Ascendis goes on cost saving exercise
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DURBAN - Ascendis Health share price surged more than 6percent in early trade yesterday on the JSE after newly appointed chief executive Thomas Thomsen said that the listed health-care group would exit some of its units as part of its strategy to reorganise the company.
Thomsen said the group would offload its Ascendis Sports Nutrition and Ascendis Direct as well as its 23000m² production plant in Isando.
He said the sell-off was aimed at creating a sustainable market position for Ascendis, accelerate organic growth, improve cash generation and enhance profitability. Thomsen said the group would, however, retain its manufacturing facility in Wynberg.
He said management expected to generate cost savings and manufacturing synergies.
“Following the review of our sports nutrition business, we have decided to focus solely on our biggest brand, Scitec, and will be divesting Ascendis Sports Nutrition in South Africa. Ascendis Sports Nutrition has a fragmented product portfolio in South Africa across the Evox, SSN, Supashape, Muscle Junkie and Nutrimax brands,” he said.
The outcome of the strategic review and the new strategic focus of Ascendis will be announced in mid-September, along with the release of the group’s 2018 annual results.
The share price responded positively to the news as it climbed to R11.20 a share yesterday morning, up from Friday’s closing price of R10.55 a share. It later closed 3.7percent up at R10.94.
Thomsen said sale processes were already under way to dispose of the three assets and the proceeds would be reinvested to improve organic revenue growth and their financial metrics.
Ascendis acquired Hungary-based Scitec in August 2016 for 170million (R2.65billion). Scitec is one of the leading sports nutrition brands in Europe and exports products to over 90 countries worldwide.
It also acquired Cyprus-based pharmaceutical manufacturer Remedica for 260m, also in 2016, in a move to propel the company to become a leading global player in the health and care sector.
Thomsen said Ascendis Direct, the group’s direct selling and network marketing business operating in southern Africa and Nigeria would be offloaded.
“The business has limited integration with Ascendis and operates its own management structure, head office and supply chain, while the model is not applied anywhere else in the group,” he said.
“In this strategic review process we have had to make difficult decisions, but realise they are imperative to strengthen our market position and grow the company profitably. We are acutely aware of the impact of these decisions on our people and the affected employees will have the option to be transferred to the new owners to ensure job retention.”
Thomsen was appointed chief executive in March, following the resignation of Karsten Wellner at the end of February.
He said clarifying the strategy would add significant value and divesting smaller non-core assets would simplify the operations and focus on the right areas.
“Core capabilities need to be strengthened to deliver organic growth and we have several pockets of competitive advantage that we need to capitalise on. In addition, cash conversion is essential to fund reinvestment and service debt while enhancing systems will improve efficiency and business intelligence,” he said.