Wrap Text
Unaudited Financial Results for the six-month period ended 31 March 2013
ADCOCK INGRAM HOLDINGS LIMITED
Incorporated in the Republic of South Africa
Registration number 2007/016236/06
Income tax number 9528/919/15/3
Share code: AIP ISIN: ZAE000123436
("Adcock Ingram" or "the Company" or "the Group")
UNAUDITED FINANCIAL RESULTS
for the six-month period ended 31 March 2013
Heritage | Quality | Integrity
SALIENT FEATURES
- Turnover increased 9% to R2,46 billion
- EBITDA increased 15% to R564 million
- HEPS decreased 5% to 188,1 cents
- Dividend per share maintained at 86 cents
- Strategic acquisition of Cosme brands in India concluded
at a cost of R782 million
- Continued operational improvement under challenging
market conditions
Adcock Ingram is a leading South African pharmaceutical manufacturer, marketer and distributor.
The Company has a 10% share of the private pharmaceutical market in South Africa with the leading
presence in over-the-counter brands. The Company is South Africa's largest supplier of hospital and
critical care products. Its footprint extends to India and other territories in sub-Saharan Africa.
The extensive product portfolio includes branded and generic prescription medicines, over-the-counter/
fast moving consumer goods (FMCG) brands, intravenous solutions, blood collection products and renal
dialysis systems.
Vision
To be recognised as a leading world-class branded healthcare company.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 March 31 March 30 September
2013 Change 2012 2012
Note R'000 % R'000 R'000
REVENUE 2 2 474 360 9 2 276 815 4 644 406
TURNOVER 2 2 457 365 9 2 251 450 4 599 249
Cost of sales (1 420 517) (1 200 931) (2 505 167)
Gross profit 1 036 848 (1) 1 050 519 2 094 082
Selling and distribution expenses (296 126) (294 405) (571 500)
Marketing expenses (97 375) (102 843) (208 625)
Research and development expenses (52 051) (40 173) (81 601)
Fixed and administrative expenses (116 397) (177 746) (363 535)
Operating profit 474 899 9 435 352 868 821
Finance income 2 9 201 8 151 18 285
Finance costs (25 446) (11 081) (26 637)
Dividend income 2 7 794 17 214 26 872
Profit before taxation 466 448 4 449 636 887 341
Taxation (139 934) (107 913) (168 265)
Profit for the period 326 514 (4) 341 723 719 076
Other comprehensive income 56 765 (45 135) (37 896)
Exchange differences on translation
of foreign operations 56 232 (31 690) (26 181)
Movement in cash flow hedge accounting reserve,
net of tax 613 (13 445) (11 715)
Net loss on available-for-sale financial asset,
net of tax (80)
Total comprehensive income for the period,
net of tax 383 279 296 588 681 180
Profit attributable to:
Owners of the parent 317 192 335 296 705 641
Non-controlling interests 9 322 6 427 13 435
326 514 341 723 719 076
Total comprehensive income attributable to:
Owners of the parent 372 310 293 246 670 434
Non-controlling interests 10 969 3 342 10 746
383 279 296 588 681 180
Basic earnings per ordinary share (cents) 188,0 (5) 198,4 417,8
Diluted basic earnings per ordinary share (cents) 187,8 (5) 198,1 417,2
Headline earnings per ordinary share (cents) 188,1 (5) 198,7 422,4
Diluted headline earnings per ordinary share (cents) 187,9 (5) 198,4 421,8
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to owners of the parent
Total
attribut-
Non- able to
Issued distri- ordinary Non-
share Share Retained butable share- controlling
capital premium income reserves holders interests Total
R'000 R'000 R'000 R'000 R'000 R'000 R'000
Balance at 30 September 2011
(audited) 16 888 765 288 1 932 212 371 368 3 085 756 137 624 3 223 380
Share issue 45 5 031 5 076 5 076
Movement in treasury shares (41) (25 509) (25 550) (25 550)
Share-based payment expense 9 069 9 069 9 069
Acquisition of non-controlling
interests in Ayrton Drug
Manufacturing Limited (2 000) (2 000) (8 752) (10 752)
Total comprehensive income 335 296 (42 050) 293 246 3 342 296 588
Profit for the period 335 296 335 296 6 427 341 723
Other comprehensive income (42 050) (42 050) (3 085) (45 135)
Dividends (1 280) (1 280)
Distribution out of share premium (183 831) (183 831) (183 831)
Balance at 31 March 2012
(unaudited) 16 892 560 979 2 265 508 338 387 3 181 766 130 934 3 312 700
Share issue 12 1 980 1 992 1 992
Movement in treasury shares (32) (20 101) (20 133) (20 133)
Share-based payment expense 10 999 10 999 10 999
Disposal of non-controlling
interests in National Renal
Care (Pty) Limited 11 279 11 279 9 108 20 387
Acquisition of non-controlling
interests in Ayrton Drug
Manufacturing Limited (148) (148) (160) (308)
Total comprehensive income 370 345 6 843 377 188 7 404 384 592
Profit for the period 370 345 370 345 7 008 377 353
Other comprehensive income 6 843 6 843 396 7 239
Dividends (144 474) (144 474) (9 602) (154 076)
Distribution out of share premium 4 542 4 542 4 542
Balance at 30 September 2012
(audited) 16 872 547 400 2 502 510 356 229 3 423 011 137 684 3 560 695
Share issue 33 3 562 3 595 3 595
Movement in treasury shares (47) (27 265) (27 312) (27 312)
Share-based payment expense 8 669 8 669 8 669
Acquisition of non-controlling
interests in Ayrton Drug
Manufacturing Limited (92) (92) (161) (253)
Total comprehensive income 317 192 55 118 372 310 10 969 383 279
Profit for the period 317 192 317 192 9 322 326 514
Other comprehensive income 55 118 55 118 1 647 56 765
Dividends (195 128) (195 128) (1 236) (196 364)
Balance at 31 March 2013
(unaudited) 16 858 523 697 2 624 482 420 016 3 585 053 147 256 3 732 309
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Unaudited Unaudited Audited
31 March 31 March 30 September
2013 2012 2012
R'000 R'000 R'000
ASSETS
Property, plant and equipment 1 655 881 1 377 191 1 560 177
Intangible assets 1 513 099 720 431 710 960
Other financial assets 139 653 139 013 139 751
Loans receivable 23 834 27 060
Deferred tax 5 135 5 058 5 097
Non-current assets 3 337 602 2 241 693 2 443 045
Inventories 1 305 287 819 041 956 164
Trade and other receivables 1 528 772 1 312 297 1 320 191
Cash and cash equivalents 97 607 567 762 492 716
Taxation receivable 32 851 32 467 70 170
Current assets 2 964 517 2 731 567 2 839 241
Total assets 6 302 119 4 973 260 5 282 286
EQUITY AND LIABILITIES
Capital and reserves
Issued share capital 16 858 16 892 16 872
Share premium 523 697 560 979 547 400
Non-distributable reserves 420 016 338 387 356 229
Retained income 2 624 482 2 265 508 2 502 510
Total shareholders' funds 3 585 053 3 181 766 3 423 011
Non-controlling interests 147 256 130 934 137 684
Total equity 3 732 309 3 312 700 3 560 695
Long-term borrowings 11 007 322 031 104 625
Post-retirement medical liability 16 645 14 883 15 341
Deferred tax 106 356 69 412 101 910
Non-current liabilities 134 008 406 326 221 876
Trade and other payables 1 086 833 752 481 983 589
Short-term borrowings 333 056 419 312 431 368
Cash-settled options 34 373 43 834 39 983
Provisions 41 621 38 607 44 775
Bank overdraft 939 919
Current liabilities 2 435 802 1 254 234 1 499 715
Total equity and liabilities 6 302 119 4 973 260 5 282 286
CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 March 31 March 30 September
2013 2012 2012
R'000 R'000 R'000
Cash flows from operating activities
Operating profit before working capital changes 590 571 496 707 1 077 581
Working capital changes (437 308) (315 534) (292 138)
Cash generated from operations 153 263 181 173 785 443
Finance income, excluding receivable 11 788 8 151 19 369
Finance costs, excluding accrual (20 573) (11 081) (22 672)
Dividend income, excluding receivable 7 794 17 214 27 035
Dividends paid (196 364) (1 280) (155 356)
Taxation paid (100 638) (129 180) (196 158)
Net cash (outflow)/inflow from operating activities (144 730) 64 997 457 661
Cash flows from investing activities
Decrease in other financial assets 1 197 457
Acquisition of business, net of cash (821 593)
Purchase of intangible assets (13 508) (13 109)
Purchase of property, plant and equipment (1) (157 950) (273 539) (511 793)
Proceeds on disposal of property, plant and equipment 346 1 732
Decrease/(Increase) in loans receivable 2 827 (11 221)
Net cash outflow from investing activities (976 716) (285 504) (533 934)
Cash flows from financing activities
Acquisition of non-controlling interests in Ayrton Drug Manufacturing Limited (253) (10 752) (11 060)
Proceeds from issue of share capital 3 595 5 076 7 068
Purchase of treasury shares (27 312) (25 550) (45 683)
Distribution out of share premium (183 831) (179 289)
Increase in borrowings 31 789 4 521 16 503
Repayment of borrowings (225 757) (103 848) (321 777)
Net cash outflow from financing activities (217 938) (314 384) (534 238)
Net decrease in cash and cash equivalents (1 339 384) (534 891) (610 511)
Net foreign exchange difference on cash and cash equivalents 4 356 (929) (355)
Cash and cash equivalents at beginning of period 492 716 1 103 582 1 103 582
Cash and cash equivalents at end of period (842 312) 567 762 492 716
(1) Additions include interest capitalised in accordance with IAS 23, of R8,1 million.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1 BASIS OF PREPARATION
1.1 Introduction
This unaudited interim report has been prepared in accordance with International Financial Reporting Standards ("IFRS"),
IAS 34: Interim Financial Reporting, the South African Companies Act, the Listings Requirements of the JSE Limited as well as the
SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting Standards Council.
Mr Andy Hall, Deputy Chief Executive and Financial Director, is responsible for this set of financial results and has supervised the
preparation thereof in conjunction with Finance Executive, Ms Dorette Neethling.
1.2 Changes in accounting policies
The accounting policies and the methods of computation are consistent with those of the previous annual financial statements,
except for the adoption of the following amended IFRS interpretation during the year:
IAS 1 Presentation of Items of Other Comprehensive Income (Amendment)
The adoption of the above standard did not have any effect on the financial performance or position of the Group.
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 March 31 March 30 September
2013 2012 2012
R'000 R'000 R'000
2 REVENUE
Turnover 2 457 365 2 251 450 4 599 249
Finance income 9 201 8 151 18 285
Dividend income 7 794 17 214 26 872
2 474 360 2 276 815 4 644 406
3 SEGMENT REPORTING
Turnover
Southern Africa 2 329 872 2 161 865 4 435 938
OTC 906 058 874 685 1 791 875
Prescription 856 707 752 145 1 520 219
Hospital 567 107 535 035 1 123 844
Rest of Africa and India 212 393 144 117 295 545
2 542 265 2 305 982 4 731 483
Less: Intercompany sales (84 900) (54 532) (132 234)
2 457 365 2 251 450 4 599 249
Contribution after marketing expenses (CAM)
Southern Africa 591 892 620 555 1 245 746
OTC 322 121 318 870 660 492
Prescription 178 204 198 037 371 801
Hospital 91 567 103 648 213 453
Rest of Africa and India 56 206 35 116 75 703
648 098 655 671 1 321 449
Less: Intercompany (4 751) (2 400) (7 492)
643 347 653 271 1 313 957
Less: Other operating expenses (1) (168 448) (217 919) (445 136)
Research and development (52 051) (40 173) (81 601)
Fixed and administrative (116 397) (177 746) (363 535)
Operating profit 474 899 435 352 868 821
(1) Other operating expenses are managed on a central basis and are not allocated to operating segments.
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 March 31 March 30 September
2013 2012 2012
R'000 R'000 R'000
3 SEGMENT REPORTING continued
Total assets
Southern Africa 4 998 083 4 803 977 5 070 135
Pharmaceuticals 4 305 599 4 319 363 4 454 715
Hospital 692 484 484 614 615 420
Rest of Africa and India 1 304 036 169 283 212 151
Total assets 6 302 119 4 973 260 5 282 286
4 INVENTORY
The amount of inventories written down recognised as an
expense in profit or loss 9 466 17 029 42 336
5 CAPITAL COMMITMENTS
Contracted 96 764 235 873 64 632
Approved 106 084 54 024 143 403
202 848 289 897 208 035
6 HEADLINE EARNINGS
Earnings per share is derived by dividing earnings attributable to
owners of Adcock Ingram for the period, by the weighted average
number of shares in issue.
Headline earnings is determined as follows:
Earnings attributable to owners of Adcock Ingram 317 192 335 296 705 641
Adjusted for:
Impairment of leasehold improvements and intangible assets 1 887
Tax indemnity on discontinued operation 2 355
Loss on disposal of property, plant and equipment, net of tax 167 509 3 526
Headline earnings 317 359 335 805 713 409
7 SHARE CAPITAL Number of shares
'000 '000 000
Number of ordinary shares in issue 201 066 200 604 200 735
Number of A and B shares held by the BEE participants (25 944) (25 944) (25 944)
Number of ordinary shares held by the BEE participants (2 255) (1 451) (1 782)
Number of ordinary shares held by Group company (4 285) (4 285) (4 285)
Net shares in issue 168 582 168 924 168 724
Headline earnings and basic earnings per share are based on:
Weighted average number of shares 168 696 168 982 168 894
Diluted weighted average number of shares 168 868 169 254 169 131
8 BUSINESS COMBINATION
8.1 Cosme Farma Laboratories Limited (Cosme)
On 17 January 2013, the Group acquired certain assets of Cosme, a division of the Cosme Group, based in Goa, India. Cosme is a
mid-sized pharmaceutical sales and marketing business which has been operating in the Indian domestic pharmaceutical market
for the past 40 years and is ranked in the top 70 in India, per IMS Health, with a sales force of approximately 1 000 staff.
The fair value of the identifiable assets as at the date of acquisition was:
Unaudited
six months
ended
31 March
2013
R'000
Assets
Property, plant and equipment 130
Marketing-related intangible assets 618 748
Customer-related intangible assets 87 368
Contract-related intangible assets 13 040
Manufacturing-related intangible assets 1 630
Total identifiable net assets at fair value 720 916
Goodwill arising on acquisition 61 484
Purchase consideration 782 400
VAT recoverable and deposits 39 193
Included in cash flows from investing activities 821 593
The significant factors that contributed to the recognition of goodwill of R61,5 million include, but are not limited to, the
establishment of a presence within the domestic Indian market, with local management and expertise to drive the company's
product sales into the various channels and customers that exist within this market.
From the date of acquisition, Cosme contributed R35,0 million towards revenue.
As the assets purchased were fully integrated into the Indian business, it is not possible to determine the exact contribution towards
profit before income tax.
R'000
Analysis of cash flows on acquisition
Transaction costs of the acquisition (included in cash flows from operating activities) 4 248
Cash outflow on acquisition 4 248
Transaction costs of R4,2 million have been expensed during the six months and are included in fixed and administrative expenses.
SALIENT FEATURES
Turnover increased 9% to R2,46 billion
EBITDA increased 15% to R564 million
HEPS decreased 5% to 188,1 cents
Dividend per share maintained at 86 cents
Strategic acquisition of Cosme brands in India concluded at a cost of R782 million
Continued operational improvement under challenging market conditions
The Company delivered satisfactory operating results from the activities under its control, reflecting continued progress with
its strategic priorities. This was, however, a challenging period for the Company, both in markets for its products and in that the
Rand weakened considerably compared to the prior corresponding period.
As released via SENS on 22 March 2013, the Company received an unsolicited proposal. Subsequent thereto, the Company
announced on 9 May 2013 that it had received other proposals which the Board is evaluating. The Board, on 31 May 2013,
updated shareholders that this process is ongoing and remains focused on obtaining the best outcome for the Company and
delivering value to shareholders.
FINANCIAL REVIEW
Turnover
The acquisition of Cosme, a mid-sized Indian pharmaceutical sales and marketing business, was concluded in late January 2013.
This acquisition, together with recent tender awards and the conclusion of further multinational (MNC) contracts, supported
turnover growth of 9% to R2,457 million (2012: R2,251 million).
New business in the product mix accounted for 6,1% of the overall increase with Novo-Nordisk and Lundbeck products
contributing R109 million in the Prescription portfolio. Price increases across the business averaged 1,9% for the period.
The Single Exit Price (SEP) increase of 5,8%, granted in March 2013, had very little effect in the six-month period, but the
2012 SEP increase of 2,14% was implemented in March 2012. Over-the-counter (OTC) turnover growth of 3,6% includes
4,8% price inflation but lower volumes on the back of weak consumer demand resulted in muted growth. The Hospital Products
division's revenue growth of 6,0% includes a 0,5% price increase, with good volume growth achieved in the public sector.
Profits
Gross profit for the six months decreased by 1,3% to R1,037 million (2012: R1,051 million) with the margin declining from
46,7% to 42,2% (September 2012: 45,5%). Gross margin as a percentage of sales was adversely impacted by the significantly
weaker Rand, which affected imported raw materials and finished products. The average exchange rates for procurement
in the period were R8,75 (2012: R7,57) and R11,08 (2012: R10,48) for US Dollar and Euro imports, respectively, with total foreign
contracts settled during the period amounting to R523,2 million (2012: R366,1 million).
Operating expenses, net of an abnormal foreign exchange gain of R42,4 million, decreased by 8,7% to R562 million (2012:
R615 million). Operating profit increased by 9,1% to R475 million (2012: R435 million) with the percentage on sales stable at
19,3% (September 2012: 18,9%).
Finance costs, net of investment income, were R8,5 million, compared to the R14,3 million income realised in the prior period as
the average cash position turned into a net overdraft position following the acquisition of Cosme.
After net finance costs and dividends received, profit before tax increased 3,7% to R466 million (2012: R450 million). The
effective tax rate for the period was 30,0% (2012: 24,0%, as a result of utilisation of the Strategic Industrial Project allowance),
resulting in profit after tax declining 4,5% to R327 million (2012: R342 million).
Headline earnings
The improved turnover, lower gross margins due to the weak Rand and sales mix effect, good cost control and expiry of
tax allowances, when combined, delivered headline earnings for the six months ended 31 March 2013 of R317,4 million.
This represents a 5% decrease from the comparable figure for 2012 of R335,8 million and translates into the same percentage
decrease at the headline earnings per share (HEPS) and earnings per share (EPS) level.
Cash flows and financial position
Cash generated from operations was R153 million (2012: R181 million) after working capital increased by R437 million.
Trade and other receivables accounted for a cash outflow of R165 million with trade accounts receivable days at the end of the
period of 68 days, deteriorating from the 65 days reported in September 2012, including debt outstanding from government
amounting to R139 million. No receivables were written off in the period.
Inventory increased by R348 million as safety stock of some major brands was increased to improve service levels, inventory
relating to new MNC and tender business added R140 million, and the overall holding cost increased due to the exchange rate
impact.
After net finance costs, dividends and taxation, cash outflow from operations was R145 million. Total capital expenditure for the
six months amounted to R158 million (2012: R274 million) which includes upgrading of the Midrand distribution facility, as well
as the completion of the upgrade at the Aeroton distribution facility and the high-volume liquids facility.
Subsequent to September 2012, an amount of R200 million has been repaid on the Capex loan facility. The remaining balance
of R300 million is being repaid in quarterly instalments with the final instalment due in December 2013. Cash decreased by
R1,3 billion, leaving the business in an overdraft position of R842 million (September 2012: R493 million net cash position).
Interim dividend from income reserves
The Board has declared an interim dividend out of income reserves of 86 cents per share for the six months ended
31 March 2013, equal to the comparable distribution in 2012.
BUSINESS OVERVIEW
Southern Africa
This segment encompasses all of the businesses in the Southern African region namely OTC, Prescription and Hospital. Overall,
the region posted a sales increase of 7,8%, despite consumers remaining under pressure. Volumes were boosted by increased
tender awards and we expect to see continued volume improvements as the ARV tender sales gain momentum during the
second half of the year.
Margins have been negatively impacted by the weak Rand, competitive trading conditions, inflation-plus cost increases on raw
materials and production inputs, and the change in mix, with higher proportions of MNC and tender business at lower margins,
resulting in the contribution after marketing expenses (CAM) decreasing almost 5% to R592 million (2012: R621 million).
OTC sales increased by 4% to R906 million (2012: R875 million), with good performance from economy brands in Pharmacy
and schedule 0 brands in the FMCG channel. Premium brands remain under pressure but are showing growth relative
to the market. Adcock Ingram is number 1 in 5 categories in the Pharmacy channel including: Pain, Colds & Flu, Allergy,
Digestive and Feminine Health and number 2 in Supplements, as measured by IMS. In the FMCG channel, Adcock Ingram
is number 1 in Supplements and Feminine Health and is number 2 in Pain and Digestive Wellbeing, as measured by Aztec
and Nielsens.
The OTC portfolio comprises a basket of both premium and economy brands from Complementary Alternative Medicines
Products and some Personal Care products to Schedule 2 medicines. These are sold through both the Pharmacy and FMCG
channels and have benefited Adcock Ingram, considering the economic pressure on consumers, as has the increase in proactive
self-care and self-medication. The core brands Panado, Corenza, Bioplus, Citro-Soda and Allergex have managed to at least
hold their market positions despite aggressive competition.
The strategic move to participation in economy brands in OTC over the last few years has reduced the Company's reliance on
a few core brands and will continue to grow competitive advantage in the OTC sector.
Turnover in the Prescription business increased by 14% to R857 million (2012: R752 million). This was impacted by new
multinational collaborations, including the most recent alliance with Lundbeck South Africa which has provided Adcock Ingram
with a leading position in the Central Nervous System category, success in the most recent ARV and other oral dosage tender
awards, and the introduction of new generics products (Atorvastatin and Lansoprazole).
Hospital turnover increased by 6% over the comparable period to R567 million (2012: R535 million) with increased tender
volumes. The Renal portfolio reflects continued growth through peritoneal dialysis, haemodialysis and Continuous Renal
Replacement Therapy (CRRT).
Rest of Africa
Revenue growth of 3% over the same period last year was achieved despite supply constraints which adversely impacted
exports to the SADC region.
In Ghana, Adcock Ingram product sales continue to grow due to expansion in territorial coverage and increased marketing
activities, but the core Ayrton brands' performance was almost flat due to production bottlenecks on the liquid lines.
In East Africa, sales increased by 34% compared to the same period last year, driven by expansion in the OTC therapeutic
areas, increased marketing activities and the re-introduction of Dawanol.
Datlabs in Zimbabwe became a 100% Adcock Ingram subsidiary at the beginning of the financial year with the business
recording a 36% increase in sales over the same period last year, benefiting from Group supply chain scale economies.
CamphaCare was successfully launched late March 2013 and has since received country-wide acceptance.
SUPPLY CHAIN
The Wadeville facility has been accepted by the Food and Drug Administration in the USA (USFDA) following an audit in
November 2011. The capacity at Wadeville for tableting will be doubled through the addition of two new granulation suites,
which is expected to be completed by the end of this calendar year. The expansion is being done with little or no disruption
to the operation of the plant and will place Adcock Ingram in a stronger position to take advantage of additional capacity for
both the general tablet and ARV tenders.
The Clayville high-volume liquids facility has been approved by the MCC following an audit in October 2012. Product-by-
product approval is being granted following completion of validation batches. Various MNC's have also conducted audits
at the facility with positive outcomes.
The inventory supply issues experienced during the distribution centre upgrade at Aeroton have been resolved and the
focus is now on efficiency and cost reduction. Additional equipment to increase the capacity at the Bangalore facility is being
investigated.
LOGISTICS
Distribution volumes on a unit basis have increased 14% compared to the same period last year, with pallet capacities in
the network remaining a challenge. Distribution expenses, as a cost per unit, have decreased year-on-year, after cost-saving
initiatives and synergies were realised following the rationalisation of certain warehouses.
REGULATORY ENVIRONMENT
The Department of Health announced an SEP increase of 5,8% in March 2013. No announcements on the regulation of
logistics fees and international benchmarking have been forthcoming. There has been a further delay to the South African
Health Products Regulatory Authority (SAHPRA) which was originally proposed to come into effect on 1 April 2013.
The use of dextropropoxyphene (DPP) containing products was recently successfully appealed on in Australia subject to
certain conditions, including the use of safety warnings and strict contra-indication criteria. Adcock Ingram's appeal process is
still in progress.
PROSPECTS
The Government tender business is benefiting from significantly increased volumes which are expected to drive greater
efficiencies in the supply chain. The factories are gearing up to the increased demand and the business is confident of its
ability to meet Government requirements on a sustainable basis.
The multinational partner of choice strategy continues to deliver attractive value with the recent additions of Lundbeck
and Novo-Nordisk. Additional collaborations are being explored to continue the path of revenue stream diversification and
to decrease mature product dependence. Supply chain collaborations will address the challenge in extending multinational
collaboration partnerships into sub-Saharan Africa.
Whilst registration delays at the MCC continue to impede the ability of the Company to bring a material number of new
products to the market, further new product launches are planned for the third quarter. Recent MCC registrations include
Irbesartan and a triple-combination ARV therapy.
The East Africa turnaround is on course with regulatory bottlenecks in Uganda and Tanzania having been resolved. Inspection
of Adcock Ingram's factories by the Ethiopian Pharmaceutical Regulatory Authorities has commenced and bodes well for entry
into that growing market. In Ghana, the new management team is progressing well with revamping the factory and distribution
infrastructure.
The Group continues to maintain its focus on the acquisition of businesses and brands in high growth emerging markets.
The impact of the current economic climate on consumer spending is concerning. Margins will continue to be impacted by cost
pressures and active ingredient prices which are directly linked to currency fluctuations, but in the second half of the financial
year will be mitigated by the recent SEP increase. The second six months of the year will incorporate a determined focus on
improving the working capital cycle within the business.
CHANGES TO THE BOARD OF DIRECTORS
Mr Andrew Thompson has been appointed as the Chairman of the Audit Committee, effective 12 April 2013. Mr Leon Schönknecht
has been appointed as a member of the Audit Committee, effective 15 May 2013. These appointments follow the resignation
of Mr Eric Diack as an independent non-executive director of the Company, Chairman of the Company's Audit Committee and
as member of the Company's Risk and Sustainability Committee with effect from 22 March 2013.
DIVIDEND
The Board has declared an interim gross dividend out of income reserves of 86 cents per share in respect of the six months
ended 31 March 2013. No credits in terms of secondary tax on companies have been utilised. The South African dividend
tax ("DT") rate is 15% and the net dividend payable to shareholders who are not exempt from DT is 73,10 cents per share.
As at the date of this declaration, Adcock Ingram has 175 157 248 ordinary shares in issue including 6 540 587 treasury shares.
There are also 25 944 261 "A" and "B" ordinary shares in issue, all held as treasury shares, which are entitled to a dividend.
The income tax reference number is 9528/919/15/3.
The salient dates for the dividend are detailed below:
Last date to trade: Friday, 28 June 2013
Shares trade "ex" dividend: Monday, 1 July 2013
Record date: Friday, 5 July 2013
Payment date: Monday, 8 July 2013
Share certificates may not be dematerialised or rematerialised between Monday, 1 July 2013 and Friday, 5 July 2013, both
dates inclusive.
On Monday, 8 July 2013 the cash dividend will be electronically transferred to the bank accounts of all certificated shareholders
where this facility is available. Where electronic fund transfer is not available or desired, cheques dated 8 July 2013 will be
posted on that date. Shareholders who have dematerialised their share certificates will have their accounts at their CSDP
or broker credited on Monday, 8 July 2013.
By order of the Board
NE Simelane
Company Secretary
Johannesburg
4 June 2013
CORPORATE INFORMATION
ADCOCK INGRAM HOLDINGS LIMITED
Incorporated in the Republic of South Africa
Registration number 2007/016236/06
Income tax number 9528/919/15/3
Share code: AIP ISIN: ZAE000123436
("Adcock Ingram" or "the Company" or "the Group")
Directors:
KDK Mokhele (Chairman)*, JJ Louw (Chief Executive Officer), AG Hall (Deputy Chief Executive and Financial Director),
M Haus*, T Lesoli*, PM Makwana*, CD Raphiri*, LE Schönknecht*, RI Stewart*, AM Thompson*
* Independent non-executive
Company secretary:
NE Simelane
Registered office:
1 New Road, Midrand, 1682
Postal address:
Private Bag X69, Bryanston, 2021
Transfer secretaries:
Computershare Investor Services (Pty) Limited
70 Marshall Street, Johannesburg, 2001
PO Box 61051, Marshalltown, 2107
Auditors:
Ernst & Young Inc.
Wanderers Office Park, 52 Corlett Drive, Illovo, 2196
Sponsor:
Deutsche Securities (SA) (Pty) Limited
3 Exchange Square, 87 Maude Street, Sandton, 2146
Bankers:
Nedbank Limited, 135 Rivonia Road, Sandown, Sandton, 2146
Rand Merchant Bank, 1 Merchant Place, corner Fredman Drive and Rivonia Road, Sandton, 2196
Attorneys:
Read Hope Phillips, 30 Melrose Boulevard, Melrose Arch, 2196
Forward-looking statements:
Adcock Ingram may, in this document, make certain statements that are not historical facts and relate to analyses and other
information which are based on forecasts of future results and estimates of amounts not yet determinable. These statements
may also relate to our future prospects, developments and business strategies. Examples of such forward-looking statements
include, but are not limited to, statements regarding exchange rate fluctuations, volume growth, increases in market share,
total shareholder return and cost reductions. Words such as "believe", "anticipate", "expect", "intend", "seek", "will", "plan", "could",
"may", "endeavour" and "project" and similar expressions are intended to identify such forward-looking statements, but are not
the exclusive means of identifying such statements. By their very nature, forward-looking statements involve inherent risks and
uncertainties, both general and specific, and there are risks that the predictions, forecasts, projections and other forward-looking
statements will not be achieved. If one or more of these risks materialise, or should underlying assumptions prove incorrect, our
actual results may differ materially from those anticipated. Forward-looking statements apply only as of the date on which they
are made, and we do not undertake any obligation to update or revise any of them, whether as a result of new information,
future events or otherwise.
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