Wrap Text
Unaudited condensed consolidated results for the quarter and six months ended 30 June 2013
LITHA HEALTHCARE GROUP LIMITED
(Registration number 2006/006371/06)
Share code: LHG, ISIN: ZAE000144671
("The Group" or "Litha" or "The Company")
UNAUDITED CONDENSED CONSOLIDATED RESULTS FOR THE QUARTER AND SIX MONTHS ENDED 30 JUNE 2013
- Q2 EBITDA up 12% from Q1 2013
- Q2 operating profit up 77% from Q1 2013
- Q2 earnings per share increased by 386% from Q1 2013
The unaudited condensed consolidated results for the quarter and the six months ended 30 June 2013 have been
prepared by the Group's Chief Financial Officer, Martin Michael Kahanovitz, CA (SA).
The unaudited condensed consolidated results for the quarter and six months ended 30 June 2013 have been prepared
in accordance with the framework concepts and the measurement and recognition requirements of the International
Financial Reporting Standards ("IFRS").
The results are based on management accounts and contain information required by the International Accounting
Standard 34 Interim Financial Reporting ("IAS 34") and in the manner required by the Companies Act. However, the
Group does not provide comparative figures for the quarter ended 30 June 2012 as formal quarterly reporting processes
were only implemented in the third quarter of 2012. Comparative information would therefore possibly be misleading and
inaccurate. Comparative quarterly results will be disclosed beginning with the third quarter 2013. The quarterly results are
being prepared as a result of the acquisition of a controlling interest in Litha by Paladin Labs Inc. on 2 July 2012. Paladin
Labs Inc., a Canadian specialty pharmaceutical company listed on the Toronto Stock Exchange, is required to prepare
quarterly financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Reviewed Audited
(R'000) 30 June 2013 30 June 2012 31 December 2012
ASSETS
Non-current assets 1 326 858 674 121 1 347 499
Property, plant and equipment 75 409 19 167 79 278
Goodwill and intangible assets 850 694 265 740 869 657
Investment in associates 6 546 4 912 5 340
Investment in joint venture 252 442 266 033 260 034
Loans to joint venture 108 884 100 673 104 744
Deferred taxation asset 26 395 11 108 21 958
Other non-current assets 6 488 6 488 6 488
Current assets 538 956 310 361 436 626
Inventories 275 750 103 233 194 964
Trade and other receivables 221 479 132 679 169 691
Taxation 4 336 - 22 904
Other current assets 10 945 25 677 2 380
Cash and cash equivalents 26 446 48 772 46 687
Discontinued operations 1 087 387 875
Total assets 1 866 901 984 869 1 785 000
EQUITY AND LIABILITIES
Total equity 1 132 549 647 249 1 107 596
Stated share capital and premium 760 473 295 473 760 473
Reserves attributable to holders of the parent 352 328 329 989 326 236
Non-controlling interest 19 748 21 787 20 887
Non-current liabilities 368 536 170 434 393 735
Other financial liabilities 277 709 158 070 293 957
Deferred taxation liability 90 827 12 364 99 778
Current liabilities 365 631 166 983 283 468
Accounts payable and provisions 223 843 86 116 139 111
Other current liabilities 87 368 35 213 84 260
Bank overdraft 54 420 45 654 60 097
Liabilities of discontinued operations 185 203 201
Total equity and liabilities 1 866 901 984 869 1 785 000
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited three Unaudited six Unaudited three Reviewed six
months ended months ended months ended months ended
R'000 30 June 2013 30 June 2013 31 March 2013 30 June 2012
Turnover 260 216 531 855 271 639 949 032
Cost of sales (143 308) (300 829) (157 521) (743 240)
Gross profit 116 908 231 026 114 118 205 792
Operating expenses (93 793) (184 282) (90 489) (135 642)
Profit on deconsolidation of Biovac - - - 169 020
Net income (loss) from associate 954 875 (79) (691)
Net Income (loss) from investment in joint
venture 1 522 (7 591) (9 113) -
Operating profit 25 591 40 028 14 437 238 479
Non-operating interest paid (5 950) (12 236) (6 286) (9 095)
Profit before taxation 19 641 27 792 8 151 229 384
Taxation (1 156) (7 971) (6 815) (11 816)
Profit from continuing operations 18 485 19 821 1 336 217 568
Profit/(loss) from discontinued operations (124) 765 889 (5 752)
Profit/ for the period 18 361 20 586 2 225 211 816
Total comprehensive income for the period 18 361 20 586 2 225 211 816
Profit attributable to equity holders of Litha
Healthcare Group Limited:
Profit from continuing operations 18 257 20 960 2 703 185 365
Profit/(loss) from discontinued operations (124) 765 889 (5 752)
Profit attributable to equity holders of Litha 18 133 21 725 3 592 179 613
Healthcare Group Limited
Non-controlling interest 228 (1 139) (1 367) 32 203
Total profit for the period 18 361 20 586 2 225 211 816
Total comprehensive income attributable to:
Equity holders of Litha Healthcare Group
Limited 18 133 21 725 3 592 179 613
Non-controlling interest 228 ( 1 139) (1 367) 32 203
Total comprehensive income for the period 18 361 20 586 2 225 211 816
Earnings per share (cents) 3,4 4,0 0,7 48,2
From continuing operations 3,4 3,9 0,5 49,7
From discontinued operations 0,0 0,1 0,2 (1,5)
Diluted earnings per share (cents) 3,2 3,8 0,7 45,9
From continuing operations 3,2 3,7 0,5 47,4
From discontinued operations 0,0 0,1 0,2 (1,5)
COMMENTARY TO THE CONSOLIDATION STATEMENT OF COMPREHENSIVE INCOME
Headline earnings reconciliation
Profit from continuing operations 18 257 20 960 2 703 185 365
Adjusted for:
Write-off of intangible assets - 242 242 -
Write-down of discontinued operations - - - 5 752
Profit on deconsolidation of a subsidiary - - - (142 512)
Tax effect of write-off of intangible assets - (68) (68) -
Loss/(profit) on disposal of property, plant and
equipment 33 20 (13) (56)
Tax effect of loss from disposal of property,
plant and equipment (9) (5) 4 16
Headline earnings from continuing
operations 18 281 21 149 2 868 48 565
Profit/(loss) from discontinued operations (124) 765 889 (5 752)
Headline earnings 18 157 21 914 3 757 42 813
Headline earnings per share (cents) 3,4 4,0 0,7 11,5
From continuing operations 3,4 3,9 0,5 13,0
From discontinued operations 0,0 0,1 0,2 (1,5)
Diluted headline earnings per share (cents) 3,2 3,8 0,7 10,9
From continuing operations 3,2 3,7 0,5 12,4
From discontinued operations 0,0 0,1 0,2 (1,5)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share-
Stated share based Reserve Accum-
capital and payment on equity ulated Ordinary share- Non-controlling
(R'000) premium reserve transaction profits holders interest interest Total
Balance at 1 January 2013 760 473 20 027 (67 215) 373 424 1 086 709 20 887 1 107 596
Total comprehensive income - - - 3 592 3 592 (1 367) 2 225
Share based payment reserve
adjustment - 765 - - 765 - 765
Balance at 31 March 2013 760 473 20 792 (67 215) 377 016 1 091 066 19 520 1 110 586
Total comprehensive
income - - - 18 133 18 133 228 18 361
Share based payment
reserve adjustment - 3 602 - - 3 602 - 3 602
Balance 30 June 2013 760 473 24 394 (67 215) 395 149 1 112 801 19 748 1 132 549
Share- Ordinary
Stated share based Reserve Accum- share- Non-
capital and payment on equity ulated holders controlling
(R'000) premium reserve transaction profits interest interest Total
Balance at 1 January 2012 295 473 1 134 (70 155) 207 959 434 411 77 698 512 109
Total comprehensive income - - - 179 613 179 613 32 203 211 816
Share based payment reserve
adjustment - 8 498 - - 8 498 - 8 498
Deconsolidation of Biovac 2 940 2 940 (88 114) (85 174)
Balance at 30 June 2012 295 473 9 632 (67 215) 387 572 625 462 21 787 647 249
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited three Unaudited Six Unaudited three Reviewed six Audited
months ended months ended months ended months ended year ended
(R'000) 30 June 2013 30 June 2013 31 March 2013 30 June 2012 31 December 2012
Cash (used)/ generated by operating (21 367) 31 842 53 209 147 797 190 628
activities
Cash flows from operating activities (30 271) 18 322 48 593 150 760 153 921
Cash flows from investing activities (27) (11 462) (11 435) (54 366) (179 968)
Cash flows from financing activities (12 674) (21 424) (8 750) (24 176) 83 491
Net (decrease)/increase in cash and (42 972) (14 564) 28 408 72 218 57 444
cash equivalents
Cash acquired on acquisition of - - - - (2 970)
subsidiary companies
Cash on deconsolidation - - - (179 337) (179 337)
Cash and cash equivalents at beginning 14 998 (13 410) (13 410) 110 237 110 237
of period
Cash and cash equivalents at end of (27 974) (27 974) 14 998 3 118 (13 410)
period
Cash and cash equivalents included in
discontinued operations 303 303 399 387 230
COMMENTARY
1. NATURE OF BUSINESS
Litha Healthcare Group Limited is a diversified healthcare business providing services, products and solutions to public
and private hospitals and government healthcare programmes in Southern Africa. It has three divisions - Litha Pharma
(pharmaceuticals and complementary medicines), Litha Medical (medical devices, equipment and consumables) and
Litha Biotech (human vaccines).
2. FINANCIAL OVERVIEW
Introduction
The Group is not providing extensive commentary on changes between the six months ended 30 June 2012 (H1 2012)
and the six months ended 30 June 2013 (H1 2013) due to significant changes following the deconsolidation of Biovac on
30 June 2012 and the acquisition of Pharmaplan on 2 July 2012. Comparative information could therefore be misleading.
To indicate a measure of continued performance, a comparison has been provided between the quarter ended
31 March 2013 (Q1 2013) and the quarter ended 30 June 2013 (Q2 2013).
While an in-depth analysis of the comparative six month periods has not been provided, the most relevant indicator of
comparative six month performance is headline earnings per share ("HEPS"), as this excludes the effect of the profit on
deconsolidation of Biovac. Other factors which impacted HEPS are increased interest expense associated with the
R125 million loan for the acquisition of Pharmaplan and the increased amortisation of intangible assets associated with this
acquisition. Excluding the effect of the increases in interest expense of R3,2 million and amortisation of intangibles of
R22,8 million, HEPS would have been 7,7 cps for H1 2013. This is a 3,8 cps decrease over the HEPS of 11,5 cps in H1
2012. H1 2013 HEPS was impacted by foreign exchange losses of R31,5 million in Biovac compared to a R3 million loss
in H1 2012. There was a significant improvement in HEPS from 0.7 cps in Q1 2013 to 3,4 cps in Q2 2013.
The Group also introduced earnings before interest, tax, depreciation and amortisation ("EBITDA") in the third quarter of
2012, as it is a more meaningful measure due to the large amortisation of intangibles and the significant increase in
finance costs associated with recent acquisitions. EBITDA provides stakeholders with a measure to assess the operating
performance of Litha's on-going business on a consistent basis without the impact of amortisation and depreciation
expenses. The company excludes depreciation and amortisation expenses, as these are dependent on non-operating
factors such as the historical cost of property, plant and equipment and intangible assets.
Reconciliation to EBITDA
EBITDA does not have a standardised definition under IFRS and therefore may not be comparable to similar measures
presented by other companies. The Group defines EBITDA as earnings before interest income/expense, other
expense/income, tax, amortisation, depreciation, foreign exchange gain/losses, income/loss from joint ventures and
equity accounted investments and unusual items, such as write-downs and gains/losses on investments. EBITDA is
calculated and presented consistently from period to period.
Unaudited Unaudited Unaudited
3 months ended 3 months ended 6 months ended
EBITDA breakdown 30 June 2013 31 March 2013 30 June 2013
R'000 R'000 R'000
Profit before taxation 19 641 8 151 27 792
Add back:
Interest expense 7 928 8 226 16 154
Depreciation expense 2 436 2 223 4 659
Amortisation expense 14 397 14 397 28 794
Net (profit)/loss from Joint Venture (1 521) 9 112 7 591
Net (profit)/loss from equity accounted investment (954) 79 (875)
Foreign exchange (gain)/loss (3 504) (8 007) (11 511)
Write off of intangible assets - 242 242
Other finance expense 357 357 714
Less:
Profit on deconsolidation of Biovac - - -
Interest income 2 505 2 384 4 889
EBITDA 36 275 32 396 68 671
Interest expense includes non-operating interest expense of R6,0 million for the quarter and R12,2 million for the six
months and relates to interest expense on cash, which were raised to fund the cash portion of previous acquisitions.
Statement of Comprehensive Income
- Turnover decreased by 4.2% to R260,2 million for Q2 2013 from R271,6 million in Q1 2013
- Operating profit increased by 77.3% to R25,6 million in Q2 2013 from R14,4 million in Q1 2013
- Earnings per share ("EPS") and HEPS increased by 386% to 3,4 cps in Q2 from 0,7 cps in Q1 2013
Turnover decreased in Q2 2013 mainly due to the decreased sales in the Litha Vaccines business of Litha's Biotech
division. The decrease follows a strong first quarter due to the seasonality of flu vaccines sales. The decline in Litha
Biotech was slightly offset by a strong quarter in Litha Medical, while Litha Pharma turnover remained flat quarter on
quarter. Further divisional analysis is provided in the operational review below.
The improvement in operating profit from Q1 2013 to Q2 2013 was mostly driven by Litha's share of net income/(loss)
from its joint venture, Biovac, and by a slight increase in turnover in Litha Medical. In Q1 2013, the Group recognised a
net loss from its investment in joint venture, before fair value adjustments and taxation, of R4,2 million, while in Q2 2013,
a profit of R3,2 million was recognised. The Q2 2013 profit in Biovac is attributable to stronger sales and reduced foreign
exchange losses when compared to Q1 2013.
The effective tax rate before loss from joint venture and income from associate was 7% for Q2 2013, compared to 39,3%
in Q1 2013, mainly due to re-assessments and over-estimation of taxation liabilities in the prior periods.
Discontinued operations (Litha Cardiac and Litha Critical Care) showed a loss after tax of (R0,1 million) in Q2 2013
(Q1 2013: profit of R0,9) and R0,8 million in H1 2013 (H1 2012: (R5,8 million)) due to the continued fulfilment of tender
obligations. These have now come to an end.
Due to the factors outlined above, EPS increased by 386% from 0,7cps in Q1 2013 to 3,4 cps in Q2 2013.
Statement of Financial Position
- Inventory increased by R80,9 million to R275,8 million as at 30 June 2013 from R194,9 million as at
31 December 2012
- Accounts payable increased by R84,7 million to R223,8 million as at 30 June 2013 from R139,1 million as at
31 December 2012
- Trade and other receivables increased by R51,8 million to R221,5 million as at 30 June 2013 from R169,7 million
as at 31 December 2012
Inventory increased significantly during the first half of the year due to a number of factors, primarily in the Litha Pharma
division:
- The diversification of supply channels
- Addressing historic tight stock management to ensure continuous supply
- Increased lead times from suppliers, which required the purchase of additional stock to maintain sufficient
inventory on hand
- Increased minimum order quantities imposed by suppliers
The increase in inventory is consistent with the Group's policy of adequately managing inventory, while protecting against
stock-outs and overstocking.
Accounts payable increased primarily due to the timing of payments made to suppliers in Litha Vaccines during the first
half of the year. Going forward, longer payment terms with suppliers have been negotiated in the Litha Pharma division to
offset the longer product supply lead times.
The decrease in goodwill and intangibles of R19,0 million during H1 2013 arose primarily from the amortisation of
intangible assets. This was partially offset by the acquisition of registered generic products for R10,1 million in the Litha
Pharma division during H1 2013.
The increase in investment in associates during H1 2013 was primarily due to income of R0,9 million from Litha's 30%
share of Firefly Investments 223 (Pty) Ltd ("Firefly"), an entity which owns the Groups office/warehousing building in
Midrand.
The investment in joint venture relates to Litha's 52.5% holding in Biovac. During H1 2013, the investment decreased by
R7,6 million due to losses from Biovac and the amortisation of intangibles recognised on the deconsolidation of Biovac.
While Q2 2013 was a strong quarter, the profit did not completely off-set losses from Q1 2013. Refer to note 5 below.
Other non-current assets relate to a social responsibility loan to the Disability Empowerment Concerns Trust.
Other current assets relate to amounts receivable from the joint venture for logistics services provided and net financial
assets realised on the revaluation of outstanding foreign exchange contracts.
The Group raised R125 million through a preference share loan in 2012 to fund the cash portion of the acquisition of
Pharmaplan. The funding for Biovac's manufacturing facility was raised at The Biovac Consortium Proprietary Limited
level, a holding company for Biovac and an 85% subsidiary of Litha. These funds were on-lent to Biovac, resulting in the
loans to joint venture. As previously noted, the debt relating to Biovac should not be used in determining the Group's
gearing, as Biovac does not rely on the Group to provide funding and is operationally separate. The table below shows
the gearing excluding and including debt related to Biovac.
Excluding Biovac Including Biovac
June 2013 December 2012 June 2013 December 2012
Interest bearing debt (R'000) 274 961 308 425 387 970 407 919
Equity (R'000) 1 132 549 1 107 596 1 132 549 1 107 596
% 24.3% 27.8% 34.3% 36.8%
Cash flow
Cash generated from operating activities, excluding investment in working capital, increased by 12% to R34,3 million in
Q2 2013 from R30,5 million in Q1 2013. Cash flow from operating activities decreased to (R30,3 million) in Q2 2013
compared to R48,5 million in Q1 2013. This was primarily due to investment in working capital, as discussed above in the
statement of financial position analysis. Cash flow from operations in H1 2013 was R18,3 million compared to
R150,8 million in H1 2012.
Cash outflow from investing activities was R0,03 million in Q2 2013 compared to R11,4 million in Q1 2013. Cash flow in
the second quarter was insubstantial against an investment in registered products in the Litha Pharma division of
R10,1 million in Q1. Cash outflows were R11,5 million in H1 2013 compared to R54,4 million in H1 2012.
Cash outflow from financing activities was R12,7 million in Q2 2013 compared to R8,7 million in Q1 2012. Cash was
primarily used for debt repayment of R10 million in Q2 2013. Cash outflow from financing activities in H1 2013 was
R21,4 million compared to R24,2 million in H1 2012.
Cash and cash equivalents, net of overdraft, at the end of June 2013 were (R28,0 million) (H1 2012: R3,1 million).
3. OPERATIONAL OVERVIEW
Litha Healthcare Group Limited consolidated
- Group turnover decreased by 4.2% in Q2 2013 to R260,2 million from R271,6 million in Q1 2013
- EBITDA increased by 12.0% to R36,3 million in Q2 2013 from R32,4 million in Q1 2013
- Operating profit increased by 77.7% to R25,6 million in Q2 2013 compared to R14,4 million in Q1 2013
Despite the decrease in turnover of R11,4 million, Q2 2013 showed a strong improvement in EBITDA compared to prior
quarters. The strength of the EBITDA number stems primarily from normalisation of operating expenses following the
acquisition of Pharmaplan in July 2012. Furthermore, operating profit increased from Q1 to Q2 by R11,2 million due to
product mix, primarily in the Litha Biotech division, increased turnover in Litha Medical and income from the investment in
Biovac.
Litha Pharma - 51% of Group operating profit before head office expenses in Q2 2013
- Turnover decreased by 1.2% to R142,3 million for Q2 2013 compared to R144,0 million in Q1 2013
- The price increases implemented in April 2013 started to flow through in Q2 2013
- Margins continue to be affected by the depreciation of the Rand
The Pharmaplan business has now been in the Group's stable for a year and the consolidation of the five business
units in Litha Pharma is on track. While there has been growth in revenues from certain products, there has
been some margin pressure on imported products due to the depreciation of the Rand. The decrease in turnover was
partly due to pressure from generic market products on certain of the division's products. The price increases, which
started to flow through in Q2 2013, as well as the strong performance from seasonal flu products, partially offset this
impact. Operating profit for Q2 2013 was R23,2 million compared to R27,3 million in Q1 2013. The decrease was due to
lower sales and less substantial foreign exchange gains on revaluations of outstanding forward exchange contracts in Q2
2013.
During the quarter, Litha Pharma continued to outsource the majority of its distribution and warehousing through an
external provider. This was done in order to ensure sufficient capacity to transfer the remaining vaccine warehouse and
forensic facility to the Group's central Midrand site, and to affect operational cost efficiencies. This is in line with the
Group's shared services strategy. As the outsourcing model is still a trial period, Litha Pharma will continue to evaluate
the product mix and work with the service provider to ensure optimisation of distribution costs.
Turnover in H1 2013 was R286,3 million (H1 2012: R82,2 million). Operating profit for H1 2013 was R50,5 million and the
division contributed 63% to the group's operating profit before head office expenses (H1 2012: R8,9 million and 10%).
Litha Medical - 20% of group operating profit before head office expenses in Q2 2013
- Turnover increased by 11% to R80,0 million in Q2 2013 compared to R 72,3 million in Q1 2013 mostly due to
forensic tender sales which started to come through in Q2 2013
- Margins continue to be impacted by the depreciation of the Rand
Litha Medical had a strong second quarter, primarily driven by tender sales in the forensics business unit, which started to
come through in the second quarter, as well as buyouts of certain products due to public sector stock-outs. Operating
profit for the quarter increased by 12.8% to R9,2 million compared to R8,2 million in Q1 2013.
Turnover for H1 2013 was R152,3 million compared to R132,9 million in H1 2012. Operating profit for H1 2013 was
R17,3 million and the division contributed 22% to the Groups operating profit before head office expenses (H1 2012:
R24,5 million and 29%)
Litha Biotech - 29% of Group operating profit before head office expenses in Q2 2013
- Turnover decreased by 31.6% to R37,9 million in Q2 2013 compared to R55,4 million in Q1 2013 due to the
seasonality of flu vaccine sales
- Operating profit increased by R14,1 million to R13,0 million in Q2 2013 from an operating loss of (R1,1 million) in
Q1 2013, due to increased income from its Biovac joint venture
Litha Biotech turnover decreased in Q2 2013 due to the seasonality of flu vaccine sales following strong sales in Q1
2013. While flu vaccine sales decreased, the impact was partially offset by strong sales of other vaccines and increased
export sales in Q2 2013.
Operating profit for the Litha Biotech division in Q2 2013 was R13,0 million compared to a net loss of R1,1 million for Q1
2013. The main contributor to the sharp increase in income in Q2 2013 was the income from joint venture, which
increased by R10,6 million from a loss of R9,1 million in Q1 2013 to income of R1,5 million in Q2 2013. The increase in
Biovac was driven by strong turnover in the quarter and decreased foreign exchange losses.
A number of supply contracts were renegotiated to share the exchange rate risk with suppliers in order to mitigate future
exchange rate volatility.
Turnover was R93,3 million in H1 2013 (H1 2012: R733,9 million, which included Biovac). Operating profit in H1 2013
was R11,9 million and the division contributed 15% to group operating profit before head office expenses (H1 2012:
R221,7 million and 61% (before gain on deconsolidation)).
Shared Services
The Group is entering the second year of its multi-year shared services strategy. In line with the Group's implementation
strategy, it has centralised all but three businesses in one location. The centralisation of the finance function also allowed
improved information flow to management, as well as the identification of areas to increase efficiencies.
4. PROSPECTS
While the Group is focusing on the consolidation of its existing businesses and the stimulation of organic growth activity
through sales and customer relationship management, it will continue to evaluate potential investment opportunities,
either through acquiring new products or through business acquisitions projects. The Group also continues to pursue opportunities
opportunities for a BBBEE ownership transaction.
In Litha Pharma, 12 new product submissions were made to the MCC in Q2. These products will strengthen the Group's
product offering and advance the Group's strategy to build scale across key therapeutic areas over the next three to five
years.
The Litha Medical division is in the process of developing various proprietary products for the local assembly and
packaging business. It is anticipated that these proprietary products will be launched in 2014. The division is also is the
process of launching new agencies in the various business units.
Litha Biotech continues to seek collaboration with international vaccine players that will add new technology and
products. Completion of the construction of the viewing labeling and packaging facility will be a big focus in the near term
as well as the validation process of the products planned for manufacture.
NOTES TO THE FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
The unaudited condensed consolidated financial statements for the three and six months ended 30 June 2013 have been
prepared in accordance with the Framework concepts and the measurement and recognition requirements of the
International Financial Reporting Standards and containing information required by the IAS 34 Interim Financial Reporting
and in the manner required by the Companies Act.
This report has also been prepared in accordance with and containing the information required by AC 500 series as
issued by the Accounting Practices Board. The unaudited condensed consolidated financial statements are prepared on
the historical cost basis, with the exception of certain financial instruments which are measured at fair value. These
financial statements should be read in conjunction with the audited financial statements for the year ended
31 December 2012. The unaudited condensed financial statements for the three and six months ended 30 June 2013 are
prepared using the same policies and methods of computation as the audited financial statements for the year ended
31 December 2012. The condensed consolidated financial statements for the quarter and six months ended
30 June 2013 have been not been audited.
The preparation of condensed consolidated interim financial statements requires the use of estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at period end
and the reported amounts of turnover and expenses during the reporting periods. Although these estimates are based on
management's best knowledge of current events and actions that the Group may undertake in the future, actual results
may differ from those estimates.
2. WEIGHTED AVERAGE NUMBER OF SHARES IN ISSUE
Unaudited three Unaudited six Reviewed six Audited
months ended months ended months ended year ended
30 June 2013 30 June 2013 30 June 2012 31 December 2012
Weighted average number of shares 540 929 406 540 929 406 372 480 311 456 751 782
Weighted average share options outstanding 33 840 696 34 550 696 18 519 935 20 952 818
Diluted weighted average number of shares 574 770 102 575 480 102 391 000 246 477 704 600
3. SUBSEQUENT EVENTS
There have been no events that are material to the understanding of this report that have occurred in the period between
30 June 2013 and the date of this report.
4. RELATED PARTY TRANSACTIONS
All transactions with related parties are carried out in the normal course of operations. The accounts payable to related
parties are on normal commercial terms and conditions.
Interest earned on the loan to join venture amounted to R2,1 million for the quarter and R4,1 for H1 2013.
Litha Medical Logistics Proprietary Limited charged cold chain logistics fees to The Biovac Institute, a joint venture, of
R13,3 million and R22,5 million for the three and six months ended 30 June 2013, respectively.
Payments made to Firefly, an associate, relating to a finance lease were R1,6 million for the quarter and R3,3 for H1
2013.
Litha also paid non-executive director fees of R0,2 million for the quarter and R0,3 million for H1 2013 to Blackstar and
R0,4 million for the quarter and H1 2013 to Paladin Labs, both of whom are associates of the Group.
5. INVESTMENT IN JOINT VENTURE
Investment in The Biological and Vaccines Institute of Southern Africa Proprietary Limited ("Biovac")
On 30 June 2012, the Company re-evaluated the accounting treatment of its investment Biovac. The government, who is
a 47.5% shareholder in Biovac, has taken an increasingly significant role in the business' decision-making of Biovac and
accordingly, under IFRS 11 Joint Arrangements, is considered to jointly control Biovac along with Litha. As a result,
effective 30 June 2012, Litha deconsolidated its interest in Biovac and recognised an investment in a joint venture.
Three months ended Six months ended Three months ended
30 June 2013 30 June 2013 31 March 2013
R'000 R'000 R'000
Carrying value, beginning of period 250 921 260 034 260 034
Share of net profit/(loss) for the period before
adjustments 3 212 (4 210) (7 422)
Adjustments to net income:
Amortisation of fair value adjustments (2 348) (4 696) (2 348)
Deferred taxation effect 658 1 315 657
Share of net income (loss) for the period 1 522 (7 591) (9 113)
Carrying values, end of period 252 443 252 443 250 921
The Company is presenting selected financial information derived from Biovac's IFRS compliant unaudited management
accounts for the three and six months ended 30 June 2013.
Biovac's statement of income data Three months ended Six months ended Three months ended
30 June 2013 30 June 2013 31 March 2013
R'000 R'000 R'000
Turnover 381 029 641 761 260 732
Cost of sales (335 929) (568 634) (232 705)
Gross income 45 100 73 127 28 027
Operating expenses (36 616) (74 300) (37 684)
Earnings (loss) before items noted here- 8 484 (1 173) (9 657)
under
Interest, depreciation and income taxes (2 366) (6 846) (4 480)
Net income (loss) for the period 6 118 (8 019) (14 137)
Biovacs Statement of Financial Position data
30 June 2013 30 June 2012 31 December 2012
R'000 R'000 R'000
Current assets 623 859 623 859 680 392
Long-term assets 243 670 243 670 263 519
Current liabilities 609 935 609 935 695 963
Long-term liabilities 121 640 121 640 123 522
6. CAPITAL COMMITMENTS
Biovac has entered into agreements to purchase R74,2 million (2012: R64,8 million) of equipment and to make
improvements to the manufacturing facility. This is expected to take place during 2013.
7. SEGMENT INFORMATION
Segment Litha Pharma Litha Medical Litha Biotech Group
(R'000)
Quarter ended
30 June 2013
Turnover (External) 142 305 80 046 37 865 260 216
Reportable segment profit 23 217 9 195 13 026 45 438
Head Office costs (19 847)
Operating profit (before taxation) 25 591
Total Assets 1 036 713 367 408 462 780 1 866 901
(R'000)
Six months ended
30 June 2013
Turnover (External) 286 265 152 328 93 262 531 855
Reportable segment profit 50 515 17 349 11 917 79 781
Head Office costs (39 753)
Operating profit (before taxation) 40 028
Total Assets 1 036 713 367 408 462 780 1 866 901
(R'000)
Quarter ended
31 March 2013
Turnover (External) 143 959 72 282 55 398 271 639
Reportable segment profit 27 298 8 154 (1 109) 34 343
Head Office costs (19 906)
Operating profit (before taxation) 14 437
Total Assets 1 041 217 313 283 491 250 1 845 750
(R'000)
Six months ended
30 June 2012
Turnover (External) 82 229 132 867 733 936 949 032
Reportable segment profit 8 932 24 529 221 662 255 123
Head Office costs (16 644)
Operating profit (before taxation) 238 479
Total Assets 207 909 323 047 453 913 984 869
DIVIDEND
No dividend has been recommended or declared for the period. It is anticipated that while the Group continues with its
growth strategy, it will continue to reinvest any profit generated back into the businesses. The Group will review its
dividend declaration policy in the medium term.
For and on behalf of the board
N Sowazi, Chairman
S Kahanovitz, Chief Executive Officer
Johannesburg
14 August 2013
Directors: N Sowazi*, S Kahanovitz, M Makhoana, M Kahanovitz, AD Bonamour* W Marshall-Smith*,
M Mzimba*, F Hendricks*, I Jacobson*#, V Mcobothi*, M Beaudet*+, M Nawacki*+
(*non-executive) (+Canadian) (#British)
Sponsor
Rand Merchant Bank (a division of FirstRand Bank Limited)
Registered auditors
Mazars
Transfer Secretaries
Computershare Investor Services
Registered Office
106 16th Road
Midrand
1686
Date: 14/08/2013 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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