Ascendis may cut segments providing ‘inadequate’ return

Health-care group Ascendis saw a drop in its profit in its interim results as management continued to trim the business amid a shift in its balance sheet, including selling its pharma segment and paying off its debt.

The company, valued at R386m on the JSE, said in its results for the six months ended December that gross profit, revenues minus the cost of sales, declined 8.6% to R311.9m, while profit for the period, helped by its discontinued operations, fell 41% to R189.9m.

However, the company continues to operate at a loss of R171.9m for continuing operations with some of the group’s businesses not generating “adequate returns to compensate shareholders for the cost of their invested capital” despite management’s intervention.

“In an effort to offset further pressure on returns, management will continue to invest significant effort in enhancing these business models (through partnerships with suppliers and customers to find innovative ways to preserve and grow margin while reducing invested capital) to build more robust and higher returning businesses,” Ascendis said.

“Where this is not possible, management will continually evaluate whether it is in the best interest of shareholders to retain or divest these businesses,” the company added.

Owner of Solal, Vitaforce and Bettaway supplements, the company listed on the JSE in 2013 and has undergone multiple leadership changes. A series of acquisitions in Europe in 2015 and 2016 caused debt to balloon and stretch the balance sheet.

In September 2021, it concluded a debt-for-asset swap with London-based lenders that walked away with some of Ascendis’ profitable offshore operations, including the cashgenerative Cyprus-based Remedica business in exchange for settling the bulk of its €444m debt.

It had several board changes in 2021, with the London-based lenders calling in outstanding debt days before Christmas that year after a board change, which forced it to find new funding to stay afloat within weeks.

More recently, to help with near-term liquidity pressures as it paid off its debt, R101.5m was raised via a rights offer. It is also looking at cutting the costs of head office as the number of employees has been reduced from 34 at the end of June 2022 to 14 by March 2023.

“This remains an area of continued focus,” the company said.

In other financials, headline loss per share, a common profit measure in SA, narrowed threequarters to 29.4c for continuing operations, amounting to R172m. Earnings per share more than halved to 32.5c.

No dividend was declared by Ascendis.