available through the public healthcare sector in Egypt. their choice of doctor. This inevitably makes quality mar- spurring investment. Following the devaluation of the Egyp- keting for hospital facilities crucial to attracting the best tian pound and a USD 12 billion aid package pledged by the medical professionals. International Monetary Fund (IMF), Egypt has witnessed a steady acceleration in GDP growth, a stable fiscal position Emerging markets are home to what are now increasingly as well as an overall improvement in its investment climate. 120 million 2.1% aging populations and rising rates of non-communicable Along with continued GDP growth, 2018 has seen a decline diseases such as hypertension, diabetes, and cardiovascu- in unemployment rates, positive real interest rates and, for lar disorders. The percentage of people 65 years or older the first time in 15 years, a primary budget surplus. These population expected by 2030 annual population growth rate in emerging markets has doubled to 10% since 1980 and is improved market conditions have made Egypt an attractive slated to hit 15% by 2030, according to the UN. Meanwhile, destination for investors. The government has supplement- according to the WHO, non-communicable diseases are ed this with favourable regulations facilitating entry into expected to account for nearly 55% of the disease burden of the Egyptian market, further incentivising investment. In these country groups. the healthcare space, the government has launched initiatives to support the improvement of the healthcare sector 1.3 75% Given the expansive economic growth of emerging mar- such as the Universal Healthcare Act, which will overhaul kets and increased purchasing power of patients in these the healthcare sector in Egypt by improving facilities, the of hospital beds available provided beds per 1,000 people in 2017 markets, the demand for quality healthcare has soared, quality of care, and insurance coverage for citizens. by public hospitals

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Overview of CHG

High Demand for Quality Healthcare Current demographics in Egypt have resulted in an ever-in- The high disease burden present in the country coupled with a is highly fragmented. According to a report by the Oxford and non-profit service providers ranging from large hospitals, creasing demand for quality healthcare. Communicable diseas- decline in the quality of public healthcare services and increased Business Group, in 2014, private sector hospitals accounted clinics, and pharmacies to NGOs, mosques, and church clin- es such as hepatitis B and C are prevalent in the country, with disposable income has resulted in a higher-than-ever demand for 68% of the market, but only had 24 beds per hospital, which ics. Most private healthcare providers are located in Cairo and the latter affecting 7% of the population, as found by a report for quality healthcare services. The heavy reliance on out-of- has driven numerous opportunities for growth in the private other urban areas. published by Oxford Business Group. According to the report, pocket spending on healthcare means that the private sector healthcare sector to consolidate this fragmentation. non-communicable diseases including diabetes, cardiovascular has increasingly become the provider of choice to meet citizens’ With favourable fundamentals, attractive macro conditions, disease, and obesity account for 82% of all deaths in Egypt while health needs. However, despite this demand, the private health- In order to alleviate pressure on public healthcare financing, favourable legislative frameworks and growing partnerships obesity affects 35% of the population, the highest rate in the care sector in Egypt continues to be under-penetrated and frag- the government is encouraging the private sector to grow between public and private parties, the Egyptian healthcare world. Meanwhile, total healthcare expenditure has been grow- mented. This provides an opportunity for large private sector enough to keep pace with demand, which has been facilitated market is poised to become one of the most attractive investing at a CAGR of 7.4% since 2010 and is expected to reach EGP groups such as CHG to capitalize on market conditions and fill by legislation to ease entry for investors and private sector ment opportunities in the region, with ample room for growth. 130 billion by 2022, according to World Bank statistics. in the demand for quality healthcare facilities. medical groups seeking to enter the Egyptian market. Cur- rently, the private sector comprises of a wide range of for-profit

Number of Beds in Egypt | 1,000 people 200% 4.5-6.7% 10.5

increase in total cancer by 2050 according to prevalence of hepatitis C in Egyptian population Ministry of Health data in 2016

4.6 3.5 2.5 2.2 1.8 1.8 16.7% CAGR 7.4% 1.3 1.1 1.1

of Egyptians aged 20 to 79 have diabetes growth in healthcare expenditure

Health Insurance in Egypt Healthcare Expenditure Contribution by Payment Channel | % As of 2016, 62% of total healthcare payments in Egypt were corporate accounts and insurance. With multinational out-of-pocket and today, the country’s insurance system cov- insurance companies continuing to penetrate the market 2% 3% 4% 6% 6% 6% ers only 60% of the population, according to a report by the and expand the scale of coverage offered, the size of these Oxford Business Group. Under its reform programme, the revenues is expected to increase significantly, creating added Egyptian government has introduced a new Universal Health growth potential for the sector. 57% 58% 57% 58% 56% 56% Insurance Act, which will seek to provide improved insurance coverage to all citizens in Egypt along with a new regulatory The Private Healthcare Market body to monitor the implementation of the system. Due to the complex management system of public healthcare and low government spending, the private healthcare sector Private insurance has a low but growing penetration rate is being increasingly viewed as an alternative to meet citizens’ 41% 39% 40% 36% 38% 38% as private hospitals enter into corporate agreements with health demands. With the private healthcare being physician- insurance companies. As a result, most revenues come from driven rather than facility driven, the private healthcare sector 2009 2010 2011 2012 2013 2014

Sources: European Bank for Reconstruction and Development: Transition Report 2018-19, Central Bank of Egypt and the Egyptian Ministry of Finance. Public expenditure Out of pocket expenditure Private insurance and others

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Overview of CHG

Total Value of Healthcare Insurance Premiums | Number of beds Top Private Hospitals in Cairo | EGP

1% 22% 16% 26% 27% 300 290

934 220

735 200 188 182 584 168 152

506 140 130 414 121 98 89 50

2010 2011 2012 2013 2014 As-Salam CSH NBH ASH AKH Queens Al Amal Intl Alex NC DAF Distribution of Healthcare Expenditure Cleopatra Ibn Sina OCT DAF German Saudi Andaluseya

38% OOP Public 40% 40% Corporate Private Insurance

62% 20%

Healthcare Expenditure per Capita (USD) | 2017

9,146 In January 2014, a constitution was passed stipulating that the government must spend a minimum of 3% of Egypt’s GDP on healthcare

5,007

1,569 808 632 608 336 309 189 151

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Overview of CHG

Our 3 5 1 4

Facilities Giza Cairo 6 The Group’s hospitals and polyclinics network spans Fifth Settlement 6th of October City the Greater Cairo area, improving patient access to high quality care and allowing CHG to better reach underserved segments of the population 2

Today, CHG operates out of six facili- medical technology and equipment ties located across the Greater Cairo to ensure patients continue to receive area, encompassing 690 total beds, the quality care CHG’s facilities aims over 650 resident doctors and consult- to deliver. The Group has introduced ants, and a nursing team of over 1,000 an all-embracing quality monitor- members. During the first few months ing framework across all its facilities of 2019, the Group added two hospitals which looks at both quality-specific and opened its first polyclinic, further KPIs and patient satisfaction surveys. expanding CHG’s geographic reach The latter was launched at the start of and service offering. Throughout the 2018 as part of the VOICE programme year, the Group continued to make which involves a multi-stage strat- progress with its extensive renovation egy to ensure patients’ comments and project, which aims to upgrade inter- complaints are heard and acted on nal and external infrastructure across to improve the overall experience at its hospitals and introduce the latest CHG’s facilities.

1 3 5 6

Location # of Beds Location # of Beds Location # of Beds Location # of Beds Mohandesin, Giza 121 Heliopolis, Cairo 188 Heliopolis, Cairo 50 Heliopolis, Cairo 89

Operating hospitals 2 4 Prospected acquisitions Polyclinics Location # of Beds Location # of Beds Maadi, Cairo 152 Heliopolis, Cairo 182 Feeder network to hospitals

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Overview of CHG

Cleopatra Hospital

Overview

Established in 1984 and acquired by the Group in 2014, doctors as well as general practitioners. In 2006, CHG ac- Cleopatra Hospital is CHG’s flagship hospital with a 35 year- quired a facility adjacent to Cleopatra Hospital and has since long track record of operational excellence, over 40 special- developed it into an extension to address the high occupancy ties and sub-specialties currently offered at the facility, and a rate of its outpatient clinic, intensive care unit (ICU), and strong network of consultants operating out of the hospital. other facilities. More recently, CHG has made a number of Over the years, Cleopatra Hospital has become an industry improvements at the hospital, including significant invest- leader for ICU and outpatient services. The hospital is home ments in the hospital’s medical technology to improve to two of the Group’s centres of excellence (CoEs), covering patient outcomes, as well as centralising the hospital’s ser- micro-invasive surgeries and orthopaedic care. Cleopatra vices in line with an integrated organisational structure that Hospital is outfitted with one of the country’s best-staffed allows for increased synergies and cross-referrals within the emergency rooms and is supported by specialised medical Group’s wider platform.

Outlook

As the Group’s flagship hospital, Cleopatra Hospital To ensure this, management will continue investing is expected to continue setting the tone for the other in the latest medical technology while continuing to Group’s hospitals in terms of both the quality of its secure the best talent in the industry. services and the efficiency of its operations.

Medical Bed Count Facilities Staff

182 242 6 beds resident doctors operating rooms 312 14 nursing staff outpatient clinics 232 1 practising physicians & consultants catheterisation lab

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Cairo Specialised Hospital

Overview

Cairo Specialised Hospital (CSH) is the Group’s largest fa- façade. The hospital is currently home to two CoEs focussed cility by number of beds and is one of Egypt’s first private on cardiology and radiology. The latter was inaugurated in hospitals. The facility is located in a prime area of the He- 2017, following a significant investment by the Group in liopolis neighbourhood in Cairo and has a more than four- state-of-the-art radiology department. In recent years, CSH decade-long track record of success. The Group acquired a has been the main focus of the Group’s infrastructure and majority share of 53.9% in CSH and has since undertaken CAPEX spending and has often led the way in introducing major infrastructure renovation projects while simultane- new frameworks and initiatives for a subsequent Group- ously significantly increasing medical CAPEX spending. wide adoption. As such, CSH was the first hospital to host Thus far, renovation works have included a complete the Group’s new HIS/ERP system which was launched in overhaul of the emergency room, endoscopy unit, labora- the second half of the year. The new operating framework tory, ICUs, dental department, and operating rooms as well immediately helped improve the hospital’s data manage- as an upgrade to its kitchen facilities. Today, CSH boasts ment and backup framework while improving its back- new operating rooms and ICUs alongside a fully renovated office management.

Outlook

Heading into 2019, the Group will push on with will be executed under the guidance of a leading the next phase of renovation works focussing on German multidisciplinary engineering consultancy patient rooms and the hospital’s entrance and firm, Vital Konzept.

Medical Bed Count Facilities Staff

188 151 9 beds resident doctors operating rooms 194 17 nursing staff outpatient clinics 220 1 practising physicians & consultants catheterisation lab

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Overview of CHG

Nile Badrawi Hospital

Overview

Nile Badrawi Hospital, located in Maadi, has been serving new external and international consultants and experts to Egyptians for more than three decades. The hospital was guide the staff and improve the use of the hospital’s cathe- inaugurated in 1985 and was later bought by CHG in late terisation labs. Nile Badrawi Hospital is home to three CoEs 2015. Since then, the Group has implemented an extensive focussed on oncology, spinal surgery, and renal transplants. infrastructure renovation plan focussed on improving the The hospital also specializes in complex treatments such as hospital’s internal and external facilities. In 2018, the Group in vitro fertilisation, neonatal care, open-heart surgery, and concluded the full renovation of Nile Badrawi Hospital’s cardiac catheterisations, in addition to providing all other façade with the next phase focussing on electromechanical major specialties. It was also one of the first hospitals in works, civil works, and outpatient clinic renovations. The Egypt to offer radiotherapy, and its oncology department is Group has also hired a new management team alongside equipped with two linear accelerators.

Outlook

During 2018, the Group focussed on improving the Group aims to continue improving the facility’s case hospital’s case mix by implementing a multi-pronged mix and carry on with internal renovation works to strategy involving investment in the hospital’s ICU, further improve patient care and overall experience. outpatient, and ER services and strengthening the The next phase of renovation works for the hospital facility’s referral gateway framework. In 2019, the will focus on the inpatient wards.

Medical Bed Count Facilities Staff

152 131 5 beds resident doctors operating rooms 191 17 nursing staff outpatient clinics 205 2 practising physicians & consultants catheterisation lab

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Al Shorouk Hospital

Overview

Al Shorouk Hospital was founded in 1996 by a group of renowned functions and the Group’s integrated corporate management consultants as a multi-specialty general hospital in West Cairo. structure. The hospital hosts four CoEs focussed on providing Today, the hospital boasts a more than two-decade-long track neurology, bariatric, urology, and oncology services. Throughout record of successful patient care and a strong reputation in the the year, the Group also installed a new cardiac catheter lab in field of oncology. CHG acquired the hospital in 2016 and has since the Hospital to address a rising demand for the service. restructured its management team to facilitate better coordination between the hospital’s various medical and non-medical

Outlook

In the coming year the hospital will see further The blueprint for the new extension, which has been renovation work in line with the Group’s commitment designed under the guidance of Vital Konzept, is now to improving both the outside and inside facilities of complete and has received the necessary go-aheads the building. During 2018, the Group embarked on the and construction work will begin in 2019. In the first hospital’s renovation work, which included upgrading quarter of 2019, the Group also acquired four floors the kitchen facilities at Al Shorouk Hospital (ASH) and in a building adjacent to Al Shorouk Hospital. The began planning the construction of an extension to newly acquired space will house more of the hospital’s the existing facility, which will add 40 new beds to outpatient and pharmacy services opening up more its current capacity to accommodate rising demand. space to expand the facility’s inpatient service capacity.

Medical Bed Count Facilities Staff

121 113 6 beds resident doctors operating rooms 234 17 nursing staff outpatient clinics 222 practising physicians & consultants

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Queens Hospital

Overview

Inaugurated in 2011, Queens Hospital is a 50-bed facil- Queens Hospital employs the latest endoscopic equip- ity focussed on delivering the best-in-class maternal and ment available on the market to minimise hospital stays neonatal facilities. The hospital offers a vast range of and eliminate complications associated with traditional services ranging from neonatal and adult intensive care surgical procedures. to gynaecology and obstetrics services, and many others.

Outlook

The group has now taken over operations at Queens Hospital and in the coming months it will explore potential opportunities to expand the hospital’s service offering and capitalise on its potential. Management is looking into adding further specialties to the Hospital’s offering while fully capitalising on Queens Hospital’s established reputation as a women’s health centre of excellence. CHG management team has also devised and begun to implement a facility upgrade strategy which will widen the Hospital’s service scope and ensure the facility delivers the quality care that patients expect from a CHG hospital. The four-pillar facility upgrade strategy includes plans to enhance the hospital’s OB-GYN services to include a comprehensive women’s health services offering; add ICU, diagnostics, ER, and general surgeries to the facility’s service offering; construct an additional OR for the hospital; and select a new management team to run the facility’s day-to-day operations.

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Overview of CHG

El Katib Hospital

Overview

Founded in 1946 by a group of highly skilled and well-re- and emergency services. With El Katib Hospital, CHG has spected doctors, El Katib Hospital is a promising new ad- added 89 beds and opened yet another CoE to its already dition to CHG. The hospital offers a full range of surgical expansive roster of specialties through the hospital’s and consultative services, as well as radiology, dialysis, urology centre.

Outlook

In the coming year, once the Group completes the full takeover of operations at El Katib Hos- pital, the Group will work to integrate the new facility within the wider CHG platform.

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Overview of CHG

Polyclinics

In February 2019, the Group inaugurated its first polyclin- home visit service, and focus on delivering value-added ic, located in East Cairo, in line with its feeder network services to ensure the best possible patient experience. East Cairo Polyclinic West Cairo Polyclinic expansion strategy. The facility is the first of a planned All polyclinics will immediately begin operating under network of polyclinics that will be strategically located the Group’s new HIS/ERP system which will ensure ef- The Group’s East Cairo Polyclinic came online in early The Group’s West Cairo Polyclinic will be inau- in high-potential, underserved neighbourhoods across ficient patient data and operations management. Since 2019 and is the first facility to be inaugurated as part gurated during the second quarter of 2019 and the Greater Cairo area and allow CHG to penetrate new the inauguration of the East Cairo polyclinic, the Group of CHG’s new polyclinic model. The facility operates will be the second facility launched by the Group segments and extend its services to patients who would has recorded strong patient demand, and combined with through the new Clinisys HIS/ERP system and has in the first few months of 2019. The facility is otherwise have limited access to care. Polyclinics repre- a new management team specifically selected to run the already been integrated within the Group’s common strategically located in the affluent catchment sent a significant opportunity for the Group to extend its polyclinic arm of the Group, CHG is confident of its suc- operating procedures which will allow for a seamless area of Cairo’s Sheikh Zayed neighbourhood. geographic reach while feeding into its hospital network cess over the coming years. The second Group polyclinic, transfer of patient data ensuring that the polyclinics The polyclinic will house 15 clinics as well as a through patient referrals. The polyclinics will offer a vast located in West Cairo, will be coming online during the serve as feeders for the Group’s main hospitals. On top pharmacy and will give patients in the largely array of services and facilities including outpatient clin- second quarter of 2019. Starting in the coming year, the of housing 14 new clinics and a pharmacy, and offering underserved neighbourhood where the facility ics, pharmacies, and laboratory and radiology services as Group is looking to open two new polyclinics per year to a full suite of diagnostic services, the facility will also is located access to a broad range of diagnostics well as serve as a coordination centre for the Group’s new reach a total of 10 over the next five years. act as a base for the Group’s new home-care service services. which will be launched in 2019. This will further enhance the Group’s reach in the generally underserved neighbourhood, but rapidly expanding catchment area that is East Cairo.

Radiology Radiology

Pharmacy Pharmacy

Laboratory Laboratory

30 Annual Report 2018 Annual Report 2018 31 Cleopatra Hospitals Group Cleopatra Hospitals Group

Overview of CHG

Our Strategy

Cleopatra Hospitals Group’s six-pillar strategy has of facilities it operates, the number of patients served, been a key driver behind the Group’s success in recent and its geographical reach while leaving its renowned years, allowing it to grow responsibly while continuing service quality intact and continuing to make significant to revolutionise the healthcare sector in Egypt. In line progress toward earning international accreditation for with its strategy, the Group has expanded the number all its hospitals.

Integrating the Platform to Achieve Higher Efficiencies

Establishing an integrated platform across the Group’s platform as well as upgrading facilities and medical hospitals ensures it continues to fully maximise opera- equipment to ensure patients receive the highest level tional efficiencies, reduce waste, and extract economies of care across its hospitals. of scale, ultimately delivering further margin expansion. Fully exploiting all existing synergies between the Over the coming year, the Group will focus on integrat- Group’s various hospitals also ensures that the Group ing the new facilities within our established operational continues to offer consistent high-quality services model. Integrating new hospitals with existing ones in- further improving the patient experience across all fa- cludes coordinating the staff recruitment, training and cilities. This is especially important in light of the new professional advancement processes to ensure the Group Enhancing Utilisation and Optimising acquisitions finalised by the Group in recent months, is securing, developing, and retaining the best talent in which have seen Cleopatra acquire two new hospitals the industry. In 2019, the Group will continue to roll-out Existing Capacity while launching its first two polyclinics. The Group is its new HIS/ERP system across all its existing and new introducing standardised management structures and facilities. Once introduced across all hospitals and poly- policies across all CHG facilities through the intro- clinics, the new system will allow the Group to build a sin- A key factor behind our ability to constantly deliver to CHG’s hospitals. Renovations include façades and duction of a single unified governance matrix across gle, integrated patient-management experience across high quality care efficiently revolves around enhanc- internal structures of existing facilities to ensure the all its existing facilities. The new framework includes all hospitals. Departments will gain real-time access to ing the efficiency and performance of our assets. The best possible experience for both patients and their a clear chain of command across all hospitals and al- information across the platform, from patients’ medical Group’s optimisation strategy focusses on renovating families. In 2018, the Group also added an additional lows for a more efficient and organised running of daily histories to KPIs, thus increasing efficiency and extract- all facilities, updating equipment to adopt new and catheterisation lab at Al Shorouk Hospital, renovated operations across CHG’s facilities. Through the adop- ing higher value from better quality services. In the com- advanced medical technologies, and attracting highly the operating rooms and ICUs at Cairo Specialised tion of the single unified governance framework, CHG ing year, management will work towards integrating the talented consultants and doctors capable of providing Hospital (CSH) to align them with the latest industry continues to lead the way in the Egyptian health care new facilities in the unified governance matrix which was exceptional care while using innovative techniques. standards, and completed a full facelift of CSH’s fa- industry by introducing new functions which will fur- introduced during 2018. This will allow for quicker and During the year, the Group retained the services of a çade. The renovations of ICU facilities are also part ther improve healthcare management in the country. better decision making, allowing all hospitals to achieve world-class external engineering consultancy firm, of a wider Group strategy which aims to enhance the In parallel, CHG is developing a comprehensive service higher efficiencies in their day-to-day operations. Vital Konzept, which is assisting in the renovations overall utilisation of its diagnostic and ICU services.

32 Annual Report 2018 Annual Report 2018 33 Cleopatra Hospitals Group Cleopatra Hospitals Group

Overview of CHG

next Establishing Centres of Excellence and Strengthen Our Unified Brand Achieving International Accreditation

Over the years, one of the Group’s key assets has been its progress on the rollout of its Group-wide HIS/Enterprise Delivering the highest quality services is at the forefront policies and procedures are appropriately amended to proven track record and brand equity, which we are con- Resource Planning (ERP) system. At the start of the fourth of the Group’s operational strategy. During the latter ensure their compliance with the necessary interna- tinually taking steps to unify and strengthen through a two- quarter, the Clinisys HIS/ERP system was launched at Cairo half of 2018, the Group set out plans for the develop- tional requirements and standards. phase strategy. Phase one focusses on standardising the Specialised Hospital. Once rolled out across all the Group’s ment of the CHG Medical Council and Board. Its com- quality of equipment, services, and staff training across all hospitals, the new system will improve the Group’s data mittees will comprise of renowned specialised consult- While working to ensure the quality of all of our ser- hospitals, attracting the best-in-class doctors, implement- management and backup framework while guaranteeing the ants from the Group’s hospitals with the objectives of vices, we are also taking steps to develop centres of ing a unified HIS system, standardising our call centre and protection of patients’ personal data. The unified system will ensuring further improvements in direct patient care, excellence (CoEs) in each of our hospitals, both exist- our registration process to promote unified brand aware- also greatly help improve the Group’s inventory management developing centres of clinical speciality excellence, ing and newly acquired, that will focus on providing ness, conducting ongoing patient satisfaction surveys, and purchasing processes. As of year-end 2018, the Unified organizing professional development training for all specific tertiary services based on each hospital’s and executing specialty awareness campaigns. Phase two Patient Medical Record framework is fully functioning across Group staff members, while working towards adding unique strengths. By specialising in specific services, will focus on clearly defining the Group’s brand identity, all departments, with all front and back office modules fully new medical services to the Group’s service offering. the Group’s hospitals will minimise CAPEX by elimi- communicating this brand to the public through internal running. Clinisys will be rolled out next at the two newly in- The Council will also work towards obtaining the JCI nating the need to invest in the same equipment across and external channels, and integrating individual hospital augurated polyclinics in early 2019, with a Group-wide adop- and HACCP certifications in line with the Group’s different facilities. CoEs will also foster affiliations brands under the new umbrella brand. The ultimate goal is tion of the system expected to be finalised by January 2020. objective of achieving international accreditation. To with international institutions and make it possible to to ensure that patients across the country view the Group’s As part of the Group’s strategy to integrate technology in its this end, the Group has been renovating its facilities, attract globally renowned experts. The newly acquired hospitals and polyclinics as a holistic entity delivering the operations, CHG has created a mobile application, which upgrading equipment, and standardising staff training. El Katib Hospital, is set to become the Group’s kidney same high standard of care. once online, will enable patients to access their medical data, The Group has also enhanced it programme monitor- centre of excellence, while Queens Hospital will see the files, and history from anywhere at any time, in addition to ing and evaluation framework to ensure that Group Group add a maternity and women’s care centre. During 2018, the Group took strides to implement the first and an appointment booking feature that will enhance patient second phases of this strategy. The Group made significant experience across all CHG hospitals and polyclinics. Patient Pathway Chart

Leverage a Stronger Position with Insurance and Contract Clients Ambulance Patient

In recent years, an increasing number of patients have healthcare facilities by insurance and corporate clients been given access to insurance plans. This not only whose constituents will benefit from the accessibility benefits the patients but also offers an opportunity and comprehensive services provided by the Group’s for hospitals groups like CHG to benefit from the sus- hospitals. Ultimately the Group is aiming to migrate tained revenue flow associated with these channels. to the value-based reimbursement model and away Over the last year, the Group continued to actively from the current fee-for-service model. The Group’s Polyclinics work towards cultivating stronger relationships with ‘One-Stop-Shop’ model, which allows CHG to cover all insurance and contract clients to increase the propor- stages of the patient treatment process, will also be a tion of Group revenue gained through these channels. significant factor to ensure the Group continues to at- Upgrading our facilities to ensure they operate in line tract an increasing number of corporate and insurance with the latest industry guidelines and standards, will clients by offering a convenient, high-quality option to also help our hospitals to be categorised as premium this growing segment of the market. Referral Hospitals Pharmacy

34 Annual Report 2018 Annual Report 2018 35 Cleopatra Hospitals Group Cleopatra Hospitals Group

Overview of CHG

Quality and Safety Report

To ensure that the quality of clinical services and patient Quality Function established in 2017 and led by an industry care at all of the Group’s facilities is consistently of the high- veteran with 20 years of experience accrediting hospitals est standard, we conduct ongoing quality assessments at all across Egypt. We have incorporated the findings of our JCI of our facilities and regularly develop strategies to address readiness assessment into a corrective action plan and are all identified shortcomings. implementing changes across our facilities in preparation for our accreditation tests. CHG conducted an internal readiness assessment across our facilities as a part of the process to achieve Joint Com- We have identified potential areas for improvement mission International (JCI) accreditation for the Group in and have begun implementing changes across the fol- the coming period. The process is spearheaded by our new lowing categories:

Policies and Training Patient Safety CHG has developed 165 The Group is improving patient safety by implementing a new framework Group-wide quality and safe- for infection and medication control. In 2018, CHG conducted continuous ty policies and has conducted staff training seminars related to the topics of hygiene and medication man- regular training sessions to agement. Throughout the year, the Group also completed the antibiotics ensure a clear understanding stewardship programme and began the implementation of the preoperative and consistent implementa- antibiotics Prophylaxis according to industry guidelines. In parallel, CHG tion of new policies and pro- has also implemented a new coding system for medication management cedures across all medical and distribution procedures across all Group hospitals. CHG also com- and non-medical personnel. pleted the unification of drug formulary that will be used across all Group hospitals to better serve patients and increase operational efficiency. In 2018, the Group contracted new laundry and food service providers that adhere to the highest standards of quality and safety.

Aligning KPIs Across CHG A Culture of Safety Going Forward Facilities CHG is actively engaging its In 2019, through continuous staff CHG has developed a compre- staff in activities and training awareness and training seminars, hensive set of both financial seminars aimed at cultivating CHG will continue to emphasise a and non-financial KPIs. This list a Group-wide culture of safety. patient-first approach across all its includes more than 140 non- The Group has given more existing and newly added facilities financial KPIs aligning them focus to risk management ensuring a quality of service in line across CHG Hospitals depart- reporting through the identifi- with the highest industry stand- ments and functions including cation of all possible sources of ards. Furthermore, the Group will staff evaluation. risk and the implementation of continue working towards com- a dedicated strategy to tackle pleting the necessary requirements them and minimise their po- to achieve national and interna- tential future impact. tional (JCI) accreditation.

36 Annual Report 2018 Annual Report 2018 37 Cleopatra Hospitals Group Cleopatra Hospitals Group

Overview of CHG

Egypt. This will allow the Group to further expand its hospital into new inpatient and ICU wards, which will act Expanding Hospital Capacities and footprint in the country and tap into a different segment as an extension to Cleopatra Hospital and CSH. of patients through a low-cost teaching hospital. In early Feeder Network 2019, the Group approved the conceptual and schematic Brownfield/Greenfield Expansions designs for the new hospital. In the coming period, CHG The Group is also targeting brownfield expansions in the will work towards contracting the project while simulta- coming period. During 2018, CHG continued assessing and In addition to better utilising existing capacities, the of new hospitals, opening up a network of polyclinics neously finalising the Shareholder Agreement (SHA) with shortlisting potential brownfield acquisitions in areas not cur- Group has been actively working toward expanding across greater Cairo, and building extensions to its Al Nahda University to formalise the partnership. rently covered by CHG facilities or in areas that are generally the number of hospitals it operates and its geographic existing hospitals. During 2018, the Group took several underserved. Currently, the Group is targeting a brownfield reach, ultimately ensuring it delivers the high-quality steps toward delivering on its expansion plan, and as Strategic Acquisitions of Operating Hospitals hospital in New Cairo with expected capacity of around 200 care it has become known for. To maximise the effec- it enters into 2019, it looks to continue solidifying its A large part of the Group’s expansion strategy revolves beds and includes seven operating rooms, a catheter lab, tiveness of the Group’s expansion, we have introduced presence across the country, bringing its services to as around completing strategic acquisitions of operating hos- and 20 outpatient clinics. The Group is confident the facil- a six-pillar expansion strategy involving the addition many patients as possible. pitals characterised by strong brand names and convenient ity’s state-of-the-art equipment will allow it to quickly begin locations, allowing them to immediately drive value for delivering high quality services to patients and become CHG’s CHG. The Group took over operations of two new hospitals flagship hospital in underserved areas of Cairo. in the neighbourhoods of Dokki and Heliopolis. Establishing Strategic Entities to Serve Operations Creating Feeder Network Building Additional Capacities in Existing Facilities El Katib Hospital is a 89-bed hospital located in Dokki. The As part of the Group’s strategy to leverage synergies and ex- The Group is expanding patient access by developing a Throughout the year, the Group began an extensive reno- facility will see the Group add a new kidney centre of excel- pand its service offering, CHG is now in the process of creat- network of polyclinics and outpatient centre offerings. vation project that will see its existing facilities outfitted lence to its roster, and CHG will invest significant resources ing new business operation entities to oversee specific areas Polyclinics are relatively underdeveloped in Egypt, but with the latest equipment while increasing capacities. This to enhance the hospital’s equipment. of the Group’s day-to-day operations. In 2018, the Group es- they represent a low-CAPEX expansion avenue. As part of will not only allow the hospital to increase the number of tablished a new Pharmacy Management Entity with a scope the Group’s feeder network strategy, it aims to inaugurate patients treated but will see the Group continue to add to The Group plans to add a new catheter lab and further to serve the pharmacy business across the entire Group. two polyclinics each year over the next five years. The fa- its already wide roster of services offered without compro- improve the general service quality of the new hospital. During the year, CHG also began looking into establishing a cilities will be located strategically across high-catchment mising the quality of care. In 2018, under the guidance of Queens Hospital is a 50-bed facility located in Heliopolis. Consumable Import Entity. The new entity’s scope will be to areas of Cairo, allowing it not only to extend its geo- Vital Konzept, the Group began designing work on the Al It’s world-class maternity care unit will further strengthen oversee and manage the Group-wide demand for consuma- graphical reach, but to fill a supply gap for segments of the Shorouk Hospital expansion, which will see the hospital the Group’s service offering in the field of women’s health. bles and medical devices and work to further improve the population who currently have limited healthcare access. add 40 new beds. During the year, the Group also com- The Group plans to convert part of the newly acquired Group’s equipment purchasing process. The polyclinics will serve as spokes intended to feed the pleted renovation works at CSH. Thus far, the Group has Group hospitals and act as a hub to launch the Group’s completed renovation of the facility’s façade, operating new home-visits service. rooms, and ICUs. In the coming year, the Group will focus on renovating patient rooms and other remaining internal In recent months, the Group has refurnished and in- facilities to ensure it maximises available capacity while augurated its first two polyclinics located in strategic continuing to deliver high-quality patient care. In the first neighbourhoods in East and West Cairo. The polyclinics quarter of 2019, the Group completed the acquisition of will work to shorten waiting times for OPD services while four floors in a building adjacent to Al Shorouk Hospi- also delivering a comprehensive suite of complemen- tal. The newly acquired space will house new outpatient tary outpatient services such as laboratory, radiology and capacity and pharmacy services, while opening up more pharmacy. Both polyclinics are fully operated through space in the Hospital to expand the facility’s inpatient the Group’s new ERP/HIS system, and the Group has al- service capacity. ready selected the specialities to be offered. The Group has registered high patient demand at the newly inaugu- Expanding Reach Beyond Greater Cairo rated polyclinics, further strengthening management’s The Group is looking to expand beyond the greater Cairo confidence in the success of the polyclinic model in the area to extend its reach in other areas of the country. coming years. In 2019, the Group will continue to survey new strategic opportunities with an eye to acquiring, In 2018, as part of the Group’s geographic expansion refurnishing, and opening two additional polyclinics to strategy, CHG entered into a JV with Taaleem (Al Nahda further strengthen the Group’s feeder network. Universities) to complete a 150-bed hospital in Upper

38 Annual Report 2018 Annual Report 2018 39 Cleopatra Hospitals Group Cleopatra Hospitals Group

Our Strategy

Current Verticals Looking Forward Multi- specialty Network

As CHG enters 2019, the management team is exploring new CHG Pharma verticals to ensure the Group continues growing and creat- CHG Pharma is a separate entity which manages the Oncology Cardiology Urology Diagnostics Paediatrics ing sustainable long-term value for all its stakeholders. This Group’s pharmacies located in its hospitals and polyclin- involves expanding past its current multi- specialty service ics. In the coming year, the Group is exploring potential network model to include a more diverse offering, venturing ways of taking its pharmacy operations to the next level. into healthcare facility management, long-term patient care, This includes opening up new branches in its newly ac- and home care. CHG is also targeting a further operational quired facilities and polyclinics, while, in parallel, opening Orthopaedics Neurology Nephrology General Surgery OB-GYN expansion of its pharmacy business in the coming year. new pharmacies outside of the Group’s facilities.

Facility Management Long-term and Home Care Facility management represents an ideal new vertical The Group’s polyclinic model, which will see the Group for CHG to venture into as it looks to further diversify launch two new polyclinics per year over the next five its revenue streams heading into 2019. By leveraging the years, will not only serve as a feeder system for the Group’s Group’s established business model, scale of opera- hospitals but will also act as headquarters for the Group’s tions, and vast experience accumulated over the last new home care and long-term care services. As the Egyp- New Verticals few years, CHG is ideally positioned to successfully offer tian population continues to grow and its life expectancy facility management services to hospitals and clinics in increases further, there will be a growing number of older the Greater Cairo area. The Group is exploring potential patients requiring long-term care services. Similarly, us- services to offer including laundry, housekeeping, and ing the polyclinics as a home base, the Group will also set Operations & Management Long-term & Home Care Distribution catering. As the healthcare industry continues to grow up a home care service. Home care allows a patient with and new hospitals and clinics are opened, management special needs stay in their home. It might be for people is confident that there will be a growing number of po- who are getting older, chronically ill, or recovering from tential customers that will be looking to make use of the an injury or medical procedure. This will represent yet non-medical facility management services that CHG is another service that the Group will offer to improve its planning to offer in the coming period. patients’ and their families’ quality of life. Healthcare Facility Long-term Care Home Care CHG Pharma Management

40 Annual Report 2018 Annual Report 2018 41 Cleopatra Hospitals Group Cleopatra Hospitals Group

2018 in Review

Throughout 2018, the Group continued to deliver strong operational and financial results in line with its multi-pronged operational and expansion strategy

EGP 1,456 MN

FY18 consolidated revenues (up 29% y-o-y)

42 Annual Report 2018 Annual Report 2018 43 Cleopatra Hospitals Group Cleopatra Hospitals Group

2018 in Review

Operational Highlights

In 2018, the Group made significant progress on its platform of patients’ personal data and improving the Group’s inventory renowned specialised consultants from the Group’s hospi- expanding existing facilities to increase the Group’s total integration and quality enhancement strategy, which aims to management and purchasing processes. The single integrated tals with the objectives of ensuring further improvements in capacity, providing the latest technology, and ensuring all its maximise efficiencies across its hospitals while ensuring that operational system will allow patients to benefit from CHG’s direct patient care, developing centres of clinical speciality facilities comply with the latest international standards. At it delivers standardised, high-quality services to patients. vast network of hospitals and clinics covering the entire Greater excellence, and organising professional development train- the same time, the Group funnelled investment into what it The ultimate aim is to see the Group revolutionise not only Cairo area while also enjoying the advantages of a unified pa- ing for all Group staff members, while working towards feels are one of its most important assets: its people. Training the way it operates but the healthcare industry as a whole tient records system which allows for seamless access to patient adding new medical services to the Group’s service offering. and development spending for the year reached a record-high throughout the nation. files from all facilities at any point in time. The Council will also work towards obtaining the JCI ac- in 2018, with the Group reporting over 8,211 cumulative days creditation in line with the Group’s objective of becoming an of training across CHG’s four hospitals involving more than During the year, the Group launched the Clinisys HIS/ERP sys- The Group continued to report significant improvements internationally recognised centre of medical excellence. 917 employees. The training focussed on enhancing patients’ tem at Cairo Specialised Hospital. Once a Group-wide system across all medical and non-medical KPIs in 2018, a testament safety and quality of care through training modules such as: adoption is complete by 2020, the new system is expected to to its efforts in ensuring it delivers the best possible patient In 2018, the Group continued delivering on its investment Advanced and Basic Life Support (ALS & BLS), International drive significant improvements in the Group’s data manage- care. The Group also initiated plans to launch the CHG programme. Significant weight was thrown behind infra- Life Saving (ILS), Apples & Oranges Healthcare and Business ment and backup framework while guaranteeing the protection Medical Council and Board. Its committees will comprise of structure and technology spending, which focussed on Etiquette for nurses.

Improvement Introduction of Adoption of a Execution of Standardisation of Unification of financial Institutionalising Strengthening of CHG Introduction of value Adoption of ERP of corporate a centralised unified authority Group expansion pricing and discount SOPs and reporting unified brand name creation plans system at CSH the Group governance corporate office matrix strategy policy across the Group procedures

Training and Creation of standard Health insurance Employee satisfaction Introduction of formal Salary scale exercise New incentive scheme development Profit sharing scheme Human Resources organisational chart schemes survey appraisal system programmes

Item and consumable Standard warehousing Increase of medical CAPEX Medication tendering and Strengthening of cross-asset Group wide tenders Material planning procedure Supply Chain and Synergies unification procedure across Group management referral pathways

Operating rooms (OR) New cath labs at Infrastructure and Introduction of Group Equipping of all CoEs Diagnostics and auxiliary HIS/ERP System roll out Facelifts at NBH and CSH and ICUs renovations Electrotechnical upgrades several of the Group’s PACs System across all Group Hospitals unit upgrades Technology Upgrades at CSH Hospitals

Cross asset Improvement of Continued Improvement of doctor Introduction of new Increased use of referral channels Unification of insurance Management of revenue Enhanced and ‘One-Stop-Shop’ development of engagement and referral and improved surgical Business Development drug formulary expansion through and corporate deals cycle optimised case mix model CoEs model framework packages new polyclinics

Introduction of CHG Drafting and approval of Unification of SOPs and Upgrade works to catering and Introduction of specialty club Continued nurse and medical Standardisation of quality KPIs Quality medical council JCI roadmap hospital manuals kitchen facilities meetings teams training programmes

Integration and Operations Optimisation Optimising Capacity and Centralisation of Introduction of unified Unification of ambulance Utilisation enhancement across Exploration for new source of Addition and renovation of ICU Management of OPD slot Patient Flow non-core functions call centre and ER protocols all segments revenue from medical tourism facilities

44 Annual Report 2018 Annual Report 2018 45 Cleopatra Hospitals Group Cleopatra Hospitals Group

2018 in Review

Management Discussion & Analysis

2018 was a transformative year for Cleopatra Hospitals growth in demand, combined with an improved case Group as it successfully delivered on all pillars of its mix and favourable pricing, drove an impressive 29% y- operational and expansion strategy while posting solid o-y revenue expansion to EGP 1,456.1 million. In FY18, top- and bottom-line growth for the year. Over the last the Group’s gross profit increased to EGP 513.6 million year, CHG renovated and expanded its existing hos- from the EGP 338.6 million recorded in FY17, represent- pitals, equipping its facilities and medical employees ing a 52% y-o-y increase and leading to a 5 percentage with the latest technology and continuing to attract point improvement in the Group’s gross profit margin and retain the best professionals in the industry, all which came in at 35%. The Group’s EBITDA also report- while putting its patients and their families first every ed a strong year-on-year growth of 56% rising to EGP Revenue by Revenue by step of the way. During 2018, the management team’s 404.8 million in FY18 in addition to margins expanding Hospital (FY18) Segment (FY18) progress in delivering on the Group’s expansion strat- by 5 percentage points y-o-y to 28% for the year. Strong egy, coupled with CHG’s established reputation for its EBITDA growth in 2018 was largely driven by solid top high-quality care delivered across its facilities helped line growth and further supported by an EGP 10.3 mil- drive a significant increase in cases handled.This lion impairment reduction during the second quarter.

Surgeries 20% Cleopatra Hospital 46% Outpatient Clinics 14% Cairo Specialised Hospital 19% Inpatients 24% EGP 1,456.1 mn 29% Laboratories 9% Nile Badrawi Hospital 17% Cardiac Catheterisation 8% Emergency Room 4% total consolidated revenue in FY18 y-o-y revenue growth in FY18 Al Shorouk Hospital 17% Radiology 5% All Others 16%

Revenues Consolidated revenues increased to EGP 1,456.1 million in volumes over the year related to the partial closure of Cairo 2018 as both volumes and average revenue per visit increased Cost of Goods Sold FY18 from EGP 1,126.8 million in FY17, representing a 29% Specialised Hospital for a period of nearly four months, while it compared to the previous year. Cost of goods sold increased by 20% y-o-y to EGP 942.5 y-o-y expansion on the back of both solid volume and pricing underwent planned renovation works to its operating rooms, million in FY18 compared to EGP 788.2 million recorded in increases, and an improved case mix. Revenues were up across intensive care units, and other spaces. The contraction in vol- Cleopatra Hospital maintained its position as the largest con- FY17. Management’s efforts in driving efficiencies across all four of CHG’s hospitals with Cleopatra Hospital leading umes for the year was more than offset by a strong rise in the tributor to the Group’s top-line during FY18 generating 46% the group’s facilities are bearing fruit as CHG’s COGS/ the way, reporting a 37% y-o-y rise in revenues to EGP 677.3 average revenue per service for the two segments. Revenues of CHG’s revenues. Despite the ongoing renovations at Cairo Sales ratio decreased to 65% in FY18 from 70% recorded million and continuing to contribute to nearly half of con- from outpatient visits made up 14% of total Group revenues as Specialised Hospital, the facility continued to make the second in FY17. Consulting physician fees was the fastest growing solidated revenues for the year. Revenues from inpatient visits both the number of cases served and average revenue per visit largest contribution to the Group’s top-line (19%), followed by component, increasing 27% y-o-y, followed by salaries and and surgeries across all hospitals contributed 24% and 20% increased year-on-year by 8% and 21% respectively. Revenue Nile Badrawi Hospital and Al Shorouk Hospital which both con- wages and medical supply outlays which grew by 21% and to total Group revenues respectively despite a marginal fall in contributions from catheterisation services increased to 8% in tributed to 17% of total consolidated revenues in FY18. 13% y-o-y respectively.

46 Annual Report 2018 Annual Report 2018 47 Cleopatra Hospitals Group Cleopatra Hospitals Group

2018 in Review

Gross Profit Net Profit Gross profit posted a year-on-year rise of 52% in FY18 to The Group’s net profit for FY18 increased to EGP 315.2 EGP 513.6 million, up from EGP 338.6 million in FY17, while million from EGP 118.2 million recorded in FY17, repre- gross profit margin was up 5 percentage points in FY18 to senting an impressive 167% y-o-y rise. Net profit margin 35%. The largest contributor to total gross profit continued expanded by 12 percentage points y-o-y to 22% for FY18. to be Cleopatra Hospital (54%) followed by Nile Badrawi Hospital and Cairo Specialised Hospital (both at 17%) and CAPEX Al Shorouk Hospital (13%). Nile Badrawi Hospital posted Total CAPEX outlays recorded EGP 148.6 million in FY18. the fastest year-on-year gross profit growth increasing by Throughout the year, the Group’s capital expenditure was 71% during 2018 compared to the previous year. mainly focussed on hospital renovations and upgrade works as well as the procurement of new best-in-class G&A Expenses equipment, including a strong expansion drive in the General and administrative (G&A) expenses consist of the cardiac catheterisation space, as the Group continues to company’s non-medical staff costs, including those of senior focus on improving its healthcare services and provide management and Group-level professional consulting fees. G&A expenses also include the Group’s Long-Term Incen- Outlook tive Programme (LTIP), a non-cash charge linked to share 2019 is set to be a year of consolidation after the remark- price appreciation and EBITDA growth, the LTIP has a four- able geographic and service offering expansion of this year maturity period maturing by 30 June 2020, after which past year. Management will focus on implementing an amounts will be disbursed. During FY18, outlays for G&A extensive integration strategy to ensure new facilities purposes increased 12% y-o-y to EGP 180.4 million from EGP begin to operate in line with the Group’s standards of COGS Gross Profit 161.4 million recorded in FY17. quality and generate margins in line with its current Breakdown by Hospital hospitals. Management is targeting the inauguration of (FY18) (FY18) Impairments fell by 86% y-o-y during FY18 as manage- two new polyclinics per year over the coming five years ment continued its efforts to enhance the quality of and is already scouting locations for its 2020 launches. CHG’s receivables, upgrade collection processes, and Management is confident that CHG’s ability to constantly conservatively write-off bad debts. deliver on its growth and operation strategy and evolve to adapt to changing market dynamics, combined with its EBITDA established reputation as the leading healthcare provider The Group’s EBITDA posted strong 56% y-o-y growth to EGP in the country, will ideally position the Group to continue 404.8 million in FY18 from EGP 259.1 million in FY17. EBITDA generating sustainable value for all its stakeholders in the Medical Supplies 30.9%% Cleopatra Hospital 53.5% margin expanded by 5 percentage points to 28% for FY18. year to come. Consulting Physicians 29.2% Nile Badrawi Hospital 16.7%

Salaries & Wages 24.0% Cairo Specialised Hospital 16.7%

Average Revenue for Average Revenue for Average Revenue for Average Revenue for Average Revenue for Other 15.8% Al Shorouk Hospital 13.1% Surgeries Outpatient Services Inpatient Services Catheterisation ER Visits 322 29,526 7,431 256 EGP 315.2 MN 924,904 EGP 404.8 MN 8,255 266 25,323 5,962 204 6,378 Net income for FY18 Cases served* in FY18 Adjusted EBITDA in FY18 (22% net income margin) (6% y-o-y growth) (28% EBITDA margin)

FY17 FY18 FY17 FY18 FY17 FY18 FY17 FY18 FY17 FY18

Historical figures have been adjusted to account for standardization of KPI reporting across all hospitals * Cases served includes number of inpatient and outpatient visits along with ER visits.

48 Annual Report 2018 Annual Report 2018 49 Cleopatra Hospitals Group Cleopatra Hospitals Group

Our People

Throughout 2018, Cleopatra Hospitals Group continued to invest in the professional development of all its medical and non-medical staff

2,400+

total medical staff

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Our People

HR Strategy

Cleopatra Hospitals Group recognises the vital role that its staff plays in ensuring all facilities continue operating efficiently and deliver an ever-improving quality of care to patients and their families. As such, the Group continues to heavily invest in the professional development of its medical and non-medical staff while actively recruiting, hiring and retaining the best nurses, doctors and consultants available in the country

2018 Initiatives The Human Resources Department organised multiple throughout 2018 to strengthen its recruitment programme. be to position Cleopatra Hospitals Group not only as the initiatives in 2018 to enhance the technical, managerial, and This included, attending both medical and non-medical em- employer of choice for medical professionals, but also as soft skills of all staff. To complement the regular seminars ployment and career fairs organised by universities and other a top-tier employer for non-medical professionals as well. and training sessions, the Group introduced an interactive institutions acorss Egypt to inform potential future graduates The department will also work to further enhance the effec- reporting tool to analyse HR performance and record train- of the employment opportunities offered by CHG. tiveness of the Group organisational structure to ensure it ing of all staff members. The newly launched HR interactive continues driving the overall progress the Group has made dashboard immediately improved the efficiency of the or- To ensure that the Group operates as efficiently and effectively on both the financial and operational side since inception. ganization as well as the the training programmes by ensur- as possible, the HR department also focussed on enhancing The Group will also work to organise joint training courses ing all employees were exposed to the relevant courses for the managerial structure of individual hospitals by appointing for the Group’s physician and nursing enhance the compe- their specific jobs. new project managers, organisation development managers, tences of all medical staff across the organisation. and nursing clinical instructors. The Group also devised and Throughout the year, CHG also expanded its human resource implemented a new employee succession plan to smooth To increase the efficiency of the hiring process and reward service offering by organising career development training handover operations and ensure optimal business continuity internal staff development, the HR department will press sessions aimed at helping staff plan a career path and establish at all times. The Group also worked to enhance employee ef- on with its effort to fill vacancies from within the organi- a step-by-step strategy to achieve their goals. The Group offers ficiency through work hour optimisation initiatives including sation. This will entail introducing an improved vacancy competitive benefit and compensation packages. To ensure detailed management reviews of current working structures. posting framework, enhance the career progression and that employees continued to be satisfied with their working The detailed review resulted in 70% of nursing staff switching succession planning systems, and set up a formal incu- environment and peers, the HR department continued the their working hours system from 15-hour shifts to 17-hour bator system to mentor young professionals and expose Employee Satisfaction Survey for the third consecutive year. shifts, which is expected to support medical service continuity. them to the experience of more seasoned medical and Although improvements were recorded across all categories, non-medical staff across the Group. In 2019, the Group the Group has already devised a plan to ensure it further 2019 Strategy will also migrate to a new integrated HRIS system to con- enhances employee satisfaction in the coming year. Offering In 2019, the Group aims to further strengthen and stream- solidate employee data and information and integrate the competitive wages and ensuring employee satisfaction is part line HR processes building on its 2018 success to further newly added staff from the Group’s 2018 facility expansion of a wider strategy to attract and retain the best talent in the enhance employee efficiency and satisfaction. In the com- into a single HR system. industry. In line with this goal, the Group took several steps ing year, a main area of focus for the HR department will

52 Annual Report 2018 Annual Report 2018 53 Cleopatra Hospitals Group Cleopatra Hospitals Group

Our People

Executive Management

Dr. Moharram El-Badawy Cleopatra Hospitals Group is led by a seasoned and experienced management team Group Chief Operating Officer - West Cairo who bring decades of experience to the table. In 2018, the executive management Prior to joining the Group in June 2016, Dr. El-Badawy was the Professor of Radio Diagnosis team underwent a reorganisation to ensure that all the Group’s facilities and at the National Cancer Institute for over 30 years before heading the department for nine years. His previous roles also include board member of Radio Diagnosis Department in functions were managed by not only experts in their fields but seasoned executives Daghastani Hospital Jeddah, K.S.A for six years, Referee for the Egyptian Journal of the that bring a wealth of management expertise that will drive the Group’s strategy National Cancer Institute, and Referee for the Journal of Egyptian Society.

Dr. Ahmed Ezz El-Din Dr. Mohamed Abdulla Ewais Group Chief Executive Officer Group Chief Operating Officer - East Cairo Dr. Ahmed Ezz El-Din brings over 35 years of healthcare experience to the group and a deep Prior to joining the Group, Dr. Ewais was the Chief Executive Officer of Saudi German Hospi- insight into healthcare businesses in Egypt. Prior to assuming his role as the Group’s CEO, tal (SGH) Jeddah since 2013 and was previously their Chief Operations Officer for seven years Dr. Ezz El-Din was the Director of Government Affairs & Policy – Middle East, North Africa at the same facility. In addition to his previous role as CEO, Dr Ewais was also the Chairman & Pakistan at Johnson & Johnson Medical, where he also held the position of Managing of the Risk Committee across Saudi German Hospitals Group and its entities. Director for Egypt & Libya. Prior to that, Dr. Ezz El-Din also held key positions at GSK, including Sales & Commercial Director at GSK Egypt and Sudan Country Manager. He holds over 18 years of global experience with MSD under his belt. Dr. Ezz El-Din has a Bachelor’s Degree in Pharmaceutical Science from Cairo University.

Khaled Hassan Marwa El-Abassiry Group Chief Financial Officer Chief Human Resources Officer Mr. Khaled Hassan joined the Group in 2015 as Chief Financial Officer with over 25 years of Ms. Marwa El-Abassiry joined the Group in February 2015. Previously, she was the Human financial experience under his belt. Prior to assuming his role with the Group, Mr. Hassan Resources Business Partner and Head of HR at Electrolux Egypt. Ms. El-Abassiry holds a was the Finance Director at Dina Farms, a subsidiary of Gozour Holding for which Mr. Bachelor of Arts from the Al-Alsun Faculty at Ain Shams University, a Senior Professional Hassan was also the Group Financial Controller. Prior to that he was the Group Financial Human Resources (SPHR) Certificate, a Business Coaching Certificate from Life Coaching Controller at ASEC Holding, Chief Financial Officer of FRANKE Egypt and Finance Man- Egypt and a Business Administration Diploma from the American University in Cairo. ager at the Olympic Group. Mr. Hassan holds a Bachelor’s Degree in Accounting from Cairo University and is a Master Financial Controller and a Certified Financial Modeler.

54 Annual Report 2018 Annual Report 2018 55 Cleopatra Hospitals Group Cleopatra Hospitals Group

Our People

Dr. Mohamed Ibrahim Dr. Nanis Adel Cleopatra Hospital Managing Director Cairo Specialised Hospital Managing Director Dr. Mohamed Ibrahim joined Cleopatra Hospital in 2001 as Medical Director and later as- Dr. Nanis has over 22 years of experience in the healthcare industry having held several key sumed his role as Managing Director of the Group’s flagship hospital in 2006. With over positions across an array of medical establishments including Director of Emergency Hos- 35 years of medical experience, Dr. Ibrahim began his career as a physician at the Military pital at Ain Shams University Hospital, Advisor to the Minister of Health and Population for Hospital and was Commander of the Navy Hospital in the United Arab Emirates. He holds Hospital Affairs, and Chairman of the Scientific Council for Health Facilities Fellowship. In a Master’s Degree in Hospital Management from the American University in Cairo. 2004, Dr. Nanis was awarded a PhD in Internal Medicine from Ain Shams University.

Dr. Hamada Abd El Hameed Dr. Khaled Aboul-Enein ASH Managing Director Queens Hospital Managing Director Dr. Hamada Abd El Hameed joined the group in August 2017 assuming the role of Al Shorouk Dr. Khaled Aboul-Enein joined the Group in April 2019 as Queens Managing Director. Dr. Hospital Managing Director. Prior to joining the Group, Dr. Hamada was the Regional Opera- Khaled has more than 20 years of combined management, research, and teaching experi- tions Manager at Andalusia Group (Cairo - Alexandria) and also served as Managing Director ence. Prior to joining the Group, Dr. Khaled held several key positions across an array of of Andalusia Hospital in Maadi from 2010 to 2016. Dr. Hamada holds a Master’s Degree in medical establishments including Business Development & Medical Consultant at IDH, Na- General Surgery and an Egyptian Fellowship in Surgery, a Master’s degree in Business Ad- tional Cancer Institute Hospital Manager and professor at the National Cancer Institute. He ministration, as well as several Diplomas including Quality Management from the American is also Consultant Haematologist for the Ministry of Interior and Ministry of Health. In 1994, University in Cairo and a Diploma in Hospital Administration. Dr. Khaled was awarded a PhD in Clinical Pathology and Oncologic Laboratory Medicine from Cairo University.

Dr. Hani Victor Dr. Marwa Al Ruby Nile Badrawi Hospital (NBH) Managing Director Outpatient Department Director Dr. Hani Victor joined the Group in 2018 and assumed the role of NBH’s Managing Direc- Dr. Marwa Al Ruby joined Cleopatra Hospital in March 2017 as Outpatient Department Man- tor. He brings over 17 years of experience having previously held the position of Chair- ager and later assumed her role as OPD Director of the Group in July 2018. Prior to joining man of the medical council in El Katib Hospital. He is an international course director the group, Dr. Marwa held several positions including Medical Auditor, Project Manager, and and educator in all the European Resuscitation Council courses (ERC) and a member OPD Manager in Andalusia Group for Medical Services. of the Course Management Committee (CMC). He is also Vice President of the Egyptian Resuscitation Council (EgRC) and one of the founders and the Secretary General of the Egyptian Trauma Society (EgTS).

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Our People

Dr. Nagwa El Hosseiny Quality Director Dr. Nagwa El Hosseiny is a Professor of Internal Medicine at Cairo University. She joined the Group in November 2016 to head the Quality Control Department. She was previously Quality Consultant and Head of the Egyptian Executive Committee of Accreditation at the Ministry of Health and Population. Dr. El Hosseiny also held positions in the private healthcare sector, including Quality Manager at Dar Al Fouad Hospital and Senior Consultant & Technical Director at Logistics Company for Consultation where she led, guided and prepared quality control teams for JCI accreditation. Dr. El Hosseiny is also a member of the Scientific Board of Arab Healthcare and Accreditation and a member of the JCI’s Mid- dle East Advisory Board.

Dr. Sherif Abd El-Fattah Supply Chain Director Dr. Sherif Abd El-Fattah has over 20 years of experience in supply chain and operations management in the medical field, having previously held positions including Supply Chain Director, Deputy General Manager, and Emergency Medical Evacuation Direc- tor. He has vast experience in sourcing both direct and indirect materials, as well as inbound and outbound logistics services and developing the local supply base to meet 637 931 world-class quality standards.

Registrar Nurses

Hassan Fikry Corporate Strategy & Investor Relations Director 295 2,067 Mr. Hassan Fikry joined the Group in 2015 as Business Analysis Manager. Mr. Fikry then went on to manage the Corporate Strategy & Development team before taking on his current position as Corporate Strategy & Investor Relations Director. Mr. Fikry brings Paramedical staff Non-medical staff valuable business development experience to the Group, having previously been the Co-Founder & Executive Director of El-Seha Laboratories, the Executive Director of the Ahmed H.Fikry Medical Centre, and Coordinator, Strategic Planner at Orascom Telecom Holding. He holds a Bachelor of Commerce & Economics from the John Molson School of Business at Concordia University and completed a Mini MBA in Telecoms. Staff members who received on-the-job training across the Group’s hospitals during 917 2018 (23% of total headcount)

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Our People

Mr. Ramez Adib Haitham Naiel Marketing Director Legal Manager Mr. Ramez Adib joined the Group in April 2019 as Marketing Director. He brings 17 years Haitham Naiel is an appeals attorney with a special focus on commercial and labour mat- of experience ranging from market research, to brand and portfolio building, and manage- ters as well as commercial/legal risk assessment. He brings more than 15 years of experi- ment within multinational companies. Prior to joining CHG, Mr. Ramez held the Market- ence across several industries. His work experience spans a number of highly respectable ing Director position in Proper Move. He holds a Bachelor of Arts in Journalism and Mass organisations, such as Hikma & EPCI Pharma, Lafarge Cement, Nile Valley Gas, Mr. Regaey Communication from the American University in Cairo. Attia Law Firm and Dr. Yehia El-Gamal Law Firm. Mr. Naiel ensures that all statutory and regulatory requirements are properly met and that the company is complying with all required laws. Mr. Naiel graduated from the Faculty of Law at Ain Shams University

Tamer Salah Amr El-Ashkar Contracting & Sales Information Technology Director Mr. Salah is the Group’s Sales and Business Development Manager, bringing over 15 years Mr. Amr El-Ashkar joined the Group in November 2015. Previously, he was Chief Information of industry experience to the Group. He previously held roles at the National Bank of Egypt Officer at Integrated Diagnostics Holdings and worked at OMS, United Nations and ITWorx. Insurance Company, Al-Salaam Hospital, Nova Pharmaceutical Company as well as Nagor He holds a Bachelor’s Degree in Computer Science from Ain Shams University, a Master of and Striker. Mr. Salah holds a BSc from Cairo University and an MBA with a marketing focus Science in Computer Science from the University of Louisville and a Doctorate in Business from the Arab Academy for Science, Technology, and Maritime. Administration from Maastricht Business School, Holland.

Ola Ahmed Eng. Amr Sherif Internal Audit Manager Projects & Engineering Director Ms. Ola Ahmed joined the Group in January 2017 as Internal Audit Manager with over 12 Eng. Amr Sherif joined the Group in 2017 as Projects and Engineering Director responsible years of experience in establishing an Internal Audit Function. Her expertise covers inter- for overseeing the Group’s projects and expansion plans. He previously served as Projects nal control and corporate governance review, risk assessment and risk-based auditing. She Director at Dar Al Fouad Hospital during which he was responsible for overseeing the new previously held positions at a number of reputable organisations, including Ernst & Young, Dar Al Fouad Hospital project in the Cairo district of Nasr City. Eng. Sherif also holds years of PricewaterhouseCoopers, Orascom for Construction Industries, Magrabi, General Motors experience as Project Manager for major engineering projects during his time at the French- and Al Sharkeya for Sugar Industries. The Internal Audit Department reports administra- Arab Engineering Consulting Company. Eng. Sherif holds a Bachelor of Architecture from Ain tively to the Group’s CEO and functionally to the Board’s Audit Committee. Shams University and is an architecture consultant at the Engineers Syndicate.

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Corporate Governance

During 2018, the Group continued to adhere to the highest governance standards in line with international best- practices

924,904

cases served in FY18, including outpatient, emergency room, and inpatient visits

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Corporate Governance

Governance

At Cleopatra Hospitals Group, the board of directors as well as other applicable laws governing companies in- Ahmed Adel Badreldin aims to safeguard the interest of its stakeholders and the corporated across Egypt. Chairman of the Board communities in which it operates by adhering to best- Mr. Badreldin was Head of MENA at Large Cap Private Equity where he managed their in- in-practice corporate governance frameworks and strict In accordance with the Egyptian disclosure requirements, vestment portfolio in the Middle East and North Africa. He previously worked for eight years ethical standards. the Group is required to publish annual and quarterly finan- at Barclays Capital where he climbed the corporate ladder until reaching Senior Director of cial statements prepared as per the Egyptian Accounting Leveraged Finance at Barclays Capital PLC, in addition to serving as an Executive Officer at In compliance with its public listing on the Egyptian Stock Standards (EAS). The Group also provides the Financial Baker Hughes Incorporated. Mr. Badreldin possesses over 15 years’ experience in investment Exchange (EGX), the corporate affairs of Cleopatra Hospi- Regulatory Authority (FRA) and the EGX with notices of any banking and consulting with a strong skillset in credit analysis, investment, and structuring tals Group are regulated under Law No. 159 of 1981 and its material developments in addition to providing EGX with in both debt and equity in addition to a comprehensive and broad experience in a variety of Executive Regulations as well as the Companies Law, the minutes of the Company’s ordinary and extraordinary gen- industries and sectors including industrial and basic materials, telecommunications, retail, Egyptian Capital Market Law, the EGX Listing Regulations eral assembly meetings. services, and energy. Mr. Badreldin holds an MBA from the Cranfield School of Management and a BSc in Mechanical Engineering, Industrial Management, and Business Administration from the American University in Cairo.

Shareholders Dr. Tarek Zahed Vice-Chairman Dr. Zahed was a founder of Cairo Specialised Hospital in 1981, where he has been chairman since 2001. He previously served as a consultant to the Medical Services Division Board of Directors of the Egyptian Presidency for 25 years. He is a fellow of the American Academy of Implant Dentistry and the International Congress of Oral Implantologists, as well as a member of the Dental Society of Western Pennsylvania. He holds a BSc in Dentistry from Cairo University and an MDS in implant dentistry from the University of Pitts- burgh School of Dental Medicine, USA. Healthcare Experts Financial and Investments Experts

Audit Nomination & Remuneration Medical Ethics & Quality Dr. Ahmed Ezz El-Din Committee Committee Committee Chief Executive Officer Dr. Ahmed Ezz El-Din brings over 36 years of healthcare experience to the Group and a deep insight into the healthcare businesses in Egypt. Prior to assuming his role as the Group’s CEO, Dr. Ezz El-Din was the Director of Government Affairs & Policy – Middle East, North Africa & Pakistan at Johnson & Johnson Medical, where he also held the position of Managing Direc- Board of Directors tor for Egypt & Libya at Johnson & Johnson Medical. Prior to that, Dr. Ezz El-Din also held key The Group’s Board of Directors provides the necessary oversight in the healthcare field as well as 4 who possess relevant financial positions at GSK, including Sales & Commercial Director at GSK Egypt and Sudan Country and combination of expertise to thoroughly oversee the Group’s and investment expertise. In addition, there are 10 members Manager, and holds over 18 years of global experience with MSD under his belt. Dr. Ezz El-Din corporate governance framework, a cornerstone of the Group’s who serve as non-executive directors, 5 of which are independ- holds a Bachelor’s Degree in Pharmaceutical Science from Cairo University. long-term success and value creation. The Board of Directors is ent. comprised of a total of 11 seats, with 3 members who are experts

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Corporate Governance

Omar Ezz Al Arab Lobna El Dessouky Non-Executive Director Independent Non-Executive Director Mr. Ezz Al Arab has over 10 years of private equity and investment banking experience Ms. El Dessouky leverages over two decades of professional experience in a wide range of sec- in Europe and the Middle East in sectors such as oil and gas, healthcare, education and tors to fulfil her numerous advisory and board roles. Currently, Ms. El Dessouky holds the post fast-moving consumer goods. Prior to joining Abraaj in 2009, Mr. Ezz Al Arab worked of Advisor for the European Bank for Construction and Development’s (EBRD) Enterprise at JP Morgan in London as part of the Mergers & Acquisitions team in the Natural Growth Programme and is Advisor to the Audit Committee at Qalaa Holdings, having been a Resources Group where he advised on more than USD 15 billion worth of transactions. member of the committee since December 2012. She is also an Adjunct Professor of Managerial Mr. Ezz Al Arab holds a Bachelor of Arts degree in Law and Business from the Univer- Accounting and Automated Financial Reporting at the American University in Cairo where she sity of Warwick, UK. teaches MBA finance courses. Ms. El Dessouky holds a Bachelor’s Degree in Commerce from Helwan University and an MBA in Management Consultancy from Sheffield University, UK. She is a CPA, CFM, and CMA charter-holder and is also a member of the Association of Corporate Governance Practitioners and a Certified Director from the Egyptian Institute of Directors.

Sameh Mahmoud Mohsen Dr. Mohamed Awad Tag El Din Non-Executive Director Independent Non-Executive Director Mr. Mohsen is one of the founders and former CEO of Cleopatra Hospital and has worked Dr. Tag El Din was the Egyptian Minister of Health from March 2002 to December 2005. in the industry for more than 30 years. He holds a Bachelor’s Degree in Engineering from Prior to that, he was the president and vice president of Ain Shams University for one Cairo University. and four years, respectively. He holds a Bachelor’s Degree in Medicine, two diplomas in internal medicine and pulmonology diseases and a PhD from Ain Shams University. He is also a professor and consultant of Pulmonology.

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Corporate Governance

Omar Atef Kinawy Independent Non-Executive Director Mr. Kinawy joined the Group in 2015. Prior to that, he was the former deputy head of the Egyptian General Intelligence and graduated from the Egyptian Military College in 1968.

Board Committees In order to achieve the governance goals set for the Group, the Board of Directors has established three committees that Samia El Baroudy include: the Audit Committee, the Medical Ethics & Quality Committee and the Nominations and Remuneration Committee. Non-Executive Director Mrs. Samia El Baroudy brings global experience in the private equity sector through being a member of an investment team that oversees investments in a variety of sectors in Egypt including the healthcare sector. She has held direct responsibility for the different portfolio companies including Integrated Diagnostics Holdings, OMS, ECCO and North Africa Hospital Holdings Group (NAHHG). Currently, Mrs. Samia is part of a team that is responsible for setting up the largest hospital platform in North Africa. Prior to joining the private equity sector, she was a consultant at Booz & Co. She holds a master’s degree in Management Science & Engineering and a bachelor’s degree in Economics, both from Stanford University.

Audit Medical Ethics & Nomination & Nabil Walid Kamhawi Committee Quality Committee Remuneration Committee Independent Non-Executive Director Mr. Kamhawi has over 40 years of consulting, audit and advisory experience in Europe The Audit Committee consists of 3 The Medical Ethics & Quality Commit- The Nominations and Remuneration and the Middle East in a wide range of industries. He was the managing partner of Ernst non-executive directors, 2 of which tee’s role is to supervise the development committee provides recommendations & Young in Egypt following its integration with Arthur Andersen, where he was manag- are independent. The committee and execution of the Group’s quality con- regarding the remuneration of the sen- ing partner. Mr. Kamhawi holds a Bachelor’s Degree in Commerce (Accounting) from Ain assists the Board in its oversight of trol programmes. The committee moni- ior management, as well as reviews the Shams University and is a member of the Institute of Chartered Accountants in England financial statements and disclosures tors the performance indicators and Group’s bonus schemes and developing and Wales. and ensures that the financial state- accordingly provides recommendations the employment succession plan. The ments adhere to the auditor’s and the development strategy of the Group’s committee is comprised of 3 members, 1 EFSA’s recommendations. services. The Medical Ethics & Quality of which is a non-executive director. Committee consists of 3 members, 2 of which are non-executive directors. Tarek Kabil Independent Non-Executive Director Mr. Tarek Kabil is the former Minister of Trade and Industry for Egypt from 2015-2018. Members Members Members He brings over 40 years of global professional experience in a variety of sectors including Government, Private Equity, and FMCGs across US, Asia, Middle East, and Africa. He has • Mr. Nabil Walid Kamhawi: • Dr. Mohamed Awad Tag El Din: • Mr. Ahmed Badreldin: led several international organisations including serving as President and CEO of PepsiCo Chairman of the Committee Chairman of the Committee Chairman of the Committee Middle East and Africa. Currently, Mr. Tarek Kabil serves as the CEO and Chairman of • Ms. Lobna El Dessouky • Dr. Tarek Zahed • Mr. Omar Ezz Al Arab Business Solutions Consulting Group, as well as a board member and advisor in different • Mr. Omar Ezz Al Arab • Dr. Ahmed Ez • Mr. Nabil Walid Kamhawi sectors such as FMCG, Banking, and Education.

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Corporate Governance

Sustainability and Corporate Social Responsibility

CHG is committed to making quality healthcare services available throughout the Skills Enhancement Floating Forward country as part of its community development planks Programme with MOH Hospital Looking Strategy

In 2018, CHG entered into talks with In line with its commitment Looking ahead, CHG will continue to As one of Egypt’s leading hospital groups, CHG has long they conform to the highest standards and international the Ministry of Health to forge an alli- to making quality healthcare work toward building partnerships established itself as part of the community in which it best practices, setting an example for other facilities in ance that would see the Group support accessible across the country, that not only help it deliver quality does business, having committed to being part of the the country. The Group has been instrumental in bring- the ministry in new initiatives slated CHG donated EGP 1 million to healthcare but shape the frameworks healthcare development story of Egypt. The Group lever- ing the latest technology in healthcare to the country, to transform the healthcare sector and the establishment of a floating that govern the healthcare sector. ages its position as a market leader in the sector to im- thereby creating access to the best possible treatments ensure that quality public medical ser- hospital in Aswan, the first of Through key partnerships with state prove the quality and accessibility of healthcare in Egypt, as it works to improve quality of life for the communities vices are available to all citizens. Under its kind in the region. Originally entities, the group will help fill a vital not only through its standard operations but by building in which it operates. At the same time, it has built part- the first phase of the initiative, CHG will a cruise ship, the boat was fit- care gap in the industry and fortify strategies and forging key partnerships to develop the nerships with both state and private institutions to assist help manage three hospitals in the Port ted with several clinics as well the invaluable connections between entire sector. Throughout its facilities, CHG works to other hospitals to meet these same standards in line with Said governorate and train their medical as multiple facilities including the private and public sector to the positively impact the lives of patients by ensuring that its strategy to institutionalize the sector. and administrative staff to transfer the an x-ray unit, a laboratory and benefit of the community. It will work kind of knowledge that has helped set a pharmacy. In the first week toward providing quality primary care CHG facilities apart from others in the alone, the floating hospital was for socially marginalised members industry. It will also implement its own able to examine 10,000 children of Egyptian society and make sure administrative systems and protocols, and will continue to sail down these efforts are efficient, sustainable which have enabled CHG to become a the Nile to meet the medical and viable for the communities they market leader in the healthcare sector, needs of women and children in target. It also aims to take steps to in these hospitals. The partnership is eight governorates. raise awareness on healthcare issues part and parcel of Egypt’s new compre- throughout the nation as a means of hensive health insurance initiative man- preventative care and to ensure that dated under the Universal Healthcare whatever channels are used reach the Act and set to be rolled out incremen- most vulnerable segments. tally throughout the country.

70 Annual Report 2018 Annual Report 2018 71 Financial Statements

2018 was a year of continued growth and development for Cleopatra Hospitals Group

EGP 405 MN

FY18 consolidated EBITDA (28% margin) Cleopatra Hospitals Group Cleopatra Hospitals Group

Auditor’s Report

To: The Shareholders of Cleopatra Hospital Company S.A.E.

Report on the consolidated financial statements Opinion We have audited the accompanying consolidated financial statements of Cleopatra Hospital Company “S.A.E.” and its sub- In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consoli- sidiaries (the “Group”), which comprise the consolidated statement of financial position as at 31 December 2018 and the dated financial position of Cleopatra Hospital Company “S.A.E.” and its subsidiaries, as at 31 December 2018, its consolidated consolidated statements of profit or loss, comprehensive income, changes in shareholders’ equity and cash flows for the financial performance, and its consolidated cash flows for the financial year then ended in accordance with the Egyptian financial year then ended, and a summary of significant accounting policies and other explanatory notes. Accounting Standards and in light of the related Egyptian laws and regulations.

Management’s responsibility for the consolidated financial statements These consolidated financial statements are the responsibility of the Group’s management. Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with Egyptian Accounting Standards and in light of the prevailing Egyptian laws. This responsibility includes designing, implementing and maintain- ing internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Management responsibility also includes selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances.

Auditor’s responsibility Basma Samra Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted Member of Egyptian Society of Accountants & Auditors our audit in accordance with Egyptian Standards on Auditing and in light of the prevailing Egyptian laws. Those standards Member of the Egyptian Tax Society require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance that the R.A.A. 6588 consolidated financial statements are free from material misstatement. F.R.A.137

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated 14 March 2019 financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of Cairo material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Group’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. An audit also includes evaluating the appro- priateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on these consolidated financial statements.

74 Annual Report 2018 Annual Report 2018 75 Cleopatra Hospitals Group Cleopatra Hospitals Group Consolidated statement Consolidated statement of financial position of profit or loss As at December 31, 2018 For the year ended 31 December 2018

(All amounts in Egyptian Pounds) (All amounts in Egyptian Pounds)

Note 2018 2017 Note 2018 2017 Assets Operating revenue 21 1,456,138,977 1,126,768,154 Non-current assets Less: Fixed assets 6 560,487,087 472,516,879 Goodwill 7 196,676,034 196,676,034 Operating costs 22 (942,517,120) (788,162,404) Intangible assets 7 44,354,000 44,354,000 Gross profit 513,621,857 338,605,750 Payments under long term investments 8 143,550,000 143,550,000 Add / (Less): Subsidaries not consilidated 9 362,500 - General and administrative expenses 23 (180,408,058) (161,373,265) Total non-current assets 945,429,621 857,096,913 Costs of acquisition activities (4,597,513) (5,332,453) Current assets Provisions 14 (17,200,122) (7,078,777) Inventories 10 40,752,369 30,089,146 Other income 25 7,226,332 5,495,284 Trade receivables 11 302,841,491 185,436,395 Due from related parties 30 7,061,892 5,421,027 Finance income 26 129,322,091 59,443,507 Debtors and other debit balances 12 48,459,433 22,099,915 Finance expenses 26 (37,950,540) (74,403,593) Cash on hand and at banks 13 953,422,594 1,007,130,631 Contribution in the comprehensive medical insurance plan 27 (1,993,467) - Total current assets 1,352,537,779 1,250,177,114 Profit for the year before income tax 408,020,580 155,356,453 Total assets 2,297,967,400 2,107,274,027 Current tax 28 (90,383,148) (32,682,010) Equity Deferred tax 29 (2,438,933) (4,436,851) Share capital 18 800,000,000 800,000,000 Profit after income tax 315,198,499 118,237,592 Reserves 19 274,181,651 270,150,127 Retained earnings 529,815,360 260,349,167 Profit for: Total equity of the parent company 1,603,997,011 1,330,499,294 Owners of the parent company 294,887,626 105,685,716 Non-controlling interests 20 74,719,570 55,729,276 Non-controlling interests 20 20,310,873 12,551,876 Total equity 1,678,716,581 1,386,228,570 Profit for the year 315,198,499 118,237,592 Liabilities Non-current liabilities Earning per share 30 0.18 0.06 Non-current portion of borrowings 17 67,879,332 276,303,047 Employee incentive plan 16 45,232,497 24,821,000 Deferred tax liabilities 28 66,869,150 64,430,217 Total non-current liabilities 179,980,979 365,554,264 - The accompanying notes on pages 8 - 47 from an integral part of these financial statements, Current liabilities Provisions 14 24,901,675 21,580,382 Creditors and other credit balances 15 317,745,368 246,313,285 Current portion of borrowings and bank overdraft 17 27,224,536 75,635,580 Current income tax liabilities 27 69,398,261 11,961,946 Total current liabilities 439,269,840 355,491,193 Total liabilities 619,250,819 721,045,457 Total equity and liabilities 2,297,967,400 2,107,274,027

- The accompanying notes on pages 8 - 37 from an integral part of these financial statements - Auditor’s report is attached

Mr. Khalid Hassan Ahmed Dr. Ahmed Ezzeddine Mahmoud Dr. Mohamed Tarek Zahed Group CFO CEO & Managing Director Non-Executive Chairman

22 February 2018 Auditor's report is attached

76 Annual Report 2018 Annual Report 2018 77 Cleopatra Hospitals Group Cleopatra Hospitals Group Consolidated statement Consolidated statement of comprehensive income of changes in equity For the year ended 31 December 2018 For the year ended 31 December 2018

(All amounts in Egyptian Pounds) (All amounts in Egyptian Pounds)

2018 2017 Profit for the year 315,198,499 118,237,592 (95,774)

Other comprehensive income - - (613,360) 700,000,000 118,237,592 315,198,499 Total equity Total (14,406,182) (27,486,802) Comprehensive income for the year 315,198,499 118,237,592 (22,614,714) 610,497,322 1,386,228,570 1,386,228,570 1,678,716,581

Comprehensive income for: - Non- Owners of the parent company 294,887,626 105,685,716 3,152 653,184 interest

Non-controlling interests 20,310,873 12,551,876 (212,484) 12,551,876 20,310,873 controlling controlling (1,067,790) (1,323,731) 43,804,490 55,729,276 55,729,276 315,198,499 118,237,592 74,719,570

- The accompanying notes on pages 8 - 47 from an integral part of these financial statements, Total Total (98,926) equity of (400,876) Company the parent the parent 700,000,000 105,685,716 294,887,626 (13,338,392) (28,139,986) (21,290,983) 566,692,832 Shareholders Shareholders 1,330,499,294 1,330,499,294 1,603,997,011 - - earnings Retained Retained (653,184) (4,130,450) 105,685,716 294,887,626 (13,338,392) (21,290,983) 168,655,027 260,349,167 260,349,167 529,815,360 - - - - - Reserves (400,876) 4,031,524 (27,486,802) 298,037,805 270,150,127 270,150,127 274,181,651 ------700,000,000 Share capital Share 100,000,000 800,000,000 800,000,000 800,000,000 Balance 1 January at 2017 Capital increase Dividends for employees Reserves formed (utilized) Transactions with non- with Transactions controlling interest Comprensive incomeComprensive for the year Balance 31 December at 2017 Balance 1 January at 2018 Dividends for employees Reserves formed (utilized) Comprensive incomeComprensive for the year Balance 31 December at 2018 - The accompanying thesepartof financial on an integral statements,notespages 8 - 47 from

78 Annual Report 2018 Annual Report 2018 79 Cleopatra Hospitals Group Cleopatra Hospitals Group Consolidated statement of CLEOPATRA HOSPITAL (S.A.E.) AND ITS SUBSIDIAREIS Notes to the consolidated financial statements - For the year cash flows ended 31 December 2018 For the year ended 31 December 2018 (All amounts in the notes are shown in Egyptian Pounds unless otherwise stated)

(All amounts in Egyptian Pounds)

Note 2018 2017 1. Indroduction Cash flows from operating activities Cleopatra Hospital Company (Lasheen and Partners) was established as a limited partnership on 19 July 1979.The decision Profit before tax 408,020,580 155,356,453 of the Chairman of Investment Authority No. 4092 of 2005 was issued on 27 June 2005 authorising the transfer of the legal Adjustments to reconcile net income to cash flows from type of Cleopatra Hospital (Lasheen and Partners) from a “limited partnership” into Cleopatra Hospital Company “S.A.E.” in operating activities Fixed asserts depreciation 6 46,477,232 34,556,351 accordance with the provisions of Law No. (8) of 1997 and Law No. (95) of 1992. Fixed assets write off 6 343,389 3,296,591 Profit from sale of fixed assets 25 (965,563) (686,240) The Company’s purpose is to establish a private hospital to provide advanced modern health and medical services, as well Amortization of intangible assets 7 - 5,350,005 as the medical care of inpatients. The Company may have interest or participate in any manner in companies or other firms Impairment of trade receivables 11 (4,242,180) (22,352,121) Impairment of inventories 10 (183,063) 435,336 which carry on similar activities in Egypt or abroad. The Company may acquire, merge or affiliate such entities under the Provisions 14 3,321,293 (3,344,322) General Authority for Investment. Interests and commissions 26 37,950,540 73,498,048 Interests payable 26 (129,272,895) (59,442,182) The Company is located at 39, 41 Cleopatra Street, Heliopolis, Cairo. Employee incentive plan 16 20,411,497 24,821,000 Income tax paid 28 (32,946,833) (52,298,210) Operating profits before changes in assets and liabilities 348,913,997 159,190,709 The Parent Company is Care HealthCare Ltd., which owns 80% of the Company’s share capital at 30 December 2017 Care Health Ltd. Shares has changed to be 69.4%. Changes in assets and liabilities Change in inventories 10 (10,480,160) 15,592,425 Change in trade receivables 11 (113,162,914) (37,148,502) On 16 September 2015, Cleopatra Hospital S.A.E. acquired 52.7% of the total shares of Cairo Specialised Hospital. And as of Changes in due from related parties 31 (1,640,865) (5,272,514) 31 December 2016 Cleopatra Hospital S.A.E share in Cairo Specialised Hospital has changed to reach 53.67% due to the write Change in debtors and other debit balances (1,855,011) 10,365,126 off of treasury shares. Change in creditors and other credit balances 77,989,614 47,026,548 Net cash flows generated from operating activities 299,764,661 189,753,792 On 28 September 2017, the ownership in Cairo specialised Hospital increased to 53.88% due acquisition of shares from the Cash flows from investing activities non-controlling shareholders in of Cairo specialised Hospital. Payments for purchase fixed assets 6 (86,572,773) (77,916,708) Payments for projects under construction 6 (48,412,349) (37,209,353) Proceeds from sale of fixed assets 1,159,859 2,164,783 On 22 September 2015, Cleopatra Hospital S.A.E. acquired 99.92% of the total shares of Nile Badrawi Hospital Company. Down payments for purchase of fixed assets (24,554,693) (10,584,782) Interests received 129,323,081 63,038,509 On 24 January 2016, Cleopatra Hospital S.A.E. acquired 99.99% of the total shares of Al-Shorouk Hospital. Payments for investments in subsidiaries - (613,360) Payments for acquisition of investment 8 (362,500) (143,550,000) Deposits with a maturities of more than 3 months from the These consolidated financial statements have been approved for issuance by the Board of Directors of the Parent Company 13 11,000,000 384,208,630 date of placement on 14 March 2019. Net cash flows (used in) generated from investing activities (18,419,375) 179,537,719 Cash flows from financing activities 2. Accounting policies Payments for capital increase - 700,000,000 The principal accounting policies used in the preparation of these consolidated financial statements are set out below. Proceeds from borrowings and overdraft 17 106,611,327 122,507,456 Interests and commissions paid (45,545,088) (77,420,346) A. Basis of preparation of the consolidated financial statements Payments of borrowings and overdraft (363,446,086) (148,715,942) Dividends paid 17 (21,673,476) (13,906,465) The consolidated financial statements have been prepared in accordance with the Egyptian Accounting Standards (EASs) Net cash flows (used in) generated from financing activities (324,053,323) 582,464,703 and the relevant laws. The consolidated financial statements have been prepared under the historical cost convention. Change in cash and cash equivalents during the year (42,708,037) 951,756,214 Cash and cash equivalents at the beginning of the year 996,130,631 44,374,417 Cash and cash equivalents at the end of the year 11 953,422,594 996,130,631

- The accompanying notes on pages 8 - 47 from an integral part of these financial statements,

80 Annual Report 2018 Annual Report 2018 81 Cleopatra Hospitals Group Cleopatra Hospitals Group

The preparation of the consolidated financial statements in conformity with EASs requires the use of certain critical account- The consolidated financial statements include the financial statements of the following subsidiaries: ing estimates. It also requires the management to exercise its judgement in the process of applying the Group’s accounting policies. The areas where the most significant accounting estimates and judgements applied in preparation of the consoli- Country of Percentage of dated financial statements are disclosed in Note 4. incorporation ownership Al-Shorouk Hospital Company S.A.E. Egypt 99.99% The EAS’s require the reference to the most recent issues by other parties with which they are associated, which are responsi- Nile Badrawi Hospital Company S.A.E. Egypt 99.92% ble for setting accounting standards and use similar scopes and concepts to develop accounting standards and philosophies Cairo Specialised Hospital Company S.A.E. Egypt 53.88% and other procedures accepted in the industry, to the extent at which these concepts do not conflict with the requirements of the Egyptian Standards on Auditing, which deal with similar related subjects, definitions, basis of recognition, concepts on 2. Sale, acquisition and non-controlling interests the measurement of assets, liabilities, revenue and expenses included in the scope of the preparation and presentation of the The Group recognises sales and acquisitions made with the minority, as transactions with parties outside the Group. Gains or financial statements when there is no Egyptian standard on accounting or legal requirements that explain the accounting losses on disposal of equity to the minority, are recognised in the consolidated equity. Where purchase is made from minor- process for certain balances or transactions. ity, the difference between the consideration paid and the carrying value of the share purchased in the subsidiary’s assets is recognised as a reserve in the consolidated equity. Matters that have not been addressed in the Egyptian Standards are subject to the International Financial Reporting Stand- ards (IFRS) until the Egyptian Standards that address such matters are issued. 3. Associates • Associates are entities over which the Group has significant influence but not control. A shareholding in these entities B. Basis of consolidation ranges between 20% and 50% of the voting rights. 1. Subsidiaries • Investments in associates are accounted for by the equity method of accounting. Investments are initially recognised at Subsidiaries are the companies (including special purpose entities) with which the Group does not deal and shall not have cost. rights in variable returns through its participation in the subsidiary, and shall have the ability to impact such returns through • Goodwill arising from shareholding in associates is stated within investment cost net of accumulated impairment. its authority over its subsidiaries. The Group’s authority over the a subsidiary arises when the Group has outstanding rights • The Group’s share of its associates’ post-acquisition profit and loss is recognised in the profit and loss statement, and its giving the Group the current ability to instruct relevant activities, such as activities that impact the subsidiary’s returns. share of post-acquisition movements in associates’ reserves is recognised in reserves, in exchange for the adjustment of Potential voting rights that may be practiced or transferred are taken into consideration when assessing the existence of carrying value of investment against the Group’s share in post-acquisition changes in equity after the acquisition date. authority over the subsidiary. • When the Group’s share of losses in associates equals or exceeds its interest in the associate, including any other receivables or unsecured borrowings, the Group does not recognise further losses, unless it has incurred legal or constructive The acquisition method of accounting is used to account for the acquisition of a subsidiary from outside the group by the obligations or made payments on behalf of the associate. Group. The cost of an acquisition is measured at the fair value or consideration of assets given by the Company for acquisi- • Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Company’s in- tion and/ or equity instruments issued and/ or liabilities incurred by the Company, and/or the liabilities accepted on behalf terest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the acquiree at the date of exchange plus any costs that are directly attributable to the acquisition. Net assets, including of the asset transferred. Accounting policies applied in the associates are adjusted when necessary to ensure consistency the identifiable contingent liabilities acquired at their fair value at the date of acquisition, are measured at fair value at the with the policies adopted by the Group. date of acquisition. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the mentioned net assets, the difference C. Segment reporting is recognised directly in the statement of profit and loss. Business segments are reported in line with the reports provided internally to the senior management, which makes decisions related to resources allocation and evaluation of segments’ performance in the Group. The senior management is In case the acquisition process is carried out by an entity under joint control, subsidiaries are fully consolidated from the date represented in Group’s executive management committee. The segment reports are provided to the Group based on each on which control is transferred to the Group. The historical cost method is used where assets and liabilities are transferred company, as each subsidiary is considered a separate business segment. from the consolidated financial statements to the highest joint control entity which consolidated the transferred company. If this is not possible, transfer will be made at the same value stated in the transferred company’s books. The difference between D. Foreign currency translation the carrying value of the net assets referred to and the cost of acquisition is recognised in equity. (1) Functional and presentation currency Items included in the consolidated financial statements are measured using the currency of the primary economic envi- Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from ronment in which the Group operates (‘the functional currency’). The consolidated financial statements are presented in the date that control ceases. Inter-companies transactions, balances and unrealised gains on transactions between the Egyptian Pounds (EGP), which is the Group’s functional and presentation currency. Group’s companies are excluded. Unrealised losses are eliminated, and are considered as an indication of the impairment of the transferred assets. (2) Transactions and balances Foreign currency transactions during the year are translated into the measurement currency using the exchange rates pre- Accounting policies of subsidiaries are changed where necessary to ensure consistency with the policies adopted at the vailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions Group’s level. and from the revaluation of monetary assets and liabilities denominated in foreign currencies at the consolidated financial position date are recognised in the consolidated statement of profit or loss.

82 Annual Report 2018 Annual Report 2018 83 Cleopatra Hospitals Group Cleopatra Hospitals Group

E. Fixed assets Goodwill is allocated to cash generating units for the purpose of measurement of impairment. Allocation is made on cash Fixed assets are stated at historical cost less accumulated depreciation. Historical cost includes expenditure that is directly generating units or a group of cash generating units that are expected to directly benefit from goodwill. attributable to the acquisition of the asset and bringing it to a ready-for-use condition. 2. Trade name All expenses attributed to the acquisition and establishment of fixed assets are recognised at the accounts of projects under Trade name is included within intangible assets, and represents the trade name of both Nile Badrawi Hospital S.A.E. and construction. When the fixed asset is complete and brought to a ready-for-use condition, the asset’s amount is transferred Al-Shorouk Hospital S.A.E., resulting from the acquisition at fair value at the date of acquisition. to the account of fixed assets. 3. Non-competition agreement All repair and maintenance costs are charged to the statement of profit and loss for the fiscal year in which they are incurred. The fair value of the recognised asset is depreciated in such agreements over the period during which it is expected to ben- Major renovation costs are capitalised over the asset’s cost when they are expected to raise the expected pattern of the Com- eficial. The period is specified to be two years long. pany’s future economic benefits over the estimated original benefits of the asset acquisition. These costs will be depreciated at the lower of the asset’s remaining useful life or the expected useful life of these renovations, the net carrying amount of the G. Inventories disposed part is eliminated. Inventories are evaluated at the lower of actual cost or net realisable value. Cost is determined using the moving average method and includes purchase cost and other direct costs. The net realisable value comprises the estimated selling price in The straight line method is used to calculate the depreciation by reducing the asset’s value to its salvage value over the the ordinary course of business, less realisable expenses. Allowance is made for slow moving inventories based on manage- estimated useful life except the land that is not considered a depreciable asset. The fixed assets’ salvage value and useful life ment’s assessment of inventory movements. are reviewed annually, and adjusted if appropriate. H. Financial assets The depreciation rates by type of asset are as follows: First – Classification: The Company classifies its financial assets into the following categories at initial recognition depending on the purpose for which the financial assets were acquired. The management of the Company has classified its financial assets within the group Buildings 2.5% of loans and receivables. Machinery and equipment 10% Tools and instruments 25% Loans and receivables: Furniture and fixtures 15% Loans and receivables are non-derivative financial assets with fixed or determinable values that are not quoted in an Vehicles 20% active market. Computers 25% Leasehold improvement Remaining of the lease contract They are included in current assets, except for those with maturities greater than 12 months after the financial position date. In this case, they are classified as non-current assets. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than the amount estimated to be recovered from operation. Gains and losses on disposals are determined by comparing the Loans and receivables include accounts receivables, cash and bank balances, and due from related parties. realisable value with the net carrying amount, and the difference is recognised in the statement of profit or loss. Second: Initial and subsequent measurement: F. Intangible assets 1. The financial assets are measured on acquisition at fair value plus transaction costs. 1. Goodwill 2. The financial assets are derecognised when the right to receive cash flows from such assets has expired or has been Goodwill results from the acquisition of subsidiaries and represents the excess of the cost of acquisition of shareholding transferred and the Company has transferred substantially all risks and rewards of ownership. in subsidiaries over the fair value of the Group’s share of the net assets of the acquired associate at the date of acquisition. 3. Loans and receivables are subsequently measured at amortised cost using the effective interest method. Goodwill resulting from the acquisition of a subsidiary is included within intangible assets. Third: Impairment of financial assets: The Group’s management conducts analysis annually or at shorter intervals, where there is an indication for impairment, to Assets recognised at amortised cost estimate whether the carrying value of goodwill is expected to be fully recovered, and reduce the carrying value of goodwill The Company assesses, at the end of each financial period, whether there is evidence that a financial asset or a group of if it is higher than the expected recoverable amount. Any losses resulting from impairment of goodwill are charged to the financial assets is impaired. statement of profit or loss, and cannot be reversed subsequently. Impairment of a financial asset or group of financial assets is recognised if an impairment evidence exists as a result of one Profits and losses resulting from the disposal of investments in subsidiaries or associates comprise the carrying value of the or more events that occurred after the initial recognition (a “loss event”) and if the loss event (or events) has an impact on the goodwill related to the investment. future cash flows of the financial asset or group of financial assets that can be reliably measured.

84 Annual Report 2018 Annual Report 2018 85 Cleopatra Hospitals Group Cleopatra Hospitals Group

Evidence of impairment may include indications that the debtors or a group of debtors are experiencing financial difficulty, not. Long term liabilities are recognised at their present value, and trade payables are subsequently shown at amortised cost default or delinquency in payments, the probability that they will enter bankruptcy or other financial reorganisation and using the effective interest method. where observable data indicate that there is a decrease in the estimated future cash flows, such as future changes or economic conditions that correlate with the impairment evidence. N. Borrowings and advances Borrowings are initially recorded at received amounts less the cost of obtaining the loan. Borrowings are subsequently stated Fixed assets’ impairment loss is measured at amortised cost, which is the difference between the asset’s carrying amount at amortised cost using the effective interest method; any difference between proceeds (net of borrowing cost) and the re- and the present value of the estimated future cash flows (after eliminating future losses that have not occurred) discounted demption value is recognised in the consolidated statement of profit or loss over the period of the borrowings using the at the original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in effective yield method. the statement of profit or loss. Borrowing costs that are directly attributable to the acquisition, construction or production of qualifying assets are capital- If, in a subsequent period, the amount of the impairment decreases and the decrease can be related to an event occurring af- ised as part of the cost of this asset. The cost of borrowing, which is capitalised, is determined based on actual borrowing ter the initial recognition (such as an improvement in the debtor’s credit rating), the reversal of the impairment is recognised costs, which are incurred by the Group during the year due to borrowing process, less any income realised from the tempo- in the statement of proft or loss. rary investment of funds borrowed.

I. Impairment of non-financial assets Borrowings and advances are classified as current liabilities unless the Group has an unconditional right to defer the settle- Intangible assets that have an indefinite useful life, and so are not depreciated, are reviewed for impairment annually or ment of such obligations for a period of not less than 12 months after the date of the financial statements. whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Impairment losses are recognised in the statement of profit or loss for the amount by which the asset’s carrying amount exceeds its recoverable O. Employees’ benefits amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal of the asset or the value expected (1) Pension and insurance scheme to be recovered its use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are The Group pays contributions to the Public Authority for Social Insurance on a mandatory basis in accordance with the rules independent cash inflows. of Social Security Law. The Group has no further obligations other than the payment of its obligations. The regular contributions are recognised as periodic costs for the period in which they are due and as such are included in staff costs. Reversal of impairment losses recognised in prior years is recorded when there is an indication that impairment losses recognised for the asset no longer exist or have decreased. Loss of impairment, which should not exceed the fair value that will be (2) Employee incentive plan determined (net of depreciation), is reversed. Such reversal is recognised in the statement of profit or loss, excluding goodwill. Cleopatra Hospital grants units of cash bonus to the selected employees of the Group according to the criteria, basis, and rules established by the Remuneriation Committee to activate this plan. To connect the interests of the beneficiaries of the J. Share capital system with the interest of the shareholders and to ensure that the participants with high efficiency obtain the appropriate Ordinary shares are classified as equity. incentive to support the growth and stability and maintain the high-efficiency workers within the management team.

K. Legal reserve The remuneration committee of the Company supervises the implementation of the system under the control and supervi- As required by the Company’s Articles of Association, 5% of the net profit shall be transferred to constitute the legal reserve, sion of the Company’s Board of Directors. once the financial statements are approved by the Company’s ordinary general assembly meeting. Such transfer may be discontinued when the reserve equals 50% of the Company’s issued and paid up capital. Whenever this reserve is lower than System elements this percentage, the deduction should be continued. This reserve is not available for distribution. Each benefiary shall be given units of monetary reward or a fixed presentage of the amounts allocated to the system in accordance with the award of the remuneration committee. L. Provisions Provisions are recognised when the Company has a (legal or constructive) obligation as a result of past events. It is ex- The remuneration committee shall determine the date of grant. pected that this settlement will result in an outflow of the Company’s resources, which ensures that economic benefits will arise, and it is probable that the resource usage will be required to settle the obligation and a reliable estimate of the Amounts due to the plan are determined according to a specific mechanism and include the following: amount of this obligation can be made. A) Payments calculated on the basis of the difference between the average market value of the Parent Company’s shares Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a on 30 September 2020 and the share price at the date of its public offering on the Stock Exchange on 2 June 2016. pre-tax rate that reflects market assessments of the time value of money and the risks specific to the obligation. The increase B) Payments are calculated on the basis of the difference between earnings before interest, tax depreciation and amor- in the provision due to passage of time is recognised as interest expense. tization (EBITDA) on the maturity date 30 September 2020 and 30 September 2016.

M. Trade payables • The beneficiaries’ entitlements from the system shall be paid within one month of the end of the fourth year of the Trade payables are obligations to pay for goods and services that have been acquired in the ordinary course of business. Trade system (“maturity date” or within one month from the date of any entitlement to the system in accordance with its payables are initially recognised at fair value of products and services received from others, whether they have been billed or terms and conditions).

86 Annual Report 2018 Annual Report 2018 87 Cleopatra Hospitals Group Cleopatra Hospitals Group

• This system is not a system of remuneration and motivation for the employees of the Company by granting or giving any The cost of lease, including the cost of maintenance of the leased assets are recognised as an expense in the consolidated rights in the shares of the Company as this system is a system of monetary incentives. statement of profit or loss for the period in which they occurred. If the Group decides to exercise the right to purchase the • The Remuneration Committee shall be entitled to amend the mechanism for calculating amounts due in light of any leased assets, the cost of the right to purchase is capitalised as a fixed asset, which is depreciated over the useful life of the developments related to the Company’s activities or achieving its objectives and after the presentation to the Board expected remaining life of the asset in the same method followed with similar assets. of Directors for approval and clarification of the justifications for this amendment. The Remuneration Committee is entitled to reallocate units that have not been used or are available in general to existing or new beneficiaries. 2. Operating leases • The Group recognizes the cost of incentives related to the services rendered by the employees under the system over the Leases in which the risks and rewards of ownership are retained by the lessor are classified as operating leases. period in which the service is performed. The Group recognizes the liability for the system at the date of each financial position in accordance with the fair value of the consideration expected to be paid to the employees on the grant date. Payments made under operating leases (net of any discounts received from the lessor) are recognised as expense in the state- The fair value of these liabilities is estimated at the date of the financial position taking into account all the circum- ment of profit or loss on a straight-line basis over the period of the lease. stances relating to the expected discounted cash flows at the effective rate of return applicable. • The Group recognises the fair value of the employees’ services received as expenses in the statement of profit or loss. R. Current and deferred income tax The income tax for the period is calculated on the basis of the tax laws enacted at the financial position date. The manage- P. Revenue recognition ment periodically evaluates the tax situation through tax returns, taking into account the differences that may arise from Revenue is measured at the fair value of the consideration received or receivable, including cash balances, trade and notes some interpretations issued by administrative or regulatory authorities, and establishes provisions where appropriate on the payable for rendering medical services and sale of medicine throughout the Group’s ordinary course of business, and exclud- basis of amounts expected to be paid to the tax authority. ing sales taxes, deductions or discounts. Deferred income tax is fully recognised, using the liability method, on temporary differences arising between the tax bases of Revenues are recognised when the amount of revenue can be reliably measured; when it is probable that future economic assets and liabilities and their carrying amounts in the consolidated financial statements. The deferred income taxes are not benefits related to the sale process will flow to the Group; and when other specific criteria have been met for each of the accounted for if it arises from initial recognition of an asset or liability other than those arising from business combination Group’s activities as described below. The revenue amount will not be considered reliably measurable unless all contingent that at the time of the transaction affects neither accounting nor taxable income. liabilities are settled. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement. Deferred income tax is determined using tax rates in accordance with the law prevailing at the consolidated financial position date that are expected to apply when the deferred income tax asset is realised or the deferred income tax liability is settled. Medical services revenue The Group renders several medical services, including surgeries, admission, medical supervision, analyses, investigations, Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which x-rays and outpatient services. The medical service income is recognised when the service is rendered to the patient. the temporary differences can be utilised.

Sale of medicine revenue S. Dividends The Group sells drugs through the hospital’s pharmacy or when giving them to inpatients admitted in the hospital. The Group Dividends are recognised in the consolidated financial statements in the period in which the dividends are approved by the recognises the revenues of medicines when the patient receives the medicine or when the medicine is used for the treatment Company’s General Assembly of Shareholders. of inpatients. T. Cash and cash equivalents Rental income For the purpose of preparation of consolidated statement of cash flows, cash and cash equivalents includes cash in hand, The Groups rents spaces to others. Such rental is recognised in the statement of profit or loss over the period of contract. bank current accounts, and term deposits with maturities of three months of the date of deposit.

Interest income U. Fair value of financial instruments Interest income is recognised on a time-proportion basis using the effective interest method. When a receivable generated Fair value is the price that would be obtained for the sale of an asset or paid to transfer a liability in an orderly transaction from the recognition of interest is impaired, the carrying amount will be reduced to its recoverable amount. between market participants at the measurement date. Fair value measurement is based on the assumption that the transaction of selling an asset or transferring a liability occurs either: Q. Leases 1. Finance Lease • In the principal market for the asset or liability, or Leases are accounted for in accordance with Law 95 for the year 1995 if the tenant is not obliged to purchase the asset • In the absence of a principal market, the most advantageous market. at the end of the lease term; the lease is registered in the register of the Companies’ Department; the lease grants the tenant the right to purchase the assets at a definite date and a definite amount; and the contract period represents at The Company must be able to reach the primary market or the most beneficial market. least 75% of the expected useful life of the asset, at least, or the present value of the total lease payments represents at least 90% of the value of the asset. The fair value of the asset or liability is measured using the assumptions that market participants might use when pricing the asset or liability by assuming that market participants act for their economic benefit.

88 Annual Report 2018 Annual Report 2018 89 Cleopatra Hospitals Group Cleopatra Hospitals Group

Fair value measurement for a non-financial asset takes into consideration the market participant’s ability to generate eco- A. Market risk nomic benefits through the best and ultimate use of the asset, or by selling them to another market participant that would i. Risk of change in foreign currency rates ensure the best and ultimate use of the asset. Foreign exchange risk arises from the foreign currency rates that affect the payments and receipts in foreign currency, as well as the valuation of assets and liabilities in foreign currencies. Given the nature of the Group’s activities, the Group does not The Company uses valuation techniques appropriate in the circumstances for which sufficient data are available to measure undertake transactions denominated in foreign currencies as it carries out all purchases in the Egyptian Pound. The Group’s fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. very limited revenue in foreign currencies are generated from certain foreign embassies. The management considers that foreign currency denominated balances are insignificant. Fair value of all assets and liabilities in the financial statements are measured and included in the fair value hierarchy below, on the basis of the lowest level input that is significant to the fair value measurement in its entirety. At the end of the year, the net financial assets of foreign currencies before impairment are denominated in Egyptian Pound as follows: • Level 1 - Quoted market prices (unadjusted) in active markets for identical assets or liabilities. • Level 2 - Other valuation techniques where all lowest level inputs that are significant to the fair value measurement are 2018 2017 directly or indirectly observable. US Dollars 32,969,736 25,461,162 • Level 3 - Valuation techniques where all lowest level inputs that are significant to the fair value measurement are not Euro 46,276 45,602 observable. GBP 366,910 369,346

As for assets and liabilities in the separate financial statements, on a periodic basis, the company determines the level, in the At 31 December 2018, if the EGP had been more/ less by 10% against foreign currencies, with all other variables held constant, case of transfers between levels within the hierarchy during the revaluation of the classification (based on the lowest input net profit after taxes would have increased / decreased as follows: levels that are considered to be significant to the fair value measurement in its entirety) at the end of each reporting period. 2018 2017 The management determines the policies and procedures for measuring the fair value either regularly or irregularly. External US Dollars 3,296,974 2,546,116 valuators are engaged in the valuation of significant assets. The criteria for selecting the valuator include their knowledge Euro 4,628 4,560 of the market, reputation, independence and compliance with the professional standards. The management determines the GBP 36,691 36,935 valuation techniques that should be applied on a case by case basis. ii. Fair value and cash flows risks resulting from the change in interest rates The management in cooperation with the Company’s external valuators compare the changes in fair value for each asset and The Parent Company obtained long-term loans at interest rates linked to the corridor rate declared by the Central Bank of liability with the relative external sources to assess whether these changes are reasonable. Egypt, and therefore, it is exposed to cash flow risks.

The fair value of non-current investments is determined based on the discounted cash flows, pricing models, net assets of B. Credit risk invested companies or prices in counterpart markets. Credit risk arises from cash and deposits with banks as well as credit risks associated with the Group’s customers. Risk management is monitored for the Group taken as a whole, through the executive management, the central finance department The financial instruments are measured according to Level No. 2, and there is no difference between book value and fair value and the executive committee at the level of the Parent Company. of of financial instruments as the deposits are payable on relatively short terms and a variable interest is added to the loans associated with the declared Corridor of the Central Bank of Egypt. For banks, only highly credit rating banks with high solvency are dealt with and are subject to the control of the Central Bank of Egypt. 3. Financial risk management 1. Financial risk factors For customers, each Hospital’s management analyses the credit risks of each potential new customer before being approved The Group’s activities expose it to a variety of financial risks: market risk (including the risk of change in foreign currency and as a credit customer by the Finance Director and the General Manager in accordance with the Group’s established poli- risk of change in interest rates), credit risk and liquidity risk. The Group is not exposed to any price risk as it does not have cies, including Cleopatra Hospital Company or the subsidiaries. The Parent Company’s Executive Committee follows-up the financial assets at fair value through profit and loss. The Group’s management aims to minimise potential adverse effects compliance with credit terms, and reviews cases of default and debt ageing report to take the necessary decisions whether to of such risks on the financial performance of the Group by the monitoring process performed by the Finance Department, cancel the credit or to refer the defaulted customer to the Legal Department for their necessary actions. Company’s General Manager, Executive Committee at the level of the Parent Company. The management makes impairment of 100% for customers in default for more than 150 days as of the date of the invoice. The Group does not use any derivative financial instruments to hedge specific risks. After deducting the amounts that expected to be collected after calculating the loss given default rate. The management also establishes the Group-based provision for impairment at historical default rates. The management calculates historical default rates for each customer individually on a monthly basis for defaulted customer balances for more than 150 days until 360 days from the financial position date. Based on those rates, the management calculates a provision on defaulted customers receivables for less than 150 days.

90 Annual Report 2018 Annual Report 2018 91 Cleopatra Hospitals Group Cleopatra Hospitals Group

Cash at banks is placed with local banks that are subject to the supervision of the Central Bank of Egypt. Accordingly, man- 3. Estimations of fair values of financial instruments agement believes that credit risk resulting from the cash at bank is minimal. The fair value of current financial assets and liabilities approximates their carrying amounts after taking into account any impairment. The Company owns long-term loan from an Egyptian bank, and the management believes that the fair value of Below are the balances that are exposed to the credit risks: the loan approximates its carrying amount as it was issued at a variable rate linked to the interest rate corridor declared by the Central Bank of Egypt. 2018 2017 Cash at banks 952,033,010 957,964,425 4. Critical accounting estimates, assumptions and judgements Trade receivables 318,870,667 315,790,840 Critical accounting estimates and assumptions Estimates and assumptions are continually evaluated and are based on historical experience and other factors, including C. Liquidity risk expectations of future events that are believed to be reasonable under the circumstances. The management makes cash flow projections on monthly basis, which are discussed during the Executive Committee’s meeting of the Parent Company, and takes the necessary actions to negotiate with suppliers, follow-up the collection process The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will seldom and manage the inventory balances in order to ensure sufficient cash is maintained to discharge the Company’s liabilities. equal the actual results.

The table below shows the Company’s liabilities by maturity: Provisions Provisions are recognised when there is a present legal or constructive obligation as a result of past events; it is probable Below 3 3 months to 1 1 year to 5 that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. The Group Above 5 years months year years reviews the provision at the date of each financial position, and adjusts it to reflect the best current estimate by using the Suppliers and notes payable 119,846,624 38,296,992 - - appropriate advisory expertise. Loans and financing interests 18,080,245 55,954,193 47,940,753 - Accrued expenses 111,918,549 31,752,294 - - Impairment of goodwill and other intangible assets Miscellaneous creditors 8,646,270 3,118,671 - - The Group’s management evaluates goodwill and other intangible assets annually to determine any impairment in goodwill. The carrying amount of goodwill is reduced if it is higher than the expected recoverable amount. Any losses resulting from During February 2018 and March 2018, the borrowing rate (corridor) decreased by 1% and 1% respectively which will affect the impairment of goodwill is charged to the statement of profit or loss, and cannot be reversed subsequently, (Note 7) il- the Company’s liabilities regarding borrowings and finance interest. lustrates more information regarding this.

2. Capital risk management Impairment of trade receivables and customers The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to Impairment of receivables and customer balances is estimated by monitoring ageing of receivables. The Group’s man- maximise returns for shareholders and provide benefits to the stakeholders, and to maintain an optimal capital structure to agement examines the credit position and ability of debtors and customers to make payments for their past due debts. reduce the cost of capital, as is followed by other companies operating in the same industry. Impairment is recognised for amounts due from debtors and customers whose credit position does not allow them to pay their dues as believed by the management. In addition, the Group calculates impairment on the Group basis for customers The Group’s management monitors capital structure using the gearing ratio, which is calculated as the ratio of net debt to and balances that suffered impairment but not yet determined, by reference to historical default rates applicable to some total borrowings, advances, notes payable, and due to related parties, less cash. The total capital represents the total net debt of the Group companies. in addition to shareholders’ equity as shown in the consolidated financial position. Employee incentive plan Net debt to total invested capital as at 31 December 2018 and 31 December 2017 is as follows: Cleopatra Hospital Group has an incentive plan for some employees of the parent company. The remuneration committee of the parent company oversees the implementation of the plan under the supervision of the parent company’s board of direc- 2018 2017 tors. Each beneficiary is granted a cash bonus or a fixed percentage of the amounts allocated to the plan. Creditors and other credit balances 317,745,368 299,681,302 Employee incentive plan 45,232,497 41,638,577 This plan is not considered as a plan of remuneration and motivation for employees in the group by granting any rights in Borrowings 95,103,868 200,469,191 the shares of the parent company, As it is a plan of cash incentives based in part on the value of shares. The values of the Less: Cash on hand and at banks (953,422,594) (963,536,900) components of the plan are calculated at current discount rates, either for share-based payments or for payments calculated Net debt (495,340,861) (421,747,830) on the basis of the difference between (EBITDA) and maturity as of 30 September 2020 and 30 September 2016. The discounts Total shareholders’ equity 1,678,716,581 1,588,473,198 rates used in calculating the system values are also reviewed with the market discount rates and reviewing the calculated Total invested capital 1,183,375,720 1,166,725,368 valued by system elements with the approved fives years plans from the management yearly.

Net debts to total invested capital (41.86%) (36.15%)

92 Annual Report 2018 Annual Report 2018 93 Cleopatra Hospitals Group Cleopatra Hospitals Group

The plan consists of the following: Below is a summary of each segment, which is presented for the financial year ended 31 December 2017 for each segment: A) Payments calculated on the basis of the difference between the market value of the Parent Company’s shares on 30 September 2020 and the share price at the date of its public offering on the Stock Exchange on 2 June 2016. Cleopatra Cairo Nile Badrawi Al Shorouk Consolidated B) Payments are calculated on the basis of the difference between earnings before interest, tax depreciation and amor- Hospital Specialised Total Hospital Hospital adjustment tization (EBITDA) on the maturity date 30 September 2020 and 30 September 2016. Company Hospital Statement of • Liabitities are estimated at each financial position date based on the present value of the expected cash flows discounted financial position Non-current assets 837,064,742 64,704,716 50,951,191 63,243,820 (158,867,556) 857,096,913 at market rate of return. • These estimates are calculated by an independent export and include the impact of market conditions using the total Current assets 1,037,118,806 112,708,712 69,215,774 44,904,557 (13,770,735) 1,250,177,114 shareholders return (TSR) as well as other non-market conditions using earning before interest, tax, depreciation and Total assets 1,874,183,548 177,413,428 120,166,965 108,148,377 (172,638,291) 2,107,274,027 amortization (EBITDA). • The assumption used, including the discount rates and expected performance are reviewed in accordance with approved Current liabilities 211,493,367 54,819,100 59,209,651 48,091,740 (18,122,665) 355,491,193 Non-current management plans annully and assumptions adjusted if nessecary. 304,822,632 4,909,467 (584,735) (840,211) 57,247,111 365,554,264 liabilities Total Liabilities 516,315,999 59,728,567 58,624,916 47,251,529 39,124,446 721,045,457 5. Segment reporting Business segments are reported in line with the reports provided internally to the senior management, which makes de- Statement of cisions related to resources allocation and evaluation of segments’ performance in the Group. The senior management is profit or loss: represented in Group’s executive management committee. The segment reports are provided to the Group based on each Operating revenue 492,799,986 244,212,788 202,184,637 191,441,728 (3,870,985) 1,126,768,154 company, as each subsidiary is considered a separate business segment. Operating costs (305,748,233) (175,459,099) (150,772,666) (149,039,678) (7,153,931) (788,173,607) Gross profit 187,051,753 68,753,689 51,411,971 42,402,050 (11,024,916) 338,594,547 Below is a summary of each segment, which is presented for the year ended 31 December 2018 for each segment: Other expenses (104,505,781) (41,609,708) (38,792,886) (33,997,036) (1,451,544) (220,356,955) Cleopatra Cairo and revenues Nile Badrawi Al Shorouk Consolidated Hospital Specialised Total Hospital Hospital adjustment Profit for year 82,545,972 27,143,981 12,619,085 8,405,014 (12,476,460) 118,237,592 Company Hospital Statement of Other Items financial position Capital expenditure 37,504,890 27,245,666 43,469,662 16,248,625 - 124,468,844 Non-current assets 856,816,465 104,718,669 65,510,510 88,362,063 (170,034,952) 945,379,621 Fixed assets 9,018,359 7,982,256 2,589,810 3,797,909 11,168,017 34,556,351 Current assets 1,038,193,892 142,876,181 116,418,259 55,982,278 (882,831) 1,352,587,779 depreciation Total assets 1,895,010,357 247,601,716 181,928,769 144,344,341 (170,917,783) 2,297,967,400

Current liabilities 230,576,494 82,247,024 76,666,496 57,527,264 (7,747,438) 439,269,840 Non-current 117,719,201 6,580,580 222,353 722,853 54,734,448 179,980,979 liabilities Total Liabilities 348,295,695 88,829,148 76,888,849 58,250,117 46,987,010 619,250,819

Statement of profit or loss: Operating revenue 677,269,997 287,495,594 257,216,457 254,844,857 (20,687,928) 1,456,138,977 Operating costs (396,578,948) (200,154,609) (169,204,082) (186,250,556) 9,676,570 (942,517,120) Gross profit 280,691,049 87,340,985 88,012,375 68,594,301 (11,011,358) 513,621,857

Other expenses (76,433,107) (43,381,926) (42,307,298) (41,170,319) 4,869,292 (198,423,358) and revenues Profit for year 204,257,942 43,953,564 45,705,077 27,423,982 (6,142,066) 315,198,499

Other Items Capital expenditure 49,402,239 54,053,091 25,296,793 30,787,692 - 159,539,815 Fixed assets 13,045,121 11,623,869 4,704,859 5,935,988 11,167,395 46,477,232 depreciation

94 Annual Report 2018 Annual Report 2018 95 Cleopatra Hospitals Group Cleopatra Hospitals Group - - 7. Business combination and intangible assets Total Total 3,690,588 6,740,125 (3,927,132) (3,296,591) (7,284,673) Non- 663,262,562 396,722,304 769,922,900 897,623,349 113,884,061 472,516,879 134,985,122 (34,556,351) (46,477,232) 396,722,304 472,516,879 560,487,087 472,516,879 560,487,087 (266,540,258) (297,406,021) (337,143,128) competition 2018 ------Cost Trade name agreement Total Goodwill Balance at 1 January 2017 44,354,000 5,350,005 49,704,005 196,676,034 under

Projects Projects Amortisation for the year - (5,350,005) (5,350,005) - 11,136,369 11,136,369 25,435,666 21,462,765 37,209,353 25,435,666 48,412,349 (3,296,591) 11,136,369 25,435,666 21,462,765 25,435,666 21,462,765 (19,613,465) (52,385,250) Balance at 31 December 2017 44,354,000 - 44,354,000 196,676,034 construction - - Balance at 1 January 2018 44,354,000 - 44,354,000 196,676,034 7,102 97,674

(7,105) Amortisation for the year - - - - (100,259) 8,471,350 2,261,602 6,344,544 14,904,336 29,713,125 46,207,759 21,204,459 16,594,893 2,261,602 Balance at 31 December 2018 44,354,000 - 44,354,000 196,676,034 (2,306,020) (8,001,617) (6,209,748) (8,508,666) Computers 21,204,459 29,795,150 21,204,459 29,795,150 (16,412,609) - - - - The good will is as follows: 161,431 116,109 209,897 Vehicles (715,110) (239,000) (116,109) 7,324,873 3,600,950 7,085,873 7,179,661 2,392,184 Balance at 1 Acquistion of a Balance at 3,600,950 2,392,184 1,886,971 2,392,184 1,886,971 (1,131,197) (3,723,923) (4,693,689) (5,292,690) January 2018 subsidiary 12/31/2018 Nile Badrawi Hospital 75,853,020 - 75,853,020 - - - - - Al Shorouk Hospital S.A.E. 120,823,014 - 120,823,014 Total 196,676,034 - 196,676,034 1,489,565 1,731,833 3,882,646 Buildings 45,803,279 243,858,285 180,631,098 247,079,683 296,765,608 173,379,403 (10,473,093) (11,145,407) (63,227,187) (73,700,280) (84,845,687) 180,631,098 173,379,403 211,919,921 173,379,403 211,919,921 Goodwill - To calculate goodwill, Nile Badrawi Hospital Company S.A.E. and Al-Shorouk Hospital S.A.E. were considered as a cash generating unit, and goodwill resulting from acquisition was allocated. 87,721 226,232 462,773 (223,631) (530,171) 5,743,783 7,886,524 4,600,686 6,793,374 Furniture 31,262,465 35,727,241 47,734,227 10,087,360 7,886,524 (2,490,172) (3,521,738) 10,087,360 19,035,381 10,087,360 19,035,381 (23,375,941) (25,639,881) (28,698,846) Recoverable amount of cash-generating unit is estimated by calculating the value in use, using pre-tax cash flows based on

- financial budgets approved by the management, which cover a period of five years maximum. The management determines the specific assumptions of cash flow forecasts based on past experience and expectations of the market. 838,188 3,131,843 3,295,823 6,063,569 85,876,499 63,997,645 59,091,963 (3,457,396) (6,538,134) Estimates have been made in terms of sales growth, operating costs and expected gross profit. Future capital expenditures equipment Machinery, Machinery, 255,879,958 319,552,050 372,944,067 134,688,545 85,876,499 (18,155,869) (23,093,360) and devices 134,688,545 171,057,637 134,688,545 171,057,637 (170,003,459) (184,863,505) (201,893,296) for future replenishment plans have been taken into account for the same outstanding assets. A discount rate and a long------term growth rate have been used to reflect the specific risks associated with the activity and economy sector. Lands Trade name 105,329,262 105,329,262 105,329,262 105,329,262 105,329,262 The fair value of the trade name is estimated using relief from royalty method. This method determines the value by referring 105,329,262 105,329,262 105,329,262 105,329,262 105,329,262 to the nominal royalty payments, which are provided when acquiring the asset compared with the license of the asset and trade name by a third party. Fixed assets Fixed Transfers from projects under from construction Transfers projects under from construction Transfers At 1 January 2017 At Cost Depreciation for the year Depreciation for the year Accumulated depreciation Accumulated depreciation of disposale of depreciation Accumulated disposale of depreciation Accumulated Net bookNet Amount Closing net book amount Balance 31 December at 2018 Year ended 31 December 2017 Year Opening net book amount At 31 DecemberAt 2017 Cost Cost Additions Accumulated depreciation Accumulated depreciation Disposals Net bookNet Amount bookNet Amount Fixed assets write-off Fixed At 31 DecemberAt 2018 Opening net book amount Additions Disposals 6.

96 Annual Report 2018 Annual Report 2018 97 Cleopatra Hospitals Group Cleopatra Hospitals Group

8. Advance payment for investment Movement in the provision for inventory is as follows:

2018 2017 2018 2017 Advance payment for invcestment 143,550,000 143,550,000 Balance at the begining of the year 435,336 - 143,550,000 143,550,000 Provisions formed during the year 11,993 435,336 Provisions no longer required during the year (195,056) - On 31 August 2017, the Company entered into an initial (conditional) contract for the purchase of the land and the private Balance at the end of the year 252,273 435,336 building in a hospital in the Arab Republic of Egypt. On 12 October 2017, the Company deposited an amount of LE 143,550,000 under an ESCROW account contract which was concluded on 4 October, on 13 December 2018, the ownership of the land 11. Trade receivables and the building was transferred to the company under a public power of attorney and ESCROW account was released as part of the total acquisition, which includes management and operation of the hospital. The company is now in the process 2018 2017 of signing a contract of purchase for the management and operation of the hospital. Due from customers 313,191,872 200,935,193 Income from inpatients 5,678,795 4,663,548 Upon completion of the purchase contract for the management and operation of the hospital, the Group will account for 318,870,667 205,598,741 the acquisition in accordance with the Egyptian Accounting Standard on Business Combinations. On December 3, 2018, the Extraordinary General Assembly approved the acquisition of fixed assets and the management and operation of the hospital. Less: Impairment of customers’ balances (15,920,165) (20,162,346) 302,841,491 185,436,395 9. Subsidaries not consilidated

Investment Country of The income from inpatients comprises the revenues that have not been billed at the financial position date for their stay 2018 2017 Percentage Origin while the procedures of the medical services have not been completed. Such income is calculated net of the amounts col- Investment in CHG for medical services 20% Egypt 112,500 - lected in advance during the year of their stay. Investment in CHG Pharma for pharma- 98% Egypt 250,000 - cies managment Movement in the provision for impairment is as follows: 362,500 - 2018 2017 Subsidaries not consilidated includes investments amounting to LE 11,2500 cash contribution to the capital of to CHG Medi- Balance at the beginning of the year 20,162,345 42,514,466 cal Services Company and in accordance with the extraordinary general assembly meeting and Article 16 of the Articles of Provision formed during the year 24,588,858 31,639,307 Association of CHG Medical Services, the shares of the Cleopatra Hospital are preferred shares entitling the owner three Provision no longer required during the year (22,752,631) (33,180,972) times of the ordinary share of profits and vote power on Decisions of the Generaly Assembly. Write-offs during the year (6,078,407) (20,810,456) Balance at the end of the year 15,920,165 20,162,345 Subsidaries not consilidated includes Investments amounting to LE 250,000 cash contribution to the capital of CHG Pharma for the management of pharmacies. Trade receivable balances, which have not been due till the financial position date and have no impairment indicators, The above companies are be consilidated as the operations did not start yet at the date of the issuance of the financial state- amounted to EGP 121,057,380 (2017: EGP 66,308,345). ments in 31 December 2018. At the financial position date, the balances that were past due but not impaired amounted to EGP 117,323,798 (2017: EGP 10. Inventories 103,078,824) regarding customers and transactions with no history of default. The ageing analysis of these balances is as follows:

2018 2017 2018 2017 Medical supply inventory 21,990,570 16,372,040 Less than one month 45,044,585 41,031,783 Medicine inventory 15,272,404 11,031,641 From one to five months 72,279,213 62,047,041 Hospitality inventory 552,251 1,669,134 Stationary inventory 972,815 757,419 The management creates a 100% impairment of customers who are overdue for more than 150 days from the claim date. After Maintenance and spare parts inventory 2,131,092 605,258 deducting the amounts that expected to be collected after calculating the loss given default rate. It also creates a group-based Food and beverage inventory 85,510 88,990 provision based on historical failure rates. The management calculates historical failure rates for each customer per month on 41,010,137 30,524,482 Less: Impairment of inventory (252,273) (435,336) the accounts of customers whose debts exceed 150 days to 360 days from the date of the financial position. Based on these rates, 40,757,864 30,089,146 the management calculates a provision for debts of customers whose debts are not more than 150 days old.

98 Annual Report 2018 Annual Report 2018 99 Cleopatra Hospitals Group Cleopatra Hospitals Group

12. Debtors and other debit balances 14. Provisions

2018 2017 2018 2017 Advances to suppliers 29,443,639 14,229,591 Provision for claims 11,959,643 14,306,471 Prepaid expenses 11,670,972 2,951,292 Provision for human resources 12,942,032 7,273,911 Withholding taxes 531,887 1,864,062 24,901,675 21,580,382 Employees custodies 1,870,937 1,761,372 Deposits with others 3,388,690 1,158,804 Movement in the provision during the year is as follows: Accrued interest income 421,157 471,343 Other debtors 2,047,356 574,691 2018 Balance at the 49,374,638 23,011,155 Formed during Utilised during Provisions no Balance at the beginning of the year the year longer required end of the year the year Less: Impairment in other debit balances (911,240) (911,240) Provision for 14,306,471 5,348,340 (7,695,168) - 11,959,643 48,463,398 22,099,915 claims Provision for 7,273,911 23,898,648 (6,183,661) (12,046,866) 12,942,032 human resources The movement of the provision for impairment is as follows: Total 21,580,382 29,246,988 (13,878,829) (12,046,866) 24,901,675

2018 2017 Balance at 1 January 911,240 1,113,366 2017 No longer required - (202,126) Balance at the Formed during Utilised during Provisions no Balance at the beginning of 911,240 911,240 the year the year longer required end of the year the year Provision for 13. Cash on hand and at banks 16,470,824 200,000 (2,364,353) - 14,306,471 claims Provision for 8,453,881 15,152,216 (8,058,747) (8,273,439) 7,273,911 2018 2017 human resources Current accounts 916,668,438 963,221,104 Total 24,924,705 15,352,216 (10,421,083) (8,273,439) 21,580,382 Time deposit 35,377,810 41,750,235 Cash on hand 1,376,346 2,159,292 953,422,594 1,007,130,631 Provision for claims Other provisions represent provisions for contingent liabilities on potential claims from certain authorities and parties The time deposits item includes an amount of LE 5,000,000 deposited in local banks in the Egyptian pound and payable within regarding the Group’s activity. The Group did not disclose the usual information on the provisions in accordance to the three months to six months from the date of deposit and is subject to a fixed annual rate of 13.75% to 14% (2017: 14% to 16% ). accounting standards as management believes that doing so may severely affect the outcome of the negotiations with those bodies and authorities. The management reviews these provisions on a yearly basis, and the allocated amount is adjusted The time deposits item includes an amount 30,377,810 at 31 December 2018 are denominated in local banks in US dollars and according to the latest developments, discussions and agreements with such parties. are payable within periods ranging from one week to one month from the date of deposit and are subject to a fixed annual return of 2.17% to 2.22%. Provision for human resources Other provisions for human resources comprise provisions for the restructure of the Company’s employees, the employees Current accounts are subject to a fixed annual rate of 14% (2017: 15%). leave provision and the provision for the benefits of the employees over 60 years old in accordance with the law.

For the purpose of preparing the statement of cash flows, cash and cash equivalents are as follows: 15. Creditors and other credit balances

2018 2017 2018 2017 Cash on hand and at banks 953,291,369 1,007,130,631 Accrued expenses 143,656,414 137,489,897 Deposits with a maturity of more than 3 months from the date of placement - (11,000,000) Suppliers and notes payable 158,143,616 98,897,890 Cash and cash equivalents 953,291,369 996,130,631 Social insurance 2,148,881 1,678,957 Dividends payable 2,017,087 1,075,849 Other creditors 11,764,941 7,170,692 317,745,368 246,313,285

100 Annual Report 2018 Annual Report 2018 101 Cleopatra Hospitals Group Cleopatra Hospitals Group

16. Employee incentive plan On 17 October 2018, the Board of Directors approved early payment of the current loan balance and settlement of the amounts owed by the Company under the loans and credit facilities in the Financial Statement approved on 30 September 2018 2017 2018. These amounts are to be repaid through the Company’s available cash flows. Accordingly, 100.000.000 Egyptian Pound Employee incentive plan based on parent company’s market value of shares 36,819,510 20,402,000 were paid on 29 November 2018 as partial settlement of the loan. Employee incentive plan based on earning performance before interest, tax, 8,412,987 4,419,000 depreciation and amortization The loans and overdraft banks include an amount of 95,103,047 Egyptian pounds at an interest rate of 2.4% in addition to the 45,232,497 24,821,000 price of the Corridor announced by the Central Bank of Egypt. As of September 2017, the interest rate was 1.9% in addition to the rate of the Corridor declared by the Central Bank of Egypt. These are secured by the following: Starting from March 2018, the Cleopatra Hospital Group managed to activate the cash-based payment system for some employees of the parent company and some of the other group companies in order to link the interests of the beneficiaries with • CARE Healthcare has secured a portion of its shares in Cleopatra Hospital SAE (note 31). the shareholders’ interest and to ensure that the highly qualified participants receive the appropriate incentive to support • The Company has secured all its shares in Al Shorouq Hospital Co. LLC. (Note 31). the growth and stability of the group. Maintain the highly qualified staff within the management team. The remuneration committee of the parent company oversees the application of the system under the supervision and supervision of the parent Financial ratios company’s board of directors. Under the terms of the contract, the Company is committed to achieving the following financial ratios:

Each beneficiary is granted a cash bonus or a fixed percentage of the amounts allocated to the system in accordance with the Debt-to-profit ratio before bank charges, taxes payable and depreciation of financial and intangible assets to be less than or remuneration committee’s decision. This system is not a system of remuneration and motivation for employees in the group equal to 3.5 for 2017 (2017: be less than or equal to 3.5). by granting or granting any rights in the shares of the parent company, which is a system of cash incentives based in part on the value of shares. • Debt service rate to be greater than or equal to 1. • Trading ratio shall be greater than or equal to 1. The advantages of the system are as follows: A- Payments calculated based on the difference between the market value of the Parent Company’s shares on 30 June 2020 18. Share capital in the period of 6 months before the date of the financial statements and the share price at the date of its offering in the On 31 December 2016, the company issued share capital was paid through 200 million shares with nominal value EGP 0.5 Egyptian Stock Exchange on 2 June 2016. with total amount EGP 100 million .

B- Payments calculated based on the difference between the profit performance before interest, income taxes, depreciation On 2 June 2016, 40 million share issued as a secondry issuance where Care Healthcare (Ltd) sold it’s shares in private offening and amortisation (EBITDA) at the maturity date of 30 September 2020 and 30 June 2016. and Public of fering.

17. Borrowings and bank overdraft On 6 April 2016, pursuant to the resolution of the Extraordinary General Assembly meeting held on 6 April 2017, the Com- pany’s issued share capital was approved to be increased within the limits of Company’s authorised share capital, provided 2018 that such increase shall be implemented after completion of the secondary offering and be capped at the same number of Non-current shares allocated for public and private offerings at the final offering price. The increase shall be funded from the proceeds of Current portion Total portion the secondary offering after liquidating the share stability account, without applying senior shareholders’ priority subscrip- Bank overfraft 821 - 821 tion rights to the increase. Such increase shall be entirely allocated to Care Healthcare Ltd, - the majority shareholder, against Borrowings 27,223,715 67,879,332 95,103,047 the shares offered for the public and private offerings in accordance with the terms set out in the prospectus. Also, the Total 27,224,536 67,879,332 95,103,868 Extraordinary General Assembly decided to authorise the BOD to implement this increase and amend Article 6 and Article 7 of the Company’s Memorandum of Association depending on the results of the secondary offering and the related increase. 2017 The subscribers in the public and private offerings may not subscribe to this increase. Non-current Current portion Total portion Consequently, and in accordance with the minutes of the Board’s meeting dated 17 July 2017 and approved by the GAFI on Bank overfraft 25,961,078 - 25,961,078 21 July 2017 and the amending contract approved on 3 August 2017 registered under No, 1598 of 2017, the Company’s share Borrowings 49,674,502 276,303,047 325,977,549 capital has been increased to EGP 100,000,000 fully paid and divided into 200,000,000 shares of EGP 0,5 each.

Total 75,635,580 276,303,047 351,938,627

On 14 January 2018, the Company early paid a loan amounting to LE 121,800,000 representing the loan amount in addition to LE 743,091 representing interest for the period from 31 December 2017 to 14 January 2018.

102 Annual Report 2018 Annual Report 2018 103 Cleopatra Hospitals Group Cleopatra Hospitals Group

And based on the above, Care Healthcare Ltd. subscribed in capital increase with 40,000,000 shares with a total value of EGP 19. Reserves 360,000,000 with the nominal value of EGP 20,000,000 and the increase was reflected in the commercial register dated 7 Below is the movement on reserves during the year: August 2016. Therefore, the Company’s structure of share capital changed as follows: 2018 Number of Balance at the Name Nominal value Provision made Balance at the shares beginning of during the year end of the year Care Healthcare Ltd. 159,999,960 79,999,980 the year Other shareholders 40,000,040 20,000,020 Legal reserve 50,000,000 4,127,298 54,127,298 Total 200,000,000 100,000,000 Special reserve 49,090,006 - 49,090,006 Acquisition reserve (76,532,044) - (76,532,044) On 6 April 2016, pursuant to the resolution of the Extraordinary General Assembly meeting held on 6 April 2016, the Com- Other reserves 247,592,165 (95,774) 247,496,391 pany’s issued share capital was approved to be increased within the limits of Company’s authorised share capital, provided Total 270,150,127 4,031,524 274,181,651 that such increase shall be implemented after completion of the secondary offering and be capped at the same number of shares allocated for public and private offerings at the final offering price. The increase shall be funded from the proceeds of 2017 Balance at the the secondary offering after liquidating the share stability account, without applying senior shareholders’ priority subscrip- Formed during Balance at the beginning of tion rights to the increase. Such increase shall be entirely allocated to Care Healthcare Ltd, - the majority shareholder, against the year end of the year the year the shares offered for the public and private offerings in accordance with the terms set out in the prospectus. Also, the Legal reserve 50,000,000 - 50,000,000 Extraordinary General Assembly decided to authorise the BOD to implement this increase and amend Article 6 and Article 7 Special reserve 49,090,006 - 49,090,006 of the Company’s Memorandum of Association depending on the results of the secondary offering and the related increase. Acquisition reserve (76,131,168) (400,876) (76,532,044) The subscribers in the public and private offerings may not subscribe to this increase. Consequently, and in accordance Other reserves 275,078,967 (27,486,802) 247,592,165 with the minutes of the Board’s meeting dated 17 July 2016 and approved by the GAFI on 21 July 2016 and the amending Total 298,037,805 (27,887,678) 270,150,127 contract approved on 3 August 2016 registered under No, 1598 of 2016, the Company’s share capital has been increased to EGP 100,000,000 fully paid and divided into 200,000,000 shares of EGP 0,5 each. During the year 2017, the Group acquired 5576 shares from Cairo Specialised Hospital from the non-controlling interest And based on the above, Care Healthcare Ltd. subscribed in capital increase with 40,000,000 shares with a total value of EGP shares for an amount exceeding the minority interest with EGP 400,876. Accordingly, this amount was added to the acquisi- 360,000,000 with the nominal value of EGP 20,000,000 and the increase was reflected in the commercial register dated 7 tion reserve, excluding the book value of these shares amounted to EGP 212,484 from the non controlling interest. August 2016. Therefore, the Company’s structure of share capital changed as follows: a) Legal reserve And based on the above, shareholders structure will be as follows: In accordance with the Law No. 159 of 1981 and the Company’s Articles of Association, 5% of the net profit for the year shall be transferred to the legal reserve. Based on a proposal by the Board of Directors, this transfer may be partially discontinued Percentage of Number of if the legal reserve reaches 50% of the issued capital. The legal reserve is not available for distribution to shareholders. Name Nominal value ownership shares Care Healthcare Ltd. 69.4% 1,109,969,377 554,984,689 b) Acquisition reserve Other shareholders 30.6% 490,030,623 245,015,311 This reserve represents the difference between the value of the acquisition by Cleopatra Hospital Company S.A.E. and the Total 100% 1,600,000,000 800,000,000 carrying value of net assets and liabilities of Cairo Specialised Hospital Company S.A.E. at the acquisition date, as the two companies are under common control. The reason for the acquisition is the reorganisation of the group companies. There- fore, the assets and liabilities of the subsidiary were transferred at historical cost.

c) Special reserve The special reserve represents the amount that was due to Care Healthcare Ltd. (Parent Company). Under the letter issued by the Company on 12 April 2016, both parties have agreed that this amount shall be claimed only in the case of dissolution or liquidation of the Company, either voluntary or for any other legal reason. In that case, the due amount shall be divided between recent shareholders of the Company upon liquidation or dissolution at the same proportion of their shares in the Company’s share capital to the total number of shares issued. Accordingly, this amount has been recognised as special reserve in equity. In addition to the resulting reconciliation from treasury shares related to Cairo Specialised Hospital (Subsidiary Company).

104 Annual Report 2018 Annual Report 2018 105 Cleopatra Hospitals Group Cleopatra Hospitals Group

d) Other reserves 20. Non-controlling interests The amount represents the amount transferred from share premium according to the requirements of Law No.159 of 1981, and there is no movement in this reserve during the year. Share of minority Retained Share capital Legal reserve interest on Total 31 December 2017 earnings settlement of Number of Payment Nominal value Share capital Share premium acquisition shares Balance at 1 Janu- Private offering 12,787,080 6,388,216 24,509,010 120,184 43,804,490 ary 2017 and share capital 306,000,000 34,000,000 EGP 0.5 17,000,000 289,000,000 Share of minor- increase ity interests in Public offering 54,000,000 6,000,000 EGP 0.5 3,000,000 51,000,000 - - (1,067,790) - (1,067,790) the acquisition of Expenses of 2017 - - - - (31,982,360) subsidiaries shares issued* Employees Expenses of 2018 - 653,184 - - 653,184 - - - - (27,486,802) dividends shares issued* Legal reserve (55,760) (32,349) (124,375) - (212,484) Transfer to legal - - - - (32,938,673) Profit for the year - - 12,551,876 - 12,551,876 reserve** Balance at 31 12,731,320 7,009,051 35,868,721 120,184 55,729,276 Total 360,000,000 40,000,000 20,000,000 247,592,165 December 2017

Balance at 1 Janu- 12,731,320 7,009,051 35,868,721 120,184 55,729,276 * The expenses of share issuance amounting to EGP 31,982,360 comprise the expenses amount of IPO of shares of increasing the Company’s ary 2018 capital (public and private subscription), representing the expenses of registration, promotion and other legal and professional expenses. Employee Divi- - - (1,323,731) - (1,323,731) dends ** Based on Article 94 of the executive regulations of the Law of Companies No. 159 of 1981, an amount of EGP 32,938,673 from the proceeds of Legal Reserve - 3,152 - - 3,152 public and private subscriptions was used to increase the legal reserve to reach 50% of the issued share capital. Comprehensive - - 20,310,873 - 20,310,873 *** The expenses of share issuance amounting to EGP 27,486,802 comprise the expenses amount of IPO of shares of increasing the Company’s income for the year Balance at 31 capital, representing the expenses of registrations promotion and other legal and professional expenses. 12,731,320 7,009,051 54,855,863 120,184 74,719,570 December 2018

21. Operating revenue

2018 2017 Accommodation and medical supervision revenue 355,389,450 284,794,190 Surgeries revenue 286,043,795 230,425,388 Outpatient clinics revenue 199,884,580 152,453,195 Laboratories revenue 124,403,509 97,835,632 Cardiac catheterization revenue 119,581,959 78,932,900 Service charge revenue 105,381,471 75,230,123 Radiology revenue 74,375,150 52,825,331 Emergency revenue 65,878,086 50,465,274 Oncology centre revenue 34,338,583 31,652,138 Pharmacy revenue 33,015,666 28,369,651 Dentistry revenue 12,811,448 11,517,148 Physiotherapy revenue 15,498,727 9,130,476 Endoscopy revenue 12,473,051 8,332,111 Cardiac tests revenue 9,287,085 6,652,704 Other departments revenue 7,776,417 8,151,893 1,456,138,977 1,126,768,154

106 Annual Report 2018 Annual Report 2018 107 Cleopatra Hospitals Group Cleopatra Hospitals Group

22. Operating costs * Employees’ costs

2018 2017 2018 2017 Medical and pharmaceutical supplies 291,702,346 258,435,164 Salaries and wages 248,300,910 193,974,373 Doctors’ fees 275,481,914 217,469,386 Incentives 48,471,156 62,676,418 Salaries, wages and benefits 226,386,857 187,697,876 Employees’ benefits 24,137,284 11,512,907 Maintenance, spare parts and energy expenses 38,930,271 36,374,825 Social insurance 14,153,066 11,261,948 Food, beverage and consumables costs 45,846,592 35,275,316 335,062,416 279,425,646 Fixed assets depreciation and write-off 38,208,271 30,344,363 Rents 4,240,694 4,528,532 Incentives item includes an amount of EGP 16,417,510 (2017: EGP 20,402,000) which represents the amount of the payments Other expenses 21,720,175 18,036,942 calculated on the basis of the difference between the market value of the Parent Company’s shares at 30 June 2020 and the 942,517,120 788,162,404 share price at the date of offering its shares in the Egyptian Stock Exchange on 2 June 2016. And an amount of EGP 3,993,987 (2017: EGP 4,419,000) which represents the value of payments calculated on the basis of the difference between profit before interest and (EBITDA) at the maturity date of 30 June 2020 and 30 June 2016. 23. General and administrative expenses 25. Other income 2018 2017 Salaries, wages and benefits 108,675,559 91,727,770 2018 2017 Professional and consulting fees 18,265,031 18,443,497 Rent 2,537,765 2,755,725 Impairment of trade receivables 1,836,228 10,828,848 Buffet income and cafeteria concession 1,054,770 829,303 Fixed assets depreciation and write-off 8,612,349 7,508,578 Capital gains 965,563 686,240 Amortization of intangible assets - 5,350,005 Miscellaneous income 2,668,234 1,224,016 Maintenance, spare parts and energy expenses 6,059,490 3,796,705 7,226,332 5,495,284 Food, beverage and consumables costs 5,378,706 2,347,917 Rent 2,054,093 1,727,079 Donations 11,469,771 1,514,643 26. Finance income / (expenses) Other expenses 18,056,831 18,128,223 180,408,058 161,373,265 2018 2017 Finance income Interest income 129,272,895 59,442,182 24. Expenses by nature Foreign currency valuation 49,196 - Total finance income 129,322,091 59,442,182 2018 2017 Salaries, wages and benefits* 335,062,416 279,425,646 Finance costs Medical and pharmaceutical supplies 291,702,346 258,435,164 Interest receivable (37,950,540) (67,431,475) Doctors’ fees 275,481,914 217,469,386 Discount of accelerated payment - (2,897,793) Maintenance, spare parts and energy expenses 44,989,761 40,171,530 Bank commissions - (3,168,780) Fixed assets depreciation and write-off 46,820,621 37,852,941 Foreign currency valuation - (904,220) Food, beverage and consumables costs 51,225,298 37,623,233 Total finance expenses (37,950,540) (74,402,268) Impairment of trade receivables 1,836,228 10,828,848 Net finance (expenses) / income 91,371,551 (14,960,086) Amortization of intangible assets - 5,350,005 Donations 11,469,771 1,514,643 Other expenses 64,336,823 60,864,273 27. Contribution in the comprehensive medical insurance plan 1,122,925,178 949,535,669 Represents the amount of Cleopatra Hospital and its subsidiaries contribution in the unified medical treatment plan with a percentage of 0.0025 from total profit which is regarding the period from 1 July 2018 to 31 December 2018, that is according to article No. 40 of law No. 2 of 2018 which is regarding the comprehensive health insurance plan.

108 Annual Report 2018 Annual Report 2018 109 Cleopatra Hospitals Group Cleopatra Hospitals Group

28. Income taxes (Expense)/ income Income tax expense as stated in the statement of profit or loss includes: charged to the statement of 2018 2017 Balance at profit or loss Balance at Current income tax for the year 90,383,148 32,682,010 Liabilities 1 Jan 2017 during the year 2017 Deferred tax (Note 29) 2,438,933 4,436,851 (Liability) (Liability) 92,822,081 37,118,861 Fixed assets (2,823,503) (6,656,747) (9,480,250) Fixed assets - Effect of fair value (49,780,264) 2,512,804 (47,267,460) The tax on profit before tax theoretically differs from the amount expected to be earned by applying the average tax rate Intangible assets - Effect of fair value (9,979,650) - (9,979,650) applicable to the Company’s profits as follows: Total Liabilities (62,583,417) (4,143,943) (66,727,360) Assets 2018 2017 Provisions (excluding claims provision) 2,590,052 (292,909) 2,297,143 Net profit before tax 408,020,580 155,356,455 Net deferred tax - Liability (59,993,365) (4,436,852) (64,430,217) Income tax calculated based on the applicable local tax rate 91,804,632 34,955,203 Add/ (less): 30. Earning per share Non-taxable expenses 6,173,964 6,418,302 The basic earnings per share for the year is calculated by dividing the net profit of the year by the number of shares outstand- Income not subject to tax (5,156,515) (4,682,354) ing during the financial year ended 31 December 2018. The earnings per share is EGP 0.18 (2017: EGP 0.06). Tax related to pPrior years adjustments - 427,710 Income taxes 92,822,081 37,118,861 2018 2017 Effective tax rate 22.75% 25.45% Distributable profit 315,198,499 118,237,592 (Less) Employees and Board of Directors dividends (32,196,359) (22,614,714) Current income tax liabilities 2018 2017 Number of shares issued 1,600,000,000 1,600,000,000 Balance at 1 January 11,961,946 31,578,146 Earning per share 0.18 0.06 Payments during the year (14,589,922) (30,594,847) Current year tax 90,383,148 32,682,010 31. Related parties transactions Advance payments to tax authorities (18,356,911) (21,703,363) During the year the Group made transactions with certain related parties. The Balances with related parties at the financial 69,398,261 11,961,946 statements date as well as the transactions during the year were as follows:

Balances of financial position 29. Deferred tax Change in tax assets and liabilities during the year is as follows: Balance due Nature of Transaction (Related parties) from / (to) transaction value (Expense)/ related parties income Expenses paid charged to the Care HealthCare (Parent Company) on behalf of the 3,876,981 3,876,981 statement of parent Company Balance at profit or loss Expenses paid Liabilities 1/1/2018 during the year Balance at 2018 CHG for medical services on behalf of the 3,180,946 3,180,946 (Liability) (Liability) Company Fixed assets (9,480,250) (6,238,171) (15,718,421) 7,057,927 Fixed assets - Effect of fair value (47,267,460) 2,512,664 (44,754,796) Intangible assets - Effect of fair value (9,979,650) - (9,979,650) Total Liabilities (66,727,360) (3,725,507) (70,452,867) Assets Provisions (excluding claims provision) 2,297,143 1,286,575 3,583,718 Net deferred tax - Liability (64,430,217) (2,438,933) (66,869,150)

110 Annual Report 2018 Annual Report 2018 111 Cleopatra Hospitals Group Cleopatra Hospitals Group

32. Tax position (3) Stamp duty • The Company was inspected since the inception to 31 July 2006, and all entitlements were paid. Cleopatra Hospital S.A.E. • The Company was assessed on presumptive basis from August 2006 to 2013, and appeal was filed in the legal due date, No inspection took place for the year 2015. (1) Corporate tax • The Company for the years 2014, 2015, 2017 and 2018 were not inspected. • Inspection was made up to 31 December 2014, and a clearance certificate was obtained from the Tax Authority. • Tax returns were filed regularly in the legal deadlines. (4) VAT • 2015 and 2016 were inspected and an internal committee is in progress. • The Company registered in April 2018. • 2017 inspection is being processed. • Tax returns were annually submitted in the legal deadline.

(2) Salaries tax Nile Badrawi Hospital • Inspection was made up to 31 December 2013, and all tax payables were settled, and a clearance certificate was obtained from the Tax Authority. (1) Corporate tax • Tax on earnings was inspected for 2014, and the internal committee is finished. • Years up to 2012 were settled, and all dues were paid. • 2015 and 2016 inspection is being processed. • Years from 2013 to 2014 are currently being inspected. • Inspection was not made for 2017. • 2015 and 2017 have not been inspected yet.

(3) Stamp duty tax (2) Salaries tax • Inspection was made up to 31 July 2006 and tax was paid. • Years up to 2011 were inspected, settled, and paid. No tax is due for the years up to 2011. • Inspection was made from 1 August 2006 to 31 December 2013. The Company was notified of stamp duty on form 19 • Tax settlement is in progress for the years from 2012 to 2015. dated 23 April 2015. Tax assessment was issued for an amount of EGP 72.966 on 3 May 2015. An was made by the com- • 2017 has not been inspected yet. pany on 3 may 2015 and the amount was paid. • Years from 2014 to 2017 inspection is being processed. (3) Stamp duty • Years up to 30 July 2006 were inspected and paid. (4) VAT • Years from 1 August 2006 up to 2014 are currently being inspected. There is a claim of EGP 220.960, for which an objection • Inspection was made up to 31 December 2004. was filed on 31 October 2017. • Inspection was made for sales tax from 2005 to 2015 and differences was settled. • 2015, 2017 and 2018 have not been inspected yet. • Tax returns were filed regularly in the legal deadline. (4) VAT Cairo Specialised Hospital “S.A.E.” • The Company registered in April 2018. • Tax returns were annually submitted in the legal deadline. (1) Corporate tax • The company was inspected from inception till 2008, and all entitlements were paid. Al Shorouk Hospital S.A.E. • Years from 2009 till 2014, the inspection has been finalized and the differences has been calculated amounted with EGP 594,616 and the Company paid EGP 700,000 as an advance payment. (1) Industrial and commercial profits tax • The Company was not inspected for the year 2015, 2017 and 2018 tax returns were annually submitted in the legal dead- • Years up to 2014 have been inspected, payment was made, tax differences were settled, and a certificate of clearance and lines. full payment was issued. • Tax returns for the years 2015 and 2016 have been submitted and inspection was done and the amounts were settled. (2) Tax on salaries and wages • 2017 inspection is in progress • The Company was inspected since the inception of activity to 2009, and all tax dues were paid. • An internal committee was formed for the years from 2010 to 2013, and the result of the committee was transferred to (2) Tax on earning the tax appeal committee. • The Company was inspected and settled up to 31 December 2004 and settled. • Years 2014, 2015 and 2017 are under inspection. • Internal committees were formed for 2005 to 2014. • Year 2018 was not inspected. • 2015 and 2016 inspection is in progress. • No inspection was made for 2017.

112 Annual Report 2018 Annual Report 2018 113 Cleopatra Hospitals Group Cleopatra Hospitals Group

(3) Stamp duty tax 3- That there is no sale of the disputed land between the Nile Badrawi Hospital and any other party. • The Company was inspected up to 31 July 2006, and settlement was made. • The Company was inspected on a presumptive basis from 1 August 2006 to 2014. 4- Cleopatra Hospital is entitled to refer to the former owners of the Nile Badrawi Hospital “S.A.E”- in accordance with • The Company was not inspected for the years 2015 and 2017. the contract for the sale of the shares of the Nile Badrawi Hospital - and to claim any losses and / or damages and / or • The Company regularly submits the tax returns on the legal deadlines. obligations that may be incurred by the Company and / or Nile Badrawi “S.A.E” resulting from any dispute concerning the ownership of land of the Nile Badrawi Hospital. (4) VAT • The Company was registered since May 2018. In light of the above, the financial liabilities of this dispute are subject to conflict between the parties concerned and shall • Tax returns annually submitted in it’s legal deadline. be definitively determined in accordance with the provisions and resolutions to be issued in the above-mentioned cases or any settlement that may be agreed by the parties. At this stage, and until the final settlement of this dispute, it is difficult to 33. Commitments determine the financial liabilities that may result from this dispute.

Capital commitments: Capital commitments related to fixed assets at financial year end, which are not yet due, amounted to EGP 7.232.846 (2017: 35. Subsequent events EGP 4,362,175). On 17 February 2019, the Group has paid all the outstanding loans as of the date amounted to EGP 90,565,795, in addition to its accrued interest amounted to EGP 598,947. Accordingly, the mortgages on the shares of Cleopatra Hospital, owned by 34. Other matters Care Healthcare and Al Shorouk Hospital, owned by Cleopatra Hospital were released. A. With reference to the disclosures issued by the Company on 20 October 2017, 2 November 2017, 18 January 2018 and 31 January 2018 to the Egyptian Stock Exchange regarding the dispute concerning the plot of land of the Nile On 3 December 2018, the Extraordinary General Assembly meeting of the parent Company approved the signing of a prelimi- Badrawi Hospital (the “Company”) to which a request has been submitted to the Committee for the Resolution of nary agreement for the acquisition of the operations, assets and equipment of a hospital located in Cairo. The agreement was Investment Disputes, in accordance with what was referred to in the offering of the shares of Cleopatra Hospital signed on 16 January 2019. in the Egyptian Stock Exchange, please be informed that - as indicated in the disclosures above - the Nile Badrawi Hospital has filed a lawsuit to discharge the company against the General Authority for River Transportation and the invalidity of any seizure order in this regard. In addition, the General Authority for River Transportation filed a sub- suit in the case of the clearance requesting the Nile Badrawi Hospital Company to pay the amount of EGP 36 million; the value of the disputed land, EGP 7 million; the value of the right to use this land and the legal benefits, in addition to the amount of EGP 20 million as a compensation and nullification of any contract between the Nile Badrawi and Abraaj Capital or any other entity to sell the disputed land, given that the Nile Badrawi Hospital Company provided its defense in this regard, taking into account the following:

1- That the Ministerial Committee for the Resolution of Investment Disputes issued a resolution on 18 February 2003, approving the non-objection of the General Authority for River Transportation to approve the disposal of land in return for an appropriate compensation. The Committee also approved the proposal that the compensation should be the value of what was paid to Cairo Governorate when the land was purchased.

2- As stated in the Disclosure dated 2 November 2017 - the Technical Secretariat of the Ministerial Committee for Dispute Resolution has notified the Nile Badrawi Hospital Company in its meeting held on 1 November 2017 that it had issued a letter to the General Authority for River Transportation on 27 October 2017 - upon a request from the Company - confirming that the Nile Badrawi Hospital is a company subject to the law of guarantees and incentives for investment and that article 9 stipulates that: “The administrative way may not impose security on companies and entities or seize, takeover, retain, freeze or confiscate their funds.” I have asked the General Authority for River Transportation to take the necessary measures to stop any action against Nile Badrawi Hospital Company until the dispute is resolved and presented to the Ministerial Committee for Resolution of Investment Dispute to take its decision in this regard. This dispute is also being handled by the State Land Recovery Commission.

114 Annual Report 2018 Annual Report 2018 115 This page has been intentionally left blank This page has been intentionally left blank Share information: EGX: CLHO.CA Listed: June 2016 Shares Outstanding: 1.6 Billion

Hassan Fikry Corporate Strategy & Investor Relations Director

Cleopatra Hospital Group 4 Elsaada street - 10th. district - Zahraa Elmaadi, Cairo, Egypt

Email: [email protected] Phone: +2 (0)2 2241 7471