[South Africa] Ascendis earnings up 92% on international growth and acquisitions

Ascendis Health has reported strong growth in normalised headline earnings of 92% to R645 million for the year to June 2017 as the group significantly increased international sales following the completion of three acquisitions in Europe during the year. 

The JSE-listed health and care brands group increased revenue by 64% to R6.4 billion, with acquisitions contributing R2.3 billion.

In a challenging environment in South Africa the group’s normalised EBITDA increased by 78% to R1.1 billion, with the EBITDA margin strengthening by 130 basis points to 16.9%. 

Since listing in 2013 Ascendis has grown revenue at a compound rate of 81% and EBITDA by 102% per annum.

Chief executive officer Dr Karsten Wellner said following the international acquisitions of pharmaceutical manufacturer Remedica Holdings in Cyprus and leading European sports nutrition business Scitec, Ascendis has been transformed into a global healthcare business, with a natural hedge against currency fluctuations.

“These acquisitions have been game changing as 60% of our earnings are now generated outside South Africa,” he said.

Late in the reporting period Ascendis concluded the acquisition of Sun Wave Pharma in Romania. Sun Wave Pharma is a leading OTC and food supplements business which provides Ascendis entry into the high-growth Romanian and eastern European markets.

The group’s foreign revenue rose by 497% to R2.8 billion and accounts for 43% of total sales. Products are currently exported to over 120 countries. Ascendis has operations in Spain, Cyprus, Hungary, Romania and Australia. While most businesses are focused on their home and regional markets, Remedica in Cyprus exports approximately 80% of products into high-growth emerging markets.

Dr Wellner said Remedica has been successfully integrated, with ongoing synergy projects within the Ascendis Pharma-Med division covering cross-selling, procurement, research and development, new product development and production. Remedica generated revenue of R987 million since acquisition, with profit of R243 million being ahead of expectations.

Scitec, the third largest sports nutrition brand in Europe, reported sales of R1.2 billion and profit of R121 million. “The business has been negatively impacted by external factors, including the increase in world market prices of whey protein, one of the most important raw materials in sports nutrition. We have taken decisive steps to improve profitability, including appointing a new head of the business, focusing on new sales channels, expanding into new markets and developing a strong new product development pipeline.”

Dr Wellner said Scitec provides an international platform for Ascendis’ Evox and SSN brands to expand abroad, and for Scitec to grow in Africa and Australia.

Locally Ascendis acquired the southern African animal health operations of Cipla India with effect from June 2017. “This business creates access to the attractive veterinary pharma market, with high margin products in strong growth segments. This is supported by the opportunity to increase export sales and create synergies with the existing African network of Ascendis Phyto-Vet.”

On the outlook for the year ahead, Dr Wellner said the group will continue to pursue its proven strategy of organic, acquisitive, synergistic and international growth to create shareholder value.

“We have initiated projects to enhance organic growth and margins. This includes consolidating our medical devices division, focusing on cost efficiencies across the group, in particular in the sports nutrition business, rationalising manufacturing facilities in South Africa and investing in new product development and launches.”

“Our acquisition strategy in 2018 will be focused on buying smaller complementary bolt-on businesses, mainly in the higher growth economies in central and eastern Europe, and South Africa, while targeting fast growing health and care market segments,” said Dr Wellner.

www.ascendishealth.com

 

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