Adcock Ingram’s share price was back on an upward trend in the latter part of the six months to end-December as the company became debt-free for the first time since 2011.
The share had jumped 3.36% in midday trade as headline earnings per share shot up 49%. Turnover rose 11% to R3bn as gross profit increased 11% to R1.1bn. The group declared a dividend of 63c per share.
It had disposed of its Indian sales and marketing business and of a majority stake in the Ghanaian enterprise in the period, saying it had now effectively dealt with all inherited underperforming assets.
CEO Andrew Hall said on Wednesday that it was "pretty tough out there", but the group was "pleased with the result". He said since control of Adcock changed in 2014 it had become a group of entrepreneurial businesses led by independent and "properly motivated leaders in each division".
Bidvest now owned about 35%, the Public Investment Corporation about 22% and black economic empowerment stakeholders about 15%. It appears that Bidvest had put its stamp on the group, turning it from a centrally controlled entity into one that is highly decentralised.
Hall said management had previously been distracted by the failed $1.3bn bid from Chilean pharmaceutical producer CFR Pharmaceuticals that happened in 2013.
Adcock’s major market remained SA, which accounted for 95% of turnover. The group manufactured mainly consumer and over-the-counter products, and also had prescription and critical care products.
It had three manufacturing plants in the country and a 50-50 joint venture facility in India, along with smaller manufacturing and distribution interests in Zimbabwe and Kenya.
The company’s chief financial officer, Dorette Neethling, said on Wednesday that the interim period to December 2016 was the first time since 2011 "that we have been in a cash position".
Hall said now there was cash Adcock was starting to be able to look at acquisitions. In this regard the group was considering adding products in personal and baby care to supplement its new sunscreen offerings.
Aslam Dalvi, associate portfolio manager at Kagiso Asset Management, said on Wednesday that overall Adcock had put in a "very good performance".
A KEY STANDOUT FROM THE RESULTS WAS ... ALL DIVISIONS DELIVERING DOUBLE-DIGIT PROFIT GROWTH
"With Adcock delivering revenue growth of 11% and trading profit growth of 22%, this is a solid performance despite cost pressures from a weakening currency and consumer downtrading particularly across the over-the-counter division. A key standout from the results was the good cost control achieved, with all divisions delivering double-digit profit growth," he said.
"A further highlight was that overall volumes were up a pleasing 4.8%. This is well above the industry [level], and highlights that recent restructuring efforts and increased focus on key business areas are paying off. The business has a strong balance sheet and we would expect acquisitions to be a key part of the company’s growth agenda going forward," he said.
In the year to June 2016, the restructuring of Adcock had helped propel cash generated from operations to R941m. It had also resulted in net debt being reduced from nearly R1.1bn to R217m at that time.
Bidvest’s acquisition of Adcock, starting in 2013, took place amid a bitter battle between Adcock’s board and Bidvest for control of the firm.
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