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TRADING, OPERATIONAL AND STRATEGIC UPDATE
LITHA HEALTHCARE GROUP LIMITED
Incorporated in the Republic of South Africa
(Registration number 2006/006371/06)
Share code: LHG
ISIN: ZAE000144671
("Litha" or "the Company")
TRADING, OPERATIONAL AND STRATEGIC UPDATE
This announcement provides shareholders with a trading, operational and strategic update ahead
of the release of Lithas results for the six months to 30 June 2012.
Operational update
Litha Biotech
The six months to 30 June 2012 saw a marked increase in sales. This was supported by a
government influenza vaccine campaign in the first quarter of this year, as well as the ongoing
outbreak of rabies disease which resulted in an increase in human rabies vaccinations.
Litha Medical
The business units of ICU Medical SA and Filterworks continued to perform well. Earth Medical signed
a number of new agency agreements during the period under review, with exciting prospects. More
details will be provided with the release of the interim results.
The delayed release of the DNA evidence collection kits government tender significantly negatively
impacted the financial performance of Manta Forensic within Litha Medical when compared to the same
period in 2011. The tender and consequent adjudication is anticipated during the second half of this
year. Due to the size of this business/tender in the division, this will also impact group results.
Litha Pharma
The integration of the recently-acquired OTC Pharma SA and Goldex Healthcare businesses was
successfully finalised in the period under review.
It is expected that synergies from the integration will enhance the profitability of the division in the
second half of 2012. The acquisition and merger of Pharmaplan with Litha Pharma will have a
significant impact on operations. It will require a process of operational restructuring and
integration over the next year to ensure synergies are optimised and enhanced.
Pharmaplan acquisition update
As announced on SENS on 3 July 2012, all conditions precedent have been fulfilled relating to the
acquisition of Pharmaplan. The transaction, as defined in the circular distributed to shareholders
dated 7 May 2012, has accordingly been implemented with effect from Monday, 2 July 2012.
The Pharmaplan transaction achieves Lithas objectives of being a diversified healthcare business
and delivers on its stated strategy of creating scale within its Pharma division through acquisitions.
Pharmaplan has performed well in the first half of 2012, with earnings ahead of expectations.
Deconsolidation of Biovac
Over the course of the last few months, Biovac has continued to develop growth strategies and
work with current and potential international partners, including the government of South Africa.
Work continues on expanding its operations into a state-of-the-art manufacturing/filling facility with
the capacity to meet local and international vaccine demands.
As a significant shareholder, the South African government, through the Department of Health, has
continuously and progressively demonstrated its commitment to Biovac's ambitious growth plans.
Government has meaningfully participated in Lithas expansion of the vaccine business in South
Africa as a model for the African continent.
The governments decision to actively participate with Litha in business decisions and the
deployment of capital has necessitated a change in accounting, which together with the early
adoption of the new consolidation suite in IFRS, results in Biovac being accounted for as a joint
venture in accordance with IFRS 11, Joint Arrangements. Under Joint Arrangements, the
government is considered to jointly control Biovac with Litha. Its results therefore have to be
presented in a single line item in the Statement of Comprehensive Income under "Income from
joint venture" and under the Statement of Financial Position as "Investment in joint venture". This
accounting treatment will be effective 30 June 2012.
The ownership structure and underlying benefits of Litha's investment in Biovac remain unchanged
in all respects. In the interest of continued benchmarking for shareholders, the results of Biovac
will be separately disclosed in the same level of detail as in the past with Litha's interim and full-
year results to 2012.
This change will have no continuing effect on the earnings per share of the group.
Revenue update
In line with our new controlling Canadian-listed shareholder, Paladin Labs Inc, we will be giving
revenue projections on a quarterly basis. In that regard, we expect consolidated revenue for the
period from 1 July 2012 to 31 December 2012 to be in excess of R500 million including
Pharmaplan, but excluding Biovacs revenues as it will now be deconsolidated. The Biovac
Institute is expected to achieve in excess of R480 million in revenue.
Earnings update
Headline earnings per share
Due to the reduced profitability at Litha Medical based on the delayed government tender,
as well as transaction costs relating to the Pharmaplan transaction in the first half of 2012
(without the benefit of Pharmaplan earnings), headline earnings per share will be between
0 to 5% lower than the six months to June 2011.
Earnings per share
As a result of the deconsolidation of Biovac, as described above, and its classification at
fair value as an investment in joint venture, it is expected that earnings per share will be
between 300% and 310% higher than the equivalent comparative period in 2011. This rise
in earnings is derived from the accounting recognition of a deemed disposal gain on the
derecognition of Lithas investment in Biovac as a subsidiary and subsequent recognition
thereof as a joint venture in terms of IAS 27.
The above forecast information has not been reviewed and reported on by the Companys external
auditors
Midrand
2 August 2012
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Date: 02/08/2012 09:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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