HARARE – Medical Air Rescue Service Pvt Limited (Mars) remains a viable business entity despite its current operations challenges, provisional judicial manager Christopher Maswi of Fairvalue Management Consultancy (Pvt) Ltd has said.
“Based on the reviews and assessments done over the last four months it is the considered opinion of the judicial manager that the company is able to be a successful concern again and the prospects of recovery are good,” he said
Maswi said the trend to date shows the company has reduced its losses from $140 000 in March 2012 to $68 000 in May 2013.
“I recommend that the business goes into final judicial management to enable the recapitalisation and restructuring process to be implemented,” Maswi said.
He added that the business — owned by businessman Zachary Wazara’s Spiritage group of companies was currently saddled with liabilities of $1 948 000, exceeding its current assets by $1,2 million.
“The current assets represent mainly debtors — an exercise is underway to clean up this area. Payroll related costs contribute 43,5 percent of total outstanding liabilities, in line with the highest cost driver already alluded to earlier. All creditors are not secured, with no fixed repayments terms,” the judicial manager said.
Maswi said the business had been hard hit by a review of its service provision arrangement with Cimas which contributed over 40 percent of the company’s revenues.
“Cimas capitation used to contribute $226 000 monthly …currently the income from the Cimas is $40 000 average per month. This represents a decrease of 82 percent,” he said.
“The decline in the proportion of medical aid schemes to total turnover is reflective of the loss of capitation where in Mars was paid on the basis of the number of members eligible for coverage by its services. Now the business is paid on a usage basis. This is the most significant single contributor to the current loss position.”
He said the company’s aviation unit would require an investment towards the acquisition of an aircraft for it to remain viable.
“The projected decline in the contribution of aviation is significant in the absence of capitation income as aviation is profitable with an average gross profit of 45 percent. However, as part of the turnaround strategies that have been identified, efforts are now underway to reverse the decline by making aviation a key component of the turn-around,” he said.
Maswi noted that the shareholder must provide funding close to $150 000 to secure an aircraft contract as this will boost the number of calls and assist in building capitation revenues for the unit.
Mars was placed under voluntary judicial management by High Court Justice Nicholas Mathonsi in February after its shareholders soughtt to revive its fortunes through the implementation of a business remodelling strategy.