Integrated Report 2017 - Adcock Ingram

1 Integrated Report 2017 Adcock Ingram Integrated Report 2017 ContentsABOUT USOur leadership4 Our geographic spread6 Our business model8 Our stakeholders10 SUSTAINABILITYOUR STRATEGYOUR PERFORMANCEE nvironment46 Our employees48 Transformation52 Our strategy18 Risk management22 Leadership review from our Chairman and CEO26 Financial review28 Operational reviewOver the counter34 Prescription36 Hospital38 Consumer40 Distribution42 Adcock Ingram regards this Report , as a valuable opportunity to engage with its stakeholders and to respond to issues raised by them. The matters reported on in the Integrated Report are considered by leadership throughout the year as being vital to the sustainability of the Group and include all material aspects up to the date of issue of this full set of annual financial statements is included with the Integrated Ingram has continued the journey towards providing a more comprehensive picture of the Group in one document, working towards producing a more Integrated PRINCIPLESA dcock Ingram is a public company incorporated in South Africa in accordance with the provisions of the Companies Act 71 of 2008 (Companies Act).

2 Adcock Ingram has applied the principles of King IV unless otherwise stated, the Companies Act, the JSE Limited Listings Requirements and other legislative requirements. The Group subscribes to high ethical standards and principles of corporate governance. For more details, and an overview of the Group governance and structure, please see the corporate governance section on pages 70 to addition to the above, the Group adheres to International Financial Reporting Standards (IFRS) in compiling its annual financial AND BOUNDARYA dcock Ingram s Integrated Report covers the financial year 1 July 2016 to 30 June Report is released at least 15 business days prior to its Annual General Meeting to be held on 23 november 2017 .

3 Comparatives are for the year 1 July 2015 to 30 June Report provides a general narrative on the performance of the Group which includes the holding company, and its subsidiaries and joint ventures across all territories. The business in South Africa has a material impact on the overall sustainability of the Group. The Group s presence in Kenya, Zimbabwe and India, individually and collectively, constitutes a small percentage of the Group s operations and are for that reason excluded from the operational review. Data is given, where relevant, about these entities. Comparatives are included where B-BBEE assessment, as well as the employment equity statistics, exclude all non-South African companies and operations.

4 ASSURANCEIn line with its responsibility, the Board ensures the integrity of the Integrated Report . The Board has accordingly applied its mind to the Integrated Report and, in its opinion, the Report presents fairly the Integrated performance of the FINANCIAL STATEMENTS 2017 The annual financial statements for the year ended 30 June 2017 were approved by the Board on 24 August independent audit of the Group s annual financial statements was performed by Ernst & Young SCORECARDThe Group s B-BBEE status has been verified by Empowerlogic, an independent verification agency, for the 2016 financial year. Through the external verification process conducted by the agency, the Group has been assessed as a Level 4 contributor in terms of the revised codes of the B-BBEE Act.

5 This rating is valid until 30 november INFORMATION The rest of the Integrated Report has not been subjected to independent review or audit, and is derived from the Group s own internal this reportADCOCK Ingram Integrated Report 20171 ABOUT USOUR STRATEGY OUR PERFORMANCESUSTAINABILITYOUR GOVERNANCEANNUAL FINANCIAL STATEMENTSSHAREHOLDER INFORMATIONOUR GOVERNANCEANNUAL FINANCIAL STATEMENTSSHAREHOLDER INFORMATIONR emuneration report58 Corporate governance70 Directors responsibility for and approval of the annual fi nancial statements78 Certifi cate by Company Secretary78 Independent auditor s Report to the shareholders of Adcock Ingram Holdings Limited79 Audit Committee report83 Directors report85 Consolidated annual fi nancial statements87 Accounting policy elections91 Notes to the Group annual fi nancial statements92 Company annual fi nancial statements120 Notes to the Company annual fi nancial

6 Statements124 Annexure A: Segment report130 Annexure B: Share-based payment plans134 Annexure C: Defi ned contribution and defi ned benefi t plan138 Annexure D: Post-retirement medical liability140 Annexure E: Financial instruments141 Annexure F: Interest in joint ventures and associate146 Annexure G: Impairments149 Annexure H: Interest in subsidiary companies, associate and joint ventures 150 Annexure I: Accounting policies151 Shareholder analysis170 Notice of AGM172 AGM explanatory notes175 Form of proxyNotes to the form of proxyGlossary184 Company informationIBCSTAKEHOLDERSSTRATEGIC FOCUS AREASDIVISIONSB uilt on the foundationAcquisitionsPartnershipsNew customers and sales channelsInnovationTransformationOver the counterPrescriptionHospitalConsumerDistr ibutionCustomers and consumersEmployeesRegulatory authorities and governmentCommunitiesMultinational partners and licensorsShareholders and investor community2 Adcock Ingram Integrated Report 2017 TRADING PROFITR724m(2016: R606m)TURNOVERR5 936m(2016.)

7 R5 546m)Our leadership4 Our geographic spread6 Our business model8 Our stakeholders10 About usABOUT USOUR STRATEGY OUR PERFORMANCESUSTAINABILITYOUR GOVERNANCEANNUAL FINANCIAL STATEMENTSSHAREHOLDER INFORMATION3 Adcock Ingram Integrated Report 2017 WATER USAGE (K )281 247(2016: 334 890)CARBON EMISSIONS* (2016: )* (Scope 1 and 2) per full-time employee (tonnes).NET CASHR335mENERGY USAGE (KWH)49 455 980(2016: 49 286 847)SHARE PRICE CLOSE5 910c Low: 4 295 cents High: 6 500 cents (2016: cents)4 Adcock Ingram Integrated Report 2017 Our leadershipRefer to page 75 for CVsThe Board of directorsLINDSAY RALPHS (62)CA (SA)Appointed: 24 november 2016 ANNA MOKGOKONG (60)BSc, MB ChB, DComAppointed: 10 April 2014 CLAUDIA MANNING (49)PhD Appointed: 24 november 2016 NON-INDEPENDENT NON-EXECUTIVE DIRECTORSINDEPENDENT NON-EXECUTIVE DIRECTORSCLIFFORD D RAPHIRI (54)BSc (Mech Eng), Grad Dip.

8 Eng, MBAA ppointed: 15 July 2008 and Chairman since 11 november 2015 LULAMA BOYCE (38)CA (SA), MCom (Fin Mgt)Appointed: 24 May 2017 MATTHIAS HAUS (68)MB ChB, MD, DCH, FCFP, FFPM, Dip ObstAppointed: 1 June 2012 JENITHA JOHN (46)CA (SA), CIA, QIALA ppointed: 24 May 2017 TLALANE LESOLI (67)MB BS, Dip of Child HealthAppointed: 15 July 2008 MPHO MAKWANA (47)BAdmin (Honours), Post-Grad Dip (Retailing Management)Appointed: 1 February 2012 MOTTY SACKS (74)CA (SA), AICPA(ISR)Appointed: 25 February 2014 ROGER STEWART (65)MB ChB, PhD (Med), Grad Dip. Comp : 15 July 2008 ABOUT USOUR STRATEGY OUR PERFORMANCESUSTAINABILITYOUR GOVERNANCEANNUAL FINANCIAL STATEMENTSSHAREHOLDER INFORMATION5 Adcock Ingram Integrated Report 2017 EXECUTIVE DIRECTORSANDREW HALL (55)CA (SA), BPharmChief Executive OfficerAppointed: 15 July 2008 DORETTE NEETHLING (43)CA (SA), MCom ( Taxation)Chief Financial Officer Appointed: 23 February 2016 BASADI LETSOALO (54)MPsych , CLDP, MLPC, MPhil (Executive coaching)Executive Director Human Capital and TransformationAppointed: 25 August 2016 COLIN SHEENMBA, PDBA, BTech, NDip (Marketing)Managing Director - Hospital NTANDO SIMELANEB.

9 Juris, LLB, Advanced Company LawCompany Secretary and Head of Legal WERNER V RENSBURGMEng (Mech Eng), MBA, EMLog, GCC (ML & OHS)Managing Director Over the CounterFRANS CRONJEBSc, NDip (Ind Eng)IT ExecutiveJULIET FOURIEIMM Grad. Dip. Managing Director -Consumer TOBIE KRIGEBEng (Ind Eng), MBAM anaging Director - DistributionASHLEY PEARCEDip Pharm, BComManaging Director PrescriptionExecutive CommitteeABOUT USOUR STRATEGY OUR PERFORMANCESUSTAINABILITYOUR GOVERNANCEANNUAL FINANCIAL STATEMENTSSHAREHOLDER INFORMATIONC ombined Adcock Ingram experience75 yearsTenure %3-5 years6-9 years9+ years302050 Age Split %35 - 5051 - 5556+40501030%70%GenderMaleFemale20%80%R aceWhiteBlackDIVERSITY OF THE EXECUTIVE COMMITTEEb6 Adcock Ingram Integrated Report 2017 OUR MISSION DIVERSITY OF THE BOARDE xecutive21%Non-executive79%We are committed to providing quality products that improve the health and lives of people in the markets we VALUES We are committed to providing Quality products and services Act with Integrity at all times Believe in Transparency and open Communication Believe in Empowerment of our people.

10 Thus encouraging entrepreneurship, innovation and accountability Practise non-discrimination and off er equal opportunity Have Respect for people, society and the environment50%50%GenderMaleFemale43%57%R aceWhiteBlack57%43%IndependenceIndepende ntNon-Independent (including executive directors)Tenure %0-2 years3-4 years5-6 years9+ years43141429 Age Split %35 - 5051 - 6061 - 7070+3529297 Combined tenure60 years6 Adcock Ingram Integrated Report 2017 Adcock Ingram Integrated Report 2017 The South African private pharmaceutical market, as measured by IMS MAT June 2017 , is worth billion, with % value and volume Ingram holds a market share of 9,0% in value and 21% in volume. Our operations are spread throughout the African continent but our manufacturing facilities are based in South Africa and India.