Ascendis stock hit by R4.2bn impairment
An extensive valuation process was completed, which had resulted in a total impairment across goodwill, intangible assets and property, plant and equipment.
The share price declined to R4 a share after the release of the trading update. It recouped some of the losses in the afternoon before closing at R4.44 on the JSE yesterday. Difficult trading conditions in the South African consumer market and the European sports nutrition business had a negative impact on its expected results.
“Lower sales in South Africa caused by liquidity constraints and related supply challenges as well as the depressed consumer environment resulted in earnings declining in all businesses except Animal Health.
"In Europe, Sun Wave Pharma performed well, but both Scitec and Farmalider reported lower earnings,” the group said. Ascendis Health acquired Europe’s leading sports nutrition company, Scitec for 170million (R2.8billion) in 2016.
The group expects to report a headline loss from continuing operations of between R475m and R495m compared to headline earnings from continuing operations of the restated figure of R100m reported last year.
Its normalised headline earnings per share from operations is expected to show a loss of between 98cents a share and 102.1c compared to normalised headline earnings of 21.7c.
The group said the earnings from continuing operations was adjusted for once-off costs of approximately R120m in the year under review compared to R37m reported last year.
“These once-off costs in the current year include the costs relating to the disposal of the Bioscience business unit and the proposed disposal of Remedica, totalling R26m, restructuring of the group debt, including the costs of the proposed corporate bond issue that was not launched for R81m and other operational restructuring and retrenchment costs R13m,” the group said.
Ascendis Health also acquired Remedica in 2016 for 260m, including a deferred payment of 90m after three years. However, just after three years since making the acquisition, the group was planning to sell the business. The group said negotiations with the preferred bidder on the disposal of its Remedica business in Cyprus were at an advanced stage.
Ascendis Health will release its results on October 30.