Wrap Text
Unaudited interim results
AFROCENTRIC INVESTMENT CORPORATION LIMITED
AFRO AFROCENTRIC INVESTMENT CORPORATION LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1988/000570/06)
JSE Code: ACT, ACTP ISIN: ZAE000078416, ZAE000082269
("AfroCentric" or "the Company")
AFROCENTRIC UNAUDITED INTERIM RESULTS
for the six months ended 31 December 2012
The Board of Directors has pleasure in presenting the Group’s unaudited results for the six months ended 31
December 2012.
The Group’s overall performance for the period under review has been satisfactory once again achieving positive
growth in earnings, while simultaneously contributing to a world of affordable and sustainable healthcare,
these objectives being cornerstones of the Group’s strategy.
HIGHLIGHTS:
REVENUE UP 22.75%
OPERATING PROFIT: UP 31.0%
NORMALISED EARNINGS PER SHARE: UP 28.8%
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited six Unaudited Audited year
months ended six months ended
31 December ended 30 June 2012
2012 31 December
2011
R’000 R'000 R'000
Non-current assets 1 027 820 941 838 991 884
Property, plant and 96 137 100 048 97 016
equipment
Investment property 10 300 10 100 10 300
Intangible assets 661 007 609 926 611 042
Unlisted investments 280 280 280
Investment in associates 88 470 62 368 86 765
Investment in preference 100 000 100 000 100 000
shares
Deferred income tax assets 71 626 59 116 86 481
Current assets 367 746 241 966 371 416
Trade and other receivables 116 733 94 685 108 511
Receivables from associates 12 260 18 647 14 591
and joint ventures
Current tax asset 29 756 7 981 6 404
Cash and cash equivalents 208 997 120 653 241 910
Total assets 1 395 566 1 183 804 1 363 300
EQUITY AND LIABILITIES
Capital and reserves 924 842 758 355 882 815
Issued capital 352 669 347 716 349 365
Contingent shares to be 188 540 188 540 188 540
issued
Share-based awards reserve 20 759 - 9 357
Treasury shares (2 701) (1 162) (1 772)
Foreign currency translation (171) (327) (646)
reserve
Distributable reserve 365 746 223 588 337 971
Non-controlling interest 38 449 17 694 30 625
Total equity 963 290 776 049 913 440
Non-current liabilities 278 685 270 376 271 968
Deferred income tax 51 846 35 031 47 595
liabilities
Borrowings 200 000 200 000 200 000
Provisions 8 350 9 215 8 350
Post-employment medical 3 504 3 821 3 504
obligations
Accrual for straight lining 14 985 22 309 12 519
of leases
Current liabilities 153 591 137 379 177 892
Borrowings - - 8 346
Provisions 7 181 2 073 8 779
Trade and other payables 92 641 69 954 76 802
Taxation 3 000 4 239 4 149
Bank overdraft - 9 087 -
Employment benefit 53 766 52 026 79 816
provisions
Total liabilities 432 276 407 755 449 860
Total equity and 1 395 566 1 183 804 1 363 300
liabilities
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited
Unaudited six months
six months ended Audited year
ended 31 31 December ended
% December 2012 2011 30 June 2012
change
R’000 R’000 R’000
Revenue 22.75% 822 422 670 007 1 448 261
Operating costs (687 239) (566 807) (1 188 960)
Operating profit 31.00% 135 183 103 200 259 301
Other income 4 482 10 965 14 894
Net finance cost (893) (1 701) 3 371
Share of profit from 7 091 4 906 14 842
associates
Profit before impairment 145 863 117 370 292 408
and amortisation
Fair value gain (impairment) 929 - 1 175
of investment
Fair value adjustment on (308) - 13 162
investment in associate
IFRS 2 compliance adjustment (11 402) - (9 357)
(Notes 1, 2 & 3)
Depreciation (17 744) (19 293) (38 128)
Amortisation of intangible (17 606) (17 359) (36 356)
assets
Profit before income tax 23.55% 99 732 80 718 222 904
Income tax expense (30 917) (21 783) (42 523)
Profit for the year 16.76% 68 815 58 935 180 381
Other comprehensive income - - -
Total comprehensive income 68 815 58 935 180 381
for the year
Attributable to:
Equity holders of the Parent 9.54% 59 529 54 344 164 506
Non-controlling interest 9 286 4 591 15 875
68 815 58 935 180 381
Note 1: Actuarially determined cost of share-based awards in each period
reserved for selected executives of Afrocentric Health Limited (AHL) in
terms of the 2009 Acquisition Agreement, categorised for disclosure herein
in terms of IFRS 2.
Note 2: The above non-cash deduction from Group profits in 2012 amounting
to R9 357 was inadvertently added back for purposes of determining diluted
earnings per share and diluted headline earnings per share for the year
ended 30 June 2012. The calculations relative to this matter have
accordingly been revised and are correctly disclosed and described in the
table of Earnings Attributable to Equity Holders.
Note 3: Given the non-cash nature of the IFRS 2 compliance adjustment and
also the specific and non-recurring nature of the executive awards, the
Board concluded that a more meaningful measure of the company’s performance
is revealed by adding back the IFRS 2 compliance adjustment which is refered
to herein as “normalised earnings”. These normalised earnings are also
disclosed and described in the table of Earnings Attributable to Equity
Holders.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Unaudited six Unaudited six
months ended months ended Audited year
31 December 31 December ended
2012 2011 30 June 2012
R’000 R’000 R’000
Balance at beginning of 913 440 747 635 747 635
the period
Issue of share capital 3 304 3 931 5 579
Share-based awards reserve 11 402 - 9 357
Revaluation of treasury (929) - (609)
shares issued
Dividends reclaimed and - - 5 868
subsidiary acquisitions
Foreign currency translation 476 (568) (887)
reserve
Dividends paid/Distribution (33 218) (33 884) (33 884)
to shareholders
Net profit for the year 59 529 54 344 164 506
Profit attributable to 9 286 4 591 15 875
minorities
Balance at end of period 963 290 776 049 913 440
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited
six months six months
ended ended Audited year
31 December 31 December ended
% 2012 2011 30 June 2012
change R’000 R’000 R’000
Net cash inflow/(outflow) 74 977 (11 947) 116 236
in operating activities
Net cash inflow/(outflow) (70 096) (24 854) (55 353)
from investing activities
Net cash inflow/(outflow) (37 794) (24 344) 8 315
from financing activities
Net (decrease)/increase in (32 913) (61 145) 69 198
cash and cash equivalents
Cash and cash equivalents at 241 910 172 711 172 712
beginning of the period
Cash and cash equivalents 87% 208 997 111 566 241 910
at end of the period
Reconciled as follows:
Cash and cash equivalents 208 997 120 653 241 910
on hand
Bank overdraft - (9 087) -
208 997 111 566 241 910
EARNINGS ATTRIBUTABLE TO EQUITY HOLDERS
Unaudited Unaudited
six months six months
ended ended Audited year
31 December 31 December ended
% 2012 2011 30 June 2012
change R’000 R’000 R’000
Number of ordinary shares in 269 154 524 267 458 718 268 231 817
issue
Number of preference shares 16 638 000 16 638 000 16 638 000
in issue
Weighted average number of 268 894 005 265 332 341 267 276 657
ordinary shares
Weighted average number of 334 333 038 312 530 939 332 384 302
shares for diluted EPS
including shares for share-
based awards
Basic earnings 9.54% 59 529 54 344 164 506
Adjusted by:
- Fair value (gain) (929) - (1 175)
impairment of investment
- Reversal of loan - (137) -
impairments
- Fair value adjustment 308 - (13 162)
of investment in associate
- Loss/profit on 35 (166) (566)
disposal of assets
- Fair value adjustments - - (810)
(other)
Headline earnings 58 943 54 041 148 793
Earnings per share (cents)
- Attributable to ordinary 8.09% 22.14 20.48 61.55
shares (cents)
- Diluted earnings per share 52.31
(cents) (as reported)
(Note 2)
- Diluted earnings per share 2.40% 17.81 17.39 49.49#
(cents)
- Normalised earnings per 28.80% 26.38 20.48 64.82
share (cents) (Note 3)
- Diluted normalised 22.01% 21.22 17.39 52.31
earnings per share (cents)
(Note 3)
Headline earnings per
share (cents)
- Attributable to ordinary 7.63% 21.92 20.37 55.67
shares (cents)
- Diluted earnings per share 47.58
(cents) (as reported)
(Note 2)
- Diluted earnings per share 1.96% 17.63 17.29 44.77#
(cents)
- Normalised earnings per 28.40% 26.16 20.37 58.94
share (cents) (Note 3)
- Diluted normalised 21.68% 21.04 17.29 47.58
earnings per share (cents)
(Note 3)
#
Revised as per Note 2
SEGMENTAL ANALYSIS
UNAUDITED INTERIM RESULTS UNAUDITED INTERIM RESULTS AUDITED RESULTS
for the six months ended 31 for the six months ended 31 for the year ended 30 June 2012
December 2012 December 2011
Revenue Profit Total Revenue Profit Total Revenue Profit Total
before assets before assets before assets
assets tax tax tax
R’000 R’000 R’000 R’000 R’000 R’000
Healthcare 822 422 119 708 1 064 448 670 007 72 152 806 941 1 448 261 217 086 977 763
administration
Electronics
(including - 3 881 - - 2 650 - - 5 988 -
investment
income)
Treasury
- 3 705 113 559 - 3 915 110 517 - 7 758 119 561
activities
Other
(including
- (27 562) 217 559 - 2 001 266 346 - (7 928) 265 976
inter-segment
elimination)
822 422 99 732 1 395 566 670 007 80 718 1 183 804 1 448 261 222 904 1 363 300
COMMENTARY
ACCOUNTING POLICIES AND BASIS OF PREPARATION
The condensed consolidated financial statements for the six months ended 31 December 2012 are prepared in
accordance with the requirements of International Financial Reporting Standards (“IFRS”), IAS 34 – Interim
Financial Reporting, 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 interim 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 2012 in terms of IFRS.
NATURE OF BUSINESS
AfroCentric Investment Corporation Limited (“AfroCentric”) is a black-controlled, diversified investment holding
company. It is listed on the Johannesburg Securities Exchange (“JSE”) in the Healthcare Sector under the code:
ACT. The Group’s preference shares are also listed on the JSE under the code: ACTP.
AfroCentric holds a substantial majority stake in AfroCentric Health Limited (“AHL”), formerly Lethimvula
Investments Limited. During the six months ended 31 December 2012, AfroCentric increased its holding in AHL to
93.64% (June 2012: 93.17%) through the purchase of minority shareholdings in that company. AfroCentric continues
to engage with AHL shareholders who wish to offer their AHL shares for sale. 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 efficiency. Medscheme has over 3.2
million lives under management. Medscheme’s healthcare management expertise has been gained over 41 years, which
includes several years of experience with the Government Employees Medical Scheme (“GEMS”). Although Medscheme
is essentially a South African enterprise, the Group has a meaningful presence in Botswana, Namibia, Mauritius,
Swaziland and Zimbabwe. Medscheme’s operations in Mauritius provide an excellent platform for further
international expansion and AHL continues to explore other opportunities on the African continent and elsewhere.
Health Management and technical support services are provided to clients in the Republic of Ireland out of
Mauritius.
AfroCentric has a 27.3% non-controlling interest in JSE-listed Jasco Electronics Holdings Limited (“Jasco”).
Jasco provides solutions, services and products to customers through three core verticals: Information and
Communication Technologies, Industry Solutions and Energy Solutions. One of Jasco’s investments is Malesela
Taihan Electric Cables (M-Tec). M-Tec is a leading manufacturer and distributor of fibre-optic cable including a
wide range of power and telecom cables, serving inter alia, infrastructural development demands in the South
African and African continental markets. Further information on Jasco can be found on the JSE lists under the
code: JSC.
AfroCentric’s exploration and prospecting relationship with Rio Tinto PLC continues in terms of the Relationship
and Strategic Cooperation Agreement (RSCA).
OPERATIONAL REVIEW
AfroCentric’s operating profits amounted to R135.2 million during the period under review (2011: R103 million)
an increase of 31%. The improved profitability arises primarily from AHL’s increased revenue growth from
expanding operations and continuing efficiency improvements in the Administration and Health Risk Management
business. AHL’s administration and managed care contracts are reviewed annually in January and accordingly
profits of AHL are favourably weighted towards the period January-June in each year. Medscheme also secured GEMS
administration contracts for contribution and debt management as well as the correspondence contract in 2012.
These contracts also contributed to the growth in earnings for the six months ended 31 December 2012. AHL’s
financial position at 31 December 2012, suggests that all warranty provisions are likely to be satisfied through
which the final price of the AHL investment will be determined.
AfroCentric’s investment in the listed entity Jasco yielded earnings and investment income for the six months
ended 31 December 2012 of R7.3 million (2011: R4.9 million). Further information on Jasco’s earnings, operations
and prospects are available on SENS under JSE Code: JSC.
AfroCentric has entered into a contract with Rio Tinto for a significant minority interest in a new iron-ore
exploration joint venture project on terms consistent with the provisions of the continuing RSCA and subject to
DMR approvals.
FINANCIAL RESULTS
Profit before tax for the six month period ended 31 December 2012, after deducting the IFRS compliance
adjustment, (more fully explained in Notes 1, 2 and 3 to the Condensed Consolidated Statement of Comprehensive
Income) increased by 23.55%. Profits after tax attributable to equity holders increased by 9.54% and earnings
per share and headline earnings per share increased by 8.09% and 7.63% respectively.
Shareholders are once again reminded that all of the warranties provided for in the 2009 AHL Acquisition
Agreement (“the agreement”) will be measured against actual performance of AHL as at 30th June 2013. To the
extent that all of the warranties are fulfilled and depending on the percentage of AHL shares owned by
AfroCentric at that date, a maximum of 138.5 million ordinary shares, referred to as “contingent shares to be
issued” in the 2012 Integrated Report, will be issued to the original vendors on or before 30 September 2013
together with past distributions attributable to such shares.
In addition, in the second quarter of the 2014 financial year, AfroCentric will notify preference shareholders
of the means by which they can elect to convert their preference shares into ordinary shares. The election to
convert must be made prior to 31st December 2013 in terms of the preference share covenants. Preference shares
not converted within the specified period will be redeemed by the company.
PROSPECTS
While the Group’s investment in AHL has generally been heartening, the progress and performance of Jasco during
the period under review has been disappointing. The board nevertheless recognises the talent and commitment of
both management teams, and remains confident of the growth prospects of each of the core businesses. The Board
will proceed to assess new opportunities which satisfy the criteria of the Board Investment Committee, including
providing continual counsel to group management on operational matters and efficiencies.
SUBSEQUENT EVENTS
No significant events have occurred in the period between the reporting date and the date of this announcement.
DIRECTORS
During the period under review NB Bam retired as Chairperson, but she will continue to act as a non-executive
director of the company. Dr AT Mokgokong was appointed Chairperson and D Dempers was appointed Chief Executive
Officer. There were no further changes to the AfroCentric Board.
DIVIDENDS
The policy of the Board is to review profits available for distribution to shareholders at the end of each
financial year. Accordingly no distribution has been considered at this time.
BASIS OF PREPARATION
The unaudited interim results have been prepared under the supervision of Mr WRC Holmes CA(SA), in his capacity
as the Group Chief Financial Officer.
By Order of the Board
Yolandi Van Zweel
Acting company secretary
Johannesburg
Directors
AT Mokgokong** (Chairperson),
D Dempers (CEO)***, WRC Holmes (CFO)***,
NB Bam**, B Joffe**, JM Kahn**,
MJ Madungundaba**, Y Masithela*, G Napier*, MI Sacks**
*independent non-executive **non-executive ***executive
Registered Office
37 Conrad Rd
Florida North 1709
12 March 2013
Johannesburg
Sponsor
Sasfin Capital (a division of Sasfin Bank Limited)
Date: 12/03/2013 12:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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