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Unaudited Group Financial Results and Cash Dividend Declaration for the six-month period ended 31 December 2020
Adcock Ingram Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 2007/016236/06)
Share code: AIP ISIN: ZAE000123436
("Adcock Ingram" or "the Company" or "the Group")
Unaudited Group Financial Results and Cash Dividend Declaration
FOR THE SIX-MONTH PERIOD ENDED 31 DECEMBER 2020
- B-BBEE Level 3
- REVENUE INCREASED 4%
- GROSS PROFIT DECLINED 7%
- OPEX DECREASED 4%
- HEPS DECLINED 15%
- INTERIM DIVIDEND 80 cents per share
Introduction
The Group delivered a resilient performance in a constrained environment, owing to the continuing adverse impact of
COVID-19, and the resultant impact on the consumer and certain categories of products.
As Adcock Ingram is an essential service provider, it has been a privilege to play a role in supporting South Africa
through the COVID-19 pandemic, ensuring continuity in producing and supplying medicines, particularly life-saving
products such as intravenous fluids and ARVs, as well as other acute medicines and hygiene products that are used
to minimise the impact of COVID-19. We pay gratitude to our employees, who are essential workers, and remember
with sadness, six of our colleagues who tragically succumbed to the virus. The COVID-19 related trends on the business
during the reporting period, were similar in nature to those reported on during the previous financial year. The Group
still experienced good demand for immune-boosting products, and increased sales of renal products, but demand
was poor in cough, colds and flu (because of the absence of a flu season); branded prescription (due to low levels
of patients consulting doctors); ophthalmic surgical products and instruments, and hospital products (due to the
postponement of elective surgeries).
Under these circumstances, the Board of Directors (Board) is satisfied with the results delivered, in the current
depressed and unpredictable environment.
Financial performance
Revenue and trading profit
Revenue during the period under review increased by 3.6% to R3,758 million (December 2019: R3,628 million), driven
by an increase in mix of 4.9%, which includes the Plush acquisition. Price realisation was 4.7%, slightly ahead of the SEP
increase of 4.5% awarded in February 2020, evidencing the value of the Company increasing its non-regulated basket of
products. Organic volumes declined by 6.0%, mainly as a result of the absence of a cold and flu season which severely
impacted the OTC division, where cough and cold formulations normally make up 40% of their portfolio.
Gross profit for the six months decreased by 6.9% to R1,298 million (December 2019: R1,395 million) with the margin
declining from 38.4% to 34.5%. The gross margin was adversely impacted by the unfavourable exchange rate (which
on average was 14.5% weaker than the comparative period), higher than inflationary wage and utility increases, a
higher proportion of ARVs in the sales mix and lower factory recoveries at the Clayville factory due to the decreased
demand for OTC products.
Operating expense discipline has been outstanding, ending 4.3% lower than the comparative period, despite the
inclusion of Plush, as the cost-saving initiatives implemented in the latter part of the prior financial year were realised.
This resulted in a 11.7% decrease in trading profit to R433.0 million (December 2019: R490.1 million).
Non-trading expenses
Non-trading expenses of R47.2 million include retrenchment costs of R32.7 million, the Group having further reduced
its headcount towards the end of the calendar year, in response to the weak economic environment and declining
demand. Share-based expenses of R13.4 million and corporate activity costs of R1.1 million make up the balance.
Headline earnings
Headline earnings for the period decreased by 16.3% to R311.9 million (December 2019: R372.8 million). This translates
into headline earnings per share of 186.5 cents (December 2019: 218.5 cents), a decrease of 14.6%, better than the
headline earnings decline due to share repurchases by the Group.
Subsequent event
On 19 February 2021, Adcock Ingram concluded an agreement to acquire a portfolio of 17 Prescription, OTC and
Hospital brands from Aspen Pharmacare, with historic annualised revenue of approximately R95 million. Closing of
the transaction, including conditions precedent, is expected to be completed during March 2021. The terms include
a two-year manufacturing and supply agreement for products manufactured by Aspen Pharmacare, to accommodate
technology transfer to Adcock Ingram's facilities.
Unaudited Unaudited
six-month six-month
period ended period ended
Change 31 December 31 December
% 2020 2019
Revenue from contracts
with customers (R'000) 4 3 758 258 3 628 386
Gross profit (R'000) (7) 1 298 425 1 394 855
Trading profit (R'000) (12) 432 989 490 134
Operating profit (R'000) (16) 385 813 461 776
Headline earnings per share (cents) (15) 186.5 218.5
Basic earnings per share (cents) (15) 186.5 219.3
Total assets (R'000) 7 508 323 6 850 967
Net asset value per share (cents) 2 842.8 2 608.9
Dividend declared per share (cents) (20) 80.0 100.0
Segment Trading profit
Consumer (R'000) 48 108 782 73 415
OTC (R'000) (45) 109 260 197 791
Prescription (R'000) - 142 249 142 213
Hospital (R'000) 6 75 798 71 733
Prospects
The Group expects that the economy and the consumer will continue to remain constrained, at least for the remainder
of this calendar year. The continued roll-out of the government's vaccination plan is eagerly anticipated, to bring relief
to South Africa's healthcare system, frontline workers and economy.
The challenge faced in attempting to protect margins, due to the weakness of the rand, and another sub-optimal
single exit price adjustment, will continue in the second half of the financial year, and may be exacerbated by weak
factory throughput if demand for OTC products declines further.
The Group will continue to exercise strict cost control, and prudent capital allocation to improve the breadth of its
portfolio, while preserving balance sheet strength. Despite the immediate challenges, the Board remains optimistic
about the longer-term prospects of the Company.
The Board expresses its appreciation to Mr Lindsay Ralphs for his valuable contribution and leadership, whilst on the
Board, and as the Chairperson. We wish him well in his retirement.
Dividend distribution
The Board has declared an interim gross dividend out of income reserves of 80 cents per share in respect of the six
months ended 31 December 2020. The South African dividend tax ("DT") rate is 20% and the net dividend payable to
shareholders who are not exempt from DT is 64 cents per share. Adcock Ingram currently has 175,758,861 ordinary
shares in issue and qualifying 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, 16 March 2021
Shares trade ex distribution Wednesday, 17 March 2021
Record date Friday, 19 March 2021
Payment date Tuesday, 23 March 2021
Share certificates may not be dematerialised or rematerialised between Wednesday, 17 March 2021 and Friday,
19 March 2021, both dates inclusive.
LP Ralphs AG Hall
Chairman Chief Executive Officer
Approved by the Board: 23 February 2021
SENS release date: 24 February 2021
Company secretary
NE Simelane
Registered office
1 New Road, Midrand, 1682
Postal address
Private Bag X69, Bryanston, 2021
Transfer secretaries
Computershare Investor Services Proprietary Limited, Rosebank Towers, 15 Biermann Avenue, Rosebank, Johannesburg, 2196.
PO Box 61051, Marshalltown, 2107
Auditors
PricewaterhouseCoopers Inc, 4 Lisbon Lane, Waterfall, 2090
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. Investec Bank Limited, 100 Grayston Drive, Sandton, 2146
The full announcement has been published on SENS and is available at https://senspdf.jse.co.za/documents/2021/JSE/ISSE/AIP/AIP012021.pdf
The contents of this short-form summary announcement are the responsibility of the Board of Directors. Any investment decision should be
considered and based on the content of the information contained in the full announcement which will be published on the Company's
website at www.adcock.com/investors/financialreports. Copies of the full announcement are available for inspection at the registered
office of the Company and may be requested without charge during office hours by phoning +27 11 635 0143.
Date: 24-02-2021 07:05:00
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