Ascendis half year revenue sails past R4bn on back of intl businesses

Dr Karsten Wellner (Supplied)
Dr Karsten Wellner (Supplied)

Cape Town - Health and care brands group Ascendis Health reported a 27% increase in revenue to R4bn for the six months to December 2017, driven by the strong performance of the group’s international operations, which grew revenue by 50% to R1.9bn.

Operating profit for the half year increased by 28% to R602m.

Thomas Thomsen has taken over as CEO from Dr Karsten Wellner on 1 March. At a results briefing in Cape Town on Thursday, Wellner indicated that he will be assisting Thomsen with the transition of leadership for the next few months. Wellner was CEO since the founding of Ascendis in 2011.

"Ascendis will grow under the leadership of Thomas. One has to embrace change and at Ascendis there is an entrepreneurial spirit regarding change," said Wellner.

He added that transparency, for instance about organic growth and in underlying subsidiaries, is very important. He said there was strong organic growth - but with the group's European businesses outshining local SA businesses.

Comparable organic revenue growth - the performance of the businesses compared to the full six months in the prior period - was 7% and comparable organic growth in earnings before interest, tax, depreciation and amortisation (EBITDA) was 5% compared to the prior period.

Wellner said there was strong revenue and EBITDA growth in the group's two biggest businesses, namely Remedica and Medical Devices.

On the other hand, Sports Nutrition businesses were negatively impacted by whey protein costs, among other factors. The group is, however implementing a recovery plan in this regard.

Earnings per share has increased by 24% to 52.8 cents per share. The normalised EBITDA rose 28% to R653m. Headline earnings on a normalised basis grew by 20% to R353m with normalised headline earnings per share 7% higher at 75.8 cents. The weighted average number of shares in issue increased by 12% during the reporting period.

Ascendis said it strengthened its balance sheet by settling vendor debt of R1.1bn.

No interim dividend was declared.

According to chief financial officer Kieron Futter, Ascendis is focused on cash generation. In this regard the Medical Devices business is doing very well. A lot of its sales are to government. In this regard the group sees remarks in Budget 2018 about government departments having to pay on time as encouraging.

Acquisitions

The group’s acquisitions of Sun Wave Pharma in Romania and Cipla Vet and Cipla Agrimed in South Africa in June 2017 contributed to the gross profit margin strengthening by 160 basis points to 44.2%.

“Ascendis has expanded its international operations to Spain, Cyprus, Hungary, Romania and Australia, and products are exported to over 120 countries globally. 57% of the group’s earnings are now generated outside of South Africa,” said Wellner.

Wellner said the international acquisitions of pharmaceutical manufacturer Remedica in Cyprus, European sports nutrition specialist Scitec (both in 2016) and nutraceuticals business Sun Wave Pharma in Romania (2017) have transformed Ascendis into a global healthcare business.

The Ascendis brand portfolio is housed across three divisions: Pharma-Med, Consumer Brands and Phyto-Vet. Pharma-Med, which contributed 50% of group sales, increased revenue by 20% owing to the strong performance of the pharma business of Remedica and the Medical Devices business.

Consumer Brands increased revenue by 39%, benefiting from the acquisition and strong growth of Sun Wave Pharma.

Margins in the sports nutrition businesses were impacted by higher global prices of whey protein, a key raw material in sports nutrition products. Scitec, which is the third largest sports nutrition brand in Europe, was further impacted by its lack of direct online presence and sales declined by 7.8%. Scitec has implemented remedial strategies, including launching a new sales and marketing programme, and building digital capabilities for online strategies.

Phyto-Vet, the biosciences business in the Ascendis stable, again experienced good revenue growth of 29%. The performance was boosted by the recently acquired Cipla business, which reported double digit sales and profit growth.

On the group’s plans and prospects, Thomsen said Ascendis will continue to pursue organic and more focused synergistic growth strategies across its South African and international businesses to increase revenue growth and profitability.

“Operationally our focus will be on turning around the performance of Scitec while generating synergies from our recent acquisitions of Remedica, Scitec, Sun Wave and Cipla. We are also targeting to improve margin, reduce gearing levels and improve cash generation,” he said.

Thomsen said a strategic business review has been initiated to create a sustainable market position for Ascendis Health and to accelerate organic growth following several acquisitions locally and offshore in recent years. The review is expected to be completed late in the 2018 financial year.

He added that the group's international strategic focus this year will be on four areas, namely global value creation, business focus strategies, strong leadership and to monitor for bolt-on acquisitions.

"We now focus on value creation - on what can give us the biggest return," said Thomsen. "We have a clear strategy."

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