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INTEGRATED REPORT Adcock Ingram Integrated Report 2014 Adding Value to Life INTEGRATED REPORT

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INTEGRATED REPORT Adcock Ingram Integrated Report 2014 Adding Value to Life INTEGRATED REPORT 2014 INTEGRATED REPORT Adcock Ingram Integrated Report 2014 Adding value to life INTEGRATED REPORT ABOUT THIS REPORT Adcock Ingram has continued the journey towards providing a more comprehensive picture of the Group in one document, working towards producing a more integrated report as 2014FOR THE NINE-MONTH PERIOD ENDED 30 JUNE 2014 recommended in the revised King Code on Governance Principles for South Africa (King III). SCOPE AND BOUNDARY Adcock Ingram regards this process as a valuable opportunity OF THIS REPORT to engage with its stakeholder groups and to respond to issues Adcock Ingram’s integrated report covers the financial that have been raised. The focus has therefore been on the period 1 October 2013 to 30 June 2014. The report is issues most material to our stakeholders as highlighted in the released at least 15 business days prior to its Annual stakeholder engagement section on pages 32 and 33. General Meeting to be held on 21 November 2014. Comparatives are for the 1 October 2012 – 30 September The other issues we report on in our integrated report are 2013, year unless otherwise indicated. considered by leadership throughout the year as being vital to the sustainability of the Group and include all material aspects The report provides a general narrative on the performance up to 10 October 2014. of the Group which includes the holding company, and its subsidiaries and associates across all territories. The Based on feedback received from our stakeholders we continue business in South Africa has a material impact on the to include a full set of annual financial statements with the overall sustainability of the Group. Reports are given, where integrated report. A summary of the financial highlights is relevant, about our businesses in Kenya, Ghana, Zimbabwe presented on pages 2 to 5. and India. Comparatives are included where available. A detailed strategy as well as a business model have been ASSURANCE excluded from the report as the Company is currently finalising In line with its responsibility, the Board of Directors structural changes. ensures the integrity of the integrated report. The Board has accordingly applied its mind to the integrated report REPORTING PRINCIPLES and, in its opinion, the report presents fairly the integrated performance of the Group. Adcock Ingram is a public company incorporated in South Africa in accordance with the provisions of the Companies Act 71 of ANNUAL FINANCIAL STATEMENTS 2014 2008 (Companies Act) and complies with the principles of King The annual financial statements for the period ended III, unless otherwise stated, the Companies Act, the JSE Limited 30 June 2014 were approved by the Board of Directors Listings Requirements and other legislative requirements. on 27 August 2014. Ernst & Young Inc., the independent The Group subscribes to high ethical standards and principles auditors, have audited the annual financial statements as of corporate governance. For more details, and an overview of disclosed in their unqualified report. the Group governance and structure, please see the corporate SUSTAINABILITY INFORMATION governance section on pages 10 to 13. The sustainability information has not been assured in 2014. In addition to the above, the Group adheres to International B-BBEE STATUS Financial Reporting Standards (IFRS) in compiling its annual The Group’s B-BBEE status has been assured by financial statements. For reporting on sustainability issues it also Empowerlogic, an independent verification agency, for the complies with Global Reporting Initiative 3 (GRI) standards to 2013 financial year. Through the external assurance received facilitate comparability with the reports of other organisations. from the agency, the Group has been assessed as a Level 3 contributor in terms of the B-BBEE Act. The 2014 period is in the process of being assessed. RECOGNISED IN OUR INDUSTRY Icon TGi Brand Survey 2014 Panado is rated No.1 in the OTC category for the third year running Legae ESG Research on JSE listed companies Adcock Ingram rated one of ten leading companies in environmental, societal and corporate issues Productivity SA: Inaugural Chairman’s Adcock Ingram Critical Care received award for innovative ‘waste-plastic to shoes’ Innovation of the Year Award 2013 recycling initiative Top Women in Business and Government Adcock Ingram rated a leader in gender empowerment publication 2014 CONTENTS GROUP OVERVIEW ANNUAL FINANCIAL 2 Financial summary STATEMENTS 6 Executive Committee 46 Directors’ responsibility for and approval of the annual financial statements 8 Board and governance structure 47 Certificate by Company Secretary 10 Corporate governance 48 Independent auditor’s report to the members of 14 Leadership statement Adcock Ingram Holdings Limited 18 Operational overview – Southern Africa 49 Audit Committee report 19 OTC 50 Directors’ report 20 Hospital 52 Consolidated statements of comprehensive income 21 Prescription 53 Consolidated statement of changes in equity 22 Logistics 54 Consolidated statements of financial position 23 Manufacturing 55 Consolidated statements of cash flows 24 Operational overview – India 56 Accounting policy elections 26 – Rest of Africa 57 Notes to the Group annual financial statements 28 Sustainability 78 Company statements of comprehensive income 32 Stakeholder engagement 79 Company statement of changes in equity 34 Remuneration report 80 Company statements of financial position 44 Risk management 81 Company statements of cash flows SHAREHOLDER 82 Notes to the Company annual financial statements INFORMATION 88 Annexure A: Segment report 90 Annexure B: Share-based payment plans 130 Shareholder analysis 93 Annexure C: Defined benefit plan 132 Shareholders’ diary 94 Annexure D: Post-retirement medical liability 133 Notice of Annual General Meeting 95 Annexure E: Financial instruments 137 Annual General Meeting – explanatory notes 100 Annexure F: Interest in joint ventures 139 Form of proxy 102 Annexure G: Impairments OTHER 106 Annexure H: Interest in subsidiary companies, joint ventures and associates 143 Glossary 108 Annexure I: Accounting policies 144 Company details 124 Annexure J: Equity-accounted joint ventures OUR VALUES OUR MISSION We are strongly committed to providing products and services of the highest quality We are committed to provide quality products that improve the health We have respect for people, society and the environment and lives of people in the markets we serve. We practice nondiscrimination and offer equal opportunity for all our staff OUR PROFILE We believe in the empowerment of our people, thus encouraging entrepreneurship, innovation and accountability Adcock Ingram is a leading South African pharmaceutical manufacturer, listed on the Johannesburg Stock We believe in transparency and open communication Exchange with a market capitalisation of We act with integrity at all times. approximately R9 billion. Adcock Ingram manufactures, markets and OUR HERITAGE distributes a wide range of healthcare products. The Company is a leading Adcock Ingram has a proud heritage which spans more than 120 years. The business began as supplier to both the private and public EJ Adcock Pharmacy in Krugersdorp in 1890. Its founders branched out into new product sectors of the South African market. development, manufacturing, distribution, and sales and marketing. Expansion into emerging markets Adcock Ingram was first listed on the Johannesburg Stock Exchange (JSE) in 1950 and enjoyed blue has given the Company a presence chip status. In 2000 Tiger Brands (then the majority shareholder) acquired the minority shares and in sub-Saharan Africa and India. Adcock Ingram was delisted from the JSE and operated as a wholly owned subsidiary of Tiger Brands. On 25 August 2008, Adcock Ingram was unbundled from Tiger Brands and relisted on the JSE. Adcock Ingram operates in three hubs in sub-Saharan Africa, being West Africa (Ghana), East PRODUCT RANGES Africa (Kenya) and Southern Africa (Zimbabwe), marketing Consumer and Over the Counter products constitute the largest segments in the South Africa business. ethical and consumer Market-leading brands such as Panado have put the Company in a leadership position in the private products. Manufacturing takes pharmacy market and the fast moving consumer goods (FMCG) market. place in Ghana and Zimbabwe. The Prescription medicines portfolio comprises a range of quality and affordable generic medicines which Adcock Ingram has a joint includes a comprehensive portfolio of anti-retroviral medicines (ARVs). Partnerships with multi-national venture manufacturing facility pharmaceutical companies continue to augment the comprehensive portfolio of originator medicines in Bangalore, India, which marketed by the Company. offers an alternative source of The Critical Care portfolio has a long history in the Group based on an agreement with Baxter and positions supply for the South African Adcock Ingram as a leading supplier of critical care products to the private and public sectors. market. The Company has a marketing operation based in Mumbai which has nationwide LOCAL MANUFACTURING coverage. The high-volume liquids facility situated in Clayville is a state of the art and highly automated factory primarily producing oral liquids, powders and effervescent formulations. The tablet and capsule facility located in Wadeville is focused on the manufacture of anti- retroviral medicines, which are supplied to the public sector through the tender system. The Critical Care facility situated in Aeroton produces intravenous
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