Strategic performance

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 presented its priorities at the start of the financial year which incorporated the following three focus areas:

1			PILLAR 1 BUILD ON THE FOUNDATION

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.

2				PILLAR 2 GROWTH AND EXPANSION

STRATEGIC FOCUS		WHAT WE ACCOMPLISHED IN 2018	FOCUS AREAS FOR 2019 AND BEYOND
	Acquisitions	Acquisitions concluded during the year included: 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. SpiderTech licence and distribution rights were acquired by the Hospital Division (kinesiology tape).	The search for acquisitions in 2019 will focus on expanding the less regulated portfolio.
	Partnerships	The Prescription division: implemented a marketing and distribution agreement with Takeda for its well known Topzole brand for treatment of stomach ulcers and gastroesophageal reflux disease; implemented a marketing and distribution agreement with Novartis for Aclasta for the treatment of osteoporosis; obtained the sales and promotional rights for the Astellas dermatology range (Protopic, SBR, Locoid and Zineryt) from Leo Pharmaceuticals.	The Prescription division will investigate further multinational partnerships in order to expand Adcock Ingram's product offering.
	Partnerships	The OTC business: concluded a sales, marketing and distribution agreement with Abbott Laboratories for Brufen, Duphalac, Creon and Calmettes.	The OTC division will investigate strategic collaborations with global/regional OTC specialist companies to broaden its product range in South Africa. The division has signed a marketing and distribution agreement with Pierre Fabre for Dexeryl, an emollient for the treatment of dry skin for launch in early 2019.
	Innovation	A number of new brands/products were launched during the year including the OTC division's Burnloc for heartburn/ hyperacidity, Immuenza to support the immune system, and the GAP range of multivitamins and minerals. The Hospital division recently launched the ADCO Hygiene range of hand and surface disinfectants.	Further line extensions and product rebranding initiatives will be introduced in 2019.
	Innovation	Innovation included rebranding of certain product lines such as OTC's vita-thion (as vita-thion Fizzies and vita-thion Extra).
	New customers and sales channels	The OTC division continues to grow its business into the Rest of Africa.	The OTC and Consumer divisions will continue to look for ways to service informal and convenience channels in order to provide greater access to Adcock Ingram's products.
	New customers and sales channels		With the aim of increasing sales to African countries, the business is currently registering products in Ghana, South Sudan and Ethiopia, with expected commencement of sales in the 2020 financial year.

3				PILLAR 3 TRANSFORMATION

STRATEGIC FOCUS		WHAT WE ACCOMPLISHED IN 2018	FOCUS AREAS FOR 2019 AND BEYOND
	Transformation	Adcock Ingram improved from a level 4 to a level 3 B-BBEE contributor.	Investigate participation in the YES programme which is part of the Draft Statement on the Codes of Good Practice on B-BBEE.
	Employment equity	85% of permanent employees are Black, 48% of permanent employees are female.	Improve black representation at senior and middle management.
		Board representation – 64% are Black directors, 57% are female directors.	Roll out a disability awareness campaign to the entire business and continue to retain learners with disabilities.
		Divisional Employment Equity plans have been implemented.	Implement a talent pipeline for junior pharmacists.
		R33 million was spent on skills development compared to R23 million in the prior year.
	Preferential procurement	R1.7 billion was spent on suppliers with a B-BBEE status of 4 or better, of which R573 million was spent on >51% black owned suppliers and R271 million on >30% black women owned suppliers.	Focus on growing small and medium black-owned businesses.
	Supplier development	Adcock Ingram continued to invest in its owner-driver distribution scheme. R16 million was invested in the year, increasing the owner drivers including employees to 232 persons and 116 vehicles.	Investigate other supplier development programs.
		CSI spend for the year was R6.6 million.	The partnership with Netcare on recycling of plastics to expand.
	Other	Adcock Ingram received an award of recognition for being one of the most supportive corporates of the SAME foundation.	The CSI programme will continue to focus on Healthcare and Education.
	Other		Actively engaging in pro-active commentary on the National Health Insurance and Medical Schemes Amendment Bills through the industry bodies – Pharmisa and PTG.

GROWTH AND
EXPANSION

During the first quarter of calendar 2018, Adcock Ingram acquired Genop Healthcare. Genop is a specialised healthcare company focussed on ophthalmic, optometry and skincare/ aesthetic markets as well as owning the well known Epi-max branded range of products.

1924
1946
1998
2001


1924 – Established as an optical lens, frame and instruments business – Cameron and McKillip.	Listed on the Johannesburg Stock Exchange (“JSE").	Genop acquired the Allergan subsidiary in South Africa.	1998 Genop delisted from JSE and the Abrahamson family bought control.

2018
2014
2006


Genop becomes part of the Adcock Ingram family.	Genop turns 90 years old, restraint of trade ended and Genop re-enters dry eye and aesthetic injectables market.	Genop sold the lens and frame business to Carl Zeiss Vision.