Ascendis Health, which almost collapsed under debts of more than R7bn in June 2021, is on course for a full recovery, acting CEO Carl Neethling said on Wednesday
A successful rehabilitation will result in the owner of the Solal, Junglevite and Bettaway vitamin brands and a medical devices business being able to focus on improving the operational performance of its six divisions, five of which are profitable but have faced years of underinvestment.
Speaking after the publication of its earnings for the year to end-June, Neethling said the company is poised to have R98m in cash after raising R101m in a rights issue in August and the successful sale of its pharmaceutical business to drug company Austell. Shareholders will vote on the proposed deal in October.
The company, which listed on the JSE in 2013, undertook a series of acquisitions in Europe in 2015 and 2016 that ended up stretching its balance sheet to the limit.
In September 2021, it concluded a debt for asset swap with London-based lenders who walked away with some of Ascendis’s profitable offshore operations, including the cash-generative Cyprus-based Remedica business, in exchange for settling the bulk of its €444m (almost R7.8bn) debt.
It has had multiple board changes in the past year with London-based lenders calling in outstanding debt days before Christmas after a board change forcing it to find new funding within weeks.
By December, Ascendis was valued at R357m on the JSE and had a debt pile of R582m.
Since June 2021, it has sold its Ascendis Skin and Body business that included the Nimue brand and its 49% stake in Spanish drug company Farmalider, as well as the Respiratory Care Africa and Animal Health businesses. These sales generated a profit of more than R1bn.
It was then set to sell its medical device to Apex Partners this year for R325m, which concerned minority shareholders, including Neethling, who felt the business was worth much more.
Three new board members, including Neethling, joined the board in May, forcing out two of the previous directors and enabling them to stop the planned sale of the device business.
Neethling told shareholders on Wednesday that the business had significantly more value than reflected in the offer price.
Ascendis has also renegotiated a better price for the sale of its pharmaceutical business to Austell for R437m. It was previously offered R375m by a consortium of PharmaQ and Imperial for the pharma business.
If the sale of the pharma business, whose brands include Sinucon, gets the go-ahead from shareholders in October, Ascendis will be left with the medical device business and its consumer business, which includes the Solal and Vitaforce and Menacal vitamins.
Neethling said: “I think that the message that people don’t necessarily get is that the business is now stable.
“The hard work on the balance sheet restructure has been done. Now we need to fix the companies, so that they can operate at the level that we believe they can.”
But he said the divisions had been neglected as management’s time had been spent on restructuring.
Neethling admitted in an investor presentation that “the challenges facing our businesses are worse than anticipated and significant work will need to be undertaken to right the ship”.
“The company reported an after-tax loss from continuing operations of R758m for the year to end-June 2022, an improvement from the loss of 1.6bn in the previous period.
Neethling said a reduction in head office, staff and consultancy fees and interest costs will allow Ascendis to start generating cash that can be reinvested into the businesses, and rewarding “patient shareholders”.
“The conclusion of the corporate activity and debt restructuring means that the group will no longer be haemorrhaging money on advisers and legal costs.”
Its annual head office costs reached R125m in June 2021, a quarter of its market cap, due to a high employee complement, advisory fees and a large office building.
The costs have dropped to R96m over the past year, with further job cuts due to take place over the next few months.
Neethling told Business Day: “The head office structure and the cost structure was designed for a multibillion-dollar business”.
But he said the business was now significantly smaller and would stay that way for a while, requiring far fewer staff and consultants. Its CFO is leaving as part of the restructuring.
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