It was 22 months ago when a vision was decussated by the inadequate healthcare services to a majority of South Africans, plus the ever-increasing burden on the government to provide healthcare to over 84% of the population, whilst the private sector has been comfortable with only being responsible for a mere 16% of the population. As a responsible company, we have taken on this gigantic task of building a company that will see the migration of those that are working but not insured and those that don’t earn enough to be serviced by the private sector.
The Company has already taken steps towards the realisation of its vision of quality healthcare, affordable access (geographical spread) and transformation. This process will entail the Company actively acquiring businesses that are in line with its mission statement. For the 28 February 2019, the Company continued on its mission to aggressively expand its healthcare portfolio, whilst making sure that the businesses are integrated properly, processing factors through the respective boards and risk management.
Based on the Company’s exponential growth and strategy, it has proved difficult for valuers and auditors to arrive at reliable cashflows that reflect the plans by management in line with its expansion and diversification plans. We believe that in the next three to four years, the story and strategy will be much clearer, supported by proven cashflows.
Although the Company traded for a full year in the previous year, it was still difficult for us to make reliable comparables with the current year, because of the acquisitions of three assets. In the 2019/20 financial year, the Company’s portfolio would have materially increased, again making it difficult for investors and valuers to reliably measure the value of our assets or the Company.
Key judgements and estimates on the preparation of the financial statements were that of the valuation of the investments, including the application of the terminal value, Weighted Average Cost of Capital (WACC) and EBITDA multiple. In addition, the Board has been concerned about the lack of liquidity or low liquidity of RH Bophelo’s shares, as the price per share for RH Bophelo is sometimes triggered by a trade of less than R1 000, approximately +/- 0,0002% of the Company; this can cause a risk of share manipulation. The reasons for the lack of liquidity can be attributed to the size, investor concertation, low retail books and investors that are tightly holding on to the shares. The Board has requested management to start with a capital-raising process, where we can attract new investors to the group, pension funds, hedge funds, retail clients, etc. Liquidity and solvency, the Company and its subsidiaries, were all assessed to be solvent and liquid, with access or sizeable cash and cash equivalents in the businesses.
Subsidiaries and associates are classified as investment entities under IFRS 10 Consolidated Financial Statements. Investment entities are exempt from consolidation and measured at fair value through profit and loss in terms of IFRS 9. Changes in fair value, primarily driven by revaluation of portfolio investments, are recognised in profit and loss in the period of change. The introduction of new standards such as IFRS 9 and 15, was found not to be material to the Company.