AfroCentric Investment Corporation Limited (ACT) Earnings Call Transcript & Summary

Good morning, and welcome to AfroCentric's Annual Results Presentation for the year ended 31 December 2025. Today, I have the honor of introducing AfroCentric's Group Chairman, Professor Anna Mokgokong; Group CEO, Gerald Van Wyk; and Group CFO, Thato Moloele. The presentation is available on the website. And at the conclusion of the presentation, the management team will address any questions. With that, I will now hand over to Professor Anna Mokgokong.

Distinguished shareholders, esteemed Board members, valued colleagues, ladies and gentlemen, good morning, and welcome to AfroCentric's Group Annual Results Presentation for the year ended 31st December 2025. I want to begin by acknowledging the time, attention and commitment of everyone joining us, our shareholders, our clients, our partners and importantly, our people across the group. Thank you. Before we turn to the results themselves, I would like to briefly set some context from the Board's perspective. As a Board, our starting point is always stewardship, governance, ethical leadership and our responsibility to our clients, members, staff and the communities we serve. AfroCentric operates at the center of the private health care system. What we do affects members, families, providers and communities, often at moments of vulnerability. It also places us in a highly regulated and scrutinized environment where trust, governance and integrity are not abstract concepts, but daily obligations. That reality shapes how the Board views performance, accountability and the decisions taken during the year. Against this backdrop, let me address the issue that is understandably front of our mind for many stakeholders, and that is the Bonitas issue. Medscheme and the AfroCentric Group have a long and proud history with Bonitas, built over more than 4 decades of collaboration. In this long-standing relationship, we shared a common goal to grow and sustain a scheme of real significance. Central to that success has been Medscheme's capabilities, which have enabled the scheme to remain competitive, resilient and focused on member outcomes in a demanding market. As a result, the outcome of the Bonitas procurement process will have a significant impact on the AfroCentric Group. And this has created uncertainty in the system. The Board recognizes the seriousness of this matter and the concern it has generated. Our position is clear. Where regulatory processes and investigations are underway, they must be allowed to run their course properly and lawfully. Governance and due process in this industry aren't optional. They are mandatory as they directly impact members and the sustainability of the sector. Two things can be true at the same time, and the Board is clear on both. It's not ambiguous, if I may emphasize. First, where allegations raised in the media relating to governance and procurement processes at Bonitas are the subject of a forensic investigation by the Council for Medical Schemes. The Board believes that due process must be respected and allowed to run its course. Second, at the same time, our responsibility to members remains paramount. And until contractual arrangements change, service delivery must continue professionally and responsibly with any transition managed to minimize disruption. As a responsible corporate citizen, we have an obligation towards the scheme, its members, our people and the greater industry to act responsibly when information of this nature could have irreparable harm to the very sustainability of the scheme if left unchecked. To our clients, more broadly, I want to say this plainly, you are central to our group, and we deeply appreciate the trust you place in Medscheme and other associated businesses. The Board's expectation is that management will safeguard service delivery and client confidence while strengthening relationships through consistent excellence, open communication and accountability. To our people, I understand that this time brings uncertainty and emotional strain. The Board acknowledges and recognizes these challenges. Working closely with management, we promise to guide the organization through this transition with integrity, fairness and compassion for all our valued employees. Our status as a top employer for 2025 demonstrates that our culture and people continue to be at the heart of our identity. We also expect the organization to remain steady, fair and disciplined during this transitional period. We do not lead through slogans. Instead, we lead through clear decisions, clear priorities and honest communication. For shareholders, you can anticipate that the Board will maintain its rigorous standards. Our governance is based on prudent decision-making, clearly defined objectives and a proactive approach rather than relying solely on optimism. The Board has directed management to run a single integrated turnaround program. The sequencing is explicit. Survival first, recovery second. This means stabilizing liquidity, delivering a structural cost reset, protecting service delivery and stakeholder confidence, managing the transition responsibly and redesigning the organization for its new scale reality. We will earn our right to grow after we stabilize and protect what we already have. The Board will be supported in its oversight through independent turnaround capabilities to ensure effective oversight and disciplined execution of the program. AfroCentric's purpose remains unchanged, but the Board is clear that in this moment, the strategic priorities will be reordered, restabilization, cost reset, reorganization and operational simplification take precedence. We have a strong core business, but excluding Bonitas, still manages over 3 million lives under our care, and this is our priority. And recently, we received news of the Sisonke Health new business win, and we look forward to servicing the client with excellence. When we have stabilized the base and optimize the operating model, we will be in a position to pursue growth from a position of strength. Looking now at the governance of the group over the past year, I'm satisfied that our Board committees, audit and risk, remuneration, social and ethics and investment committees, each operated with rigor and independence. I'm also satisfied that our corporate governance frameworks remain robust and that our adherence to the principles of King Code is not a compliance exercise, but a genuine expression of who we are as an organization. In line with this commitment, several important governance developments took place. Mr. Hannes Boonzaaier resigned as the Group Chief Financial Officer with effect from the 31st of January 2025. And Mr. Thato Moloele was appointed in his place on the 1st of January 2025, assuming office as Group CFO on the 1st of February 2025. On the 26th of February 2025, the Board dissolved the role of Deputy Chairman on the Board. Mr. Joe Madungandaba, who previously held this role continues to serve as a Non-Executive Director. Mr. Ronnie Wa-Mundalam, an external member on the Remuneration Committee resigned on the 28th of August 2025. Further strengthening the Board's diversity and expertise, Ms. Charlotte Mokoena, joined as an Independent Non-Executive Director on the 1st of October 2025 and also joined the Social and Ethics and Remuneration Committee as a member. Lastly, Mr. Robert Goff, an external member of the Remuneration Committee also resigned with effect from the 2nd of October 2025. His vacancy on the Remuneration Committee has recently been filled by Dr. Munisi, and a Non-Executive Director. To my fellow Board members, your counsel, candor and commitment has been invaluable. The depth of experience and diversity of perspective around the table is one of AfroCentric's greatest and perhaps most underappreciated assets. With that, I will hand over to the Group CEO, Gerald Van Wyk and the Group CFO, Thato Moloele for the detailed financial and operational review. Thank you.

Good morning, and welcome, everyone, to the AfroCentric Group Annual Results Presentation for the period ended 31 December 2025. And thank you, Professor Mokgokong, for those contextual words. I will provide an overview of our performance for the year and draw out a few specific material matters that are relevant to these results. I will then hand over to our Group CFO, Thato Moloele, who will take you through the detailed financial presentation. After Thato's section, I will return and join him for a Q&A. There are 5 key messages I want you to keep in mind as we go through the results this morning. First, the challenging 2025 financial performance are indicative of a difficult year operationally, which was shaped by resilience in core operations, but continued pressure in the retail cluster. But even in a challenging year, our exceptional service excellence remained a defining strength of this business. We continue to deliver at scale and sustain high service standards in key parts of the business. Then our progress in clinically led innovation, value-based care and collaboration with Sanlam are becoming tangible innovation proof points with the launch of key strategic initiatives, which are starting to move from concept into delivery. And we've taken difficult yet necessary decisions to clean up the balance sheet and ready the group for its new reality, and that includes actively refocusing the portfolio and recognizing impairments where the underlying economics no longer support the historic carrying values. And lastly, our strategic response to the Bonitas outcome represents a defining inflection point for the group. We are responding with a structured turnaround program built on 4 pillars. That's the cost reset, stabilization, a reorganized operating model and portfolio simplification with an explicit objective of reaching breakeven by 2027. And so when we look at the financial performance in summary, the year produced what can be described as a mixed operating outcome across the portfolio with the group delivering revenue of ZAR 7.3 billion, which is down materially from the prior year. And some of the biggest drivers were the contracted losses that affected both the services and the retail clusters. We had a reduction in the private patient script volumes directly linked to the loss of designated service provider arrangements. And then we had ongoing margin pressure on certain of our pharmaceutical products. We had also seen lower membership in some of the medical schemes, which contributed to softer fee-based revenue in parts of the service cluster. And you'll recall that contract losses in Boncap and ADS that sits in the prior 2024 year base are now no longer in the 2025 revenue base in explaining what's driven that material delta in our revenue profile. But as you would have seen in the reported results for the year, there are significant once-off noncash adjustments, which include goodwill impairments taken after the Bonitas contract outcome as well as impairments related to Activo's underperformance. And then as you see on the bottom right-hand side of the slide, when we compare the 2 main clusters, it still reflects the resilience of the services engine and the pressure that persisted in the retail cluster. But it is worth highlighting the tremendous turnaround in the pharmacy public sector business, CCMDD as well as the Scriptpharm business that together far exceeded expected results for the year in contributing significantly to the group's performance. And speaking of Scriptpharm, although it's also impacted by the loss of the Bonitas contracts, it is a key capability that we've now successfully integrated into the Medscheme environment, where it will strengthen our integrated pharmacy benefit management proposition to our other schemes. And so I think that's quite important in terms of how we're thinking about that key enablement capability that we have in the organization. And whilst we have taken decisive actions in the retail sector, including cost rightsizing, which we implemented throughout the course of last year. We've applied stricter inventory management towards the end of the period. And we've undergone critical assessments of the profitability of those product lines. And then we've taken the strategic action from a portfolio perspective to dispose of the Activo Group in an important step in simplifying that portfolio and improving our focus. We haven't yet seen the full impact of these targeted management actions to address this underperformance coming through in the numbers. But most certainly, the run rate of some of these actions are proving to be positive. If you consider Pharmacy Direct, the private business, where we had the 3 DSP losses right in the beginning of the year. That business, although over an annualized period, has missed performance expectations on a run rate basis since the implementation of these key management actions have turned net positive and on its own are starting to return some value from activity again. But the point being that there's still this contrast in terms of underlying performance of the servicing business versus that of the servicing business with management actions yet to fully realize in the actual numbers. I also thought to just put up this slide, and Thato will talk through our detailed liquidity position in detail. But I thought to highlight the group's ability to convert cash from operations, which now sit at around 74%. And this equates to cash generated from normal operations in the year of nearly ZAR 1 billion. And if you compare that with our net debt-to-EBITDA position of 1.56 and the headroom it provides us, it really is still a story of a very deliberate, disciplined capital management policy that we are focused on. And typically, in a typical environment, this would have been a great enabler to help us fund the growth from our own value-creating activities. But with the headwind we are facing, it will now become the enabler of the capital restructure that we are embarking on and which Professor Mokgokong had alluded to earlier. And Thato will go through the detail, but I think it's an important anchor in terms of where our focus is going now is that the group still from its underlying operations are remaining cash generative, and that's what we're going to also use as an enabler for the implementation and successful execution of our turnaround strategy. Now inherent to our business model, and I know to our investors in the market, this is well understood, but it's manifested now in quite a material way. But inherent to our business model are the inescapable feature of our contract life cycles. Whilst our 2 biggest competitors are allowed to benefit from a permanent unfair competitive advantage through a supposed quirk in the law by having a brand-aligned anchor scheme, we have to navigate this material risk without any such protections. And so we are almost always in contract preservation mode and where all things are equal, we have been very successful in navigating this. And here, you can see we have successfully renewed the GEMS managed care and contribution and debt contracts on the 1st of January 2026, which reflects the scheme's confidence in our delivery capability and our continuation of it. Medscheme, as the Chairperson had also indicated, was also awarded the full suite of administration and managed care contracts for Sisonke Medical Scheme where we competed against our largest competitor, and we were successful. And in addition to the admin and managed care contracts, that we are now losing on the Bonitas front, we had also lost the Bonitas designated service provider contracts on 3 plan options, which impacted our retail businesses, including Pharmacy Direct, Curasana and Activo. And in Namibia, the NHP Namibia managed care contract was lost through a tender process, and we are currently transitioning to the new service provider. And as you can see in terms of contracts due for renewal in 2026, the remaining cycle is clearly focused across some of the key contracts that are coming up. There's still the remaining of the Bonitas DSPs. The CCMDD contract with the National Department of Health is also due for renewal in 2026 as well as the Polmed contracts that are also coming up for renewal. And we are in a high engagement and execution mode around these discussions. But I thought to just contextualize for you the inherent nature and risk associated with our businesses having to go through contracts and tender processes. Turning to Bonitas. I think it's important for us to anchor to the market what the share referred to as a relationship that spans over 4 decades and demonstrate to you the value that's been delivered as being quite measurable across very many metrics, whether it's solvency, affordability, growth, retention, service levels, governance and more importantly, clinical outcomes. If one just look at the scheme solvency recovery, it is one of the clearest indicators of sustainability for members. and driven by disciplined managed care interventions and evidence-based models, Medscheme have played a primary role in executing on the scheme solvency recovery. The service levels at over 80% customer effort scores have remained high even under complex delivery conditions, including the scheme introducing multi-provider complexities where Medscheme have not had a single SLA bridge over this period. And all of this have culminated in the scheme being recognized as the top medical aid scheme for excellence in customer experience in the Ask Africa Orange Index, not once but twice in 2024 and recently now in 2025. The key metrics here that provides clear evidence of the value that Medscheme have brought to Bonitas and why we state with confidence that what has transpired here is not a performance issue or scheme sustainability issue. And as you know, we took a decision then to seek interdictory relief related to this Bonitas RFP. And the relief we are seeking is quite specific. Pending the outcome of the Council for Medical Scheme's forensic investigation, we asked for an order directing Bonitas from taking further steps to negotiate, finalize or implement the RFP. And the reason for this is straightforward. Following persisting media reporting on allegations of improper procurement processes at Bonitas, the CMS, the regulator, initiated a Section 44 investigation into the affairs of the scheme. Now this is not a routine step. It is a formal regulatory inspection with extensive powers and it exists to protect scheme governance and member interest when serious failures are suspected. But whilst this is ongoing, we will continue to deliver the contracted services to members and act in their best interest and in accordance with our obligations as the Chairperson had also alluded to. And as is evident by our own conduct in how we are participating in the scheme's wind-down processes and preparing for this transition of services. But the principle it holds, ladies and gentlemen, we are pursuing this because of serious allegations of undisclosed conflicts of interest and a predetermined outcome in the awarding of these contracts and because of the regulatory intervention. And so procurement integrity from our perspective in a scheme of this size doesn't just affect us and Medscheme, it goes to member affordability, scheme integrity and the stability of this scheme and the trust in the entire health care funding system. So as a corporate citizen, we feel it is not something that can be left unchecked. And hence, we are pursuing this matter in the way that we have stated to you publicly, and we'll keep you posted on how it progresses. Then if we consider the impact of the Bonitas contract loss, I think it's clear and obvious. It's material and it will have significant implications for the group in terms of income and for our operating model and the shared capabilities that has historically been built around Bonitas as the anchor scheme within Medscheme. And here, you can see how the revenue will taper down from May onwards and when we enter the wind-down period over a 4-month period and how it will then ultimately compare in 2026 against 2025. And so as a result, we've had to establish a dedicated Board-approved turnaround program with a clear target. We want to break even by 2026 through a lean organized operating model. And put simply, as the Chair said, survival first and recovery second. And this for me is an important distinction because we believe there is a viable core business, and we need to preserve it and we need to reorganize ourselves to serve our existing clients in an efficient and sustainable model. And once we have done this, we will earn the right to pursue our validated growth ambitions again. And so in essence, our operating model and our cost base were built for a larger scale. And so we can't really just shrink what we have as a result of some significant stranded costs that do exist in the business. We will have to redesign the entire cost base and also the resultant operating model because the entire enablement and support infrastructure actually sits above the operating business. And so we need to reorganize how we service our clients going forward. And so a key performance outcome for us will be measured against these focus pillars that are sequenced and are supported by both dedicated internal teams as well as independent external advisory capabilities. And really the point being around cost reset, we need to deliver that structural cost reduction and simplify the cost to serve to the size of a new revenue base that will exclude Bonitas. On the stabilization side, as we said, we need to protect the core. It remains a sizable proposition that serves over 3 million beneficiaries, but it needs to be supported by an enablement structure that is fit for the new revenue base. We need to reorganize the entire operating model and look at those stranded costs and how we serve and create a lean accountable structure. And then the portfolio simplification where we have to focus on our core capabilities and remove complexity that does not pay for itself or create impact in the new reality. And so going forward, this will become the deliverables that management will be accountable for and which we will report to the market on as part of a group's scorecard in tracking progress because as the Chairperson said, execution here for us will be key. And then just in terms of looking ahead, I think the next 12 to 18 months are definitely execution focused on this turnaround strategy and ensuring that we deliver these cost actions whilst maintaining the service standards. We're going to have to lock in the structural efficiencies so that we can, on an annualized basis into 2026, support our breakeven ambition. And then we need to manage the transition and the wind down in a professional way to protect our reputation, protect member interest and also protect our remaining client relationships. And once we're stable, we will continue the strategy path that supports our long-term differentiations, whether that's Sanlam or our clinically led innovation through our value-based care and our digital and data enablement because we fundamentally believe that to win in this future contract environment or contract cycle and to retain our existing clients, it's going to be measurable outcomes in our proposition and not narratives that will give us that right to win. And so we are committed to our growth ambition and strategy. But in the immediacy, our focus is on executing on a turnaround strategy. That's why I'll leave it for now and hand over to Thato to just take you through the detail as it relates to our financial performance, and I'll join you later for the Q&A.

Good morning, and thank you to our investors, our analysts, our staff, directors and stakeholders for joining us here today as we unpack the financial results for the 31 December 2025 financial year. In short, 2025 was a tale of 2 halves. On the one hand, we delivered resilient operational performance across our local SA and international markets, we maintained exceptional service delivery standards in a highly constrained health care environment, and we preserve liquidity and solvency during a period of heightened uncertainty. On the other hand, our performance has been impacted by revenue contraction across both the services and the retail cluster as well as impairment losses driven primarily by the regression of future income anticipated from Bonitas, which has historically been one of the largest contributors towards group revenue and operating earnings. As a group, we generated ZAR 7.3 billion in revenue for the period, of which ZAR 4 billion was generated from the Services Cluster and ZAR 3.3 billion was generated from our retail cluster. Whilst this represents a 16% top line decrease to last year, we managed to improve operating profit in the Services Cluster by 9%, up to ZAR 577 million, while operating performance in the retail cluster halved down to ZAR 102 million. Profit for the year was impacted by ZAR 1.4 billion impairment, mainly against goodwill and intangible assets in Medscheme Pharmacy Direct as well as Activo. The latter of which has since been reclassified as a discontinued operation and an asset held for sale. The impairments recognized for these business primarily reflects the impact of lower forecast profitability from Bonitas and are the primary factor behind the loss generated for the year. Despite this challenging backdrop, our administration, managed care, capitation and public retail distribution businesses performed well and in some instances, exceeded expectations, each contributing towards positive headline performance for the period. As I note, the Services Cluster generated ZAR 4 billion in revenue, reflecting a 13% decrease against comparable period in 2024, which included revenue from the Boncap option and marketing revenue from Bonitas. Outside of these terminations, the Services Cluster performed relatively well and was supported by CPI-related fee increases across our scheme clients, which is further supported by 2.5% membership growth across our [ retail options ], options and schemes, both local and abroad. Full year membership trends followed a similar pattern to what we reported at the interim period, with most of the 96,000 additional lives being driven by our closed schemes with GEMS contributing 60,000 new lives, followed by Bonitas and Fedehealth each contributing growth of 26,000 new lives and 7,840 new lives, respectively. These trends were marginally offset by downward trends in the local corporate schemes, which recorded a 6% decrease in membership year-on-year. Despite the resilient operating performance, it should be noted that Bonitas contributed ZAR 1.4 billion towards Services Cluster revenue for the period. This revenue was split between administration income, managed care fees and HIV management fees, which in total contributed 29% of revenue from the Services Cluster. Furthermore, Bonitas-related income within Scriptpharm, which is reported under our retail cluster, was ZAR 713 million for the period, which is largely offset by capitation claims, culminating in total Bonitas related capitation profits of ZAR 7 million for the period. Outside of South Africa, our Africa and international businesses performed well. These businesses contributed stable performance for the period, contributing ZAR 261 million towards revenue and ZAR 84 million towards EBIT. These earnings were mainly attributable to our Namibia business, which generated ZAR 167 million in revenue and ZAR 61 million in EBIT for the period. The Namibia business growth was mostly generated off the back of positive membership growth, of which 2% up to 82,000 new lives. Coming back towards our dental capitation business within dentist. This business benefited from local membership growth across both Bonitas and Polmed and reported a 26% increase in EBIT, up to ZAR 54 million. This was a result of strong claims, management experience and improved membership. Within the Services Cluster, we managed to improve our overall margins, which recovered relative to the prior period. This is a combination of the improved operational performance noted earlier as well as slowed expenditure on strategic initiatives relative to the 2024 period and our original plans. As noted, the retail cluster has had significant revenue decreases, which trail below the prior periods. The main contributors towards the downward performance were Pharmacy Direct Private, the Curasana Wholesale business as well as Activo, which were all impacted by the Bonitas DSP terminations, which took effect from February 2025. The DSP terminations reduced private margin script -- private market scripts to a monthly average of 106,000 scripts per month, marking a 30% net volume decrease. Furthermore, the DSP terminations resulted in a 22% decrease in wholesale purchase volumes in Curasana, which further eroded fee margins by 74 basis points for the period. And then as a third knock-on impact, the Activo ARV lines of business reduced by 16% from a volumes perspective year-on-year. Together, these events were primarily responsible for the regression in revenue, of which ZAR 435 million was attributable to PD and Curasana and Activo, which lost ZAR 111 million in the year. So, yes, I think it's quite clear that the impact of Bonitas has been quite significant throughout the group with Bonitas -- with Activo now reporting ZAR 945 million in revenue, mostly as account of lower ARV and oncology profit sales. On a more positive note, the CCMDD business, which is our public courier business and our managed care capitation business in Scriptpharm ended the year strong, building from interim year momentum. The CCMDD business maintained its position as a key strategic partner to the Department of Health by increasing average monthly delivery volumes to 1.4 million scripts and servicing almost 2.4 million patients, which represents a 77,000 increase in patient numbers for the period. Taken on a collective basis, our courier, wholesale and pharma marketing businesses contributed ZAR 74 million to EBIT, which represents a credible contribution in response to a challenging environment. The mixed fortunes of the private and public business has resulted in a courier margin decrease of about 4.6% year-on-year, and this is mostly attributable to the shift in split and contribution between the private business as well as the public business. As noted, Scriptpharm has had a strong year, achieving an EBIT of ZAR 61 million compared to ZAR 47 million in the comparable period, marking a 28% increase from a bottom line level. This strong performance is attributable to the growth of membership in both Bonitas and Polmed and the attainment of oncology profit shares and the maintenance of good underwriting margins from both Polmed and Bonitas, which averaged 5% for the period. Our year-end balance sheet has been materially impacted by the reclassification of Activo as a held-for-sale asset and the recent developments with regards to the Bonitas contract, which has impacted both current year performance and our forecast future earnings. While considerable management action is planned to reset the group's cost base through aggressive cost containment, controlling centralized and discretionary costs as well as facility and IT-related spend, the possible loss of Bonitas has required us to take a conservative approach towards measuring the recoverable amount of our assets, notably and most materially within goodwill, intangibles, PPE and capitalized lease assets. Accordingly, these assets have been impaired by ZAR 1.4 billion collectively, which is mostly allocated towards goodwill within Medscheme of ZAR 612 million, goodwill within Pharmacy Direct, goodwill within AfA of ZAR 23.5 million and goodwill and intangible asset values within Activo of about ZAR 550 million. This has collectively brought our goodwill figures down to just over ZAR 70 million for the period from ZAR 1 billion in the prior period. The remaining goodwill is attributed to DENIS, our international businesses in Africa as well as our health insurance businesses locally. Our gearing ratios have also regressed during the period on a debt-to-asset level, debt-to-equity basis as well as a borrowings to equity basis. The regression of these ratios is a function of the impairments in goodwill and the financing of a new regional office in Namibia. These events have contributed to a lower net debt-to-EBITDA ratio for the period of 1.06x, which remains 38% ahead of our 2.5x covenant limit. This ratio will be carefully monitored and managed during the year with the aim of decreasing overall credit exposure and as an additional lever towards absorbing the impact of contract losses. We're quite pleased with the improvement in cash generated during the period. This has been mainly achieved as a consequence of our headline performance in the Services Cluster, more measured working capital management in the retail cluster, supported by lower stock holdings in the private business as well as Activo and improved collections from pharma debtors. The improvement in cash is also a result of higher contributions of services operations relative to retail operations and due to prudent cash management processes. Whilst we intended to increase strategic spend in the second half of 2025 to bolster our digital and managed care capabilities, we now plan to preserve cash reserves, manage risk and direct cash to critical areas in the business, which support short- and medium-term sustainability as we navigate the next 12 months operating cycle and implement our cost reset. With that, we'll pause for a quick break, after which the group CEO will join me to take questions. [Break]

Thank you, Gerald and Thato. We have our first question on the line from David Talpert from Visio Fund Management. Please, could you give a sense of how big Bonitas is as a share of your earnings and cash flows rather than revenue? And then just to add on to that, how much of the costs related to Bonitas are fixed versus variable?

I think -- yes, thank you, David. Yes. Thank you, David, for the question. So on a fully absorbed basis, Bonitas represents 36% of Medscheme's earnings in the group within the Medscheme construct. So 36% of that. And roughly around 40% of the cost base is what we refer to as stranded mainly related to the IT infrastructure. And so that is an area of focus where we would need to rethink how do we organize ourselves from an operating perspective to deal with that. And hence, we are quite clear in terms of the immediate focus being the stabilization and thereafter, the reorganization, which will include considerations around how do we replatform the IT infrastructure in order to remove that fixed component of the cost base. So hopefully, that gives you a sense on both parts of your question.

At the moment, there's no further questions on the line. [Operator Instructions] Maybe just to -- sort of from my side, just to add to the previous question, just in terms of that stabilization of the cost base or normalization, and it's probably quite a tough question to ask, but sort of what is the sort of goal time line to sort of achieve that sort of tangibly and sort of how will that be communicated to the market?

Yes. Thank you, Sean. I think in the first instance is dealing with the transition and the wind down around Bonitas. And that obviously means come the 31st of May, there's some direct costs that we would need to have managed as part of the revenue decrease. But as you would have seen on my impact slide, there is a wind-down process where we need to retain certain services that will step down on that basis. And for that, we would need to make sure that we are able to meet those contractual obligations until Bonitas is fully wind down and exited the business. And at that juncture, it's another key milestone then to ensure that, that remaining direct cost is effectively dealt with. So that gives you at least 2 very clear milestones as it relates to the 1st of June and then towards the end of December. And then as we look at a breakeven scenario for 2027, it's important from how we're approaching this that we need to be able to annualize the efficiency gain as early as possible. So the 1st of January 2027 becomes another critical milestone in terms of that second phase beyond the wind down in dealing with the remaining costs within the organization. And then the more medium to longer-term impact around the potential stranded cost that sits in the business that we would then also need to manage. So those are very critical milestones for us in how we're looking at the turnaround strategy as it relates to the 1st of June impact, the fourth quarter impact after the wind down and then the annualized front-loading of efficiency gains that we want to see all throughout 2027. And we will report to the market on that basis in terms of progress on execution.

Great. Thanks, Gerald. There seem to be no further questions on the line. I'm not sure if you've got any closing remarks.

Yes. Thank you, Sean, and thank you to the investors in the market for joining us as well as our staff and partners. I think we've been quite clear in giving you a sober assessment of our financial performance. It's -- and the difficulty that we faced. But we're also clear about realizing it and taking decisive actions, however, painful and then having a well-articulated Board-approved plan now in terms of how we're going to execute, which is critical for us right now. It's execution against the said plan and ensuring that we are transparent and we communicate and we're honest about what we are dealing with and that we preserve the core of this organization, but that we are also realistic about how it now needs to reorganize itself to deal with its new reality. So I think from that perspective, just a big thank you for your scrutiny and your support, and we will ensure that we continuously update you on some of the material matters that are now playing out in the organization. Thank you.