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value
The drug regulatory arm of the Indian business
will remain as an essential support function to
the Group’s operations in South Africa. Adcock
Ingram remains fully committed to the joint-
venture manufacturing facility in Bangalore, with
Medreich, now owned by a Japanese partner,
Meiji Seika.
The Group also concluded an agreement with
Dannex Limited regarding the Ayrton business
in Ghana. Dannex is a Ghanaian company
very familiar with the local environment, and
will acquire a controlling stake in the business
while Adcock Ingram will retain 25,1%. The deal
is subject to certain regulatory approvals from
the Ghana Stock Exchange and Securities and
Exchange Commission.
The Group’s persistent focus on
customers, services and products
led tomarket share gains across all
four commercial divisions.
According to IMS, the total private market grew
by 6.7% in value but only 0.4% in volume on a
12-month moving annual total basis to 30 June
2016. Adcock Ingram’s growth in value and
volume is reflected at 11.0% and 3.6% respectively,
adding credibility to the efforts of the sales and
marketing teams, and is reflective of the Group’s
resilient and well-diversified portfolio. Adcock
Ingram’s market share by value and volume
has grown to 9.0% (June 2015: 8.6%) and 21.4%
(June 2015: 20.1%) respectively. This in-market
effort led to growth in sales and trading profit in
every division, culminating in the generation of
R941 million of cash from operations this year,
and reducing net debt over the two-year period
since the restructuring, from R1,082 million to
R217 million.
GOVERNANCE, ETHICS AND RISK
The Board recognises that a corporate culture
which promotes ethical behaviour supported
by honest and open communication with all
stakeholders is integral to good governance.
Ethical behaviour, fairness, accountability and
transparency are essential to building stakeholder
confidence in the Group. We actively pursue
transformation and ensure employment
practices which maximise the potential of our
employees. Further, we accept responsibility
for the sustainability and environmental issues
associated with this business.
In performing its functions, the internal audit
team provides assurance to the Board, regarding
the effectiveness of the Group’s network of
governance, risk management and internal
control processes and systems.
The Board is satisfied that the executive team
in each division is constantly aware of risks and
actively seeks ways in which to overcome and
influence controllable risks and minimise the
impact of uncontrollable risks. A summarised
overview of Risk Management is featured on
pages 22 to 23.
FACILITIES
Manufacturing is key to our business, and
differentiates us as one of only a few local
pharmaceutical manufacturers in South Africa.
The upgrade of the Group’s facilities receives
ongoing attention, whether it be to meet
regulatory requirements or entails expansion
and modernisation.
In the high-volume liquids facility in Clayville,
throughput continues to increase and we are
satisfied with the progress in that regard. The
effervescent plant is struggling to meet demand
for Citro-Soda and vita-thion, so we are in the
process of procuring a high-speed automated
sachet packing machine for that area. Reliable
and consistent supply of ophthalmic products
and other steriles from certain third party
manufacturers remains an issue. The Group has
therefore decided to embark on a three-phase
project to build an ophthalmic facility within the
Clayville factory, and we expect the first phase to
be fully implemented in two years.
TheWadeville tabletting facility is still running well
below capacity but we have seen improvements
in the current year in the ARV business.The liquids,
creams and ointments facility is operating at
or near capacity and we intend to invest an
additional R40 million in that part of the factory
over the next three years, to address regulatory
changes and improve flexibility.
As always, our Critical Care facility in Aeroton
is well utilised and continues to operate at full
capacity in almost all areas.
TRANSFORMATION
In the face of the revised B-BBEE codes we were
pleased to have achieved a rating of Level 4 for
the current period.
Our people are encouraged to
try in every way possible, to live
transformation in the Company,
and to strive towards improving
our performance in this important
area, throughmakingmeaningful
change.
We are dedicated to this imperative for the local
business and continue to score well in the areas
of Preferential procurement, Skills development,
Enterprise development and CSI. We need to
give greater attention to Employment equity and
Management control and are scaling up plans to
improve against these measures.
Adcock Ingram’s owner-driver scheme, was
developed to give promising candidates
ownership of a business, while realising the
Company’s commitment to support enterprise
supplier development. Eight more vehicles were
recently added to the fleets of the owner-drivers
that are based in Johannesburg, Cape Town and
Durban, bringing the total number of vehicles to
52, under the control of 19 entrepreneurs.
In line with our commitment to
be involvedwith the communities
in which we operate and to
undertake sustainable initiatives,
we have continued to support
our flagship projects, and also
supported various smaller
community initiatives nominated
by employees.
We once again funded a week of surgical
interventions organised by the Smile Foundation
at theTygerberg Hospital, which gave 43 children
the opportunity to have life changing surgery
to repair facial deformities. Our continuing
support for the Leratong Hospital in Krugersdorp,
contributed to the refurbishment of certain wards.
One of our most gratifying initiatives has been our
work to distribute containers of water to drought
stricken areas of the country. It has been most
rewarding to see employees volunteering over
weekends, to deliver the much-needed water.
WAY FORWARD
We are now in a position, with reduced distraction
from non-core business interests, to focus on the
necessary growth investment required for the
local business. We will continue to concentrate on
investment in our brands, striving for excellence
in customer relationships and the improvement
of service levels within the operating divisions.
TheGroup is focussedon searching
for appropriate acquisitions
to bolster our non-regulated
portfolio, building mutually
beneficial partnerships and
innovating within our current
product portfolio.
We are building partnerships – especially building
on the successes we have had this year with
various multinationals. We strive for greater
innovation, where we have a number of launches
planned for 2017 and continue to explore new
customer channels such as exports and the
informal sector.
APPRECIATION
We thank all those who have contributed to the
business in any way during the year, especially
our customers, suppliers, partners and employees.
We will continue to deliver on our promise of
‘Adding value to life’.
FIVE
SIX
THREE
ONE
FOUR
TWO
OUR PERFORMANCE
(continued)
| 27
Integrated Report 2016