| |
| |
| |
| |
| |
|
|
|
|
|
|
| At 30 June 2020 |
|
|
|
|
|
|
|
| At cost |
47 873 |
286 365 |
957 654 |
535 312 |
1 422 024 |
303 452 |
3 552 680 |
| Accumulated amortisation**** |
(40 775) |
(14 454) |
(235 270) |
(216 903) |
– |
(225 221) |
(732 623) |
| Accumulated impairment**** |
– |
– |
(47 000) |
(29 196) |
(48 674) |
– |
(124 870) |
| 7 098 |
271 911 |
675 384 |
289 213 |
1 373 350 |
78 231 |
2 695 187 |
| |
|
|
|
|
|
|
| Acquisitions through business combinations* |
– |
– |
7 230 |
– |
34 918 |
65 017 |
107 165 |
| Additions |
– |
12 379 |
181 916 |
14 907 |
– |
– |
209 202 |
| Amortisation |
(806) |
(16 800) |
(86 818) |
(60 477) |
– |
(30 153) |
(195 054) |
| Impairment loss recognised in profit or loss*** |
– |
– |
(6 093) |
(35 485) |
(771) |
– |
(42 349) |
| Reversal of impairment loss recognised in profit or loss |
– |
– |
39 167 |
– |
– |
– |
39 167 |
| Disposals |
– |
(1 177) |
– |
(2 482) |
– |
– |
(3 659) |
| Write-off |
– |
– |
(26 793) |
– |
– |
– |
(26 793) |
| 6 292 |
266 313 |
783 993 |
205 676 |
1 407 497 |
113 095 |
2 782 866 |
| |
|
|
|
|
|
|
| At cost |
47 873 |
297 566 |
1 114 938 |
547 743 |
1 456 942 |
368 469 |
3 833 531 |
| Accumulated amortisation |
(41 581) |
(31 253) |
(317 019) |
(277 386) |
– |
(255 374) |
(922 613) |
| Accumulated impairment |
– |
– |
(13 926) |
(64 681) |
(49 445) |
– |
(128 052) |
| 6 292 |
266 313 |
783 993 |
205 676 |
1 407 497 |
113 095 |
2 782 866 |
| * |
The recognition of goodwill (R34.9 million) and customer relationships (R65 million) is as a result of the business combinations in the current financial year. |
| ** |
Pharmaceutical dossiers relate to a set of documents that contains all the technical data (administrative, quality, non-clinical and clinical) of a pharmaceutical product in order to promote, market, sell, import and distribute the product in a specific territory.
|
| *** |
During the current year an impairment loss was recognised for Schema6 (R6.1 million) due to no clients using the system, as well as IFM system (R35.5 million) due to a reduction in expected future cash flows. An impairment loss in respect of previously recognised goodwill on the acquisition of Workcare Health to the value of R771 000 was incurred, as the company is incurring losses and the recoverability of the goodwill cannot be substantiated. |
| **** |
The prior year accumulated amortisation and impairment has been disaggregated to separately disclose the accumulated amortisation from the accumulated impairment. |
| |
| |
Brands
and
intellectual
property
R’000 |
Pharma-
ceutical
dossiers* |
Internally
generated
software |
Computer
software |
Goodwill |
Customer
relationships |
Total |
| |
R’000 |
R’000 |
R’000 |
R’000 |
R’000 |
R’000 |
| |
|
|
|
|
|
|
| At 30 June 2019 |
|
|
|
|
|
|
|
| At cost |
47 873 |
286 365 |
754 336 |
477 803 |
1 399 808 |
303 452 |
3 269 637 |
| Accumulated amortisation*** |
(39 934) |
– |
(166 416) |
(198 180) |
– |
(187 144) |
(591 674) |
| Accumulated impairment*** |
– |
– |
(47 000) |
(26 277) |
(48 674) |
– |
(121 951) |
| Closing carrying amount 30 June 2019 |
7 939 |
286 365 |
540 920 |
253 346 |
1 351 134 |
116 308 |
2 556 012 |
| |
|
|
|
|
|
|
| Additions |
– |
– |
203 318 |
80 713 |
22 216 |
– |
306 247 |
| Amortisation |
(841) |
(14 454) |
(68 854) |
(41 927) |
– |
(38 077) |
(164 153) |
| Impairment loss recognised in profit or loss** |
– |
– |
– |
(2 919) |
– |
– |
(2 919) |
| 7 098 |
271 911 |
675 384 |
289 213 |
1 373 350 |
78 231 |
2 695 187 |
| |
|
|
|
|
|
|
| At cost |
47 873 |
286 365 |
957 654 |
535 312 |
1 422 024 |
303 452 |
3 552 680 |
| Accumulated amortisation*** |
(40 775) |
(14 454) |
(235 270) |
(216 903) |
– |
(225 221) |
(732 623) |
| Accumulated impairment*** |
– |
– |
(47 000) |
(29 196) |
(48 674) |
– |
(124 870) |
| Closing carrying amount 30 June 2020 |
7 098 |
271 911 |
675 384 |
289 213 |
1 373 350 |
78 231 |
2 695 187 |
| * |
Pharmaceutical dossiers relate to a set of documents that contains all the technical data (administrative, quality, non-clinical and clinical) of a pharmaceutical product in order to promote, market, sell, import and distribute the product in a specific territory. |
| ** |
The previous year R2.9 million in respect of the Solatium system – an impairment has been recognised as there are no expected cash flows from the system, resulting in the recoverable amount not being able to be substantiated. |
| *** |
The prior year accumulated amortisation and impairment has been disaggregated to separately disclose the accumulated amortisation from the accumulated impairment. |
A summary per CGU of the goodwill allocation is presented below:
| |
| |
2020
R’000 |
2020
R’000 |
| 493 363 |
459 216 |
– |
– |
| Medscheme – healthcare administration |
274 972 |
274 972 |
– |
– |
| Medscheme – health risk management |
89 298 |
89 298 |
– |
– |
| Aid for AIDS Management Proprietary Limited – healthcare administration |
23 490 |
23 490 |
– |
– |
| Allegra Proprietary Limited – healthcare IT support |
1 268 |
1 268 |
– |
– |
| AfroCentric Distribution Services Proprietary Limited – healthcare
marketing support |
835 |
835 |
– |
– |
| Klinikka Proprietary Limited – medical equipment supplier |
2 435 |
2 435 |
– |
– |
| Wellness Odyssey – healthcare wellness days |
14 857 |
14 857 |
– |
– |
| Tendahealth – healthcare insurance broker |
1 162 |
1 162 |
– |
– |
| Scriptpharm – chronic scripts claim |
2 699 |
2 699 |
– |
– |
| Essential Group – healthcare insurance |
9 333 |
9 333 |
– |
– |
| AfroCentric Integrated Corporate Solutions Group –
healthcare administration |
38 096 |
38 096 |
– |
– |
| Workcare – healthcare administration |
– |
771 |
– |
– |
| Denis Group |
34 918 |
– |
– |
– |
| 15 535 |
15 535 |
– |
– |
| Medscheme Mauritius Limited – local administration |
4 969 |
4 969 |
– |
– |
| Medscheme Mauritius Limited – international administration |
10 566 |
10 566 |
– |
– |
| 898 599 |
898 599 |
– |
– |
| Pharmacy Direct, Curasana and Glen Eden (PD, CS and GE) |
473 954 |
473 954 |
– |
– |
| Activo |
424 645 |
424 645 |
– |
– |
|
|
|
|
|
| 1 407 497 |
1 373 350 |
– |
– |
Management determines the recoverable amount of Cash Generating Units (CGUs) as being the higher of fair value less costs to
sell or value in use. In the absence of an active market, value in use is used to determine the recoverable amount. A traditional
method of discounting management’s best estimate of future cash flows attributable to the CGU has been applied to determine
the value in use. A growth rate has been applied to cash flow streams to take into account the effect of inflation as well as
business-specific expectations.
Assumptions used in the determination of the recoverable amount are as follows:
- The estimated revenues to be earned from the use of the assets;
- The forecast period over which those revenues are projected;
- An average growth rate;
- The pre-tax discount rate that takes into account the yield on government bonds, Beta and a market risk premium;
- Risk adjustment factors used in deriving an appropriate discount rate applied to future estimated cash flows;
- The rate on government bonds (risk-free rate) of 7.25% as at 30 June 2021 (30 June 2020: 7.32%);
- A market risk premium of 7.8% (2020: 7.7%) is justified as the overall risk is to the downside; and
- The Beta (ß) is 0.91 as at 30 June 2021 (30 June 2020: 0.92).
The inputs above were adjusted for geographical and entity specific risk.
The following table sets out the key assumptions for those CGUs that management considers the most significant to the Group.
| |
| |
|
|
|
| Medscheme – admin and managed care |
5 010 916 |
12.67 |
5 years |
5 |
| Activo |
1 488 160 |
12.67 |
5 years |
7 |
| Pharmacy Direct, Curasana and Glen Eden |
1 237 827 |
12.67 |
5 years |
7 |
| |
|
|
|
| Medscheme – admin and managed care |
4 746 798 |
13.16 |
5 years |
6 |
| Activo |
941 072 |
13.16 |
5 years |
7 |
| Pharmacy Direct, Curasana and Glen Eden |
1 243 246 |
13.16 |
5 years |
7 |
Management has determined the values assigned to each of the above key assumptions as follows:
| Average growth rate (%) |
Average annual growth rate over the five-year forecast period; based on past performance and management’s expectations of market development specifically taking into account the impact that the COVID-19 pandemic is expected to have on future earnings noted below:
Medscheme – admin and managed care:
- Average revenue increases in the forecast period have been muted with 4% growth expected in revenue.
-
- Management has embarked on effective cost savings initiatives through early investment in systems development. This increased IT capacity has now been applied to greater scale and through improved procedural efficiencies.
-
- The Group will continue with system renewals and upgrades to explore better and more cost efficient ways in servicing and engaging its customers/members.
-
- These programmes are expected to enable the Group to achieve 5% growth.
Activo, Pharmacy Direct, Curasana and Glen Eden:
- Average revenue increases in the forecast period is 7%.
- The pharmaceutical related component yielded significant growth during the year, particularly during the stressful time under COVID-19. This included the increasing volume of activity in Pharmacy Direct.
- The more heedful attention paid by patients reliant on chronic medication during lockdown, not least an obvious desire to stay healthy in general, the convenience of group deliveries during lockdown, at work or home, proved extremely valuable to those dependent on their chronic medications and other requirements.
- The trends experienced are expected to continue in the forecast period. This, together with the cost efficiency embarked on, resulted in a growth rate of 7% being applied.
|
Discount rate (%) |
Discount rate the company is expected to pay on average to all its security holders to finance its assets which reflects specific risks to the relevant CGU. |
| |
|
|
|
Worst case
R’000
Medscheme:
4%
PD, CS, GE &
Activo: 6% |
Growth rate
Base case
R’000
Medscheme:
5%
PD, CS, GE &
Activo: 7% |
Best case
R’000
Medscheme:
6%
PD, CS, GE &
Activo: 8% |
| Medscheme |
Discount rate |
Worst case |
14.17% |
3 776 026 |
4 190 091 |
4 705 489 |
| Base case |
12.67% |
4 430 384 |
5 010 916 |
5 765 509 |
| Best case |
11.80% |
4 927 599 |
5 656 064 |
6 635 900 |
| Pharmacy Direct, Curasana
and Glen Eden |
Worst case |
14.05% |
870 337 |
995 689 |
1 162 501 |
| Base case |
12.67% |
1 050 255 |
1 237 827 |
1 505 721 |
| Best case |
11.80% |
1 208 985 |
1 463 909 |
1 853 148 |
| Activo |
Worst case |
14.17% |
1 052 689 |
1 170 616 |
1 325 470 |
| Base case |
12.67% |
1 295 781 |
1 488 160 |
1 761 238 |
| Best case |
11.80% |
1 499 380 |
1 769 765 |
2 180 565 |
|
| |
During the period under review, management embarked on a process of assessing the internally generated intangible assets for
potential impairment. Following from this process, an impairment loss was recognised for the following system:
- R6.1 million in respect of the Schema6 system – an impairment has been recognised as there are no expected cash flows
from the system, resulting in the recoverable amount not being able to be substantiated.
- R35.5 million in respect of the IFM system due to a reduction in expected future cash flows. AfroCentric has been notified
by FICO that the support on the IFM system will come to an end at the end of March 2022, resulting in the system not being
available for continued use. As a result of this, it is expected that cash flows generated from the schemes for use of the
Fraud Management Software (IFM system) will cease from January 2022.
- In the 2019 financial period, an impairment loss of R47 million was recognised as a result of the recoverable amount of the
Gexus system being lower than the carrying value. This internally generated software is used to administer a portion of
our managed care business and forms part of the Groups’ IT segment assets. In the 2021 financial period, key managed
care contracts were procured by AfroCentric resulting in the recoverable amount (calculated based on value in use) in
excess of R195 million. An impairment reversal of R39 million has been recognised in the current financial period, to
restore its carrying value to what it would have been, had there been no impairment raised in 2019, in line with IAS 36.
The value in use has been calculated using a discount rate of 12.75% (12.59% in 2019).
|