COMMENTARY

INTRODUCTION

The Board is pleased to present the Company’s reviewed interim results for the six months ended 31 December 2014. On a rand for rand basis, the Company has satisfactorily continued its trend of growth as in past periods, this revealed inter alia, in an 8.4% increase in Revenue, a 29% increase in headline earnings, a 26.6% increase in Profits after Tax with further information as set out alongside this commentary. The dilution in Basic Earnings and Headline Earnings per share arise primarily as a result of the increased weighted average number of shares in issue at 31 December 2014, arising through shares issued for the “second tranche” payments at 31 December 2013, including the shares issued on conversion of the Company’s Convertible Preference Shares which occurred on the same date (refer to note 1).

ACCOUNTING POLICIES AND BASIS OF PREPARATION

The condensed consolidated financial statements for the six months ended 31 December 2014 are prepared in accordance with the requirements of International Financial Reporting Standards (“IFRS”), the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, the JSE Limited Listings Requirements, and the South African Companies Act 71 of 2008, as amended. The condensed consolidated financial statements are prepared on the historical cost basis and the accounting policies are consistent with those adopted and applied for the year ended 30 June 2014 in terms of IFRS.

NATURE OF BUSINESS

AfroCentric is a black-controlled, diversified investment holding company. It is listed on the exchange operated by the JSE Limited in the Healthcare sector under the code: ACT. AfroCentric holds a substantial 94.1% majority stake in AfroCentric Health Limited (“AHL”). AHL owns 100% of the issued share capital in Medscheme Holdings (Pty) Ltd (“Medscheme”), a multi-medical scheme administrator and managed care provider. The Group also has a meaningful presence in various African countries as well as Mauritius.

RECENT DEVELOPMENTS

The Board is pleased to report on the progress towards the finalisation of the two material transactions, first announced to shareholders during September 2014. These relate to the acquisition of the wholesale and courier pharmacy businesses belonging to WAD Holdings (Proprietary) Limited (“WAD”) and the strategic investment by SANLAM Limited in a Group subsidiary, AfroCentric Health Limited (“AHL”).

These transactions have progressed to the point where agreements in the case of WAD have been signed and the suite of agreements on the SANLAM investment are expected to be completed within weeks hereafter. Both transactions remain subject to certain Regulatory Approvals and conditions precedent and these processes will be appropriately attended to. In the case of SANLAM, shareholder approval is required and a circular will shortly be distributed in this regard. Accordingly, these results were purposely reviewed, given that the circular to shareholders for the SANLAM transaction approval, requires that these interim results be reviewed by the Company’s auditors.

The Jasco redeemable preference shares held by the Company were redeemed on 6 February 2015. The R90 million received through this redemption were utilised to reduce AfroCentric’s loan with ABSA from R150 million at 31 December 2014, to R60 million presently.

OTHER HIGHLIGHTS

Some notable achievements for the Group were the following:

Medscheme, and in particular the Medscheme Health Intelligence Unit (“HIU”), was named a semifinalist at the recent Accenture Innovation Index Awards 2015; and
Medscheme, the largest health risk management services provider and the third largest medical scheme administrator in South Africa, dominated the 2014 PMR Awards scooping an impressive 14 awards, underlining its position as the country’s foremost managed healthcare firm.
Helios has together with myCARE which is a Pretoria based Managed Healthcare organisation, secured a contract with Government Employees Medical Scheme (“GEMS”) to provide the medical claims clearing house functionality for its providers.

PROSPECTS

While economic indicators in South Africa at this time suggest a challenging period ahead, it is nevertheless expected that the principal business of the Group will continue to generate positive outcomes, particularly given that the acquisition of WAD and the strategic investment by SANLAM will significantly expand the Group’s capital base and positively position the Group for further growth.

DIRECTORS AND OFFICERS

There were no changes to the Board of Directors for the period under review. However, on 1 March 2015, Shireen Lutchan was appointed as Group Company Secretary, following the resignation of Wilbert Mhlanga.

INTERIM DIVIDEND

The Board of Directors has pleasure in announcing that the Company’s first interim dividend of 10 cents per ordinary share (gross) has been declared for the six months ended
31 December 2014. Dividends are subject to Dividends Withholding Tax. The payment date for the dividend is Monday, 18 May 2015. This interim dividend will constitute part of the Group’s annual dividend, to be considered with the results at year-end.

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 31 December 2014; and
the company’s income tax reference number is 9600/148/71/3.

The salient dates relating to the dividend are as follows;

Last day to trade cum dividend Friday, 8 May 2015;
Shares commence trading ex dividend Monday, 11 May 2015;
Dividend record date Friday, 15 May 2015; and
Dividend payment date Monday, 18 May 2015.

Share certificates for ordinary shares may not be dematerialised or rematerialised between Monday, 11 May 2015 and Friday, 15 May 2015, both days inclusive.

BASIS OF PREPARATION

The reviewed interim results have been prepared under the supervision of Mr WRC Holmes CA (SA), in his capacity as the Group Chief Financial Officer. These results were purposely reviewed given that the circular to shareholders for the SANLAM transaction approval, required that the interim results be reviewed by the Company’s auditors SizweNtsalubaGobodo Inc and PricewaterhouseCoopers Inc. Their review report is available at the Company’s registered office. Any reference to the Group’s future financial performance has not been reviewed or reported on by the Group’s Auditors.