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S.Africa's Adcock Ingram scraps dividend on weak outlook

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.

Drop in consumer spending to hurt growth

Expects 2020/21 cash flows to be muted

Co saw small drop in annual HEPS

Preserving cash for acquisitions

Adds CEO comment

JOHANNESBURG, Aug 26 (Reuters) - South African drugmaker Adcock Ingram Holdings AIPJ.J 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 South African 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 7.3 billion rand and it ended the period with cash reserves of 317 million rand, 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.

(Reporting by Promit Mukherjee; Editing by Subhranshu Sahu and Mark Potter)

((promit.mukherjee@thomsonreuters.com; +27 64833 4448;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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