OUR CAPITALS
Our Financial Capital
OUR CAPITALS
Our Financial Capital
As a result of bedding down a strong finance team and various process improvement initiatives in recent years in the finance space, we achieved excellent results for the 2024 financial year (FY24). This is despite a challenging external environment and the implementation of eProgessa, our new Blood Establishment Computer Software (BECS).
What Financial Capital means to SANBS
Our financial capital consists of the pool of funds available to us to collect blood, conduct research and development, provide services, and invest in technology, people, and growth. It is largely obtained through grants and financing generated through our operations.
CFO Financial Review
I am pleased to present the FY24 CFO report which, not only provides an insight of our accomplishments and strategic initiatives but also outlines the financial performance of SANBS in an environment that has continued to be extremely challenging. Most noteworthy in the year ending 31 March 2024 is the implementation of eProgressa, the new Blood Establishment Computer Software (BECS), which required the collective efforts of management and many employees in the organisation.
Despite these challenges and as a result of various continuing process improvement initiatives in the finance field, SANBS achieved another set of excellent results for FY24. SANBS remains committed to providing trusted blood products and services to all patients at a world-class cost and quality level.
Tshepo Kgage - Chief Financial Officer
The Environment in which we are Operating
The financial year under review was, and continues to be, characterised by a South African health system that is beset by systemic and structural challenges. The ongoing conflicts in the Middle East and the Ukraine-Russia war have significantly impacted the global economy, causing substantial disruptions in energy markets, food security, and international trade. The Middle East conflict has resulted in fluctuating oil prices, which not only strain economies dependent on energy exports but also lead to increased costs for consumers worldwide. Meanwhile, the Ukraine-Russia conflict has exacerbated global food shortages, as both countries are key grain exporters, further complicating supply chains already affected by tensions in the Middle East. These intertwined crises highlight how regional disputes can create far-reaching economic repercussions, emphasising the fragile interconnectedness of today’s global landscape. As nations grapple with these challenges, the effects ripple through various sectors, reminding us of the delicate balance that sustains international stability and prosperity.
The effect of this on the South African economy is that it has affected the ability of private patients to pay their debt to SANBS, as well as payment from the government and other institutions coming under pressure.
Increased Collection Efforts
SANBS, benefitting from the concentrated efforts of several initiatives to improve cash collection levels in recent years, continued to reap the benefits of those improvement initiatives in the current year as we saw a steady increase in monthly cash collected throughout the year, despite the hardship brought on by the pressures identified above.
Summary of Significant Financial Results for the Year Ending 31 March 2024
Outstanding Financial Results
SANBS achieved a notable surplus of R247.7 million for FY24, exceeding our initial forecasts and reflecting our ongoing commitment to financial stability. However, this figure represents a 37% decline from the previous year's surplus of R394.0 million. The decrease can primarily be attributed to a significant increase in the provision for doubtful debts. This adjustment underscores our persistent challenges in recovering certain debts despite our ongoing efforts to enhance collection processes and improve overall efficiency.
Despite these challenges, revenue growth remained relatively flat at R4.0 billion for the year. This stagnation can be linked to persistent issues within the public sector, particularly staffing shortages in hospitals and deteriorating infrastructure. These factors significantly impact our ability to deliver services effectively and meet the increasing demands of the healthcare system, ultimately affecting the overall effectiveness of blood transfusion services across the region.
On the cost side, expenses saw a rise of 4.8%. This increase indicates our efforts to normalise operations as we adapt to the post-pandemic landscape. We have made significant strides in filling permanent positions more quickly, addressing vacancies based on the evolving needs of SANBS. This ensures we maintain a fully staffed workforce capable of delivering high-quality services.
Our unwavering focus on efficiency and service quality continues to drive our operations. We remain dedicated to balancing prudent financial management with our commitment to excellence in service delivery. By upholding these principles, we aim to navigate the challenges ahead while reinforcing our reputation as a trusted provider in the healthcare sector.
Other income increased by R7.4m as the profit in the current year related to the profit made on the disposal of assets.
Net interest income increased from R108.0m to R181.6m, as interest rates remain elevated at high levels and cash balances increased during the year.
Net working capital was R648.0m as at 31 March 2024, up from R591.0m on 31 March 2023. Accounts receivable decreased during the year from a total gross amount of R1,843bn to R1,491bn after a write off of irrecoverable non-government debt. The breakdown between the private sector and the government sector therefore changed significantly. The total gross amount due at 31 March 2024 was:
| Accounts Receivable | 2024 R000s |
% | 2023 R000s |
% |
| Private Sector | 395,439 | 27% | 939,930 | 51% |
| Government Sector | 1,095,951 | 73% | 903,070 | 49% |
| - | 1,491,390 | - | 1,843,000 | - |
Writing off long-overdue debt deemed irrecoverable can be a prudent decision as it allows for a more accurate representation of your financial position. By removing uncollectible debts from your balance sheet, you can improve the clarity of your financial statements, enhance cash flow management, and allocate resources more effectively. This action also helps to focus your efforts on more viable accounts, reducing the administrative burden of pursuing debts that are unlikely to be recovered. Ultimately, it contributes to a more sustainable financial strategy and supports better decision-making.
Debtors Days decreased from 149 days to 108 days, mostly due to the write-off of R721m write off, but also due to the focused efforts on debtors by the Debtors task team that was formed in the previous financial year. This task team, which includes the CEO, CFO, Medical Director, and other executives, continues to meet on a regular basis to review the debtors balance, collections, and progress on engagements with large debtors. Engagements include discussions with national and provincial departments of health and some medical aids to ensure timeous collections. A renewed focus on the process improvement of the end-to-end Order-to-Collect cycle also commenced in the 2022/2023 financial year.
The impact on future collections, especially from private patients, remains uncertain, especially as there is a concern that the economy will continue to deteriorate as well as the effects of other socio-economic pressures.
Details of our results are contained in our Annual Financial Statements on the SANBS website.
External and Internal Auditors
The independence of our external auditors is very important and any non-audit services performed by Deloitte are approved by the Audit Committee, prior to services being rendered. During the year, Deloitte assisted with the administration of our anonymous tip-off line. Our internal audit function is outsourced to SNG Grant Thornton.
Financial Outlook over the Medium to Long Term
The FY24 saw us remain focused on process improvements, identification of cost-reducing efficiencies, and automation of finance processes, which would eliminate manual processes that result in delays and errors.
Optimisation and business improvement efforts continued throughout the FY24. The Procure to Pay project was nearing completion, allowing us to focus on implementation as well as the development of associated policies and procedures. Simultaneously, we were finalising the first phase of the Order to Collect initiative. The success of the second phase is closely tied to the implementation of the Transfusion BECS, as billing data is significantly affected by this system. Additionally, this phase will introduce enhanced strategies for managing private patients, further streamlining our processes and improving overall efficiency.
With the world remaining a volatile and uncertain place and the global economic outlook struggling, the projects that we have embarked on take on more of an important and significant meaning. Ensuring the efficiency and effectiveness of all processes, improvement of cash collections, tight expenditure control, and continued management of investments and cash reserves becomes paramount. Global inflation and energy uncertainty will continue to have a significant impact on the business landscape. It is therefore important that strategic partnerships that are being formed are firmed up and we work together with all stakeholders in contributing to the affordability of healthcare and continued service delivery to our people. SANBS remains committed to providing trusted blood products and services to all patients at a world class level of cost and quality.
Appreciation
The Finance team which was previously under tremendous pressure with several changes in leadership and challenges around stability, capacity and continuity, has settled. Management, with the support of the Audit Committee and the Board, achieved excellent results.
Acknowledgment is extended to the Executive Committee for their support, and the dedication and tenacity of the Finance team is commendable. Their efforts have ensured timely and accurate financial management and reporting in compliance with all laws and regulations. Additionally, special thanks are directed to the various business area teams for their efforts in achieving increased efficiencies.
The cooperation and engagement of service providers, medical aid partners, as well as National and Provincial Departments of Health, are appreciated, and the organisation looks forward to continued trusted partnerships in fulfilling its purpose of being "Trusted to save lives."
Tshepo Kgage – Chief Financial Officer