Ascendis Health shares rally nearly 30% on trading statement

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Ascendis Health's [JSE:ASC] stock increased nearly 30% on Thursday afternoon, shortly after the release of its trading update, which projected increased revenues for the six months ended 31 December 2019.

The health and care brands company's share price opened at 44c on Thursday morning and was trading around 41c before the trading statement was released on the stock exchange news service at 15:10. It climbed as much as 27% to 56c by 15:20. By 16:03 it stabilised at around 49c.

According to the trading statement, Ascendis Health expects its revenue to be bolstered by higher sales in Europe due to a new tender business secured by its Cyprian pharmaceutical business Remedica, and new product launches by its Romanian business Sun Wave Pharma. However, these effects were partly negated by increased market competition in European sports nutrition company Scitec and lower licence fee revenue in Spanish pharmaceutical group Farmalider.

"In South Africa, revenue growth is due to the recovery from prior year supply issues in Pharma, and new agency business in Medical Devices," the statement read.

Projections show revenue is expected to increase between 9% and 14% or between R3.7 billion and R3.9 billion, compared to last year's restated figure of R3.5 billion.

As for its earnings, the group expects a dip, with headline earnings per share to decline between 35% and 25% (between 20.3c and 23.7c) from the previous year's 31.4c. Normalised headline earnings are projected to be between 17% and 3% lower (between R156 million and R182 million) compared to R188 million reported last year.

The group suffered an impairment loss of R24 million, related to its direct selling division, which led to the deterioration of its trading results, it said.

"These additional costs and impairments have had an adverse effect on profit after tax compared to the prior period, with the majority of earnings per share measures decreasing," the group said.

"The group incurred extensive consulting and professional fees associated with the restructuring of the senior lender debt, and other once-off costs related to the disposal of Biosciences and the planned disposal of Remedica as well as a considerable increase in finance expenses associated with the interim stability agreements with the senior lenders," the statement read.

Last year, to deal with its debt burden Ascendis Health decided to cancel plans to dispose of Remedica, in favour of finding ways to restructure its debt, Business Day previously reported.

Ascendis Health's share price has slumped more than 90% compared to a year ago – as it battled with poor operational and financial performance, facing a tough trading environment, suffering impairments and liquidity constraints.

The group sacked its previous CEO Thomas Thomsen in May 2019, and did not give reasons. Mark Sardi has been CEO since October 2019.

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