199.

PROFILE ON VETERINARY CLINIC

 199-2

TABLE OF CONTENTS

PAGE

I. SUMMARY 199-3

II. SERVICE DESCRIPTION & APPLICATION 199-3

III. MARKET STUDY AND SERVICE CAPACITY 199-4

A. MARKET STUDY 199-4
B. SERVICE CAPACITY 199-6

IV. MEDICAL SUPPLIES AND UTILITIES 199-6

A. MEDICAL SUPPLIES 199-6
B. UTILITIES 199-10

V. MEDICAL EQUIPMENT AND BUILDING 199-11

A. MEDICAL EQUIPMENT 199-11

B. LAND, BUILDING & CIVIL WORKS 199-12

VI. MANPOWER & TRAINING REQUIREMENT 199-12

A. MANPOWER REQUIREMENT 199-12
B. TRAINING REQUIREMENT 199-12

VII. FINANCIAL ANLYSIS 199-14

A. TOTAL INITIAL INVESTMENT COST 199-14
B. OPERATION COST 199-15
C. FINANCIAL EVALUATION 199-16
D. ECONOMIC BENEFITS 199-17
 199-3

I. SUMMARY

This profile envisages the establishment of a veterinary clinic with a capacity of

treating 20 – 25 livestock and pet animals per day.

The market study shows that in Addis Ababa currently 5 veterinary clinics are required.
If additional veterinary clinics are not established the requirement will increase to 14 by
the year 2020.

The total investment requirement is estimated at about Birr 7.44 million, out of which
Birr 2.74 million is required for equipment. The center will create employment
opportunities for 25 persons.

The project is financially viable with an internal rate of return (IRR) of 21.80% and a
net present value (NPV) of Birr 511.24 thousand discounted at 8.5%.

II. SERVICE DESCRIPTION AND APPLICATION

A veterinary clinic is an institution that provides preventive and curative medical services
to livestock and pet animals. Most people only take their pet to a veterinarian when a
health problem already exists or for routine vaccinations. Preventive vaccinations and
early detection of diseases are the keys to successfully treating the pet. Because of the
shorter life span of livestock and pet animals, it shall stress the importance of veterinary
clinic and the clinics will make through check-up and preventive care can help alleviate
serious heath problems.
 199-4

III. MARKET STUDY AND SERVICE CAPACITY

A. MARKET STUDY

1. Past Supply and Present Demand

Veterinary medicine, branch of medical science that deals with the health and welfare of
animals. Doctors of veterinary medicine diagnose and treat the diseases and injuries of
household pets and livestock.

According to the data obtained from the Urban Agricultural Department of Addis Ababa,
veterinary service is on the part of Urban Agriculture Development and is given through
the Agricultural Development Team in Trade and Industry Offices in seven sub-cities.
Moreover, currently they are ten veterinary clinics operating in the city which means
there are a total of 17 veterinary service providers in Addis Ababa.

In Addis Ababa, in the intra urban areas it is estimated that about 31,000 cross bred cattle
are found while in peri-urban areas about 35, 700 heads of local cattle are found which
means there are a total of 66,700 cattle in and around Addis Ababa.

On the other hand the poultry population in the Addis Ababa is estimated at about
350,000 while the number of sheep and goats (shoats) is estimated to be about 28,000.

Regarding pet animals ( cats and doges) there is no official data available. However, it
can be conservatively assumed that in Addis Ababa 50% of the households own a cat or
dog. Therefore , considering the current (2008) number of house holds in Addis Ababa
which is 659,434 it can be assumed that there are 329,717 cats and doges in the city.

Therefore, the total number of animals that require veterinary service are estimated at
1,104,134. Assuming that one veterinary clinic is required for 50,000 animals the total
 199-5

veterinary clinic requirement of the city is estimated to be 22. The existing number of
veterinary clinics in the city is 17 which mean demand exceeds supply by 5 clinics.

2. Projected Demand

In projecting the demand for veterinary clinics it is assumed that number of animals
increases at annual average growth rate 2.9% which is equivalent to the growth rate of
households. Accordingly, the projected demand and supply gap is shown in Table 3.2.

Table 3.2
DEMAND PROJECTION FOR VETERINARY CLINICS

Projected Number of Existing

Number of Veterinary Number Demand
Year Animals Clinics Required of Clinics Supply Gap
2009 1,136,154 23 17 6
2010 1,169,102 23 17 6
2011 1,203,006 24 17 7
2012 1,237,893 25 17 8
2013 1,273,792 25 17 8
2014 1,310,732 26 17 9
2015 1,348,744 27 17 10
2016 1,387,857 28 17 11
2017 1,428,105 29 17 12
2018 1,469,520 29 17 12
2019 1,512,136 30 17 13
2020 1,555,988 31 17 14
 199-6

3. Service Fee

Based on current fee charged by existing veterinary service providers Birr 30 per check
up is recommended for the envisaged clinic.

B. SERVICE CAPACITY

The envisaged veterinary clinic will have a capacity of treating 20-25 livestock and pet
animals per day.

IV. MEDICAL SUPPLIES AND UTILITIES

A. MEDICAL SUPPLIES

The medical supplies required by the clinic and corresponding costs are indicated in
Table 4.1.

Table 4.1
MEDICAL SUPPLIES REQUIREMENT AND ESTIMATED COST

Sr. Description Unit of Qty. COST(Birr)

No. Measure FC LC TC
1 Adrenomone Pack 10 875 2625 3,500
2 Terramycin® Ophthalimic “ 15 3150
Ointment with Polymyxin 787.5 2362.5
3 Liquamycin® Injectable, “ 20 4,800
Teramycin® Injectable 1200 3600
4 Sulmet® Solution Injectable “ 25 3375 10125 13,500
5 Kemithal L.A “ 5 1500 4500 6,000
6 Ophthaine® Solution “ 35 3750 11250 15,000
7 P.L.H. Injectable “ 20 3000 9000 12,000
8 Synovex® –C, Synovex® –S “ 10 3375 10125 13,500
 199-7

Cont’d Table 4.1

Sr. Description Unit of Qty. COST(Birr)

No. Measure FC LC TC
9 Nicarbazin “ 5 1375 4125 5,500
10 Primidone “ 5 1875 5625 7,500
11 Fumidil B “ 10 625 1875 2,500
12 Terramycin® 10 Type A “
Medicated Articles,
Terramycin® 100 SS Type A
Medicated
Article,Terramycin® 100D
Type A Medicated Article,
Terramycin® 100SS Type A
Medicated Article,
Terramycine® 20 Type A
Medicated Articles,
Terramycin ®200 Type A
Medicate Article,
Terramycin® 50 Type A
Medicated Article,
Terramycin 25 2500 7500 10,000
13 Carafen Cough Syrup, pack 20 3,000
Carafen Cough Tablets 750 2250
14 Nolvasan® Antiseptic “ 15 4720
Ointment 1180 3540
15 Nolvasan® Cap-Tabs® “ 25 2187.5 6562.5 8750
16 Meticorten® “ 15 1625 4875 6,500
17 Darbazine Spansule No.1, “ 10 9,500
Darbazine Spansule No.3 2375 7125
18 Jenomycin Tablets “ 20 1500 4500 6,000
 199-8

Cont’d Table 4.1

Sr. Description Unit of Qty. COST(Birr)

No. Measure FC LC TC
19 Tylan® Premix No. 10 “ 5 750 2,250 3,000
20 Amprovine 9.6% Solution “ 10 1,875 5,625 7,500
21 Liquamycin® Intramuscular “ 5 1,000 30,00 4,000
22 Tylan® Soluble “ 5 1125 3375 4,500
23 Thibenzole Sheep & Goat “ 15 2,500
Wormer 625 1875
24 Kopertox® “ 10 787.5 2362.5 3,150
25 Tylan® Injection 200mg. “ 30 12,000
Tylan® Injection 50 Mg 3000 9000
26 Dyrex Bolus, Dyrex “ 25 5750
Capsules, Dyrex Granules,
Dyrex Tablets 1437.5 4312.5
27 Pharmastatine® -20 “ 5 875 2625 3,500
28 Promazine Granules “ 20 945 2835 3,780
29 Bo-Se,L-Se Pack 10 1000 3000 4,000
30 Azium® Solution “ 15 1125 3375 4,500
31 Tylosin®/Hygromix “ 5 625 1875 2,500
32 Tylan® 100 CAL Type A “ 10 2,980
Medicated Article, Tylan 745 2235
33 Dizan Suspension With “ 15 6,500
Piperazine 1625 4875
34 Temaril®-P Tablets “ 10 1075 3225 4,300
35 Albamix® Feed Medication “ 5 1150 3450 4,600
36 Amprovine 25%, CORID® “ 3 3,400
25% 850 2550
37 Pig Wormer, Wazine®, “ 3
Wazine-34 675 2025 2,700
 199-9

Cont’d Table 4.1

Sr. Description Unit of Qty. Cost(Birr)

No. Measure LC FC TC
38 Mylepsine Tablets “ 2 250 750 1,000
39 Gallimycin® -100P “ 5 375 1125 1,500
40 Carb-O-Sep® Type A “ 5
Medicated Article 437.5 1312.5 1,750
41 Meticortelone Acetate “ 5 337.5 1012.5 1,350
42 Combuthal Powder “ 10 625 1875 2,500
43 Nalline Hydrochloride “ 15 562.5 1687.5 2,250
44 Nolvasan® Suspension “ 15 750 2250 3,000
45 Shurjets “ 3 150 450 600
46 Newo-Cortef “ 5 2,500
®Withtetracaine 625 1875
47 Sparine Injection “ 10 750 2250 3,000
48 Nonemic “ 3 375 1125 1,500
49 Surital “ 5 187.5 562.5 750
50 Ferrextran 100 “ 5 750 2250 3,000
51 Hygromix 2.4 “ 5 700 2100 2,800
52 Butazolidin® Bolus, Pack 10 5,000
Butazolidin® Tablets 1250 3750
53 Terramycin® Scour Tablets “ 5 875 2625 3,500
54 Hydeltrone-TBA Suspension “ 10 375 1125 1,500
55 Zoamix® Type A Medicated “ 5 3,000
Article 750 2250
56 Unistat-2 Type A Mediated “ 3 450
Premix 112.5 337.5
57 NFZ® Puffer “ 5 625 1875 2,500
58 Diquel Tablet “ 5 187.5 562.5 750
59 Promazine HCL Injectable “ 15 3000 9000 12,000
 199-10

Cont’d Table 4.1

Sr. Description Unit of Qty. COST(Birr)

No. Measure FC LC TC
60 Parvex® Suspension “ 10 1250 3750 5,000
61 Medro® Tablets “ 5 1653.75 4961.25 6,615
62 Neomix® 325 Soluble “ 10 25,000
Powder, Neomix® AG 325
Soluble Powder, Neomycin
325 Soluble Powder 6250 18750
Total 77,598.75 232,796.3 310,395

B. UTILITIES

The major utilities required by the veterinary clinic are electricity and water. The
required quantity of these utilities and corresponding cost are indicated in Table 4.2.

Table 4.2
ANNUAL UTILITIES REQUIREMENT AND COST

Sr. Description Qty. Cost ‘Birr

No.
1 Electricity, kWh 75,000 35,520
2 Water, m3 5,000 16,250
Total 51,770
 199-11

V. MEDICAL EQUIPMENT, BUILDING AND CIVIL WORKS

A. MEDICAL EQUIPMENT

The list of medical equipment required by the envisaged veterinary clinic is shown in
Table 5.1.

Table 5.1
LIST OF REQUIRED MEDICAL EQUIPMENT & COST

Sr. Cost ‘Birr

No. Description Qty FC LC TC
1 Anesthesia equipment 1 set 80,750 14,250 95,000
2 Surgical lights 4 76,500 13,500 90,000
3 Treatment table 1 2,550 450 3,000
4 Grooming & tubs 1 4,250 750 5,000
5 Stainless steel cages 4 51,000 9,000 60,000
6 Centrifuges 2 127,500 22,500 150,000
7 Dental equipment 1 1,275,000 225,000 1,500,000
8 Electro surgery 1 12,750 2,250 15,000
9 Faucets 2 12,750 2,250 15,000
10 IV Fluids administration 1 21,250 3,750 25,000
11 Laboratory 1 255,000 45,000 300,000
12 Light-surgical /treatment/ 1 45,000
dental 38,250 6,750
13 Microscopes 2 51,000 9,000 60,000
14 Otoscopes /ophthal mas 1 10,000
copes 8,500 1,500
15 Refracto meter 1 2,550 450 3,000
16 Scales 2 10,200 1,800 12,000
17 Sterilization 2 80,750 14,250 95,000
18 Surgery tables/scrubs 1 4,250 750 5,000
19 Tables & cabinets 1 21,250 3,750 25,000
20 Tables with adjustable height 1 2,550 450 3,000
21 Thermometers 20 15,300 2,700 18,000
22 Warming systems 2 42,500 7,500 50,000
23 Wet tables & drop-Ins 1 29,750 5,250 35,000
24 X-ray 1 102,000 18,000 120,000
Total 2,739,000
2,328,150 410,850
 199-12

1. Source of Medical Equipment

The medical equipment required by the envisaged veterinary clinic can be obtained from
the following supplier.

THE VET STORE

Phone: 450-670-0880
Fax: 450-670-7915
E-mail: info@thevestore.com

B. LAND, BUILDING AND CIVIL WORKS

The total area requirement of the project is estimated at 1,000m 2, out of which the built-
up area is estimated to be 500 m 2. Out of the total 500m2 built up area, 150m2 will be
used for laboratory, 200m2 for examination rooms, 100m2 for office purpose, and 30m2
for guard house. The total cost of building and civil works, at a rate of 2,300 Birr per m 2,
is estimated to be Birr 1.15 million.

According to the Federal Legislation on the Lease Holding of Urban Land (Proclamation
No 272/2002) in principle, urban land permit by lease is on auction or negotiation basis,
however, the time and condition of applying the proclamation shall be determined by the
concerned regional or city governments depending on the level of development.

In Addis Ababa the city’s Land Administration And Development Authority is directly
responsible in dealing with matters concerning land. Accordingly, the initial land lease
rate in Addis Ababa set by the Authority based on the location of land is as shown in
Table 5.2.
 199-13

Table 5.2
INITIAL LAND LEASE RATE IN ADDIS ABABA

Sr. Land Initial Price in

No Location of the land Grade m2
1 Central Business zones 1 1167.3
2 1062.9
3 916.2
4 751.5
5 619.2
Places That are Under
2 Transit 1 716.4
2 647.1
3 559.8
4 472.5
5 384.3
3 Expansion Zones 1 245.7
2 207
3 150.3
4 132.3

Source; Addis Ababa City Land Administration Authority

As can be seen from Table 5.3, the initial land lease rate ranges from Birr 1,167.3 to
132.3 per m2 .

Currently, most of the health facilities in Addis Ababa are located on the central business
zones of the city. Therefore, places under transit and expansion zones are recommended
as the best locations for the project. Accordingly, the average of the highest land lease
rates in places under transit and expansion zones, which is Birr 481.05 m2 is adopted.

The Federal Legislation on the Lease Holding of Urban Land legislation has also set the
maximum on lease period and the payment of lease prices ( see Table 5.3 and Table 5.4).
 199-14

Table 5.3
LEASE PERIOD

Lease Period
Type of Service ( Years)
Residential area 99
Industry 80

Education, cultural research health, sport,

NGO and religious 99
Trade 70
Urban Agriculture 15
Other service 70

Table 5.4
LEASE PAYMENT PERIOD

Period of Payment
Sr. According to the Grade of
No. Service Type Towns
Private residential are obtained
1 through tender or negotiation 50 - 60 years
2 Trade 40 - 50 years
3 Industry 40 - 50 years
4 Real estate 40 years
5 Urban Agriculture 8 - 10 years
6 Trade and social service 40 - 50 years
7 Others 40 years

Moreover, advance payment of lease based on the type of investment ranges from 5% to
10%. For those that pay the entire amount of the lease will receive 0.5% discount from
the total lease value and those that pay in installments will be charged interest based on
the prevailing interest rate of banks. Moreover, based on the type of investment, two to
seven years grace period shall also be provided. The lease price is payable after the grace
period annually.
 199-15

Regarding, the terms and conditions of land lease the Addis Ababa City Government
have adopted Article 6 of the Federal Legislation with very minimal changes. Therefore,
for the purpose of this project profile since the project is engaged in social service , 99
years lease period, 50 years lease payment completion period, 5% down payment and
seven years grace period is used.

Accordingly, the land lease cost of the project, at rate of Birr 481.05 per m 2 for 99 years
of holding is estimated at Birr 47.62 million. Assuming 5% of the total cost ( Birr 2.38 )
will be paid in advance as down payment and the remaining Birr 45.24 million will be
paid in equal installments with in 50 years, the annual lease payment is estimated at Birr
904,855.

VI. MANPOWER AND TRAINING REQUIREMENT

A. MANPOWER REQUIREMENT

The envisaged veterinary clinic requires 25 work forces. The proposed manpower
requirement for the envisaged clinic and the estimated annual labour cost including fringe
benefits are given in Table 6.1.
 199-16

Table 6.1
MANPOWER REQUIREMENT AND ANNUAL LABOUR COST

Sr. Description Req. Monthly Annual Salary

No. No. Salary (Birr) (Birr)
1 Medical director 1 5,000 60,000
2 Administrator 1 2,000 24,000
3 Doctor (Medical) 1 4,000 48,000
4 Doctor (Surgical) 1 4,500 54,000
5 Matron (Head nurse) 1 1,600 19,200
6 Nurse 3 1,200 43,200
7 Health Assistant 2 850 20,400
8 Health officer 1 1,500 18,000
9 Dermatology 1 3,000 36,000
10 Cardiology 1 3,500 42,000
11 Ophthalmology 1 3,000 36,000
12 Neurology 1 2,500 30,000
13 Radiology 1 1,500 18,000
14 Anesthesiology 1 1,200 14,400
15 Lab technician 2 1000x2 24,000
16 Secretary (receptionist) 1 650 7,800
17 Cleaner 3 400x3 43,200
18 Driver 1 500 6,000
19 X-ray technician 1 1,000 2,000
Sub Total 25 546,200
20 Employees benefit 25% of basic salary 136,550
Total 682,750

B. TRAINING REQUIREMENT

There is no any training requirement for the envisaged plant.

 199-17

VII. FINANCIAL ANALYSIS

The financial analysis of the veterinary service project is based on the data presented in
the previous chapters and the following assumptions:-

Construction period 1 year

Source of finance 30 % equity
70 % loan
Bank interest 8%
Discount cash flow 8.5%
Accounts receivable 30 days
Medical supplies 30 days
Finished products 30 days
Cash in hand 5 days
Accounts payable 30 days

A. TOTAL INITIAL INVESTMENT COST

The total investment cost of the project including working capital is estimated at Birr
7.44 million, of which 31 per cent will be required in foreign currency.

The major breakdown of the total initial investment cost is shown in Table 7.1.
 199-18

Table 7.1
INITIAL INVESTMENT COST

Sr. Cost Items Local Foreign Total

Cost Cost Cost
No.
1 Land lease value 2,381.19 - 2,381.19
2 Building and Civil Work 1,150.00 - 1,150.00
3 Plant Machinery and Equipment 410.85 2,328 2,739.00
4 Office Furniture and Equipment 100.00 - 410.85
5 Vehicle 450.00 - 450.00
6 Pre-production Expenditure* 523.21 - 523.21
7 Working Capital 96.23 - 96.23
Total Investment cost 5,111.48 2,328.2 7,439.63

* N.B Pre-production expenditure includes interest during construction ( Birr 423.21

thousand ) and Birr 100 thousand costs of registration, licensing and formation of the
company including legal fees, commissioning expenses, etc.

B. OPERATING COST

The annual operating cost at full capacity operation is estimated at Birr 4.60 million
(see Table 7.2). The major components of the operation cost are depreciation, direct
labour and medical supplies accounting for 19.37%, 17.82% and 16.88% of the total
operation cost respectively. The remaining 45.94% is the share of utility, labour
overhead, depreciation, repair and maintenance, financial cost and administration cost.
 199-19

Table 7.2
ANNUAL OPERATING COST AT FULL CAPACITY ('000 BIRR)

Items Cost %
Medical supplies
310.39 16.88
Utilities 51.77 2.81
Maintenance and repair
137.0 7.45
Labour direct 327.7 17.82
Labour overheads
136.6 7.42
Administration Costs 218.5 11.88
Land lease cost - -
Total Operating Costs 1,181.9 64.26
Depreciation 356.2 19.37
Cost of Finance 301.2 16.38
Total Production Cost
1,839.27 100

C. FINANCIAL EVALUATION

1. Profitability

Based on the projected profit and loss statement, the project will generate a profit through
out its operation life. Annual net profit after tax will grow from Birr 29.79 thousand to
Birr 117.30 thousand during the life of the project. Moreover, at the end of the project life
the accumulated cash flow amounts to Birr 2.15 million.

2. Ratios

In financial analysis financial ratios and efficiency ratios are used as an index or yard
stick for evaluating the financial position of a firm. It is also an indicator for the strength
and weakness of the firm or a project. Using the year-end balance sheet figures and other
relevant data, the most important ratios such as return on sales which is computed by
dividing net income by revenue, return on assets ( operating income divided by assets),
 199-20

return on equity ( net profit divided by equity) and return on total investment ( net profit
plus interest divided by total investment) has been carried out over the period of the
project life and all the results are found to be satisfactory.

3. Break-even Analysis

The break-even analysis establishes a relationship between operation costs and revenues.
It indicates the level at which costs and revenue are in equilibrium. To this end, the
break-even point of the project including cost of finance when it starts to operate at full
capacity ( year 3) is estimated by using income statement projection.

BE = Fixed Cost = 21%

Sales – Variable Cost

4. Payback Period

The pay back period, also called pay – off period is defined as the period required to
recover the original investment outlay through the accumulated net cash flows earned by
the project. Accordingly, based on the projected cash flow it is estimated that the
project’s initial investment will be fully recovered within 4 years.

5. Internal Rate of Return

The internal rate of return (IRR) is the annualized effective compounded return rate that
can be earned on the invested capital, i.e., the yield on the investment. Put another way,
the internal rate of return for an investment is the discount rate that makes the net present
value of the investment's income stream total to zero. It is an indicator of the efficiency or
quality of an investment. A project is a good investment proposition if its IRR is greater
than the rate of return that could be earned by alternate investments or putting the money
in a bank account. Accordingly, the IRR of this porject is computed to be 21.80%
indicating the vaiability of the project.
 199-21

6. Net Present Value

Net present value (NPV) is defined as the total present ( discounted) value of a time
series of cash flows. NPV aggregates cash flows that occur during different periods of
time during the life of a project in to a common measuring unit i.e. present value. It is a
standard method for using the time value of money to appraise long-term projects. NPV
is an indicator of how much value an investment or project adds to the capital invested. In
principal a project is accepted if the NPV is non-negative.

Accordingly, the net present value of the project at 8.5% discount rate is found to be
Birr 511.24 thousand which is acceptable.

D. ECONOMIC BENEFITS

The project can create employment for 25 persons. In addition to supply of the
domestic needs, the project will generate Birr 0.458 million in terms of tax revenue.