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On 1 January 2018, Adcock Ingram Healthcare Proprietary Limited acquired 100% of Genop, a highly specialised instrument, surgical and pharmaceutical products company focused on the ophthalmic, optometry, skincare, aesthetic and plastic surgery segments in Southern Africa. Genop owns and markets the well-known Epi-max branded range of consumer products.
The fair value of the identifiable assets as at the date of acquisition was:
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| Assets |
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| Inventories |
87 003 |
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| Trade and other receivables |
89 383 |
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| Property, plant and equipment |
18 291 |
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| Marketing-related intangible assets |
121 385 |
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| Cash and cash equivalents |
9 082 |
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| Taxation receivable |
1 579 |
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326 723 |
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| Liabilities |
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| Trade and other payables |
99 602 |
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| Short-term borrowings |
24 297 |
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| Deferred tax |
27 622 |
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| Provisions |
2 255 |
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153 776 |
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| Total identifiable net assets at fair value |
172 947 |
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| Goodwill arising on acquisition |
163 758 |
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| Purchase consideration |
336 705 |
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| Net cash acquired with the business |
(9 082) |
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| Net cash consideration |
327 623 |
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| The fair value of the trade receivables equals the net amount of trade receivables and amounts to R74.3 million. |
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| Market-related intangible assets relate to Epi-Max brand. Epi-Max was fair valued, at acquisition, from R11.7 million to R120 million which gave rise to a deferred tax liability of R30.3 million. The royalty relief methodology was used to
determine the valuation, by applying a 9% royalty rate and market related discount rate. |
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| Goodwill represents the difference between the purchase consideration and the fair value of the net assets acquired as
there are no further separately identifiable intangible assets. The significant factors that contributed to the recognition
of goodwill include, but are not limited to the acquisition of a specialised and quality pharmaceutical business with a
management team with proven experience, knowledge, skills and track record in their field. |
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| From the date of acquisition, Genop contributed R223.8 million towards revenue and reported a profit before income
tax of R6.2 million. |
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| If the Genop acquisition had taken place at the beginning of the reporting period, the revenue would have been
R452.3 million and profit before income tax would have been R24.5 million. |
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| Analysis of cash flows on acquisition |
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| Transaction costs of the acquisition (included in cash flows from operating activities) |
(5 662) |
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| Net cash acquired with the business (included in cash flows from investing activities) |
9 082 |
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Transaction costs of R5.7 million have been expensed and are included in non-trading expenses. |
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On 1 April 2017, Adcock Ingram Healthcare Proprietary Limited acquired 100% of the shareholding of Virtual, a national fine distribution company. The Group acquired Virtual as it complements the Company's reach and capacity, allowing for improved service levels to customers.
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2017
R’000 |
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| The fair value of the identifiable assets as at the date of acquisition was: |
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| Assets |
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| Trade and other receivables |
16 485 |
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| Property, plant and equipment |
5 288 |
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| Intangible assets |
2 880 |
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| Taxation receivable |
462 |
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| Deferred tax |
204 |
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| Inventories |
94 |
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25 413 |
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| Liabilities |
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| Trade and other payables |
11 015 |
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| Bank overdraft |
2 275 |
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| Short-term borrowings |
1 198 |
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| Long-term borrowings |
920 |
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15 408 |
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| Total identifiable net assets at fair value |
10 005 |
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| Goodwill arising on acquisition |
5 595 |
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| Purchase consideration |
15 600 |
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| Deferred consideration |
(8 000) |
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| Net bank overdraft acquired with the business |
2 275 |
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| Net cash consideration |
9 875 |
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| The fair value of the trade receivables equalled the gross amount of trade receivables and amounted to R16.1 million. None of the trade receivables were impaired and it was expected that the full contractual amounts could be collected. |
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| Goodwill represented the difference between the purchase consideration and the fair value of the net assets acquired as
there were no further separately identifiable intangible assets. The significant factors that contributed to the recognition of
goodwill include, but were not limited to, the establishment of a fine distribution network, expanding the Group’s national
footprint. |
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| During the previous financial year, Virtual contributed R21.7 million towards revenue and reported a profit before income
tax of R0.9 million. |
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| If the Virtual acquisition took place at the start of the previous financial year, the revenue would have been R84.9 million
and profit before income tax would have been R3.1 million. |
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| Analysis of cash flows on acquisition |
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| Transaction costs of the acquisition (included in cash flows from operating activities) |
(1 467) |
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| Net bank overdraft acquired with the business (included in cash flows from investing activities) |
(2 275) |
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Transaction costs of R1.5 million were expensed and were included in non-trading expenses.
A payment of R8.0 million of the purchase price, which was fully provided for in the previous financial year, was deferred and subject to the
achievement of profit targets. During the 2018 financial year the deferred amount was paid. |