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ADCOCK INGRAM HOLDINGS LIMITED - Unaudited group interim results and cash dividend declaration for the six months ended 31 December 2018

Release Date: 21/02/2019 07:05
Code(s): AIP     PDF:  
 
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Unaudited group interim results and cash dividend declaration for the six months ended 31 December 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")
 
Unaudited Group Interim Results and Cash Dividend Declaration
for the six months ended 31 December 2018

SALIENT FEATURES
*Turnover up 16% to R3,595 million
*Gross profit improves 18% to R1,390 million
*Trading profit increases 17% to R485 million
*Headline earnings per share increases 16%
Dividend declared: 100 cents per share
B-BBEE level 3 achieved
Operation in Zimbabwe (Datlabs) disposed of in January 2019
*Continuing operations

INTRODUCTION
The Board is pleased to report that the business operations posted encouraging growth and commendable results in the half year under review,
including the contribution of Genop, acquired on 1 January 2018. Each of the business units posted solid performance, achieving good growth in
turnover, with disciplined cost control, yielding growth in trading profits across the board.

The results were achieved against a background of a price-regulated environment, coupled with tough trading conditions, reflected in the continued
pressure on the consumer due to the macro-economic environment. The Group's diversified portfolio remained resilient with growth in market share,
with continued relentless focus on customer service and product quality.

FINANCIAL PERFORMANCE
TURNOVER AND PROFITS
Turnover during the period under review increased by 15.6% to R3,595 million (December 2017: R3,108 million), benefiting from the inclusion of Genop
from 1 January 2018. On a like-for-like basis (excluding Genop), turnover increased by 7.4%, supported by an increase in volume of 5.0%, with mix and
price contributing the balance. Price increases were realised in the Consumer segment, but offset to a large extent by price reductions in the other
segments due to competitive market conditions and pressure from Funders to lower prices of certain Prescription medicines.

The gross margin improvement from 38.0% to 38.7% was driven by an advantageous sales mix and improved throughput at the Clayville factory.

Total operating expenses increased by 18.4%, but excluding Genop, were well controlled and only increased by 6.2%, resulting in a 16.6% improvement
in trading profit to R485.5 million (December 2017: R416.3 million).

NON-TRADING EXPENSES
Non-trading expenses of R28.5 million include share-based expenses of R19.4 million, an impairment of the associate investment in Ghana (Ayrton
Drug Manufacturing Limited) of R5.8 million and corporate activity costs of R3.3 million.

NET FINANCE COSTS AND HEADLINE EARNINGS
Net finance costs of R8.5 million were incurred in the period, compared to net finance income of R0.7 million in the prior period and are reflective of
the decrease in cash resources after the Genop acquisition in the previous financial year.

Headline earnings from continuing operations for the period under review increased to R361.2 million (December 2017: R310.3 million). This translates
into headline earnings per share from continuing operations of 217.2 cents (December 2017: 186.6 cents), an increase of 16.4%.

CASH FLOWS
Cash generated from operations amounted to R328.6 million (December 2017: R455.9 million) after working capital increased by R253.2 million
(December 2017: R85.7 million). Trade and other payables have decreased by R211.4 million since June 2018, which was partially offset by a decrease
in inventories (R109.6 million) as the stock holding from certain multinational partners has decreased. Trade and other receivables have increased by
R151.4 million, with the festive season having delayed some receipts. The Group had net cash resources of R109.1 million at the end of the period
(June 2018: R155.7 million).

DIVIDEND DISTRIBUTION
The Board has declared an interim dividend of 100 cents per share for the six-month period ended 31 December 2018, out of income reserves, an
improvement of 16% over the comparable period.

BUSINESS OVERVIEW
OTC turnover improved by 4.9% over the prior comparative period to R1,019 million (December 2017: R970.7 million), driven by improved volumes.
This is a satisfactory performance given the depressed consumer trading environment and difficulty in obtaining export permits from SAHPRA.
A number of the top brands including Allergex, Corenza C and Citro-Soda showed double-digit growth.

A gross margin improvement was realised in comparison to the prior comparative period, driven by an advantageous sales mix and better recoveries
in the Clayville factory. As a result, trading profit increased by 19.7% to R216.7 million (December 2017: R181.1 million).

Prescription turnover improved 33.5% to R1,364 million (December 2017: R1,021 million) aided by the acquisition of Genop which contributed R257 million.
Volumes increased by 5.9% due to an excellent ARV performance, driven by Trivenz in the private market, compensating for a price decrease
of 2.5% as a result of the reduction of reference pricing of certain generic products by funders. Mix contributed to the balance, with the introduction
of new products. This division achieved double digit growth in the total private market as measured by IQVIA.

Gross margin is slightly lower compared to the prior comparative period, with a change in sales mix compensating largely for the erosion in certain
selling prices and Rand weakness which impacted unfavourably on imported raw materials and finished goods. As a result, trading profit of R150.2 million
is 13.4% ahead of the comparative period of R132.5 million.

Consumer turnover increased by 6.4% to R393.3 million (December 2017: R369.5 million) with key brands posting healthy growth. An average price
increase of 4.1% was achieved with volumes only increasing 2.0%, indicative of the pressure on the consumer. Notwithstanding an increasingly
competitive environment and with good cost control, trading profits increased by 12.6% to R65.8 million (December 2017: R58.4 million).

Hospital turnover improved by 11.4% to R764.4 million (December 2017: R686.4 million) with all product categories achieving growth. Increased volumes
contributed 10.1% and mix 2.5%, which compensated for the loss in price. A gross margin improvement was realised, driven by the advantageous
sales mix. Trading profits improved by 25.9% to R51.2 million (December 2017: R40.6 million) with very disciplined control of operating expenditure.

REST OF AFRICA
Following the Board's decision to dispose of the Group's Zimbabwean operating subsidiary, this operation has been treated as an asset held-for-sale
and is reflected in the financial statements as a discontinued operation. As of 30 November 2018, amortisation and depreciation of assets in this
subsidiary were accordingly suspended.

In Kenya turnover declined by 7.3% to R30.5 million (December 2017: R32.9 million), but the business still achieved a trading profit R1.6 million during
the period under review (December 2017: R0.9 million).

CHANGES TO THE BOARD
On 21 November 2018, Mr Mpho Makwana resigned as a non-executive Director, a member of the HR, Remuneration and Nominations Committee
and Chairman of the Social, Ethics and Transformation Committee. Dr Tlalane Lesoli retired by rotation from the board and did not make herself
available for re-election as a Director at the Annual General Meeting, held on 22 November 2018, after having served for more than nine years.
She accordingly, relinquished her position as a Director and a member of the Social, Ethics and Transformation Committee. The process to fill the
vacancies on the Board is currently underway.

PROSPECTS
Trading conditions are expected to remain challenging, particularly in the Consumer and OTC environment. The low Single Exit Price (SEP) increases
granted to the industry in March 2018 of 1.26% and 3.78% in the current calendar year, do not compensate for the above inflationary increases in
salaries, wages and utilities. Against this background the Group is focused on improving its operational efficiency, growing the established brands and
expanding its product range through the acquisition of non-regulated brands to defend its position in the market.

Adcock Ingram is delighted it has been successful in winning a number of key products within the ARV tender and was awarded a 12% share of the overall tender, 
equating to approximately R1.8 billion (excluding VAT) to supply ARV drugs to state-run hospitals, over a period of three years, effective from 1 July  2019.
Adcock Ingram?s share of the ARV Tender award over the three years includes 11% (16.8 million packs) of the 147 million packs of DLT requested in the tender,
2.8 million packs of other oral solid dosage products and 2.7 million bottles of oral solutions.

As a member of Proudly South African, Adcock Ingram has its roots firmly entrenched in the South African market. We are proud to be a leading South African 
manufacturer, which has been recognised as a partner of the State in the national fight against HIV and AIDS. The tender award reflects positively on our 
manufacturing capability, breadth of our product offering and our historical service delivery levels. 


DIVIDEND DISTRIBUTION
The Board has declared an interim gross dividend out of income reserves of 100 cents per share in respect of the six months ended 31 December 2018.
The South African dividend tax ("DT") rate is 20% and the net dividend payable to shareholders who are not exempt from DT is 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, 12 March 2019
Shares trade ex distribution                                           Wednesday, 13 March 2019
Record date                                                               Friday, 15 March 2019
Payment date                                                              Monday, 18 March 2019

Share certificates may not be dematerialised or rematerialised between Wednesday, 13 March 2019 and Friday, 15 March 2019, both dates inclusive.


CD Raphiri                                 AG Hall
Chairman                                   Chief Executive Officer
20 February 2019

CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME

                                                                                                            Restated*      Restated*
                                                                                  Unaudited                 Unaudited        Audited
                                                                                 six months                six months           year
                                                                                      ended                     ended          ended
                                                                                31 December               31 December        30 June
                                                                                       2018         %            2017           2018
Continuing operations                                                  Notes          R'000    Change           R'000          R'000
REVENUE                                                                    2      3 599 962        15       3 122 913      6 405 316
Revenue from contracts with customers                                      2      3 594 581        16       3 108 185      6 382 706
Cost of sales                                                                   (2 204 920)               (1 928 104)    (3 871 397)
Gross profit                                                                      1 389 661        18       1 180 081      2 511 309
Selling, distribution and marketing expenses                                      (647 878)        18       (549 891)    (1 166 443)
Fixed and administrative expenses                                                 (256 329)        20       (213 845)      (494 922)
Trading profit                                                                      485 454        17         416 345        849 944
Non-trading expenses                                                       3       (28 498)                  (24 600)       (46 895)
Operating profit                                                                    456 956        17         391 745        803 049
Finance income                                                             2          4 003                    13 109         18 270
Finance costs                                                                      (12 505)                  (12 433)       (25 401)
Dividend income                                                            2          1 378                     1 619          4 340
Equity-accounted earnings                                                            47 069                    41 888         79 252
Profit before taxation                                                              496 901        14         435 928        879 510
Taxation                                                                          (138 771)                 (122 511)      (246 145)
Profit for the period/year from continuing operations                               358 130        14         313 417        633 365
Profit after taxation for the period/year from discontinued operation      4          3 803                    10 022         10 708
Profit for the period/year                                                          361 933        12         323 439        644 073
Other comprehensive income which will subsequently be
recycled to profit or loss                                                            4 120                  (55 491)          6 406
Exchange differences on translation of foreign operations:
           ? Continuing operations                                                      844                   (1 172)          1 126
           ? Joint venture and associate                                              8 399                  (11 729)        (1 914)
           ? Discontinued operation                                                   2 396                   (2 623)          2 588
Fair value profit on available-for-sale asset, net of tax                                 ?                         ?             24
Movement in cash flow hedge accounting reserve, net of tax                          (7 519)                  (39 967)          4 582
Other comprehensive income which will not be recycled to
profit or loss
Actuarial profit on post-retirement medical liability                                     ?                         ?            634
Total comprehensive income for the period/year, net of tax                          366 053                   267 948        651 113
Profit attributable to: 
Owners of the parent                                                                358 027                   320 322        637 943
Non-controlling interests                                                             3 906                     3 117          6 130
                                                                                    361 933                   323 439        644 073
Total comprehensive income attributable to: 
Owners of the parent                                                                362 147                   264 831        644 983
Non-controlling interests                                                             3 906                     3 117          6 130
                                                                                    366 053                   267 948        651 113
Continuing operations:
Basic earnings per ordinary share (cents)                                             213.0        14           186.6          377.2
Diluted basic earnings per ordinary share (cents)                                     212.9        14           186.6          377.2
Headline earnings per ordinary share (cents)                                          217.2        16           186.6          381.3
Diluted headline earnings per ordinary share (cents)                                  217.1        16           186.6          381.3
Discontinued operation:
Basic earnings per ordinary share (cents)                                               2.3                       6.0            6.4
Diluted basic earnings per ordinary share (cents)                                       2.3                       6.0            6.4
Headline earnings per ordinary share (cents)                                            2.3                       6.0            6.4
Diluted headline earnings per ordinary share (cents)                                    2.3                       6.0            6.4
Total operations:
Basic earnings per ordinary share (cents)                                             215.3        12           192.6          383.6
Diluted basic earnings per ordinary share (cents)                                     215.2        12           192.6          383.6
Headline earnings per ordinary share (cents)                                          219.5        14           192.6          387.7
Diluted headline earnings per ordinary share (cents)                                  219.4        14           192.6          387.7

* Prior period/year-end has been restated to show comparatives for the discontinued operation.

CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY

                                                     Attributable to holders of the parent
                                                        Non-distributable reserves
                                                                                                               Total
                               Issued                                                                   attributable           Non-
                                share       Share       Continuing    Discontinued       Retained        to ordinary    controlling
                              capital     premium       operations       operation         income       shareholders      interests        Total
                                R'000       R'000            R'000           R'000          R'000              R'000          R'000        R'000
 As at 1 July 2017             17 147     666 873          200 372                      2 603 090          3 487 482          7 522    3 495 004
 Movement in share-based
 payment reserve                                            14 800                                            14 800                      14 800
 Total comprehensive income                               (55 491)                        320 322            264 831          3 117      267 948
 Profit for the period                                                                    320 322            320 322          3 117      323 439
 Other comprehensive income                               (55 491)                                          (55 491)                    (55 491)
 Dividends                                                                              (110 671)          (110 671)        (4 404)    (115 075)
 Balance at 31 December 2017
 (unaudited)                   17 147     666 873          159 681                      2 812 741          3 656 442          6 235    3 662 677
 Movement in treasury shares      (1)       (517)                                                              (518)                       (518)
 Movement in share-based
 payment reserve                                             1 663                                             1 663                       1 663
 Total comprehensive income                                 62 531                        317 621            380 152          3 013      383 165
 Profit for the period                                                                    317 621            317 621          3 013      320 634
 Other comprehensive income                                 62 531                                            62 531                      62 531
 Dividends                                                                              (125 233)          (125 233)        (6 835)    (132 068)
 Balance at 30 June 2018
 (audited)                     17 146     666 356          223 875                      3 005 129          3 912 506          2 413    3 914 919
 IFRS 9 adjustment*                                                                       (6 092)            (6 092)                     (6 092)
 Restated balance at
 30 June 2018                  17 146     666 356          223 875                      2 999 037          3 906 414          2 413    3 908 827
 Movement in treasury shares      (3)     (2 483)                                                            (2 486)                     (2 486)
 Movement in share-based
 payment reserve                                           (5 237)                                           (5 237)                     (5 237)
 Transfer to discontinued
 operations                                               (16 189)          16 189
 Total comprehensive income                                  1 724           2 396        358 027            362 147          3 906      366 053
 Profit for the period                                                                    358 027            358 027          3 906      361 933
 Other comprehensive income                                  1 724           2 396                             4 120                       4 120
 Dividends                                                                              (125 220)          (125 220)                   (125 220)
 Balance at 31 December 2018
 (unaudited)                   17 143     663 873          204 173          18 585      3 231 844          4 135 618          6 319    4 141 937
* Refer to note 1.2.

CONSOLIDATED STATEMENTS OF
FINANCIAL POSITION
 
                                                                                    Unaudited         Unaudited        Audited
                                                                                  31 December       31 December        30 June
                                                                                         2018              2017           2018
                                                                       Notes            R'000             R'000          R'000
ASSETS       
Property, plant and equipment                                                       1 519 158         1 459 029      1 521 255
Intangible assets                                                                     620 619           344 971        626 242
Deferred tax                                                                            6 446             1 695         18 120
Other financial assets                                                                 32 669            38 699         34 010
Investment in joint ventures                                                          483 599           407 188        445 150
Investment in associate                                                                 2 459             5 296          8 014
Non-current assets                                                                  2 664 950         2 256 878      2 652 791
Inventories                                                                         1 408 660         1 290 514      1 565 949
Trade and other receivables                                                         1 737 367         1 611 281      1 641 295
Cash and cash equivalents                                                             448 176           747 606        404 629
Taxation receivable                                                                    13 689                 ?          6 061
Current assets                                                                      3 607 892         3 649 401      3 617 934
Assets classified as held-for-sale                                         4          143 926                 ?              ?
Total current assets                                                                3 751 818         3 649 401      3 617 934
Total assets                                                                        6 416 768         5 906 279      6 270 725
EQUITY AND LIABILITIES       
Capital and reserves       
Issued share capital                                                                   17 143            17 147         17 146
Share premium                                                                         663 873           666 873        666 356
Non-distributable reserves  : Continuing operations                                   204 173           159 681        223 875
                               : Discontinued operation held-for-sale      4           18 585                 ?              ?
Retained income                                                                     3 231 844         2 812 741      3 005 129
Total shareholders' funds                                                           4 135 618         3 656 442      3 912 506
Non-controlling interests                                                               6 319             6 235          2 413
Total equity                                                                        4 141 937         3 662 677      3 914 919
Long-term borrowings                                                                       ?              1 267              ?
Post-retirement medical liability                                                      16 478            16 931         16 340
Deferred tax                                                                          103 590            55 509        118 914
Non-current liabilities                                                               120 068            73 707        135 254
Trade and other payables                                                            1 575 183         1 828 993      1 841 343
Bank overdraft                                                                        359 161             3 844        248 877
Short-term borrowings                                                                      ?            250 680              ?
Provisions                                                                            132 280            79 795        130 332
Taxation payable                                                                            ?             6 583              ?
Current liabilities                                                                 2 066 624         2 169 895      2 220 552
Liabilities classified as held-for-sale                                    4           88 139                 ?              ?
Total current liabilities                                                           2 154 763         2 169 895      2 220 552
Total equity and liabilities                                                        6 416 768         5 906 279      6 270 725

CONSOLIDATED STATEMENTS OF
CASH FLOWS

                                                                                    Unaudited         Unaudited 
                                                                                   six months        six months        Audited
                                                                                        ended             ended     year ended
                                                                                  31 December       31 December        30 June
                                                                                         2018              2017           2018
                                                                                        R'000             R'000          R'000
Cash flows from operating activities 
Operating profit from continuing operations                                           456 956           391 745        803 049
Operating profit from discontinued operation (note 4)                                   4 918            11 915         16 433
Operating profit                                                                      461 874           403 660        819 482
Other adjustments and non-cash items                                                  119 897           137 901        378 360
Operating profit before working capital changes                                       581 771           541 561      1 197 842
Working capital changes                                                             (253 169)          (85 708)      (342 968)
    Decrease/(Increase) in inventories                                                109 603         (166 620)      (438 199)
    (Increase)/Decrease in trade and other receivables                              (151 354)          (50 138)         11 695
    (Decrease)/Increase in trade and other payables                                 (211 418)           131 050         83 536
 
Cash generated from operations                                                        328 602           455 853        854 874
Finance income received                                                                 4 074            10 931         17 363
Finance costs paid                                                                   (11 839)          (12 818)       (25 605)
Dividend income received                                                               18 131            17 378         30 100
Dividends paid                                                                      (125 220)         (115 075)      (247 143)
Taxation paid                                                                       (140 755)         (109 505)      (246 663)
Net cash inflow from operating activities                                              72 993           246 764        382 926
Cash flows from investing activities 
Decrease in other financial assets                                                      1 341             3 047          5 232
Acquisition of business                                                                     ?                ?       (327 623)
Purchase of property, plant and equipment   : Expansion                              (54 601)          (56 044)       (84 684)
                                            : Replacement                            (65 525)          (35 780)      (134 564)
Purchase of intangible assets                                                               ?                 ?        (4 450)
Proceeds on disposal of property, plant and equipment                                      49             1 953          6 911
Net cash outflow from investing activities                                          (118 736)          (86 824)      (539 178)
Cash flows from financing activities 
Increase in borrowings                                                                      ?               147              ?
Repayment of borrowings                                                                     ?                 ?      (276 177)
Purchase of treasury shares                                                           (2 486)                 ?          (518)
Net cash (outflow)/inflow from financing activities                                   (2 486)               147      (276 695)
Net (decrease)/increase in cash and cash equivalents                                 (48 229)           160 087      (432 947)
Net foreign exchange difference on cash and cash equivalents                            1 602           (2 776)          2 248
Cash and cash equivalents at beginning of period/year                                 155 752           586 451        586 451
Cash and cash equivalents at end of period/year                                       109 125           743 762        155 752
Split as follows: 
Cash and cash equivalents                                                             448 176           747 606        404 629
Bank overdraft                                                                      (359 161)           (3 844)      (248 877)
Net cash position per statement of financial position                                  89 015           743 762        155 752
Cash at banks and short-term deposits attributable to the discontinued operation       20 110                 ?              ?
Cash and cash equivalents at end of period/year                                       109 125           743 762        155 752

NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS

1     BASIS OF PREPARATION

1.1   INTRODUCTION
      The summarised unaudited interim results for the six months ended 31 December 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.
      The Board of directors take full responsibility for the set of financial results which have been prepared by Ms Dorette Neethling, Chief
      Financial Officer.

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 new and
      amended IFRS standards and interpretations during the period, which did not have a significant impact on the financial performance or
      position of the Group:

      IFRS 9: Financial instruments ? recognition and measurement
      IFRS 9 is the new financial instrument accounting standard and includes the requirements for classification and measurement of financial
      assets, the impairment and derecognition of financial assets, as well as general hedge accounting.

      The classification and measurement of the Group's financial assets are substantially the same as under IAS 39, except for:

      - the reclassification of the long-term receivable from the Black Managers Share Trust, from amortised cost to fair value through profit or
        loss; and

      - the measurement of the impairment provision for trade receivables.

      In measuring the provision for trade receivables, the Group has applied the new rules using the modified retrospective approach, whereby
      the financial statements are retrospectively adjusted and the cumulative impact (a reduction of R6.1 million of net trade receivables) was
      recorded on 1 July 2018, the initial date of implementing the standard, by recognising an adjustment to opening retained earnings. A
      simplified impairment approach was used, whereby the lifetime expected losses on trade receivables are recorded immediately.

      The Group has chosen to continue to apply the hedge accounting requirements of IAS 39, instead of the requirements in IFRS 9, to all of its
      hedging relationships.

      IFRS 15: Revenue from contracts with customers

      IFRS 15 establishes a five-step model for entities to use in accounting for revenue arising from contracts with customers. The new
      standard is based on the principle that revenue is recognised at an amount that reflects the consideration to which the entity expects to
      be entitled in exchange for transferring goods or services to a customer. The new standard supersedes all current revenue recognition
      requirements under IFRS.

      The Group adopted IFRS 15 using the retrospective approach, with the following impact on the Group's financial statements:

      - disaggregated revenue disclosure; and
 
      - liabilities for the non-performance on customer contracts will be recognised against revenue. 
 
                                                                                     Unaudited        Unaudited       Audited
                                                                                    six months       six months          year
                                                                                         ended            ended         ended
                                                                                   31 December      31 December       30 June
                                                                                          2018             2017          2018
                                                                                         R'000            R'000         R'000
       
2     REVENUE   
      Contracts with customers*                                                      3 594 581        3 108 185     6 382 706
      Finance income                                                                     4 003           13 109        18 270
      Dividend income ? Black Managers Share Trust                                       1 378            1 619         4 340
                                                                                     3 599 962        3 122 913     6 405 316
      *Refer note 5.2 for customer contract and channel details.  
       
3     NON-TRADING EXPENSES    
      Impairments                                                                      5 823**                ?         5 235
      Transaction costs                                                                  3 253            7 316         7 315
      Share-based payment expenses                                                      19 422           17 284        34 345
                                                                                        28 498           24 600        46 895
    
      ** The investment in the Ghanaian associate has been impaired due to its declining operational performance.

4     DISCONTINUED OPERATION
      The Board has resolved to dispose of Datlabs Proprietary Limited (Datlabs) in Zimbabwe. The results of Datlabs are presented below and
      the net assets were reclassified as held-for-sale as completion of the disposal is expected by year end.
      
                                                                                     Unaudited        Unaudited       Audited
                                                                                    six months       six months          year
                                                                                         ended            ended         ended
                                                                                   31 December      31 December       30 June
                                                                                          2018             2017          2018
                                                                                         R'000            R'000         R'000
      REVENUE                                                                           86 240           90 839       157 549
      Revenue from contracts with customers                                             86 240           90 839       157 549
      Cost of sales                                                                   (61 150)         (55 537)     (102 838)
      Gross profit                                                                      25 090           35 302        54 711
      Selling, distribution and marketing expenses                                    (11 371)         (11 646)      (21 799)
      Fixed and administrative expenses                                                (8 801)         (11 741)      (16 479)
      Operating profit                                                                   4 918           11 915        16 433
      Finance costs                                                                          ?            (419)         (786)
      Profit before taxation                                                             4 918           11 496        15 647
      Taxation                                                                         (1 115)          (1 474)       (4 939)
      Profit for the period/year                                                         3 803           10 022        10 708
      Details of assets and liabilities transferred to held-for-sale:
      ASSETS
      Property, plant and equipment                                                     45 458
      Inventories                                                                       25 795
      Trade and other receivables                                                       52 162
      Cash and cash equivalents                                                         20 110
      Taxation                                                                             401
      Total assets                                                                     143 926
      LIABILITIES
      Trade and other payables                                                          76 803
      Provisions                                                                         3 031
      Deferred tax liability                                                             8 305
      Total liabilities                                                                 88 139
      Net assets classified as held-for-sale                                            55 787
      Non-distributable reserves related to assets classified as assets
      held-for-sale
      Foreign currency translation reserve                                            (18 585)
      Net assets                                                                        37 202
      Included in the Group's consolidated statement of cash flows are cash flows
      from the Zimbabwean discontinued operation. These cash flows are included in
      operating, investing and financing activities as follows:
      Cash (outflow)/inflow from operating activities                                  (3 630)           35 730       40 165
      Cash outflow from investing activities                                           (7 262)          (2 516)      (7 964)
      Cash inflow/(outflow) from financing activities                                        ?              147      (1 881)
      Net cash (outflow)/inflow                                                       (10 892)           33 361       30 320

                                                                                     Unaudited                   Unaudited      Audited
                                                                                    six months                  six months         year
                                                                                         ended                       ended        ended
                                                                                   31 December                 31 December      30 June
                                                                                          2018           %            2017         2018
                                                                                         R'000      change           R'000        R'000
            
5     SEGMENT REPORTING           
5.1   REVENUE FROM CONTRACTS WITH CUSTOMERS           
      Continuing operations:            
      Southern Africa                                                                3 578 251          15       3 111 649    6 338 389
      OTC                                                                            1 018 625           5         970 669    1 989 225
      Prescription                                                                   1 363 453          34       1 021 117    2 237 620
      Hospital                                                                         764 361          11         686 359    1 347 698
      Consumer                                                                         393 262           6         369 478      686 699
      Other ? shared services                                                           38 550                      64 026       77 147
      Rest of Africa                                                                    30 551                      32 904       65 075
      Research and development services in India                                        10 353                      10 197       19 494
      Less: Inter-company sales                                                       (24 574)                    (46 565)     (40 252)
                                                                                     3 594 581                   3 108 185    6 382 706
      Discontinued operation:             
      Rest of Africa                                                                    86 240                      90 839      157 549
                                                                                     3 680 821                   3 199 024    6 540 255
            
                                                                                                      Export  
                                                                                                         and  
                                                                        Private          Public      foreign          Total
                                                                          R'000           R'000        R'000          R'000
5.2   REVENUE FROM CONTRACTS WITH                 
      CUSTOMERS BY CHANNEL                  
      31 December 2018                  
      Continuing operations:                  
      Southern Africa                                                 3 044 226         436 507       97 518      3 578 251
       OTC                                                              930 929          58 939       28 757      1 018 625
       Prescription                                                   1 174 649         159 128       29 676      1 363 453
       Hospital                                                         529 596         218 436       16 329        764 361
       Consumer                                                         370 502               4       22 756        393 262
       Other ? shared services                                           38 550               ?            ?         38 550
      Rest of Africa                                                          ?               ?       30 551         30 551
      Research and development services in India                              ?               ?       10 353         10 353
      Less: Inter-company sales                                               ?               ?     (24 574)       (24 574)
                                                                      3 044 226         436 507      113 848      3 594 581
      
      All of the Group's revenue from contracts with customers is recognised at a point in time.

                                                                                     Unaudited               Unaudited      Audited
                                                                                    six months              six months         year
                                                                                         ended                   ended        ended
                                                                                   31 December             31 December      30 June
                                                                                          2018          %          2017         2018
                                                                                         R'000     change        R'000        R'000
5.3   TRADING AND OPERATING PROFIT
      Continuing operations:
      Southern Africa                                                                  482 672         17      413 806      845 540
      OTC                                                                              216 714         20      181 111      399 640
      Prescription                                                                     150 217         13      132 516      239 435
      Hospital                                                                          51 152         26       40 615       95 312
      Consumer                                                                          65 808         13       58 419      112 181
      Other ? shared services                                                          (1 219)                   1 145      (1 028)
      Rest of Africa                                                                     1 585                     934        1 897
      Research and development services in India                                         1 197                   1 605        2 507
      Trading profit                                                                   485 454                 416 345      849 944
      Less: Non-trading expenses                                                      (28 498)                (24 600)     (46 895)
      Operating profit                                                                 456 956                 391 745      803 049
      Discontinued operation: 
      Rest of Africa                                                                     4 918                  11 915       16 433

5.4   TOTAL ASSETS
      Continuing operations: 
      Southern Africa                                                                5 961 565               5 503 746    5 844 806
      OTC                                                                            1 733 746               1 741 791    1 761 603
      Prescription                                                                   2 112 789               1 386 414    1 987 006
      Hospital                                                                       1 174 818               1 163 652    1 236 482
      Consumer                                                                         307 001                 330 695      315 425
      Other ? shared services                                                          633 211                 881 194      544 290
      Rest of Africa                                                                    47 206                 151 609      163 141
      India                                                                            264 071                 250 924      262 778
                                                                                     6 272 842               5 906 279    6 270 725
      Discontinued operation:
      Rest of Africa                                                                   143 926                       ?            ?
                                                                                     6 416 768               5 906 279    6 270 725

 6    INVENTORY
      The amount of inventories written down recognised as an expense in profit or
      loss in cost of sales:
      Continuing operations                                                             28 561                  26 439       91 466
      Discontinued operation                                                               290                   2 102        3 388

 7    CAPITAL COMMITMENTS
      ? Contracted                                                                      54 611                 115 693       32 932
      ? Approved, but not contracted                                                    76 869                 113 262      151 909
                                                                                       131 480                 228 955      184 841
 
                                                                                     Unaudited        Unaudited      Audited
                                                                                    six months       six months         year
                                                                                         ended            ended        ended
                                                                                   31 December      31 December      30 June
                                                                                          2018             2017         2018
                                                                                         R'000            R'000        R'000

8     HEADLINE EARNINGS
      Headline earnings is determined as follows:
      Continuing operations
      Earnings attributable to owners of Adcock Ingram from total operations           358 027          320 322      637 943
      Adjusted for:  
      Profit attributable from discontinued operation (refer note 4)                   (3 803)         (10 022)     (10 708)
      Earnings attributable to owners of Adcock Ingram from continuing operations      354 224          310 300      627 235
      Adjusted for:
      Impairment of intangible assets                                                        ?                ?        2 700
      Impairment of investment                                                           5 823                ?            ?
      Loss/(Profit) on disposal of property, plant and equipment                           264              220      (1 968)
      Tax effect on loss/(profit) on disposal of property, plant and equipment           (118)            (165)         (42)
      Adjustments relating to equity accounted joint ventures                              970             (26)        6 116
      Headline earnings from continuing operations                                     361 163          310 329      634 041
      Discontinued operation  
      Profit attributable to owners of Adcock Ingram and headline earnings
      from discontinued operation ***                                                    3 803           10 022       10 708
      Headline earnings from total operations                                          364 966          320 351      644 749
      *** No adjustments were needed for the purposes of reporting headline earnings
    
                                                                                          '000             '000         '000
    
9     SHARE CAPITAL
      Number of shares in issue                                                        175 748          175 748      175 748
      Number of ordinary shares held by the Group company                              (4 326)          (4 285)      (4 292)
      Net shares in issue                                                              171 422          171 463      171 456
      Headline earnings and basic earnings per share are based on:  
      Weighted average number of ordinary shares outstanding                           166 265          166 294      166 293
      Diluted weighted average number of shares outstanding                            166 352          166 295      166 295

10    SUBSEQUENT EVENTS
      Datlabs (Private) Limited (Zimbabwe) (Datlabs)
      On 31 January the Group signed a sale of shares agreement, disposing of its interest in Pharmalab (Jersey) Limited, the owner of Datlabs.
      All conditions precedent were met and the proceeds have been received.

11    FAIR VALUE HIERARCHY

The Group classifies all financial instruments and its fair value hierarchy as follows:

                                                                                                    Unaudited       Unaudited      Audited
                                                                                                   six months      six months         year
                                                                                                        ended           ended        ended
                                                                                                  31 December     31 December      30 June
                                                                   Statement of financial                2018            2017         2018
Financial instruments              Classification per IAS 39       position line item                   R'000           R'000        R'000

Investment (1)                     Available for sale              Other financial assets               1 614           1 905        1 937
Black Managers Share Trust(3)      Loans and receivables           Other financial assets              31 055          36 794       32 073
Trade and sundry receivables(3)    Loans and receivables           Trade and other receivables      1 657 982       1 522 688    1 535 369
Foreign exchange contracts ?
derivative asset (2)               Cash flow hedge                 Trade and other receivables          4 622           2 365       21 838
Cash and cash equivalents(3)       Loans and receivables           Cash and cash equivalents          448 176         747 606      404 629
Long-term borrowings(3)            Loans and borrowings            Long-term borrowings                     ?           1 267            ?
Trade and other payables(3)        Loans and borrowings            Trade and other payables         1 520 839       1 728 298    1 830 652
Foreign exchange contracts ? 
derivative liability (2)           Cash flow hedge                 Trade and other payables               410         559 555            ?
Short-term borrowings(3)           Loans and borrowings            Short-term borrowings                    ?         250 680            ?
Bank overdraft(3)                  Loans and borrowings            Bank overdraft                     350 161           3 844      248 877

(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)
Ms B Letsoalo (Executive Director)
Ms N Madisa (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
Mr 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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