Ascendis has Europe acquisitions in sights

Author: Michelle Gumede

Source: Business Day

ASCENDIS Health is eyeing bolt-on acquisitions in Central and Eastern Europe in 2018 to boost its business. In SA, the group said, it would target the fast-growing health and care industry, which still offered opportunities for growth. The healthcare group bought a number of companies in countries such as Cyprus that lifted its revenue for the year to June.

CEO Karsten Wellner said that the group’s acquisition strategy would focus on higher-growth economies in Europe. Ascendis reported a 64 percent jump in revenue to R6.4-billion, with acquisitions contributing R2.3-billion. The company acquired pharmaceutical manufacturer Remedica Holdings in Cyprus and European sports nutrition business Scitec as well as Sun Wave Pharma in Romania, an over-the-counter medicine and food supplements business.

Wellner said that the acquisitions were game changing as 60 percent of earnings was now generated outside SA. Locally, Ascendis acquired the Southern African animal health operations of Cipla India in June. Nitrogen Fund Managers’ Rowan Williams said the fairly low 6.5 percent revenue growth from African operations, which was largely organic, might have been the reason why the market was slightly disappointed. The group did not declare a dividend. Wellner said that in 2016, investors complained about the company paying out dividends only to engage in equity-raising activities soon after.

Ascendis reported a 92 percent rise in normalised headline earnings to R645-million for the year to June. Normalised earnings before interest, tax, depreciation and amortisation (ebitda) rose 78 percent to R1.1- billion, with the ebitda margin strengthening by 130 basis points to 16.9 percent. Williams said the consumer division had been disappointing. This indicated sustained pressure on discretionary spending by consumers. Ascendis Health chief financial officer Kieron Futter said the group results were strengthened by the rand hedging strategy it adopted. Ascendis owns a portfolio of brands targeting people, plants and animals. It exports to more than 120 countries and has operations in Spain, Cyprus, Hungary, Romania and Australia. Since listing in 2013, Ascendis revenue has grown at a compound rate of 81 percent. Meanwhile, ebitda has increased 102 percent annually. The group said it had initiated projects to enhance organic growth and ebitda margins. These included consolidating the medical devices division in SA focusing on cost efficiencies across the group. The management was aiming to improve the ebitda margin from 17 percent to 18 percent over the medium term.