Adcock turns focus from survival to development

After being in “remedial mode” for the past two years, JSE-listed pharmaceuticals giant Adcock Ingram is eyeing growth and development after generating healthy amounts of cash and accumulating “significant” resources during the year ended June 30.

The group, which is progressing the sale of its lossmaking India assets, now aims to pursue its nonregulated product portfolio expansion plans through partnerships and acquisitions.

“The successful restructuring of the business over the past two years has resulted in a substantially cleansed, well-controlled commercial platform, with a broad product range, [which] in most cases, [is] enjoying growing market support; but more importantly, [the business has] a re-energised, incentivised and informed management team,” Adcock CEO Andy Hall said on Friday.

Adcock’s year-end financial results revealed a continuing positive performance and market share gains across all divisions since the reorganisation of the business started in June 2014, he said.

“Most gratifying is the cash generation in the business, which resulted in net debt for total operations over the past two years reducing from R1.1-billion at June 30, 2014, to R217-million at June 30, this year. This important indicator shows the positive outcome of the group’s restructure and focused management control,” Hall continued.

Adcock, which swung back into the black in the 2015 financial year, posted headline earnings a share of 228.7c, an increase of 43% on the prior year, while basic earnings a share contracted 14% to 101.4c during the 12 months under review.

Normalised headline earnings a share from continuing operations increased by 20.1% to 238.6c.

Profit for the year was down 10% to R179-million.

Adcock’s turnover edged up 7% to R5.5-billion, with all the company’s divisions reporting improvements.

Operating costs and assets, increasing 5%, were well managed and controlled during the year under review, resulting in a 16.9% increase in trading profit to R606-million, Hall added.

Adcock reported a total dividend distribution of 104c a share for the year under review, up 28% on the prior year.

DISPOSALS
Meanwhile, the sale of Adcock’s India interests, which, together with the held-for-sale Ghana interest, is reflected as a discontinued operation holding impairment provision of R208-million, is progressing well.

Following the R822-million 2013 buyout of Cosme Farma Laboratories, a prolonged disappointing performance and several impairments sparked Adcock to dispose of the India-based pharmaceutical company for R336-million to Samara Capital Partners Fund.

“The sale processes in each case are progressing well and I can confirm that the regulatory approval in relation to the disposal of our Indian sales and marketing operation was announced by the Foreign Investment Promotion Board on August 23.

“The drug regulatory arm of the Indian business will remain as an essential support function to our operations in South Africa and we remain committed to the joint venture manufacturing facility in Bangalore, which is an important part of the local supply chain,” Hall commented.

The company is also selling 53% of its majority stake in Ghana-based Ayrton Drugs Manufacturing to local company Dannex for an undisclosed amount.

Adcock will retain a 25.1% interest in the asset, but will hand over management and operational control to Dannex.

The agreement remains subject to approvals, including the green light from the Ghana Stock Exchange and the Ghana Securities and Exchange Commission.