SENS

[BACK TO ARTICLES]

8/25/2017 7:05:00 AM

I-Net Bridge
AIP: ADCOCK INGRAM HOLDINGS LIMITED - Group annual results for the year ended 30 June 2017 and cash dividend declaration
AIP: ADCOCK INGRAM HOLDINGS LIMITED - Group annual results for the year ended 30 June 2017 and cash dividend declaration
Group annual results for the year ended 30 June 2017 and cash dividend declaration
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")
GROUP ANNUAL RESULTS
for the year ended 30 June 2017
AND CASH DIVIDEND DECLARATION
Salient features
Continuing Operations
Increase of 7% in Turnover to R5,936 million
Increase of 10% in Gross Profit to R2,242 million
Increase of 20% in Trading Profit to R724 million
Increase of 37% in HEPS from continuing operations
Increase of 34% in total dividends declared to 139 cents per share
Net cash position of R335 million
Introduction
The Board of Directors (Board) has pleasure in presenting Adcock Ingram shareholders with commentary on the Group's excellent results 
for the year ended 30 June 2017.
It was only three years ago that a newly constituted leadership team at Adcock Ingram was grappling with crucial legacy matters,
simultaneously planning the implementation of a decentralised organisational structure and operating control system, to better manage each
of the various business units within the Group. This was a material and challenging undertaking, not only in its planning and implementation, 
but against a backdrop of economic uncertainty, volatile currency conversion rates, production issues, customer relationship matters, including 
a loss of market share. 
It is now common cause, that the restructured management team diligently responded to the call and Adcock Ingram's business has over
the past three years been competently re-engineered, not only in its progressing profitability, but once again, the Group enjoys the respect
of its national customer and consumer base, more particularly, having restored Adcock Ingram's decades long, trusted reputation in the
general pharmaceutical, health and personal care markets of South Africa.
Although the 2017 financial year has been somewhat challenging, aggravated by a poor economic and often unstable socio-
political environment, a lack of growth in consumer disposable income and rising unemployment, the Group has nevertheless achieved
satisfactory growth in turnover, which through efficiencies and cost control, has yielded an exceptional increase in trading profits.
This is a reflection of management's commitment and continued focus on customer service, an investment in sales, marketing and
brand innovation, all coupled with proper production planning, disciplined overhead management and improved economics in factory
output.
Adcock Ingram once again proudly takes its place as one of the leading pharmaceutical, consumer and health product manufacturers
and distributors in South Africa.
Financial performance - continuing
operations
Turnover and profits
Turnover increased by 7% to R5,936 million compared to the previous year and all business units recorded improvements in turnover. Price
adjustments contributed approximately 5.7% of the annual increase through two single exit price (SEP) increases, whereas the improved sales mix
and a marginal volume increase, contributed the balance of approximately 1.3%.
Gross profit margins improved from 36.6% in 2016 to 37.8% in the current year substantially arising from the improved product sales mix, good
inventory management and factory efficiencies.
Operating expenses were well controlled and increased by only 6.6%, resulting in a 20% improvement in trading profit to R724 million
(2016: R606 million).
Non-trading expenses
Non-trading expenses of R47.1 million include share-based expenses of R40.7 million and corporate activity costs of R6.3 million.
Net finance costs and headline earnings
Good cash flow management and the proceeds on the disposal of the Indian selling and marketing business, contributed to a
material reduction in the Group's net debt. Accordingly, net finance costs decreased from R71.8 million in the prior year to R22.6 million in
the current year, a saving of R49.2 million.
Headline earnings from continuing operations for the year increased to R513.7 million (2016: R376.4 million). This translates into headline
earnings per share from continuing operations of 308.9 cents (2016: 226.1 cents), an improvement of 36.6%.
Cash flows
Cash generated from operations amounted to R767.9 million (2016: R941.1 million) impacted in the main by an increased working
capital demand of R233.9 million (June 2016: decrease of R113.8 million). Notwithstanding the aforesaid, the Group had net cash resources
of R335 million at year-end, compared to net debt of R311 million at the end of the prior year, an improvement of R646 million.
Dividend distribution
The Board has declared a final dividend of 76 cents per share for the year ended 30 June 2017 out of income reserves. Total dividend
distributions for the year will therefore be 139 cents per share an increase of 34% compared to 2016.
Business overview
Southern Africa
This segment encompasses all of the business units in the southern African region (excluding Datlabs in Zimbabwe), namely, OTC,
Prescription, Consumer and Hospital.
OTC turnover improved by 10.8% to R1,849 million, substantially triggered by greater volume demand in most of the top brands,
particularly Allergex, Citro-Soda, Napamol and Alcophyllex, supported by increased demand in the tender and export markets, the
new products acquired during the year (Brolene, Stop-Allerg and Asic) and innovation on established brands. This business unit, which
focuses on products for pain, colds and flu and anti-histamine therapeutic areas, primarily marketed through the pharmacy channel,
posted resilient growth, as measured by IMS. The gross margin is marginally lower than the prior year, impacted by greater demand in
lower margin tender business and consumer buying patterns, choosing smaller pack sizes. Trading profit, however, increased by 10.4% to
R342.3 million (June 2016: R310.0 million).
Prescription turnover improved by 5.9% to R1,938 million (June 2016: R1,831 million) substantially aided by the SEP increases. The
division nevertheless achieved double digit growth in the private market segment on a "moving-annual-turnover" (MAT) basis as
measured by IMS. Volume growth was evident through increased private-sector demand for Trivenz, the Group's largest anti-retroviral
(ARV) product, and numerous other generic products. This was partially offset by lower demand from the public sector for certain ARVs.
A gross margin improvement was nevertheless realised, driven by the increased private sector sales mix. Trading profit of R207.8 million
is 21.2% ahead of the trading profit in the prior year of R171.5 million.
Consumer turnover of R689 million is marginally ahead of the comparable period, which typically reflected muted consumer
spending patterns, particularly amongst the lower LSM groups. According to Nielsen's research, Panado and Compral continue to outperform
the product segments in which they compete. Good cost control in this business unit, enabled trading profit to increase by 21.6% to
R110.0 million (June 2016: R90.5 million).
Hospital turnover increased by 2.4% to R1,257 million (June 2016: R1,227 million) with the Medicine Delivery product category not
achieving any growth over the prior year. This was affected by a 4% decline in Tender sales. This decline was compensated by growth of
10% by a somewhat better Renal portfolio demand. A gross margin improvement was realised in the year, driven by the variation in the
sales mix. Trading profits increased to R58.5 million (June 2016: R35.1 million). The hospital division commenced the marketing of the
Pharma-Q range of products, after securing the commercial rights for South Africa during the year.
Rest of Africa
The Group's non-South African enterprises comprise of operations in Zimbabwe and Kenya. The OTC Division has assumed management
responsibility for the Kenyan operation, the purpose being to exercise better control over operations in that region. These foreign
entities collectively posted a trading profit of R2.7 million, compared to a trading loss of R3.5 million in the prior year.
Changes to the Board
On 24 May 2017, Ms Lulama Boyce and Ms Jenitha John were appointed as independent non-executive directors and members of the
Audit Committee. Ms Boyce is also a member of the Human Resources, Remuneration and Nominations Committee and Ms John a member
of the Risk and Sustainability Committee. Mr Andrew Hall and Ms Dorette Neethling, in their respective capacities as Chief Executive Officer
(CEO) and Chief Financial Officer (CFO), were appointed members of the Risk and Sustainability Committee in accordance with the
recommendations of the King IV Report on Corporate Governance.
On 21 August 2017, Dr Brian Joffe resigned as non-executive director and Chairman of the Acquisitions Committee.
Prospects
The Adcock Ingram Group, like other corporates in South Africa, enters a new financial year presently characterised by a range of challenges
which include, inter alia, low economic growth, volatile currency conversion rates, rising unemployment, political uncertainty and several other
local and global spheres of instability.
Notwithstanding these national and international realities, the Board takes comfort from the fact that today, the Adcock Ingram Group is a
well-managed, well capitalised and profitable group enterprise, with inspired and motivated teams throughout the organisation operating in a 
relatively defensive sector of the economy.
The strategy of the Group remains the pursuit of additional sector opportunities, by acquisition or partnership, to expand the Group's product
portfolio and to leverage and rationalise the Group capacity for further growth, particularly in less regulated product classes, preferably without
the immediate need for material capital expenditure and infrastructure.
The experience gained over the past three years of focused remedial activity, is not materially different from the protective nature of conducting
business in today's economic circumstances and the Board remains assured by the Group's capable management and is cautiously confident in
the prospects for sustainability for the year ahead, subject always to there being no unexpected material economic and/or political disruptions
arising.
CD Raphiri      AG Hall                      D Neethling
Chairman        Chief Executive Officer      Chief Financial Officer
24 August 2017
Dividend distribution
The Board has declared a final gross dividend out of income reserves of 76 cents per share in respect of the year ended 30 June 2017. The
South African dividend tax ("DT") rate is 20% and the net dividend payable to shareholders who are not exempt from DT is 60.8 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 September 2017
Shares trade ex distribution            Wednesday, 13 September 2017
Record date                                Friday, 15 September 2017
Payment date                               Monday, 18 September 2017
Share certificates may not be dematerialised or rematerialised between Wednesday, 13 September 2017 and Friday, 15 September 2017, both
dates inclusive.
By order of the Board
NE Simelane
Company Secretary
24 August 2017
Consolidated statements of
comprehensive income
                                                                                                            Audited                 Audited
                                                                                                               2017          %         2016
Continuing operations                                                                            Notes        R'000     Change        R'000
Revenue                                                                                              2    5 957 700          7    5 559 896
Turnover                                                                                             2    5 936 056          7    5 545 610
Cost of sales                                                                                           (3 693 773)             (3 516 089)
Gross profit                                                                                              2 242 283         10    2 029 521
Selling, distribution and marketing expenses                                                            (1 068 585)          6  (1 004 534)
Fixed and administrative expenses                                                                         (449 275)          7    (419 293)
Trading profit                                                                                              724 423         20      605 694
Non-trading expenses                                                                                 3     (47 128)                (52 449)
Operating profit                                                                                            677 295         22      553 245
Finance income                                                                                       2       15 665                   5 107
Finance costs                                                                                              (38 239)                (76 888)
Dividend income                                                                                      2        5 979                   9 179
Equity-accounted earnings                                                                                    64 144                  59 288
Profit before taxation                                                                                      724 844         32      549 931
Taxation                                                                                                  (204 856)               (170 547)
Profit for the year from continuing operations                                                              519 988         37      379 384
Profit/(Loss) after taxation for the period/year from discontinued operations                        5       41 132               (200 242)
Profit for the year                                                                                         561 120                 179 142
Other comprehensive income which will subsequently be recycled to
profit or loss                                                                                             (24 832)                 107 129
 Exchange differences on translation of foreign operations:
 - Continuing operations                                                                                    (5 732)                   8 121
 - Joint venture and associate                                                                             (17 486)                  23 372
 - Discontinued operations                                                                                 (21 353)                  89 071
 Fair value profit/(loss) on available-for-sale asset, net of tax                                                 7                   (588)
 Profit on sale of shares                                                                                         -                   1 067
 Movement in cash flow hedge accounting reserve, net of tax                                                  19 732                (13 914)
Other comprehensive income recycled to profit or loss                                                     (125 784)                       -
Other comprehensive income which will not be recycled to profit or loss
Actuarial profit on post-retirement medical liability                                                           511                   6 079
Total comprehensive income for the year, net of tax                                                         411 015                 292 350
Profit attributable to:
Owners of the parent                                                                                        553 534                 168 801
Non-controlling interests                                                                                     7 586                  10 341
                                                                                                            561 120                 179 142
Total comprehensive income attributable to:
Owners of the parent                                                                                        405 568                 279 736
Non-controlling interests                                                                                     5 447                  12 614
                                                                                                            411 015                 292 350
Continuing operations:
Basic earnings per ordinary share (cents)                                                                     308,9         38        223,6
Diluted basic earnings per ordinary share (cents)                                                             308,9         38        223,6
Headline earnings per ordinary share (cents)                                                                  308,9         37        226,1
Diluted headline earnings per ordinary share (cents)                                                          308,9         37        226,1
Discontinued operations:
Basic earnings/(loss) per ordinary share (cents)                                                               24,0        120      (122,2)
Diluted earnings/(loss) per ordinary share (cents)                                                             24,0        120      (122,2)
Headline earnings per ordinary share (cents)                                                                    3,7         42          2,6
Diluted headline earnings per ordinary share (cents)                                                            3,7         42          2,6
Total operations:
Basic earnings per ordinary share (cents)                                                                     332,9        228        101,4
Diluted basic earnings per ordinary share (cents)                                                             332,9        228        101,4
Headline earnings per ordinary share (cents)                                                                  312,6         37        228,7
Diluted headline earnings per ordinary share (cents)                                                          312,6         37        228,7
Consolidated statement of
changes in equity
                                                         Attributable to holders of the parent
                                                                                                             Total
                                    Issued                      *NDR-             *NDR-               attributable         Non-
                                     share       Share     Continuing      Discontinued     Retained   to ordinary  controlling
                                   capital     premium     operations        operations       income  shareholders    interests       Total
                                     R'000       R'000          R'000             R'000        R'000         R'000        R'000       R'000
As at 1 July 2015 (audited)         16 888     512 938        505 000                      1 982 589     3 017 415       99 509   3 116 924
Share issue                              1         189                                                         190                      190
Movement in share-based
payment reserve                                                12 578                                       12 578                   12 578
Transfer to discontinued
operations                                                   (58 200)            58 200
Implementation of BEE scheme           258     153 746                                      (44 587)       109 417     (79 883)      29 534
Acquisition of non-controlling
interests in Ayrton Drug
Manufacturing Limited                                                                            (1)           (1)          (1)         (2)
Total comprehensive income                                     24 137            86 798      168 801       279 736       12 614     292 350
 Profit for the year                                                                         168 801       168 801       10 341     179 142
 Other comprehensive income                                    24 137            86 798                    110 935        2 273     113 208
Dividends                                                                                  (190 762)     (190 762)      (6 215)   (196 977)
Balance at 30 June 2016 (audited)   17 147     666 873        483 515           144 998    1 916 040     3 228 573       26 024   3 254 597
Movement in share-based
payment reserve                                                23 710                                       23 710                   23 710
Disposal of business                                                                                                   (18 465)    (18 465)
Share-based expenses transferred
from non-distributable reserves                             (303 885)                        303 885
Total comprehensive income                                    (2 968)         (144 998)      553 534       405 568        5 447     411 015
 Profit for the year                                                                         553 534       553 534        7 586     561 120
 Other comprehensive income                                   (2 968)         (144 998)                  (147 966)      (2 139)   (150 105)
Dividends                                                                                  (170 369)     (170 369)      (5 484)   (175 853)
Balance at 30 June 2017 (audited)   17 147     666 873        200 372                      2 603 090     3 487 482        7 522   3 495 004
* Non-distributable reserves.
Consolidated statements of
financial position
                                                                                                                          2017         2016
                                                                                                                         R'000        R'000
ASSETS 
Property, plant and equipment                                                                                        1 445 095    1 423 173
Intangible assets                                                                                                      349 997      276 070
Deferred tax                                                                                                             1 588        8 129
Other financial assets                                                                                                  41 746       74 310
Investment in joint ventures                                                                                           392 013      354 139
Investment in associate                                                                                                  6 071            -
Non-current assets                                                                                                   2 236 510    2 135 821
Inventories                                                                                                          1 156 949    1 167 005
Trade and other receivables                                                                                          1 567 802    1 398 501
Cash and cash equivalents                                                                                              592 070      200 555
Taxation receivable                                                                                                      9 642       84 087
Current assets                                                                                                       3 326 463    2 850 148
Assets classified as held-for-sale                                                                                           -      610 638
Total current assets                                                                                                 3 326 463    3 460 786
Total assets                                                                                                         5 562 973    5 596 607
EQUITY AND LIABILITIES 
Capital and reserves 
Issued share capital                                                                                                    17 147       17 147
Share premium                                                                                                          666 873      666 873
Non-distributable reserves:  Continuing operations                                                                     200 372      483 515
                             Discontinued operations held-for-sale                                                           -      144 998
Retained income                                                                                                      2 603 090    1 916 040
Total shareholders' funds                                                                                            3 487 482    3 228 573
Non-controlling interests                                                                                                7 522       26 024
Total equity                                                                                                         3 495 004    3 254 597
Long-term borrowings                                                                                                   251 492      500 000
Post-retirement medical liability                                                                                       16 793       16 994
Deferred tax                                                                                                            73 138       75 868
Non-current liabilities                                                                                                341 423      592 862
Trade and other payables                                                                                             1 637 197    1 564 265
Bank overdraft                                                                                                           5 619       11 755
Short-term borrowings                                                                                                      416            -
Cash-settled options                                                                                                     7 384        3 117
Provisions                                                                                                              75 930       69 906
Current liabilities                                                                                                  1 726 546    1 649 043
Liabilities classified as held-for-sale                                                                                      -      100 105
Total current liabilities                                                                                            1 726 546    1 749 148
Total equity and liabilities                                                                                         5 562 973    5 596 607
 
Consolidated statement of
cash flows
                                                                                                                       Audited      Audited
                                                                                                                          2017         2016
                                                                                                                         R'000        R'000
Cash flows from operating activities
Operating profit from continuing operations                                                                            677 295      553 245
Operating profit/(loss) from discontinued operations (note 5.1)                                                          8 416    (198 712)
Operating profit                                                                                                       685 711      354 533
Other adjustments and non-cash items                                                                                   316 097      472 839
Operating profit before working capital changes                                                                      1 001 808      827 372
Working capital changes                                                                                              (233 935)      113 752
Cash generated from operations                                                                                         767 873      941 124
Finance income received                                                                                                 16 938       17 249
Finance costs paid                                                                                                    (41 612)     (86 689)
Dividend income received                                                                                                21 368       23 835
Dividends paid                                                                                                       (175 853)    (196 977)
Taxation paid                                                                                                        (133 281)    (176 421)
Net cash inflow from operating activities                                                                              455 433      522 121
Cash flows from investing activities
Decrease in other financial assets                                                                                      32 356       11 961
Acquisition of business                                                                                                (9 875)            -
Disposal of businesses                                                                                                 291 096            -
Purchase of property, plant and equipment - Expansion                                                                 (75 930)     (34 650)
                                          - Replacement                                                               (87 308)     (60 792)
Purchase of intangible assets                                                                                         (70 821)            -
Proceeds on disposal of property, plant and equipment                                                                    2 298          486
Proceeds on disposal of intangibles                                                                                          -        2 009
Disposal of non-controlling interest in Blue Falcon Trading Proprietary Limited                                              -     (11 616)
Net cash inflow/(outflow) from investing activities                                                                     81 816     (92 602)
Cash flows from financing activities
Acquisition of non-controlling interests in Ayrton Drug Manufacturing Limited                                                -          (2)
Proceeds from issue of share capital                                                                                         -          190
Proceeds from sale of shares                                                                                                 -       30 410
Increase in borrowings                                                                                                   9 917            -
Repayment of borrowings                                                                                              (252 223)     (19 816)
Net cash (outflow)/inflow from financing activities                                                                  (242 306)       10 782
Net increase in cash and cash equivalents                                                                              294 943      440 301
Net foreign exchange difference on cash and cash equivalents                                                           (2 954)       10 992
Cash and cash equivalents at beginning of year                                                                         294 462    (156 831)
Cash and cash equivalents at end of year                                                                               586 451      294 462
Split as follows:
Cash and cash equivalents                                                                                              592 070      200 555
Bank overdraft                                                                                                         (5 619)     (11 755)
Net cash position per statement of financial position                                                                  586 451      188 800
Cash at banks attributable to discontinued operations                                                                        -      105 662
Cash and cash equivalents at end of year                                                                               586 451      294 462
Notes to the consolidated
financial statements
1. Basis of preparation
   1.1   Introduction
         The audited consolidated annual financial statements for the year ended 30 June 2017 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. These summarised results for the year ended 30 June 2017, extracted from the audited consolidated financial
         statements, which the Board of directors take full responsibility for, have been prepared by Ms Dorette Neethling,
         Chief Financial Officer. Both these summarised results and the consolidated financial statements were audited by the independent
         external auditors, Ernst & Young Inc. and copies of their unqualified audit opinion are available for inspection at the Company's
         registered office.
   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
         amended IFRS standards and interpretations during the year which did not have any effect on the financial performance or position
         of the Group:
         - IFRS 11: Joint Arrangements - Accounting for acquisition of interests in Joint Operations      
         - IAS 1: Presentation of Financial Statements - Disclosure initiative amendments
                                                                                                                     Audited     Audited
                                                                                                                        2017        2016
                                                                                                                       R'000       R'000
2. Revenue
   Turnover                                                                                                        5 936 056   5 545 610
   Finance income                                                                                                     15 665       5 107
   Dividend income - Black Managers Share Trust                                                                        5 979       9 179
                                                                                                                   5 957 700   5 559 896
3. Non-trading expenses
   Impairments                                                                                                           217       8 638
   Transaction costs                                                                                                   6 251       3 892
   Share-based payment expenses                                                                                       40 660      39 919
                                                                                                                      47 128      52 449
                                                                                                                                 Audited
                                                                                                                                    2017
                                                                                                                                   R'000
4. Acquisition of business
   On 1 April 2017, Adcock Ingram Healthcare Proprietary Limited acquired 100% of the shareholding of Virtual Logistics
   Proprietary Limited (Virtual), a national fine distribution company. The Group acquired Virtual as it complements the
   Company's reach and capacity, allowing for improved service levels to customers.
   The fair value of the identifiable assets as at the date of acquisition was:
   Assets
   Trade and other receivables                                                                                                    16 485
   Property, plant and equipment                                                                                                   5 288
   Intangible assets                                                                                                               2 880
   Taxation receivable                                                                                                               462
   Deferred tax                                                                                                                      204
   Inventories                                                                                                                        94
                                                                                                                                  25 413
   Liabilities
   Trade and other payables                                                                                                       11 015
   Bank overdraft                                                                                                                  2 275
   Short-term borrowings                                                                                                           1 198
   Long-term borrowings                                                                                                              920
                                                                                                                                  15 408
   Total identifiable net assets at fair value                                                                                    10 005
   Goodwill arising on acquisition                                                                                                 5 595
   Purchase consideration                                                                                                         15 600
   Deferred consideration                                                                                                        (8 000)
   Net bank overdraft acquired with the business                                                                                   2 275
   Net cash consideration                                                                                                          9 875
   The fair value of the trade receivables equals the gross amount of trade receivables and amounts to R16.1 million. None
   of the trade receivables have been impaired and it is expected that the full contractual amounts can be collected.
   Goodwill represents the difference between the purchase consideration and the fair value of the net assets acquired as
   there are no further separately identifiable intangible assets. The significant factors that contributed to the recognition
   of goodwill include, but are not limited to, the establishment of a fine distribution network, expanding the Group's
   national footprint.
   From the date of acquisition, Virtual contributed R21.7 million towards revenue and reported a profit before income tax
   of R0.9 million.
   If the Virtual acquisition had taken place at the beginning of the reporting period, the revenue would have been R84.9
   million and profit before income tax would have been R3.1 million.
   Analysis of cash flows on acquisition
   Transaction costs of the acquisition (included in cash flows from operating activities)                                        (1 467)
   Net bank overdraft acquired with the business (included in cash flows from investing activities)                               (2 275)
   Net cash flows from acquisition                                                                                                (3 742)
   Transaction costs of R1.5 million have been expensed and are included in non-trading expenses.
   
   A payment of R8.0 million of the purchase price, which is fully provided for, has been deferred. The deferred payment is subject to the
   achievement of profit targets.
                                                                                                                     Audited      Audited
                                                                                                                        2017         2016
                                                                                                                       R'000        R'000
5. Discontinued operations
   During the year ended 30 June 2016, the Board had resolved to dispose of:
   - Adcock Ingram Private Limited (India); and
   - Ayrton Drug Manufacturing Limited (Ayrton) in Ghana.
   This resulted in the above businesses being classified and accounted for as a disposal group held-for-
   sale during the previous financial year. India was disposed of on 14 October 2016 and 53.47% of
   Ayrton on 7 December 2016, with the Group retaining a 25.1% minority share in Ayrton. The loss of
   control on disposal resulted in the foreign currency translation reserve relating to both entities being
   recycled to profit and loss.
   5.1   STATEMENT OF COMPREHENSIVE INCOME
         Revenue                                                                                                     120 174      412 289
         Turnover                                                                                                    118 901      403 892
         Cost of sales                                                                                              (47 191)    (175 204)
         Gross profit                                                                                                 71 710      228 688
         Selling, distribution and marketing expenses                                                               (39 077)    (143 210)
         Fixed and administrative expenses                                                                          (17 384)     (53 883)
         Trading profit                                                                                               15 249       31 595
         Non-trading expenses                                                                                        (6 833)    (230 307)
         Operating profit/(loss)                                                                                       8 416    (198 712)
         Finance income                                                                                                1 273        8 397
         Finance costs                                                                                               (2 014)      (8 574)
         Profit/(Loss) before taxation                                                                                 7 675    (198 889)
         Taxation                                                                                                    (1 301)      (1 353)
         Profit/(Loss) for the period/year from discontinued operations                                                6 374    (200 242)
         Profit on disposal of the discontinued operations                                                            34 758            -
         Profit/(Loss) for the period/year from discontinued operations                                               41 132    (200 242)
         Profit/(Loss) attributable to:
         India                                                                                                        46 638    (139 583)
         Ayrton                                                                                                      (5 506)     (60 659)
                                                                                                                      41 132    (200 242)
         Profit/(Loss) attributable to:
         Owners of the parent                                                                                         39 903    (203 403)
         Non-controlling interests                                                                                     1 229        3 161
                                                                                                                      41 132    (200 242)
   a)    Non-trading expenses
         Impairment of assets transferred to held-for-sale                                                                 -      207 971
          India                                                                                                            -      135 012
          Ayrton                                                                                                           -       72 959
         Transaction costs                                                                                             6 833       22 656
         Profit on sale of intangible asset                                                                                -        (320)
                                                                                                                       6 833      230 307
   5.2   STATEMENT OF FINANCIAL POSITION
         Details of assets and liabilities transferred to held-for-sale:
         Assets
         Property, plant and equipment                                                                                             19 234
         Intangible assets                                                                                                        381 109
         Inventories                                                                                                               32 757
         Trade and other receivables                                                                                               56 660
         Taxation receivable                                                                                                        2 114
         Cash and cash equivalents                                                                                                118 764
         Total assets                                                                                                             610 638
         Liabilities
         Long-term borrowings                                                                                                       5 464
         Short-term borrowings                                                                                                      5 971
         Bank overdraft                                                                                                            13 102
         Trade and other payables                                                                                                  71 733
         Provisions                                                                                                                 3 835
         Total liabilities                                                                                                        100 105
         Net assets/(liabilities) classified as held-for-sale
         India                                                                                                                    527 174
         Ayrton                                                                                                                  (16 641)
         Net assets                                                                                                               510 533
         Foreign currency translation reserve related to assets classified as held-for-sale:                                    (148 667)
          India                                                                                                                 (203 991)
          Ayrton                                                                                                                   55 324
         Share issue expenses related to assets classified as held-for-sale (India)                                                 3 669
         Net assets                                                                                                               365 535
   5.3   CASH INFLOW ON DISPOSAL
         Consideration received                                                                                      338 601
          India                                                                                                      327 565
          Ayrton                                                                                                      11 036
         Net cash disposed of with the discontinued operations                                                      (47 505)
          India                                                                                                     (48 807)
          Ayrton                                                                                                       1 302
         Net cash inflow                                                                                             291 096
   5.4   CASH FLOW STATEMENT
         Included in the Group's consolidated statement of cash flows are cash flows from the Indian and
         Ayrton discontinued operations. These cash flows are included in operating, investing and
         financing activities as follows:
         Cash inflow/(outflow) from operating activities                                                              19 487      (6 061)
         Cash inflow/(outflow) from investing activities                                                                 744      (1 962)
         Cash outflow from financing activities                                                                     (78 388)      (8 419)
         Net cash outflow                                                                                           (58 157)     (16 442)
                                                                                                                     Audited      Audited
                                                                                                                        2017         2016
                                                                                                                       R'000        R'000
6. Segment reporting
   Turnover
   Continuing operations:
   Southern Africa                                                                                                 5 754 241    5 388 857
    Consumer                                                                                                         688 807      662 981
    OTC                                                                                                            1 849 038    1 668 438
    Prescription                                                                                                   1 937 925    1 830 669
    Hospital                                                                                                       1 256 753    1 226 769
    Other - shared services                                                                                           21 718            -
   Rest of Africa                                                                                                    207 052      178 594
   Research and development services in India                                                                         18 396       15 099
                                                                                                                   5 979 689    5 582 550
   Less: Intercompany sales                                                                                         (43 633)     (36 940)
                                                                                                                   5 936 056    5 545 610
   Discontinued operations:
   India                                                                                                              67 206      258 936
   Rest of Africa (Ghana)                                                                                             51 695      144 956
                                                                                                                     118 901      403 892
   Trading and operating profit
   Continuing operations:
   Southern Africa                                                                                                   719 103      607 043
    Consumer                                                                                                         110 038       90 476
    OTC                                                                                                              342 322      310 022
    Prescription                                                                                                     207 787      171 453
    Hospital                                                                                                          58 475       35 092
    Other - shared services                                                                                              481            -
   Rest of Africa                                                                                                      2 712      (3 522)
   Research and development services in India                                                                          2 608        2 173
   Trading profit                                                                                                    724 423      605 694
   Less: Non-trading expenses                                                                                       (47 128)     (52 449)
   Operating profit                                                                                                  677 295      553 245
   Discontinued operations:
   India                                                                                                               6 300        7 269
   Rest of Africa (Ghana)                                                                                              8 949       24 326
   Trading profit                                                                                                     15 249       31 595
   Less: Non-trading expenses                                                                                        (6 833)    (230 307)
   Operating profit/(loss)                                                                                             8 416    (198 712)
   Total assets
   Continuing operations:
   Southern Africa                                                                                                 5 161 098    4 611 160
    Consumer                                                                                                         354 965      325 800
    OTC                                                                                                            1 667 220    1 556 402
    Prescription                                                                                                   1 239 248    1 216 989
    Hospital                                                                                                       1 125 158    1 099 499
    Other - shared services                                                                                          774 507      412 470
   Rest of Africa                                                                                                    146 661      143 854
   India                                                                                                             255 214      230 955
                                                                                                                   5 562 973    4 985 969
   Discontinued operations:
   India                                                                                                                   -      584 844
   Rest of Africa (Ghana)                                                                                                  -       25 794
                                                                                                                   5 562 973    5 596 607
                                                                                                                     Audited      Audited
                                                                                                                        2017         2016
                                                                                                                       R'000        R'000
7. Inventory
   Inventories written down and recognised as an expense in profit or loss:
   Continuing operations:
   Cost of sales                                                                                                      66 215       63 986
   Discontinued operations:
   Cost of sales                                                                                                           -        4 616
                                                                                                                      66 215       68 602
8. Capital commitments
   - Contracted for                                                                                                   72 202       11 362
   - Approved but not contracted                                                                                     128 281       38 577
                                                                                                                     200 483       49 939
9. Headline earnings
   Headline earnings is determined as follows:
   Continuing operations
   Earnings attributable to owners of Adcock Ingram from total operations                                            553 534      168 801
   Adjusted for:
   (Profit)/Loss attributable to Adcock Ingram from discontinued operations (note 5.1)                              (39 903)      203 403
   Earnings attributable to owners of Adcock Ingram from continuing operations                                       513 631      372 204
   Adjusted for:
   Impairment of intangible assets                                                                                         -        3 149
   (Profit)/Loss on disposal/scrapping of property, plant and equipment                                                (194)          888
   Tax effect on (profit)/loss on disposal of property, plant and equipment                                               76         (23)
   Adjustments relating to equity accounted joint ventures
   Loss on disposal of property, plant and equipment                                                                     199          211
   Headline earnings from continuing operations                                                                      513 712      376 429
   Discontinued operations
   Profit/(Loss) attributable to owners of Adcock Ingram from discontinued operations                                 39 903    (203 403)
   Adjusted for:
   Impairment of held-for sale assets (note 5.1)                                                                           -      207 971
   Profit on sale of discontinued operations (note 5.1)                                                             (34 758)            -
   Profit on sale of intangible asset                                                                                      -        (320)
   Loss on disposal/scrapping of property, plant and equipment                                                           975           70
   Headline earnings from discontinued operations                                                                      6 120        4 318
                                                                                                                        '000         '000
10. 
   Source: JSE News Service (SENS)
[BACK TO ARTICLES]