Adcock (AIP) – A Dwindling Dose

AIP delivered pleasing 1H17 results, with GP margins well controlled. We are concerned about the impact of consumers trading down in OTC to cheaper brands and smaller pack sizes, which we think could put pressure on topline growth. OTC trading margins have been declining, which may exacerbate the situation, in our view. Although we are pleased by the purchase of intangible assets worth R46m, we still are of the view that the company’s growth opportunities in the short term are limited within South Africa.