Wrap Text
Unaudited Interim Results and Dividend Declaration
for the six months ended 31 December 2017
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”)
Unaudited Interim Results and Dividend Declaration
for the six months ended 31 December 2017
Highlights
14.29% up Dividends
19.00% up Headline EPS
12.59% up Total revenue
13.10% up Profit before tax
Summarised consolidated statement of financial position
Unaudited Unaudited
six months six months Audited
ended ended year ended
31 December 31 December 30 June
2017 2016 2017
R’000 R’000 R’000
Assets
Non-current assets 2 141 169 2 121 295 1 927 272
Furniture, fittings and
equipment 197 396 176 690 179 731
Land and buildings (Note 1) 122 451 31 933 31 973
Investment property 15 418 15 000 15 418
Intangible assets (Note 2) 1 571 435 1 440 173 1 463 746
Available for sale investment 18 444 18 444 18 444
Listed investments 26 558 41 608 36 296
Managed funds and deposits
(Note 6) 62 517 278 851 59 976
Investment in associates 45 385 29 374 38 823
Deferred income tax assets 81 565 89 222 82 865
Current assets 871 245 867 714 1 141 608
Trade and other receivables 351 257 361 100 320 236
Inventory 87 830 77 465 73 376
Current tax asset 34 130 30 792 25 235
Receivables from associates and
joint venture 9 981 12 637 13 388
Managed funds and deposits
(Note 6) 105 972 – 347 635
Cash and cash equivalents
(Note 6) 282 075 385 720 361 738
Total assets 3 012 414 2 989 009 3 068 880
Equity and liabilities
Capital and reserves 1 888 232 1 081 596 1 793 694
Issued ordinary share capital 18 686 18 686 18 686
Share premium 1 054 932 970 358 999 058
Share-based payment reserve 375 28 700 –
Treasury shares (2 324) (2 324) (2 324)
Conditional put option reserve
(Note 3) – (750 913) –
Foreign currency translation
reserve (510) 4 020 3 454
Distributable reserve 817 073 813 069 774 820
Non-controlling interest 639 026 549 504 585 359
Total equity 2 527 258 1 631 100 2 379 053
Non-current liabilities 153 963 1 004 497 135 778
Deferred income tax liabilities 122 947 90 394 100 627
Non-current provisions 8 350 8 350 8 350
Post-employment medical
obligations 2 771 2 691 2 771
Second tranche payment (Note 4) – 134 893 –
Conditional put option
obligation (Note 3) – 750 913 –
Deferred payment 5 364 – 5 051
Accrual for straight lining of
leases 14 531 17 256 18 979
Current liabilities 331 193 353 412 554 049
Provisions 3 705 11 406 8 947
Borrowings 23 850 – –
Second tranche payment (Note 4) – – 194 475
Trade and other payables 246 941 288 076 264 394
Employment benefit provisions 56 697 53 930 86 233
Total liabilities 485 156 1 357 909 689 827
Total equity and liabilities 3 012 414 2 989 009 3 068 880
Note 1
The increased value of Land and Buildings reflects the cost of a new
warehouse acquired in December 2017 to accommodate the expanding needs
of the healthcare retail business.
Note 2
Carrying
value Amortisation Amortisation
2017 2017 2016
Intangible assets R’000 R’000 R’000
Goodwill – AfroCentric Health 400 208 – –
Goodwill – WAD acquisition 473 954 – –
Customer relationships – WAD
acquisition 72 333 (4 474) (4 474)
AfroCentric Health intangible
assets 624 940 (37 193) (37 661)
AfroCentric Health Intangible
PPA 37 620 (2 598) (2 916)
Afrocentric Health intangible
Software 510 577 (24 024) (24 298)
Insurance Fraud Manager (Fraud
Management Software) 76 743 (10 571) (10 447)
1 571 435 (41 667) (42 135)
Note 3
Given the fulfilment of the Sanlam profit warranty, the conditional put
option reserve was written back to capital and reserves.
Note 4
The second tranche payment was calculated in terms of the contract
formula for the WAD Asset acquisitions and settled in cash during
September 2017.
Summarised consolidated statement of changes in equity
Unaudited Unaudited
six months six months Audited
ended ended year ended
31 December 31 December 30 June
2017 2016 2017
R’000 R’000 R’000
Balance at beginning of the period 2 379 053 1 563 582 1 563 582
Share-based awards reserve 375 2 096 2 096
Distributions to shareholders (77 613) (66 525) (144 138)
Net profit for the period 115 902 98 046 113 891
Transferred to conditional put
option reserve – 22 953 45 906
Conditional put option reserve
accruals – (22 953) (45 906)
Profit attributable to minorities 57 362 52 166 102 372
Sanlam second tranche contribution 55 874 – –
Conditional put option obligation
reversal (Note 3) – – 773 866
Conditional put option obligation
2016 balance – – 727 960
Conditional put option finance
obligation accrual – – 45 906
Minority interest in subsidiary (367) – –
Distributions to subsidiary
minorities (3 328) (18 265) (32 616)
Balance at end of the period 2 527 258 1 631 100 2 379 053
Summarised consolidated statement of comprehensive income
Unaudited Unaudited
six months six months Audited
ended ended year ended
31 December 31 December 30 June
% 2017 2016 2017
change R’000 R’000 R’000
Healthcare services
revenue 1 441 561 1 300 155 2 715 266
Healthcare services
operating costs (1 198 253) (1 069 204) (2 219 292)
Healthcare services
operating profit 5.35 243 308 230 951 495 974
Healthcare retail
revenue 596 239 509 778 1 069 435
Healthcare retail cost
of sales (442 928) (409 909) (836 734)
Healthcare retail gross
profit 53.51 153 311 99 869 232 701
Healthcare retail
operating costs (112 970) (72 070) (164 566)
Total healthcare
operating profit 9.62 283 649 258 750 564 109
Impairment of assets – 2 895 (19 851)
Net finance and
investment income 20 882 13 150 16 106
– Finance and investment
income 31 284 31 704 50 380
– Fair value gain/(loss)
in Listed Investments
(Note 5) (9 738) 4 426 12 393
– Finance cost:
Conditional put option
(Note 3) – (22 953) (45 906)
– Finance cost (664) (27) (761)
Share-based payment
expense (375) (2 096) (2 096)
Fair value of second
tranche consideration
(Note 4) – – (59 582)
Indemnity expense – – (14 787)
Share of associate
profits 11 772 9 907 14 306
Profit before
depreciation and
amortisation 11.79 315 928 282 606 498 205
Depreciation (25 635) (20 652) (45 098)
Amortisation of
intangible assets
(Note 2) (41 667) (42 135) (86 450)
Profit before income
taxation 13.10 248 626 219 819 366 657
Taxation expense (71 398) (66 600) (146 616)
Profit for the period
after taxation 15.67 177 228 153 219 220 041
Other comprehensive
(loss)/income (3 964) (3 007) (3 778)
Comprehensive net income
for the period 173 264 150 212 216 263
Attributable to:
Equity holders of the
Parent 115 902 98 046 113 891
Non-controlling interest 57 362 52 166 102 372
173 264 150 212 216 263
Note 5
This represents a decline in the share price of the listed investment.
Earnings attributable to equity holders
Unaudited Unaudited
six months six months Audited
ended ended year ended
31 December 31 December 30 June
% 2017 2016 2017
change R’000 R’000 R’000
Number of ordinary shares
in issue 554 377 328 554 377 328 554 377 328
Weighted average number
of ordinary shares 554 377 328 554 377 328 554 377 328
Weighted average number
of shares for diluted EPS 554 377 328 580 570 230 554 377 328
Basic earnings 119 866 101 053 117 669
Adjusted by: 242 (111) 6 169
– Reversal of impairment – – 16 640
– Reversal of fair value
gains – – (418)
– Loss on disposal of
assets 471 (216) 681
Total tax adjustments (132) 60 (97)
Total non-controlling
interest adjustments (97) 45 (10 637)
Headline earnings 120 108 100 942 123 838
Earnings per share
(cents)
– Attributable to
ordinary shares (cents) 18.60 21.62 18.23 21.23
– Diluted earnings per
share (cents) 24.18 21.62 17.41 21.23
Headline earnings per
share (cents)
– Attributable to
ordinary shares (cents) 19.00 21.67 18.21 22.34
– Diluted earnings per
share (cents) 24.61 21.67 17.39 22.34
Summarised consolidated statement of cash flows
Unaudited Unaudited
six months six months Audited
ended ended year ended
31 December 31 December 30 June
2017 2016 2017
R’000 R’000 R’000
Cash generated from operations 177 496 105 249 450 887
Net finance income 19 059 20 918 38 860
Distribution to shareholders (80 941) (84 791) (176 754)
Dividends received 5 189 5 010 5 010
Tax and other payments (64 392) (55 063) (112 815)
Net cash inflow/(outflow) from
operating activities 56 411 (8 677) 205 188
Net cash (outflow)/inflow from
investing activities (155 960) 13 640 (212 945)
Net cash inflow from financing
activities 23 850 10 696 –
Effect of foreign exchange benefit (3 964) (3 007) (3 573)
Net (decrease)/increase in cash and
cash equivalents (79 663) 12 652 (11 330)
Cash and cash equivalents at
beginning of the period 361 738 373 068 373 068
Cash and cash equivalents at end of
the period (Note 6) 282 075 385 720 361 738
Note 6
Total Group cash resources
Unaudited Unaudited
six months six months Audited
ended ended year ended
31 December 31 December 30 June
2017 2016 2017
Cash and cash equivalents 282 075 385 720 361 738
Managed funds and deposits
(current) 105 972 – 347 635
Managed funds and deposits (non
current) 62 517 278 851 59 976
Total cash resources 450 564 664 571 769 349
Segmental analysis
Unaudited
six months ended
31 December 2017
Profit Total
Revenue before tax assets
R’000 R’000 R’000
Healthcare SA 1 339 982 126 353* 3 242 956
Healthcare Africa 94 117 24 586 136 925
Healthcare Retail 596 239 44 625 395 106
Total Healthcare 2 030 338 195 564 3 774 987
Information technology 288 533 56 061* 478 646
Other (including inter-segment
elimination) (281 071) (2 999) (1 241 219)
2 037 800 248 626 3 012 414
Unaudited
six months ended
31 December 2016
Profit Total
Revenue before tax assets
R’000 R’000 R’000
Healthcare SA 1 134 075 141 231* 3 508 397
Healthcare Africa 76 382 18 025 92 695
Healthcare Retail 509 778 32 502 305 149
Total Healthcare 1 720 235 191 758 3 906 241
Information technology 269 686 33 849* 333 855
Other (including inter-segment
elimination) (179 988) (5 788) (1 251 087)
1 809 933 219 819 2 989 009
Audited
year ended
30 June 2017
Profit Total
Revenue before tax assets
R’000 R’000 R’000
Healthcare SA 2 378 130 209 843 3 435 646
Healthcare Africa 184 443 46 636 112 401
Healthcare Retail 1 069 435 67 990 353 504
Total Healthcare 3 632 008 324 469 3 901 551
Information technology 561 021 89 922 420 138
Other (including inter-segment
elimination) (408 328) (47 734) (1 252 809)
3 784 701 366 657 3 068 880
* The change in profit before tax is as a result of a modification in the
IT fee structure between the wholly owned subsidiaries, Medscheme and Helios.
Commentary
Introduction and review
The Board is pleased to present comments on AfroCentric’s (“ACT”) summary
interim results for the six months ended 31 December 2017. The period
under review has been characterised by the consolidation and rationalization
of several processes within Group enterprises, all having contributed
positively to the Group’s growing operations and earnings. In addition,
the Group continued to invest in system development and increased IT capacity,
early benefits already having arisen through further client consolidation
in this period, such consolidation and improved income, expected to continue
to impact the full year results, including results for financial year 2019
and beyond.
Apart from ACT’s principal subsidiary Medscheme providing healthcare
administration and managed care services to the membership of a growing
number of prominent institutional clients, (having memberships in excess
of 3.7 million lives), the Group’s further range of health related
subsidiary enterprises has similarly continued to make good progress
during the period, as will be evident in the financial results set
out herein.
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 summarized 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.
Nature of business
AfroCentric is a JSE listed investment holding company which operates in and
provides specialised services to the public and private healthcare sectors.
AfroCentric continues to maintain its deliberate objective of being the leading
exemplar of transformation and empowerment in the South African healthcare
sector.
AfroCentric’s operating enterprises also provide 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.
Industry highlights
AfroCentric proudly advise that during the period under review:
* AfroCentric Health (Pty) Ltd, a core operating subsidiary within the
Group, achieved a level 2 B-BBEE status for the sixth consecutive year.
* Medscheme Holdings (Pty) Ltd was awarded the “Service Excellence – Health
Administrator Award”, at the 2017 BHF Titanium Awards ceremony.
* AfroCentric was awarded the “Diversity in the Workplace Award” at the
15th Annual National Business Awards ceremony.
Financial Performance
Profit before tax increased by 13.10% for the period under review
amounting to R248.6 million (2016: R219.8 million). Profit after tax (PAT)
increased by 15.67%, a satisfying and positive result delivered through great
effort and efficient management control. Earnings per share (EPS) increased
in this period by 18.60% and headline earnings per share (HEPS), increased by
19.00%, substantially through consistent growth in almost all divisions and
sound cost management.
Developments
AfroCentric has for some time been focused on opportunities which will serve
to create a platform, designed to establish a value chain of healthcare
services, to optimize the purchasing power of every healthcare Rand through
models of integration, mergers, partnerships and economic incentives devised
to improve the effectiveness of patient care and viable treatment outcomes,
within the broader healthcare delivery system. Several such proposals are
already in place, several are in the pipeline and discussions on these
initiatives are in progress, both for the public and private healthcare
sectors.
During the period under review and prior to publishing these results, the
following projects are in progress or have been concluded:
* Assisted and facilitated the successful consolidation of approximately
5 600 Community Medical Scheme members (COMMED) into Bonitas Medical Scheme.
* Secured the Hosmed Administration contract for Medscheme of approximately
24 000 members, a contract for providing Administration services for a
significant number of members of the South African Local Government
Association (SALGA).
* Acquired 100% of the shares in Wellness Odyssey, a wellness company
providing wellness days, health awareness and clinical guidance to
medical schemes, including the broader corporate market, this effective
from 1 July 2017.
* Acquired 80% of the shares in Scriptpharm Risk Management, a business
which manages chronic script claims, this effective from 1 August 2017.
* Acquisition of 51% of the shares in Essential Group, which provides
healthcare insurance, effective 1 March 2018.
The government has progressed towards the next phase in the implementation
of the NHI. We welcome and support the proposed introduction of an NHI fund
during 2017/2018. The Group is well positioned to support the NHI project
through delivery of universal quality and affordable healthcare to a broader
market.
AfroCentric’s Insurance Fraud Manager (“IFM”) provides comprehensive analytics
which enable client schemes to identify and assess fraud and abuse related to
medical claims. It is common cause that fraud, both by members and practitioners
have over the years, become a material source of concern for all Medical Schemes.
The identification and recovery of fraudulent or improper claims has been a
great developmental success within our client portfolio and fraudulent claims
amounting to in excess of R300 million have been detected, with a large percentage
having already been recouped or are in the process of recovery.
Pharmacy Direct, our distribution subsidiary of pharmaceuticals, continues to
make impressive progress. Pharmacy Direct now procures, dispenses and distributes
chronic medication to public and private sector patients in seven provinces of
South Africa, presently dispensing and distributing in excess of 500 000
pharmaceutical scripts per month. Given the positive growth and the divisions
expanding market, a new warehouse was acquired in December 2017 to accommodate
this growth in business.
Having regard to confirmation during this reporting period, that the AfroCentric/
Sanlam profit warranty was comfortably fulfilled, the Board is pleased to report
that both Sanlam and AfroCentric management are diligently working towards the
finalisation of a range of healthcare products and lifestyle solutions to be
jointly introduced into the market, this initiative, substantially being the
very purpose of Sanlam’s interest in AfroCentric in the first place. The roll
out is expected to occur towards year end and we are confident that this
associate relationship could well evolve into a meaningful source of income
and profit.
Prospects
AfroCentric has once again delivered a solid operating result,
particularly during an interim period laced with challenging politics and
economic uncertainty. It was a period characterised by a lack of economic
growth and declining consumer disposable incomes. Notwithstanding the above,
the benefits of the Group’s maintained programme of expansion, including the
general and sustained quality of earnings from within the underlying businesses,
all contributed to the more than satisfactory financial outcome of the Group
during this period under review.
The Group’s financial position remains sound, cash generation is strong and it
retains adequate headroom to accommodate expansion opportunities. At corporate
and operational level, management is assessing and implementing plans for real
growth and pursuing selective local and international opportunities to complement
the existing product and service offering.
Directors
There were no changes to the Board during the period under review.
Dividends
The Board has pleasure in announcing that an interim dividend of 16 cents per
ordinary share (gross) has been declared for the six months ended 31 December 2017.
Dividends are subject to Dividends Withholding Tax. The payment date for the dividend
is Monday, 14 May 2018. 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 2018.
* Dividends have been declared out of profits available for distribution.
* Local Dividends Withholding Tax rate is 20%.
* Gross dividend amount is 16 cents per ordinary share.
* Net cash dividend amount is therefore 12.8 cents per ordinary share.
* Company has 554 377 328 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, 8 May 2018
Shares commence trading ex-dividend Wednesday, 9 May 2018
Dividend record date Friday, 11 May 2018
Dividend payment date Monday, 14 May 2018
Share certificates for ordinary shares may not be dematerialised or rematerialised
between Wednesday, 9 May 2018 and Friday, 11 May 2018, both days inclusive.
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 AV Van Buuren
Chairperson Group Chief Executive Officer
Johannesburg
19 March 2018
Directors
ATM Mokgokong** (Chairperson), MJM Madungandaba** (Deputy Chairperson), AV Van Buuren***
(CEO), JW Boonzaaier*** (CFO), A Banderker**, WH Britz***, LL Dhlamini*, JM Kahn (lead)*,
IM Kirk**, SE Mmakau*, ND Munisi**, MI Sacks*, HG Motau*
*independent non-executive **non-executive ***executive
Registered Office
37 Conrad Rd, Florida North 1709
Sponsor
Sasfin Capital (a member of the Sasfin group)
www.afrocentric.za.com
Company Secretary
B Mokale
Group Investor Relations
Nosipho Phewa
investor-relations@afrocentric.za.com
Tel: +27 11 671 2475
Date: 19/03/2018 10:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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