Ascendis warns of lower earnings as asset sales progress


Ascendis warns of lower earnings as asset sales progress

Published Date: 2019-03-11 | Source: Stephen Gunnion | Author: Stephen Gunnion

Ascendis warns of lower earnings as asset sales progress

The healthcare group says talks over its Remedica business continue while it's making progress with the disposal of non-core businesses.

Ascendis Health says it's still in talks regarding the possible sale of Remedica after it received an unsolicited offer for the Cyprus-based business in January.

In a trading statement and update, the healthcare group said the sales of a number of non-core businesses were also progressing as it changes its strategy. It's already sold its manufacturing faculty in Isando and is making headway with the disposal of its Biosciences operations. It said it would also consider selling its Avima/Klub 5 biosciences businesses in the short to medium term.

The sale of Remedica was not on the group's original disposal list. It bought the business, together with European-based sports nutrition company Scitec, for a combined R7.3 billion in 2016. Remedica supplies over 300 generic products to about 100 countries. The pharmaceutical manufacturer grew revenue last year by 29% to €87 million, contributing more than a third of Ascendis's international revenue and more than half of its international earnings before interest, tax, depreciation and amortisation (EBITDA) at €28 million.

Guiding investors on what to expect from its half-year results, Ascendis said revenue from its international operations grew in the mid-single digits in the six months to end-December, while the poor consumer environment in SA resulted in minimal growth at home. Although its growth profit margin improved, increased spending on marketing, distribution and supply chain left its EBITDA margin flat. Higher depreciation costs and a bigger interest bill resulted in a fall in normalised profit.

The group expects to report a 4% to 9% decline in normalised headline earnings from continuing operations. These exclude capital profits of R19.6 million from the Isando factory. Earnings per share will also be further diluted by a 4.3% increase in the number of shares in issue during the reporting period, it said. Headline earnings per share will be down by as much as 25%, while on a normalised basis they'll be up to 7% lower.

Its shares closed 1.2% higher at R5.01 on Friday.

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