Credit Analysis- MedLife

Contents
1. Description of the loan............................................................................................................................... 2
2. Description of the company....................................................................................................................... 2
2.1 Company history...................................................................................................................................... 2
2.2 Ownership structure................................................................................................................................ 3
2.3 The company management...................................................................................................................... 3
2.4 Equipment and technology....................................................................................................................... 4
2.5 Product analysis....................................................................................................................................... 4
2.6 Future Development and Strategy........................................................................................................... 5
2.7 Current outstanding credits and banking relations of MedLife...............................................................6
3.Analysis of the business/ market/ industry/ economy......................................................................................7
3.1 The private medical services industry in Romania.........................................................................................7
3.2 The analysis of the company’s competitors......................................................................................................9
3.3 MedLife’s suppliers..........................................................................................................................................10
3.4 Analysis of company’s customers...................................................................................................................10
3.5 Analysis of the company’s market position...................................................................................................11
4. Financial analysis of the borrower............................................................................................................... 12
4.1 Turnover evolution................................................................................................................................. 12
4.2 Main Financial Ratios............................................................................................................................ 13
4.3 Assets Evolution..................................................................................................................................... 14
4.4 Equity and Liability Evolution............................................................................................................... 14
5. Cash Flow Analysis...................................................................................................................................... 15
6. Collateral Analysis....................................................................................................................................... 16
7. SWOT Analysis............................................................................................................................................ 17
8. Risk Evaluation............................................................................................................................................ 17
9. Credit scoring.............................................................................................................................................. 18
10. Credit committee decision.......................................................................................................................... 19
Bibliography..................................................................................................................................................... 20

1. Description of the loan

 MedLife applied for an investment credit of 200 000 EUR, over a period of 3 years. This
credit will be used with the purpose of modernizing the medical equipment in their laboratory in
Craiova. The total value of this equipment is 250 000 EUR.
The equipment will be financed in the following manner:
 20% of the price of the equipment will be paid by the client, namely 50 000 EUR
 the remaining 80% of the equipment will be through the requested credit
The credit will be backed by a 1st rank mortgage on the building and land of the laboratory
with its equipment located in Drobeta Turnu-Severin, which is owned by MedLife.
The accepted value of the collateral is 235 00 EUR.
So far, the company has constantly invested in improving the equipment in order to provide
reliable, fast medical test results and has modernized its hospitals and clinics to offer great
services and comfort to its patients. All of this has led to the company increasing its number of
clients and profits in the highly competitive market of private medical services in Romania.
The reimbursement of the loan will be made in equal monthly installments, according to the
schedule agreed upon by both parties. The source of this reimbursement will be represented by
the monthly cash flow of MedLife.

2. Description of the company

2.1 Company history

MedLife was founded in 1996, with the first MedLife clinic that offered medical assistance in
Pediatrics, Ob-Gyn, Ophthalmology and Internal Medicine to young couples. Since then, the
company has thrived and constantly sought to develop and improve. Thus, in 1999 it opened its
first medical laboratory, in 2002 it added dental services along with a facility for physical
therapy. What followed was process of rapid expansion all across the Romanian territory, by
2015 managing to be present in all of the country’s historical regions.
Currently, the company operates:
 over 200 points of collection for medical exams
 33 laboratories
 50 clinics
 21 hyperclinics
 12 hospitals
 10 pharmacies
 12 dentistry centers
 4 maternities
 1 stem cells bank
 The mission of MedLife is to provide each and every client with professional medical
services of the highest standards, done in a safe and comfortable environment and based
on the best available equipment and technology.
2.2 Ownership structure
MedLife is organized as a SA company according to Romanian law, and a very
important piece of its history is represented by the fact that it organized the very first
Romanian IPO in 2014.
Currently, the ownership structure is as follows:

Ownership structure

Marcu Nicolae
12%

Cristescu Mihaela Gabriela

14%

Natural and Juridical

Persons
56%

Marcu Mihail
18%

Figure 1- MedLife Ownership Structure

The current total number of outstanding shares is 22 145 082 and the total social capital is
5 536 270,50 RON.

2.3 The company management

MedLife is managed in a unitary system by the Board of Directors consisting of 7
members appointed by the Ordinary General Meeting of Shareholders for a four-year
term with the possibility of being re-elected. Out of 7 members of the Medlife Board of
Directors, 2 members are independent members. The Board of Directors is responsible
for MedLife's management, acting in the interest of society and protecting the interests of
its shareholders by ensuring a sustainable development of the company. According to the
Articles of Incorporation, the Board of Directors is responsible for all necessary and
necessary acts in order to fulfil the MedLife object of activity, including the management
of MedLife subsidiaries or investments, except for the attributions attributable to the
General Meeting of Shareholders by law.
 At the date of December 31st, 2019, the Board of Directors had the following structure:
NAME TITLE
MIHAIL MARCU Member and Chairman of the Board of Directors
ANA MARIA MIHAESCU Member of the Board of Directors - independent
member
ION NICOLAE SCOREI Member of the Board of Directors
DIMITRIE PELINESCU-ONCIUL Member of the Board of Directors
DORIN PREDA Member of the Board of Directors
MARIUS-LEONARD GHERGHINA Member of the Board of Directors - independent
member
NICOLAE MARCU Member of the Board of Directors
Table 1- MedLife management Structure

2.4 Equipment and technology

The Group purchases medical equipment to ensure professionally qualified to the
highest standards medical services to every client. These devices include, but are not
limited to: optical coherence tomography systems, magnetic resonance imaging
equipment, computerized tomography equipment, bone density measuring instruments,
imaging and identification systems used in dermatoscopy, measurement equipment
hepatic rigidity.
Medlife laboratories also feature state-of-the-art equipment such as the Abbot
Accelerator A3600 automatic line placed in MedLife Grivita laboratory, the first in
Romania and in Eastern Europe.
With this equipment and the technologies used by MedLife doctors, several surgical
interventions have been successfully completed, becoming medical premieres in
Romania.
When it comes to information technology, MedLife relies on international providers
for its IT hardware infrastructure. The Company has also implemented a robust IT
infrastructure within all its hospitals, which covers admission and surgery appointments,
medical procedures, patient check-in and check-out, medical supplies and consumables
management, billing on a per-customer basis and generating general management reports.
The Laboratories business line has been equipped with software to manage the lab test
processes including the management of samples, patient records, barcode labelling and
automated procedures for final results.
2.5 Product analysis
MedLife’s business model is based on providing medical services to its clients both
individuals and companies. The group’s activities are split in six business lines:
 Corporate: the corporate business line offers client companies health prevention
packages as part of the benefits granted by the later to their employees
 Clinics: the clinics business line includes ambulatory and imagistic medical services
provided by the Group
 Laboratories: the laboratory business line includes providing laboratory analyses,
biochemical, haematological, coagulation, immunological, microbiological, anatomical,
pathological, cytological, molecular and toxicological laboratory analyses
 Hospitals: The Hospitals business line covers the Group's hospitalization activities,
consisting of a wide range of medical and surgical specializations. The 10 hospitals of the
group are located in Arad, Bucharest, Brasov, Cluj and Sibiu.
 Pharmacies: The Business Line Pharmacies offer recipe products, free products and
other associated medical products in the 10 pharmacies opened in or near the Clinics of
the Group.
 Dentistry: The Dentistry business line provides a wide range of dental services ranging
from simple examinations to complex surgery

As a result of this, MedLife has 48 subsidiaries, operating in all of these fields

mentioned above, with different stakes in them, ranging from wholly-owned subsidiaries
to the lowest stakes of around 30% in dentistry businesses. However, having expanded
into the dentistry business will almost certainly prove to be profitable seeing as it can be a
source of differentiation with regards to its other competitors, as MedLife can include
preventive dental check-ups in some of its Health Prevention Packages. Therefore, this
could prompt customers to opt for MedLife.
2.6 Future Development and Strategy
MedLife’s strategy focuses on maintaining leadership position. MedLife Group seeks
to expand its portfolio of units and services, ensuring profitable national coverage to meet
the needs of existing and new customers of the Group. At the same time, the Group
remains committed to providing clients with safe and quality medical treatments,
ensuring a balance between the medical risks and opportunities and the commercial
objectives of the Group.
The Group is pursuing opportunities to capture additional revenues and achieve
synergies within its current networks and services. The Group aims to achieve this goal
through organic growth and the acquisition of smaller providers of medical services on
the market. As a result of this strategy, over the past two years, the MedLife Group has
been characterized by significant increases in Sales of 27.5% and EBITDA of 22.4%
In regards to the future, MedLife is currently investing in the development of the
largest private medical project in Romania: MedLife Medical Park. The new medical
project will be built next to Medlife Memorial Hospital. Located in the middle of a green
area, it will have at completion 1000 beds in a total number of 8 buildings built in
pavilionary system. The medical park will include two different stages of development. In
the first stage a new hyperclinic, a center for R&D and innovation, kinetotherapy and
medical recovery rooms, two restaurants, a center of imaging and radiotherapy, pharmacy
and bio food store will be arranged. in the second stage, which is in the phase of
feasibility study, MedLife Oncological Institute will be built. The first stage will last for
18-24 months, while the second stage will take place over a period of 3-5 years.
2.7 Current outstanding credits and banking relations of MedLife
At the current moment, MedLife does not have relations with our bank, but it does
have with a number of other Romanian banks.
As at December 31, 2019, the Group's drawn and undrawn financing facilities
included the following:
 On 24 September 2019, Med Life SA (together with the co-borrowers of the
Policlinica de Diagnostic Rapid SA, Bahtco Invest SA, Accipiens SA, Genesys
Medical Clinic SRL, Clinica Polisano SRL, Centrul Medical Sama SA, Dent
Estet Clinic SA and Valdi Medica SRL) signed with Banca Comerciala
Romana, Raiffeisen Bank, BRD Groupe Societe Generale and Banca
Transilvania the refinancing of the existing facilities, the extension the
reimbursement of the related terms and conditions, as well as an additional
credit limit of 28 million euros, which will be in the form of a term facility and
will be used by Medlife, together with other company's own cash, for possible
new opportunities acquisitions in the market. At December 31, 2019, the
balance of these facilities is 343,462,123 RON;
 a guaranteed overdraft facility between Garanti Bank S.A. and Med Life S.A.,
the amount drawn on 31 December 2019 is of RON 9,558,600;
 a guaranteed overdraft facility between ING Bank SA and Solomed Clinic SA,
the amount drawn on #1 December 2019 is of RON 140,979
 an overdraft facility between Unicredit Tiriac Bank and Prima Medical S.R.L.,
with a maximum credit limit of RON 800,000, drawn in full on 31 December
2019;
 2 guaranteed loan facilities concluded between Garanti Bank S.A. and Anima
Specialty Medical Services S.R.L; the balance outstanding at 31 December
2019 is RON 5,224,159;
 an overdraft facility concluded between Garanti Bank S.A. and Anima
Specialty Medical Services S.R.L within 1,500,000 RON; on 31 December
2019 the amount drawn is RON 1,000,000;
 a guaranteed loan agreement concluded between Banca Transilvania S.A. and
Almina Trading S.A., with a balance outstanding at December 31, 2019 of
RON 113,408;
 a guaranteed loan concluded between Bancpost and Med Life Ocupational
S.R.L. worth EUR 225,000; the balance outstanding at 31 December 2019 is
RON 371,501;
 2 guaranteed loan contracts concluded between Banca Transilvania S.A. and
Ghencea Medical Center, the balance outstanding at 31 December 2019 is
RON 695,207;
 a loan agreement and a guaranteed overdraft facility between CEC Bank S.A.
and Clinic Polisano S.R.L., the balance outstanding at 31 December 2019 is
RON 35,780,086.
  a guaranteed overdraft facility between Banca Transilvania S.A. and Onco
Team Diagnostic S.A., the balance outstanding as at 31 December 2019 is
RON 549,049 RON;
 an overdraft facility contracted by Rozsakert Medical Center, the outstanding
balance at 31 December 2019 is RON 165,333;
The current portion of long-term debt on 31st of December 2019 was 24 802 015
RON, while the overdraft was 29 011 944 RON, the rest of the company’s debt being
long-term and worth 345 952 241 RON.
Furthermore, the company has outstanding mortgages on the following properties:
 mortgage on the land located in 365 Calea Grivitei Street, district 1, Bucharest
Romania (CF 201556) and related constructions
 mortgage on the land and buildings that make up the Pediatric Hospital in
Bucharest, 7 Zagazului Street - CF 218010
 mortgage on the land and buildings that make up the Clinic and PDR Hospital
located in Brasov, 5 Turnului Street - CF 127854
 mortgage on the land and buildings that make up the Clinic and Genesys
Hospital located in Arad, 5 Dr. Cornel Radu Street - CF 301842
 mortgage on the land and buildings located in Craiova, 5A Infratirii Street - CF
204837

3.Analysis of the business/ market/ industry/ economy

3.1 The private medical services industry in Romania

The private healthcare market is one that has grown significantly in the last years in
the countries in Central Europe. The value in billions of euros was expected to keep
growing until 2023, as it can be seen in the graph below:

Figure 2- Value of private healthcare market in Central Europe (bn. euros)

 In Romania, data shows that business in this sector has grown with 21.3% in 2017 and
if we look at historical data, we will see that since 2007, it has grown with a staggering
472%.
Moreover, the development of private investment was boosted by the recently
introduced tax deductibility, increasing even further the development of the healthcare
market in Romania. The average Compounded Annual Growth Rate (CAGR) for 2018-
2023 for development of the private healthcare markets in the countries in Central
Europe, show that Romania is expected to perform better than the rest.

Figure 3- CAGR for 2018-2023 development of private healthcare markets in Central Europe

This is possible due to a favorable macroeconomic environment such as the

expansion of the Romanian economy (5% in Q1 2019) and the European Commission
forecasts stated that Romanian GDP is expected to stabilize at approx. 4% YoY growths,
namely 3.8% in 2019 and 3.6% in 2020, as compared to EU – expected growth of 1.5%
in 2019 and 1.7% in 2020.
In addition to this, foreign direct investment grew by 2.9% in 2018 and successive tax
cuts between 2016 and 2018 played an important role in stimulating the economy and the
results can be seen in the recent evolution of GDP; in addition to tax incentives, many
business and entrepreneurial incentives were enabled.
Moreover, the average net salary follows an increasing trend with an increase of 13%
in 2018 and the private consumption per capita has shown consistent growth rates of 6-
8% p.a., driven by the increase of the average net salary, fiscal easing measures and low
interest rates and is expected to continue to grow in the long term at a solid pace of 5-6%
p.a.
When it comes to change of GDP per inhabitant in purchasing power standards (PPS),
Romania has increased with 5-15 percentage points & even higher than 15 percentage
points in certain regions of the country in relation to the EU-28 average between 2007-
2015.
One of the risks that is associated with the private healthcare market when it comes to
Romania is the lack of support and information from decision makers, either in the
central administration or in the healthcare sector. There is political instability which
might affect the foreign direct investment as well and bureaucracy and lack of coherent
paperwork in establishing and running a business are also major holdbacks.
Another factor that can affect MedLife in Romania at the current present time in the
pandemic of coronavirus, but this remains to be seen. The last report compiled by the
MedLife board, however, stated that they have taken the necessary measures in order to
deal with it and that when it comes to the impact over its business, the financial
statements will not be significantly affected by this event, but that is certainly subject to
change.
3.2 The analysis of the company’s competitors
This industry is highly competitive, there were 14 236 companies operating in this
sector in the territory of Romania in 2017, but the main 30 players amassed 29.7% of the
market share, a number growing as compared to the 20% recorded in 2008. The absolute
market share recorded by MedLife in 2017 was 4.1%.
MedLife’s main competitors include:
a) Reteaua Privata de Sanatate Regina Maria which was founded 1995 and which
has 31 own locations in Bucharest and the country. Its absolute market share in
2017 was 4.1%, and it has recorded an average growth rate of 19.2%, all of which
have contributed to making it the market leader by a small margin.
b) Sanador SRL which opened in 2011 the largest private hospital in Romania and in
2018 inaugurated the Oncological Center Sanador. Overall, it currently boasts with
over 1600 employed doctors and over 1500 collaborating doctors. Its absolute
market share in 2017 was 3.1%, having recorded the highest average growth rate
of 25%
c) Fresenius Nephrocare Romania SRL is next when it comes to absolute market
share in the Romanian private healthcare market, having amassed a total of 3%.
This company is specialized in dialysis and has been providing services since 2010
in our country, with an average growth rate of 11.8%.
d) Synevo Romania SRL which was founded in 1995 and has 16 laboratories and 99
collection centers in Romania. It also has a wide network of hospitals, clinics and
special care facilities that provide top quality medical services to their customers.
The absolute market share of this company is of 2.3% and it has recorded an
average growth rate of 12,4% in 2017.
e) Medicover SRL with a network of 37 clinics in Bucharest and the rest of the
country and with over 200 partner clinics and 2 hospitals. This competitor had
amassed in 2017 an absolute market share of 0.9% and an average growth rate of
approximately 6%.
3.3 MedLife’s suppliers

SUPPLIER PRODUCT PAYM PAYMENT ACQUISITION

 ENT METHOD FREQUENCY
TERM
(DAY
S)
NEPHROCARE Products for the 90 days Payment Order Once every 4-6
ROMANIA SRL treatment of chronic months.
renal diseases
TEHNO ELECTRO Anesthesia and 45-60 Payment Order Monthly
MEDICAL intensive care, days
COMPANY (TEMCO) medical diagnostic
devices, medical
furniture
GENERAL Medical devices, 60 days Payment Order Once every 3-4
ELECTRIC cardiology, months
MEDICAL SYSTEMS endoscopy and
ROMANIA surgery devices
SANTE Disinfectants 30 days Payment Order Monthly
INTERNATIONAL
GEMEDICA Medical Imaging 30 days Payment Order Monthly
devices and suture
instruments
Table 2- MedLife main suppliers

The payments time ranges between 30-90 days for all the suppliers listed by the
company. MedLife has developed long-term relationships with its suppliers and it has no
dependence on any of them.
3.4 Analysis of company’s customers
MedLife offers a wide range of packages aimed to suit the needs of companies
operating in all sectors. Thus, it offers 4 prevention packages to choose from: Executive
Package, Business Package, Classic Package and the Standard Package.
In addition to this, the company also has private individuals who pay. In this case, the
payment is either done directly by the patient through cash payments or through the
National Health House.

CUSTOMER PRODUCTS PAYMENT PAYMENT

FREQUENCY METHOD
MICHELIN Healthcare Monthly Payment Order
insurance packages
BVB Healthcare Monthly Payment Order
insurance packages
EMAG Healthcare Monthly Payment Order
insurance packages
SOFTVISION Healthcare Monthly Payment Order
insurance packages
BRITISH Healthcare Monthly Payment Order
COUNCIL insurance packages
REGA Healthcare Monthly Payment Order
ENGINEERING insurance packages
Table 3- MedLife main customers

Overall, the company has reported that the average credit period on collection for
services rendered is 90 days. They have formed long-term partnerships with the
companies for which it offers healthcare insurance and they currently have about 5000
companies in their portfolio. Credit risk is spread over a large customer base and the
Group is not dependent on the collection of receivables from a limited number of
customers.
3.5 Analysis of the company’s market position
Ever since it has started its journey in the Romanian private healthcare market,
MedLife has managed a process of organic growth which is owed to a great extent to the
quality of the services that it provides. The brand reputation and image have helped it
gather a large, diverse pool of customers, which is reflected in the fact that in its 20 years
of operations it has served over 5 million unique customers. About 57% of its sales come
from the Private sector (cash), while 24% come from Health Prevention Packages (HPP).
The remaining 19% of its recorded sales are coming from Public Money through the
State and the National Health Insurance Houses.
The structure of MedLife’s turnover is as it follows:

Turnover structure
Other
StomatologyPharmacies
6% 5%1% Clinics
30%
Laboratories
17%

Corporate Hospitals
20% 21%

Clinics Hospitals Corporate Laboratories

Stomatology Pharmacies Other

Figure 4- Turnover Structure

As it can be seen, the main source of turnover is represented by the clinics, followed
by hospitals and the corporate sector close by. The stomatology represents a lower part,
but MedLife believes that this number will grow in the following years.
4. Financial analysis of the borrower

4.1 Turnover evolution

Evoluti on of the turnover 2017-2019 (RON)

1,200,000,000

1,000,000,000

800,000,000

600,000,000

400,000,000

200,000,000

0
2017 2018 2019

Evolution of the turnover 2017-2019 (RON)

Figure 5- Turnover Evolution

As it can be seen in the graph presented above, MedLife has found itself recording an
increasing turnover trend, with the turnover results improving significantly each of the
studied years. Therefore, in 2018 the sales went up by 27.5% and in the following year,
2019, the sales increased by 22% compared to the figure in 2018.
This can be explained mainly by the significant growth in all of the Group’s business
lines, led on a percentage basis by Clinics, Hospitals, Corporate and Laboratories, as well
as the impact of the acquisitions completed by the Group. The highest increase, of over
30% was recorded in the Dentistry field, showing that the investments are starting to pay
off. Among the most important acquisitions recorded by the company in the timeframe
2018 are Solomed Clinic, Ghencea Medical Center and Polisano Clinic, while in 2019,
the most noteworthy ones are: Rozsakert Medical Center Group Hungary, Onco
Team Diagnostic, Lotus Hospital and Micromedica Medical Center.

4.2 Main Financial Ratios

YEAR 2017 2018 2019

TURNOVER 623,219,949 RON 794,562,861 RON 967,380,307 RON
EBITDA 77,937,407 RON 95,375,554 RON 149,738,299 RON
EBIT 14,276,545 RON 23,833,882 RON 29,083,155 RON
NET PROFIT 8,731,625 RON 16,782,637 RON 29,083,155 RON
EQUITY 167,661,959 RON 178,872,902 RON 210,265,569 RON
TOTAL DEBT 0.72 0.77 0.79
RATIO
CURRENT RATIO 1.02 0.67 0.62
OPERATING 5.6% 4.8% 5.8%
PROFIT MARGIN
SOLVABILITY 1.38 1.31 1.25
INTEREST COVER 2.45 2.45 2.93
EQUITY RATIO 27.7% 23.72% 20%
Table 4- Main Financial Ratios

The increase recorded in the EBITDA was of 22.4% in absolute value in 2018
compared to 2017, respectively an increase of 57% in absolute value in 2019 compared to
2018. The increase was also influenced by the implementation of IFRS 16, which restates
rent expenses in financial expense and depreciation. The impact of IFRS 16 on EBITDA
for 2019 is RON 36,904,921.
We can also note that EBIT has been constantly increasing, influenced by the constant
increase in sales. In addition to this, other factors of significant influence when it comes
to understanding the operations of MedLife and its Profit and Loss account, which
directly influence the profit, are the operating expenses. There were, as a percentage of
sale, relatively constant, at 95.6% in 2017, 95.2% in 2018 and 94.2%, with a slight
decrease in all of the years studied due to the company’s improvement of its technology.
The increase in MedLife’s equity is mostly due to an increase in the retained earnings
and also from a much smaller increase in the non-controlling interests.
The total debt ratio is below 1 and it has remained relatively constant, around 0.7,
which is below 1 and it shows that a greater portion of the company’s assets is funded
through debt. The increase recorded between 2017 and 2019 is a result of some of the
added debt that the company has incurred in order to finance its future plan regarding
MedLife Medical Park.
The current ratio has significantly dropped due to the large amount of debts that
MedLife has taken out in the last 2 years to build its projects and acquire stakes in
numerous businesses. Thus, before it was slightly above 1, indicating that it could meet
its short-term liabilities, while now it rests below 1 showing that there might be some
trouble with that.
The operating profit margin has increased slightly from 2018, which is in line with the
company’s stated plans of working hard to increase the profit margin for each of the units
of business that it operates, through the improvement of the IT documentation of patient
conditions by using better suppliers of technology from abroad and employing a better
cost-saving method regarding the employees’ paid time and health insurance.
The interest coverage of MedLife has increased in 2019 from the previously recorded
2,45 and it indicates that the company is being able to pay the interest on its outstanding
debt and this was done by increasing the net operating income and by slightly decreasing
 the operating expenses as it was seen before, while also paying the current part of its
debt.
The equity ratio shows how much the company’s assets have been generated by
issuing equity shares rather than by taking on debt. The decrease noted in the case of
MedLife is consistent with the fact that it took out larger amounts of debt in 2018 and
2019 in comparison to 2017 in order to finance its future development plans.

4.3 Assets Evolution

The assets increase in 2018 from 2017 was of approximately 25% and it was owed to
an increase in goodwill and also in great part to a sharp increase in the tangible fixed
assets, from 325,845,288 RON to 458,033,010 RON. The increase was mainly due to the
acquisitions performed: Polisano, Solomed and Ghencea. When it comes to the current
assets, the ones that help explain this increase are the inventories and receivables which
both grew significantly.
The increase in assets from 2018 to 2019 was of 35.6% which is explained by the
increase in tangible assets, consistent with the firm’s acquisitions of Rozsakert Medical
Center Group Hungary, Onco Team Diagnostic, Lotus Hospital and Micromedica
Medical Center. In addition to this, there was also a big increase in the receivables.
4.4 Equity and Liability Evolution
Total equity and liabilities increased between 2017 and 2018, the main cause being
the sharp increase in the liabilities. This is mainly due to the large amounts of long-term
debts and overdrafts that MedLife has incurred and which have been already presented in
this report.
This trend of increasing the debt was even more pronounced in the period between
2018 and 2019, when the long-term debt went from 287,013,365 RON to 345,952,241
RON and in the trade account payable. The equity ratio evolution as well as the total debt
change are some financial indicators that have reflected the changes brought by the
amount of debt that the company is taking out. The drop in the current ratio is also a good
indicator and it shows that MedLife might not be able to meet its short-term liabilities.

5. Cash Flow Analysis

DISCOUNTED CASH FLOW
2020 2021 2022 2023
NET CASH 6,052,161.04 8,166,834.84 9,560,807.83 10,529,930,29
FLOW
DISCOUNT 0.87 0.75 0.65 0.57
FACTOR
CASH FLOW 5,265,380.1 6,125.126.13 6,214525.08 6,222,060.26
PRESENT
VALUE
Table 5- Cash Flow Analysis
 Starting with EBIT, we took out the taxes, the changes in the working capital and
CAPEX and added the depreciation and amortization in order to obtain the net cash flow.
Using the discounted cash flow model, we computed the present value of the cash flows
using the following assumptions:
 the bank will grant the credit
 because of the purchase of the new equipment and the evolution of the private
healthcare industry, the sales will grow by 6% in the next year, 8% in 2022 and
then at 7.5% in 2023
 the working capital changes will have a similar trend to the operational
revenues
 the depreciation expenses were computed by taking into account the book
value of the new equipment (1 225 000 RON) with a useful life of 5 years and
the depreciation of the old equipment
 the income tax rate is 16% and the discounting rate used for the cash flows is
15%
 the financial expenses will be represented by the reimbursement of the loan
granted by us, along with the other loans that MedLife already has taken out
 the salary expenses are expected to also increase because MedLife has plans of
opening up a new hospital and some clinics within the timeframe discussed
 the Dentistry branches of MedLife will start generating greater revenues
The increase in sales of the company is estimated to increase greatly by 2023, thus
prompting an increase in the net income before taxes which will go up from 29,983,155
RON in 2019 to 36,713,545 RON in 2023. This will be owed to the new equipment
bought, the opening of even more MedLife clinics and the MedLife Medical Park and
also because of the high growth that the Dentistry is currently experiencing.
As it can be seen from the forecast of the cash flows, MedLife has a positive operating
cash flow that will generate the needed cash in order to cover its debts. The projected net
cash flows also have steadily increasing values.

6. Collateral Analysis
The credit will be backed by a 1st rank mortgage on the building and land of the
laboratory with its equipment located in Drobeta Turnu-Severin, which is owned by
MedLife.
The market value of the collateral is 313 000 EUR, to which the bank applied a 25%
risk coefficient, thus resulting in the accepted market value of 235 000 EUR.
The value of this collateral covers the entire amount of the loan agreement (the loan
amount, the amount of interest payable in the course of the first year of the credit) and
also the expense related to the collateral enforcement.
7. SWOT Analysis

Strengths:
Weaknesses:
strong brand and reputation in Romania
leader of the private healthcare market in
Romania and comptetent management prices above average for a large portion of the
Romanian market
one of the large providers of private
healthcare services in Central and Eastern Europe expensive data protection software needed
balanced and robust business model, spanning all long wait times for patients insured through
key private healthcare segments NHH
largest number of HPP clients in Romania big amount of administrative work
Strong financials with an asset-rich balance sheet
Access to the financing required for expansion
Sales largely from cash-pay and HPP with low
dependency on NHIH funding

Opportunities:
MedLife
expanding global market for medical services
increased expenditure on medical services
rising demand for good quality healthcare
aging of the population
growth of the private healthcare market
Threats:
high political instability
Romanian doctors leaving to Western
Europe
high, exacerbated competition
government regulations and possibility of
lawsuits
new, emerging start-ups in the medical
tech field

Figure 6- SWOT Analysis

8. Risk Evaluation

KEY RISKS MITIGATION FACTORS

LIQUIDITY RISK The board of directors has built an appropriate framework for dealing with this.
Some of the measures that it needs to address this risk are maintaining
adequate reserves, continuously monitoring forecast and actual cash flows and
matching the maturity profiles of financial assets and liabilities.
CREDIT RISK The company could mitigate this risk by setting credit limits for individual
customers and monitoring outstanding receivables. It could also perform
regular analysis of debt service, ageing of receivables, etc.
BUSINESS RISK The experienced management is a good indicator of the mitigation of this risk
and also the organic growth process of the company of the course of the years.
MARKET RISK This can be mitigated by the growth of the private healthcare system, in Central
Europe and in Romania particularly. By constantly investing and acquiring new
companies and equipment, MedLife will be able to remain one of the top
players in this developing industry.
REPAYMENT RISK The company has good financials, the ability to pay in time has stood the test of
time and the reputation also attest to this, while the countrywide coverage
ensures customers in one of the fastest developing industries.
FOREIGN The main foreign exchange risk that MedLife is exposed to is the one regarding
EXCHANGE RISK EUR and RON, yet the good profit margin will help them mitigate this risk. It
could also consider hedging and using options or futures.
Table 6- Risk evaluation

9. Credit scoring
Evaluation Weight Values Mark Evaluation
criteria
Qualitative criteria
Management 21% Experience 1 0.21
quality, age of within the
the company and market, good
business strategy, reputation,
collateral good
received development
strategy,
organic
growth
Ownership 4% Most shares 2 0.08
structure owned by the
management
Quantitative criteria
Current ratio 18% 0.62 5 0.9
Solvability 18% 1.25 2 0.36

Operating 12% 5.8% 3 0.36

Profit Margin
Interest Cover 18% 2.93 3 0.54
Equity ratio 9% 20% 2 0.18
Client rating- 2.63-B
financial
performance
Figure 7- Credit Scoring

MedLife has an overall credit score of 2.63, which according to the bank’s norms is
included in the type B category of credits, meaning credits under supervision. In this
class, there are included companies who currently have a good financial standing, but
will not be able to maintain it in the following period. This could be owed to the
 extensive debts that the company has taken out in order to fund its acquisition of other
companies and to invest in its plan of opening MedLife Medical Park.

10. Credit committee decision

Taking into account all the facts previously presented, the Credit Committee approved
the investment credit of MedLife under the following conditions:
 credit type: investment credit
 purpose: modernizing the medical equipment in the laboratory in Craiova.
 amount: 200 000 EUR
 interest: 10%
 collateral: 1st rank mortgage
 contract date: May 2020
 maturity date: April 2023
 Other conditions:
 The company will not apply for any other credits without the written
approval of the bank due to the already high number of outstanding
credits
 The company will carry out at least 80% of the payments through this
bank
 The payment of dividends will only be done with the written approval
of the bank
In case MedLife does not fulfill any of the above conditions, the Bank maintains the right to
increase the interest rate by an additional 3%, to declare the contract null and to demand payment
in advance of all its obligations.
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Table of Figures:
Figure 1- MedLife Ownership Structure......................................................................................................3
Figure 2- Value of private healthcare market in Central Europe (bn. euros)...............................................8
Figure 3- CAGR for 2018-2023 development of private healthcare markets in Central Europe..................8
Figure 4- Turnover Structure.....................................................................................................................12
Figure 5- Turnover Evolution.....................................................................................................................12
Figure 6- SWOT Analysis............................................................................................................................17
Figure 7- Credit Scoring.............................................................................................................................18
Y

Table 1- MedLife management Structure....................................................................................................4

Table 2- MedLife main suppliers................................................................................................................10
Table 3- MedLife main customers.............................................................................................................11
Table 4- Main Financial Ratios...................................................................................................................13
Table 5- Cash Flow Analysis.......................................................................................................................15
Table 6- Risk evaluation.............................................................................................................................18