Ascendis grew headline earnings by 48 percent to R131 million. A large driver of this rapid growth was its offshore currency earnings and its international expansion strategy. Picture: Supplied

Johannesburg - Ascendis Health’s share price leapt 7.53 percent to R20 after its interim results showed profit muscling 66 percent higher, boosted by offshore currency earnings and its international expansion strategy.

In the six months to December, the health and care brands group’s profit rose to R147 million from R88m. Headline earnings grew 48 percent to R131m, with headline earnings per share up 37 percent to 49c.

Read: Deals bolster Ascendis

The company said it would issue a dividend of 9.5c a share, 19 percent higher than in the previous year.

Ascendis chief executive Karsten Wellner said yesterday that revenue from foreign markets grew by 220 percent to R365m, accounting for 20 percent of total sales.

Increase revenue

Wellner said Ascendis wanted to increase its revenue from outside South Africa by 30 percent through exports next year, establishing offshore offices and continuing to acquire international businesses.

“Ascendis brands were exported to more than 50 countries globally,” he said. For a company that only listed on the JSE in November 2013, with a maiden share price of R11, the company has made great strides.

Worth R5.43 billion, it competes against established health-care firms such as Adcock Ingram (worth R7.65bn) and Aspen (R138.69bn).

Ascendis group’s revenue increased by 40 percent to R1.9bn, boosted by new product launches, international growth and acquisitions concluded over the past year.

Wellner said the group’s first international acquisition of Spanish pharmaceutical group Farmalider, which manufactures mainly generic pharmaceuticals, was growing its presence in other European markets and had performed well.

“The acquisition is aligned with our international growth strategy of diversifying across different international markets and increasing foreign denominated earnings,” he said.

Farmalider contributed R212m sales and R29m profit after tax to the Ascendis’s Pharma-Med division for the five months to December. The Pharma-Med division comprises the sale of prescription and selected over-the-counter pharmaceuticals as well as medical devices.

Locally, the group acquired pharmaceutical Acacia Healthcare in November for R345m. Acacia sells the Reuterina probiotic range and the cold and flu brands Sinucon and Sinuend. Wellner said that, looking ahead, the group would continue to focus on international acquisitive growth to “further improve its hard currency revenue base”.

“We are currently evaluating opportunities to acquire companies for all three divisions in Australia and Europe. In South Africa, we are in negotiations for further bolt-on acquisitions across all divisions,” he said.

Ascendis chief financial officer Kieron Futte said South Africa regulations were affecting the complementary medicines industry.

Keeping ahead

He said South Africa was the only market in the world where you needed a prescription for melatonin.

“We are keeping ahead of the curve by investing in our manufacturing plants to ensure GMP (good manufacturing practice) compliance now for areas such as sports nutrition.”

When asked whether South Africa’s investment rating status being downgraded by rating agencies would have a material affect on Ascendis, Futte said it would affect the businesses in two areas. “The first is the exchange rate as 66 percent of our cost of goods is imported. We have successfully mitigated this effect with increasing export sales (in dollars and euros), forex hedging, international acquisitions and price increases.”

An increase in interest rates would affect Ascendis’s cash flow as it had gearing on its balance sheet, but at the current debt levels Ascendis had enough headroom to “comfortably comply with our covenants”, he said.

Ascendis’s strategy was to grow “acquisitions (20 percent to 25 percent revenue growth), realising synergies (5 percent profit growth), organically (10 percent to 15 percent revenue growth) and internationally (30 percent of revenue)”.

36One Asset Management analyst Jean Pierre Verster said yesterday: “It is a strong set of results on the face of it. Earnings are higher and the group raised its dividend. Pharma-Med’s acquisition of Farmalider was significant.”

Focus on synergies

Ascendis also acquired The Scientific Group for R284m in February last year.

He said Ascendis’s focus on synergies was important.

“It’s not unusual for pharmaceutical firms to seek acquisitions,” he said.

Health-care firm Aspen had also seen the benefit from acquisitions, but it was how well those companies were integrated, Verster said.

Verster said the weak local economy would probably hurt Ascendis’s consumer brands, such as Nimue Skin Technology, as consumers cut down on discretionary spend.

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