Johannesburg -
Litha Healthcare Group [JSE:LHG] formerly Myriad Medical Holdings, on Tuesday reported diluted headline earnings per share of 9.2 cents for the six months ended June 2010 compared with 6.6 cents for the six months ended November 2009.
Litha Healthcare was formed through the acquisition by Myriad Medical Holdings of Litha Healthcare Holdings, which saw the diversified company list on the main board of the JSE in May 2010.
During the period, the group acquired 51% of Litha Healthcare and the remaining 74% of shares in Pharmafrica not already owned by the group. The effective date for these acquisitions was 1 May 2010 and their results are therefore only included for two months.
In the original medical business, demand from the public sector for the group's products was strong, with the private sector sales lagging behind somewhat, it said. With the acquisitions, the mix between public and private sector contribution has changed significantly with the public sector currently contributing 45% and private sector 55% to group gross profit.
Group revenue increased by 172% to R423.7m. Organic revenue growth for the period in the original business decreased slightly from R155.5m to R153.8m, reflecting the current economic environment and the pressure being imposed by some of the group's medical division customers.
Earnings per share increased by 9% to 7.5c per share despite significant transaction costs relating to the acquisitions and a goodwill impairment in the group's critical care business unit.
Transaction costs relating to the acquisition of Litha amounted to R4.78 million rand and had a large impact on earnings as they were large relative to the size of the original business and were only offset by two months of LHH results.
The group also impaired the remainder of the goodwill pertaining to the Critical Care business unit amounting to R4.25m.
As 90% of the group's products are imported, the strong rand significantly contributed to gross profit margin growth in each of the Litha Medical, Pharmaceutical and Biotechnology divisions. The group's policy is to take out forward cover for approximately 60% of its estimated foreign purchases for a year in advance.
The Biotechnology division is largely hedged against currency fluctuations due to exchange rate mechanisms in place with the National Department of Health.
The Litha group's business development plans will see the company grow through profitable acquisitions, joint ventures, co-marketing ventures and manufacturing and distributions agreements, including currently marketed products, it said.
The businesses remain well positioned to benefit from increased government spend on healthcare, specifically in the biotechnology and medical consumables areas, as well as to maintain its market share in the private sector through the delivery of quality products and services.
A combination of organic growth and value-adding acquisitive growth opportunities will see the expansion of Litha Healthcare Group in the next three to five years, particularly in the Pharmaceutical division, as that is where management believes significant growth opportunities exist, it added.
Litha Medical Division will be expanding the number of international agencies and is presently investigating local packaging and assembly opportunities to enable the group to be more competitive. Business development plans are in place to acquire new products and agencies to complement existing product groupings and to establish new business opportunities. Synergies between all business units will also be developed to better manage operational protocols and procedures.
Litha Biotechnology will be looking for technology transfer arrangements with existing and new strategic partners for products that can expand on its product range for the South African and developing world markets.
A lucrative 10-year joint venture was concluded with a large European generics company and the Litha Pharma Division is set to introduce a minimum of 80 new generic over-the-counter products within the same timeframe.
Plans are also underway to identify niche products and therapeutic areas, to secure a highly competitive product pipeline. These combined initiatives will assist in the group continuing to grow its market share, operating profit and margins.
To consolidate existing markets and to drive growth and expansion into new markets, the group will focus on leveraging the strengths of each of the group's divisions. Further cost reductions and streamlining of operations is expected to reduce overhead costs of the larger group.
With the appointment of three divisional CEOs for the Medical, Biotech and Pharma divisions, the group also anticipates greater alignment of the divisions' operations to the group's strategy.