| Fri 28 Jun 2013, 16:43 | | LITHA HEALTHCARE GROUP LIMITED - Notice of annual general meeting posting of annual report and abridged results for 31 December 2012 |
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LHG 201306280090A
Notice of annual general meeting, posting of annual report and abridged results for 31 December 2012
Litha Healthcare Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 2006/006371/06)
Share code: LHG
ISIN: ZAE000144671
("The group" or "Litha" or "The company")
NOTICE OF ANNUAL GENERAL MEETING, POSTING OF ANNUAL REPORT AND ABRIDGED RESULTS FOR 31 DECEMBER 2012
Notice of the annual general meeting
Notice is hereby given that the annual general meeting of the Company shareholders will be held in the Boardroom of
the Company, at No. 106 16th Road, Midrand, Gauteng, 1685 at 10:00am on Wednesday 31 July 2013 to transact the
business as stated in the annual general meeting notice forming part of the annual financial statements.
Salient dates
The notice of the Company's annual general meeting has been sent to its shareholders who were recorded as such in
the Company's securities register on Friday 21 June, 2013 being the notice record date set by the Board of the
Company determining which shareholders are entitled to receive notice of the annual general meeting.
The record date on which shareholders of the Company must be registered as such in the Company's securities
register in order to attend and vote at the annual general meeting is Friday 26 July 2013 being the voting record date
set by the Board of the Company determining which shareholders are entitled to attend and vote at the annual
general meeting. The last day to trade in order to be entitled to vote at the annual general meeting will therefore be
Friday 19 July 2013. Proxy forms must be lodged by no later than 10:00am on Friday 26 July 2013. Any forms of
proxy not lodged by this time must be handed to the chairperson of the annual general meeting immediately prior to
the annual general meeting.
Abridged audited condensed consolidated results for the year ended 31 December 2012
Shareholders are advised that the company's annual report, incorporating the audited financial statements of the year
ended 31 December 2012, has been distributed to shareholders today, 28 June 2013.
The annual report contains changes to the consolidated statement of cash flows in the reviewed consolidated results
which were announced on SENS on 28 February 2013 ("the SENS announcement"). This change does not affect the
quarterly results for 31 December 2012 or 30 September 2012. An abridged report for the year ended 31 December
2012 is released below.
The audited condensed consolidated results for the year ended 31 December 2012 have been prepared by the
group's chief financial officer, Martin Michael Kahanovitz, CA (SA)
The audited condensed consolidated results for the year ended 31 December 2012 have been prepared in
accordance with the framework concepts and the measurement and recognition requirements of the International
Financial Reporting Standards.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Audited 31 Audited 31
December 2012 December 2011
(R'000)
ASSETS
Non-current assets 1 347 499 533 614
Property, plant and equipment 79 278 186 860
Goodwill and intangible assets 869 657 318 500
Investment in associates 5 340 4 201
Investment in joint venture 260 034 -
Loans to joint venture 104 744 -
Deferred taxation asset 21 958 15 734
Other non-current assets 6 488 8 319
Current assets 436 626 901 366
Inventories 194 964 280 763
Trade and other receivables 169 691 442 371
Taxation 22 904 27 995
Cash and cash equivalents 46 687 150 237
Other current assets 2 380 -
Discontinued operations 875 7 765
Total assets 1 785 000 1 442 745
EQUITY AND LIABILITIES
Total equity 1 107 596 512 109
Share capital and premium 760 473 295 473
Reserves attributable to holders of the parent 326 236 138 938
Non-controlling interest 20 887 77 698
Non-current liabilities 393 735 196 871
Other financial liabilities 293 957 178 709
Deferred taxation liability 99 778 18 162
Current liabilities 283 468 733 050
Accounts payable and provisions 139 111 631 913
Other current liabilities 84 260 61 139
Bank overdraft 60 097 40 000
Liabilities of discontinued operations 201 715
Total equity and liabilities 1 785 000 1 442 745
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Audited year Audited year
ended ended
R'000 31 December 31 December
2012 2011
Revenue 1 465 799 1 781 799
Turnover 1 434 460 1 747 026
Cost of sales (1 007 735) (1 358 381)
Gross profit 426 725 388 645
Operating expenses (376 421) (277 680)
Other income 18 213 34 773
Profit on deconsolidation 171 530 -
Operating profit 240 047 145 738
Non-operating interest paid (24 206) (7 171)
Profit before taxation 215 841 138 567
Taxation (11 448) (27 312)
Profit/(loss) from continuing operations 204 393 111 255
Loss from discontinued operations (7 626) (7 347)
Profit/(loss) for the period 196 767 103 908
Other comprehensive income net of tax
Fair value adjustments released to profit for the year - (964)
Total comprehensive income/(loss) 196 767 102 944
Profit/(loss) attributable to equity holders of Litha Healthcare Group
Limited:
Profit/(loss) from continuing operations 173 089 93 648
Loss from discontinued operations (7 626) (7 347)
Profit/(loss) attributable to equity holders of Litha Healthcare Group
Limited 165 463 86 301
Non-controlling interest 31 304 17 607
Total profit 196 767 103 908
Total comprehensive income/(loss) attributable to:
Equity holders of Litha Healthcare Group Limited 165 463 85 337
Non-controlling interest 31 304 17 607
Total comprehensive income for the year 196 767 102 944
Earnings per share (cents) 36.2 23.2
From continuing operations 37.9 25.2
From discontinued operations (1.7) (2.0)
Diluted earnings per share (cents) 34.6 22.1
From continuing operations 36.2 24.0
From discontinued operations (1.6) (1.9)
Headline earnings reconciliation
Profit from continuing operations 173 089 93 648
Adjusted for:
Write-off of intangible assets 507 -
Tax effect of write-off of intangible assets (142)
Profit on deconsolidation of subsidiary (171 530) -
Profit on deconsolidation of subsidiary attributable to non-controlling
interests 29 018 -
Loss on disposal of property, plant and equipment 30 (81)
Tax effect of loss from disposal of property, plant and equipment (8) 23
Headline earnings from continuing operations 30 964 93 590
Loss from discontinued operations (7 626) (7 347)
Headline earnings 23 338 86 243
Headline earnings per share (cents) 5.1 23.2
From continuing operations 6.8 25.2
From discontinued operations (1.7) (2.0)
Diluted headline earnings per share (cents) 4.9 22.1
From continuing operations 6.5 24.0
From discontinued operations (1.6) (1.9)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Available Ordinary
Share for sale Reserve on Accum- share-
Share based revaluation equity ulated holders Non-
capital and payment reserve transaction profits interest controlling
(R'000) premium reserve interest Total
Balance at 1 January 2011 197 447 974 964 - 121 818 321 203 181 053 502 256
Acquisition of non-controlling interests 103 454 - - (70 155) - 33 299 (120 962) (87 663)
Disposal of treasury shares (6 928) - - - - (6 928) - (6 928)
Shares issued 1 500 - - - - 1 500 - 1 500
Total comprehensive income - - (964) - 86 141 85 177 17 607 102 784
Share based payment reserve adjustment - 160 - - - 160 - 160
Balance at 31 December 2011 295 473 1 134 (70 155) 207 959 434 411 77 698 512 109
Deconsolidation of subsidiary - - 2 942 - 2 942 (88 115) (85 173)
Share based payments - 18 893 - - 18 893 - 18 893
Issue of shares 465 000 - - - 465 000 - 465 000
Total comprehensive income - - - - 165 463 165 463 31 304 196 767
Balance at 31 December 2012 760 473 20 027 - (67 213) 373 422 1 086 709 20 887 1 107 596
CONSOLIDATED STATEMENT OF CASH FLOWS
Audited year Audited year
ended ended
31 December 31 December
(R'000) 2012 2011
Cash generated by operating activities 190 628 115 495
Cash flows from operating activities 153 921 53 744
Cash flows from investing activities (179 968) (247 594)
Cash flows from financing activities 83 491 73 006
Net (decrease)/increase in cash and cash equivalents 57 444 (120 844)
Cash acquired on acquisition of subsidiary (2 970) 1 014
Cash on deconsolidation of subsidiary (179 337)
Cash and cash equivalents at beginning of period 111 683 231 513
Cash and cash equivalents at end of period (13 180) 111 683
Cash and cash equivalents included in discontinued operations 230 1 446
COMMENTARY
1. NATURE OF BUSINESS
Litha Healthcare Group Limited (Litha) 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 Biotech (vaccines), Litha Medical (medical devices) and Litha Pharma (pharmaceuticals and complementary medicines).
Introduction
Biovac deconsolidation
As previously disclosed, Biovac has been accounted for as a joint venture from 30 June 2012. Biovac's results have
therefore been fully consolidated for the first six months of the year. Its results have been included in the line
"Loss from joint venture" for the six months ended 31 December 2012.
Pharmaplan acquisition
On 2 July 2012, Litha completed the acquisition of Pharmaplan. Consequently, Pharmaplan's results have been
consolidated for the six months ended 31 December 2012.
2. FINANCIAL OVERVIEW
Statement of Comprehensive Income
Turnover for and the year ended 31 December 2012 was R1 434.5 million (2011 R1 747.0 million). As explained above,
the 2012 revenue includes Biovac's turnover for the first six months, and Pharmaplan turnover for the last six
months of the year.
Other income for the year ended 31 December 2012 was R18.2 million (2011: R34.8 million). Other income relates to
the group's external logistics fees, income from grants received and sundry income. The 48% decrease in other
income is due to the deconsolidation of Biovac mid-year, which accounted for the majority of the other revenue.
Operating profit before income tax for the year was R215.8 million (2011: R138.6 million). A large portion of the
increase in operating profit stems from the deconsolidation of Biovac in the second quarter. Upon deconsolidation
Litha fair valued its investment in Biovac, which is now accounted for as a joint venture. This resulted in a
R171.5 million gain.
The operating profit for the year was negatively impacted by a number of factors, including:
- Weakness of the SA Rand - higher cost of sales and losses on foreign exchange contracts
- subsequent to year end, Single Exit Price (SEP) adjustment of 5,8% being implemented Q1 2013
- Approximately 60% of Litha's foreign purchases are paid for in United States Dollars, 30% in European Euros
and 10% British Pounds.
- Delayed tender in the forensics business unit within Litha Medical
- at year-end the tender was awarded to Manta Forensic
- Impacts from the Pharmaplan transaction
- Once-off transaction and integration costs of R6.4 million
- IFRS adjustment of R4.7 million to stock and cost of sales
- Interest expense of R4.6 million
- Amortisation of intangibles relating to Pharmaplan and other recent acquisitions of R20.8 million
Due to the above-mentioned factors, earnings per share from continuing operations 37.9 cents for the year ended
31 December 2012. Headline earnings per share from continuing operations, which excludes the once-off profit on
deconsolidation and other unusual items, was 6.8 cents per share for the year ended 31 December 2012.
Non-operating interest expense of R24.2 million for the year relates to interest expense on the Rand Merchant Bank
(RMB), a division of First Rand Bank Limited, Preference Shares which was raised to fund the cash portion of the
acquisition of Pharmaplan, the initial RMB term loan raised in June 2011 and the IDC and Technology and
Innovations Agency of South Africa loans within the Litha Biotech division.
The effective tax rate for the year ended 31 December 2012 was 5.3% (2011: 19.7%), mostly due to the non-taxable
profit recognised on deconsolidation of Biovac, which was slightly off-set by the non-deductibility of interest expense
and transaction costs related to the Pharmaplan acquisition.
As outlined in the June 2012 results, the full R7.6 million of the previously disclosed discontinued operations of the
Capex and Cardiac business units have been provided for.
Statement of Financial Position
Due to the deconsolidation of Biovac discussed above, the statement of financial position is not comparable in most
respects to the prior year.
In May 2012, Litha signed an addendum to the existing lease agreement with Firefly Investments 223 Proprietary
Limited (Firefly), an associate. The terms of the addendum resulted in the classification of the lease, under the criteria
in IAS 17, as a finance lease. This resulted in the capitalisation of the building amounting to R63.9 million, with a
corresponding liability of R63.9 million.
The increase in goodwill and intangibles arises mainly from the allocation of the purchase price upon acquisition of
Pharmaplan; refer to note 5, and the capitalisation of Cpoint capital share based payments expense.
The increase in investment in associates arises from Litha's 30% share of Firefly, an entity which owns the
office/warehousing building in Midrand.
The investment in joint venture relates to the investment in Biovac. Upon deconsolidation of Biovac, Litha fair valued
its 52.5% investment in Biovac and recorded a gain of R171.5 million. During the second half of the year, the
investment decreased by R6 million due to losses from Biovac and the related amortisation of intangibles. Refer to
note 6 below.
Other non-current assets relates to a social responsibility loan to the Disability Empowerment Concerns Trust.
Other current assets relates to amounts receivable from Biovac for logistics services provided.
The R22.9 million tax receivable relates to the over provision for taxation, which was based on prior year profits,
R9.9 million of which has been refunded subsequent to year end.
Litha raised R125 million through a preference share loan during the period 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% held subsidiary of Litha. These funds were on-lent to Biovac,
resulting in the loans to joint venture of R104.8 million. As previously noted, the debt relating to Biovac operations
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
December 2012 December 2011 December 2012 December 2011
Interest bearing debt (R'000) 308 425 95 766 407 919 111 663
Equity (R'000) 1 107 596 512 109 1 107 596 512 109
% 27.8% 18.7% 36.8% 21.8%
The large increase in deferred tax liability mostly relates to the deferred tax raised on the intangible assets realised
upon the allocation of the purchase price for the acquisition of Pharmaplan. See note 5 below.
The increase in share capital and premium relates to the issue of 169 090 909 shares at R2.75 per share for the
share-based portion of the settlement of the Pharmaplan acquisition.
Cash flow
Cash flows from operating activities were R153.9 million from R53.7 million in 2011, an increase of 187%. This
stemmed primarily from the collection of outstanding amounts from the Gauteng Department of Health in the
beginning of the year.
Cash outflow from investing activities was R180.0 million for the year (2011: R247.6 million). During the year,
Litha purchased property, plant and equipment for the vaccines facility in Cape Town for R48.0 million and paid
R125.0 million of cash to Paladin Labs in connection with the acquisition of Pharmaplan. The remaining cash flows stem
from investment in intangible assets and other property, plant and equipment, net of disposals.
Cash generated from financing activities was R83.5 million for the year ended 31 December 2012
(2011: R73.0 million). Cash generated arose primarily from the R125.0 million raised to fund the cash portion of the
Pharmaplan transaction and R5.9 million received as compensation for leasehold improvements on the Midrand property from
Firefly, partially offset by the repayment of the loans.
Cash and cash equivalents were negative R13.4 million for the year ended 31 December 2012
(2011: Positive R110.2 million) excluding the cash in Biovac of R179 million which arose as a result of the deconsolidation.
With cash generation in 2013, the company will reduce the overdraft. Net overdraft acquired upon the acquisition of Pharmaplan
was R2.9 million.
3. OPERATIONAL OVERVIEW
Litha Biotech
Due to the deconsolidation of Biovac at 30 June 2012, the divisional revenue of R795 million for the 12 months ended
31 December 2012 only includes six months of Biovac's revenue. During the second half of the year, Biovac was
accounted for as an investment in joint venture and, accordingly, Litha's share of Biovac's net loss for the second six
months was included in the operating loss for the year. Litha's share of Biovac's net loss amounted to R6 million for
the six months ended 31 December 2012.
Divisional revenue, excluding Biovac, was R132 million for the year ended 31 December 2012 (2011: R114.7 million).
The 15% increase during the year was primarily driven by strong demand of rabies vaccines in Litha Vaccines.
Segment profit was R226.7 million for the year ended 31 December 2012 (2011: R67.5 million). This 236% increase is
primarily due to the one-time profit recognised on the deconsolidation of Biovac. This division contributed 43% to
group operating profit (excluding the gain on deconsolidation of Biovac) before head office expenses.
Litha Medical
Litha Medical turnover was R289 million for the year ended 31 December 2012 (2011: R351 million). The 18%
decrease year-on-year was due to the delay in adjudication of the forensic tender which accounted for R33.3 million of
revenue in 2011. Revenue was further impacted by a slowdown in government business in 2012 which accounted for
R10 million in sales in 2011. The forensic tender outlined at interim was adjudicated at the beginning of December
and the full tender was awarded to Manta Forensic for a two year period.
Segment profit was R41.6 million for the year ended 31 December 2012 (R82.5 million). In addition to revenue
shortfalls, operating profit was impacted by increased cost of sales due to foreign exchange losses resulting from the
weakening of the Rand. Operating costs increased during the year due to investment costs associated with new
agency developments. These costs related to the Intuitive Surgery and Ophthalmic agencies in Earth Medical and are
seen as investment costs. The benefits are expected in 2013. This division contributed 32% to group operating profit
(excluding the gain on deconsolidation of Biovac) before head office expenses.
Litha Pharma
Litha Pharma's revenue R350.3 million for the year ended 31 December 2012 (2011: R106.6 million). The 229%
increase year-on-year is primarily due to new business acquisitions, mainly the acquisition of Pharmaplan, which
contributed R186.9 million to revenue during the last six months.
Segment profit was R31.3 million for the year (2011: R14.6 million). The 115% increase was driven by incremental
profit associated with the acquisition of Pharmaplan which contributed R37.8 million since acquisition. This was
partially offset by once-off costs of R6.4 million related to the Pharmaplan transaction, a once off stock adjustment of
R4.7 million also associated with the acquisition of Pharmaplan and the integration of the entire division. This division
contributed 24% to group operating profit (excluding the gain on deconsolidation of Biovac) before head office
expenses.
The merger of Litha Pharma and Pharmaplan continues to progress well and the financial systems have been
integrated from 1 January 2013.
Litha expects to extract further efficiencies and cost savings as the integration within the Pharma division is reaching
finality.
NOTES TO THE FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
The audited condensed consolidated annual results have been prepared in accordance with the Framework concepts
and the measurement and recognition requirements of the International Financial Reporting Standards.
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 audited 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 condensed consolidated financial statements for the year ended 31 December 2012 have
been audited by Mazars, the group's auditors. Their unqualified audit report is available for inspection at Litha's
registered office during normal business hours.
The condensed consolidated financial statements for the year ended 31 December 2012 are prepared using the same
policies and method of computation as the audited financial statements for the year ended 31 December 2012.
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
Audited
year Audited
ended December Year ended
2012 31 December 2011
Weighted average number of shares 456 751 782 371 561 020
Weighted average share options outstanding 20 952 818 18 424 242
Diluted weighted average number of shares 477 704 600 389 985 262
3. SUBSEQUENT EVENTS
Subsequent to year end, Dr. Gert Hoogland has resigned as a board member for Litha Healthcare Group Limited. He
is relocating to Europe with his family, but will continue to advise on business development within the greater Litha
and Paladin businesses and play an important role in evaluating unique opportunities to expand both groups'
pipelines.
Shareholders are referred to the announcement published on the SENS on 26 February 2013 ("Announcement")
pertaining to, inter alia, the proposed subscription for ordinary shares in the company by a selected black economic
empowerment party, other transactions ancillary thereto, the intention to seek a voluntary delisting of Litha from the
exchange operated by the JSE Limited ("Delisting") and the potential share repurchase offer to Shareholders ("Share
Repurchase"), pursuant to the Delisting (collectively the "Proposed Transactions"). Shareholders are advised that
although negotiations between the parties reached an advanced stage, unfortunately the group and the relevant
parties could not agree on a number of final terms to conclude the definitive agreements. The Proposed Transactions
will therefore not proceed.
Other than the above, there have been no events that are material to the understanding of this report that have
occurred in the period between 31 December 2012 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 and are non-interest bearing.
Litha Medical Logistics Proprietary Limited charged cold chain logistics fees of R17.1 million for the six months ended
31 December 2012 to The Biovac Institute, a joint venture. Prior to the deconsolidation of The Biovac Institute in the
second quarter, these logistics fees were eliminated on consolidation.
In May 2012, Litha Medical Proprietary Limited, a 100% held subsidiary of Litha, signed an addendum to the existing
lease agreement with Firefly. The terms of the addendum resulted in the classification of the lease, under the criteria
in IAS 17, as a finance lease. Payments related to this finance lease amounted to R4.1 million for the year ended 31
December 2012.
Litha paid R5.0 million underwriting fees in connection with the raising of the R125.0 million RMB loan, to Blackstar
Limited, a shareholder of the entity, of which the company is an associate.
5. ACQUISITION OF PHARMAPLAN (PTY) LTD (PHARMAPLAN)
Effective 2 July 2012, the group acquired 100% of the issued share capital of Pharmaplan from Paladin Labs Inc.
(Paladin) for a total consideration of R590 million. The purchase price was settled through the issue of 169 090 909
shares at a price of R2.75, the remaining R125 million was settled with cash. The cash portion of this acquisition was
financed through the issue of 125,000 redeemable, no par value Preference Shares at R1,000 per share to RMB.
Pharmaplan is a pharmaceutical company which represents small to medium sized international principals in South
Africa and other selected sub-Saharan territories. The company offers a full service of registering, importing,
promoting and distributing the products of its principals exclusively to all wholesalers, hospitals and clinics in South
Africa and selected neighbouring countries. According to IMS data, Pharmaplan is ranked the 8th top generic company
in South Africa.
The acquisition of Pharmaplan achieves Litha's objective of becoming a diversified healthcare business and delivers
on its strategy of creating scale through acquisitions within Litha's Pharma Division. The merging of the Litha Pharma
Division with Pharmaplan boosts Litha Pharma's current portfolio, broadens its access to international research and
development pipelines and improves its current platform for expansion into new therapeutic markets.
In addition, the strategic relationship with Paladin, which now owns 44.5% of the Litha, provides Litha with access to
Paladins portfolio of products for the South African and sub-Saharan markets. Paladin intends to play an active role in
opening up international licensing opportunities from a product pipeline and investment perspective. It is anticipated to
produce increased deal flow and future product acquisition success rates for Litha.
Qualitative factors which make up goodwill include: its ability to attract suppliers of innovative and biotechnology
pharmaceuticals due to its historic success and reputation over many years; the wealth of experience of its executive
team to source and ultimately commercialise pharmaceutical products within South Africa and its strong relationships
with the private and public healthcare sectors. In addition, the benefits that Pharmaplans scale will bring to the group
and the extensive range of products that span across different therapeutic groups can be used as a platform for
existing and new product ranges.
The acquisition was accounted for using the acquisition method of accounting and the results of Pharmaplan are
included in the Company's consolidated financial statements from 2 July 2012, the effective date of the transaction.
The purchase price was allocated as follows:
2 July 2012
100%
R'000
Net book value of identifiable assets acquired 65 099
Definite life intangibles 348 498
Indefinite life intangibles 6 325
Future income tax liabilities (97 580)
Goodwill 267 658
Acquisition price 590 000
During the period 2 July 2012 to 31 December 2012, Pharmaplan recorded revenue of R186.9 million and net income
of R37.8 million.
Effective date of acquisition for accounting purposes 02-Jul-12
Voting equity percentage 100%
At acquisition fair values
(R'000)
Non-current assets acquired
Property, plant and equipment 322
Current assets acquired
Inventory 59 553
Trade receivables 54 950
Other current assets 1 009
Current liabilities assumed
Accounts payable and provisions (51 354)
Other current liabilities 3 589
Bank overdraft (2 970)
Net asset value 65 099
Total Cost of acquisition
Cash 125 000
Issuance of 169 090 909 shares at R2.75 465 000
Goodwill 267 658
Revenue for the period 2 July 2012 to 31 December 2012 186 926
Profit for the period 2 July 2012 to 31 December 2012 37 820
Revenue for the period 1 January to 31 December 2012 388 829
Profit for the period 1 January to 31 December 2012 72 587
Details of debtors:
Trade receivables 60 072
The average debtor's days outstanding are 44 days. Due to the short term nature of the trade receivables, cost is
considered to be fair value.
All trade receivables are expected to be collected.
6. INVESTMENT IN JOINT VENTURE
Investment in The Biological and Vaccines Institute of Southern Africa Proprietary Limited ("Biovac")
On June 30, 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 June 30, 2012, Litha deconsolidated its interest in Biovac and recognised an investment in a joint
venture.
The deconsolidation required the Company to measure its share in the fair value of Biovac. The allocation of the fair
value of the investment in The Biovac Institute is identified below:
Ownership percentage: 52.5%
R'000
Litha's portion of fair value 266 034
Litha's portion of definite life intangibles (46 961)
Deferred taxation 13 149
Goodwill 232 222
R'000
Carrying value, beginning of period -
Recognition at 30 June 2012 266 034
Share of net loss for the period before adjustments (2 619)
Adjustments to net income:
Amortisation of fair value adjustments (4 696)
Deferred taxation effect 1 315
Share of net loss for the period (6 000)
Carrying values, end of period 260 034
The Company is presenting selected financial information derived from Biovac's IFRS compliant unaudited
management accounts for the six months ended 31 December 2012.
Biovac's statement of income data R'000
Turnover 504 092
Cost of sales (480 351)
Gross income 23 741
Operating expenses (26 020)
Earnings before items noted here-under (2 279)
Interest, depreciation and income taxes (2 709)
Net income for the period (4 988)
Biovac's Statement of Financial Position data R'000
Total assets 943 911
Total liabilities 819 485
7. CAPITAL COMMITMENTS
Biovac has entered into agreements to purchase R64.8 million (2011: R35.1 million) of improvements and equipment
relating to the manufacturing facility which is expected to take place during the 2013 financial year.
8. SEGMENT INFORMATION
Segment Medical device Pharmaceutical Biotechnology Group
division division division
(R'000)
Year ended
31 December 2012
Turnover (External) 289 045 350 312 795 103 1 434 460
Reportable segment profit 41 603 31 256 226 702 299 561
Head Office costs (59 514)
Operating profit (before taxation) 240 047
Total Assets 315 605 976 963 492 432 1 785 000
Medical device Pharmaceutical Biotechnology Group
division division division
(R'000)
Year ended 31 December 2011
Segment 351 287 106 604 1 289 135 1 747 026
Reportable segment profit 82 498 14 561 67 447 164 506
Head Office costs (18 768)
Operating profit (before taxation) 145 738
Total Assets 361 928 134 151 946 666 1 442 745
DIVIDEND
No dividend has been recommended or declared for the period. It is anticipated that while the group continues with its
investing 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
28 June 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
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