Ascendis Health will shelve its acquisition strategy for a year as the group wants to reduce debt and prioritise organic growth, said founding CEO Karsten Wellner, who stepped down from the role on Thursday.
Investors have been concerned about Ascendis’s tepid organic growth and cash generation rates and its high debt after an offshore acquisition spree.
The company’s stock has roughly halved since May 2017, although the change in focus, a strong interim performance and the appointment of a “credible” replacement CEO had helped the shares to rebound on Thursday, analysts said.
The share closed 15.5% up at R13.69 as Ascendis said revenue from continuing operations rose 27% to R4bn in the six months to December and normalised headline earnings grew 20% to R353m. Wellner said the company had made a concerted effort to ensure its results were transparent, partly to show that organic growth was now looking healthy and partly to allay concerns that its acquisition model resembled that of scandal-hit Steinhoff.
Ascendis was rumoured to be the target of a Viceroy Research report in 2018, although it was Capitec that was ultimately named.
“We consolidate 100% of our businesses. We don’t have joint ventures or SPVs [special purpose vehicles] in the background,” said Wellner, who will remain on the board until the end of June to work with new CEO Thomas Thomsen.
Meanwhile, Wellner said some Ascendis brands – and possibly companies – could be trimmed from the portfolio if they no longer fit the group.
The company would also start manufacturing its consumer health brand Solal in Australia, having penned a deal with a large pharmacy chain in the country. Ascendis would use a contract manufacturer and would reach full production there in July, Wellner said.
Rayhaan Joosub, deputy CEO of Sentio Capital Management, said the market was encouraged by the shift in strategy to prioritise organic growth, and by the fact that Thomsen was “very credible given his experience at large multinationals like Reckitt Benckiser, Johnson & Johnson and Novartis”. The stock was undervalued, Joosub said.
Ascendis planned to reduce its debt to earnings ratio from 3.5 to 3.1 over 18 months, the outgoing Wellner said.
hedleyn@businesslive.co.za
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