Lumina Specialist Hospital — Financial Plan

Key assumptions, the projected income statement, balance sheet and cash flow, the revenue and EBITDA-margin trajectory, debt service and DSCR, working capital and the financial ratios.

Section 13 · Business Plan

Financial Plan

Key assumptions, the projected income statement, balance sheet and cash flow, the revenue and EBITDA-margin trajectory, debt service and DSCR, working capital and the financial ratios.

The financial plan presents a fully integrated three-statement model
over a seven-year operating horizon. The Sponsor’s headline revenue and
EBITDA ambitions are retained, but profitability is re-derived
independently and conservatively — charging full depreciation and
amortisation, full interest (including capitalised mezzanine interest)
and South African corporate tax at 27% with assessed-loss carry-forward.
The balance sheet ties to zero in every year.

13.1 Key modelling assumptions

Assumption	Basis
Horizon	7 operating years; Year-7 trade-sale exit at 8.0x EBITDA
Licensed beds	120 (phased: ~80 → 100 → 120 by Year 3)
Occupancy	45% (Y1) ramping to 72–74% (Y5–Y7)
Revenue per patient day	R9,800 base, escalated 6.5% p.a.
Tariff escalation	6.5% p.a.; opex 6.0%; salaries 6.5%
Staff costs	~46% of revenue in ramp → ~36% at maturity
Consumables & pharmacy	~24.5% of revenue
Working capital	Debtors 55 days; inventory 30 days; creditors 45 days
Tax	27% with assessed-loss carry-forward (80% limitation)
Senior debt	R450m @ 11.75%; 3-yr capital grace; amortise Yrs 4–15
Subordinated (mezzanine)	R150m @ 14.0%; PIK Yrs 1–3; cash interest Yrs 4–7; bullet
Discount rates	WACC 13.5%; equity hurdle 16.5%

Reading these projections

These are forward-looking projections built on the assumptions above.
They are internally consistent and conservatively derived, but they are
not forecasts of certain outcomes. The honest-analyst caveats throughout
this section identify where results are most sensitive and where the
authors judge assumptions to be optimistic.

13.2 Projected income statement

Revenue grows from R240m to R784m as occupancy ramps. EBITDA is
positive throughout, but full depreciation on a R720m asset base and
heavy early interest produce net losses in Years 1–4, with net-profit
break-even in Year 5.

R’million	Y1	Y2	Y3	Y4	Y5	Y6	Y7
Revenue	240	370	512	593	666	725	784
Operating expenses	(221)	(322)	(425)	(480)	(535)	(577)	(619)
EBITDA	18	48	87	113	131	149	165
Depreciation & amortisation	(65)	(65)	(65)	(53)	(46)	(46)	(46)
EBIT	(47)	(17)	22	61	85	103	119
Net interest	(74)	(77)	(80)	(84)	(80)	(75)	(71)
Profit before tax	(121)	(94)	(58)	(23)	6	28	48
Taxation	0	0	0	0	(0)	(1)	(3)
Net profit / (loss)	(121)	(94)	(58)	(23)	6	26	46

Figure 13.

Figure 13. Net profit re-derived conservatively — break-even from Year 5 (R’m).

Honest analyst note — margin &
profitability

The EBITDA margin reaches 21% by Year 7, deliberately conservative
versus listed peers. However, the venture absorbs cumulative net losses
of roughly R296m before turning profitable in Year 5. This accumulated
deficit erodes book equity during the ramp — a normal feature of
greenfield hospitals, but one that distorts gearing ratios and requires
the funded reserve to carry the venture through.

13.3 Projected balance sheet

The balance sheet is anchored by net property, plant and equipment,
which depreciates from the R720m initial asset base, and by debt that
peaks early and then amortises. Retained earnings are negative through
the ramp and recover as profits accumulate. The balance check is zero in
every year.

R’million	Y1	Y2	Y3	Y4	Y5	Y6	Y7
Net PP&E	655	590	525	484	451	419	389
Receivables	36	56	77	89	100	109	118
Inventory	5	7	10	12	13	15	16
Cash	114	92	108	77	66	67	75
Total assets	810	745	720	662	631	610	598
Debt (senior + mezz)	621	645	672	635	597	560	522
Payables	10	15	20	23	26	29	31
Share capital	300	300	300	300	300	300	300
Retained earnings	(121)	(214)	(273)	(296)	(293)	(278)	(256)
Total equity & liabilities	810	745	720	662	631	610	598

Figure 14.

Figure 14. Balance-sheet evolution — asset composition by year (R’m).

13.4 Projected cash flow

Operating cash flow turns positive early and strengthens with the
margin, but investing outflows (initial capex and ongoing maintenance
capex) and financing flows (drawdowns, interest and amortisation) shape
the cash trajectory. The funded reserve keeps the closing cash balance
positive throughout the ramp — cash never falls below R66m.

R’million	Y1	Y2	Y3	Y4	Y5	Y6	Y7
Operating cash flow	(66)	(22)	15	18	42	64	84
Investing cash flow	0	0	0	(12)	(13)	(14)	(15)
Financing cash flow	0	0	0	(38)	(40)	(49)	(60)
Net cash movement	(66)	(22)	15	(31)	(11)	1	8
Closing cash balance	114	92	108	77	66	67	75

Figure 15.

Figure 15. Cash-flow components and closing cash — the reserve bridges the ramp (R’m).

13.5 Debt service & DSCR

Senior debt carries a three-year capital grace period and then
amortises; the subordinated mezzanine capitalises (PIK) its interest
during the ramp, rolling its balance from R150m towards roughly R222m
before converting to cash-pay and a later bullet repayment. Debt-service
cover is below 1.0x in the early ramp and again as senior amortisation
begins, recovering above 1.2x as EBITDA matures.

R’million / ratio	Y1	Y2	Y3	Y4	Y5	Y6	Y7
Cash available for debt service	(13)	31	68	102	121	139	154
Senior interest	53	53	53	53	48	44	40
Senior principal	0	0	0	38	38	38	38
Mezzanine cash interest	0	0	0	31	31	31	31
Total cash debt service	53	53	53	121	117	113	108
DSCR (x)	-0.24x	0.59x	1.29x	0.84x	1.04x	1.24x	1.43x

Figure 16.

Figure 16. Debt outstanding — senior amortises while subordinated PIK rolls then bullets (R’m).

Figure 17.

Figure 17. Debt-service cover ratio — sub-1.0x in ramp/early-amortisation years, DSRA-covered.

Honest analyst note — debt service

DSCR falls below 1.0x in Year 1 (-0.24x) and again in Year 4 (0.84x)
as senior amortisation begins before EBITDA has fully matured. The
structure relies on the funded debt-service reserve and the PIK feature
of the mezzanine to bridge these troughs. Lenders should size the
reserve to a stressed ramp and consider a cash-sweep and a covenant
holiday or step-up schedule rather than flat covenants from Year
1.

13.6 Working capital

Working capital is a meaningful early use of cash: at 55 debtor days,
receivables build quickly as revenue scales, partly offset by 45
creditor days on consumables and 30 days of inventory. Disciplined
scheme claiming and collections are essential to avoid a deeper cash
trough.

R’million	Y1	Y2	Y3	Y4	Y5	Y6	Y7
Receivables (55 days)	36	56	77	89	100	109	118
Inventory (30 days)	5	7	10	12	13	15	16
Payables (45 days)	(10)	(15)	(20)	(23)	(26)	(29)	(31)
Net working capital	31	48	67	78	87	95	103

13.7 Break-even analysis

On a Year-5 cost base, the venture covers its fixed costs and full
debt service at an occupancy of approximately 71%, against a base-case
Year-5 occupancy of 72%. The margin of safety is therefore only about 1
percentage points — thin, and the clearest single indicator of the
venture’s sensitivity to the demand ramp.

Figure 18.

Figure 18. Occupancy versus net-profit break-even — a thin margin of safety.

13.8 Sensitivity analysis

Year-5 EBITDA is most sensitive to occupancy/volume and to tariff
(revenue per day), and secondarily to the staff-cost and consumables
ratios. A swing of a few percentage points in occupancy or tariff moves
EBITDA by tens of millions of rand, underlining why payer contracting
and the ramp dominate the risk picture.

Figure 19.

Figure 19. Sensitivity of Year-5 EBITDA to key value drivers (R’m).

13.9 Scenario & stress analysis

Three scenarios frame the range of outcomes. The downside applies a
slower ramp and tighter tariffs; the upside reflects faster contracting
and stronger case mix. The base case sits between them and is the
reference for the returns below.

Scenario	Y3 revenue	Y5 revenue	Y7 revenue	Y7 EBITDA
Downside	R429m	R559m	R658m	R125m
Base	R512m	R666m	R784m	R165m
Upside	R563m	R732m	R860m	R189m

Figure 20.

Figure 20. Scenario analysis — revenue and EBITDA under downside, base and upside (R’m).

13.10 Leverage & covenant dashboard

Net debt to EBITDA falls from a very high ramp-year multiple towards
roughly 3.2x by Year 7 as EBITDA matures and senior debt amortises. The
indicative covenant package below should be tested against the downside
scenario.

Metric	Y3	Y4	Y5	Y6	Y7	Indicative covenant
Net debt / EBITDA (x)	7.7x	5.6x	4.6x	3.8x	3.2x	≤ 3.5x by Y6
DSCR (x)	1.29x	0.84x	1.04x	1.24x	1.43x	≥ 1.20x (post-ramp)
Current ratio (x)	9.6x	2.9x	2.8x	2.9x	3.1x	≥ 1.0x
EBITDA margin	17%	19%	20%	21%	21%	trend ↑

Figure 21.

Figure 21. Deleveraging profile — net debt / EBITDA by year.

Honest analyst note — leverage

Ramp-year leverage is very high and gearing ratios are further
distorted by the accumulated deficit eroding book equity. The
deleveraging path is credible but back-ended — it depends on EBITDA
maturing on plan. Covenants set to base-case levels from Year 1 would be
breached; a covenant profile that steps up with the ramp (with a reserve
and cash-sweep) is the appropriate structure.

13.11 Returns

On the base case, the Project generates an unlevered IRR of 16.8% and
a positive NPV of R141m at a 13.5% WACC. Equity returns are driven
substantially by the Year-7 exit: at an 8.0x EBITDA trade sale, equity
IRR is 17.2% with a money multiple of 3.02x.

Figure 22.

Figure 22. Returns versus hurdle rates, with equity MOIC and project NPV.

Return metric	Base case
Project IRR (unlevered)	16.8%
Project NPV @ 13.5% WACC	R141m
Equity IRR	17.2%
Equity money multiple (MOIC)	3.02x
Implied Year-7 exit enterprise value	R1,317m
Implied Year-7 equity value	R870m

Figure 23.

Figure 23. Year-7 exit — enterprise-value-to-equity-value bridge (R’m).

Honest analyst note — returns & exit
dependency

Equity returns are materially exit-dependent. The 17.2% equity IRR
assumes a Year-7 sale at 8.0x EBITDA; at 7.0x the equity value and IRR
fall sharply, and a delayed exit compresses the multiple further. The
equity NPV at the 16.5% hurdle is only modestly positive (R12m), meaning
the base case clears the equity hurdle by a slim margin. Investors
should treat the exit multiple, exit timing and the ramp as the three
variables that determine whether this is an attractive equity
investment.

Confidential — this business plan is provided to prospective investors and lenders for evaluation purposes only and may not be reproduced or distributed without the written consent of Lumina Health Holdings (Pty) Ltd.