ADCOCK INGRAM HOLDINGS LIMITED - Group Annual Results and Cash Dividend Declaration for the year ended 30 June 2018

Release Date: 29/08/2018 07:05
Code(s): AIP
 
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Group Annual Results and Cash Dividend Declaration
for the year ended 30 June 2018

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")

Group Annual Results and Cash Dividend Declaration
for the year ended 30 June 2018

SALIENT FEATURES

Turnover increases 10% to R6,540 million
Gross profit improves 14% to R2,566 million
Trading profit increases 20% to R866 million
Headline earnings per share from continuing operations increases 26%
Total dividend increases 24% to 172 cents per share

INTRODUCTION

The Board of Directors (Board) is very pleased with the excellent earnings growth achieved by the Group in the past financial year, considering 
the price-regulated environment in which it operates and difficult economic environment in South Africa. The results were achieved through continued 
investment in well established brands, improved factory efficiencies, and relentless focus on customer service and product quality.

FINANCIAL PERFORMANCE

TURNOVER AND PROFITS

Group turnover during the year under review increased by 10.2% to R6,540 million (2017: R5,936 million), driven by an increase in mix of 5.4%, which
includes the Genop acquisition from 1 January 2018, an average realised price increase of 3.8% and improved volumes contributed the balance.

The gross margin improvement from 37.8% to 39.2% was realised from an improvement in the exchange rate, a change in the sales mix and
improved efficiencies at the Wadeville factory on the back of increased production of ARV's.

Operating expenses including those relating to Genop increased by 12.0%. Excluding Genop, expenses increased by less than 6%, resulting in a
19.6% improvement in trading profit to R866 million (2017: R724 million).

NON-TRADING EXPENSES

Non-trading expenses of R46.9 million include share-based expenses of R34.4 million, corporate activity costs of R7.3 million and impairments
of R5.2 million.

NET FINANCE COSTS AND HEADLINE EARNINGS

The improvement in the Group's net average cash position during the year resulted in net finance cost decreasing to R7.9 million (2017: R22.6 million).

Headline earnings for the period under review amounted to R644.7 million (2017: R513.7 million). This translates into headline earnings per share
from continuing operations of 387.7 cents (2017: 308.9 cents), an increase of 25.5%.

CASH FLOWS

Cash generated from operations amounted to R854.9 million (2017: R767.9 million) after working capital increased by R343.0 million (2017: R233.9
million) with additional investment in inventory as the Group took on new product portfolios and increased stockholding of raw materials for the
production of ARVs. Trade receivables remained well controlled and the average days outstanding are 65 (2017: 70 days).

The Group had net cash resources of R156 million (2017: R335 million) at the end of the year.

DIVIDEND DISTRIBUTION

The Board has declared a final dividend of 86 cents per share for the year ended 30 June 2018 out of income reserves. Total dividend distribution
will therefore be 172 cents per share, an improvement of 24% compared to 2017.

BUSINESS OVERVIEW

SOUTHERN AFRICA

OTC, which focuses on products in the pain, coughs, colds and flu, and anti-histamine therapeutic areas through the pharmacy channel, has seen a
turnover improvement of 7.6% to R1,989 million (2017: R 1,849 million) with top brands like Adco-Dol, Allergex, Alcophyllex and Napamol showing
double-digit growth. This business unit realised the full SEP price increase granted by government. Mix and volume improvements were healthy,
following innovative new product launches and decent demand for smaller pack size analgesics. OTC was appointed by Abbott Laboratories to perform
the sales, marketing and distribution of a range of products, namely Brufen, Creon, Duphalac and Calmettes, for South Africa, Lesotho and Swaziland.

A gross margin improvement was realised in this year, driven by an advantageous sales mix and the improvement in the exchange rate. As a result,
trading profit increased by 16.7% to R399.6 million (2017: R342.3 million).

Prescription turnover improved by 15.5% to R2,238 million (2017: R1,938 million), and the Division also showed double-digit growth in the private
market segment as measured by IQVIA. Mix, although adversely impacted by the loss of a low-margin multinational partner contract, improved by
10.1%, aided substantially by the acquisition of Genop (R223.8 million), and the on-boarding of the Astellas portfolio from Leo Pharma and Topzole
from Takeda. Volumes increased by 3.6% mainly as a result of the increased demand in the ARV private market and an average price increase of 1.8%
was achieved. A gross margin improvement was realised in the year, driven by increased ARV throughput at the Wadeville factory and a better sales
mix. As a result, trading profit of R239.4 million is 15.2% ahead of the prior year of R207.8 million.

Consumer turnover was almost flat at R686.7 million (2017: R688.8 million), in a challenging environment, characterised by limited consumer discretionary
spend. Despite the poor trading, the Division delivered a small improvement in trading profit to R112.2 million (2017: R110.0 million). In the second
half of the financial year, the Division underwent a leadership change. Subsequently, some reorganisation has taken place and we expect to see an
improvement in customer focus, brand support and trading performance.

Hospital turnover improved by 7.2% to R1,348 million (2017: R1,257 million) with an average realised price increase of 1.9%. Additional volumes
contributed 2.9% and mix 2.5%, following the award of the marketing rights to the Pharma Q injectable product range. The gross margin improved
as a result of a change in the sales mix with gains in the private market and the improved exchange rate. Trading profits improved by an impressive
63.0% to R95.3 million (2017: R58.5 million).

On the regulatory front in South Africa, the National Health Insurance Bill, Medical Schemes Amendment Bill and Health Market Inquiry Report have all 
recently been issued. The Company is supportive of initiatives that broaden access to healthcare in South Africa and do not threaten the sustainability 
of the local pharmaceutical manufacturing industry. Adcock Ingram will continue to engage government through the industry bodies in that regard.  
The Company is a well-diversified  Consumer, OTC, Prescription and Hospital pharmaceutical business with an extensive and affordable product portfolio 
that is able to take advantage of the opportunities which may emanate from implementation of National Health Insurance.

REST OF AFRICA

Turnover in the Group's enterprises in Zimbabwe and Kenya collectively increased by 7.5% to R222.6 million (2017: R207.1 million) and achieved a trading
profit of R18.3 million, a good improvement on the R2.7 million reported in the prior year. The positive performance is attributable in Zimbabwe to a
significant improvement in demand for the top brands following improved stock availability, whilst the improvement in the Kenyan operation is due to
strict management focus by the OTC Division from South Africa. Operations in Zimbabwe remain unpredictable and investment may be required in the
short- to medium-term to recapitalise its facilities. Consequently, the Board is assessing the viability of the Group's continued presence in that country.

CHANGES TO THE BOARD AND IN DIRECTOR'S FUNCTION

Ms Jenitha John was appointed as Chairperson of the Audit Committee, effective 20 February 2018.

PROSPECTS

The Board expects trading conditions to remain difficult with constrained consumer spend and high levels of unemployment, but is confident in
the equity and resilience of the broad portfolio of brands in the Group. The recent decline in the value of the Rand is of concern and
against this background cost-control will be a focus in the year ahead.

Adcock Ingram is engaging constructively with the National Department of Health through the Pricing Committee on whether any short-term relief on 
SEP will be available. 

The Board remains committed in seeking additional affordable brands to augment its range of products and defend its position in the market. Expanding
the non-regulated portfolio to limit the impact of the exchange rate and SEP environment remains a focus in this regard.

DIVIDEND DISTRIBUTION

The Board has declared a final gross dividend out of income reserves of 86 cents per share in respect of the year ended 30 June 2018. The
South African dividend tax ("DT") rate is 20% and the net dividend payable to shareholders who are not exempt from DT is 68.80 cents per share.
Adcock Ingram currently has 175 748 048 ordinary shares in issue of which 149 905 089 qualify for ordinary dividends. The income tax reference
number is 9528/919/15/3.

The salient dates for the distribution are detailed below:          
                        
Last date to trade cum distribution                                                                            Tuesday, 25 September 2018   
Shares trade ex distribution                                                                                 Wednesday, 26 September 2018   
Record date                                                                                                     Friday, 28 September 2018   
Payment date                                                                                                       Monday, 1 October 2018   

Share certificates may not be dematerialised or rematerialised between Wednesday, 26 September 2018 and Friday, 28 September 2018, both
dates inclusive.

CD Raphiri                                                         AG Hall
Chairman                                                           Chief Executive Officer

28 August 2018

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

                                                                                                           Audited                Audited   
                                                                                                              2018        %          2017   
Continuing operations                                                                          Notes         R'000   change         R'000   
Revenue                                                                                            2     6 562 865       10     5 957 700   
Turnover                                                                                           2     6 540 255       10     5 936 056   
Cost of sales                                                                                          (3 974 235)            (3 693 773)   
Gross profit                                                                                             2 566 020       14     2 242 283   
Selling, distribution and marketing expenses                                                           (1 188 242)       11   (1 068 585)   
Fixed and administrative expenses                                                                        (511 401)       14     (449 275)   
Trading profit                                                                                             866 377       20       724 423   
Non-trading expenses                                                                               3      (46 895)               (47 128)   
Operating profit                                                                                           819 482       21       677 295   
Finance income                                                                                     2        18 270                 15 665   
Finance costs                                                                                             (26 187)               (38 239)   
Dividend income                                                                                    2         4 340                  5 979   
Equity-accounted earnings                                                                                   79 252                 64 144   
Profit before taxation                                                                                     895 157       23       724 844   
Taxation                                                                                                 (251 084)              (204 856)   
Profit for the year from continuing operations                                                             644 073       24       519 988   
Profit after taxation for the period from discontinued operations                                                -                 41 132   
Profit for the year                                                                                        644 073       15       561 120   
Other comprehensive income which will subsequently be recycled to profit or loss                             6 406               (24 832)   
Exchange differences on translation of foreign operations:                                                                                  
- Continuing operations                                                                                      3 714                (5 732)   
- Joint venture and associate                                                                              (1 914)               (17 486)   
- Discontinued operations                                                                                        -               (21 353)   
Fair value profit on available-for-sale asset, net of tax                                                       24                      7   
Movement in cash flow hedge accounting reserve, net of tax                                                   4 582                 19 732   
Other comprehensive income transferred to profit or loss                                                         -              (125 784)   
Other comprehensive income which will not be recycled to profit or loss                                                                     
Actuarial profit on post-retirement medical liability                                                          634                    511   
Total comprehensive income for the year, net of tax                                                        651 113                411 015   
Profit attributable to:                                                                                                                     
Owners of the parent                                                                                       637 943                553 534   
Non-controlling interests                                                                                    6 130                  7 586   
                                                                                                           644 073                561 120   
Total comprehensive income attributable to:                                                                                                 
Owners of the parent                                                                                       644 983                405 568   
Non-controlling interests                                                                                    6 130                  5 447   
                                                                                                           651 113                411 015   
Continuing operations:                                                                                                                      
Basic earnings per ordinary share (cents)                                                                    383.6       24         308.9   
Diluted basic earnings per ordinary share (cents)                                                            383.6       24         308.9   
Headline earnings per ordinary share (cents)                                                                 387.7       26         308.9   
Diluted headline earnings per ordinary share (cents)                                                         387.7       26         308.9   
Discontinued operations:                                                                                                                    
Basic earnings per ordinary share (cents)                                                                                            24.0   
Diluted earnings per ordinary share (cents)                                                                                          24.0   
Headline earnings per ordinary share (cents)                                                                                          3.7   
Diluted headline earnings per ordinary share (cents)                                                                                  3.7   
Total operations:                                                                                                                           
Basic earnings per ordinary share (cents)                                                                    383.6       15         332.9   
Diluted basic earnings per ordinary share (cents)                                                            383.6       15         332.9   
Headline earnings per ordinary share (cents)                                                                 387.7       24         312.6   
Diluted headline earnings per ordinary share (cents)                                                         387.7       24         312.6   

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

                                                   Attributable to holders of the parent
                                                            Non-distributable
                                                                reserves
                                                                                                          Total
                                                                                                         attri-
                                                                                                        butable
                                                                                                             to        Non-
                                  Issued                      *NDR           *NDR                      ordinary   controll-
                                   share       Share    Continuing   Discontinued         Retained       share-         ing
                                 capital     premium    operations     operations           income      holders   interests         Total
                                   R'000       R'000         R'000          R'000            R'000        R'000       R'000         R'000
As at 1 July 2016 (audited)       17 147     666 873       483 515        144 998        1 916 040    3 228 573      26 024     3 254 597
Movement in share-based
payment reserve                                             23 710                                       23 710                    23 710
Share-based expenses
transferred from non-
distributable reserves                                   (303 885)                         303 885
Disposal of business                                                                                               (18 465)      (18 465)
Total comprehensive income                                 (2 968)      (144 998)          553 534      405 568       5 447       411 015
Profit for the year                                                                        553 534      553 534       7 586       561 120
Other comprehensive income                                 (2 968)      (144 998)                     (147 966)     (2 139)     (150 105)
Dividends                                                                                (170 369)    (170 369)     (5 484)     (175 853)
Balance at 30 June 2017
(audited)                         17 147     666 873       200 372                       2 603 090    3 487 482       7 522     3 495 004
Movement in treasury shares          (1)       (517)                                                      (518)                     (518)
Movement in share-based
payment reserve                                             16 463                                       16 463                    16 463
Total comprehensive income                                   7 040                         637 943      644 983       6 130       651 113
Profit for the year                                                                        637 943      637 943       6 130       644 073
Other comprehensive income                                   7 040                                        7 040                     7 040
Dividends                                                                                (235 904)    (235 904)    (11 239)     (247 143)
Balance at 30 June 2018
(audited)                         17 146     666 356       223 875                       3 005 129    3 912 506       2 413     3 914 919

* NDR-Non-distributable reserves

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

                                                                                                                    Audited       Audited   
                                                                                                                       2018          2017   
                                                                                                                      R'000         R'000   
ASSETS                                                                                                                                      
Property, plant and equipment                                                                                     1 521 255     1 445 095   
Intangible assets                                                                                                   626 242       349 997   
Deferred tax                                                                                                         18 120         1 588   
Other financial assets                                                                                               34 010        41 746   
Investment in joint ventures                                                                                        445 150       392 013   
Investment in associate                                                                                               8 014         6 071   
Non-current assets                                                                                                2 652 791     2 236 510   
Inventories                                                                                                       1 565 949     1 156 949   
Trade and other receivables                                                                                       1 641 295     1 567 802   
Cash and cash equivalents                                                                                           404 629       592 070   
Taxation receivable                                                                                                   6 061         9 642   
Current assets                                                                                                    3 617 934     3 326 463   
Total assets                                                                                                      6 270 725     5 562 973   
EQUITY AND LIABILITIES                                                                                                                      
Capital and reserves                                                                                                                        
Issued share capital                                                                                                 17 146        17 147   
Share premium                                                                                                       666 356       666 873   
Non-distributable reserves                                                                                          223 875       200 372   
Retained income                                                                                                   3 005 129     2 603 090   
Total shareholders' funds                                                                                         3 912 506     3 487 482   
Non-controlling interests                                                                                             2 413         7 522   
Total equity                                                                                                      3 914 919     3 495 004   
Long-term borrowings                                                                                                      -       251 492   
Post-retirement medical liability                                                                                    16 340        16 793   
Deferred tax                                                                                                        118 914        73 138   
Non-current liabilities                                                                                             135 254       341 423   
Trade and other payables                                                                                          1 838 930     1 637 197   
Bank overdraft                                                                                                      248 877         5 619   
Short-term borrowings                                                                                                     -           416   
Cash-settled options                                                                                                  2 413         7 384   
Provisions                                                                                                          130 332        75 930   
Current liabilities                                                                                               2 220 552     1 726 546   
Total equity and liabilities                                                                                      6 270 725     5 562 973   

CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                                                                   Audited        Audited   
                                                                                                                      2018           2017   
                                                                                                                     R'000          R'000   
Cash flows from operating activities                                                                                                        
Operating profit from continuing operations                                                                        819 482        677 295   
Operating profit from discontinued operations                                                                            -          8 416   
Operating profit                                                                                                   819 482        685 711   
Other adjustments and non-cash items                                                                               378 360        316 097   
Operating profit before working capital changes                                                                  1 197 842      1 001 808   
Working capital changes                                                                                          (342 968)      (233 935)   
Cash generated from operations                                                                                     854 874        767 873   
Finance income received                                                                                             17 363         16 938   
Finance costs paid                                                                                                (25 605)       (41 612)   
Dividend income received                                                                                            30 100         21 368   
Dividends paid                                                                                                   (247 143)      (175 853)   
Taxation paid                                                                                                    (246 663)      (133 281)   
Net cash inflow from operating activities                                                                          382 926        455 433   
Cash flows from investing activities                                                                                                        
Decrease in other financial assets                                                                                   5 232         32 356   
Acquisition of business (note 4)                                                                                 (327 623)        (9 875)   
Disposal of businesses (note 5)                                                                                          -        291 096   
Purchase of property, plant and equipment - Expansion                                                             (84 684)       (75 930)   
                                          - Replacement                                                          (134 564)       (87 308)   
Purchase of intangible assets                                                                                      (4 450)       (70 821)   
Proceeds on disposal of property, plant and equipment                                                                6 911          2 298   
Net cash (outflow)/inflow from investing activities                                                              (539 178)         81 816   
Cash flows from financing activities                                                                                                        
Purchase of treasury shares                                                                                          (518)              -   
Increase in borrowings                                                                                                   -          9 917   
Repayment of borrowings                                                                                          (276 177)      (252 223)   
Net cash outflow from financing activities                                                                       (276 695)      (242 306)   
Net (decrease)/increase in cash and cash equivalents                                                             (432 947)        294 943   
Net foreign exchange difference on cash and cash equivalents                                                         2 248        (2 954)   
Cash and cash equivalents at beginning of year                                                                     586 451        294 462   
Cash and cash equivalents at end of year                                                                           155 752        586 451   

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1     BASIS OF PREPARATION

1.1   INTRODUCTION

      The audited consolidated annual financial statements for the year ended 30 June 2018 have been prepared in compliance with the
      Listings Requirements of the JSE Limited, International Financial Reporting Standards (IFRS), the requirements of the International
      Accounting Standards (IAS) 34: Interim financial reporting, SAICA Financial Reporting Guidelines as issued by the Accounting Practices
      Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council and the Companies Act, No. 71 of
      2008. These summarised results for the year ended 30 June 2018, extracted from the audited consolidated financial statements, which
      the Board of directors take full responsibility for, have been prepared by Ms Dorette Neethling, Chief Financial Officer. Both these
      summarised results and the consolidated financial statements were audited by the independent external auditors, Ernst & Young Inc.
      and copies of their unqualified audit opinion are available for inspection at the Company's registered office.

1.2   CHANGES IN ACCOUNTING POLICIES

      The accounting policies adopted are consistent with those of the previous financial year except for the adoption of the following
      amended IFRS standards and interpretations during the year which did not have any effect on the financial performance or position of
      the Group:
      -  IAS 7: Statement of cash flows - disclosure initiative amendments
      -  IAS 12: Income taxes - recognition of deferred tax assets for unrealised loss - amendments

2     REVENUE
      
                                                                                                                        2018         2017   
                                                                                                                       R'000        R'000   
      Turnover                                                                                                     6 540 255    5 936 056   
      Finance income                                                                                                  18 270       15 665   
      Dividend income - Black Managers Share Trust                                                                     4 340        5 979   
                                                                                                                   6 562 865    5 957 700   

3     NON-TRADING EXPENSES
      Impairments                                                                                                      5 235          217   
      Transaction costs                                                                                                7 315        6 251   
      Share-based payment expenses                                                                                    34 345       40 660   
                                                                                                                      46 895       47 128   
4     ACQUISITION OF BUSINESSES

4.1   GENOP HOLDINGS PROPRIETARY LIMITED (GENOP)

      On 1 January 2018, Adcock Ingram Healthcare Proprietary Limited acquired 100% of Genop, a highly specialised instrument, surgical
      and pharmaceutical products company focused on the ophthalmic, optometry, skincare, aesthetic and plastic surgery segments in
      Southern Africa. Genop owns and markets the well-known Epi-max branded range of consumer products.
      The fair value of the identifiable assets as at the date of acquisition was:

                                                                                                                                  Audited
                                                                                                                                     2018
                                                                                                                                    R'000
      Assets
      Inventories                                                                                                                  87 003
      Trade and other receivables                                                                                                  89 383
      Property, plant and equipment                                                                                                18 291
      Marketing-related intangible assets                                                                                         121 385
      Cash and cash equivalents                                                                                                     9 082
      Taxation receivable                                                                                                           1 579
                                                                                                                                  326 723
      Liabilities
      Trade and other payables                                                                                                     99 602
      Short-term borrowings                                                                                                        24 297
      Deferred tax                                                                                                                 27 622
      Provisions                                                                                                                    2 255
                                                                                                                                  153 776
      Total identifiable net assets at fair value                                                                                 172 947
      Goodwill arising on acquisition                                                                                             163 758
      Purchase consideration                                                                                                      336 705
      Net cash acquired with the business                                                                                         (9 082)
      Net cash consideration                                                                                                      327 623

      The fair value of the trade receivables equals the net amount of trade receivables and amounts to
      R74.3 million.

      Marketing-related intangible assets relate to the Epi-Max brand. Epi-Max was fair valued, at
      acquisition, from R11.7 million to R120 million which gave rise to a deferred tax liability of R30.3 million.
      The royalty relief methodology was used to determine the valuation, by applying a 9% royalty rate
      and market related discount rate.

      Goodwill represents the difference between the purchase consideration and the fair value of the
      net assets acquired as there are no further separately identifiable intangible assets. The significant
      factors that contributed to the recognition of goodwill include, but are not limited to the
      acquisition of a specialised and quality pharmaceutical business with a management team with
      proven experience, knowledge, skills and track record in their field.

      From the date of acquisition, Genop contributed R223.8 million towards revenue and reported a 
      profit before income tax of R6.2 million.

      If the Genop acquisition had taken place at the beginning of the reporting period, the revenue
      would have been R452.3 million and profit before income tax would have been R24.5 million.

      Analysis of cash flows on acquisition

      Transaction costs of the acquisition (included in cash flows from operating activities)                                     (5 662)
      Net cash acquired with the business (included in cash flows from investing activities)                                        9 082

      Transaction costs of R5.7 million have been expensed and are included in non-trading expenses.

                                                                                                                                  Audited
                                                                                                                                     2017
                                                                                                                                    R'000
4.2   VIRTUAL LOGISTICS PROPRIETARY LIMITED (VIRTUAL)

      On 1 April 2017, Adcock Ingram Healthcare Proprietary Limited acquired 100% of the shareholding
      of Virtual Logistics Proprietary Limited (Virtual), a national fine distribution company.
      The fair value of the identifiable assets as at the date of acquisition was:
      Assets                                                                                                                       25 413
      Liabilities                                                                                                                  15 408
      Total identifiable net assets at fair value                                                                                  10 005
      Goodwill arising on acquisition                                                                                               5 595
      Purchase consideration                                                                                                       15 600
      Deferred consideration                                                                                                      (8 000)
      Net bank overdraft acquired with the business                                                                                 2 275
      Net cash consideration                                                                                                        9 875

      The fair value of the trade receivables equaled the gross amount of trade receivables and amounted to R16.1 million.
      None of the trade receivables were impaired and it was expected that the full contractual amounts could be
      collected.

      Goodwill represented the difference between the purchase consideration and the fair value of the net assets
      acquired as there were no further separately identifiable intangible assets. The significant factors that contributed
      to the recognition of goodwill include, but were not limited to, the establishment of a fine distribution network,
      expanding the Group's national footprint.

      During the previous financial year, Virtual contributed R21.7 million towards revenue and reported a profit before
      income tax of R0.9 million.

      If the Virtual acquisition took place at the start of the previous financial year, the revenue would have been R84.9
      million and profit before income tax would have been R3.1 million.

      Analysis of cash flows on acquisition

      Transaction costs of the acquisition (included in cash flows from operating activities)                                     (1 467)
      Net bank overdraft acquired with the business (included in cash flows from investing activities)                            (2 275)

      Transaction costs of R1.5 million were expensed and were included in non-trading expenses.

      A payment of R8.0 million of the purchase price, which was fully provided for in the previous financial year, was
      deferred and subject to the achievement of profit targets. During the 2018 financial year the deferred amount was paid.

 5    DISCONTINUED OPERATIONS

      Adcock Ingram Private Limited (India) and 53.47% of Ayrton Drug Manufacturing Limited (Ayrton)
      in Ghana were disposed of on 14 October 2016 and 7 December 2016 respectively. The loss of
      control on disposal resulted in the foreign currency translation reserve relating to both entities
      being recycled to profit and loss during the previous financial year.

5.1   STATEMENT OF COMPREHENSIVE INCOME

      Profit for the period from discontinued operations                                                                            6 374
      Profit on disposal of the discontinued operations                                                                            34 758
      Profit for the period from discontinued operations                                                                           41 132

      Profit/(Loss) attributable to:
      India                                                                                                                        46 638
      Ayrton                                                                                                                      (5 506)
                                                                                                                                   41 132
      Profit attributable to:
      Owners of the parent                                                                                                         39 903
      Non-controlling interests                                                                                                     1 229
                                                                                                                                   41 132
5.2   CASH INFLOW ON DISPOSAL

      Consideration received                                                                                                      338 601
      India                                                                                                                       327 565
      Ayrton                                                                                                                       11 036
      Net cash disposed of with the discontinued operations                                                                      (47 505)
      India                                                                                                                      (48 807)
      Ayrton                                                                                                                        1 302
      Net cash inflow                                                                                                             291 096

6     SEGMENT REPORTING
      
                                                                                                                    Audited       Audited   
                                                                                                                       2018          2017   
                                                                                                                      R'000         R'000   
      Turnover                                                                                                                              
      Continuing operations                                                                                                                 
      Southern Africa                                                                                             6 338 389     5 754 241   
      OTC                                                                                                         1 989 225     1 849 038   
      Prescription                                                                                                2 237 620     1 937 925   
      Hospital                                                                                                    1 347 698     1 256 753   
      Consumer                                                                                                      686 699       688 807   
      Other - shared services                                                                                        77 147        21 718   
      Rest of Africa                                                                                                222 624       207 052   
      Research and development services in India                                                                     19 494        18 396   
                                                                                                                  6 580 507     5 979 689   
      Less: Intercompany sales                                                                                     (40 252)      (43 633)   
                                                                                                                  6 540 255     5 936 056   
      Discontinued operations                                                                                                               
      India                                                                                                               -        67 206   
      Rest of Africa (Ghana)                                                                                              -        51 695   
                                                                                                                          -       118 901   
      Trading and operating profit                                                                                                          
      Continuing operations                                                                                                                 
      Southern Africa                                                                                               845 540       719 103   
      OTC                                                                                                           399 640       342 322   
      Prescription                                                                                                  239 435       207 787   
      Hospital                                                                                                       95 312        58 475   
      Consumer                                                                                                      112 181       110 038   
      Other - shared services                                                                                       (1 028)           481   
      Rest of Africa                                                                                                 18 330         2 712   
      Research and development services in India                                                                      2 507         2 608   
      Trading profit                                                                                                866 377       724 423   
      Less: Non-trading expenses                                                                                   (46 895)      (47 128)   
      Operating profit                                                                                              819 482       677 295   
      Discontinued operations                                                                                                               
      India                                                                                                               -         6 300   
      Rest of Africa (Ghana)                                                                                              -         8 949   
      Trading profit                                                                                                      -        15 249   
      Less: Non-trading expenses                                                                                          -       (6 833)   
                                                                                                                          -         8 416   
      Total assets                                                                                                                          
      Southern Africa                                                                                             5 844 806     5 161 098   
      OTC                                                                                                         1 761 603     1 667 220   
      Prescription                                                                                                1 987 006     1 239 248   
      Hospital                                                                                                    1 236 482     1 125 158   
      Consumer                                                                                                      315 425       354 965   
      Other - shared services                                                                                       544 290       774 507   
      Rest of Africa                                                                                                163 141       146 661   
      India                                                                                                         262 778       255 214   
                                                                                                                  6 270 725     5 562 973   
7     INVENTORY

                                                                                                                    Audited       Audited
                                                                                                                       2018          2017
                                                                                                                      R'000         R'000

      Inventories written down and recognised as an expense in profit or loss in
      cost of sales                                                                                                  94 854        66 215

8     CAPITAL COMMITMENTS

      - Contracted for                                                                                               32 932        72 202
      - Approved but not contracted                                                                                  63 258       128 281
                                                                                                                     96 190       200 483
9     HEADLINE EARNINGS

      Headline earnings is determined as follows:
      Continuing operations
      Earnings attributable to owners of Adcock Ingram from total operations                                        637 943       553 534
      Adjusted for:
      Profit attributable to Adcock Ingram from discontinued operations (note 5.1)                                        -      (39 903)
      Earnings attributable to owners of Adcock Ingram from continuing operations                                   637 943       513 631
      Adjusted for:
      Impairment of intangible assets                                                                                 2 700             -
      Profit on disposal/scrapping of property, plant and equipment                                                 (1 968)         (194)
      Tax effect on profit on disposal of property, plant and equipment                                                (42)            76
      Adjustments relating to equity accounted joint ventures
      Impairment of goodwill                                                                                          5 312             -
      Loss on disposal of long term receivable                                                                          828             -
      (Profit)/Loss on disposal of property, plant and equipment                                                       (24)           199
      Headline earnings from continuing operations                                                                  644 749       513 712
      Discontinued operations
      Profit attributable to owners of Adcock Ingram from discontinued operations                                                  39 903
      Adjusted for:
      Profit on sale of discontinued operations (note 5.1)                                                                       (34 758)
      Loss on disposal/scrapping of property, plant and equipment                                                                     975
      Headline earnings from discontinued operations                                                                                6 120
      Headline earnings from total operations                                                                       644 749       519 832

                                                                                                                       '000          '000
10    SHARE CAPITAL

      Number of shares in issue                                                                                     175 748       175 748
      Number of ordinary shares held by the Group companies                                                         (4 292)       (4 285)

      Net shares in issue                                                                                           171 456       171 463

      Headline earnings and basic earnings per share are based on:
      Weighted average number of ordinary shares outstanding                                                        166 293       166 294
      Diluted weighted average number of shares outstanding                                                         166 295       166 295

11    FAIR VALUE HIERARCHY

      The Group classifies all financial instruments and its fair value hierarchy as follows:
                                                                                                                    Audited       Audited
                                                                              Statement of financial position          2018          2017
      Financial instruments                Classification per IAS 39          line item                               R'000         R'000
      Investment(1)                        Available for sale                 Other financial assets                  1 937         1 906
      Black Managers Share Trust(3)        Loans and receivables              Other financial assets                 32 073        39 840
      Trade and sundry receivables(3)      Loans and receivables              Trade and other receivables         1 535 369     1 485 705
      Foreign exchange contracts -
      derivative asset(2)                  Cash flow hedge                    Trade and other receivables            21 838         8 957
      Cash and cash equivalents(3)         Loans and receivables              Cash and cash equivalents             404 629       592 070
      Long-term borrowings(3)              Loans and borrowings               Long-term borrowings                        -       251 492
      Trade and other payables(3)          Loans and borrowings               Trade and other payables            1 830 652     1 622 899
      Foreign exchange contracts -
      derivative liability(2)              Cash flow hedge                    Trade and other payables                    -           752
      Short-term borrowings(3)             Loans and borrowings               Short-term borrowings                       -           416
      Bank overdraft(3)                    Loans and borrowings               Bank overdraft                        248 877         5 619
      
      (1) Level 3. The value of the investment in Group Risk Holdings Proprietary Limited is based on Adcock Ingram's proportionate share of the net 
          asset value of the Company.
      (2) Level 2. Fair value based on the ruling market rate at year-end. The fair value of the forward exchange contract is calculated as the difference 
          in the forward exchange rate as per the contract and the forward exchange rate of a similar contract with similar terms and maturities concluded 
          as at the valuation date multiplied by the foreign currency monetary units as per the FEC contract.
      (3) The carrying value approximates fair value.

CORPORATE INFORMATION

DIRECTORS
Ms L Boyce (Independent Non-executive Director)
Mr A Hall (Chief Executive Officer)
Prof M Haus (Independent Non-executive Director)
Ms J John (Independent Non-executive Director)
Dr T Lesoli (Independent Non-executive Director)
Ms B Letsoalo (Executive Director)
Ms N Madisa (Non-executive Director)
Mr M Makwana (Independent Non-executive Director)
Dr C Manning (Non-executive Director)
Dr A Mokgokong (Non-executive Director)
Ms D Neethling (Chief Financial Officer)
Mr L Ralphs (Non-executive Director)
Mr C Raphiri (Independent Non-executive Chairman)
Dr R Stewart (Independent Non-executive Director)

COMPANY SECRETARY
NE Simelane

REGISTERED OFFICE
1 New Road, Midrand, 1682

POSTAL ADDRESS
Private Bag X69, Bryanston, 2021

TRANSFER SECRETARIES
Computershare Investor Services Proprietary Limited
Rosebank Towers, 15 Biermann Avenue, Rosebank
Johannesburg, 2196
PO Box 61051
Marshalltown, 2107

AUDITORS
Ernst & Young Inc.
102 Rivonia Road, Sandton, 2146

SPONSOR
Rand Merchant Bank (A division of FirstRand Bank Limited)
1 Merchant Place, corner Fredman Drive and Rivonia Road
Sandton, 2196

BANKERS
Nedbank Limited
135 Rivonia Road, Sandown
Sandton, 2146

Rand Merchant Bank
1 Merchant Place, corner Fredman Drive and Rivonia Road
Sandton, 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.

http://www.adcock.com



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