Adcock (AIP) – Scheduled Performance

The stronger ZAR, increased demand for the ARV Trivenz by the private sector and improved sales mix, saw AIP’s gross margins improve by 190bps to 38% in 1H18. However, the sharp increase in inventory written off is a concern to us, and we believe this could be due to low volume growth experienced by the company. We view the down-scheduling of Genpayne as a positive for the group but are concerned that AIP’s SEP exposure could potentially increase from current levels of 65% to 80%.