ACCOUNTING POLICIES AND BASIS OF PREPARATION
The summary consolidated financial statements are prepared in accordance with the requirements of the JSE Limited Listings Requirements for provisional reports, and the requirements of the Companies Act applicable to summary financial statements. The Listings Requirements require provisional reports to be prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (“IFRS”) and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council and to also, as a minimum, contain the information required by IAS 34 Interim Financial Reporting. The accounting policies applied in the preparation of the consolidated financial statements from which the summary consolidated financial statements were derived are in terms of IFRS and are consistent with those accounting policies applied in the preparation of the previous consolidated annual financial statements.
NATURE OF BUSINESS
AfroCentric Investment Corporation Limited (“AfroCentric”) is a black-controlled, diversified investment holding company. It is listed on the Johannesburg Stock Exchange (“JSE”) in the Healthcare Sector under the code: ACT.
AfroCentric holds a substantial 94.10% majority stake in AfroCentric Health Limited (“AHL”). AHL owns 100% of the issued share capital in Medscheme Holdings (Pty) Limited (“Medscheme”), a multi-medical scheme administrator and managed care provider. As the largest health risk management services provider and third largest medical scheme administrator in South Africa, Medscheme’s focus is to achieve sustainability through innovation, effective health risk management, complemented by a relentless drive for operational and service excellence. Medscheme now has over 3.2 million lives under management with several years experience in managing the Government Employees Medical Scheme (“GEMS”).
Although Medscheme is essentially a South African enterprise, the Group has a presence in Botswana, Namibia, Mauritius, Swaziland, Kenya and Zimbabwe. Medscheme’s operations in Mauritius provides a platform for further international expansion and AHL continues to explore other opportunities on the African continent and elsewhere.
In addition to the conventional but impressive health management infrastructure, specialised healthcare support services are provided to the group by Allegra, Helios and other subsidiaries, including to a number of third party clients.
While profits before taxation improved by 13.40% to R279 358 million for the year under review, attributable earnings have for the first time been subjected to the fully dilutive impact of the significant number of shares issued for the redemption of the preference shares and second tranche payments. The results of this extraordinary factor is that earnings per share and headline earnings per share have both reduced by less than 20% as set out separately in this announcement. The marginal growth in operating profit is partly the result of the Group’s costly expenditure into more IT and clinical skills so as to create an expanded health management platform and capacity for the foreseeable future. Membership resignations in GEMS also had an effect on the growth in revenues and operating profit.
The Road Accident Fund (“RAF”) contract for claims management was awarded to the Group during the 2014 financial year and while much of the start up and employee costs have been absorbed since the award was made, the service is only expected to generate a contribution to profits during the ensuing year.
During the year, the Group announced a strategic partnership that establishes South Africa’s leading fraud management solution for healthcare. The partnership sees AfroCentric’s healthcare IT services subsidiary, Helios and global analytics software provider, FICO, collaborating to offer an industry-leading fraud management and payment integrity platform to all interested medical schemes in Southern Africa. Deployed through Helios, it will dramatically enhance a medical schemes’ ability to detect, review, and investigate suspicious claims by scheme members and service providers and set a standard in South Africa for cost-effective quality healthcare with integrity. This latest partnership with FICO is a meaningful step towards detecting and solving industry-wide financial losses through fraud and system abuse.
The Group has provided for an impairment loss of R21 million due to the decline in Jasco’s share price at year-end. Management has recommended the disposal of the investment within the next 12 month period and has accordingly classified the asset as a “Non-current asset held for sale”.
An update of recent developments is provided below:
Agreements were concluded for the acquisition of various WAD businesses, the principal enterprise being Pharmacy Direct which is a designated service provider to a wide range of South African medical aid schemes. The business supplies chronic medication under prescribed minimum benefits and normal chronic benefits to approximately 110 000 patients nationally. Pharmacy Direct was awarded a tender in terms of which chronic medication is dispensed on behalf of Government to districts in five of South Africa’s nine provinces.
An agreement was also concluded with SANLAM Limited for their investment in AfroCentric Healthcare Assets a wholly owned subsidiary of AfroCentric. At this time almost all regulatory requirements have been approved and we are not expecting any to be declined. The commencement of this relationship is a proud moment, for AfroCentric, given that Sanlam is one of the largest financial services groups in South Africa and that they have chosen AfroCentric with a view to developing initiatives into healthcare. It is intended that, the investment by Sanlam will inter alia, facilitate a platform for the joint pursuit and expansion of the Group’s traditional activities, as part of an expanded administration and managed healthcare business model.
SOUTH AFRICAN POLICE MEDICAL SCHEME (“POLMED”)
AfroCentric has been fortunate to have been awarded the tender for both the Administration and Managed Care contracts, with services commencing in January 2016. Polmed Medical Scheme is one of the largest and most prestigious closed schemes in South Africa with approximately 180 000 principal members. We are indeed honoured to have won the tender for these contracts and look forward to providing Polmed with our range of quality services for which we are now well-known and recognised.
All of the above recent developments, will instill positive synergies to the Group’s general value proposition for all stakeholders, inter alia, adding scale, enhancing marketing and distribution channels, significantly expanding its capital base and positively positioning the Group for accelerated growth.
After several years of hard work in a fiercely competitive market, AfroCentric have not only developed a successful and sustainable business, but in association with its new business partners, its new and expanding client base and the continuing improvements in system technologies, the Group is mindful of its opportunity for potential growth and expansion. While the Board is generally cautious about measuring future prospects, the developments recorded herein are encouraging features for the Group’s overall business going forward.
CHANGES IN DIRECTORS
Subsequent to the year under review, the following changes were made to the Board which are effective from 1 August 2015:
– Mr Wallace Holmes retired as Group Chief Financial Officer and as an Executive Director.
– Mr Hannes Boonzaaier was appointed as Group Chief Financial Officer.
– Mr Willem Britz was appointed as an Executive Director of AfroCentric.
Mr W Mhlanga resigned as Group Company Secretary on 31 January 2015. Subsequently, Ms S Lutchan was appointed with effect from 1 March 2015.
The Board of Directors has pleasure in announcing that in addition to the interim dividend already declared and paid for the year, a final dividend of 10 cents per ordinary share (gross) has been declared for the year ended 30 June 2015. Dividends are subject to Dividends Withholding Tax. In accordance with the provisions of the JSE Listings Requirements, the following additional information is disclosed.
• the dividends have been declared out of profits available for distribution.
• the local Dividends Withholding Tax rate is 15%.
• the gross dividend amount is 10 cents per ordinary share.
• the net cash dividend amount is therefore 8.5 cents per ordinary share.
• the company has 467 855 101 ordinary shares in issue at 30 June 2015.
• the company’s income tax reference number is 9600/148/71/3.
The salient dates relating to both the ordinary and preference dividends are as follows:
|• Last day to trade cum dividend||Friday, 16 October 2015|
|• Shares commence trading ex dividend||Monday, 19 October 2015|
|• Dividend record date||Friday, 23 October 2015|
|• Dividend payment date||Monday, 26 October 2015|
Share certificates for ordinary shares may not be dematerialised or rematerialised between Monday, 19 October 2015 and Friday, 23 October 2015, both days inclusive.
This summarised report is extracted from audited information, but is not itself audited. The directors take full responsibility for the preparation of this report and the financial information has been correctly extracted from the underlying annual financial statements. The annual financial statements were audited by PricewaterhouseCoopers Inc. and SizweNtsalubaGobodo Inc. who expressed an unmodified opinion thereon. The audited annual financial statements and the auditor’s report thereon are available for inspection at the company’s registered office.
On behalf of the Board
|Dr ATM Mokgokong
|Mr D Dempers
Group Chief Executive Officer
22 September 2015