Ascendis Health Announces Maiden Year-End Results
Ascendis Health, which listed in November 2013 on the JSE main board, announced their maiden Year-end results 09 September 2014.
The group recorded revenue up 171% to R1.6 billion, operating profit up 310% to R216 million, operating margin improved from 8.8% to 13.3% with headline earnings up from R9.0 million to R138 million. Cash generated from operations was a healthy R176 million, resulting in a dividend of 15 cents per share.
Commenting on the performance, Ascendis Chief Executive Officer Dr. Karsten Wellner said, “We are extremely pleased with our maiden year end results which far exceeds our pre-listing forecast and was driven by healthy double digit organic growth and the benefit of our strategic acquisitions. The benefit of these acquisitions will only be fully accretive in the new financial year, hence our annualised sales would have been close to R2.2 billion. Further growth will be recorded by our 2 important post year end acquisitions of Respiratory Care Africa and the Arctic Healthcare brands. It also affirms our focused business model and importantly delivers on our original commitment to our shareholders.”
Ascendis is a fast growing health and care group which sells health brands for people, plants and animals, housed in three divisions: Consumer Brands (nutraceuticals, vitamins, sports nutrition and skin care products); Pharma-Med (prescription drugs and medical devices) and Phyto-Vet (plant and animal health and care). The revenue split in 2014 was Consumer Brands 41%, Pharma-Med 25% and Phyto-Vet 34%. The company aims to strategically achieve a mix of 40%, 40% and 20% for its three divisions.
The brands in the Consumer Brands and Phyto-Vet divisions are mostly aimed at higher LSM consumers making the business more resilient in the face of weaker economic conditions. The brands in the pharmaceutical sector of the Pharma-Med division focus more on the lower LSM consumer and will benefit from government’s focus on making medicines more affordable and accessible as well as the National Health Insurance implementation. The Medical Device business focuses on theatres and ICU’s in private and state hospitals.
Ascendis follows an acquisition strategy of buying established, well managed businesses and resilient brands which are integrated into the divisional platforms without the full associated fixed overhead structure. Organic growth from the group’s established market-leading brands is healthy and is supported by vertical integration across the value chain and horizontal integration from complimentary bolt-on acquisitions which increased the gross margin for the year to 45.0%.
Ascendis extracts synergies down the value chain from imports of raw materials, manufacturing, brand development, to distribution to consumers through retail, wholesale, doctors, pharmacies, hospitals and direct selling channels both locally and internationally. The group has an expanding international presence and currently exports products to 53 countries, mainly in Africa and Europe. Listed on the JSE in November 2013, the market capitalisation of Ascendis is approximately R4 billion.
Shortly after the JSE listing Ascendis acquired Surgical Innovations, a distributor of high-end medical devices to surgeons, and together with the post year-end acquisition of Respiratory Care Africa (“RCA”), a meaningful medical devices platform in the Pharma-Med division has been created. RCA distributes specialist medical equipment and surgical consumables for critical care facilities such as intensive care units and operating theatres. The range of equipment is complementary to Surgical Innovations with combined businesses now capable of offering a turn-key solution to existing hospitals, with further growth potential expected from this synergy.
In the second half of the financial year the group also acquired Atka Pharma and PharmaNatura, which have been integrated into the Consumer Brands division. Atka Pharma markets the BioBalance brand and PharmaNatura sells household nutraceutical, homeopathic and herbal brands such as Vitaforce, Bettaway, Homeoforce and Herbaforce. These are all manufactured at their GMP-accredited plant in Johannesburg.
Shortly after the end of the reporting period the group acquired market leading vitamin and mineral brands, Arctic Healthcare which includes the Chela-Fer, Menacal7 and Supa Chewz brands.
Ascendis brands are currently sold in 22 African countries, which account for the majority of export sales. Major export markets outside the continent are the Scandinavian countries, Netherlands, Germany, Dubai and Australia. Revenue generated from foreign markets increased by 86% to R187 million. The increase in export performance together with the strong market position of the brands (enabling Ascendis to pass on price increases) has also allowed Ascendis to counteract the higher than expected imported inflation due to the Rand weakness.
Dr Wellner comments, “We are currently accelerating the growth of our export operations through recent acquisitions of category leading brands into existing well established distribution channels, and are aiming to achieve 30% of our sales from international markets within three years.”
Going forward Ascendis plans to focus on the continued strong organic growth of its market leading brands in the Consumer Brands division through profit enhancing bolt-on acquisitions together with integration and synergy projects and the internationalisation of selected brands.
Pharma-Med plans to reduce its dependence on raw material imports, focus on internationalisation and new product launches to enhance profitability. The medical devices business will concentrate on developing synergies and economies of scale between Surgical Innovations and RCA, and better offerings for its complementary hospital customer base. Acquisitions will include local bolt-ons and the first international acquisition.
In Phyto-Vet, which services the higher LSM market, the focus will mainly be on profit enhancing bolt-ons and synergies between the existing businesses.
The group has a healthy acquisition pipeline and is currently evaluating projects across all divisions. This pipeline will be supported by the establishment of a R2 billion domestic medium term note (DMTN) program which includes a R400 million debut issue. The group has negotiated a debt reference package which includes a term facility, revolving credit facility, general banking facility and a trade finance facility totaling R660 million.
Together with the DMTN program the aggregate debt refinance negotiated by the Company totals R1.06 billion. The DMTN program has been supported by leading domestic primary capital market institutions and is a significant milestone enabling further growth of Ascendis Health. Management plans to increase the groups BEE shareholding and seek further capital both locally and internationally to fund its growth aspirations.
Dr. Wellner adds, “The cash flow generated from our planned acquisitions together with our integration synergies and ongoing organic growth will ensure that our debt levels remain comfortably within our targeted range.”
The key deliverables for the year ahead include the finalisation of current acquisition projects; the integration of the recently announced acquisitions of PharmaNatura, RCA and the Arctic Healthcare brands; further organic growth locally and internationally; the extraction of vertical and horizontal synergies and internationalising of strong owned brands.
Dr. Wellner concludes, “It’s been an extremely dynamic and rewarding year for everyone associated with Ascendis Health. We have a fantastic team of talented industry professionals all focused towards achieving our targeted goals, which are clearly reflected in the results presented here today. Our strong deal pipeline together with integration synergies has allowed us to set clear, bold targets for the year ahead which includes being recognised as a leading and trusted health and care company that consistently delivers exciting results for our shareholders and great products to our customers in the space of care, health and wellness.”
Photo Caption: Dr Karsten Wellner, Ascendis Chief Executive Officer.
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