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Audited results for the year ended 30 June 2014 and dividend declaration
AfroCentric Investment Corporation Limited Incorporated in the Republic of
South Africa
Registration number 1988/000570/06
JSE Code: ACT
ISIN: ZAE 000078416
(“AfroCentric” or “the Company” or “the Group”)
Audited Results
For the year ended 30 June 2014 and dividend declaration
Headline earnings up 42%
Revenue growth up 10%
Dividend up 20%
Introduction
The Board of Directors has pleasure in presenting the Group’s audited
results for the year ended 30 June 2014.
The publication of AfroCentric’s results for the year ended June 30, 2014
coincides with the announcement of two important strategic initiatives for
AfroCentric which are briefly explained herein under “Recent Developments”.
- an agreement to acquire WAD Holdings Proprietary Limited (“WAD”)
businesses that specialise in wholesaling, dispensing and delivery of
chronic medication; and
- an agreement for a significant minority investment by Sanlam Limited.
Apart from the satisfactory results of the Group’s business operations,
the year ended 30 June 2014 has important significance in the Group’s
history. During the year, the AfroCentric Health Limited’s (formerly
Lethimvula) profit warranty was finally measured, which triggered the
issue of the shares due under the second tranche payment provisions. In
addition, ordinary shares were issued to Preference Shareholders in terms
of the Preference Share Redemption covenants. Shareholders should consider
these factors for a better appreciation of this results announcement.
Condensed consolidated statement of financial position
Audited Audited
year ended year ended
30 June 2014 30 June 2013
R’000 R’000
Assets
Non-current assets 881 257 1 031 601
Plant and equipment 100 143 90 349
Investment property 15 000 15 000
Intangible assets 603 152 628 305
Investment in associates 77 183 42 484
Investment in preference shares - 100 000
Interest bearing loan - 74 000
Deferred income tax assets 85 779 81 463
Current assets 679 450 497 060
Trade and other receivables 190 828 127 559
Investment in preference shares 90 000 -
Inventory 4 610 -
Current portion of interest bearing loan - 2 378
Current tax asset 4 563 6 912
Cash and cash equivalents 389 449 360 211
Total assets 1 560 707 1 528 661
Equity and liabilities
Capital and reserves 1 070 968 1 002 874
Issued ordinary share capital 543 454 356 711
Contingent shares to be issued - 137 258
Share-based awards reserve 10 765 49 225
Treasury shares (2 324) (2 324)
Foreign currency translation reserve 1 337 1 254
Distributable reserve 517 736 460 750
Non-controlling interest 52 634 50 205
Total equity 1 123 602 1 053 079
Non-current liabilities 171 117 268 375
Deferred income tax liabilities 43 188 51 090
Borrowings 112 946 200 000
Provisions 8 350 8 350
Post-employment medical obligations 3 202 3 551
Accrual for straight-lining of leases 3 431 5 384
Current liabilities 265 988 207 207
Borrowings 44 877 7 926
Provisions 9 105 8 677
Trade and other payables 121 887 94 246
Employment benefit provisions 90 119 96 358
Total liabilities 437 105 475 582
Total equity and liabilities 1 560 707 1 528 661
Condensed consolidated statement of comprehensive income
Audited year Audited year
ended ended
% 30 June 2014 30 June 2013
change R’000 R’000
Revenue 10.62% 1 958 260 1 770 330
Operating costs (1 601 903) (1 436 673)
Operating profit 6.80% 356 357 333 657
Other income 2 2 307
Net finance income 17 699 8 168
– Finance income 34 246 24 841
– Finance cost (16 547) (16 673)
Foreign exchange benefit 83 1 900
Share of associate
profits/(losses) - Jasco 2 805 (30 030)
Share of associate profits -
Healthcare 1 536 8 553
Profit before impairment and
amortisation 16.62% 378 483 324 555
Reversal of impairment 3 720 7 253
Fair value gain of investment - 5 252
Impairment of intangible asset (40 620) -
Share-based payment expense (10 765) (39 868)
Profit on sale of investment - 51 014
Depreciation (40 475) (37 251)
Amortisation of intangible assets (43 907) (40 098)
Profit before income tax 246 436 270 857
Income tax expense (75 692) (84 848)
Profit for the year 170 744 186 009
Other comprehensive income - -
Total comprehensive income for
the year 170 744 186 009
Attributable to:
Equity holders of the Parent 153 823 163 570
Non-controlling interest 16 920 22 439
170 744 186 009
Condensed consolidated statement of changes in equity
Audited Audited
year ended year ended
30 June 2014 30 June 2013
R’000 R’000
Balance at beginning of the period 1 053 079 913 440
Issue of share capital 186 743 7 345
Second Tranche payment (26 744) -
Share-based awards reserve 10 765 39 868
Reduction in share based awards reserve (49 225) -
Reduction in contingent shares to be issued (137 258) (51 282)
Revaluation of treasury shares issued - (552)
Distribution to shareholders (70 178) (33 219)
Net profit for the period 153 823 163 570
Acquisition of businesses - (4 477)
Profit attributable to minorities 16 920 22 439
Distribution to AHL minorities (14 323) (4 053)
Balance at end of period 1 123 602 1 053 079
Earnings attributable to equity holders
Audited year Audited year
ended ended
30 June 2014 30 June 2013
R’000 R’000
Number of ordinary shares in issue 467 855 101 270 010 639
Number of preference shares in issue - 16 638 000
Weighted average number of ordinary shares 384 574 258 269 256 170
Weighted average number of shares for
diluted EPS which include shares on
conversion of preference shares share-
based awards and second tranche
shares to be issued 384 574 258 452 953 162
Basic earnings 153 823 163 570
Adjusted by:
- Impairment of intangible asset 40 620 -
- Adjustment of impairments recognised by
associate - 30 030
- Fair value gain on investment - (5 252)
- Reversal of impairment (3 720) (7 253)
- Loss/(profit) on disposal of assets 235 (440)
- Loss/(profit) on disposal of assets - (51 014)
- Fair value adjustments (other) - (4)
- Total tax effects of adjustments (4 906) -
- Total non-controlling effects of
adjustments (2 107) -
Headline earnings 183 945 129 637
Earnings per share (cents)
- Attributable to ordinary shares (cents) 40.00 60.75
- Diluted earnings per share (cents) 40.00 36.11
Headline earnings per share (cents)
- Attributable to ordinary shares (cents) 47.83 48.15
- Diluted earnings per share (cents) 47.83 28.62
Condensed consolidated statement of cash flows
Audited Audited
year ended year ended
30 June 2014 30 June 2013
R’000 R’000
Cash generated from operations 321 044 340 413
Net finance income 17 699 8 168
Distribution to shareholders (70 178) (33 196)
Tax and other payments (126 624) (88 305)
Net cash inflow in operating activities 141 941 227 080
Net cash outflow from investing activities (62 940) (114 459)
Net cash inflow from financing activities (49 846) 3 780
Effect of foreign exchange benefit 83 1 900
Net increase in cash and cash equivalents 29 238 118 301
Cash and cash equivalents at beginning of
the period 360 211 241 910
Cash and cash equivalents at end of the
period 389 449 360 211
Segmental analysis
Audited results
for the year ended 30 June 2014
Profit Total
Revenue before tax assets
R’000 R’000 R’000
Healthcare administration 1 959 760 271 884 1 308 762
Electronics (including investment
income) - 2 805 -
Treasury activities - - -
Other (including inter-segment
elimination) (1 500) (28 253) 251 945
1 958 260 246 436 1 560 707
Audited results
for the year ended 30 June 2013
Profit Total
Revenue before tax assets
R’000 R’000 R’000
Healthcare administration 1 771 370 337 215 1 276 080
Electronics (including investment
income) - (30 030) -
Treasury activities - 6 587 121 584
Other (including inter-segment
elimination) (1 040) (42 915) 130 997
1 770 330 270 857 1 528 661
Commentary
Accounting policies and basis of preparation
The condensed consolidated financial statements for the year ended 30 June
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 2013 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 Stock Exchange (“JSE”) in the Healthcare Sector under the
code: ACT.
AfroCentric holds a substantial 94.10% majority stake in AfroCentric
Health Limited (“AHL”). 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 efficiency and service
excellence. Medscheme has over 3.2 million lives under management.
Medscheme’s healthcare management expertise has been gained over 42 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, Kenya 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.
AfroCentric has a 20.27% 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.
Further information on Jasco can be found on the JSE lists under the code:
JSC.
AfroCentric’s exploration and prospecting relationship agreement with Rio
Tinto PLC continues in terms of the Relationship and Strategic Cooperation
Agreement (“RSCA”).
Operational and Financial review
AfroCentric’s profit before impairment and amortisation increased by 16.6%
to R378 million during the period under review. (2013: R324 million). The
improved profitability arises primarily from AHL’s increased revenue
growth of 10.6% from incremental medical scheme membership across the
total portfolio. In order to create greater IT capacity and the
development of clinical skills, additional human resources were recruited
to service the Group’s organic growth, including requirements arising
through successful awards of additional contracts. In anticipation, the
cost base of the Group increased disproportionately during the second half
of the year. This increase in the cost base is expected to remain static
for the remainder of 2014, with a more efficient recovery rate being
attained in this period. During February 2014, Medscheme was awarded a
claims administration contract from the Road Accident Fund (“RAF”).
The contract entails the legal, medical and financial analysis of RAF
claims. This contract is expected to generate more meaningful revenues
in the 2015 financial year. In addition, Helios, AHL’s IT subsidiary,
was appointed the IT systems service provider to CIMAS, the largest
medical scheme in Zimbabwe. This contract was only effective from 1 January
2014 and should similarly make a greater contribution to Group revenues
in the 2015 financial year. Over the past four years Medschemes’s core
operations have enjoyed a compound average growth rate of 28.6%.
AfroCentric’s investment in Jasco has yielded a small profit of R2.8
million. The various business units in Jasco have been restructured over
the past three years and hopefully given the recent recapitalization, the
business will start to generate improved profits for the 2015 financial
year.
Given the issue of shares for the redemption of the preference shares, as
well as the issue of shares for the second tranche payments, both
occurring during the year, the Board has always been of the view that
headline earnings and diluted headline earnings per share, as a
measurement, best represents the performance of the Group. Headline
earnings increased by 41.89% to R184 million compared to R130 million in
2013. Diluted headline earnings per share increased from 28.62 cents in
2013 to 47.83 cents for this year.
Recent Developments
AfroCentric has been under a Cautionary notice since 10 June 2014. The
Board is now pleased to announce that the Company has concluded two
material transactions, the broad nature of which are as follows:
1. Agreement has been reached to acquire the wholesale and courier
pharmacy businesses belonging to the WAD Holdings (Proprietary) Limited
(“WAD”), businesses that specialise in the wholesaling, dispensing and
delivery of chronic medication for and on behalf of private and public
sector clients and patients. In addition, the transaction will include the
purchase of the group’s agency enterprise and a strategic minority
interest in the generic and OTC complementary medicine distribution
business. The Company has also secured an option to acquire WAD’s two
specialised commercial properties. The purchase price will be satisfied
substantially by the issue of AfroCentric shares and a certain amount in
cash.
2. Agreement has been reached with Sanlam Limited (“SANLAM”), whereby
SANLAM will acquire a 28.7% shareholding in ACT Healthcare Assets
(Proprietary) Limited (“AHA”), a wholly owned subsidiary of AfroCentric
which owns 94.10% of AfroCentric Health Limited (“AHL”). The total SANLAM
investment amount will be approximately R700 million (after the transfer
of acquired WAD businesses referred to above) of which about R160 million
will be applied to the repayment of AHA third party borrowings, the
balance being applied to the repayment of inter-company loans between AHA
and the Company. As a result of the total SANLAM investment, and the
repayment of third party debt of approximately R160 million, AfroCentric
shall be substantially debt-free and have additional cash resources of
approximately R542 million. The Sanlam Investment is subject to certain
suspensive conditions being fulfilled or waived.
Further information and details of the transactions were released on SENS
on 30 September 2014.
Prospects
Apart from the Group’s consistent past trends of growth, both transactions
referred to herein, expand the Group’s value proposition for all
stakeholders, materially enhances its marketing and distribution channels,
significantly expands its capital base and positively positions the Group
for accelerated growth.
Directors
Mr. Brian Joffe resigned as a Director on 3 March 2014. There have been no
further changes to the AfroCentric Board during the year.
Dividends
The Board of Directors has pleasure in announcing that a dividend of 18
cents per ordinary share (gross) has been declared for the year ended
30 June 2014. Dividends are subject to Dividends Withholding Tax. In
accordance with the provisions of 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 15 %.
- the gross dividend amount is 18 cents per ordinary share.
- the STC credits available for utilisation is 0 cents per ordinary share.
- the net cash dividend amount is therefore 15.3 cents per ordinary share
- the company has 467 855 101 ordinary shares in issue at 30 June 2014.
- the company’s income tax reference number is 9600/148/71/3.
The salient dates relating to the ordinary dividend are as follows;
Last day to trade cum dividend Friday, 21 November 2014
Shares commence trading ex dividend Monday, 24 November 2014
Dividend record date Friday, 28 November 2014
Dividend payment date Monday, 1 December 2014
Share certificates for ordinary shares may not be dematerialised or
rematerialised between Monday, 24 November 2014 and Friday, 28 November
2014, both days inclusive.
Audit opinion
The information included in this report is extracted from audited
information, but is not itself audited. The directors take full
responsibility for the preparation of this report and the financial
information has been correctly extracted from the underlying group’s
financial statements.
The auditors, SizweNtsalubaGobodo Inc and PricewaterhouseCoopers Inc,
(“the auditor”) have issued their unmodified opinion on the group’s
financial statements for the year ended 30 June 2014. The audit was
conducted in accordance with International Standards on Auditing. A copy
of the auditor’s audit report together with the group’s financial
statements is available for inspection at the company’s registered office.
Any reference to future financial performance included in the
announcement, has not been reviewed or reported on by the company’s
auditors.
By Order of the Board
Wilbert Mhlanga
Company secretary
Johannesburg
30 September 2014
Directors
AT Mokgokong** (Chairperson), D Dempers (CEO)***, WRC Holmes (CFO)***,
NB Bam**, JM Kahn**, MJ Madungandaba**, Y Masithela*, G Napier*,
J Appelgryn*, MI Sacks**
*independent non-executive **non-executive ***executive
Registered Office
37 Conrad Rd
Florida North 1709
Sponsor
Sasfin Capital (A division of Sasfin Bank Limited)
Date: 30/09/2014 04:04:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
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indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
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