Since the battle for control of Adcock Ingram between Bidvest and Chile's CFR Pharmaceuticals in 2014 - which ended in a change of leadership and a reorganisation of the business - CEO Andrew Hall has done well to improve the drugmaker's balance sheet. This is reflected in the company's annual results to June 30, which were released on Friday.Turnover up 7.5% to R5.5-billion, trading profit up 16.9% to R606-million, normalised headline earnings per share up more than 20%, and a final dividend of 54c were declared. Net debt is down another R466-million, with total debt dropping from more than R1-billion in 2014 to just R217-million today.In the two years under Hall, Adcock has become a business which generates more cash, has improved factory efficiency and production throughput, and has more scope for volume increases in its facilities - most likely in the form of acquisitions in Southern Africa.Cash generated from Adcock's operations grew from R598-million last year to R941-million in the 2016 financial year, where the company reinstated its half-year dividend after a two-year hiatus.Adcock, which owns well-known brands like Panado, Bioplus, Compral and Cepacol, is once again looking healthy, but its weighting of profits indicates the direction in which its leadership is keen to move: over-the-counter medicines available through the pharmacy channel brought in 30% of Adcock's revenue for the year but nearly two-thirds of its operating profit.The margins from its regulated medicine products are slim and price increases on single-exit pricing-regulated products have not come through, which saw sales to hospitals make up 27% of revenue but only 6% of Adcock's profit.The company has decided to drop Cosme Pharma Laboratories of India, which it bought in 2012, as well as its stake in Ghanaian business Ayrton Drug Manufacturing, which it acquired in 2010.According to John Thompson, an analyst at Investec Asset Management, Hall has said he refuses to overpay for acquisitions, but without pricing power in roughly 75% of its business, acquisitions are necessary. Organic growth would be slower and potentially costly."A lot of selling businesses are asking too much, so Adcock needs to think carefully about where to invest. They want to buy into brands that sell in nonregulated market channels so they can extract pricing power, grow the top line above inflation and develop leading brands," Thompson said."Adcock is potentially targeting areas like home care, beauty, personal care and baby products."Thompson said it would be interesting to see whether Tiger Brands CEO Lawrence MacDougall decided to narrow his focus to food brands. If this happened, Adcock might be able to grab some valuable household brands - such as personal grooming products - provided the price was right.If Adcock managed to snare these items, Thompson said, it could easily lift its margins to double figures, with more work to be done on factory automation, contract volumes and working capital."Adcock can utilise its assets better, even though they've done a lot of work on costs."Although the battle for control of Adcock is over, investors didn't react much to the company's great figures because they were not sure of Bidvest's future interest in Adcock, Thompson said. There were also fears that Bidvest's 37.5% stake could end up being sold."It's a discernible change in strategy . . . but Bidvest won't sell out of Adcock at any price - they've already written down their purchase by a billion rand."Thompson said that with the most recent single-exit pricing increase not yet assured, rand volatility and no corporate action on the radar, investors needed a catalyst beyond the next six-month period to really get excited."The share price is a far cry from what it could be ... The management team has shown it can reposition the business and the market should have more confidence. I think it's a matter of time and steady delivery."peacockb@sundyatimes.co.za..