It’s taken only five years but Adcock Ingram shares are now finally back to the level at which Bidvest bought out the struggling pharmaceuticals company in one of SA’s most hostile takeover battles, between 2013 and 2014.
Bidvest, then still under the leadership of former CEO Brian Joffe, eventually stumped up R70 a share in 2014 to wrest control of the company from Chilean group CFR. But it’s clear the hard graft put in by Adcock since the deal was struck is paying off. After all, where do you read of a listed company "very pleased" with "excellent earnings growth" these days?
Trading profit grew 20% and turnover increased 10%, well ahead of average price increases allowed by the government, and due in part to a change in Adcock’s sales mix and efficiencies at the Wadeville factory.
But Adcock, like all other local manufacturers, will get no help from the state in the year ahead. Aaron Motsoaledi’s health department gazetted a single exit price increase of 1.26% — a quarter of official inflation, which is now at 5.1%.
SA’s poor economic standing in an emerging markets arena already out of favour with international investors puts any local pharma company in a double bind. The rand has a profound effect on the price at which active ingredients are imported to manufacture drugs, which are then sold at regulated prices.
No surprise that cost control is the mantra for the year ahead.
There clearly is disappointment from the market with Growthpoint’s dividend forecast. Shares in the big daddy of SA property fell again on Wednesday and are effectively back at levels last seen in 2014. And yet, with the property market being in what CEO Norbert Sasse reckons is its toughest state since he started in 2003, a 4.5% dividend growth may well be the new normal.
While retail vacancies remain unchanged, office and industrial vacancies have climbed, taking total SA vacancies to 5.4%.
This is clearly a move in the wrong direction but Growthpoint remains below the national average in both. The company is also cushioned to some extent from weakness in SA Inc by its investment in Cape Town’s Victoria & Alfred Waterfront, which remains a mecca for international tourists. Growthpoint also has its long-term investment in Australia to cushion it from local weakness, although its move into Central and Eastern Europe still appears to be a late scramble to catch up with other local players.
Still, with a portfolio this diversified it may be premature to bail out just yet.
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