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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.
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