Restructure gives Adcock profit a boost
Pharmaceutical group increases overall revenue 7%
Pharmaceutical group Adcock Ingram has managed to turn its rest of Africa operations profitable, contributing to a tripling of after-tax profit in the year to end-June.
Adcock Ingram grew overall revenue by 7% to R5.96bn and after-tax profit was up 213% to R561m in the year to end-June.
The group declared a final dividend of 76c, taking its total for the year to R1.39, a 34% increase on the prior year’s R1.04.
Over-the-counter (OTC) medicines are Adcock Ingram’s second-biggest contributor to revenue but biggest contributor profit. Its OTC division grew revenue by 11% to R1.8bn, contributing 31% of group revenue.
It was only three years ago that a leadership team was grappling with crucial legacy matters
Adcock Ingram says the process of re-engineering its business has borne fruit and allowed it to claw back profit in a tough operating environment.
The pharmaceutical company said on Friday the shake-up of the leadership team had also restored its trusted reputation in SA.
A new management was installed by Bidvest in 2014 after the group acquired a majority interest in the firm.
Bidvest’s share is about 37.5%, followed by the Public Investment Corporation with 22% and empowerment partner Ad-Izinyosi with 14.7%.
“It was only three years ago that a newly constituted leadership team at Adcock Ingram was grappling with crucial legacy matters,” said CEO Andrew Hall.
“Adcock’s business has been competently re-engineered, not only in its progressing profitability, but again, the group enjoys the respect of its national customer base.”
Adcock Ingram grew overall revenue 7% to R5.96bn and aftertax profit was up 213%, at R561m in the year to end-June.
Kagiso Asset Management associate portfolio manager Aslam Dalvi said Adcock’s management had executed well across several areas and had delivered a good result in a very challenging environment.
“Overall profit growth in this period was supported by very strong cost control, good pricing and the benefit of a stronger currency in the second half of the year which supported gross margin expansion,” said Dalvi.
“While we expect the operating environment to remain challenging, the increased focus on product innovation, higher investment in sales and a disciplined focus on costs should all support medium-term earnings growth,” he said.
Over-the-counter (OTC) medicines are Adcock Ingram’s second-biggest contributor to revenue, but the biggest contributor to profit.
Its OTC division grew revenue 11%, to R1.8bn, contributing 31% of group revenue, while trading profit grew 10%, to R342m, contributing 47% of the group’s total.
The group’s operations in Zimbabwe and Kenya swung to a profit in the period under review. Adcock said this was partly due to the OTC division’s takeover of management responsibility in Kenya “to exercise better control over operations in that region”.
The two operations collectively reported a trading profit of R2.7m from a trading loss of R3.5m for the corresponding period a year earlier.
Adock said its new financial year would be fraught with challenges such as low economic growth, currency volatility, global instability and political uncertainty. However, it said its strategy would remain the same. “The strategy of the group remains the pursuit of additional sector opportunities, by acquisition or partnership ... preferably without the immediate need for material capital expenditure and infrastructure,” Adcock said.
The group declared a final dividend of 76c, taking its total for the year to R1.39, a 34% increase on the prior year’s R1.04. In the year to date, the share price is up 34.8%.