Goldshield, the Croydon-based drug manufacturer being sued by the Department of Health and investigated by the Serious Fraud Office, halved its dividend yesterday and admitted costs across the business had spiralled out of control.
The company has laid off two-thirds of its US workforce and Ajit Patel has bowed to pressure from shareholders to split his role as executive chairman. Mr Patel will continue as chief executive but a new non-executive chairman will join after the annual general meeting later this summer.
Mr Patel said: "Since the SFO investigation began, one or two shareholders have said we should hasten the split of the roles. I will have someone I can take a bit more advice from."
Goldshield's shares fell a further 15 per cent after its full-year results showed profit in the year to March had collapsed to £3.5m from £15.9m the year before. Mr Patel blamed falling consumer confidence in the US for the dramatic decline in profitability at its business selling vitamins by mail order.
Staff numbers in the division have been slashed from nearly 200 to just 50 in the last two months. Redundancy costs - which Mr Patel said were yet to be totted up - would hit profits in the current financial year, while the reduced scale of the division would hold back group revenues. The results reported yesterday had also been affected by the higher than expected costs of setting up a television shopping channel selling health supplements and by health scares over vitamin supplements in the UK.
Margins were hit by Goldshield's ultimately failed efforts to try to prop up Miza, a supplier in Ireland, through buying products at over-the-odds prices.
The Department of Health is demanding £28m in compensation from Goldshield and three other companies over allegations of price-fixing. The companies are accused of breaching competition law to inflate the price of warfarin, an anti-coagulant, to the NHS.
The Department of Health lawsuit followed the Government's decision to call in the SFO to investigate the price of warfarin. Goldshield's offices and Mr Patel's home were raided in April last year. The company denies the accusations.