MAC3761 EXAM PACK 2022

MAC3761 EXAM PACK 2022. Chris Bara Hospitals Limited (“Chris Bara” or “the Group”) is the largest provider of private healthcare both in South Africa and in the United Kingdom (UK). Chris Bara was founded in 1983 in Soweto and has since grown to be the largest hospital group listed on the Johannesburg Stock Exchange (JSE). Chris Bara currently operates a total of 128 health facilities and is in the process of acquiring a Kimberley-based private hospital (Life eKaroo). This acquisition will bring the Group’s total number of beds to 10 842. The owners of Life eKaroo approached the Group after Life eKaroo reported disappointing financial results for the year ended 30 September 2020. This dismal performance was at the back of a long 6-month lockdown (April – September) in the country to curb the spread of COVID19. The lockdown period saw the (bed) occupancy rate at several hospitals (Life eKaroo included) decline to their lowest level ever as the country reported a significant reduction in critical hospital emergencies; cancellation of all elective surgical procedures; and with citizens encouraged to recover from home unless for critical illnesses or urgent procedures. Regrettably, the decrease in prime interest rate did not provide sufficient relief for Life eKaroo as it continues to battle with high levels of debt. Chris Bara, with its healthy balance sheet, has been Life eKaroo’s preferred acquirer due to number of synergies that can be unlocked as the two hospital entities have similar operations. Owners of Life eKaroo have asked R540 million in exchange for a 51% stake in their hospital. Should Chris Bara not take up the offer, Life eKaroo will consider filing for liquidation which will see the assets of the hospital sold in order to settle its mounting debts. Chris Bara is currently working on its own offer to be presented to the owners of Life eKaroo. In assessing the financing of any offer to Life eKaroo, Chris Bara will first use R100 million from its cash reserves and then finance the balance of the offer price in a manner that will bring the Group closer to its target capital structure of 25:75 (Debt:Equity). The Group wants to maintain a strong cash position especially as it moves towards uncertain times of post-COVID-19 era, after having already spent a considerable amount on: additional ventilators, expanding intensive care units (ICU), personal protective equipment, safety measures awareness campaigns and other consumables. A. The financial statements, together with other key information relating to Chris Bara Hospitals Limited, are first presented below: 1. STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 30 SEPTEMBER 2020 Rm Notes Revenue 4. Cost of goods sold and services rendered (10 653) (10 364) Gross profit Other income 4.2 446 511 Administrative and other expenses 4.3 (7 614) (6 827) Profit before finance income and costs Finance income 245 165 Finance costs 4.4 (656) (452) Profit before taxation Taxation 4.5 (879) (1 038) Net profit for the year S - The study-notes marketplace Downloaded by: alixiapearllegrange | Distribution of this document is illegal S - The study-notes marketplace Page 5 of 12 MAC3761 October/November 2021 CONFIDENTIAL [TURN OVER] QUESTION 1 (continued) 2. STATEMENT OF FINANCIAL POSITION FOR THE YEAR ENDED 30 SEPTEMBER 2020 Rm Notes ASSETS Non-current assets PPE, goodwill and intangibles assets Investments and other financial assets Other non-current assets 512 608 Total non-current assets Current assets Inventories (medicines and consumables) 1 155 689 Loans, trade and other receivables Cash and cash equivalents Total current assets TOTAL ASSETS EQUITY AND LIABILITIES Capital and reserves Ordinary share capital 4. Retained earnings Other reserves 499 156 Total shareholders’ equity Long-term debt 4. Current liabilities Provisions Trade and other payables Short-term debt 4. Total current liabilities TOTAL EQUITY AND LIABILITIES 3. OTHER SALIENT INFORMATION Number of facilities (hospitals, primary care and pharmacies) 128 131 Number of patients (‘000) Number of employees Number of hospital beds South African Rand: UK British Pound (average) 21,64 18,60 South African Rand: US Dollar (average) 16,74 15,12 Prime lending rate (closing %) 7,0 10,0 S - The study-notes marketplace Downloaded by: alixiapearllegrange | Distribution of this document is illegal S - The study-notes marketplace Page 6 of 12 MAC3761 October/November 2021 CONFIDENTIAL [TURN OVER] QUESTION 1 (continued) 4. Notes and additional information: 4.1. The segment revenue is presented below: Rm Hospital and primary care – South Africa Hospital and primary care – United Kingdom Pharmacy operations – South Africa Total 4.2. Other income is made up of rental income from doctors, specialists and consultants utilising office space at the Group’s facilities, as well as income from government and corporate clients requiring access to healthcare services from time to time. 4.3. Administrative and other expenses are made up of the following: Rm Employee costs Medicines and consumables Depreciation of property, plant and equipment 498 324 Operating lease charges and maintenance 681 615 Impairment on intangible assets 122 91 BEE deal transaction costs and other legislation costs – 222 Other administrative expenses 592 403 Total 4.4. Chris Bara’s debt instruments are granted by financiers within South Africa only. The following items make up the total finance costs as at 30 September 2020: a) Interest expense of R333 million is paid annually in arrears on term loans which were issued in October of 2018. These term loans totalling R3,5 billion (book value) will be repaid at the end of September 2023. The market related interest rate for similar long-term debt is prime + 2,25%. b) A fixed annual dividend of R128 million on eight million redeemable preference shares issued four years ago at R200 each (nominal value). These preference shares will be redeemed on 30 September 2026 at a discount of 5% on nominal value. Similar preference shares are trading at 7,825% per annum. c) Annual interest expense on debentures, all issued a year ago, is charged in arrears at a pre-tax rate of 7,47% per annum. Similar debentures are trading at a post-tax interest rate of 5,04% per annum. d) The balance relates to interest expense on short-term debt. The average amount of short-term debt balance during the year was R1,38 billion, and the prime lending rate is considered to be the market related cost of similar short-term debt. We offer online tutoring, help with assignments and essay writing for all Majors with a guaranteed pass. For assistance Contact Tutor Lucas: