The Tribune

• Yet to determine mechanism, size of equity raise

• Aims to ‘near double’ pre-COVID’s $60m revenue

• Eyes solution for up to $5m ‘uncompensated’ care’

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Doctors Hospital is targeting end-August 2023 for a share offering that will give more Bahamians an ownership interest in the healthcare provider just as it aims to “near double” pre-COVID’s $60m annual revenues.

Dennis Deveaux, the BISX-listed company’s chief financial officer, told Tribune Business it was committed to the offering although the size of the capital raise and mechanism that will be employed are still being determined.

Disclosing that RF Bank & Trust has been retained as financial advisers for the offering, he pledged that Doctors Hospital will “engage” both existing shareholders and potential new investors about the merits of a rights issue, private placement or some combination of both as it seeks to broaden the company’s existing 1,000-strong equity ownership base.

The offering proceeds will ultimately finance Doctors Hospital’s “fairly aggressive expansion agenda”, which includes its new 50,000 square foot-plus Freeport hospital plus clinics and outpatient facilities in Grand Bahama, the Family Islands and New Providence.

Mr Deveaux, confirming that Doctors Hospital will open one facility on the “Village Road corridor” this year, along with another New Providence location he has yet to disclose, told this newspaper that recent investments on the island are expected to pay dividends as early as the company’s current financial year by generating an extra $5m in revenue.

He explained that this growth that has given the BISX-listed private healthcare provider confidence it can “near double” the $60m annual revenues it was generating pre-COVID. Disclosing that Doctors Hospital is targeting improved efficiency, and aiming to hit a net profit margin of 10 percent over the mid-term, Mr Deveaux added that it is keen to partner with the Government to address the $3m-$5m it provides in annual care for which it never receives payment.

“We will announce towards the end of August that we are going to be going to market with an opportunity for Bahamians to purchase stock in the company,” he told Tribune Business. “We think it’s an exciting opportunity for Bahamians to participate in healthcare transformation in The Bahamas by helping to contribute on our plans.

“We have executed an agreement with RF Bank & Trust to act as financial advisers, and towards the end of August - shortly after our annual general meeting (AGM) - we intend to be coming to market with a public offering.” Mr Deveaux, though, said Doctors Hospital and its advisers have yet to determine how much capital they will seek to raise from offering ordinary (equity) shares to investors.

“We haven’t set a quantum yet for the raise. That will be determined in the coming weeks as we work through the road to the raise with RF Bank & Trust,” he added. “We do envision using a combination of equity through the capital raise and have secured some commitments around debt financing. It’s likely to be a combination of both that we look to to fuel our growth.”

Doctors Hospital is also exploring whether the share offering will take the form of a rights issue, where existing shareholders are given an opportunity to acquire new stock in proportion to their existing holdings, or a private placement where new investors are also sought. A combination of both remains a possibility.

“We do envision some existing shareholders are likely to take up a portion of the raise,” Mr Deveaux said. “We haven’t determined if we will do a rights offer or private placement yet. We haven’t worked this out, and will be engaging key groups of shareholders to see if there’s an interest in them subscribing from a rights perspective.

“We are also likely to engage key groups who are non-shareholders to see if there’s interest in a private placement.” While Doctors Hospital is seeking to broaden its ownership base via either mechanism, he added that the “most important” goal was to give small retail (individual) investors the chance to acquire equity ownership and “participate in what is an amazing success story - the transformation of private healthcare in the country.

“We have 1,000 shareholders and through this offering we expect to expand that and hope Bahamians will follow the success story that is Doctors Hospital and join us in the transformation of private healthcare in the country.”

Asked how Doctors Hospital plans to use the share offering proceeds, Mr Deveaux replied: “We continue to have a fairly aggressive expansion agenda. The largest use of the funds is going to be the construction of the healthcare system in Grand Bahama, with the flagship facility in Freeport north of 50,000 square feet.

“Beyond that, we envision rounding out of the EAGLE initiative where we’re looking at investments in Eleuthera, Abaco, Grand Bahama and Exuma. That’s obviously driven by our president and chief executive, Charles Diggiss. It goes beyond the establishment of a new hospital; it’s also investing in our out-patient space.

“We are planning two new openings in New Providence before the end of 2023. One is on the Village Road corridor, and the other is subject to future announcement. Last year we invested fairly significantly, $6m, in a new electronic health records system and then several million dollars in expansion to The Pointe, Carmichael Road, the clinic at Dowdeswell Street, the new relationship with Baha Mar,” Mr Deveaux continued.

“Our expectation is that those clinics will not only broaden access to quality private healthcare services but they are expected to generate revenues in excess of $5m in the current financial year, which is obviously a significant uptake from the Bahamian public.

“Based on these investments, we expect to see a near-doubling - not quite a doubling - of our revenue line relative to pre-COVID. The pre-COVID benchmark was our revenue line was about $60m a year, and while we will not see a doubling of that we expect to see a significant revenue curve following the investments from last year. That’s an important thing going into a market offering.”

Mr Deveaux said Doctors Hospital is keen to partner with the Government to address the $3m-$5m in “uncompensated care” that the BISX-listed provider grapples with annually, meaning care that patients do not subsequently pay for. “We continue to experience, as we continue to grow, a significant level of uncompensated care,” he told Tribune Business.  

“We know our ethical obligation is to treat people when they come in and save life. But that represents a loss that is starting to approach $3m-$5m a year. We’re really anxious on how we can partner with the Government of The Bahamas on defining a sustainable financial strategy for uncompensated care in the country.

“We know that as we seek to balance access that partnership is going to be the linchpin of what allows Bahamians to access high quality care and life saving interventions through Doctors Hospital.” Mr Deveaux said the company’s employees have always responded “to the clarion call”, and added: “We know healthcare in the country has been broken for a while, and it’s part of our vision to stand in the gap and grow the business.

“We’re improving our efficiency. In the mid-term, we have set ourselves an efficiency benchmark measured by net income [margin) of north of 10 percent. We think that’s critically important for sustainability. We think Bahamians want to know the country’s largest healthcare system is not only accessible and affordable, but financially resilient.

“We are running a good business, and in a position to deliver sustainable returns to shareholders. These priorities are not in competition; they must by aligned with quality healthcare, growing the top-line and sustainable returns for shareholders. These represent the triad of priorities that we have to execute on.”