RMC is an acute 123-bed (with the capacity and potential to reach above 200 beds) independent private hospital conveniently located on Klipfontein Road, opposite the Red Cross Children’s Hospital, in Rondebosch, Cape Town. RMC was officially established in 2011 after converting an existing 27 bed and 4 theatre day hospital licence into an acute licence and moving the longstanding practice, which was originally established and has been operating since the late 1980s, to Rondebosch. RMC has grown incrementally with limited capital and the founders have successfully applied to the Department of Health (DoH) for an increase in beds over the years.
RMC offers quick access into the Cape Town metropolis, which is generally prohibitive due to its cost of entry. The acquisition presents RH Bophelo with an opportunity for entry into a growing market at an attractive price per bed. RMC is well positioned to cater to a wide array of income groups, including those from a previously disadvantaged population.
RMC represents a facility and doctors who are trusted in the community, ensuring a loyal patient base. It will serve as RH Bophelo’s launch pad into the greater Cape Town community and provides the ability to move from a minority shareholding to a majority shareholding position in 4 years, and the capacity and potential to establish new units and increase from 123 beds to more than 200 beds.
Acquisition for 30% with an option for 21% in 4 years’ time for an equity cheque of R0.2 million and a shareholder loan of R49.8 million.
Current Year Performance
Total revenue decreased year on year by 5% to R100,8 million. EBITDA decreased year on year by 244% to a negative R8,6 million. RH Bophelo’s 30% investment, resulted in a decrease of 30%, the valuation in RMC reduced to R35 million (Cost: R50 million) in the current year. The Company has an option to acquire 21% of the business in 3 years, the option was valued at R1.
Response to the Weak Performance
- The hospital commissioned a hematology unit in January 2019. The unit will contribute to at least 20% of revenue in the hospital going forward.
- Negotiations with key medical aids for the hospital to be included on the network options.
- Hospital renovations to be concluded in August 2019.
- Investigation on commissioning incorporating day hospital beds.
- Business remained with a strong net-working capital of R36 million, which include a positive bank balance of R34 million.