Adcock Ingram scraps dividend

South African drugmaker Adcock Ingram Holdings scrapped its dividend on Wednesday, warning the coronavirus crisis could wipe out revenue growth in its new financial year.

“If we can remain flat, I would say we have done well,” Chief Executive Andy Hall told Reuters, referring to revenues.

The country’s second largest drugmaker reported a 1% fall in annual headline earnings per share (HEPS) to 417.5 cents ($0.2483) for the year to June 30. HEPS is the main profit measure for companies in South Africa.

The drugmaker’s businesses were classed as essential services during the weeks-long lockdown from the end of March to curb the spread of the coronavirus. But while they continued in operation, sales suffered as many people postponed medical procedures and cut back on non-essential purchases.

Adcock has four divisions – a consumer division that sells healthcare, personal care and homecare products; an over-the-counter division that sells medicinal products; a prescription division; and a hospital products and services division.

Although the annual results were largely unaffected by the crisis, the company scrapped its dividend to conserve cash.

“2021 is going to be a difficult year,” said Hall, adding cash flows might stay muted.

“I am hoping to see green shoots in the business shortly, but high unemployment and (the) decline in GDP will impact consumer products sales,” he said.

Adcock’s annual turnover rose 4% year-on-year to R7.3 billion and it ended the period with cash reserves of R317 million, giving it the opportunity to hunt for acquisitions.

It has a target to increase the share of its high-margin consumer products business over next five years to 50% of overall sales from 44% currently.