William Ransom & Son's future profitability questionable
following a disappointing and unacceptable six-month financial
report, compounded by a suspension of the companys manufacturing
According to the six-month results, ended 30 September, which was released today, operating profit was posted at 0.9m ($1.8m), down from 2.2m ($4.4m) in the same period last year. Group sales also showed a drop. For the six months, sales came in at 17.6m, down from 17.7m at the same time in 2006. This has been a disappointing and unacceptable performance, William Ransom & Son non-executive chairman David Suddens said in a statement. The board needs to achieve greater focus, particularly as UK consumer market conditions are likely to remain unhelpful. We have a profitable consumer healthcare business which generates cash and which has the potential for growth. The changes announced today are intended to provide the platform for improved performance in the future. The company had anticipated the revenues for the pharmaceuticals division to increase in the full year but according to the results, the division was 15 per cent lower at 2.2m for the period under review. Since the end of the reporting period, the future profitability of the company has been further called into question following a voluntary recall of several products manufactured at the companys contract manufacturing facility in Witham, Essex. A routine inspection by the Medicine and Healthcare Products Regulatory Agency (MHRA) in November "found some evidence of deficiencies in the company's control and investigation of microbial contamination of the purified water supply used in the manufacture of certain products". The agency also suspended the companys manufacturing license for certain products for three months. Since the announcement of the recall in December, an independent expert review of procedures at the site has led the MHRA to conclude the company is no longer required to implement a recall. Meanwhile, the agency is undergoing a review of other products manufactured at the facility and will re-inspect the plant with the view of reinstating the manufacturing license. The company now anticipates the current inability to manufacture will affect the full year financial results. In addition to the professional costs incurred by the Group in its dealing with the MHRA, the company may incur costs associated with the product recalled by our customers. The longer term financial impact arising from the suspension of the license will be determined by the amount of time it will take the MHRA to re-inspect the facility and reinstate the license, the report said. It added: It is not currently possible to assess with any certainty either the length of time that it will take to reinstate the license, the cost of doing so or the future impact on revenues which may occur as a result of the interruption to the companys business. In the meantime, the company has been further knocked by the announcement that Tim Dye will stand down as chief executive at the end of January. A search for a successor has begun. William Ransom has the potential to improve on this performance. It has good brands and products, sold through a broad spread of channels of distribution, in markets that have growth potential. The board will quickly implement changes to group management and will focus efforts on the integration and rationalisation of its many consumer healthcare brands, in order to address the short term operational issues highlighted above. We will also review the potential of our contract manufacturing business, Suddens said.