Wrap Text
Reviewed Provisional Results For The Year Ended 28 February 2019
RH BOPHELO LIMITED
Incorporated in the Republic of South Africa
(Registration number: 2016/533398/06)
JSE share code: RHB, ISIN: ZAE000244737
("RHB" or "the Company")
REVIEWED PROVISIONAL RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2019
INTRODUCTION
The board of directors ("the Board") of the Company is pleased to present the provisional results for the year ended
28 February 2019.
RHB successfully listed as a Special Purpose Acquisition Company ("SPAC") on the Johannesburg Stock Exchange ("JSE")
on 12 July 2017, raising R500 million through the issue of 50 000 000 "A" ordinary shares at R10 a share.
The company has successfully completed various acquisitions and has since been reclassified by the JSE Limited to that of an
investment entity. Since the listing, management has been diligently reviewing various potential acquisition opportunities and
is continuously engaging with potential vendors on propositions that could satisfy the Company's vision and values. The
Company has sufficient resources to make a significant investment, using cash, equity and debt, or any combination thereof as
deemed appropriate by management and the Board.
Since the listing, management has been diligently reviewing various potential acquisition opportunities and is continuously
engaging with potential vendors on propositions that could satisfy the Company's vision and values. The Company has
sufficient resources to make a significant investment, using cash, equity and debt, or any combination thereof as deemed
appropriate by management and the Board.
RHB assets are managed as a balanced portfolio composed of two major components: (i) an equity portion; and (ii) a fixed
income portion. The expected role of RHB equity investments will be to maximize the long-term real growth of portfolio assets,
while the role of fixed income investments will be to generate current income, provide for more stable periodic returns, and
provide some protection against a market fluctuations in the value of its equity investment portfolio.
The Company primarily focuses on investing in the healthcare sector, with focus on the hospitals, pharmaceuticals, retail,
information technology, education, and financial services verticals. In the current year, the Company had exposure only in the
hospital vertical portfolio.
FINANCIAL OVERVIEW
The key financial indicators reflected in these financial results are:
- RHB recorded an increase of 161% in operating profit to R21,2 million as compared to the prior year of R8 119 325,
which comprised of a gain in the valuation of investments, the interests earned from funds held in the money market,
less administrative and operational expenses;
- The total revenue increased by 99% in the current year to R41,3 million as compared to the prior year of R20,8 million;
- The operating expenses reported for this period increased by 9% to R13,2 million, when compared to the prior year of
R12,1 million;
- Basic earnings per share and headline earnings per share increased by 63% to 41,5 cents when compared to the prior
year of 24,7 cents;
- RHB recorded a 15% increase in the fair value of its investments;
- The net asset value of the Company increased by 7% to R530 million, when compared to the prior year of R495,9 million;
- The Company remains liquid and solvent, with its healthy balance sheet and a total of R373,6 million in cash and cash
equivalents still available for new acquisitions, including those that in subsequent events.
- No dividends were declared in the current year; and
- RHB has acquired additional assets post year-end and therefore any income earned is not indicative of the Company's
future prospects.
PREPARATION
The condensed provisional financial results have been prepared internally under the supervision of the Chief Finance Officer,
D Mhlaba CA(SA), and approved by the Board.
The Board takes full responsibility for the preparation of this report and ensuring that the financial information has been
correctly prepared.
These condensed provisional annual financial results have been reviewed by our external auditor, Deloitte & Touche. A copy
of their unmodified review conclusion is available from the Company's registered office. Any reference to future financial
performance included in this announcement, has not been reviewed or reported on by the external auditor. The auditor's report
does not necessarily report on all the information contained in this announcement. Shareholders are therefore advised that in
order to get a full understanding of the nature of the auditor's engagement, they should obtain a copy of the auditor's report
together with the accompanying financial information from the Company's registered office.
CONDENSED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 28 FEBRUARY 2019
Feb-19 Feb-18
R R
Other income 16 827 266 -
Finance income 24 490 345 20 826 640
Profit before taxation 41 317 611 20 826 640
Administrative and other operating expenditure (13 174 556) (12 128 479)
Profit before tax 28 143 055 8 698 161
Taxation (6 982 166) (578 836)
Profit for the year 21 160 889 8 119 325
Other comprehensive income - -
Total comprehensive income for the year 21 160 889 8 119 325
Earnings per share (cents)
Basic and headlines earnings per share (cents) 41,5 25,5
WANOS 50 938 356 31 780 822
CONDENSED STATEMENT OF FINANCIAL POSITION AS AT 28 FEBRUARY 2019
Feb-19 Feb-18
R R
ASSETS
Non-current and current assets
Financial asset at fair value through profit and loss 157 896 791 -
Loans and other receivables 4 103 493 -
Cash and cash equivalents 373 548 658 499 063 418
535 548 942 499 063 418
Total assets 535 548 942 499 063 418
EQUITY AND LIABILITIES
Stated capital 500 839 672 487 826 373
Retained income 29 280 214 8 119 325
Total equity 530 119 886 495 945 698
Non-current and current liabilities
Deferred tax 3 717 681 -
Other payables 1 711 375 3 117 720
5 429 056 3 117 720
Total equity and liabilities 535 548 942 499 063 418
Net Asset Value per share (R ) 10,34 9,92
Tangible Net Asset Value (R ) 7,28 9,98
CONDENSED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 28 FEBRUARY 2019
Stated capital Retained income Total equity
R R R
Opening balance as at 1 March 2017 1 - 1
Shares issued 500 000 000 - 500 000 000
Transactional costs (12 173 628) (12 173 628)
Total comprehensive income for the year - 8 119 325 8 119 325
Balance at 28 February 2018 - Audited 487 826 373 8 119 325 495 945 698
Shares issued 13 013 299 - 13 013 299
Total comprehensive income for the year - 21 160 889 21 160 889
Balance at 28 February 2019 - Reviewed 500 839 672 29 280 214 530 119 886
CONDENSED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 28 FEBRUARY 2019
Feb-19 Feb-18
R R
Cash generated from operating activities
Profit before tax 28 143 055 8 698 161
Net gain from financial instruments at fair value through profit
and loss (16 596 791) -
11 546 264 8 698 161
Changes in working capital
Increase in other receivables (1 432 736) -
(Decrease)/increase in other payables (1 406 345) 3 117 720
Cash generated from operations 8 707 183 11 815 880
Income tax (3 596 701) (578 836)
Net cash inflow from operating activities 5 110 482 11 237 044
Cash flow from investing activities
Net investments in financial instruments at fair value through
profit and loss and loans* (128 286 670) -
Cash flow from financing activities
Net proceeds on share issue* - 487 826 372
Net movement in cash and cash equivalents (125 514 760) 499 063 417
Cash and cash equivalents at beginning of the year 499 063 418 1
Cash and cash equivalents at the end of the year 373 548 658 499 063 418
*The current year share issue was used to settle some of the investments acquisition purchase price
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
BASIS OF PREPARATION
The reviewed provisional financial results have been prepared in accordance with the framework concepts and the
measurement and recognition requirements of International Financial Reporting Standards ("IFRS") and interpretations of
IFRS, as issued by the International Accounting Standard Board, the SAICA Financial Reporting Guides as issued by the
Accounting Practices Committee, the Financial Pronouncements as issued by Financial Reporting Standards Council, the
JSE Limited Listings Requirements, and the requirements of the South African Companies Act, 71 of 2008, and the
presentation and disclosure requirements of IAS 34 Interim Financial Reporting.
The provisional financial results have been prepared on the historic cost basis except that financial assets and liabilities at
fair value through profit and loss are stated at their fair value. The results are presented in Rand, which is the Company's
functional and presentation currency.
ACCOUNTING POLICIES
The accounting policies applied in the preparation of the annual financial statements from which the provisional financial
statements were derived are in terms of IFRS and are consistent with the previous annual financial statements. There was
no impact on changes of accounting standards.
New standards and interpretation
In the current year, the Company has adopted the following standards and interpretations that are effective
for the current financial year and that are relevant to its operations:
- Standard: IFRS 15 Revenue from Contracts with Customers; and
- IFRS 9 Financial Instruments
Effective date: years beginning on or after 1 January 2018
Expected impact: The adoption of this standard has not had a material impact on the results of the company given the nature
of the company and the fact that this is the first year that the company has operations.
Accounting for investments
Subsidiaries classified 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.
Where the Company does not have control, but has significant influence over a portfolio investment, such entities are
classified as associates. Given the nature of the Company's operations, associates are accounted for in accordance with
IFRS9 at fair value through profit and loss (exemption allowed in IAS 28: Investments in Associates and Joint Ventures).
Changes in fair value are recognised in profit or loss in the period of change.
The following were part of the consideration used by management in the application of IFRS 10:
- The business will realise value through the capital appreciation and dividend return of its investee companies;
- The company has finalized a diversified investment strategy that will see growth in other sectors; and
- At the appropriate time, the Company will exit each investment vertical following a carefully crafted Investment
strategy in line with its investment policy.
Initial Measurement:
Financial instruments are initially measured at fair value, which includes transaction costs, except for instruments classified
at fair value through profit and loss. Investments that are not traded in an active market are initially measured a using
acquisition cost.
Subsequent Measurement:
The investments, which are not traded on an active market, are valued using recognised principles to estimate fair value in
accordance with IFRS13.
The Company will adopted different valuation techniques as the base valuation method as highlighted by the general
principles below:
- Available market values of the acquired assets as at reporting date;
- A Discounted Cash Flow valuation for operational assets;
- Market values for recent similar traded assets; and
- Income multiple approach in year 7 to 9 years, since the hospitals would have reached maturity and stability.
Net gain/loss from financial instruments at fair value through profit or loss includes all realised and unrealised fair value
changes.
FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT AND LOSS
The company has adopted an accounting policy of measuring its investments at fair value through profit or loss with
fair value movements on its assets under management recognised in the statement of profit or loss.
2019 2018
R R
Financial assets at fair value through profit and loss 157 896 791 -
In the current year, the Company had only one direct investment into RH Bophelo Operating Company Proprietary Limited
("RHBO"), a 100% held subsidiary. RHBO is a special purpose vehicle created in order to hold investments that are classified
under the Company's hospital portfolio. The R157 896 791 is only indicative of the net asset value of RHBO as at 28 February 2019:
Below is an extract from statement of financial position from RHBO as at 28 February 2019.
Total assets 164 291 832 -
Total liabilities 6 395 040 -
Net asset value 157 896 791 -
a) Unlisted investment held indirectly classified as Financial asset at fair value through profit and loss:
During the current year, RHBO made the following acquisitions which were classified as investments through profit and loss.
Opening Investment Closing
balance acquisition Fair value balance
Africa Healthcare - 62 500 000 32 989 661 95 489 661
Vryburg Private Hospital - 24 320 000 2 834 529 27 154 529
Rondebosch Medical Centre - 200 000 (199 999) 1
- *87 020 000 35 624 192 122 644 192
b) Loans issued:
Opening balance Investment Interest/ Closing balance
acquisition (impairment)
Vryburg Private Hospital - 4 480 000 562 230 5 042 230
Rondebosch Medical Centre - 49 800 000 (14 800 000**) 35 000 000
- *54 280 000 (14 237 770) 40 042 230
*total investments of R141 300 000 in loans and equities.
**the loan was impaired in the current year.
c) Assumptions and estimates
Entity % Fair value at Valuation Unobservable FV
ownership year end* technique inputs Range** Hierarchy
Africa Healthcare 60% 95 489 661 Discounted EBITDA, 6,76; 18% Level 3
Proprietrary Limited(1) cash flow WACC, and and 7,3%
growth rate
Vryburg Holdings 74% 27 154 529 Discounted EBITDA, 6,76; 18%; Level 3
Proprietary Limited(2) cash flow WACC, 7,3% and
growth rate 11%
and cap rate
Rondebosch Medical 30% 35 000 000 Discounted EBITDA, 7; 18% and Level 3
Centre Proprietary cash flow WACC, and 6,5%
Limited(3) growth rate
*management has applied a 15% valuation provision from the valuation reports performed by independent valuers.
**Assumptions and estimates
(1) In May 2018, RHBO successfully acquired 60% of Africa Healthcare Proprietary Limited for R62,5 million, payable in
combination of a cash subscription and share swap.
(2) In May 2018, RHBO successfully acquired 74% of Vryburg Private Proprietary Limited for R24,3 million, through a sale of
assets and liabilities.
(3) In June 2018, RHBO successfully subscribed for 30% of Rondebosch Medical Centre Proprietary Limited for R200 000 and
a shareholder loan of R49,8 million. In line with the policy, both the equity and loan are valued together. RHBO is entitled to
a call option to acquire an additional 21% of the issued shares on the 4th anniversary.
d) Sensitivty analysis:
AHC equity value - 60% -10% -5% Base +5% +10%
Termina value 88 489 929 92 510 105 95 489 661 102 975 350 109 962 462
WACC 116 060 638 105 720 226 95 489 661 90 221 316 84 263 134
Vyrburg equity value - 74% -10% -5% Base +5% +10%
Termina value 10 741 236 11 416 424 12 216 100 13 178 192 14 357 769
WACC 14 283 413 13 605 169 12 216 100 11 065 111 10 096 478
Capitalisation rate 17 860 500 17 010 000 16 200 000 15 390 000 14 620 500
*RMC equity value - 30% -10% -5% Base +5% +10%
Termina value 31 587 500 33 250 000 35 000 000 40 200 000 42 600 000
WACC 38 587 500 36 750 000 35 000 000 33 250 000 31 587 500
*Valuation includes shareholder loan
SEGMENTAL REPORTING
The Board has considered the implications of IFRS 8: Operating segments and are of the opinion that the current operations
of the Company constitute one operating segment.
RELATED PARTIES
Management fees
Management fees of R4 363 015 (R2 458 055 in the prior year) have been paid by the Company to RH Bophelo Management
Company Proprietary Limited for providing operational management services. Management fees are 0,7% per quarter of the
total capital raised, while the Company has not fully deployed more than 60% of the listing capital raise. An amount of R14 286
((R776 616) in the prior year) was included in other receivables /(payables) at year end.
Subsidiary
Fees of R1 138 747 (R2 900 000 in the prior year) were paid by the Company to RH Bophelo Operating Company Proprietary
Limited, a wholly owned subsidiary of the Company, for the costs related to the operations of the business. An amount of
R2 338 541 (R26 403 in the prior year) was included under loans at year end.
Professional fees
Professional fees of Rnil (R11 508 300 in the prior year) were paid by the Company to Thirdway Investments Proprietary
Limited. These payments were made for capital raising and corporate advisory services. Thirdway Investments Proprietary
Limited owns 30% of RH Bophelo Management Company Proprietary Limited and a John Oliphant (non-executive director)
of the Company is a partner in Thirdway Investments Proprietary Limited.
ISSUE OF SHARES
During the current year, the Company issued 1 250 000 shares "A" ordinary shares at a VWAP of R10 a share as part of the
settlement for the Africa Healthcare acquisition. In the prior year, the Company issued 49 999 999 "A" ordinary share in issue
at R10 per share.
BASIC AND HEADLINE EARNINGS PER SHARE
Basic earnings per share was based on profit after tax of R21 160 889 (prior year: R8 119 325) and weighted average
number of ordinary shares of 50 938 356 (prior year: 31 780 822) issued.
Feb-19 Feb-18
Headline earnings per share (cents) 41,5 25,5
Diluted headline earnings per share (cents) 41,5 25,5
Reconciliation between earnings and headline earnings
Basic earnings (R) 21 160 889 8 119 325
Adjustment - -
Headline earnings (R) 21 160 889 8 119 325
SIGNIFICANT OUTSTANDING TRANSACTION AT YEAR END
Transactions signed before year end:
- *In October 2018, the Company entered into a sale of shares agreement to acquire Fauchard Day Hospital through
its wholly owned subsidiary RH Bophelo Operating Company, upon the fulfilment or waiver (as the case may be)
of the conditions precedent contained in the Agreement will, inter alia, the acquisition is for a combined
consideration of R25 million cash (R15 million for the property and R10 million for the Day Clinic;
- *On 5 February 2019, the Company entered into a Sale of Shares and Claims agreement ("Agreement"),
through its wholly owned subsidiary, to acquire 51.0% of the issued share capital in Medicare Private Hospital
Proprietary Limited ("MPH") through the purchase of existing shares from the current shareholders for a combined
consideration of R99,6 million, consisting of a cash consideration of R75 million and 2.5 million RH Bophelo listed
shares, using a 30-day volume weighted average price ("VWAP"). the acquisition was classified as category 2;
*during the current financial period, the investments were not included in the current year report because not all
conditions were met.
SUBSEQUENT EVENTS
The directors are not aware of any other material items that arose subsequent to 28 February 2019 that affect the condensed
financial statement as at the same date that should either be adjusted or disclosed other than the below acquisitions.
By the time of this report, the Company entered into the following acquisition agreements for the acquisition of Medicare
Private Hospital, Fauchard Day Hospital, Netcare Bell Hospital, Westmart Financial Services and Africa and Worldwide
Medical Assistance Service for a combined consideration of R185,5 million.
Transactions signed after year end:
- On 15 March 2019, the Company entered into a Sale of Business Agreement ("SBA") and a Sale of Property
Agreement ("SPA") to acquire 100% of Netcare Bell's assets (being the business) from Netcare Hospitals;
andacquire 100% of the Bell Property from Netcare Property Holdings for a combined consideration of
R55.2 million, which consists of R1.6 million for the Bell's assets and R53.6 million for the Bell Property.
The acquisition was classified as category 2;
- The acquisition of 60% of Westmart Financial Services was concluded on 30 April 2019 for R2 750 000. Wesmart
is registered as an authorised Financial Services Provider, (FSP: 45769), has received exemption in terms of the
Demarcation Regulations from the Council for Medical Schemes. The business will allow the Company to support
a platform that offers an affordable healthcare insurance products;
- On 27 May 2019, the Company obtained an approval to subscribe for a 60% in Africa and Worldwide Medical
Assistance Service Proprietary Limited "Africa Assist" through its wholly owned subsidiary RH Financial Services
for a total cash consideration of R3 000 000. Africa Assist is a registered administrator that provides medical
emergency services in South Africa and in the continent.
COMMITMENTS
- The Company has entered into a R20 million loan agreement with Africa Healthcare Proprietary Limited, its
subsidiary, where the proceeds will be used by Africa Healthcare Proprietary Limited for the acquisition of Fochville
Private Hospital. The full loan amount has not been drawn by year-end.
GOING CONCERN
The Board has undertaken a detailed review of the going concern capability of the Company with reference to certain
assumptions and plans underlying various internal cash flow forecasts. The solvency and liquidity test was applied to
assess the going concern assumption.
The Board has not identified any events or conditions that individually or collectively cast significant doubt on the ability
of the Company to continue as a going concern.
DIVIDENDS
No dividend has been declared during the period under review.
On behalf of the Board
Dion Mhlaba
CFO
Quinton Zunga
CEO
Johannesburg
3 June 2019
Registered Office Transfer Secretaries
3rd floor, 18 Melrose Boulevard Computershare Investor Services Proprietary Limited
Melrose Arch, Melrose North (Registration number 2004/003647/07)
Johannesburg, 2076 Rosebank Towers,
South Africa 15 Biermann Ave, Rosebank,
Johannesburg, 2196
Directors South Africa
Q Zunga (Chief executive officer)
KD Mhlaba (Chief financial officer)
VP Nomvalo (Executive director)
MP Mehlape (Non-executive Director)
Dr. SG Motuba (Lead independent non-executive Director) Sponsor
Dr. KR Ntshwana (Independent non-executive Director) Deloitte & Touche Sponsor Services Proprietary Limited
JR Oliphant (Non-executive chairman) (Registration number 1996/000034/07)
Dr. PD Sekete (Non-executive Director) The Woodlands, Woodlands Drive
L Shezi (Independent non-executive Director) Woodmead, Sandton
Johannesburg, 2196
Company Secretary South Africa
Corporate Vision Consulting Proprietary Limited
(Registration number 2015/006536/07)
3 Decotah, Canart Street, Kyalami Hills
Johannesburg, 1684
South Africa
Auditors
Deloitte & Touche
The Woodlands, Woodlands Drive
Woodmead, Sandton
Johannesburg, 2196
South Africa
Date: 03/06/2019 08:31:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
