Adcock Ingram Integrated Report 2018

Strategic performance BUILD ONTHE FOUNDATION PILLAR 1 1 STRATEGIC FOCUS WHAT WE ACCOMPLISHED IN 2018 FOCUS AREAS FOR 2019 AND BEYOND A relentless focus on customer service Continued engagement with customers on various levels. Constant management of the expectations of our customers by our commercial divisions. Expansion of our fine distribution footprint through the integration of Virtual Logistics and the rebranding to AVL Healthcare. Continue to find new and better ways to service the needs of our customers. The Distribution division achieved in excess of 98% on time delivery rates consistently over the year. The Distribution division must ensure orders are delivered on time as per customers' requests. Strict cost control Operating expenses increased by 5.4% on a like-for-like basis (excluding Genop). Keep operating expenses, outside of marketing investments, to inflationary levels, especially in the light of the low SEP increase (1.26%) granted at the start of calendar year 2018, and the uncertainty of an interim SEP adjustment following the exchange rate deterioration in mid- to late-2018 calendar year. Extracting manufacturing efficiencies and increasing throughput at Wadeville and Clayville Throughput increased in Wadeville with the manufacturing of Trivenz, Adcock Ingram's triple-combination ARV product, following increased demand in the private sector. Continue to find opportunities to increase factory throughput at Wadeville and Clayville. To this end, some of the Epi-Max (largest Genop brand) manufacturing and packing will be moved to Wadeville by the end of December 2019. In addition, contract manufacturing opportunities will be explored at Wadeville. All Good Manufacturing Practice (GMP) upgrades to the general plant's packing facility (Phase I) in Clayville were completed during December 2017. Further continuous GMP upgrades to follow in other parts of the manufacturing facilities. Capital expenditure has been directed towards the commissioning of a new powder sachet line (for Citro-Soda and vita-thion) and an Ophthalmic facility in Clayville, and the upgrade of the Liquids, Creams and Ointments (LCO) section of the Wadeville plant. The Ophthalmic facility is on track for completion in the final quarter of the 2019 calendar year. Validations for the LCO facility will commence in the second quarter of the 2019 financial year. Critical Care won in excess of 80% of the IV Fluids state tender. All three manufacturing sites have been certified as National Key Points during the year. The purchase of the manufacturing facility adjacent to the current Bangalore factory was concluded in June 2018. Construction to start in the beginning of the 2019 financial year to expand the laboratory and manufacturing capacity. Focused investment in sales and marketing of our major brands, to grow our market share Marketing investment increased by 13%. Adcock Ingram's overall private market share increased by 0.2% as per IQVIA, with growth ahead of the overall market. Continued investment behind major brands as well as supporting the launch of new products to grow our market share. Maintaining full regulatory compliance in the factories and distribution centres. Continuously updating and development of Standard Operating Procedures (SOPs) to be in line with revised regulatory changes. Wadeville will be finalising the upgrade of its liquids, creams and ointments facility, and Clayville the Ophthalmic facility. All Good Manufacturing Practice (GMP) upgrades to the general plant's packing facility (Phase I) in Clayville were completed during December 2017. Maintain current positions in technical committees and working groups in professional and trade associations. Actively engaging in pro-active commentary on the National Health Insurance and Medical Schemes Amendment Bills through the industry bodies - Pharmisa and PTG. Reinforcing the culture of responsibility, accountability and fun at work Adcock Ingram's staff turnover decreased from 10.4% to 10.1%, against the industry norm of 11.2%. Continue to keep the staff turnover below the industry level. Adcock Ingram presented its priorities at the start of the financial year which incorporated the following three focus areas: The progress made over the past year has put the business in a more sustainable position, within the tough economic climate and socio-political conditions within which the business is operating. The front-end focus remained on Customers, Products and Service, with strict attention to quality, efficiencies and costs at the back- end. The business continues to explore growth and expansion opportunities. ADCOCK INGRAM  Integrated Report 2018 12 INTEGRATED THINKING AND VALUE CREATION