[South Africa] Ascendis sales top R3billion as headline earnings rise 105%

Listed health and care brands group Ascendis Health increased revenue by 66% to R3.1 billion in the half year to December 2016 as the business significantly increased international sales following two major acquisitions in Europe.

Ascendis has grown revenue at a compound rate of 78% over the past five years.

The group’s normalised EBITDA increased by 89% to R541 million, with the EBITDA margin increasing by 210 basis points to 17.4%.  

Headline earnings on a normalised basis increased by 105% to R310 million, with normalised HEPS up 34% to 74.9 cents per share. The interim dividend was increased by 16% to 11 cents per share.  

Early in the reporting period Ascendis completed the game changing acquisitions of Cyprus-based pharmaceutical manufacturer, Remedica Holdings, and leading European sports nutrition business Scitec International, for a combined €430 million.

Chief executive officer Dr Karsten Wellner said the two European acquisitions formed part of the group’s strategy to internationalise the business by buying platform businesses in offshore markets and extracting synergies from these businesses. “Our strategy ensures diversity across products, channels, geographies and currencies,” he said.                                                                                               

Remedica and Scitec have been successfully integrated into the group and contributed revenue of R940 million for the five months since being acquired. This resulted in the group’s foreign revenue increasing by 270% to R1.3 billion, accounting for 43% of total sales and providing a natural hedge against Rand volatility.

Dr Wellner said Remedica performed ahead of expectations and generated revenue of R398 million. “Remedica provides a platform for Ascendis to expand internationally in both Europe and emerging markets. We have retained the previous owner as our CEO and this provides continuity in the integration process. Several synergy projects with the Pharma-Med division are ongoing and the business has a strong pipeline of new specialty generic drugs, particularly in oncology and HIV.”

Scitec, the third largest sports nutrition brand in Europe, complements the Ascendis Sports Nutrition strategy and provides an international platform for the Evox and SSN brands to expand abroad, and for Scitec to grow in Africa.

Scitec reported sales of R542 million while profitability was impacted by the increase in whey protein prices globally and the costs of expanding into new sales regions, including the United States. Synergy projects covering research and development, cross-selling and production are being implemented.

On the outlook for the remainder of the financial year, Dr Wellner said synergy projects for the European acquisitions of Remedica, Farmalider and Scitec remain management’s priority while the group will continue to seek value-enhancing acquisitions locally and offshore.

“Funds of approximately R750 million are available for acquisitions in the next 12 months, without the group needing to raise further equity. We are currently evaluating potential acquisitions of platform and bolt-on businesses in Europe and emerging markets as well as South Africa,” he added.

Ascendis today announced its first acquisition in eastern Europe with the purchase of Sunwave Pharma, the leading OTC nutrition and food supplements brand business in Romania. The business will be acquired for €42.5 million, with a maximum deferred payment of €23 million over three years based on financial targets, and will be accretive from May 2017.

“Sunwave provides an attractive platform for Ascendis to enter the high growth Romanian and eastern European OTC markets. The business has a strong sales and profit track record based on a unique distribution model of marketing complementary medicines directly to doctors through a sales force of 290,” commented Dr Wellner.

He said Sunwave has a well-diversified product, customer and supplier portfolio, margins of close to 20% and a strong product pipeline. “We have identified multiple potential synergies and cross-selling opportunities with the Ascendis wellness and OTC ranges, and believe that Sunwave’s successful distribution model can be replicated in surrounding eastern European countries. This is another very exciting acquisition.”

Earlier this week Ascendis announced the R375 million acquisition of the southern African animal health product operations of Cipla India which comprise Cipla Vet (companion animal products) and Cipla Agrimed (commercial animal products). The acquisition is expected to be accretive from May 2017.    

“These businesses are strategically aligned with our phyto-vet division and will enable Ascendis to enter the attractive veterinary pharma market, with high margin products in strong growth segments,” he said.

“These two strategic acquisitions, together with another great set of results, highlight our commitment to delivering value to our shareholders.”

www.ascendis.co.za