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Send  Share  RSS  Twitter  21 May 2009

VENTURES: Lazaron Profits Stemmed Again

 



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THIS time last year CBN reported on the distinct lack of progress at Lazaron Biotechnologies, the Cape Town-based stem cell storage and research entity that predicted huge earnings from its biotechnology offerings.

At that time, a marked improvement is Lazaron’s fortunes was being punted by the company’s backers. But alas, the news this time around is pretty much the same time with Lazaron clearly nowhere nearer to the ‘big time’ profits mooted when the company tapped the public for funding several years ago.

Recent results released by parent company JDH show Lazaron increasing interim turnover (to end December 2008) from R1.3 million to R1.8 million. While that scant gain (in terms of rands, not percentages) may be deemed encouraging, the problem for Lazaron is that its loss widened from R152 000 last year to R368 000.

In comments accompanying the interim results, JDH directors notes that while Lazaron remains cash flow positive the credit terms in this business were also tightened in line with the overall tightening of credit facilities. The directors said Lazaron continued to build on its relationship with a leading South African hospital group – which, they reckoned, helped the company maintain turnover and margins as household disposable income decreased for its potential clients.

The marketing budget for Lazaron was also increased to more actively market the stem cell storage service. “To date, this has enabled the company to maintain its market position,” the directors say.

The same comment about additional marketing expenditure was made at the end of June 2008 – and the pitiful growth in turnover off an already low base must raise questions around whether the marketing budget is really being used profitably.

What the directors did not address in their rather brief comment about Lazaron is the rather prickly question of why the company is not performing to the original specs outlined in the fund raising documentation.

Lazaron initially believed it could easily generate longer term turnover of over R50 million a year – a prediction based on the premise that the company could sign up 8 000 new clients a year.

The reported turnover figures suggest Lazaron is probably battling to sign up even 800 new clients a year – a development that again raises questions around how realistic forecasts by directors were when the group presented its prospects to potential investors.

Lazaron’s dismal performance also makes one wonder how the directors of JDH – at the end of June last year – could deduce “that it was quite clear that the market for storage of umbilical cord blood stem cells is growing proportionately in SA to the growth experienced internationally.”

CBN supposes that the most fretting around Lazaron’s viability is being done by Golden Oak Corporate Advisors – the mystery investor that plugged up JDH’s balance to the tune of R10 million so that it could provide the necessary capital to grow its projects.


 
 
 
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