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Debt, restructuring costs weigh on Ascendis

Ascendis health production line. When the recapitalisation is complete, the lenders will also provide a new two-year drawdown term loan facility to the group in the rand equivalent amount of €20m. Photo Supplied.

Ascendis health production line. When the recapitalisation is complete, the lenders will also provide a new two-year drawdown term loan facility to the group in the rand equivalent amount of €20m. Photo Supplied.

Published Oct 1, 2021

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DEBT-riddled Ascendis Health, whose shareholders are scheduled to vote on the group’s proposed recapitalisation programme on Monday, yesterday posted a R1.6 billion after tax loss from continuing operations during the year ended June 2021.

The group said rising debt levels, restructuring costs and higher finance charges contributed to the group reporting a loss after tax from continuing operations of R1.6bn. Normalised earnings before interest, taxes, depreciation and amortization (Ebitda), from continuing operations, which excludes the assets earmarked for sale, increased by 120 percent to R14 million from -R70m a year earlier. Normalised Ebitda from total operations rose 18 percent to R1.45bn.

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Through the recapitalisation Ascendis Health, which focuses on supplying pharmaceutical and animal health products aims to settle outstanding debt of approximately €444 million (R7.7bn) owed to senior lenders. The transaction requires the approval of 75 percent of shareholders who will attend the general meeting on Monday.

The group warned if the transaction did not receive the required support, the senior lenders will be able to enforce their security rights by taking control of the group’s European assets and placing the South African assets in business rescue.

Chief executive Mark Sardi said through the recapitalisation the group was transitioning from a global business with eight segments to a local group with three businesses, namely Medical Devices excluding Respiratory Care Africa (RCA), which was being sold, Pharma and Consumer Health.

“Management plans to unlock shareholder value in the ‘new’ Ascendis Health in the shortest period possible,” he said.

When the recapitalisation is complete, the lenders will also provide a new two-year drawdown term loan facility to the group in the rand equivalent amount of €20m.

Under that recapitalisation programme the lenders required the group to sell all the assets in the group except for Farmalider, Pharma South Africa and Consumer South Africa.

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Farmalinder is a Spanish pharmaceutical company that develops, licenses and supplies mainly generic and over-the-counter products to a range of multinational companies.

Ascendis said the current recapitalisation proposal offered improved value prospects for shareholders due to the shared upside on the disposal of Farmalider, together with exclusive access to Farmalider’s value enhancing product portfolio.

“The licensing agreement concluded as part of the disposal process gives Pharma access to all Farmalider products, 40 of which have been identified for commercialisation,” said Ascendis.

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The group said the Farmalider licensing agreement granted the Pharma division indefinite and exclusive access and rights to market Farmalider’s portfolio of products for 14 Southern African Development Community countries including South Africa and 11 other African countries.

In the year to June 2021, Ascendis Health’s three businesses recorded a 1 percent increase in revenue to R2.2 billion. The group said medical devices, the largest revenue contributor, increased turnover by 13 percent due mainly to the strong performance from The Scientific Group which supplies PCR diagnostic kits used for Covid-19 testing and diagnostic equipment to public and private hospitals.

Medical Devices was negatively impacted by the decline in elective medical procedures and the reduction in trauma cases during the pandemic.

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Revenue in Pharma was 17 percent lower owing largely to the absence of the normal winter cold and flu season in 2020 and reduced consumer spending during lockdown.

Consumer Health grew revenue by 5 percent with strong demand for immunity building vitamins, minerals and supplements, including Solal, Vitaforce and Bettaway during the pandemic.

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