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Audited Final Results and Dividend Declaration
For the year ended 30 June 2016
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)
Summary of Audited Final Results and Dividend Declaration
For the year ended 30 June 2016
Group earnings up 24.55%
Healthcare service revenue up 14.36%
Dividend growth up 20%
Summarised consolidated statement of financial position
Audited Audited
year ended year ended
30 June 30 June
2016 2015
R’000 R’000
Assets
Non-current assets 2 190 076 991 080
Property and equipment 189 362 102 639
Investment property 15 000 15 000
Intangible assets (Note 1) 1 388 815 744 487
Available for sale investment 18 444 18 444
Listed investment (Note 2) 37 182 –
Managed funds and deposits 411 934 –
Investment in associates 24 477 14 873
Deferred income tax assets 104 862 95 637
Current assets 850 640 569 738
Trade and other receivables 365 004 228 884
Inventory 72 310 6 803
Current tax asset 19 821 –
Receivables from associates and joint venture 20 437 –
Cash and cash equivalents 373 068 334 051
Non-current asset held for sale (Note 2) – 24 788
Total assets 3 040 716 1 585 606
Equity and liabilities
Capital and reserves 1 047 979 1 104 149
Issued ordinary share capital 18 686 17 821
Share premium (Note 3) 970 358 525 633
Conditional put option reserve (Note 4) (727 960) –
Share-based payment reserve 26 604 20 160
Treasury shares (2 324) (2 324)
Foreign currency translation reserve 7 027 2 204
Distributable reserve 755 588 540 655
Non-controlling interest 515 603 62 930
Total equity 1 563 582 1 167 079
Non-current liabilities 977 573 86 252
Deferred income tax liabilities 82 390 54 822
Non-current provisions 8 350 8 350
Post-employment medical obligations 2 691 3 134
Second tranche payment (Note 5) 134 893 –
Conditional financial obligation (Note 6) 727 960 –
Accrual for straight lining of leases 21 289 19 946
Current liabilities 499 561 332 275
Borrowings – 61 224
Provisions 9 755 9 211
Trade and other payables 383 029 146 317
Taxation – 4 418
Employment benefit provisions 106 777 111 105
Total liabilities 1 477 134 418 527
Total equity and liabilities 3 040 716 1 585 606
Note 1
Carrying
value Amortisation Amortisation
Intangible assets 2016 2016 2015
Goodwill – WAD Acquisition 473 954 – –
Goodwill – AfroCentric Health 398 124 – –
Customer relationships – WAD
Acquisition 81 282 (8 203) –
AfroCentric Health intangible assets 435 455 (71 129) (48 734)
AfroCentric Health intangible PPA 68 436 (13 811) (15 951)
AfroCentric Health intangible
Software 278 399 (39 062) (28 589)
Insurance Fraud Manager (Fraud
Management Software) 88 620 (18 256) (4 194)
1 388 815 (79 332) (48 734)
The increase in intangible assets relates to the WAD Acquisition. Refer to
supporting documentation on the AfroCentric website.
Note 2
The investment in Jasco Electronics Holdings Limited is no longer categorized
as assets held for sale.
Note 3
The increase relates to the issue of 86.5 million shares amounting to
R445 million for the acquisition of the WAD assets.
Note 4
The recognition of the conditional put option reserve (R703 million) plus
interest, an IAS 32 accounting adjustment, is as a result of certain terms
contained in the SANLAM agreement.
Note 5
26 192 902 shares to the value of R134.8 million will be issued to WAD
vendors subject to certain profit thresholds being attained. These shares
will be issued during 2017/2018 and the value thereof has already been
anticipated by inclusion in Intangible Assets.
Note 6
Sanlam acquired an effective 28.7% interest in AHA for R703 million in
December 2015. The acquisition agreement provides for a performance warranty
in AHL any breach of which entitles Sanlam to claim a maximum additional
4.3% interest in the shares of AHA in satisfaction of such claim. In the
event that the claim calculates at an amount in excess of 4.3% Sanlam has a
right to require ACT to repurchase the shares owned by Sanlam at Sanlam’s
initial cost plus interest at the 90 day deposit rate from the date of
investment to the date of redemption. The Board do not expect such conditions
to arise but International Accounting Standards (IAS 32) dictates the
disclosure of such circumstances under Non-current liabilities rather
than Capital and reserves.
WAD Business combination
Share Number
price of shares R’000
Consideration paid 5.15 112 715 129 580 483
Fair value of net asset value (106 529)
Goodwill 473 954
For more detail on the Business Combination (Effective 1 August 2015)
refer to supporting documentation on the AfroCentric website.
Summarised consolidated statement of comprehensive income
Audited Audited
year ended year ended
% 30 June 2016 30 June 2015
change R’000 R’000
Healthcare service revenue 14.36 2 399 669 2 098 312
Healthcare service operating costs (2 055 514) (1 726 240)
Healthcare service operating profit 344 155 372 072
Healthcare retail revenue 748 477 –
Healthcare retail cost of sales (588 204) –
Healthcare retail gross profit 160 273 –
Healthcare retail operating costs (128 067) –
Total healthcare operating profit 376 361 372 072
Impairment of assets (21 469) (36 697)
Net finance and investment income 54 924 18 802
– Finance and investment income 59 471 28 799
– Finance cost (4 547) (9 997)
Share-based payment expense (6 444) (9 395)
Share of associate profits 10 118 19 037
Profit before depreciation and
amortisation 13.65 413 490 363 819
Depreciation (38 011) (35 727)
Amortisation of intangible assets
(Note 1) (79 332) (48 734)
Profit before income taxation 296 147 279 358
Taxation expense (77 573) (100 584)
Profit for the year after taxation 218 574 178 774
Other comprehensive income 5 029 753
Comprehensive net income for the year 24.55 223 603 179 527
Attributable to:
Equity holders of the Parent 170 280 154 785
Non-controlling interest 53 323 24 742
223 603 179 527
Earnings attributable to equity holders
Audited Audited
year ended year ended
30 June 30 June
% 2016 2015
change R’000 R’000
Number of ordinary shares in issue 18.49 554 377 328 467 855 101
Weighted average number of ordinary
shares 18.19 552 958 931 467 855 101
Weighted average number of shares
for diluted EPS (anticipating the
Second Tranche issue of shares) 579 151 833 467 855 101
Basic earnings 170 280 154 785
Adjusted by: 11 876 24 989
– Reversal of impairment 21 469 36 697
– Loss on disposal of assets 245 186
Total tax effects of adjustments (1 429) (10 327)
Total NCI effects of adjustments (8 409) (1 567)
Headline earnings 182 156 179 774
Earnings per share (cents)
– Attributable to ordinary shares
(cents) 30.79 33.08
– Diluted earnings per share (cents) 29.40 33.08
Headline earnings per share (cents)
– Attributable to ordinary shares
(cents) 32.94 38.43
– Diluted earnings per share (cents) 31.45 38.43
Summarised consolidated statement of cash flows
Audited Audited
year ended year ended
30 June 30 June
% 2016 2015
change R’000 R’000
Cash generated from operations 393 851 396 996
Net finance income 27 839 18 802
Distribution to shareholders (131 485) (145 445)
Dividend received 4 112 1 841
Tax and other payments (102 584) (92 958)
Net cash inflow from operating
activities 191 733 179 236
Net cash outflow from investing
activities (645 465) (138 902)
Net cash inflow from financing
activities 487 926 (96 599)
Effect of foreign exchange benefit 4 823 867
Net increase in cash and cash
equivalents 39 017 (55 398)
Cash and cash equivalents at beginning
of the period 334 051 389 449
Cash and cash equivalents at end of
the period 11.68 373 068 334 051
Summarised consolidated statement of changes in equity
Audited Audited
year ended year ended
30 June 30 June
2016 2015
R’000 R’000
Balance at beginning of the period 1 167 079 1 123 602
Issue of share capital 445 590 –
Share-based awards reserve 6 444 9 395
Net profit for the year 170 280 154 785
Profit attributable to minorities 53 323 24 742
Sanlam investment 703 000 –
Premium on subscription 246 738 –
Changes in ownership 456 262 –
Conditional Financial Obligation (727 960) –
AHL minorities share buy-back (122 164) –
Increase in shareholding of Klinikka (525) –
Distribution to shareholders (121 963) (130 999)
Distribution to minorities (9 522) (14 446)
Balance at end of the period 1 563 582 1 167 079
Segmental analysis
Audited year ended 30 June 2016
Profit
before Total
Revenue taxation assets
R’000 R’000 R’000
Healthcare SA 2 066 327 195 075 3 328 479
Healthcare Africa 180 534 67 166 160 739
Healthcare Retail 748 477 46 310 238 198
Total Healthcare 2 995 338 308 551 3 727 416
Information technology 499 411 40 178 310 001
Other (including inter-segment
elimination) (346 603) (52 582) (996 701)
3 148 146 296 147 3 040 716
Audited year ended 30 June 2015
Profit
before Total
Revenue taxation assets
R’000 R’000 R’000
Healthcare SA 1 913 529 227 581 2 013 236
Healthcare Africa 157 818 56 056 126 357
Healthcare Retail – – –
Total Healthcare 2 071 347 283 637 2 139 593
Information technology 401 454 33 663 465 035
Other (including inter-segment
elimination) (374 489) (37 942) (1 019 022)
2 098 312 279 358 1 585 606
Commentary
Introduction
The Board of AfroCentric is pleased to present the Group’s audited results
for the year ended 30 June 2016, a watershed year in many respects, given
the number of corporate actions which occurred and the material growth in
principal members of Medical Schemes administered by the Group. These
positive events, substantially occurring in parallel, demanded diligent
management focus, including considerable capacity building and systems
development in anticipation of the new scale of Group operations. In
addition, an enormous management effort was required to ensure the
seamless registration of 175 667 new principal members of the South
African Police Service Medical Scheme (“POLMED”), an administration and
managed care contract, the preparation for which started during August
2015, but operationally only commenced on 1 January 2016. AfroCentric was
also delighted to finalize SANLAM’s acquisition in subsidiary, ACT
Healthcare Assets (“AHA”), a premium partnership designed inter alia,
to broaden SANLAM’s client choices in healthcare and healthcare products.
In addition, 2016 was the first period of ownership of Pharmacy Direct
and Curasana, (“WAD Assets”), enterprises of significance, the integration
process being reasonably seamless, but nevertheless requiring a review
of divisional authority within the group and management reorganisation.
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
provisional reports, and the requirements of the Companies Act applicable
to summary financial statements. The Listings Requirements require
provisional reports 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 the consolidated financial statements from which the
summary consolidated financial statements were derived are in terms of
IFRS and are consistent with those accounting policies applied in the
preparation of the consolidated annual financial statements.
Subsequent events and related parties are not material.
Nature of business
AfroCentric is a JSE listed investment holding company which operates
in and provides services to the healthcare sector. AfroCentric is one
of very few JSE listed companies that is black owned and controlled,
fulfilling the Group’s principal philosophy of transformation and
empowerment. The Group enjoys a Level 2 B-BBEE rating, based on the
new codes and is easily the most empowered healthcare-related enterprise
on the JSE. AfroCentric’s core business is to provide health administration
and health risk management solutions to its Medical Scheme clients.
Through other speciality competences within its integrated network of
health services, AfroCentric provides a range of complementary services
which include, inter alia, information technology (“IT”) solutions;
fraud detection, transactional switching; specialised disease management;
pharmaceutical wholesaling and courier distribution services. AfroCentric
continues to seek new and expansion opportunities in the healthcare sector
that are aligned with Group strategy and are likely to contribute to the
health and welfare of South African communities.
Other highlights of the year
Level 2 B-BBEE status achieved for the fourth successive year, based on
the revised codes.
Medscheme appointed as health administrator and health risk management
provider to POLMED.
BHF member of the year.
Medscheme achieved the Service Excellence award for Health
Administration and Health Risk Management from the BHF.
Medscheme Swaziland (Swazimed Medical Scheme) received the PMR Diamond
Arrow Award for the best Medical Scheme in the country for the second
consecutive year.
AfroCentric Health (AHL) repurchased the 5.9% minority interest held by
its minority shareholders, the effect being that AHA now owns 100% of AHL.
SANLAM owns 28.7% of AHA.
Financial Performance
Given the positive nature and extent of the corporate actions and activities
during the year, management in each business unit were continually under
pressure, to ensure the seamless integration of the new and/or expanded
operations without compromising service levels. In the event, management
were able to rise to the challenge and their efforts are revealed in certain
key financial statistics disclosed herein. It is common cause that AfroCentric
and most other companies in South Africa, have unfortunately had to endure a
consistently difficult and unstable economy, often punctuated by discordant
politics and further affected by volatile currency conversion rates. In such
prevailing circumstances, the results for the 2016 year, are regarded by
the Board as highly satisfactory.
Comprehensive Net Income for the year increased by 24.55%, notwithstanding that
early costs incurred in preparation for the Polmed contract have been absorbed.
Income arising through Polmed, is only reflected for the latter six months of
the year. The dilution through the issue of 86.5 million AfroCentric ordinary
shares to the vendors of the WAD assets, including the dilution arising from
the sale to SANLAM of 28.7% of the shares in AHA, all occurring during the year,
earnings per share and headline earnings per share only reduced by 6.92% and 14.27%
respectively. The WAD asset acquisitions performed as expected and the future
WAD earnings, including the contributions expected through the SANLAM relationship,
suggest that both business relationships will be earnings enhancing.
Operational review
The following expenditure items were incurred during the year which are substantially
regarded as non-recurring expenditure, all of which have adversely impacted on
the Group’s earnings:
Transaction and advisory costs relating to both the WAD assets and
Sanlam of R11.5 million.
Legal costs on the Neil Harvey and Associates matter of R10.8 million
Road Accident Fund (RAF) contract losses of R16.7 million
Executive service contract settlement costs of R20.2 million.
Prospects
During this past financial year, AfroCentric has successfully admitted, merged and/or
integrated a number of commercial concerns, associates and new clients into the Group
enterprise. These initiatives, in certain cases, required an early investment in
capacity and infrastructure, were highly demanding of management, the reward however,
being a broader beneficial spread of synergistic health sector interests. All of these
enhancing health related steps were concluded with, or in association with, well known
and respectable institutions, equally committed to the same objective of enabling easier
healthcare access and more affordable delivery. The Group’s growth, its BEE status and
its regular industry award winning competencies, have attracted significant market interest,
evidenced earlier this year by Group subsidiary, Medscheme, appointed as administrators to
POLMED and more recently, being approved administrators of the LMS Medical Fund with
110 000 lives (previously Liberty Medical Scheme), awaiting merger approval with Bonitas
Medical Fund. All of these positive growth events are likely to add value to Group
revenues in the future, hopefully to be translated into an enhanced level of earnings
going forward. The Group is substantially debt free, is more than adequately capitalized,
is systematically improving and increasing its IT capacity and will continue to seek
related earnings enhancing acquisitions and partnerships. AfroCentric also stands
ready and receptive to facilitate and participate in medical scheme consolidation
which is seemingly taking place in the sector at this time. Notwithstanding the current
market volatility and general economic challenges facing South Africa, the Board remains
cautiously confident in the group’s growth prospects.
Directors and officers
The variety of corporate actions which became effective during the year under review,
inevitably saw several changes occurring, both in Executive management appointments and
on the Board of Directors.
Having regard thereto, the following changes took place during the year, in certain
respects, reflecting the fulfilment of certain contractual undertakings.
Mr WRC Holmes retired as Executive Director and Group Chief Financial
Officer effective 1 August 2015.
Mr D Dempers stepped down as Group Chief Executive Officer on
15 December 2015.
Mr D Dempers resigned as an Executive Director effective 2 June 2016.
Mr JW Boonzaaier was appointed as an Executive Director and Group Chief
Financial Officer effective 1 August 2015.
Mr AV Van Buuren was appointed as an Executive Director and Group Chief
Executive Officer effective 16 March 2016.
Mr WH Britz was appointed as an Executive Director effective
1 August 2015.
Ms LL Dhlamini was appointed as an Independent Non-executive Director and
a member of the Audit and Risk Committee effective 2 December 2015.
Dr ND Munisi was appointed as a Non-executive Director effective
7 December 2015.
Mr IM Kirk was appointed as a Non-executive Director effective
15 December 2015.
Mr A Banderker was appointed as a Non-executive Director effective
15 December 2015.
Ms Y Masithela resigned as an Independent Non-executive Director
effective 15 September 2016.
Dividends
The Board of Directors has pleasure in announcing that in addition to the
interim dividend of 12 cents per share already declared and paid during
the year, a final dividend of 12 cents per ordinary share (gross) has been
declared for the year ended 30 June 2016. 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 12 cents per ordinary share.
The net cash dividend amount is therefore 10.2 cents per ordinary share.
The company has 554 377 328 ordinary shares in issue at 30 June 2016.
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 Tuesday, 8 November 2016
Shares commence trading ex-dividend Wednesday, 9 November 2016
Dividend record date Friday, 11 November 2016
Dividend payment date Monday, 14 November 2016
Share certificates for ordinary shares may not be dematerialised or rematerialised
between Wednesday 9 November 2016 and Friday, 11 November 2016 both days inclusive.
Basis of preparation
This summarised report is extracted from audited information but is not itself
audited. This announcement does not include the information required pursuant
to paragraph 16A(j) of IAS 34. The full provisional report is available on the
our website (http://www.afrocentric.za.com/inv-reporting.php), at our offices and
upon request. The directors take full responsibility for the preparation of this
report and the financial information has been correctly extracted from the underlying
annual financial statements. The annual financial statements were audited by
PricewaterhouseCoopers Inc. who expressed an unmodified opinion thereon. The audited
annual financial statements and the auditor’s report thereon are available for
inspection at the company’s registered office.
On behalf of the Board
Dr ATM Mokgokong Mr AV Van Buuren
Chairperson Group Chief Executive Officer
Directors
ATM Mokgokong++ (Chairperson) AV Van Buuren+++ (CEO) JW Boonzaaier+++ (CFO)
MJM Madungandaba++ (Deputy Chairman) JG Appelgryn++ NB Bam+
A Banderker++ WH Britz+++ LL Dhlamini+ JM Kahn+ IM Kirk++ ND Munisi++
GL Napier+ MI Sacks+
+independent non-executive ++non-executive +++executive
Registered Office
37 Conrad Rd Florida North 1709
www.afrocentric.za.com
Company Secretary
S Lutchan
Group Investor Relations
Shivani Ramdhani
shivanir@afrocentric.za.com
Tel: +27 11 671 2475
Johannesburg
19 September 2016
Sponsor
Sasfin Capital (A division of Sasfin Bank Limited)
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