Directors' reportfor the year ended 30 JUNE 2021
The AfroCentric Board has pleasure in presenting its report on the activities of AfroCentric for the year ended 30 June 2021, and can confirm that we continue to create value through our diversified portfolio of services and offerings to all of our stakeholders.
NATURE OF BUSINESS
AfroCentric is a majority black-owned JSE-listed investment holding company which operates in and provides specialised services to the public and private healthcare sectors, making quality healthcare more accessible and affordable to members and beneficiaries in both sectors. A principal objective of the Group is to ensure the delivery of efficient health management services, the distribution of quality products, all at manageable and affordable cost, for the benefit of scheme clients, scheme members and the Group's growing customer base.
The consolidated annual financial statements as at 30 June 2021 and for the year then ended, comprise the Group's and its subsidiaries (referred to as "the Group"), and the Group's investments in associates.
AFROCENTRIC SHARED VALUE
The Group's operating subsidiaries continue to provide value-added complementary services to its traditional medical scheme clients as part of the Group's strategy inclusive of consolidated, disruptive and innovative offerings. Through this, the Group continues to preserve shareholder value and provide solutions to healthcare client needs. This has further enabled us to understand both our clients and competitor environment and we can confirm that the Group is geared towards sustainability.
Our strategy is to optimise our Group's products and services to offer organisations and members a seamless service. As part of our growth strategy, the Group contributes to South Africa's sustainable health and welfare by investing in healthcare-related businesses that grow its portfolio and diversify its revenue sources.
DEVELOPMENTS
We are excited to announce that, to further strengthen our capabilities and diversify our service offering, during the financial year under review, we acquired the following investments:
- DENIS Group of Companies effective 1 October 2020. DENIS provides and manages sustainable dental benefits for medical scheme members.
- The Group has further increased its shareholding in Scriptpharm Risk Management Proprietary Limited (Scriptpharm) from 80% to a 100% shareholding, effective 1 August 2020. Scriptpharm is a national pharmacy network comprising over 2 000 pharmacies operating throughout South Africa, with provider status of either a preferred provider to medical schemes or a designated service provider.
- Exeltis SA Proprietary Limited, known as Forrester Pharma, effective 1 August 2021. Forrester Pharma is a registered pharmaceutical company focused on providing innovative healthcare, focusing on product launches and swift generic entries.
- The Group invested 20% in the Medgap cell captive from Guardrisk effective 1 April 2021.
- AfroCentric Health (RF) Proprietary Limited, has entered into negotiations with Sanlam Health Solutions Proprietary Limited for the acquisition of a Gap Cover business that is supplementary to its current medical scheme offerings, effective 1 September 2021.
FINANCIAL REVIEW
- Group consolidated revenue increased by 25.8% to R8 074.4 million (2020: R6 418.9 million).
- Group headline earnings increased by 7.2% to R329.1 million compared to R306.8 million in the prior year.
- During the 2019 financial year a non-IFRS earnings measure model was adopted given the material non-cash, non-trading and non-recurring deductions which have a significant adverse impact on the earnings. The Group's normalised headline earnings are R353.8 million compared to R321.8 million in the prior year, representing an increase of 9.9%. Normalised headline earnings are a non-IFRS earnings measure model that has historically been adopted, given the material non-cash, non-trading and non-recurring deductions which have a significant adverse impact on the earnings.
- Profit before tax increased by 12.3% for the year under review amounting to R699.5 million (2020: R622.7 million).
- Profit after tax from continuing operations increased by 5.8% compared to prior financial year.
GOING CONCERN
The Group Annual Financial Statements have been prepared on the going concern basis. The Board having performed a review of the Group's ability to continue as a going concern in the foreseeable future and therefore, based on this review, considers the preparation of the Annual Financial Statements on this basis to be appropriate. Refer to Note 36 for COVID-19 impact on going concern.
DIVIDENDS
The Company declared an interim dividend of 17 cents per ordinary share for the six months ended 31 December 2020. The Company further declared a final dividend of 17 cents per ordinary share for the year ended 30 June 2021. This was declared on 13 September 2021. These dividends are subject to Dividends Tax in terms of the Income Tax Act (Act 58 of 1962 amended) for which shareholders are liable. The solvency and liquidity requirements were satisfied at passing of the resolution in accordance with Section 46 of the Companies Act.
In accordance with 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 20%;
- The gross dividend amount for both declarations in 2021 is 34 cents per ordinary share (17 cents in interim and 17 cents in final);
- The Company has 574 964 584 ordinary shares in issue on declaration date; and
- The Company's income tax reference number is 9600/148/71/3.
SHARE CAPITAL
The Company's share capital issued was 574 964 584 ordinary shares in the year under review. As per the Companies Act, Section 38, the Board may resolve to issue shares of the Company at any time, but only within the classes, and to the extent, that the shares have been authorised by or in terms of the Company's Memorandum of Incorporation.
SHARE REPURCHASES
During the year, no share repurchases were made by the Company. AfroCentric Health Proprietary Limited holds 1 999 999 treasury shares.
AUDIT AND RISK COMMITTEE
The information relating to the Audit and Risk Committee is set out here.
DIRECTORS
The table below illustrates the directors of AfroCentric for the year ended 30 June 2021
| Director’s name | Date of appointment | Designation |
| ATM Mokgokong (Chairman) | 10 June 2010 | Non-executive |
| MJ Madungandaba | 10 June 2010 | Non-executive |
| A Banderker | 15 December 2015 | Executive – salaried |
| JW Boonzaaier | 1 August 2015 | Executive – salaried |
| SE Mmakau | 30 November 2016 | Executive – salaried |
| WH Britz | 1 August 2015 | Executive – salaried |
| JB Fernandes | 23 November 2018 | Lead Independent Non-executive |
| AM le Roux | 25 May 2020 | Independent Non-executive |
| M Chauke | 1 June 2020 | Independent Non-executive |
| SA Zinn | 23 November 2018 | Independent Non-executive |
| ND Munisi | 7 December 2015 | Non-executive |
| FG Allen | 12 September 2019 | Non-executive |
| JJ Strydom | 3 August 2020* | Non-executive |
| * | Mr JJ Strydom was appointed to the board during the year under review. |
During the year under review, no material contracts in which directors have an interest were entered into which significantly impacted the business of the Company.
Directors' ordinary shareholdings as at 30 June 2021
| Director | Direct beneficial |
Indirect beneficial |
Held by associate |
Total | % |
| ATM Mokgokong (Chairman) | – | 42 470 699* | – | 42 470 699 | 7.39 |
|---|---|---|---|---|---|
| MJ Madungandaba | – | 98 514 964* | – | 98 514 964 | 17.13 |
| A Banderker | 511 326 | – | – | 511 326 | 0.09 |
| JW Boonzaaier | 96 667 | – | – | 96 667 | 0.02 |
| WH Britz | – | 115 164 537 | – | 115 164 537 | 20.03 |
| ND Munisi | 7 000 | 70 000 000 | – | 70 007 000 | 12.18 |
| FG Allen | 46 880 | – | – | 46 880 | 0.01 |
| AM le Roux | 39 462 | – | – | 39 462 | 0.01 |
| 701 335 | 326 150 200 | – | 326 854 535 | 56.85 |
| * | During the current year, a detailed allocation of the Community Healthcare Holdings shares reflecting a percentage per representative director was done. This does not reflect a transaction for the sale of shares but rather a correction on full representation. |
There were no changes in the directors' interests between the end of the financial year and date of approval of annual financial statements.
Directors' ordinary shareholdings as at 30 June 2020
| Director | Direct beneficial |
Indirect beneficial |
Held by associate |
Total | % |
| ATM Mokgokong (Chairman) | – | 140 426 628 | – | 140 426 628 | 24.45 |
| MJ Madungandaba | – | 570 266 | – | 570 266 | 0.10 |
| A Banderker | 511 326 | – | – | 511 326 | 0.09 |
| JW Boonzaaier | 30 000 | – | – | 30 000 | 0.01 |
| WH Britz | – | 94 013 355 | – | 94 013 355 | 16.37 |
| ND Munisi | – | 69 564 752 | – | 69 564 752 | 12.11 |
| FG Allen | 46 880 | – | – | 46 880 | 0.01 |
| 588 206 | 304 575 001 | – | 305 163 207 | 53.14 |
DIRECTORS' REMUNERATION
Remuneration of Non-executive Directors and Board Committee members
Non-executive Directors received the following total remuneration in the year under review:
| Director | Fees* R’000 |
| ATM Mokgokong (Chairman) | 1 608 |
|---|---|
| MJ Madungandaba | 1 553 |
| ND Munisi | 408 |
| SA Zinn | 588 |
| JJ Strydom | 193 |
| JB Fernandes | 595 |
| FG Allen | 356 |
| AM le Roux | 457 |
| M Chauke | 387 |
| * | The director's remuneration highlighted above reflects their total gross directors' fees received across various subsidiaries within the Group. |
Remuneration of Executive and Non-executive Directors
Details of the remuneration are set out in Note 23 of the Group Financial Statements.
Remuneration of the five highest paid subsidiary executives as at 30 June 2021 who are not directors of AfroCentric
| Employee | Annual cost to Company and incentives R’000 |
| J van Rooyen | 5 946 |
|---|---|
| AA Mahmood | 5 328 |
| N Nyathi | 4 733 |
| G Erasmus | 4 507 |
| AC Edwards | 4 136 |
MATERIAL RESOLUTIONS
In terms of the JSE Listings Requirements the Company noted the following material resolutions passed at the prior AGM and during the financial year under review:
- General approval to repurchase shares;
- Inter-company loans and other financial assistance;
- Fees payable to Non-executive Directors;
- Group Annual Financial Statements for the financial year ended 30 June 2021;
- Audit report for the year ended 2021;
- Re-appointment of independent registered auditor;
- Election and re-election of directors;
- Appointment of members to the Audit and Risk Committee;
- Approval to issue ordinary shares and to sell treasury shares, for cash;
- Endorsement of the remuneration policy; and
- Authority of directors.
Details of these resolutions can be obtained via the Company's website or on request.
LITIGATION STATEMENT
In terms of the JSE Listings Requirements, the directors note that they are not aware of any legal or arbitration proceedings that are pending or threatened, apart from the matters per Note 31 of the Financial Statements, that may have or have had in the recent past, being at least the previous 12 months, a material effect on the Group's financial position.
BORROWING POWERS
In terms of the Memorandum of Incorporation, the borrowing powers of the Company are unlimited. The Company has no restrictive funding arrangements.
INSURANCE
The Group protects itself and the directors against crime and civil liability, and has professional indemnity in place by maintaining a comprehensive insurance policy.
COMPLIANCE
No events or actions during the financial year have led to the Group being non-compliant with the required laws and regulations relevant to the individual business units.
EXTERNAL AUDITOR
PwC serves as auditor of the Company.
