AfroCentric Investment Corporation Interim Results for the period ending 31 December 2019
2020 Interim Review Group CEO: Ahmed Banderker
STATE OF THE MEDICAL SCHEMES INDUSTRY Premium increases > CPI Buy-down trend to continue Low Cost Benefit Options Limited overall membership growth 14m taxpayers vs. 8.9m medical aid lives NHI uncertainty remains COVID-19
OUR VISION AND PURPOSE OUR VISION Transforming healthcare OUR PURPOSE Enhancing the quality of life
GROUP STRUCTURE Most focused and diversified Healthcare company in Southern Africa Medical Aid Administration, Risk Pharma Cluster Corporate Solutions Management and Technology 3.7m lives Largest SA courier pharmacy Primary Care & Occupational 39% market share Full value chain acquired Health Clinics Bonitas positive growth Highly impactful on overall Reduces healthcare costs Scheme mergers and acquisitions healthcare spend Medical scheme integration NHI potential
OUR STRATEGY AND APPROACH Transitioning to Phase 2 Phase 1 Phase 2 • Operational Excellence • Unlocking Synergies for growth • Disruptive Models • Creating value and delivering the returns Acquisition of • Investing in our People building blocks TRANSFORMING HEALTHCARE
3 YEAR STRATEGIC PLAN Be the BEST at what we do… Administration Platform (Cost and performance) People skills and culture – Leadership Excellence & Culture Transformation Aggressively target Schemes with new models Explore new structures for small Schemes Exploring disruptive models Digital Initiatives – UX and Self Service Optimise Business Processes
STRATEGIC INITIATIVES ROBOTICS HOSPITAL OPERATIONAL STAFF TO IT OPERATING PHARMACY Process automation BENEFIT EFFICIENCIES MEMBER RATIO MODEL AUTOMATION Reduced call time Improvements Enhancement focus Proof of Concepts MANAGEMENT areas PROJECT 1 st phase – July 2020 SPLIT RISK CX CULTURE BUSINESS TEAM Customer journey ACT First OPPORTUNITY REVIEW RESTRUCTURE maps Employees want Performance based Medscheme COO choice role still vacant
RECENT ACHIEVEMENTS Approach already yielding positive results… NEW BUSINESS Acquisition of DENIS Winning MEDiPOS contracts Scriptpharm Primary Care and Occupational Health CLIENTS RETAINED PHA retained 2 Hosmed contracts Pharmacy Direct retained Medshield AWARDS FICO Decisions Award ceremony PMR Award
A TRACK RECORD OF GROWTH OPERATING PROFIT - LIVES R’m 4 500 000 1 000 1000 900 4 000 000 900 21.1% 800 800 3 500 000 Compound 700 700 3 000 000 Annual Growth over 600 600 2 500 000 10 years 500 500 2 000 000 400 400 1 500 000 300 300 1 000 000 200 200 500 000 100 100 0 0 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Services operating profit Retail operating profit Lives Interim results annualised
COVID 19 - OFFER OF ASSISTANCE AfroCentric has offered its services to the National Minister of Health BASIS FOR ASSISTANCE ACT’s Pharmacy Direct has been a holder of contracts for the Centralised Chronic Medicine Dispensing and Distribution (CCMDD) programme of the National Department of Health since inception in 2014 Current CCMDD Previous CCMDD contract (2014 - 2018) contract Pharmacy Direct until recently delivered Pharmacy Direct is currently Pharmacy Direct delivers chronic chronic medication to district health facilities medication to district health facilities in delivering 1 million parcels in four provinces: four provinces: per month between private and Limpopo North West Province public contracts Northern Mpumalanga Gauteng Cape Free State KwaZulu-Natal Eastern Cape
COVID 19 - OFFER OF ASSISTANCE AfroCentric has offered its services to the National Minister of Health Containing this airborne virus requires: ACT offered distribution to all CCMDD patients or bulk delivery to facilities of: • Awareness Information flyers / booklets • Use of hand sanitisers Hand sanitisers • Masks covering nose and mouth Masks (where necessary) Activo acquired immune boosters
Interim Financial Review Group CFO: Hannes Boonzaaier
Medical Aid Administration, Risk Pharma Cluster Corporate Solutions Management and Technology Medscheme SA AfroCentric Integrated Corporate Pharmacy Direct AfroCentric Technologies Solutions Activo Marketing Wellness Odyssey Scriptpharm Group head office EssentialMed MMed Revenue - R’m Revenue - R’m Revenue - R’m 2018 R 23 2018 R 1 828 2018 R 700 8% 112% 127% 2019 R 1 950 2019 R 1 483 2019 R 52 Operating Costs - R’m Operating Costs - R’m Operating Costs - R’m 2018 R 666 2018 R 26 2018 R 1 564 76% 7% 106% 2019 R 46 2019 R 1 368 2019 R 1 672 Operating Profit * - R’m Operating Profit * - R’m Operating Profit * - R’m 2018 R 264 2018 R (3.6) 2018 R 34 5% 233% 249% 2019 R 277 2019 R 5.3 2019 R 115 PD R25m Anticipating first significant primary care Efficiency projects starting to yield results R81m Activo R43m client Diversification within the membership base Scriptpharm R 13m * Operating profit excluding IFRS 16 lease reversals per segmental analysis.
2019 2017 2018 R’m R’m R’m 398.0 294.8 283.6 Operating Profit * 35.0% 3.9% (9.4) 20.1 20.8 Net Finance Income / (Cost) n/a 3.3% (106.4) (82.0) (67.3) Depreciation / Amortisation 21.8% 29.7% IFRS 16 (Leases) Net effect (10.0) (4.5) - 11.5 (3.5) 11.2 Other (n/a) 2.6% 268.7 239.6 248.6 Profit before tax 12.2% (3.6)% *2018 and 2019 operating profit stated after actual lease costs to be in line with 2017 standard pre IFRS 16.
Operating Profit 2019 2018 2017 R’m R’m R’m EssentialMed (Health Insurance) - 2.0 (2.5) Mmed (Surgicals / Consumables) (2.7) (2.9) - Eswatini (Administration) (6.7) (4.4) (3.4) Scriptpharm (Pharma Managed Care) 9.5 3.5 - TOTAL 4.4 (11.8) (6.7)
Most notable changes 31 Dec 2019 31 Dec 2018 Notes R’m R’m 263.3 119.0 Land and Buildings Medscheme purchase of office block - R77m Activo acquisition - R278m Intangible Assets 1 265.2 937.3 Cash 205.9 275.5 Cash utilised to reduce borrowings R98 million capital reduction in less than 9 months Net Borrowings 452.5 - (max drawing R550 million) Activo acquisition brought R162m into group; MMed 331.4 Inventory 100.6 inventory levels at R90m (534.0) (306.5) Trade Payables Activo and MMed supplier accounts 559.5 445.2 Trade Receivables Activo R83m Net Working Addition of Activo and growth in Pharmaceutical 356.5 239.2 Capital cluster
2019 2018 2017 574 241 554 377 554 377 Weighted average number of shares (‘000) 3.6% 0% 120.9 134.8 119.9 Base Earnings (R’000) 0.8% 11.4% 134.8 123.9 120.1 Headline Earnings (R’000) 8.7% 3.2% 23.48 21.83 21.62 Earnings per share (cents) 7.6% 1.0% 23.47 22.35 21.67 Headline Earnings per share (cents) 3.1% 5.0% 523 456 487 Net Asset Value per share (cents) 7.4% 6.8%
CORPORATE RATE SOLUTI UTIONS PHAR ARMA A CLUSTER USTER EssentialMed Pharmacy Direct Health Insurance CMS Circular 80 R 40.5m 2018 Wellness R 65.1m 2019 • 2018 R 4.0m *New NDoH contract stabilization • 2019 R 5.2m MEDICA CAL L AID ADMINISTRATI ISTRATION, during 2019 Other Scriptpharm contracts RISK K MANAGEMENT T AND • Home Based Nursing 2018 – Nedgroup R 40m TECHNOLO LOGY GY • Occupational Health 2019 – Add POLMED R 500m offering 2020 – Add Bonitas R 780m - Anticipating first Medscheme client base Activo (full year per circular) significant contract Bonitas members 8 000 R 95m 2019 R 131m 2020 Fedhealth members 7 000 MMed integration with scheme Closed schemes 19 000 procurement?? GEMS members 21 000 *Dental offering via DENIS acquisition awaiting Competition Commission approval *MEDiPOS joining 1 April 2020 (approximately 12 000 members)
Thank You Interim Results for the period ending 31 December 2019
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