AFROCENTRICâ€™S HEALTHY EARNINGS: ROBUST STRATEGY BEARING FRUIT
- Group revenue: +25.2%
- Health services operating profit: +16.4%
- Group profit after tax: +13.6%
- NAV per share growth: 19.1% (CAGR)
- Interim gross dividend: 17c per ordinary share
Johannesburg, 9 March 2021 — AfroCentric Group (JSE:ACT), an investment holdings company that owns and operates a diverse range of health-related enterprises, today announced a robust set of interim earnings for the six months ended 31 December 2020.
Headline earnings were up 10.9% versus last year, driven by strong operating profit growth of 16.5% in a clear sign that measures to diversify revenue, focus on growth, contain costs and improve procedural efficiencies are bearing fruit.
The results were delivered against a challenging economic backdrop. Despite this, two divisions of the business, the health administration and pharmaceutical cluster reported double-digit growth in operating profit. The financial position of the group remains sound and the group is sufficiently capitalised for immediate needs. Going forward, the group intends to continue to promote organic growth and will consider compatible further opportunities for both acquisition as well as innovation.
Commenting on the results, Ahmed Banderker, Group CEO of AfroCentric Group says: "We are pleased to report strong growth across our business, particularly given the difficult economic environment. They show that we are reaping the rewards of our steadfast focus on diversifying our business across the spectrum of client health needs, lowering costs through innovative tech-based solutions and realising greater efficiencies in how we do business and deliver our offering.
"The last 12 months have been challenging both locally and globally due to the Covid-19 pandemic, we are therefore particularly proud that these results show that we have the right strategy in place, which has made our business resilient and is yielding immediate results and we remain excited about future prospects.
"That said, we have experienced some pressure as a result of Covid-19. We continue to see that medical scheme members face increased financial pressure, although outright cancellations are lower than expected. This indicates to us that, amidst a global pandemic, South Africans are choosing to keep some level of health insurance. Owing to improved costs and efficiencies, we’ve been able to offset this to a large extent to continue delivering value for our shareholders.
"Our future focus will be assimilating the elements of the group’s businesses to leverage the full benefits of being the most diversified healthcare group in Southern Africa," said Banderker, adding that these efforts are intended to make significant progress towards achieving AfroCentric’s vision of transforming healthcare."
Pharmaceutical business grows profits at over 20%
AfroCentric's pharmaceutical cluster was bolstered by the Group's purchase of dental benefit management company DENIS Group. This drove impressive revenue growth in this cluster of 48.6%, which, in turn, contributed to the strong revenue growth of 25.2% seen at group level.Meanwhile, increased demand for multi-vitamins and chronic medication resulted in pharmacy courier subsidiary Pharmacy Direct filling in excess of 1 million prescriptions per month. This was also beneficial for the cluster’s revenue, which boosted the group’s drug manufacturer growth.
Looking at this cluster’s costs, the acquisition costs associated with DENIS Group purchases were material and contributed to the overall rise in pharmaceutical costs. However, meaningful savings in other parts of the cluster helped to offset these to some extent.
Savings solutions in the health administration cluster
The health administration cluster, which is largely made up of the medical scheme administration business, saw revenue (4.0%) grow roughly in line with industry-related inflation (4.4%).
However, growth in operating costs was substantially lower at 1.6%, owing to the implementation of several measures to improve cost and process efficiencies. These included the roll-out of a VirtualCare™ application, a platform that enables consultations between medical scheme members and health providers, as well as a WhatsApp solution to communicate with and educate members on Covid-19.
Another new initiative was the Hospital Benefit Management system, which automates and streamlines the hospital authorisation, admission and claims process. With this system now fully in place, the hospital admissions and claims process for Medscheme members is almost immediate at first submission.
Banderker concludes, "Looking forward, we recognise that we have a pivotal role to play in the distribution of Covid-19 vaccines. The group has a national network of over 3,000 nurses that can be mobilised to administer vaccines across the country."It remains our strategic objective to deliver quality and affordable health management services to both the public and private health sectors. We are committed to transforming the health system and reducing the cost of health in South Africa through our highly diversified and efficient group of companies."
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