Johannesburg - Litha Healthcare had embarked on a cost-cutting programme that would reduce staff headcount and result in the restructuring of management to make the business more efficient, chief executive Selwyn Kahanovitz said on Friday.
Kahanovitz said the group intended to realise about R20 million in savings from the restructuring process.
Cost cutting began two months ago and was expected to be concluded by the end of the second quarter, which was when the group could provide further details.
The past year had been tough for the group, which weathered challenging trading conditions including increased competition, which led to the commoditisation of some of the firm’s key generic products.
On Friday, the firm reported a 92.5 percent drop in earnings a share to 2.7c for the full year to December last year from 36.2c a year earlier. Headline earnings a share declined to 2.1c from 5.1c previously.
Group revenue declined to R1.04 billion from R1.43bn for the previous 12 months.
However, revenue during the last quarter of the year increased by 4.1 percent to R247.3m compared with revenue of R237. 5m for the same quarter a year earlier.
Selling, distribution and regulatory and administrative expenses declined to R367.5m during the year under review from R378.2m for the 12 months to December 2012. Group operating profit decreased during the period under review to R46.9m compared with R232m for the corresponding period.
“We felt we needed to look at some rationalisation,” Kahanovitz said.
Litha, the smallest health-care firm listed on the JSE, supplies pharmaceuticals, medical devices and equipment and human vaccines to public and private health-care operations through its three divisions, Litha Pharma, Litha Medical and Litha Biotech.
Litha was expecting results to improve during the current fiscal year. The company is awaiting approval from the Medicines Control Council on 70 new molecules, in line with other industry players.
Litha Medical was the group’s best performer, while Litha Pharma saw revenue decline due to competition.
Cash and cash equivalents, net of overdraft, at the end of last year was R9.2m compared with R13.4m a year earlier.
Litha Medical contributed 48.8 percent to operating profit during the fourth quarter.
Fourth-quarter revenue grew compared with the same quarter in 2012 on sales associated with the group’s forensic tender including sales resulting from a new agency agreement that was signed early last year. Losses associated with the weaker rand were tempered by a favourable product mix during the fourth quarter of last year.
Litha had entered into negotiations with Rand Merchant Bank (RMB) to restructure its funding facilities, the company said. It had received approval from RMB for the proposed restructuring, which it expected to be finalised by the end of the month.
Kahanovitz said the restructuring was a “clean up” and consolidation exercise of the group’s existing debt.
Interest bearing debt including Biovac, a joint venture with the government to produce vaccines, in which Litha holds 52.5 percent was R392.7m compared with R407.9m a year earlier.
The stock fell as low as R1.92 on Friday before closing 1.91 percent down at R2.05.