| Wed 27 Oct 2004, 17:25 | | PRESS RELEASE |
|
AFROX HEALTHCARE`S RESULTS SHOW STRONG SUSTAINABLE GROWTH - PRESS RELEASE
Afrox Healthcare Limited
(Incorporated in the Republic of South
Africa)
(Registration number: 1985/001313/06)
Share code: AHH
ISIN: ZAE000022059
(`Ahealth`)
AFROX HEALTHCARE`S RESULTS SHOW STRONG SUSTAINABLE GROWTH
Afrox Healthcare Limited (AHealth) has once again posted strong results for the
year ended 30 September 2004. The group performed well, with a 10 percent
increase in revenue to R4,9 billion (2003: R4,5 billion), 16 percent increase in
operating profit to R665 million (2003: R571 million), and a 33 percent increase
in cash generated from operations to R974 million (2003: R733 million).
Over the past five years the group has produced good compound annual growth in
revenues and profits. This corroborates Afrox Healthcare`s selection in the
2004 Sustainable Growth Awards where the company attained first place overall as
well as first place in the listed category over five years.
Afrox Healthcare`s chief executive, Michael Flemming, attributes the sound
performance to solid organic growth and operating efficiencies. He said, `The
past year saw little improvement in patient volumes, but we are reaping rewards
from our focus on operational excellence and by striving for quality in every
facet of the comprehensive range of healthcare elements we provide.`
To entrench quality standards in every employee, Afrox Healthcare launched the
most comprehensive quality programme to date in the private hospital industry.
Flemming said, `The equivalent of 40 000 working days will be spent on quality
training in all our hospitals and units countrywide. We strive to be best in
class while providing appropriate solutions to healthcare needs.`
The results were boosted by increasing the shareholding in the Wilgeheuwel
Hospital in Roodepoort from 28 percent to 74 percent, as well as the
commissioning of the new 124 bed Roseacres Clinic in Germiston.
Continued investment in acquisitions, additional facilities and equipment
amounted to R242 million. Construction began on a R174 million 194-bed hospital
in Fourways, Gauteng, that will give the company more exposure to medically
insured patients in this high growth node. Other major construction projects
are in progress at Glynnwood in Benoni, and Rosepark in Bloemfontein.
An additional cardiac catheterisation laboratory and oncology centre was opened
at the Vincent Pallotti Hospital in the Western Cape. The Jan S Marais Hospital
was sold, and the Cape Anaesthetic Clinic and Brackenfell Sameday Surgical
Centre closed during the last quarter.
Referring to international expansion, Flemming said, `Our venture in the United
Kingdom was successfully launched with a London listed company, Care UK,
providing orthopaedic services to the National Health Services (NHS). We
operate at two existing NHS hospitals as an interim arrangement while our two
new facilities, due for commissioning in 2005, are under construction. Initial
profit objectives have been met and we anticipate that we will be a preferred
bidder on further contracts with the NHS.`
The healthcare services operations, Afrohc, Lifecare Special Health Services,
and Afrox Rehabilitation performed well. Afrohc (occupational healthcare)
achieved solid growth in all regions with good prospects for 2005. A new
rehabilitation centre was commissioned at the Entabeni Hospital in Durban.
A R13,5 million private wing, funded by Afrox Healthcare and empowerment
partner, Star Season Trading, opened at the Humansdorp Hospital. Together the
partners manage the Humansdorp Hospital for the Eastern Cape Department of
Health in a public/private partnership.
A number of legislative developments have impacted on the private hospital
industry. Flemming said, `Legislation applicable to single exit pricing for
ethical drugs intends to bring down costs, but it has increased our input costs
and has eliminated the margin derived from the sale of ethical drugs. We have
had to make adjustments to ward and theatre fees to remain cost neutral for the
medical schemes. Our representations to the Department of Health regarding this
legislation in its current form have unfortunately not been successful.`
`Our Direct Medicines business was severely impacted by the changes. Steps have
been taken to restructure the business model to allow operations to continue.
We will need to evaluate the impact of these changes over time.`
Future legislation likely to affect the industry includes the proposed
introduction of the Health Sector Charter. The Minister of Health has appointed
Flemming to the key Health Charter Task Committee that will evaluate industry
input and establish the framework for the Charter.
Funders acknowledge Afrox Healthcare as being the lowest cost provider in the
private healthcare industry. `We have been innovative in terms of pricing, risk
sharing, asset utilisation and product development to control costs and to offer
an affordable service in the traditional medical aid market. A large proportion
of our business in now on a risk-sharing basis and by expanding this we are able
to reach formally employed low-income earners,` said Flemming.
Looking to the future, Flemming said that although there was uncertainty pending
the proposed sale of Afrox Healthcare, his company was fully prepared to launch
its new brand and image. In December 2004, Afrox Healthcare will move to its
new premises in Illovo. The company is in good health. Its critical mass,
infrastructure and reputation for quality have given it the impetus to forge
ahead as a stand alone company.
`We will examine opportunities for organic growth as well as growth through
partnerships. We will continue our outreach to the state for public/private
partnerships, strategies for widening access to healthcare for low-income groups
and provision of hospitalisation to patients from neighbouring African
countries,` said Flemming.
`Our services have been highly acclaimed in the United Kingdom where we now have
a track record, and, with the NHS committed to increase its spend to GBP87
billion over the next three years, we plan to expand our business
internationally as opportunities arise.`
Issued by Afrox Healthcare Limited
For further information contact
Ros Beart 011 490 0712 or 082 891 5149 or
Chris Fieldgate 011 490 0430
27 OCTOBER 2004
