Integrated Diagnostics Holdings PLC
LSE:IDHC
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Integrated Diagnostics Holdings PLC
Earnings Call Analysis
Summary
Q1-2024
In the first quarter of 2024, IDH reported a 28% year-on-year top-line growth, reaching nearly EGP 1.2 billion. This growth was driven by an 18% increase in average revenue per test and an 8% rise in test volumes. Egypt remained the key market, contributing 85% of consolidated revenues. Despite geopolitical challenges in Nigeria and Jordan and the suspension of operations in Sudan, IDH's profitability improved, with a notable 139% rise in net profit. The company anticipates around 30% consolidated revenue growth and an EBITDA margin of 30% for the full year 2024.
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Hello, everyone. This is Ahmed Moataz from EFG Hermes, and welcome to IDH's First Quarter of '24 Results Conference Call. I'm pleased to be joined with Dr. Hend Sherbini, Chief Executive Officer; Sherif El Zeiny, Chief Financial Officer; and Tarek Yehia, Director of Investor Relations.
The company, as usual, will start with a brief presentation, and then we'll open the floor for Q&A.
Tarek, please go ahead.
Thank you, Ahmed. Good afternoon, ladies and gentlemen, and thank you for joining us for Analyst Call for Q1 2024. My name is Tarek and I'm Head of Investor Relations.
With me today, we have Dr. Hend Sherbini, IDH Chief Executive Officer; and Mr. Sherif El Zeiny, IDH Chief Financial Officer. As always, Dr. Hend will begin today call by giving you a brief introduction regarding the key development of the quarter as well as guidance for the remainder of the year. Following her introduction, I will present to you our operational results for the period, followed by Mr. Sherif who will discuss with you our financial performance in more details. After the discussion, we'll open the floor to any questions you may have.
And with that, I will hand the floor to Dr. Hend. Please.
Thank you, Ahmed, and Tarek, and good afternoon, ladies and gentlemen. This quarter has been a very eventful period in IDH's history. I'm proud to say that despite significant hurdles in several of our main geographies, the company continued delivering strong results during the first quarter of 2024.
On a consolidated level, we delivered a strong top line of nearly EGP 1.2 billion, reflecting a 28% growth compared to the same time last year. Revenue growth during the quarter was supported by higher test volumes, which reached a total of 8.7 million tests during Q1 2024 as well as higher average revenues per test, as we continue to assess market changes and respond with strategic price hikes in both Egypt and Nigeria.
In addition to this top line expansion, we focused on optimizing our costs throughout the period. Pinpointing redundancies and streamlining our operations were possible to deliver higher margins. As a result, we successfully booked improved profitability on all levels.
Considering the performance of our individual markets, our home market Egypt continued to be the primary driver of our growth for the period, constituting nearly 85% of our consolidated revenues. In Egypt, we booked solid growth at both our pathology and radiology offerings, utilizing an expanded branch network compared to the same time last year to attract more patients, perform more tests and expand our revenues per test.
Our pathology offering in our home market continued to represent the lion's share of results, contributing around 94% to Egyptian revenues. During the quarter, we performed nearly 8 million pathology tests, a 9% year-on-year increase, serving a greater number of patients and expanding the segment's revenue by 33% compared to the same quarter last year. Meanwhile, our radiology venture in Egypt, Al-Borg Scan maintained the growth momentum it has been experiencing over the past couple of years, recording a strong 81% year-on-year revenue growth and cementing its position as a leader in the fragmented radiology market. Today, Al-Borg Scan operate 7 branches across the greater Cairo area. Turning to our second largest market, Jordan, we booked 4% year-on-year...
Dr. Hend, I'm sorry to interrupt. I'm not sure if you guys are trying to let the presentation, but it's stuck at the very first slide.
No, we have -- no, it's just me...
Sorry. Then go ahead, sorry. I'm very sorry.
Go ahead.
Meanwhile, our Radiology venture in Egypt Al-Borg Scan maintained the growth momentum it has been experiencing over the past couple of years, recording a strong 81% year-on-year revenue growth and cementing its position as a leader in the fragmented Radiology market. Today, Al-Borg Scan can operate 7 branches across the Greater Cairo area.
Turning to our second largest market, Jordan. We booked a 4% year-on-year decrease in revenues in local currency terms, while our average revenue per test in the market remained relatively stable due to the strict government pricing regulations. We recorded a 3% decrease in test volume during the quarter. A portion of our Jordanian operations relies on medical tourism with international travelers coming to the country for testing. For this reason, geopolitical instability has hindered our test volumes in Jordan during the first quarter of the year.
Meanwhile, in Nigeria, as anticipated economic downturn from the previous year have carried on into 2024. In fact, Nigerian central bank devaluated the naira again in early 2024, leading to a significant loss of value against the U.S. dollar and surging inflation in the country. Subsequently, patient purchasing power has been tangibly impacted and has led to a decline in our testing volumes. In Sudan, the ongoing civil war and violent conflict has meant that we are not able to continue our operations in the country while ensuring the safety of both our patients and staff. For this reason, starting Jan 2024, we have decided to completely halt our operations in the country, shutting down the last of our 18 branches in Sudan.
Finally, I'm here to announce the official commencement of our operations in our new geographies, Saudi Arabia in January 2024. We currently have 2 operational branches in the Kingdom's capital city, Riyadh. A few weeks ago, we announced our proposal to voluntary delist from the Egyptian Exchange. We originally listed on the EGX 3 years ago to improve the liquidity of IDH's share and access a pool of local investors who are excited to capitalize on IDH's growth prospectives and versatile business model.
Unfortunately, since listing, we have seen trading volumes on the EGX lower than what we had originally anticipated. I want to affirm you that this proposal to delist from the EGX in no way affects either our day-to-day operations across all geographies or our commitment to our listing and the disclosure requirements on the London Stock Exchange are primary listing.
Before handing the floor back to Tarek to continue the presentation, I want to share with you our guidance for the remainder of 2024. Based on the positive economic developments we are seeing in Egypt and the strong start we recorded in the first quarter of the year, we expect to record consolidated revenue growth of around 30% in 2024. On the profitability front, we anticipate our EBITDA margin to settle around the 30% mark after excluding contributions from KSA and any nonrecurring expenses.
I will now pass the mic back to Tarek and Sherif to give you a more detailed round-down of our operational and financial results for the quarter. Thank you.
Thank you, Dr. Hend. In the first quarter of 2024, we booked top line growth of 28% year-on-year, reaching almost EGP 1.2 billion. Revenue growth for the period was driven primarily by higher average revenue per test. We continue implementing strategic price increase across both Egypt and Nigeria to combat present inflation. As a result of our average revenue per test grew by 18% compared to the first quarter of last year to reach EGP 135. Secondary higher test volume also contributed to our revenue growth. We performed 8.7 million tests during Q1 2024 with an 8% year-on-year increase, which was mainly driven by higher testing in our home market Egypt.
Turning to our patients. We served a total of 2 million patients during the 3 months period, up from 1.9 million patients. Patient volume growth was entirely supported by increase in contract patients, specifically in Egypt as more of our working patients swift our contract segment. In parallel, I'm happy to confirm that one of our most crucial operation metrics, average test per patient carried the growth trend started in 2023 into the new year, hitting another record high of IDH. During the quarter, we recorded an average of 4.3 test per patient. The sustained growth of this metric is a direction -- is a direct reflection of our effectiveness of IDH in attracting and retaining its patient while encouraging increasing testing. One of the main avenues for this strategy is our loyalty program, which we introduced in 2021 to boost patient retention and which continues to yield a strong result for the company. It is important to highlight that the strong growth achieved at the consolidated level came despite significant economic and political turndowns in several of our geographies.
In Nigeria, specifically as we expected, economic challenges are on the rise. In early 2024, [ the naira, ] went another devaluation, trading at [ 1,357 ] to the U.S. dollar at the end of April. Expected this devaluation was met with widening inflation with the country experiencing record highs eating away patients' purchasing power. In Sudan, as Dr. Hend previously mentioned, the civil war which has been going on for just over a year now has meant that we have had to suspend our operations in the country. Also Sudan constitute just 0.3% of our consolidated top line during 2023. It represents our first international expanding beyond Egypt and remains support of our operation until recently.
Turning to Jordan. The geopolitical instability caused by Palestine-Israel war has affected medical tourism in the country and led to a decline in the geographical test volumes. It is important to mention that although we have recorded lower test volumes, it has only declined 3% compared to the same period of last year. And the solid economic fundamental experienced by Jordan leave us confident that this is a trend which will shortly be revised -- reversed.
And finally, I'm glad to report that the positive development in the Egyptian market, which we discussed during last quarter's call, continued to hold up until today. We are seeing a recovery in the Egyptian economy, which is characterized by stabilizing inflation rate -- for this reason, despite the continuation of inflation, we remain optimistic that the economic hardship, which had weighted down on the growth of our largest market during the past 2 years are slowly fading and we will continue to see the solid expansion of our operation in Egypt.
Moving on to our performance in Egypt, IDH posted sustained operational success driven by constant growth of our extensive branch network compared to the same period last year, we have rolled out 26 new branches in Egypt, including one Al-Borg Scan branch and currently employee a network of 546 branch in total. In addition to our branch network expansion, our house call service also continued to play a crucial role in revenue growth in Egypt.
The service continued to expand in its contribution to the country top line with 17% of the Egyptian revenue during the quarter. This is costly above our pre-pandemic average. And finally, as Dr. Hend discussed earlier, our fast-growing radiology venture in Egypt is performing strongly with the growth continuing driven by increased testing and higher revenue per test, relying on our [ steady ] brand name and quality service.
During the quarter, Al-Borg Scan posted revenue of EGP 50 million and 81% year-on-year increase. And parallelly, the venture contributed 5.1% to Egyptian revenues during Q1 2024 compared to only 3.8% in Q1 2023. Turning to the results of our individual markets based on the drivers I outlined for you in the previous slide, we booked a 10% increase in test volume in Egypt during Q1 2024 as well as 23% year-on-year growth in our average revenue per test. Combined, these figures resulted in a 35% growth in revenues during the quarter, with the country posting a top line of EGP 989 million.
In Jordan, while our revenues were down 4% in local currency terms due to geopolitical instability, we booked a 14% year-on-year revenue increase in EGP terms. This expansion is a result of the translation effect following the devaluation of the pound compared to the same time last year. Meanwhile, in Nigeria, we booked a 29% growth in revenues in Nigerian naira terms. This is entirely attributed to a 65% increase in average revenue per test in local currency terms. We're considering the results in terms of Egyptian pound; however, the country booked a 49% revenue decline due to translation effect following the devaluation of the Nigerian naira multiple times during 2023 and 2024.
Finally, our newest geographic Saudi Arabia started its operation with rollout of 2 branches in Riyadh, one in January and another in March. During the quarter, KSA posted a revenue of SAR 58,000, performing 2,000 tests. Moving into our profitability. Our initiatives to optimize our costs, streamline our operations and leverage our strong relationship with suppliers have yielded positive results with IDH booking improved profitability down the entire income statement. During the quarter, we booked gross profit of EGP 428 million, a 32% increase compared to the figure booked in Q1 2023. Meanwhile, our gross profit margin stood at 37%, up from 35% 1 year prior, higher gross profitability for the period reflected during direct -- declining direct salaries as a share of revenue as we continue to optimize our headcount across our operations as well as lower depreciation expense as a percentage of revenue.
Meanwhile, our EBITDA during Q1 2024 came at EGP 330 million and yielded a margin of 28%, expanding from 25% 1 year prior. Increased EBITDA profitability was driven both by higher gross profitability as well as lower SG&A as a percentage of revenue, which increased only 6% year-on-year and 18% of revenue compared to 21% in Q1 2023. Finally, our bottom line profitability expanding significantly with net profit posting EGP 402 million in Q1 2024, a 139% year-on-year increase in parallel increase. Parallelly Our net profit margin stood at 34%, up from 18% 1 year prior.
with that, I would like to hand the floor to Sherif, who will give you a detailed overview of our financials.
Hello, everybody. This past quarter, we were able to record a strong revenue growth of 28% year-on-year, relying on an 18% year-on-year rise in our average revenue per test as well as an 8% expansion in our test volumes. During the quarter was primarily driven by our home and largest market Egypt, which continues to represent the big share of operations and is still characterized by considerable growth potential, specifically in the fragmented radiology market. The growth we have reported over the past 3 months has been made possible by our robust business model, which we have consistently relied on to navigate economic and political challenges, specifically in Nigeria and Sudan.
The increased efficiency of our operations has enabled us to record higher gross profit, EBITDA and net profits margin. We rolled out operations in Sudan -- in Saudi Arabia, and operations in Kingdom -- in the Kingdom are continuing to ramp up, even though we are still in the early stage. We are confident that the solid fundamentals which characterize the Saudi economy as well as its fragmented diagnostics market made the country, an exciting growth opportunity for IDH.
Finally, we have taken the decision to propose the voluntary delisting of our shares from the Egyptian exchange. This decision came following the low trading volume of our shares we -- of our shares, we continue to see on the Egyptian market. Despite this delisting, we remain committed to our listing on the London Stock Exchange. While our initiatives to leverage our relationship with suppliers and optimize our cost and control, the increase in our raw material costs, inflationary pressures during the past 12 months period resulted in a slight increase in our raw materials cost not less in Q1 2024.
Raw materials as a share of our top line stood at just over 21%, increasing less than 1 percentage point from 20.2% this time last year. This growth in raw materials costs; however, offset by lower total wages and salaries as the share of revenue due to our optimization strategies, which I have previously mentioned. As a result, wages only constituted 26.4% of revenues during the quarter.
Overall, the controls we have put in place coupled with the easing of macroeconomic turbulences in our largest market, have not only resulted in the recovery of our profitability, but also leave us confident in our ability to maintain this margin recovery into the remainder of the year.
I would like to now shift over to our EBITDA profitability for the period. We booked an EBITDA of EGP 330 million during Q1 2024. As a result on year increase -- year-on-year increase of 45%, as previously mentioned, in parallel, our EBITDA margin recorded 28% up from 25% in Q1 2023.
This slide outlines the main expense leading from our revenues to our EBITDA for both this period and the comparable one. I will now run through them quickly. Raw materials remained the largest contribution to our cost of sales during the quarter constituting nearly 32% of cost. This quarter's raw materials amounted to EGP 247 million and stood at 21% of revenue, up marginally from 20% one year prior due to the inflation and devaluations we saw during the second half of year 2023 and early 2024.
Additionally, total wage and salary which includes both direct and indirect wage came in at EGP 309 million during this year -- this 3-month period. Total wage was one of the main contributors to our increased EBITDA profitability comprising 26% of revenue in Q1 2024 compared to 28% at the same time last year. This decline was driven by our initiatives to optimize our headcount across our geographies.
When considering our net profitability, we record a rather significant net profit increase of 139% compared to Q1 2023 with our net profit margin recording 34% during the quarter. The sharp increase in our net profit during the period was largely attributable to the foreign exchange gain we recorded. In Q1 2024, we booked a ForEx gain of EGP 301 million arising from intercompany transactions between our Egyptian subsidiaries and the holding companies in Jersey and [indiscernible]. It is important to note that even when excluding these contributions from ForEx gain in both periods, we still booked improved net profitability, our adjusted net profit accounting for ForEx gain stood at EGP 100 million with our net profit margin expanding from 6% in Q1 2023 to 9% this quarter.
This increase in net profitability was driven both by higher EBITDA profitability we discussed earlier as well as by lower depreciation expense as share of revenues. In Q1 2024, total depreciation expenses stood at EGP 110 million, making up approximately 9% of revenues compared to 11% this time last year. Declining depreciation expense as a share of revenue reflects our strong year-on-year top line growth during the period coupled with management's effective utilization of its branch network, expanding operations from its existing branches and reducing the need for additional rollouts.
Finally, I would like to quickly go over our balance sheet highlights. Capital expenditures during Q1 2024, excluding contributions from translation amounted to EGP 50 million, 4.3% of revenue. The majority of these outliers were for the opening of new branches as well as the renovation of existing brands in IDH network.
Finally, our cash balance at the end of March 2024 reached EGP 944 million, up from EGP 835 million at the end of 2023. Before opening up the floor to your questions, allow me to once more confirm the guidance that Dr. Hend mentioned at the beginning of this call. We have been seeing positive signs of economic recovery in Egypt. These developments, coupled with our strong results during Q1, lead us to anticipate approximately 30% revenue growth during 2024.
In terms of profitability, we expect our EBITDA margin to have around the 30% mark, excluding contributions from Saudi Arabia, which is still ramping up as well as any nonrecurring expenses.
I would like to thank you very much for your attention today. And now I invite you to share any questions you may have. Thank you very much.
[Operator Instructions] I'm going to take your first question from the line of Sergey.
I have 3 questions, so I'll just go one by one. So with regard to your revenue guidance, you achieved 28% revenue growth in Q1, but you're guiding for 20% for the full year. So I'd like to understand why is there a slowdown? And also if you can decompose that guidance in terms of how much of that 20% comes from volume growth and how much is from pricing?
Our guidance is 30%, not 20% on revenue.
30%, I'm sorry.
Yes. Compared to 28% last year, we are guiding around 13% number of tests and a 20% revenue per test.
Okay. Got it. And with respect to revenue per test growth of 20%, could you help understand -- I believe you implemented some price increases when were they done and how much? And 20% is still below the inflation, right? I mean inflation in Egypt is now more than 30% per year. So how do you think about -- are you thinking that you're going to catch up over time? Or how should we think about your revenue -- your pricing versus inflation?
So yes, you're right. We always price below inflation, and we've done that before. Because we want to take it gradually, we cannot just raise the prices to match inflation all of a sudden. So what we've done is that we raised around 20%. No, no, I'm talking about Egypt, we raised around 23% by the beginning of the year. And we've done that in the corporate and the walk-in side.
And as you know, for the corporate side, we've been -- we do that through negotiations. So it's not -- it's really -- it's really a lot of negotiations that we do with the corporate side, the insurance and other corporates trying to raise prices. So we were able to raise around 23%, as I said. And we can increase again depending on the situation in the country and depending on the inflation. So this is what we've been doing. So overall, we are aiming at 30% increase on revenue for the whole year -- for the whole of IDH, not only Egypt for the whole IDH. And we are on the way to catch the inflation as well.
Okay. Very helpful. Actually, you in answering my first question, you already alluded to my second question, which is regarding your composition of your patients, right, of tests, so your contract patients before pandemic or actually walk-in patients rather were almost 1/3 of your total patient count 32% in 2019 and 2020.
And now it has fallen to 21%, right? So my question is, it's kind of related to pricing and also margins, right? Like in kind of before the pandemic and before these devaluations, your EBITDA margins were upwards of 40%, like 44% or something like that. And now obviously, they're much lower than that. And I understand there has been a huge devaluation of the pound and you cannot necessarily make this up very quickly.
But I'm wondering whether margin trajectory would ever get back to that 40-plus percent levels? Or is that just, at this point, unachievable given the massive devaluation that you went through and also the fact that your walk-in patients have contracted as a percentage of so, obviously, you have much higher revenue per patient, right, for walk-ins and revenue per test. So help me think through the margin objective longer term over a 3- to 5-year period?
It's always -- when you look at the margins, it's always a combination between the price increase and the volume. So the corporates, although they have lower prices than the walk-ins; however, they have more test per patient. So you're getting more volume from the corporates; however, the prices are less than the walk-ins. So overall, we have seen -- and I think this is all over the world, not only in Egypt, it's seen a shift between the walk-ins and the corporates because of the high inflation that we're seeing. So people are trying to find subsidies for their medical service, not only for diagnostics, but for the overall health care service.
However, I don't think we're going to see any decrease in margins because as you can see this year, despite the shift between the continuing shifts between the walk-ins and the corporates, we are seeing still an improvement in our margins. So we're able to increase the top line of 28%, and we're anticipating 30% growth on our top line. And we're also seeing an improvement on the EBITDA margin and the margin, the EBITDA margin and overall from the gross profit to the EBITDA margin.
Okay. Yes, it's an improvement from the trough, right? So you're 28% now versus 25% in Q1 '23. But I guess my question was more longer term, like would you be ever able to get to 40% plus where you were a few years ago, or is that just too ambitious of a goal at this juncture?
I think we are on the right track to getting back to the 40%, but not this year. I mean we cannot do it in 1 year. You have to also look at what happened in the country so far with the different devaluation rounds that we've seen of the pound and this -- and the high inflation that has really affected the purchasing power of the consumer as well as the high costs of everything, including not only raw material, but everything else and wages and salaries and so on.
So given what's happening and also given that we're raising the prices and we get -- I think we'll be getting to the 40%, but not this year. We'll do it on an increase on a yearly basis.
Okay. That's fine. And then...
This year -- just let me finish this part. Looking at this year, this was, I think, one of the toughest years that we've seen in the country.
Yes. Yes. No, no. I understand that it's not just you, it's the whole country. Maybe my third question had to do with some of your international operations, right? So first, Saudi Arabia. Could you maybe quantify a little bit more how big this market can get for you in terms of revenue and profit over next medium term, right, let's say, 3 years, what are your targets? And kind of what -- how much capital would it get to get there, right?
So you're saying that it's still burning cash, right? It's still in the red, when would these losses turn into profits? And how profitable can it be?
it will break even a net profit in 2026, and we're expecting to be profitable in 2027.
Okay. And how -- in terms of the contribution to revenues, like what are you thinking in like in 2027? How -- is it 10% of your revenue or 15%? Can you give some sort of metric?
Around 5%.
So 5% in '27. Okay. And regarding maybe last quick question also, and I'll go back into queue. Regarding other operations that hasn't gone well is Nigeria, right? It's been a subscale operation. I don't think you ever made money on this or maybe you made money very briefly, but it's not sustainable, right?
And it's very clear that Nigerian operation is -- you don't really have any competitive advantage there, like you do in Egypt. It's not -- given the situation in Nigeria, it even worsen in Egypt, I think from a devaluation standpoint, why are you still there? I mean are you considering getting out of it? And if not, like what's your rationale for staying there? And why not just cut losses and move on?
Yes, you're absolutely right. I mean the thing in Nigeria is that whenever you are growing on the top line; however, you have devaluation, one after the other, coming after the other, with a very high inflation, the country is seeing changes all over and unfortunately, to the -- not to our favor or to anyone else's favor. So we are trying -- we were trying to break even in Nigeria. So this is the plan. However, you're absolutely right, we're not doing very well there.
Yes. So what is -- now that you acknowledge that, like what is your -- are you going to continue to stay there or potentially you may pull out? Or like what are your thoughts like in a longer -- like maybe next 12 or 24 months. What's the plan?
We're trying to breakeven so that if we want to sell it or if we want to find an exit, it would be easier for us. So we're looking at that and trying to break even this year.
Okay. And then sell it after you breakeven.
We will see. We'll see about that. We'll see if we can be convert into profits and go on because we already have investment there. But definitely, we want to expand our revenue, increase our top line, trying to be rational in our expenses as much as we can until we find proper exit scenario or we stay profitable. So this is -- we need to, of course, to correct this situation of Nigeria.
I will take 2 questions from the chat. One, I think, was in some way been answered. What lessons have you learned from your expansions outside of Egypt? And accordingly, how does it influence your strategy going forward in other markets beyond Saudi, if there is any. And if that's the case, are we likely to see any changes or a prioritization on the stable markets? And that example, is Egypt and Saudi.
I think it's -- I mean, it is obvious that when you operate in a stable market with a stable currency, it really helps a lot. However, this is not very easy to find in our region. So for the time being, we're focusing on Egypt, Jordan and Saudi and we're still operating in Nigeria.
But for further -- I mean, for further expansion, we're looking at markets with a stable currency, totally right.
A follow-up on this same point as would you be considering exiting Sudan or at the current stage, given what's happening, it's just kind of a wait and see.
I mean we don't have any operation right now for Sudan given the situation there. So we just -- we're just seeing what's happening there and monitoring everything, but we don't have an operation right now.
One question is on Saudi. Can you please elaborate on the structure of your operations there? Is this a hub and spoke model with the central lab or more stand-alone pledged centers? And what are the tests being performed there at the moment?
So we have 2 branches in Saudi for the time being, and we're doing all the tests there. When you're talking about the hub and spoke model, we are not on the hub and spoke model. We're having 2 branches, one of them is the B branch, the other one is a C branch.
And the things that are not done in Saudi, they are sent to Biolab in Jordan.
From all Africa has 4 questions. I'll say them one by one. The first one, what do you think is happening to your market share in the walk-in segment in Egypt? Would you like me to tell you all 4 of them or we go them one by one?
You can say all the questions, and then we'll get to them.
Sure. Second one is Sudan fully closed. And -- you've answered this one. Can you provide outlook on the Jordanian business given long-term price caps and stagnant revenue per volume. And his last part is Q1 EBITDA margin 28.2% versus 30% clean guidance for 2024, is the 2% drag in the first quarter from KSA and is this expected to continue for the full of 2024.
So just to answer the last question first, the 28% of the EBITDA margin is including Saudi Arabia, the 30% is excluding Saudi Arabia and excluding any one-offs.
The second question that you asked about the we're not losing market share in the walk-in segment, we are seeing a shift in the walk-in segment overall to the corporate side. So we're seeing people shifting from the walk-ins to the corporate because of the high inflation people are trying to find a way of to subsidize their health care service fees.
What -- I did -- I don't know if there are...
Yes, there's one on Jordan, if you can give any outlook on that business given that there are price caps and the revenue per volume, there has been stagnant for a couple of quarters.
Yes. We've seen this capping on the revenue in Jordan or the price per test in Jordan for more than a decade now. So the price per test have not been raised for more than 10 years in Jordan. However, we've seen an increase in revenues, increase in the net profit and the EBITDA margin in Jordan. This was very apparent, of course, during the pandemic, but also before and after the pandemic. So there is an increase because Jordan is increasing in terms of the number of patients, in terms of mix, in terms of revenue and profitability.
However, this year -- the first quarter of this year has been exceptional due to the geopolitical situation there. And at the borders in Gaza, this is why we're seeing a decrease in revenue for the first time in Jordan.
We'll take questions from the line of [ Marina ]. We're still not able to hear. So I would suggest that you send your questions through the Q&A and I'll read them out to the company. One question is on the normalized effective tax rate because it has dropped significantly in the first quarter versus the historical average that we've had of 30-something percent. So assuming no further FX gains and any other abnormal items, where would you typically see your normalized effective tax rate at?
FX tax rate was 20% last quarter. And this is a normal one. And we took just deferred tax because of the 10% of non-distributed profit. But it's everything normal in the tax.
So the normalized tax rate that you would continue with is the level that you've achieved in the first quarter?
Tax rate going forward within range between 33% and 35%.
Okay. Understood. One question is if you have any targets that you can share on your working capital, specifically your receivables, and that is in terms of days on hand.
So he's asking about the DSO. The DSO is 124 days. And the question was -- what is the...
Yes, if you have any targets on whether it would normalize this year or next? And if you have any targets that you can share with us in general.
We are working on increasing the efficiency of the collection and trying to solve any older programs to get it done as much as we can. We are targeting like 100 days, 110 to reduce by one month, but it needs lots of efforts, but this is our target for this year by the end.
Great. And when it comes to inventory, it has also increased. Are you -- do you have to stockpile because of the currency, Red Sea disruptions, et cetera? And if so, would you expect any normalization during this year or more comfortably from next year?
We were increasing our inventory because of what was happening in the country and because of the lack of foreign currency and the lack of kits from suppliers. So we were increasing our inventory not to be -- not to stop doing our testing. And this was very important.
However, given that now there is an improvement in the currency and improvement in the -- the availability of the currency in Egypt, we plan to decrease our inventory.
Yes. It will -- again, we'll go to about 100 days or something, then we'll shift it from about 150 days to 100 days [ to make ] because we are now stable, and we have already stocked and can work with us with our purchasing. So this will help as well. It will refresh our working capital.
Marina has just sent a question, it's kind of on the same point. So given that the devaluation occurred at the beginning of March and the fact that you had excess inventory on hand, is the devaluation already in the base? Or we will see pressure on margins in the second quarter. And on the same point, have you already renegotiated with the suppliers post the deval that happened in March?
So to answer the question, yes, we have negotiated with the suppliers; however, we're not going to see any pressures on the margins going forward.
Understood. Two participants who ask questions and do not have follow-ups, please lower your hands or else, I will unmute you. Sergey please unmute yourself and go ahead.
Just a couple of quick follow-ups. When you said you raised prices in Egypt 23%. Does that -- can you break that down between corporate and walk-ins? Or was that -- was it number blended? Or was it 23% for each of these groups?
Yes, the blended price increase.
Okay. So presumably, for corporates, it was lower than walk-ins, right?
Can you please repeat the question again.
Yes. I'm paying for -- to get to the 23%, it was higher for walk-ins and lower for corporates, correct?
Yes.
Okay. And then also regarding this whole FX issue that was just asked about. I thought that you mentioned at some point that you -- even though your raw materials are denominated effectively in dollars, you pay for them in Egyptian pounds. Is that correct?
Correct.
So if that's the case, why will you hindered by unavailability of dollars? If you pay for everything in pounds anyway, why do you care if dollars are scarce or not?
We don't care; however, the suppliers care. So as a result, we found shortage of kits in the Egyptian market. So they were not bringing in kits because they were not able to source dollars and this is why we increased our inventory not to take the risk of not having kits and not doing our tests.
Okay. So Egyptian companies that procure these kits are the ones that you deal with, right? I thought you deal with like these manufacturers directly, but it sounds like you're going through some intermediaries, which are like suppliers, right?
We have all sorts of suppliers. So we have the big ones like Siemens, Roche, Sysmex, but we have also the smaller ones. So not everything is supplied by one supplier.
We have no further questions noted in the chat or the raise-hand function. I'm not sure if you have any concluding remarks. Otherwise, we can end the call.
Thank you very much, Moataz, and thank you, everyone.
Thank you very much to IDH's management and have a good rest of day, everyone. This concludes today's earnings call.