Adcock Ingram geared for growth after positive H1 results

Each of JSE-listed Adcock Ingram’s business units had posted “solid performances” in the six months to December 31, achieving good growth in turnover and good cost control.

The group on Wednesday reported a 70% increase in earnings a share and a 49% increase in headline earnings a share for the six months under review.

Headline earnings from continuing operations reached R241-million, compared with R159-million in the six months to December 2015, translating into headline earnings a share from continuing operations of 144.9c

“Against a tough economic background, we have been able to increase both turnover and gross profit by 11%, and trading profit by 22%. Significant sales and marketing effort was put into each of the business units and these results are encouraging,” CEO Andy Hall said. 

Group turnover increased by 11% to R2.98-billion.

The adverse impact of the currency was largely balanced by an advantageous sales mix, factory efficiencies and the impact of the single exit price adjustments.  

Gross profit, of R174-million, maintained a satisfactory level, while cash generated from operations amounted to R367.6-million, despite working capital increasing by R66-million. 

Net finance costs decreased from R38.8-million in the prior comparable period to R17.5-million, following the reduction in the company’s overall net debt since June 2016.
 
“We are set for growth and ready to make acquisitions in line with our strategy, owing to our strong cash position,” Hall said.

He further noted that the disposal of the Indian sales and marketing operation had been finalised. 

A 53% share in Ayrton, Ghana, was also successfully sold to Ghanian operating business Dannex, a local operator familiar with the Ghanaian market. Net profit arising from the disposals of the Indian and Ghanaian operating businesses, after accounting for the reversal of a foreign currency translation reserve of R126-million, amounted to R35-million.
 
Adcock declared a dividend of 63c a share for the interim period.

DIVISIONAL PERFORMANCE
Adcock’s over-the-counter operations grew turnover by 16.2% year-on-year, supported by increased volumes during the winter season and encouraging demand in the tender and export markets.

“Top brands including Allergex, Citro-Soda, Alcophyllex, Dilinct and Adco-Linctopent all achieved double-digit growth. Analgesic brands containing codeine achieved very low growth following a change in regulation for these products,” Hall noted.

He pointed out that this business unit, which focuses on products in pain, coughs, colds and flu, and antihistamine therapeutic areas through the pharmacy channel, posted growth well ahead of the market.
Despite the punitive impact of the exchange rate and a detectable change in consumer buying patterns to smaller pack sizes, trading profit increased by 13.2% to R145.6-million.

The prescription division’s turnover, meanwhile, improved by 13% to R1.01-billion. This division achieved double-digit growth in the private market segment.

“Trading profit of R116.5-million is well ahead of the trading profit in the comparative period, of R87.1-million. In July 2016, this division obtained the sales and promotional rights for the Astellas dermatology range through our partner Leo Pharmaceuticals.”

Consumer turnover of R334.8-million is only marginally ahead of the comparable period. The division faced a challenging economic environment, where discretionary spend remains under pressure.

The hospital division’s turnover increased by 5.8% to R662.4-million with all product categories achieving growth.

Trading profits increased to R27-million. The division secured the commercial rights to the Pharma-Q range of products in South Africa in December 2016 and has recently started marketing the range on behalf of Pharma-Q.

“The group’s enterprises in Zimbabwe and Kenya have, for some time, underperformed in challenging markets. These entities fortunately constitute a very small percentage of group assets and collectively incurred a trading loss of R900 000 during the period under review,” Hall said.