Pharmaceuticals firm Ascendis Health reported a 5% decrease in revenue for the first six months, reflecting subdued consumer spending, product pricing pressure and competitive forces within the medical device market.
The group, whose products include vitamins, medical devices and a compounding pharmacy, reported headline earnings per share of 10.2c from continuing operations for the six months through December, after a loss per share of 29.4c a year ago.
Revenue decreased by 5% to R737.5m and operating profit rose to R47.7m after a loss of R122.8m a year ago as efforts to aggressively reduce and restructure costs yielded positive results.|
The group said it was essential to contextualise this improvement which includes a R43.1m provision reversal related to VAT which was previously raised from a claim by the SA Revenue Service from Surgical Innovations that was resolved during the interim period. The operating profit also includes an accounting gain of R27.1m following the reacquisition of control of Surgical Innovations.
Excluding these nonrecurring items together with impairments and transaction costs, the adjusted operating profit amounted to R8.9m after a loss of R47m in the comparative period.
Selling and distribution costs decreased by 18.7%, administrative costs declined 21.4% compared with the prior period, mainly driven by a 23.1% reduction in payroll expenses, and other operating expenses decreased by 46.2%.
The group achieved a slight improvement in its gross profit margin, rising to 40.9% in the interim period from 39.4% in the previous full financial year. However, structural challenges persist within the medical devices businesses, driven by currency depreciation and cost inflation pressures from key foreign suppliers, it said.
These challenges have exerted downward pressure on gross profit margins, necessitating ongoing efforts to mitigate adverse impacts.
Management remains focused on concluding restructuring and stabilisation efforts in the short term, it said.
Investments in net working capital, capital assets, and potentially funding for acquisitions will be required to enable growth and the board may consider looking to shareholders to raise further equity over the short to medium term if appropriate, it said.
The company is in the process of delisting from the JSE and the board remains of the view that this is a critical step in the process of unlocking value for shareholders. It has offered shareholders 80c per share.
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