Introduction and review
AfroCentric is a 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. AfroCentric is doing this by broadening its presence in the healthcare industry by pursuing new opportunities and expanding its existing Group healthcare enterprises.
The Board is pleased to present a summarised commentary on AfroCentric’s (“ACT”) interim results for the six months ended 31 December 2019. The period under review has been characterised by further complementary investments and the expansion of existing contractual relationships. Entities more recently acquired, have been profitably integrated into Group operations and innovative digital applications are being applied, to drive greater efficiencies to improve the quality of services rendered to our customers, our clients and their medical scheme members.
Our prior investment in system development and increased IT capacity, continues to contribute favourably towards our operating results, achieving beneficial cost savings through greater scale and procedural efficiencies.
Apart from ACT’s subsidiary, Medscheme, which provides healthcare administration and managed care services to its growing number of prominent institutional clients, the Group has invested in other healthcare businesses, servicing both the public and private healthcare markets. The Group continues to grow its wholesale pharmaceutical supply operations and its chronic medication distribution capability. Other compelling and effective services include, specialised disease management, information technology (IT) solutions, transactional switching, and healthcare fraud detection.
- Medscheme won an international award at the 2019 FICO World Decisions. Conference for Decision Management Innovation on its new Fusion development.
- ACT’s Aid for Aids, won the PMR award for managed care.
- AfroCentric Health (Pty) Ltd, the Group’s main operating subsidiary retained its level 1 B-BBEE rating.
- AfroCentric Investment Corporation Ltd, achieved level 1 B-BBEE, in December 2019.
The financial performance for the six months period starts to present the benefits of the Group’s deliberate diversification strategy, revealing the solid growth in the maturing trading cluster. The beneficial effect of the acquisition of the shares in Activo Health in 2019, the impressive growth in Scriptpharm, including the enduring volume activity in Pharmacy Direct, were the notable contributory factors, yielding growth in comparative operating profits in excess of 50%.
The Services Cluster, mainly supported by the medical scheme administration business, has also performed well during the period under review. Open scheme growth of a net 18 000 members during 2019, was offset by the loss of the Old Mutual Staff Medical Aid fund, but a growth in membership in GEMS, in excess of 22 000 members supported a consistent operating profit performance. The continued effort to improve service efficiencies through more economic platforms and IT systems has favourably resulted in a lower cost base. As a result of these stringent and more disciplined cost controls, the Services Cluster was able to achieve an 8.8% growth in operating profit.
Profit before tax increased by 12.1% for the period under review amounting to R268.7 million (2018: R239.6 million). Profit after tax (PAT) increased by 14.5% compared to prior financial period.
Given the nature of assets of the Group being mostly intangible, the cash generation ability of its various subsidiaries is imperative and is demonstrated in the cash inflow from operating activities increasing by 480% for the reporting period.
AfroCentric has for some time focused on opportunities designed to establish a value chain of healthcare ventures in order to maximise the purchasing power of every healthcare Rand spent. Through models of integration and partnerships, the objectives are to improve the affordability of patient care, with viable patient outcomes for easier accessibility to a broader community.
During the period under review and prior to publishing these results:
- Two important contracts were secured for efficient Chronic Medical and HIV management.
- Medscheme has secured the contract to administer the MEDiPOS Medical Scheme effective 1 April 2020.
- The Group is in the process of acquiring 100% of the DENIS Group which specialises in dental benefit management. The transaction enables the Group to focus specifically on cost reduction and innovation in the dental treatment offerings to all SA medical schemes and their members. The transaction is subject to Competition Commission approval.
AfroCentric has once again delivered a very satisfactory operating result, particularly during a period of challenging political and economic uncertainty, not least a period characterised by a lack of economic growth and declining consumer disposable incomes. Notwithstanding the above, the profits arising through the Group’s expanded trading base, including the sustainable and/or improved earnings from the Group’s established underlying businesses, contributed satisfactorily to the financial results of the Group during this period under review.
The Group’s financial position remains sound, cash reserves were applied to working capital needs when necessary and the early repayment of debt. Management continues to assess plans for organic growth and selective opportunities for acquisition, to complement existing group trading and service offerings.
The following changes were made to the Board during the period under review:
- Ms HG Motau resigned as an Independent Non-Executive Director effective 07 November 2019.
- Mr T Alsworth-Elvey was appointed as a Non-Executive Director effective 1 July 2019.
- Mr I Kirk retired as a Non-Executive Director effective 12 September 2019, he was replaced by Mr G Allen on the same date (a Sanlam representative with Healthcare experience).
The Board has pleasure in announcing that an interim dividend of 17 cents per ordinary share (gross) has been declared for the six months ended 31 December 2019. Dividends are subject to Dividends Withholding Tax. The payment date for the dividend is Monday, 11 May 2020. This interim dividend will constitute part of the Group’s annual dividend, to be considered in due course with the results for the year ending on 30 June 2020.
- Dividends have been declared out of profits available for distribution.
- Local Dividends Withholding Tax rate is 20%.
- Gross dividend amount is 17 cents per ordinary share.
- Net cash dividend amount is therefore 13.6 cents per ordinary share.
- Company has 574 241 248 ordinary shares in issue as at the declaration date.
- 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
|Tuesday, 5 May 2020
|Shares commence trading ex-dividend
|Wednesday, 6 May 2020
|Dividend record date
|Friday, 8 May 2020
|Dividend payment date
|Monday, 11 May 2020
Share certificates for ordinary shares may not be dematerialised or rematerialised between Wednesday, 6 May 2020 and Friday, 8 May 2020, both days inclusive.
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 summary financial statements, and the requirements of the Companies Act applicable to summary financial statements.
The Listings Requirements require summary financial statements 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 these summarised interim financial statements are in terms of International Financial Reporting Standards and are consistent with those accounting policies applied in the preparation of the previous consolidated annual financial statements.
Basis of preparation
The unaudited unreviewed interim results have been prepared under the supervision of Mr JW Boonzaaier CA(SA), in his capacity as the Group Chief Financial Officer. This announcement does not include the information required pursuant to paragraph 16A(j) of IAS 34. This is however available on our website (http://www.afrocentric. za.com/inv-reporting.php), or at our offices upon request.
On behalf of the Board
Dr ATM Mokgokong
Mr A Banderker
Group Chief Executive Officer
13 March 2020