1. GenesisCare site performance without Doctor investment:a. 10 year Profit and Loss . Note: you...

Question

1. GenesisCare site performance without Doctor investment:
a. 10 year Profit and Loss . Note: you should utilise the high level assumptions on the left hand side, there is no need to build out detailed operating assumptions.

b. 10 year Cashflow. Note: assume no further capex is required and there is no leverage.

c. Calculate GenesisCare’s NPV for this site
d. Calculate the NPV to GenesisCare shareholders. Note: assume that GenesisCare IPOs in FY20 (year 3 of the model). In other words, calculate the sale value of the site on IPO and work out the net present value of this.
2. GenesisCare site performance with Doctor investment. Under this scenario, there is a higher growth of the service however part of the site profitability is given to doctors in return for cash upfront:

a. 10 year Profit and Loss
b. 10 year Cashflow
c. Calculate GenesisCare's NPV for this site
d. Calculate the NPV to GenesisCare shareholders.

3. GenesisCare position:

a. Utilising the analysis performed in (1) and (2) what is the net value impact to GenesisCare shareholders due to Doctor investment?

4. Doctor position:

a. What return do the Doctors receive from the investment? Note: dividends are received at the NPAT level. You should consider a number of appropriate return calculations.
5. Sensitivities:
a. Provide sensitivity analysis for GenesisCare shareholders and for Doctor
Questions – Qualitative (should be no longer than 1-2 paragraphs for each):
1. What is different financially about offering doctors investment in a greenfield site to an existing site?

2. How would you price the investment for a doctor on an existing site? Is 12x last year’s EBITDA appropriate?

3. What kind of return could a doctor receive on an existing site investment under your assumptions?

4. What kind of growth would you need in the site to justify Doctor investment to GenesisCare shareholders?

5. What is the relevance of CRG IPO plans?

6. How would you approach exit mechanisms for the doctors?

7. How would you approach bringing in new doctors, selecting doctors and replacing doctor investors?

8. If we decided to proceed with Doctor investment, noting your previous answers and analysis, how would you approach discussions and process with the doctors?
9. If we decided not to proceed with Doctor investment, noting your previous answers and analysis, how would you approach discussions and process with doctors who expressed interest?

10. If we decided to proceed with Doctor investment, what process do you think would need to occur internally to get sign off and support?

11. Who else do you think should be involved in developing this structure (e.g. advisers internally or externally)?

case-study-bd-candidates-2019analyst-clean1-pn1hqflm.docx uk-bd-case-study-oct-2019-b2ul3yp4.xlsx

Kushal · Accepted Answer

Model
						Flag year	0
						Beginning of period	Jul-19
						End of period	Jul-20
		Assumptions				GC Position - (£'000)	2020	2021	2022	2023	2024	2025	2026	2027	2028	2029	2030	2031	2032
						Site X no Dr investment
		Site	Site X				FY20	FY21	FY22	FY23	FY24	FY25	FY26	FY27	FY28	FY29	FY30	FY31	FY32
						Activity	2,758	2,841	2,926	3,014	3,105	3,198	3,294	3,392	3,494	3,599	3,707	3,818	3,933
		Activity assumptions				Revenue 	2,483	2,557	2,634	2,713	2,794	2,878	2,964	3,053	3,145	3,239	3,336	3,436	3,539
		FY18 Actual Activity 	2,600			EBITDA 	1,490	1,553	1,599	1,647	1,697	1,748	1,800	1,854	1,910	1,967	2,026	2,087	2,149
		FY19 Budget Activity	2,678			Depreciation	500	500	500	500	500	500	500	500	500	500	500	500	500
		FY20 + growth rate - no Dr investment	3%			EBIT	990	1,053	1,099	1,147	1,197	1,248	1,300	1,354	1,410	1,467	1,526	1,587	1,649
		FY20 + growth rate - with Dr investment	6%			Tax	188	200	209	218	227	237	247	257	268	279	290	302	313
		Stable growth rate 	1%			NPAT 	54	57	59	62	65	68	70	73	76	79	83	86	89
		Fractionation	15
						Patients per day	10.6	10.9	11.3	11.6	11.9	12.3	12.7	13.0	13.4	13.8	14.3	14.7	15.1
		Static business assumptions				Incremental patient per day versus prior year		0.3	0.3	0.3	0.3	0.4	0.4	0.4	0.4	0.4	0.4	0.4	0.4
		Units	1,000			Incremental patients per year		82.8	85.2	87.8	90.4	93.1	95.9	98.8	101.8	104.8	108.0	111.2	114.5
		Fee per fraction (activity)	900
		EBITDA margin on base activity	60%			Cash flow 
		EBITDA margin on incremental activity	85%
		Depreciation assumption (£'000 p.a.)	500
		Tax	19%
		GC WACC	10%			Unlevered free cash flows	554	557	559	562	565	568	570	573	576	579	583	586	589
		Days per year	260																5,951
						Present value  	504	507	509	512	514	516	519	522	524	527	530	533	536
						Terminal value													1,896
						NPV to business no dr investment 	8,650
						NPV to GC shareholders no dr investment	4,325
		Doctor investment assumptions				Site X w/ Dr investment	FY20	FY21	FY22	FY23	FY24	FY25	FY26	FY27	FY28	FY29	FY30	FY31	FY32
		LTM Entry multiple	12x			Site base activity forecast	2,678	2,839	3,009	3,190	3,381	3,584	3,799	4,027	4,268	4,524	4,796	5,084	5,389
		Exit value based on 	0			Activity at higher growth during dr investment horizon	80	85	90	96	101	108	114	121	128	136	144	153	162
		LTM Exit multiple - good leaver	12x			Activity at regular growth post dr investment horizon	80	85	90	96	101	108	114	121	128	136	144	153	162
		GC proportion	85%			Total Activity 	2,839	3,009	3,190	3,381	3,584	3,799	4,027	4,268	4,524	4,796	5,084	5,389	5,712
						Patients / day 	10.9	11.6	12.3	13.0	13.8	14.6	15.5	16.4	17.4	18.4	19.6	20.7	22.0
		Dr investment level 	15.0%			Incremental patients / day versus no investment	0.3	0.6	1.0	1.4	1.8	2.3	2.8	3.4	4.0	4.6	5.3	6.0	6.8
		Dr sale year (assumes sale at beginning of year)	5			Incremental patient / day overall (year on year)		0.7	0.7	0.7	0.8	0.8	0.9	0.9	1.0	1.0	1.

1. GenesisCare site performance without Doctor investment: a. 10 year Profit and Loss . Note: you should utilise the high level assumptions on the left hand side, there is no need to build out...

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