Ascendis swings into a loss amid R4.2bn in writedowns
The health group aims to sell off more businesses after suffering impairments totaling more than twice its market capitalisation
Health and wellness firm Ascendis Health, whose share price has fallen 85% since the start of 2017, says it is urgently pursuing the sale of its crown jewel, Cyprus-based pharmaceutical maker Remedica, after suffering writedowns that are more than twice its market capitalisation.
The company swung into a normalised loss after tax of R459m in its year to end-June, from a profit of R93m previously, with the debt-laden company saying it may need to borrow further to retain its going-concern status.
The company said that at the end of June its current liabilities of R8.6bn exceeded its current assets of R8.2bn, an insufficient solvency ratio.
As a result of the economic headwinds in SA and Europe, an extensive valuation process was completed that resulted in a total impairment across goodwill, intangible assets and property, plant and equipment of about R4.2bn, the company said.
Ascendis, which has a market capitalisation of R1.8bn, said it had seen lower sales in SA due to liquidity constraints and supplier challenges.
The company is selling off non-core assets to pay down its debt, saying after markets closed on Wednesday that CEO Mark Sardi, who was appointed on October 14, was focusing on disposing of Cyprus-based Remedica, which it acquired for R4.4bn in 2016.
“Getting the Remedica deal done within a tight timeline is very important,” said Sardi on Thursday. “Time is the enemy of a deal and it is important to get it done as quickly and efficiently as we can.”
The proceeds of the sale would be used to address debt, Sardi said, amid a short-term focus on fixing the balance, sheet. The company is also targeting improved revenue, as well as improved relationships with suppliers, vendors and staff, he said.
“Good business, bad balance sheet,” said Sardi, adding that he will update the market soon on the company’s new strategy, although he refused to be drawn on the selling price.
The company’s debt pile is “catastrophic”, and it is clear the company needs to finalise the sale of Remedica soon, said Small Talk Daily’s Anthony Clark. “This was forced upon them, they have no choice. With a R6bn debt pile, much of it offshore, with [the rand], in a weakening domestic market, they have no choice but to sell their crown jewels to stop the entire ship from sinking.”
Ascendis CFO Kieron Futter said on Thursday that 65% of the company’s debt is in euro, although the company has reached an interim stability agreement with lenders. This led to debt covenant provisions being waived.
Ascendis’s share price was down 3.7% to R3.64 as of 11am on Thursday, having fallen 12.5% so far in 2019.