DURBAN - JSE-listed Ascendis Health plans to sell its subsidiary, Scitec, to cut its ballooning debt of R5billion and restore liquidity to its balance sheet.
The group yesterday announced the sale of Europe’s leading sports nutrition business for 5million (R101.4m).
The sale comes after the health and wellness company embarked on an international growth strategy by acquiring businesses in Europe in 2015. However, the acquisitions left the company with a huge debt as reported in the six months to end December 2019.
The debt ballooned after Ascendis Health acquired Scitec in Hungary for 170m, as well as Cyprus-based Remedica for 260m, both in 2016. To contain the debt that is threatening to spiral out of control, the group has resorted to sell its non-core assets and exit non-performing operations.
Ascendis Health said it had concluded a sale and purchase agreement between its subsidiary, Ascendis Health International Holdings, and Atlas Invest, a Dutch limited liability company, for the disposal of its Scitec business unit housed in its consumer health segment.
“The board has taken a view to investigate and progress the disposal of non-core and under-performing assets in order to reduce the Ascendis Health’s debt levels. In line with this strategy, the proposed transaction represents a good opportunity for the company to reduce its debt levels and enhance its balance sheet and liquidity position,” the group said.
The group said Scitec’s financial performance had deteriorated in the past few years, driven by increased competition, profit erosion and volume losses caused by loss of key partners.
“As a result of the business’ weak performance, Ascendis Health has impaired all of Scitec’s goodwill in 2019,” it said.
Scitec contributed a normalised earnings before interest, tax, depreciation and amortisation (Ebitda) of R20.02m in the six months to end December to the group’s overall normalised Ebitda of R611.44m. The sale was subject to regulatory conditions.
Last year Ascendis Health was also in negotiations for the better part of 2019 to sell its subsidiary Remedica, but the talks were terminated with the preferred bidder citing the failure to agree on key terms for the transaction.
The group has seen its share price plummeting by more than 95 percent in the past four years.
The share price has fallen from the highs of R26.76 a share in September 2016 to around R1.24 yesterday. It closed at R1.30 on the JSE yesterday.