Debt-laden Ascendis Health expects rise in earnings as it continues to restructure its business

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Ascendis Health expects its balance sheet to show signs of improvement.
Ascendis Health expects its balance sheet to show signs of improvement.
  • Ascendis produces consumer, pet and pharmaceutical brands such as Nimue skin products, Vitaforce supplements and pet products like Triworm.
  • The group fired its Germany-based CEO, Thomas Thomsen, last year only 14 months after he was appointed.
  • On Tuesday in a trading update it said it expects a major increase in earnings for for the year ended 30 June 2020.

Ascendis Health announced on Tuesday that it expects its earnings to increase by up to 333% for the year ended 30 June 2020, as it continues to chip away at its debt pile.

The Johannesburg-headquartered health and wellness company produces consumer, pet and pharmaceutical brands such as Nimue skin products, Vitaforce supplements and pet products like Triworm.

The group has had a tough five years during which it grappled with rising debt, experienced a share price decline of more than 95% and fired its Germany-based CEO Thomas Thomsen only 14 months after he was appointed.

He was replaced in October last year by Mark Sardi, who has been working on restructuring the business. Its debt reduction strategy follows the ambitious expansionist phase it embarked on between 2015 and 2017 that saw it acquiring Scitec in Hungary, Farmelider in Spain and Sunwave in Romania.

According to its interim results for the six months ended 31 December 2019, the group's net bank debt stood at R5 billion, with current liabilities at R8.2 billion.

As part of the strategy to reduce its debt, the group started selling its assets, with the most recent announcement on Monday that it was selling Dezzo Trading, its subsidiary that buys and sells over the counter products and generic pharmaceuticals to the state and private sector for about R25 million. It is also selling Ascendis Direct Selling for R10.5 million.

On Tuesday in a separate trading update ahead of its annual results for the year ended 30 June 2020, Ascendis said it expects its normalised earnings to increase by up to 333% from R279 million to up to R1.2 billion. It also expects its revenue to improve by up to 26% to R 6.8 billion from R5.5 billion in 2019. 

However, the group is not out of the woods yet, as it expects its normalised headline loss to be as high as R31 million. This would still be an improvement on last year’s loss of R484 million. The health and wellness company anticipates a headline loss per share of 7%, an improvement from 2019's 13%. 

Ascendis is still struggling to sell its Cyprus based pharmaceuticals business Remedica, after announcing last year that it had found a buyer for the pharmaceutical business it had acquired in 2016 for R4.4 billion. However, that sale did not happen and the company is currently preparing to sell Remedica again.  

In a note on Tuesday, Small Talk Daily Research analyst, Anthony Clark, said the combined R35.5 million transactional value of its Dezzo Trading and Ascendis Direct Selling businesses was not enough to make a dent on its debt. But it does constitute an ongoing commitment to restructure its business and remove underperforming units. 

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