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Cape Town – Listed health and care brands group Ascendis Health reported operating profit growth of 84% to R161m for the six months to December 2014, driven by strong revenue growth of 101% to R1.3bn.
Headline earnings increased by 65% to R89m with headline earnings per share up 21.6% to 35.5 cents, impacted by the 35% increase in the weighted average number of shares in issue during the period.
The group declared an interim dividend of 8c per share. According to the company this reflects the strong cash generation of the business and the confidence in the group’s prospects.
CEO Dr Karsten Wellner said at a presentation in Cape Town on Wednesday that the strong revenue growth was attributable to comparable organic growth of 14.9% and R617m from strategic acquisitions concluded over the past year.
The Consumer Brands division increased revenue by 55% to R462m and accounted for 35% of group revenue, Pharma-Med grew 654% to R531m (40% of total revenue) and Phyto-Vet increased revenue 16% to R340 million, contributing 25% of group revenue.
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Potential for synergies
At the presentation Wellner said the company sees lots of potential for synergies. An example could be where various warehouses are consolidated into one.
“We are targeting to achieve 10% to 15% organic revenue growth from the group’s strong and resilient brands. This is supported by the acquisition of complementary businesses, brands and dossiers targeting a further 20% to 25% revenue growth.”
Wellner also mentioned that the weak rand has impacted the company's Pharma-Med businesses as most of their costs come from imports, especially related to the yen and the dollar.
In October 2014 Ascendis announced the acquisition of the diagnostics business of The Scientific Group for R284m which was finalised at the end of February 2015.
“This acquisition, together with our Surgical Innovations and Respiratory Care Africa businesses, will create a R1bn Ascendis Medical platform and position us as the country’s second largest medical device company,” he said.
“The diagnostics product range of The Scientific Group will further entrench a turnkey offering of medical equipment and devices to private and public hospitals, clinics and medical professionals.”
Ascendis undertook a successful private capital raising of R455m during the period which was partially used to fund the acquisition of The Scientific Group.
The acquisitions of Respiratory Care Africa and Arctic Healthcare both became effective during the reporting period. Respiratory Care Africa distributes specialist medical equipment for intensive care, trauma units and operating theatres in state and private hospitals. This range of equipment is complementary to Surgical Innovations.
Arctic offers a range of vitamin and mineral brand dossiers, including Chela-Fer, Menacal7, Chela-Preg and Supa Chewz. The integration of the Arctic business into Ascendis Consumer Brands has now been completed.
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Growing foreign customer base
Wellner said Ascendis is rapidly growing its foreign customer base and the international expansion strategy includes exports, establishing offshore operations and acquiring international businesses.
Ascendis brands are currently sold in 52 countries globally, including 22 other African countries. Revenue generated from foreign markets in the past six months increased by 10% to R114m, accounting for 9% of the group’s total sales. The group is targeting to achieve 30% of revenue from international markets by June 2017.
On the outlook for the group, Wellner said the priority is to deliver on its organic and acquisitive growth strategies.
"We have huge opportunities for exports and we want to focus on organic growth with our customers in mind," said Wellner.
Ascendis also wants to focus on offshore acquisitions to grow its international operations. The other focus will be on gross margin improvements and Wellnerr said the company wants to look at more cost effective production, for instance, by looking at synergy projects.
New product development and innovation is another main focus for the company going forward.
“We are currently considering the pursuit of international acquisitions for the Pharma-Med platform. We are also evaluating potential bolt-on acquisitions for the Consumer Brands and Phyto-Vet divisions,” said Wellner.
