Commentary

Introduction and review

AfroCentric “ACT” is a Level 1 B-BBEE JSE listed investment holding company, committed to transforming and advancing healthcare access and affordability across Southern Africa. Through our diversified portfolio of subsidiaries, we deliver integrated health management solutions, including medical aid administration, managed care, medicine provision, wellness services and digital health innovations. The Group plays a pivotal role across the public and private sectors, driving efficiencies, health outcomes and enabling sustainable healthcare delivery. Our strategic focus remains on expanding our footprint, leveraging technology and clinical innovation, and fostering partnerships that support inclusive, value-based healthcare for all.

The Board presents commentary on the Group’s operating performance for the six months ended 30 June 2025. These results have been achieved on the backdrop of losses of some contracts with clients in the prior year, as well as the intentional investment that the Group has made in executing on the refreshed strategy.

Last year, we firmly established the growth drivers and key enablers that will propel us towards our Vision 2030: to become the most trusted and innovative healthcare partner in Southern Africa. In 2025, we have continued to execute on this vision, making meaningful progress in delivering on our strategic objectives.

Over the past six months, the Board has been intentional about executing on Vision 2030:

At the core of Vision 2030, AfroCentric is the enabling partner that supports Sanlam’s ambition to build a leading open medical scheme with its strategic partner, Fedhealth. Following the 2024 Fedhealth launch, Sanlam made a bold move by migrating all its employees to the scheme. In support of this, AfroCentric Distribution Services was rebranded to Sanlam Health Distribution and integrated into Sanlam Corporate Distribution. This strategic integration enables AfroCentric to seamlessly embed its healthcare offering within Sanlam’s extensive distribution ecosystem, thereby expanding our market presence and unlocking significant strategic value for AfroCentric shareholders – achieved on a cost-efficient basis.

In strengthening AfroCentric’s partnership with Sanlam as well as to leverage off Sanlam’s world-class data centre that has ample power capacity, secondary power sources and optimal cooling facilities, AfroCentric successfully relocated its computer servers and storage hardware that were housed in its two data centres located in Johannesburg to Sanlam facilities in Cape Town in April 2025.

This transition enables AfroCentric to benefit from a more stable and secure IT environment, enhancing the resilience of our infrastructure, reducing operational downtime risk, and reinforcing our commitment to delivering uninterrupted, high-quality service to our Medical Scheme clients.

Progress has been made in implementing the Data Refresh Strategy. In strengthening data governance, a Data Governance Committee has been established, bringing together representatives from across the Group. In support of the modern customer engagement strategy, AfroCentric Technologies adopted the ScaleForce architecture, thus enhancing our integration and data capabilities available for servicing clients.

We launched the Orthocare Spinal Programme on 1 January 2025 for selected schemes. The programme implements a multi-disciplinary biopsychosocial rehabilitation approach, integrating psychological support and exercise therapy to improve pain management function and coping skills through a Documentation-Based Care (DBC) process. This programme will improve clinical outcomes for patients with chronic lower back pain through evidence-based care pathways, while simultaneously reducing the incidence of unnecessary spinal surgeries and interventions. This will thus enhance operational efficiency, optimise resource utilisation, and support sustainable cost containment.

Key changes to our operating model and business structure were implemented to ensure that we have the right organisational and leadership foundations in place to deliver on our strategic intent. They are a critical part of our journey to help us realise our long-term objectives.

• AfroCentric Technologies is in the process of being restructured, with IT operations moving into Medscheme and IT infrastructure into Sanlam Group Technology. These changes will ensure that our technology capabilities are closely connected to business needs, enabling better security and faster agile delivery of services.
• In line with our long-term strategy, we are evolving the structure of the Pharma division in the context of Scriptpharm Risk Management to better align and leverage pharmacy and medicine management with Medscheme – allowing for an integrated, streamlined service to members.

Strategic changes also include creating the Chief Risk Officer position to strengthen risk and governance, which is part of the refreshed strategy.

These changes are more than structural – they are strategic enablers for our future. They are designed to assist us to streamline our business and bring greater focus to how we execute our purpose within a stable and secure environment, strengthen our partnerships, and position us to lead with confidence and purpose.

Financial performance

This period has been one of continued transition, adapting to our ever-evolving operating environment, the challenges and opportunities we face as a business and how we should position ourselves for future success. AfroCentric’s financial performance for the six months was marked by growth in the operating earnings of the Services Cluster due to revenue growth but is diluted by the decrease in the operating earnings of the Retail Cluster. The Retail Cluster continued to face tough trading conditions resulting in a decline in revenue.

The Group’s revenue for the last six months decreased by 2.6% compared to the six months ended 30 June 2024 – the decreased revenue is mainly due to lower private patient scripts pursuant to the loss of the designated service provider contracts in Pharmacy Direct, and the loss of margin in hospital products.

The Group’s profit before tax for the period of R161.0 million is a significant improvement to the loss incurred for the six months ended 30 June 2024 of R81.2 million. The headline earnings of R98.2 million is a decrease to the headline earnings for the six months ended 30 June 2024 of R157.8 million.

The performance for the six months ended 30 June 2024 was impacted by lower profitability due to margin erosion and channel pressure arising in the retail cluster, resulting in an impairment of goodwill within the Retail Cluster.

AfroCentric continues to make deliberate and forward-looking investments aligned with our Vision 2030. Over the past six months, we have committed approximately R9 million toward executing our refreshed strategy.

While the benefit of these investments is still unfolding, they have already begun shaping the foundation for long-term value creation.

Looking ahead, the Group is preparing for further significant investments in the next six months. These will be targeted at accelerating our strategic transformation, strengthening our managed care leadership, and delivering innovative, technology-driven healthcare solutions. This continued investment underscores our commitment to building a resilient, future-ready business that delivers sustainable growth and shareholder value.

Capital management and cashflow generation continues to be a focal point for management. During the past six months, this has yielded positive results in the cash and cash equivalents balances reaching R483.1 million (Jun 2024: R329.9 million). Borrowings marginally increased to R654.2 million (Jun 2024: R628.4 million) due to a R45 million mortgage bond in Namibia and the interest incurred.

Cluster review

Services Cluster

The Services Cluster, substantially comprising the medical scheme administration and managed care business, has an ambitious strategy centred on driving change to how we do business. This strategy and the projects that support it, are critical to our ambition of driving growth and profitability, creating greater efficiencies, and delivering greater value to our clients.

We have an aggressive agenda to strengthen our client value proposition, thereby enabling us to retain existing client relationships and to build new strategic partnerships. Key to these strategic partnerships is the partnership with Sanlam, that will allow us to leverage the Sanlam distribution networks, product offerings and operations that complement our own.

The key strategic shifts that the Cluster is focusing on, includes the following:

• We are reorganising our structures to create better alignment, collaboration, and efficiency in operations and administration areas.
• To unlock value and untapped business opportunities, we are consolidating capabilities within Medscheme.
• We are aligning towards a value-based care .approach in the Managed Care area.
• We are enhancing our technology, digital and data enablement capabilities to fully support our business ambitions. This includes the technology we use, the roles people play and our utilisation of data across a broad range of business areas.
• We are shifting our culture, leadership, and underlying values, to one where empathy, care and integrity are in the system, while maintaining our focus on performance excellence, efficiency, client-obsession, ethical standards and sound business practices.

In aligning towards a value-based care approach, as a leader in managed care, we are committed to clinical innovation towards quality clinical outcomes and best-in-class coordination of healthcare services. By leveraging a data-driven approach to monitor clinical and financial impacts, Medscheme continues to set the standard for managed care excellence, ensuring patients receive the most effective and sustainable treatment solutions.

The Cluster has seen a 8.7% increase in revenue to the six months ended 30 June 2025 – revenue growth is attributed to the growth in membership of some of the open schemes bolstered by the growth in Fedhealth, supported by the migration of Sanlam employees, fees increases, and the growth in primary health insurance revenue. This growth has however been diluted by lower Bonitas membership attributed to the termination of the Boncap option administration contract, as well as marketing revenue that was recognised in ADS in the prior year but has been excluded in the current year due to the termination of this contract in August 2024.

The increased costs in clinical servicing of medical claims, investment in new product development capabilities, as well as the enhancement of the Group’s cybersecurity posture and IT licences has however increased in line with the revenue growth resulting in a marginal 3.7% increase in operating earnings.

Retail Cluster

The Retail Cluster seeks to participate throughout the pharmaceutical value chain to reduce medicine and related costs and improve adherence to medication.

Through its subsidiary, Pharmacy Direct, the Cluster continues to position itself as a key partner for the government in the National Health Insurance (NHI) environment. In the recent past, Pharmacy Direct has demonstrated significant success in driving access to care by increasing the script volumes on the Central Chronic Medicines Dispensing and Distribution (CCMDD) programme despite challenges, such as the net decline in price per script.

The Retail Cluster has seen a 14.2% reduction in revenue – performance has been adversely affected by lower private scripts mainly attributed to the loss of the designated service provider contract on the Boncap option, Primary option and the Primary Select option. Performance was further adversely affected by the loss of margin on the hospital products. The decrease in revenue has however been diluted by the increase in revenue in the Scriptpharm business due to inflationary fee increases. Following the loss of contracts, the Pharma Cluster embarked on a costs rationalisation process which was concluded in April 2025. The combination of these events resulted in a 13.2% decrease in operating earnings.

On a positive note, the Cluster has made progress on enhancing efficient working capital management practices to address stock holding.

High stock holdings will remain an area of focus for the Group for the remainder of the year as we seek to improve our working capital management.

Growth Initiatives

Following the approval of the Board, AfroCentric concluded two inter-related transactions to sell AfroCentric Distribution Services Proprietary Limited (ADS), together with its subsidiaries, and Wellworx Proprietary Limited (Wellworx) to Sanlam Life Insurance Limited (Sanlam Life). The transactions were implemented on 28 July 2025.

The details of the transactions are:

• AfroCentric Health (RF) Proprietary Limited disposed of its entire interest in ADS, along with its wholly owned subsidiaries Tendahealth Proprietary Limited (Tendahealth) and AfroCentric Financial Services Proprietary Limited (AFS) to Sanlam Life for R2.8 million.
• Medscheme Limited disposed of its entire interest in Wellworx to Sanlam Life for R12.2 million.

These transactions are pivotal to advancing our strategic objectives as they lay the foundation for a unified and scalable healthcare offering, leveraging the strengths of both AfroCentric and Sanlam Life.

These transactions will further enable the development of a strong distribution network, led by Sanlam Life, to promote AfroCentric’s health solutions across a broader customer base, with an expectation to grow the number of members using Medscheme-administered medical schemes and enhance our joint operational efficiency, as well as strengthen our position in the market and improve how we support both public and private medical schemes.

Outlook

The focus for the remainder of 2025 will be to deliver on our strategic priorities in pursuit of our 2030 ambition and set our business on an exciting new growth trajectory. We will be focused on a more cohesive and integrated operating model that leverages the unique strengths of our diversified businesses.

As we move forward:

• Clinical innovation will become a key differentiator for our business. Critically, our track record to unlock significant value on Clinical Managed Care will remain a key asset and a success factor will be to transform traditional care delivery programmes to focus on value-based care.
• We will unlock our core strengths in service delivery, allowing us to proactively respond to our customer needs, deliver exceptional experiences for our clients and members, and running an efficient business that is digitally enabled.
• We will continue to focus on key partnerships with our schemes, intermediaries and service providers to grow our networks and deliver a compelling proposition that is data and digitally enabled.
• We will work tirelessly to build trust and demonstrate our commitment to making a positive impact on the lives of those we serve, and most importantly, ensure the well-being of our people to remain motivated and engaged.

AfroCentric enters the second half of 2025 with a clear focus on delivering against our strategic priorities and advancing our Vision 2030 ambition. While we maintain a leading market position, we remain vigilant to both internal and external factors that could influence our trajectory.

Externally, regulatory developments – including ongoing NHI discussions and the recent Council of Medical Schemes (CMS) Low-Cost Benefit Options (LCBOs) report recommending the phasing out of Primary Health Insurance – continue to shape the healthcare landscape and require agile strategic responses.

Internally, we are navigating a complex operating environment that includes performance pressures in certain clusters, evolving client needs, and the natural dynamics of client contract renewals.

Despite these challenges the Group’s core business remains sound and competitive. Our diversified healthcare assets, strong partnerships, and prudent capital management position us well to respond to market shifts and unlock new opportunities.

We are committed to developing a cohesive value proposition that leverages our strengths in a more integrated and scalable way, ensuring we continue to deliver sustainable value to shareholders.

Directors

The following changes were made to the Board during the six months under review:

• Mr Hannes Boonzaaier resigned as the AfroCentric Group Chief Financial Officer and Executive Director effective 31 January 2025.
• Mr Thato Moloele was appointed as CFO designate and Executive Director of AfroCentric effective 1 January 2025. He took office as the Group Chief Financial Officer effective 1 February 2025.
• On 26 February 2025, the Nominations Committee resolved that the role of deputy chairman was no longer required on the board. Mr Joe Madungandaba, who previously held this role, continuous to serve as a Non-Executive Director on the board.
• Ms Charlotte Mokoena was appointed as an Independent Non-Executive Director, effective 1 October 2025.

Basis of preparation

The Condensed Consolidated interim financial statements for the six months ended 30 June 2025 have been prepared in accordance with and containing the information required by IAS 34: Interim Financial Reporting, the Financial Pronouncements as issued by the Financial Reporting Standards Council and SAICA Financial Reporting Guides as issued by Accounting Practices Committee (collectively “JSE Financial Reporting Requirements”), IAS 34: Interim Financial Reporting and the South African Companies Act.

The accounting policies applied in the Condensed Consolidated Financial Statements are the same as those applied in the Group’s Audited Consolidated and Separate Financial Statements for the year ended 31 December 2024.

The Board of Directors (the Board) takes full responsibility for the preparation of this report. These unaudited and unreviewed Condensed Consolidated Financial Statements have been prepared under the supervision of Thato Moloele CA (SA), the Group Chief Financial Officer. This announcement does not include the information required pursuant to paragraph 16 (A)(j) of IAS 34 and this is available on our website (https://www.afrocentric.za.com/investor-centre/), or at our offices upon request.

Responsibility statement

The AfroCentric Board, individually and collectively, accepts responsibility for the information contained in this announcement insofar as it relates to AfroCentric. In addition, the AfroCentric Board confirms that, to the best of its knowledge and belief, the information contained in this announcement, as it relates to AfroCentric, is true and correct and, where appropriate, does not omit anything that is likely to affect the importance of the information contained herein, and that all reasonable enquiries to ascertain such information have been made.

On behalf of the Board

Dr ATM Mokgokong
Chairman

Mr GN Van Wyk
Group Chief Executive Officer

Johannesburg
2 September 2025