Adcock Ingram Holdings Limited (AIP) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to the Adcock Ingram Interim Results Call. [Operator Instructions] Please note that this call is being recorded. I'd now like to turn the conference over to Mr. Andy Hall, the CEO. Please go ahead, sir.

Thank you, Claudia. Good morning, ladies and gentlemen. Welcome to the results webcast for our 6 months ended 31 December. We do appreciate you taking the time to show interest in the company, particularly on a budget day. I'm going to take you through an overview of what we consider to be an exceptional operational and financial performance for the 6 months despite the company having to operate within an environment still facing macroeconomic challenges. Once I complete my overview, I'll hand over to Dorette Neethling, our CFO, and Dorette will take you through detailed overview of the financials. At the end of the presentation, we'll be happy to take any questions. I just wanted to start the presentation to give you an indication of where the company is relative to its COVID-19 statistics. In the fourth wave, we recorded just over 180 infections, but thankfully, none of our employees were hospitalized. In total, we've had 824 cases at the company since the start of the pandemic, which is about one-third of our workforce. But of course, we know that these statistics over-time lose a little bit of their meaning because of all of the asymptomatic cases that have been experienced and the many that we experienced in the fourth wave, which of course, we wouldn't have known were positive. In terms of vaccinations, we are fully supportive of vaccinations for our people. We do believe that this is still the best way to prevent hospitalization and death. We've had a lot of internal vaccination awareness campaigns at the company. We've made every effort to encourage our employees to get voluntary vaccinations and we've made significant progress in that regard with 83% of our workforce having been vaccinated to-date. We're currently considering and consulting with our employees and their representatives on where the mandatory vaccinations would be appropriate for our company to protect our employees and we intend to make a decision on that within the next 6 weeks or so. Getting on to the business performance. Looking at the business overall, we are happy with what we consider to be a strong financial and operational performance. For the period under review, you will see that turnover increased by 16%, mainly attributable to a 9% growth in volumes where we had good demand -- increased demand for over-the-counter and consumer health care products, particularly, and our new products contributed 6% in the mix. We've recorded a gross margin improvement, supported by a relatively strong rand, a favorable sales mix with those consumer health care and OTC products in it as well as improved recoveries at our Clayville site, which does manufacture a lot of the over-the-counter products for Adcock Ingram. Operating expenditure increased by 13%, driven mainly by selling and distribution expenses as well as an increase in marketing expenditure to support our core brands and a number of new product launches. As a result, trading profit increased by a healthy 25%. We look at the pharmaceutical market that's measured by IQVIA. And according to them, Adcock Ingram has retained its second-place ranking in the market. They show the total private market having grown by 6% over the last 12 months and they show Adcock Ingram having grown by 9% over that period. If we look at the individual business divisions, our consumer business, which has grown substantially as we've tried to bulk up that business with non-price regulated products, it now competes in health care, personal care and home care segments of the market with products in analgesia, energy, dermatology, vitamins, minerals and supplements, shoe care and home cleaning. The division delivered a very strong performance during the period with an increase in turnover of 33%, but that 33% was supported by the inclusion of Epi-max from January 2021. On a like-for-like basis, if we strip the Epi-max out of this division, revenue has increased by 14% and some of the division's key brands like Panado, Compral and ProbiFlora have shown really excellent growth. Trading profit was 59% ahead of the corresponding period and 21% ahead on a like-for-like basis if we removed Epi-max. So very good performance financially from this division. The COVID-19 pandemic has produced erratic trends with regards to consumers' health care demands and the division has shown good flexibility in adapting to these changing needs. In line with the division's strategy to expand its basket of products, it acquired 6 personal care and health care brands in December. Those products being Prosana, Aqua cream, Superzest, Arnicamill, Stop Cough and Floradix. So we should see some traction from those products in the second half of the year. On the innovation front, the division expanded its Panado range in September. It launched convenient 5-milliliter pediatric sachets. In November, it added a Bioplus stimulant-free booster variant into the mix, that's a caffeine-free formulation. And in December, it added a ProbiFlora fit-for-school chewable tablet into the ProbiFlora range. So good innovation overall from the consumer business. The division will continue to look for acquisitions within the health care, personal care and baby care space where we are currently looking. Moving on to the over-the-counter division. This division still holds market leadership positions in pain, in coughs, colds and flu, in digestive and allergy therapeutic categories through the pharmacy channel in South Africa. The division's winter basket was obviously adversely impacted by the COVID pandemic due to the lack of traditional cold and flu seasons in South Africa, but we have seen a recovery in that over the 6 months that we are currently reporting to you. Turnover improved by 26% and coupled with higher factory recoveries at the Clayville facility resulted in trading profit increasing by an extraordinary 58%. The division has maintained its position as market leader in Schedule 1 and 2 medicines in pharmacy. According to IQVIA, the growth is recorded at 15% on a moving annual turnover basis in a market growing at 11%. Some of the division's flagship brands, including Citro Soda, Allergex and Corenza C have achieved double-digit ex-factory growth. So really strong performance from a lot of the brands in this division. The marketing agreement with Mundipharma for Betadine and Teejel commenced in July. So those products are doing quite well in the market. And Scopex, one of our treatments for abdominal cramps was moved from secure retainers to convenient blister packs, resulting in a doubling of the sales rate for that brand. They're now very well-established and successful sponsors of Brave campaign continues to recognize health care professionals who are doing exceptional work within their communities. So overall, we're very pleased with how this division has recovered. Our prescription division markets a portfolio of branded and generic medicines and also promotes numerous brands on behalf of multinational partners. This division performed well with turnover improving by 5%, about 11% on a like-for-like basis is the impact of the transfer of Epi-max to the Consumer division is removed. The recovery here has been assisted by an increase in elective surgeries and doctors consultations over the easing of the lockdown restrictions during the period. The division launched 3 products within its generics portfolio in the period. In addition to that, it's brought the Stopayne tablets back to market. Those were brought back in December and some additional launches, including a new chemical entity are being planned for the second half of the year. Our entry into biosimilars has paid off with Blitzima gaining more than 50% market share of all new rituximab patients during the period. We have submitted our tender documents for the ARV tender and we are awaiting the outcome of the adjudication of the tender from the National Department of Health, the new tender scheduled to start on the 1st of July. Our hospital division, which is the leading manufacturer and supplier of critical care and hospital products in South Africa increased turnover by 13%. That was added substantially by the onboarding of a portfolio of products from Roche, and we also saw improved demand for a number of therapies because of increased hospital admissions in elective surgeries. The division has partnered with Abbott Diagnostics to supply a range of rapid testing diagnostic kits. Demand was very good for those kits, especially during the fourth wave of the pandemic and revenue for that portfolio now running at close to ZAR 30 million in the 6-month period. The decline in COVID-19-related hospitalization has resulted in less demand for acute renal dialysis products in the period. Trading profit in this division improved by 6%. Looking at the regulatory environment. For 2022, the government has announced a single exit price increase of 3.5%. The industry was looking for 3.9%. So hopefully, something closer to 4%, but certainly the 3.5% on its own will assist in protecting margins at the company. In December, a further 2-year extension was also granted for all scheduled non-medicines from the pricing regulation. So that means products like Panado and Compral and the like continue to enjoy free pricing in the market and a 3-year extension was granted for medical devices. We've had no further correspondence from SAHPRA in relation to their review of the scheduling status of coding and coding containing medicines. We completed all our necessary submissions of information requested by the regulator, so we now await any further correspondence from SAHPRA. Looking at the manufacturing and distribution side of the business. At Clayville, we have a high-volume liquids and effervescent powders facility. As we said earlier, that business has delivered a good performance over the period with improved recoveries relative to the corresponding period. The good news for us is that in late December 2021, the company received regulatory approval from SAHPRA for the ophthalmic facility. So we've now been able to commence manufacturing of sterile eye drops at Clayville We are busy with the production of the first validation batches of allergic eye drops at the moment and we intend to bring in an additional 4 products for manufacturing before the end of this financial year. The facility in Wadeville continues to be impacted by lower-than-anticipated tender demand for antiretrovirals. However, that plant has performed fairly well this period in terms of recoveries and well-controlled expense management. They're busy preparing for a World Health Organization inspection during the second half of this calendar year at Wadeville. And in addition, the manufacturing of some of the products that we purchased from Aspen at the end of the 2021 financial year have been transferred into that facility. So overall, decent progress being made there. Our Aeroton-based critical care facility has had satisfactory throughput during the period and that facility continues to undergo a number of regulatory improvements and infrastructure upgrades to maintain its regulatory compliance and those will continue to happen over the course of this calendar year. Our distribution department operates in partnership with RTT, which is our outbound logistics provider. Our focus with RTT remains on service levels, regulatory compliance and cost containment, especially following the recent fuel price hikes. Although the pandemic has obviously placed significant pressure on the operations in distribution, the timely delivery of products was not compromised. And overall, an on-time delivery of 98.5% was achieved. Unit volumes in that system have increased by 15%. Looking at the environment, we've completed a solar installation at our Midrand site in partnership with our landlord growth point that was commissioned on the 1st of February and we are busy with further solar installations at our Durban and Cape Town distribution centers, and we've also approved some capital expenditure for a solar facility at our Clayville factory. So starting to make decent progress on the environmental side. On the transformation side, very happy with the performance of the team there. It's still a key strategic focus area for our business. And in November, we were given a Level 2 broad-based black economic empowerment rating from our ratings agency. That completes my overview. I'll hand over to Dorette for a commentary on the detailed financials.

Thank you, Andy, and good morning, ladies and gentlemen. Before I get into the details of the financial results, I would just like to mention that the results [indiscernible] is available on our website as well as on the SENS platform. In a close to look at the income statement and looking -- starting with turnover of ZAR 4.3 billion, which increased by 15.6% compared with the 6 months to December 2020, driven by excellent volume growth of 9.3%, mainly due to the improved demand for the over-the-counter and consumer health care products as well as a mix benefit of 6%. Overall, price realization was however less than 1%. In the OTC and consumer businesses, price increases in line with inflation were realized, but this was offset by double-digit price deflation in both the renal segment of the Hospital division and the ARV segment in the prescription division. Gross profit of ZAR 1.5 billion, 17.2% higher than the comparative 6-month period, just ahead of the growth in sales. The gross margin of 35.0% ended slightly above the comparative period, which was at 34.5%, supported by the strengthening of the rand and improved product sales mix and higher factory recoveries at the Clayville factory as a result of the increased demand for the over-the-counter products, which offset the higher than inflationary increases we've seen in utilities and wages. Turning to some detail on the material foreign currencies we bought during the 6 months. USD 34.3 million at an average rate of ZAR 15.01, which was 11.3% strengthening compared to the comparative period, which was at ZAR 16.92 and EUR 24.7 million at an average rate of ZAR 17.60, representing a 7.9% strengthening compared to the comparative period, which was at ZAR 19.12. With approximately 54% of FECs in US dollars and 45% in euro, the weighted cost of our basket of all currencies decreased by approximately 9.8% compared to the comparative period. At the end of December, that is at the end of the reporting period, we carried the following open FECs. USD 19.2 million at ZAR 15.68, which is 4.5% weakening over the ZAR 15.01 achieved in the first 6 months and EUR 21.1 million at ZAR 17.99 which is a 2.2% weakening over the ZAR 17.60 achieved in the half year. Operating expenses ended 13.1% higher than the comparative period. The primary drivers being increased selling and distribution expenses related to the higher turnover and higher marketing investments behind our core brands and to support the new product launches. As a result, trading profit of ZAR 543 million is 25.5% above December 2020. The non-trading expenses of just short of ZAR 32 million consists mainly of share-based expenses of ZAR 27 million, which is higher than the prior period due to the change from the Phantom option scheme to a performance-based long-term incentive scheme and also some corporate transaction activity costs of ZAR 3.6 million. Consequently, operating profit of ZAR 512 million ended 32.6% above the comparative 6 months. Net finance costs for the period are ZAR 22.5 million, which includes IFRS 16 finance costs of ZAR 13.2 million. Equity accounted earnings from joint ventures for the period, which arise from National Renal Care, the joint venture with Netcare as well as the India facility, a joint venture with Meiji of Japan of ZAR 54 million, 9% below the comparative period. We've seen a bit of a mixed bag in the results here with the NRC results improving by 14% over the comparative period whilst the Indian JV earnings dropped by 16%, and this was due mainly to the increased cost of paracetamol as well as the discontinuance of a government export incentive in India. Profit before tax for the 6 months is ZAR 544 million, up 28.2%. The effective tax rate adjusted for equity-accounted earnings is 31% with non-deductible expenditure causing the increase over the statutory rate. Headline earnings for the 6-month period under review amounted to ZAR 392 million, which is up 25.7%. This translates into headline earnings per share of ZAR 242.03, 30% above the comparative period, assisted by the share repurchases by the group in the previous financial year. If we turn to the balance sheet, which is on page 7 of the booklet. And looking at property, plant and equipment, the depreciation charges for the 6 months amounted to ZAR 89 million, marginally below the prior year and includes depreciation of ZAR 20 million on the separately disclosed right-of-use assets capitalized in terms of IFRS 16. Intangible assets, including goodwill have a carrying value of ZAR 1.3 billion and comprised of generic, consumer and OTC trademarks and license agreements and it also includes the addition of the Aspen brands acquired in the current reporting period for ZAR 165 million. The other big ticket items are the basket of products we acquired from Aspen in the previous financial year as well as the intangibles and goodwill recognized when the group acquired Genop and Plush. Amortization amounted to just short of ZAR 5 million in the period. Looking at the working capital, and I'll start with inventory. The inventory of just short of ZAR 2 billion is stated at the lower of cost and net realizable value after provisions of ZAR 305 million. Days in inventory at the end of December are 121 days compared to the 123 days at the end of June 2021. Trade accounts receivable of ZAR 1.8 billion show net of provisions of ZAR 58 million with the increase in the value due to the higher sales. Days in receivables are 59 days, the slight improvement from the 60 days we reported in June. Government debt makes up 19% of the trade receivables and around 60% of this customer's total outstanding amount is due within 60 days or less. At the bottom of the balance sheet, the group has shareholders' funds of just over ZAR 5 billion at the end of December. The other big movement was in the non-distributable reserves, which moved about ZAR 80 million, which was due to an increase in the cash flow hedge accounting reserve of ZAR 21 million, an increase in the foreign currency translation reserve of ZAR 36 million and an increase in the share-based payment reserve of ZAR 23 million. The only liabilities at the bottom of ZAR 265 million relates to leases. So turning to the segment information, which is on pages 10 and 11 of the booklet. And I'll start with the Consumer division. The consumer turnover improved by 32.7% to just short of ZAR 800 million, with key brands posting healthy growth, as Andy explained, notably from Panado benefiting from the COVID-19 vaccination campaign and the inclusion of the Epi-max brand effective 1 January 2021 after being transferred from the prescription division. On a like-for-like basis, sales improved 13.6%. Volumes improved 8.1% and price realization in this division was 4.2%. A gross margin improvement was realized in this period, driven by the improvement in the exchange rate and advantageous sales mix with the addition of Epi-max with a high margin. As a result, trading profit ended on an impressive ZAR 173 million, 59% ahead of the prior period or 21% ahead on a like-for-like basis. It seems our strategy of continuing to build the non-price regulated consumer business is proving beneficial. Moving to the OTC business. OTC, which focuses on products through the pharmacy channel, turnover improved by 26.5% to ZAR 994 million, arising from the relaxation in COVID-19 restrictions, which has resulted in improved demand across the cough and cold basket compared with the struggles experienced in the comparative period, resulting in volumes increasing by 20.7%. An average price increase of 5.2% was realized, whilst mix contributed 0.5% as the Mundipharma business compensated for the loss of the added brands, which were returned to the principal. A significant gross margin improvement was realized, driven by the advantageous sales mix and higher recoveries in the Clayville factory due to the increase in production levels, following the improved demand. As a result, trading profit increased by an exceptional 58% to just short of ZAR 170 million. And looking at prescription, prescription turnover improved by 4.6% to ZAR 1.57 billion, aided by the lower levels of lockdown compared to the comparative period as well as a steady increase in elective surgery seen over the last 6 months. On a like-for-like basis, sales increased by 11.2%, that is if we take out the impact of Epi-max being removed. Volumes increased by 6.5%, but double-digit price deflation in the ARV segment resulted in overall price deflation in the division of just short of 0.5%. The launch of products in the second half of the previous financial year and in the current period substantially compensated for the transfer of Epi-max to consumers. A decline in the gross margin was realized due to a variation in the sales mix after the transfer of Epi-max as well as the higher proportion of ARV tender sales at a lower margin in the current reporting period. As a result, trading profit declined by 14% to ZAR 122 million, but improved almost 12% like-for-like. Lastly, in the Hospital division, where turnover improved by 13% to ZAR 984 million, with all product categories achieving growth. The Blood and Specialty segment benefited from ongoing rapid testing diagnostic products for COVID-19 in the pathology portfolio as well as an increase in blood drives. The medicine delivery segment gained from the increased level of elective surgeries, whilst the renal segment benefited from the onboarding of the Roche renal portfolio, effective since February of last year. Organic volumes contributed 2.8%. Selling prices were decreased in the renal business following the strengthening of the rand as agreed with customers when prices have been increased during the previous financial year when the rand deteriorated. This resulted in an overall price deflation of 5.2% in this business. Although the gross margin ended marginally lower than the prior period and marketing investment spend increased as a result of the new product launches, trading profit improved by 6.3% to ZAR 80.6 million. Thank you. I will hand back to Andy to close the session.

Thanks, Dorette. That's all from our side. Claudia, we're happy to take any questions on the teleconference in the first instance.

[Operator Instructions] At this time, we have no questions on the phone lines. Can I just hand over to see if there are any questions on the webcast.

From Jonathan Block, what feedstock input prices are important and which currencies affect profit margins? Jonathan, I think Dorette has spoken through the FX effects on the business. So effectively, if you look at our cost of goods across the business, the entire business, just over 50% of our input costs are foreign denominated. And that's just marginally more in dollars than in euros. If you looked at each of the individual businesses, certainly in a business like prescription and consumer, a heavy dollar impact there. In OTC, it swings a little bit more to the rand because we do a lot of local production here in OTC. And then in the hospital business, it's heavily weighted towards the euro because our renal products come in from Europe.

Okay. Then there was also a question to Andy and team. You see elective demand in prescription back to pre-pandemic levels. Some color in terms where we are relative to pre-COVID. And then the second part relates also from Itumeleng. What was the amount of COVID costs incurred versus the prior period? How much of these costs are confined in your normal OpEx cost? And how much do you expect to remain in the base going forward as part of our normal OpEx. Andy?

Okay. Look, on whether we are back at pre-COVID levels, if you look back to sort of December 2019, that gives you, I think, a reasonable benchmark of where the business was pre-COVID because effectively, in the first half of calendar 2020, you had a lot of volatility in terms of sales because people didn't really know what to buy relative to the COVID-19 pandemic. And then in the second half, you saw a pretty large depression in cough, cold and flu medicine because of no winter season in that particular year. If we look overall at the business, this last 6 months, we'd be up in double digits at both the revenue and the trading profit line relative to the 6 months ended December 2019. So you can see that the business has sort of recovered with kind of inflationary increases overall within the business. If you looked at the businesses individually, it's difficult to deconstruct consumer and prescription because we've moved products between those markets. But if you combine the consumer and prescription business, they are well ahead of where they were pre-COVID. So they're up by around about a third at the revenue level and a little bit more at the trading profit level. And one would suggest one would expect that, that's more weighted towards the consumer business than the prescription business because the script business has still suffered from some COVID pandemic-related demand because we haven't had 100% easing of lockdown restrictions over this period. The OTC business is still a little bit behind where we were pre-COVID, but we're very happy with the recovery. So at the top line, they're doing better, but at the bottom line, a little bit behind where we are pre-COVID, but they appear to be recovering towards the sort of ZAR 400 million trading profit level on an annual basis. And then the hospital business is well ahead of where it was pre-COVID, in double digits, both at revenue and trading profit level, but there's a mixed story there. So when there are a lot of COVID-19 hospitalizations, you sell a lot of acute renal therapy. When there are elective surgeries, you sell a lot of injections, intravenous fluids and you get more blood bags through the system because [indiscernible] is busy with its blood drives. So that's a story of mix more than anything else. The second question.

So I can comment on the COVID cost, Itumeleng. The COVID costs we currently have in the business is really not material. I think we've embedded the measures we have to show a little bit of cost in additional cleaning, et cetera, but also with having the employees not full time back at the office, there's a bit of savings on certain other operational costs. I think through the lockdown levels, we've come a long way from that third wave when if someone was sicker, plant was shut down for 3 days and a deep cleansing was done and those processes are a lot quicker, and there are no plant interruptions because of COVID. So nothing material in that regard. Then from Grant Morris with regards to the sterile eye drops, could you please give us some detail on the products or the use and whether for the local or export market and would this be in the description division?

Yes. Grant, the ophthalmic facility is a big win for us to have got it approved by SAHPRA. So to give you some background, we sell ophthalmic products, both in our prescription division and in our OTC division, but primarily in prescription. So we have an ophthalmic business in prescription today that is around about ZAR 200 million per annum, about ZAR 120 million of that is capital equipment that we import from various partners across the globe and about ZAR 80 million of that is eye drops. And virtually all of those eye drops were not at the moment, virtually, but prior to this facility being approved, all of those eye drops are either manufactured by a contract manufacturing in South Africa or by our license partners from whom we bring them in offshore. So our plan here is to take all of the products that we manufacture locally through contract manufacturers and over-time, push them into this Clayville facility. And as I said, that's around about ZAR 80 million worth of revenue to the company per annum. And if you look in the market today, because of the dearth of contract manufacturers in South Africa, we're out of products like Spersallerg and Spersadex Comp, which are very -- products that are highly recommended by pharmacists and very well prescribed by doctors. So there's no doubt that we can improve revenue by bringing those products into the market. In addition to that, we're on the brink of signing a marketing and sales agreement with another big ophthalmic company that could add around about another ZAR 200 million worth of revenue at Adcock Group. Now we would only get a sales and marketing fee out of that agreement. So it's not particularly high margin, but it gives our reps in the ophthalmic division more products to take to ophthalmologists. And over-time, we would explore with that company, particularly on older products, whether they would want to move those products into our factory for the local market. There's no intention to sell export products, ophthalmic export products out of Clayville. We don't have any export sales for those types of products.

[indiscernible] also had a question with regards to group volumes relative to December 2019, but Andy did touch on that. So unless we've met something, I'm going to skip that question. Then there is a question from [ Junaid ]. You mentioned the recovery in manufacturing utilization. Where is it currently at relative to normal levels?

Junaid, again, we've got to talk individual factories there. So at the moment, at the Clayville factory, if you look at our cough mixture production as well as our powders and effervescent production. So I'm talking about products like our Alcophyllex, Citro Soda, [indiscernible] powders and alike. We're operating at full capacity there, and in fact, are running overtime shifts in that factory. The ophthalmic facility still at very low capacity because we still are validating the first product there. So that's going to take a little bit of time to get going. If you look at Wadeville, the ARV facility currently running at around about 40% to 50% capacity, and that is largely a factor of the demand on the state tender. So when you get a lot of orders through for the state, you get a lot of production. When you get less orders, the production obviously falls-off. And we've become a pretty small player in the private sector ARV market. So that's not affecting that factory much, given that we're not a big player in private sector ARVs. The factory on the creams and ointments, liquid side there at Wadeville has done well, that's operating at about 80% capacity and there we benefited both from the demand for our own products and we're doing quite a lot of contract manufacturing for other pharmaceutical companies in that half of the factory. At the Aeroton factory, there, again, we're running at full capacity and we don't expect that to change in the foreseeable future. The real issue about Aeroton is trying to do all of these regulatory upgrades and infrastructure upgrades while trying to produce or else building sufficient inventory ahead of when we have to upgrade a particular section. So there's a lot of complexity in just running that factory.

Then there is a question from [ Jan ]. That says, adjusting for the restructuring costs in the buys, profit growth was closer to 21%. Can this growth be maintained in the second half if current conditions prevail. The stronger rand will also help.

Jan, look, we agree with you on the rand. So while the rand sitting at these levels of about ZAR 15, certainly that's good for Adcock Ingram and, I guess, for the pharma industry in general. So that does make us feel good. I guess we don't give forecasts. But certainly, if we're reverting to an environment where there's a more of a normal cold and flu environment in South Africa, then we would think that this is sustainable for the second half because we should sell in winter products effectively in March, April and May. So it's all for us going to be a factor of what happens relative to COVID restrictions and freedom of movement restrictions in the market. Normalized, I think we can sustain it, but if we have another big COVID wave, which is not indicated at the moment by the way. A big COVID wave with hospitalizations, that changes the scenario a little bit. But again, it only impacts the OTC business. The other 3 businesses should still continue to perform well.

I think this adds to the question that James Corkin asked about how much more is to come from OTC and consumer, if this cough and flu cycle normalizes. But he also asks if we can comment on what drove the strong performance, given the weak flu cold season.

Look, I think where we were coming from was a base where there was very little cold and flu inventory in the wholesaler and retailer system because effectively, they've gone through 2 winters where they had pulp, they stocked up in March 2020. So we had ridiculously high sales in March 2020 across the industry. And then effectively, those products never sold out properly across the next 2 winters. The first winter particularly bad in 2020 and in 2021, a little bit better, but not markedly so. So effectively, I think we're now in a position where we are restocking that channel, which has taken, let's call it, 18 months to 2 months to effectively move through the system. And in a normal cold and free environment, it would have moved out in a single season. The second thing that helped us was that this Omicron variant definitely gave rise to some symptoms that are very akin to cold and flu. So we had people who are complaining of coughs, we had people who were complaining of sore throats, we had people who were complaining on some level of sinusitis and headaches and alike. So just symptomatically, our products would be indicated for those sorts of problems and Omicron definitely helped us in that respect.

And there is a question from [ Nick Defoe ], asking, please can you comment on the prospect of future share repurchases and also comment on overall trading post half year end.

Nick, we have authorization to continue with share buybacks that was given to us by our shareholders at the November AGM. So we've obviously been in a close period. So we haven't been in the market recently, but we'll continue to look at what the share price is, look at what our available capital is relative to our capital expenditure program and any opportunities on the market. And if we think it's opportune, there's nothing to stop us purchasing back additional shares. And then your other questions -- what was Nick's other question? Sorry, trading post [indiscernible]. Look, the momentum is pretty much what it's been. It gets a little bit lumpy now in January and February. And the reason is the SEP increase of 3.5%, we effectively have got through the administrative process at the Department of Health at the end of January. So what traditionally happens pre-SEP increase is that some of the big customers that have available capacity in their system will order pre-SEP increase to try and take advantage of that margin. So that means January would be a good month just because they were anticipating an SEP increase and February would be a quieter month because effectively, they've stocked up. But on average, the 2 months look like the momentum is pretty much what we've seen in the period that we've reported, maybe just marginally softer, but not remarkably so.

Then question from James Corkin. What multiple did you pay for the July and December acquisitions and what synergies do you expect?

So we're not disclosing those multiples on the Aspen products. What we can tell you is that we effectively in our negotiation with Aspen had agreed a gross margin multiple on those products because effectively, once we get them into our system, that looked like a reasonable metric to be conducting a valuation. The synergies on those products really are manufacturing synergies. So the quicker we can get those products into the Wadeville factory, the better because what it means is there's a contract manufacturing margin inherent in those products, which at the moment we aren't getting.

James also had a question that asked about commenting on what drove the increase in the provision line. So James, you were not clear on that, but I assume it's an increase on the provision of stock line because that moved a little bit from last year. It's mainly because of 2 things. Because we have a higher stock value and some of these purchases we did in the COVID levels of lockdown was still quite strict, we have some products that will expire that we did some prudent provisioning for and we also have done or changed slightly in some divisions the way we provide for quarantine stock. So that is a period since stock is released from the factory and a wide clearance from the quality assurance people, so we have shortened that time line that also drove that increase in the inventory provision. And lastly, yes, there's one more question from Itumeleng and he just ask how we've seen our demand being impacted in brand does make sense compared to or affected by the private label?

Itumeleng, I assume you are referring mainly to the OTC and consumer businesses there. I will be honest with you. Still in health, let's call it pure health care. So analgesia, coughs, cold and flu and alike, we haven't seen a significant impact from house brands. Where we do see more of a switch towards house brands is on the more complementary medicine sites. So vitamins, minerals and supplements and alike, where retailers effectively have the ability to sell in a much broader portfolio there. But on the branded side, no real impact that we have noticed.

Okay. that is all the questions on the webcast. Claudia, if we can ask if there are any questions on the conference call line.

[Operator Instructions] Mr. Hall, we've no further questions. Can I hand back to you for closing remarks.

Claudia, thank you for your assistance today and to all of our shareholders and other investors who have dialed in. We appreciate you taking interest in the company. And if you have any other questions that you want to raise, you are welcome to either call us or send through on e-mail. So thanks, everybody, and have a good day.

Thank you very much, sir. Ladies and gentlemen, that concludes today's conference. Thank you for joining us. You may now disconnect your lines.