Wrap Text
Annual Financial Results 2017
Ascendis Health Limited
(Incorporated in the Republic of South Africa)
Registration number 2008/005856/06
JSE share code ASC
ISIN ZAE000185005
("Ascendis" or "the group")
ANNUAL FINANCIAL RESULTS 2017
KEY HIGHLIGHTS
Global healthcare business with 60% earnings outside SA
Revenue up 64% to R6.4 billion
Normalised EBITDA up 78% to R1.1 billion
EBITDA margin up 130bps to 16.9%
Normalised HEPS up 29% to 156.4 cents per share
Cash from operations R787 million
Three international acquisitions completed during the year
COMMENTARY
Group profile and strategy
Ascendis Health is a South African-based global health and care group which owns a portfolio of market-leading brands for
humans, plants and animals.
The brands are housed in the Pharma-Med, Consumer Brands and Phyto-Vet divisions, with revenue diversified across
products, channels, geographic regions and currencies.
- Pharma-Med: prescription and over-the-counter (OTC) drugs; medical devices
- Consumer Brands: nutraceuticals; complementary medicines; derma-cosmeceuticals and sports nutrition
- Phyto-Vet: plant and animal health and care.
The group's strategy is to complement organic growth by acquiring bolt-on companies in South Africa, acquiring international
platform and complementary businesses, and extracting synergies from these acquisitions.
The international acquisitions of pharmaceutical manufacturer Remedica in Cyprus and leading European sports nutrition
business Scitec early in the financial year have transformed Ascendis Health into a global healthcare business. Earnings
generated outside South Africa in the reporting period have grown to 60% of total earnings.
Financial performance
Note: The group is reporting normalised results which have been adjusted for once-off acquisition costs in the current and
prior financial years.
Group revenue from continuing operations increased by 64% to R6.4 billion (2016: R3.9 billion), with acquisitive growth
of R2.3 billion from Remedica and Scitec (consolidated for 11 months) and Sun Wave Pharma and Cipla Animal Health
(consolidated for one month).
Revenue has grown at a compound rate of 81% and EBITDA by 102% per annum since the listing of Ascendis Health in 2013.
Foreign revenue increased by 497% to R2.8 billion and comprises 43% (2016: 12%) of the group's total sales. Products are
currently exported to over 120 countries globally.
The group's gross margin strengthened by 380 basis points to 43.7% owing to a higher contribution from prescription drugs
following the acquisition of Remedica in August 2016 and strong performances from the high-end wellness brand Solal and
the medical devices business in South Africa.
Earnings from continuing operations before interest, tax, depreciation and amortisation (EBITDA), on a normalised basis,
increased by 78% to R1 085 million, with the EBITDA margin improving by 130 basis points to 16.9% (2016: 15.6%).
Normalised operating profit rose by 60% to R857 million. Headline earnings on a normalised basis increased by 91% to
R645 million, with normalised HEPS 29% higher at 156.4 cents. The weighted average number of shares in issue increased
by 48% during the reporting period, mainly in relation to the rights issue and vendor placement in August 2016 for the
acquisitions of Remedica and Scitec.
Cash generated from operating activities increased to R787 million with a cash conversion rate of 73%.
The directors have elected not to declare a final dividend and to retain cash to fund complementary acquisitions. An interim
dividend of 11 cents per share was declared in March 2017.
Segmental performance
Pharma -Med Consumer Brands Phyto-Vet
Revenue from continuing operations R3 558m R1 954m R923m
Revenue growth 55% 113% 32%
Revenue contribution 55% 30% 14%
EBITDA R731m R290m R141m
EBITDA growth 98% 42% 46%
EBITDA margin 21% 15% 15%
EBITDA contribution before head office costs 63% 25% 12%
Pharma-Med, which includes the acquisition of Remedica, experienced better than expected turnover and EBITDA growth.
The EBITDA margin of the division improved despite the impact of foreign exchange losses from its hedged positions resulting
from the Rand strengthening approximately 11% against its main trading partners. Farmalider and Remedica's focus on higher
margin sales resulted in a strong improvement in the EBITDA margin of the Pharma-Med division. The division continues to
benefit from synergy projects underway in Europe and South Africa.
Consumer Brands benefited from the acquisitions of Scitec and Sun Wave Pharma but EBITDA margins were negatively
impacted by external factors. These include increasing global whey protein prices which reached a three year high and
challenges in Nigeria affecting the direct selling business. Some of the market-leading wellness brands including Solal showed
double digit growth in South Africa.
Phyto-Vet experienced growth in terms of both revenue and EBITDA aided by the biosciences business and the expansion
of Afrikelp into international markets. EBITDA margins improved as a result of stricter cost control and focus on higher
margin sales.
Acquisitions
International
Remedica has been successfully integrated, with ongoing synergy projects within the Pharma-Med division covering
cross-selling, procurement, research and development, new product development and production. Remedica generated
revenue of R982 million in the 11 months since acquisition, with profit before interest after tax (PBIAT) of R243 million being
ahead of management's expectations.
Scitec reported sales of R1 247 million with PBIAT of R121 million. Margins came under pressure from higher global whey
protein prices which the business was unable to pass on to customers. Decisive measures have been taken to
improve profitability, including appointing a new head of the business, initiating cost savings, focusing on new sales channels,
expanding into new markets and developing a strong new product development pipeline.
Sun Wave Pharma, a leading OTC and nutraceuticals business in Romania, was acquired with effect from 1 June 2017.
The acquisition provides entry into the high-growth Romanian market, allows for duplication of the successful business model
to other selected markets in the central and eastern European region, with sourcing, production, research and development,
and cross-selling opportunities within Consumer Brands.
South Africa
The acquisition of the southern African animal health businesses from Cipla India creates access to the attractive veterinary
pharma market, with high margin products in strong growth segments. This is supported by the opportunity to increase
export sales and create synergies with Phyto-Vet's existing African network. The acquisition was effective from 1 June 2017.
Outlook for 2018 financial year
The group will continue to pursue its proven strategy of organic, acquisitive, synergistic and international growth to create
shareholder value.
Projects have been initiated to enhance organic growth and EBITDA margins. These include consolidating the medical
devices division in South Africa focusing on cost efficiencies across the group, in particular in the sports nutrition businesses,
rationalising manufacturing facilities in South Africa and investing in new product development and launches. Management
is targeting to improve the EBITDA margin from 17% to 18% over the medium term. Plans are being implemented to maximise
free cash generation and reduce gearing levels.
The group's acquisition strategy in 2018 will be focused on buying complementary bolt-on businesses, mainly in the higher
growth economies in central and eastern Europe, and South Africa, while targeting fast growing health and care market
segments.
Dr Karsten Wellner Kieron Futter
Chief Executive Officer Chief Financial Officer
Johannesburg
12 September 2017
AUDITED SUMMARISED GROUP STATEMENT OF
FINANCIAL POSITION
at 30 June 2017
2016
2017 Restated
R'000 R'000
Property, plant and equipment 991 668 348 223
Intangible assets and goodwill 9 114 959 3 041 497
Investments accounted for using the equity method - 386
Derivative financial assets 2 760 -
Other financial assets 29 168 73 287
Deferred income tax assets 40 109 10 651
Non-current assets 10 178 664 3 474 044
Inventories 1 597 726 939 355
Trade and other receivables 1 881 591 1 054 396
Other financial assets 32 761 22 281
Current tax receivable 39 824 30 561
Derivative financial assets 53 012 6 727
Cash and cash equivalents 634 719 198 905
Assets held for sale as part of a discontinued operation 68 320 -
Current assets 4 307 953 2 252 225
Total assets 14 486 617 5 726 269
Stated capital 5 447 899 2 138 684
Other reserves (782 088) (259 892)
Retained earnings 475 645 396 949
Equity attributable to equity holders of parent 5 141 456 2 275 741
Non-controlling interest 154 886 179 302
Total equity 5 296 342 2 455 043
Borrowings and other financial liabilities 4 002 769 1 048 502
Deferred income tax liabilities 467 819 236 858
Deferred vendor liabilities 1 437 394 86 212
Put-option on equity instrument 113 055 120 972
Derivative financial liabilities 6 444 45 801
Finance lease liabilities 20 486 3 932
Long term employee benefits 15 188 -
Investments accounted for using the equity method 1 066 -
Non-current liabilities 6 064 221 1 542 277
Trade and other payables 1 250 209 849 343
Derivative financial liabilities 38 156 -
Borrowings and other financial liabilities 1 027 037 376 631
Current tax payable 21 239 38 031
Deferred vendor liabilities 645 374 222 706
Provisions 26 595 17 493
Finance lease liabilities 9 900 3 444
Bank overdraft 107 544 221 301
Current liabilities 3 126 054 1 728 949
Total liabilities 9 190 275 3 271 226
Total equity and liabilities 14 486 617 5 726 269
AUDITED SUMMARISED STATEMENT OF PROFIT AND
LOSS AND OTHER COMPREHENSIVE INCOME
for the year ended 30 June 2017
2016
2017 Restated
Continuing operations R'000 R'000
Revenue 6 435 027 3 914 427
Cost of sales (3 622 025) (2 351 345)
Gross profit 2 813 002 1 563 082
Other income 41 579 84 791
Selling and distribution expenses (615 324) (325 948)
Administrative expenses (1 087 417) (704 362)
Other operating expenses (403 517) (234 308)
Operating profit 748 323 383 255
Finance income 40 734 32 968
Finance expense (346 728) (162 967)
(Loss)/gain from equity accounted investments (1 452) 5 625
Profit before taxation 440 877 258 881
Income tax expense (62 581) (68 665)
Profit from continuing operations 378 296 190 216
Loss from discontinued operation (70 976) (135)
Profit for the period 307 320 190 081
Other comprehensive income
Items that may be reclassified to profit and loss
Foreign currency translation reserve (255 101) (54 125)
Effects of cash flow hedges 27 803 (37 009)
Items that will not be reclassified to profit and loss
Revaluation of property, plant and equipment 1 149 8 577
Income tax relating to items that may be reclassified - (5 337)
Other comprehensive income from discontinued operations - 10 483
Other comprehensive income for the year net of tax (226 149) (77 411)
Total comprehensive income for the year 81 171 112 670
Profit attributable to:
Owners of the parent 283 131 158 733
Non-controlling interest 24 189 31 348
307 320 190 081
Total comprehensive income attributable to:
Owners of the parent 110 907 69 403
Non-controlling interest (29 736) 43 267
81 171 112 670
Earnings per share from continuing operations
Basic and diluted earnings per share (cents) 85.9 57.1
Total earnings per share
Basic and diluted earnings per share (cents) 68.7 57.1
Earnings before interest, tax, depreciation and amortisation
(EBITDA) 1 085 564 610 846
AUDITED SUMMARISED GROUP STATEMENT OF CHANGES IN EQUITY
at 30 June 2017
Total
Put option attributable
Foreign non-controlling to equity Non-
Stated translation Revaluation Hedging interest Total other Retained holders of the controlling
capital reserve reserve reserve reserve reserves* income Group interest Total equity
Balance as at 1 July 2015 1 576 730 188 976 (949) - (51 723) 299 417 1 824 639 - 1 824 639
Profit for the period - - - - - - 158 733 158 733 31 348 190 081
Other comprehensive income - (54 125) 13 723 (37 009) - - - (77 411) 11 919 (65 492)
Total comprehensive income for
the year - (54 125) 13 723 (37 009) - - 158 733 81 322 43 267 124 589
Issue of ordinary shares 557 890 - - - - - - 557 890 - 557 890
Raising fees capitalised (658) - - - - - - (658) - (658)
Purchase of treasury shares 4 722 - - - - - - 4 722 - 4 722
Dividends - - - - - - (57 066) (57 066) - (57 066)
Acquisition of a subsidiary - - - - - - - - 101 145 101 145
Put-option on non-controlling
interest - - - - (99 817) - - (99 817) - (99 817)
Foreign currency translation reserve - (37 845) - - (17 927) 17 167 - (38 605) 38 605 -
Statutory reserve: Farmalider
allocation to reserve - - - - - 7 850 (4 135) 3 715 (3 715) -
Total contributions by and
distributions to owners of the
Group recognised directly in equity 561 954 (37 845) - - (117 744) 25 017 (61 201) 370 181 136 035 506 216
Balance as at 30 June 2016 2 138 684 (91 782) 14 699 (37 958) (117 744) (26 706) 396 949 2 276 142 179 302 2 455 444
Profit for the period - - - - - - 283 131 283 131 24 189 307 320
Other comprehensive income - (108 068) 1 149 27 803 - - (93 108) (172 224) (53 925) (226 149)
Total comprehensive income for
the year - (108 068) 1 149 27 803 - - 190 023 110 907 (29 736) 81 171
Issue of ordinary shares 3 432 245 - - - - (450 114) - 2 982 131 - 2 982 131
Raising fees capitalised (24 309) - - - - - - (24 309) - (24 309)
Purchase of treasury shares (98 721) - - - - - - (98 721) - (98 721)
Dividends - - - - - - (112 758) (112 758) 13 384 (99 374)
Foreign currency translation reserve - (10 473) - - 5 950 254 - (4 269) 4 269 -
Reclassification of reserves into
retained earnings - - - - - (13 280) 13 280 - - -
Statutory reserve: Farmalider
allocation to reserve - - - - - 24 182 (11 849) 12 333 (12 333) -
Total contributions by and
distributions to owners of the
Group recognised directly in equity 3 309 215 (10 473) - - 5 950 (438 958) (111 327) 2 754 407 5 320 2 759 727
Balance as at 30 June 2017 5 447 899 (210 323) 15 848 (10 155) (111 794) (465 664) 475 645 5 141 456 154 886 5 296 342
*Other reserves include a Share-based payment reserve (R13.3 million) that has been reclassified to retained earnings during the 2017 financial period. Also included in this reserve is a Farmalider
Statutory reserve (R49.4 million). In terms of Spanish legislation a portion of the period's profits should be recognised in a non-distributable reserve.
During the 2017 financial period Ascendis raised equity capital by means of a Rights Offer. Other reserves also include the difference between the R22.00 subscription price and the presiding fair
value on the date of issue.
AUDITED SUMMARISED GROUP STATEMENT OF
CASH FLOWS
2017 2016
R'000 R'000
Cash inflow/(outflow) from operations 787 383 (280 537)
Interest income received 40 734 32 968
Finance costs paid (299 172) (163 477)
Income taxes paid (160 232) (95 167)
Net cash inflow/(outflow) from operating activities 368 713 (506 213)
Cash flows from investing activities
Purchase of property, plant and equipment (117 885) (95 881)
Proceeds on the sale of property, plant and equipment 3 623 36 707
Purchase of other intangibles assets (119 062) (83 003)
Proceeds on the sale of intangible assets 767 333
Payment for acquisition of subsidiaries - net of cash (5 454 161) (440 160)
Repayments on deferred vendor liabilities (246 343) (10 825)
Payments for the settlement of foreign exchange contracts (119 513) -
Repayment of loans advanced to related parties 46 932 41 608
Loans advanced to related parties (9 199) -
Loans advanced to external parties (16 854) (27 552)
Repayment of loans advanced to external parties 14 072 -
Net cash utilised in investing activities (6 017 623) (578 773)
Cash flows from financing activities
Proceed from issue of shares 2 981 281 557 232
Proceed on the sale of treasury shares 37 888 6 049
Payments made to acquire treasury shares (137 678) -
Proceeds from borrowings raised 5 140 675 926 813
Repayment of borrowings (1 663 244) (475 062)
Repayment of loans from related parties (26 290) -
Finance lease payments (1 803) (490)
Dividends paid (112 758) (57 066)
Net cash inflow from financing activities 6 218 071 957 476
Net increase/(decrease) in cash and cash equivalents 569 161 (127 510)
Cash and cash equivalents at beginning of period (22 396) 101 215
Effect of exchange difference on cash balances (19 590) 3 899
Cash and cash equivalents at end of period 527 175 (22 396)
NOTES TO THE AUDITED SUMMARISED
CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
Corporate information
Ascendis Health Limited is a health and care brands company. The Group operates through health care areas: Consumer
Brands, Pharma-Med and Phyto-Vet. Consumer Brands consists of health and personal care products sold to the public,
primarily at the retail store level. The Group offers over-the-counter (OTC) medicines and consumer brands products,
including vitamins and minerals, homeopathic, herbal products, dermaceuticals, functional foods, functional super foods,
sports nutrition, health beverages, weight management and therapeutic cosmetics. Pharma-Med consists of the sale of
prescription and selected OTC pharmaceuticals, and includes medical devices. Phyto-Vet supplies products to the plant and
animal markets. Phyto-Vet manufactures and supplies over 3 500 different products supplied to over 4 500 retail stores.
These summarised consolidated group financial results as at 30 June 2017 comprise of the Company and its subsidiaries
(together referred to as the Group) and the Group's interest in equity accounted investments. The audited annual results can
be obtained from the Ascendis website (https://ascendishealth.com/investor-relations/financial-results).
Going concern
The directors consider that the Group has adequate resources to continue operating for the foreseeable future and that it
is therefore appropriate to adopt the going-concern basis in preparing the Group's financial statements. The directors have
satisfied themselves that the Group is in sound financial position and that it has access to sufficient borrowing facilities to
meet its foreseeable cash requirements.
Basis of preparation
The annual consolidated financial statements are prepared in accordance with the requirements of the JSE Limited Listings
Requirements for annual reports, and the requirements of the Companies Act of 2008 applicable to annual financial
statements. The Listings Requirements require annual reports to be prepared in accordance with the framework concepts
and the measurement and recognition requirements of International Financial Reporting Standards ("IFRS") and the SAICA
Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the
Financial Reporting Standards Council and to also, as a minimum, contain the information required by IAS 34 Interim Financial
Reporting. The accounting policies applied in the preparation of the annual consolidated financial statements are in terms of
International Financial Reporting Standards and are consistent with those accounting policies applied in the preparation of
the previous consolidated annual financial statements.
The summary consolidated financial statements for the year ended 30 June 2017 have been prepared under the supervision
of Chief Financial Officer Kieron Futter CA(SA) and audited by PricewaterhouseCoopersInc. The auditor expressed an
unmodified opinion on the annual financial statements from which these summary consolidated financial statements were
derived. A copy of the auditors report on the summarised consolidated financial statements is available for inspection at the
Company's registered office.
The auditors report does not necessarily report on all information contained in this announcement. Any reference to
pro forma or future financial information included in this announcement has not been review or reported on by the auditors.
Shareholders are advised that in order to obtain a full understanding of the nature of the auditors' engagement they should
obtain a copy of that report together with the accompanying financial information from the Companies registered office.
The annual financial statements have been prepared on the historical cost basis, except for the measurement of certain
financial instruments and land and buildings at fair value. The financial statements are prepared on the going-concern basis
using accrual accounting.
Items included in the annual financial statements of each entity in the Group are measured using the functional currency of
the primary economic environment in which that entity operates. The annual financial statements are presented in Rand. This
represents the presentation and functional currency of Ascendis. The Group owns the following entities which operate in
primary economic environments which are different to the Group:
- Farmalider - Spain
- Akusa - United States of America
- Nimue UK - United Kingdom
- Heritage Resources Limited - Isle of Man
- Remedica - Cyprus
- Scitec - Hungary
- Ascendis Wellness - Romania
- Ascendis Australia - Australia
- Ascendis International - Malta
For each of these entities a functional currency assessment has been performed. Where the entity has a functional currency
different to that of the Groups presentation currency they are translated upon consolidation in terms of the requirements
of IFRS.
Judgement and estimates
In preparing these annual financial results, management made judgements, estimates and assumptions that affect the
application of accounting policies and the reported amounts of assets, liabilities, income and expenses.
This note provides an overview of the areas that involved a higher degree of judgement or complexity, and of items which are
more likely to have the actual results materially different from estimates. Detailed information about each of these estimates
and judgements is included in the notes to the financial statements.
Significant estimates and judgements:
- The useful lives and residual values of property, plant and equipment and intangible assets.
- Impairment testing and allocation of cash-generating units.
- Estimation of fair value in business combinations.
- Estimated goodwill impairment.
- Estimation of fair values of land and buildings.
- Control assessments of investments in other entities acquired.
1. Group Segmental Analysis
Ascendis Health owns a portfolio of brands within three core health care areas, namely Consumer Brands, Pharma-Med
and Phyto-Vet. Within these healthcare areas the Group has five reportable segments.
The Group executive committee (EXCO) considers the three core health care areas, as well as the reportable segments
to make key operating decisions and assess the performance of the business. The EXCO is the Group's chief operating
decision maker.
The reportable segments were identified by considering the nature of the products, the production process, distribution
channels, the type of customer and the regulatory environment in which the business units operate. In addition to the
above, similar economic characteristics such as currency and exchange regulations, trade zones and the tax environment
were also considered to incorporate and assess the different markets in which the Group operate. The reportable
segments included in the Group's divisions are:
- Consumer Brands (human health), incorporating Sports Nutrition, Skin and all of the Ascendis Over The Counter
(OTC) and Complementary and Alternative Medicines Consumer Brands products. This division includes two
reportable segments:
- Consumer Brands Africa segment: Operating predominantly in the South African market.
- Consumer Brands Europe segment: Operating predominantly in the European market.
- Phyto-Vet (animal and plant health), incorporating all of the Ascendis animal and plant health and care products.
- Pharma-Med (human health), incorporating Ascendis' pharmaceutical and medical devices products. This division
includes two reportable segments:
- Pharma-Med Africa segment: Operating predominantly in the South African market.
- Pharma-Med Europe segment: Operating predominantly in the European market.
Restatement
The Group acquired large international operations during the 2017 financial period. The businesses acquired operate
predominantly in the European market, which is a substantially different economic and regulatory environment from
the South African market. This has resulted in a significant change in the Group's internal environment and subsequently
the reportable segments. Individual operating segments previously included in Consumer Brands, are now included in
Consumer Brands Africa and Consumer Brands Europe. The Pharma-Med Europe segment was called International in
the 2016 Annual financial statements.
(a) Statement of comprehensive income measures applied
2016
2017 Restated
Revenue split by segment R'000 R'000
Consumer Brands 2 162 570 921 836
Africa 724 992 747 678
Europe 1 437 578 174 158
Phyto-Vet 922 991 700 895
Pharma-Med 3 558 515 2 295 701
Africa 2 093 176 1 808 204
Europe 1 465 340 487 497
Revenue from discontinued operations (209 049) (4 005)
Total revenue 6 435 027 3 914 427
Revenue generated by geographical location
South Africa 3 675 806 3 451 972
Cyprus 987 762 -
Spain 477 578 462 455
Other Europe 1 284 175 -
Other 9 706 -
Total revenue 6 435 027 3 914 427
There has been no inter-segment revenue during the financial period. All revenue figures represent revenue from
external customers.
The revenue from discontinued operations relates to the Consumer Brands Africa segment.
The Group has an expanding international footprint and currently exports products to 120 countries, mainly in
Africa and Europe.
The revenue presented by geographic location represents the domicile of the entity generating the revenue.
51% of the Group's revenue is generated through the wholesale and retail market (2016: 46%). In this market,
4% (2016: 6%) of the total Group revenue is derived from a single customer and 12% of the Group's revenue is
generated from government institutions (local and international).
The Group evaluates the performance of its reportable segments based on EBITDA (earnings before interest, tax,
depreciation and amortisation). The financial information of the Group's reportable segments is reported to the
EXCO for purposes of making decisions about allocating resources to the segment and assessing its performance.
The percentage disclosed represents the EBITDA/sales margin.
2016
2017 Restated
EBITDA split by segment R'000 R'000
Consumer Brands 290 024 13% 204 397 22%
Africa 115 721 16% 170 886 23%
Europe 174 303 12% 33 511 19%
Phyto-Vet 140 543 15% 96 184 14%
Pharma-Med 730 743 21% 369 599 16%
Africa 328 550 16% 278 963 15%
Europe 402 193 27% 90 636 19%
Head office (75 746) (59 334)
Total EBITDA 1 085 564 610 846
Non-controlling interest proportionate share (39 502) (46 225)
Total EBITDA attributable to the parent 1 046 062 564 621
2016
2017 Restated
Reconciliation of EBITDA to Consolidated Results R'000 R'000
Consolidated operating profit 748 323 383 255
Total impairment, amortisation and depreciation 228 453 74 680
Business combination costs 89 722 152 911
Restructuring costs 19 066 -
Non-controlling interest proportionate share (39 502) (46 225)
Total EBITDA attributable to the parent 1 046 062 564 621
*Restructuring and business integration costs are excluded from EBITDA for performance measurement purposes.
2016
2017 Restated
Net finance cost split by segment R'000 R'000
Consumer Brands Africa
Finance income 1 449 335
Finance expense (11 347) (2 089)
Consumer Brands Europe
Finance income 2 952 863
Finance expense (84 747) (1 144)
Phyto-Vet
Finance income 1 320 979
Finance expense (11 751) (2 073)
Pharma-Med Africa
Finance income 3 890 2 321
Finance expense (2 300) (20 484)
Pharma-Med Europe
Finance income 418 2 307
Finance expense (41 216) (76)
Head-Office
Finance income 30 705 26 163
Finance expense (195 367) (137 101)
Total consolidated net finance cost (305 994) (129 999)
Finance income and costs are managed centrally through the Group's Treasury function housed within Ascendis
Financial Services (included in Head office) and Scitec (Consumer Brands Europe). The EXCO evaluates the finance
income and expenses based on utilisation within subsidiaries as illustrated above.
The European debt facilities raised to finance the acquisition of the recent international acquisitions are housed
within Consumer Brands Europe.
2016
2017 Restated
Tax expense split by segment R'000 R'000
Consumer Brands (1 592) (14 621)
Africa 3 706 (6 833)
Europe (5 298) (7 788)
Phyto-Vet (8 992) (6 134)
Pharma-Med (50 457) (41 160)
Africa (42 352) (40 785)
Europe (8 105) (375)
Head office (1 540) (6 750)
Total consolidated tax expense (62 581) (68 665)
The EXCO monitors taxation expenses per segment to ensure optimal tax practices are being adhered to.
(b) Statement of financial position measures applied
2016
2017 Restated
R'000 R'000
Assets and liabilities split by segment Assets Liabilities Assets Liabilities
Consumer Brands 5 558 299 (4 494 222) 1 233 112 (85 861)
Africa 1 526 655 (751 425) 1 067 444 (53 433)
Europe 4 031 644 (3 742 797) 165 668 (32 428)
Phyto-Vet 1 508 258 (474 651) 900 856 (254 052)
Pharma-Med 7 405 499 (2 433 957) 2 932 382 (707 730)
Africa 2 620 118 (555 912) 2 227 754 (402 392)
Europe 4 785 381 (1 878 045) 704 628 (305 338)
Head office 14 561 (1 787 445) 659 919 (2 223 583)
Total consolidated assets and liabilities 14 486 617 (9 190 275) 5 726 270 (3 271 227)
The fixed assets presented below represent the material non-current assets held in various geographic locations.
2016
2017 Restated
Fixed assets by geographic location R'000 R'000
South Africa 278 204 321 973
Cyprus 499 447 -
Other Europe 214 017 26 250
Fixed assets per geographic location 991 668 348 223
2. Earnings per share, Diluted earnings per share and Headline earnings per share
The calculation of headline earnings per share is based on the profit attributable to equity holders of the parent, after
excluding all items of a non-trading nature, divided by the weighted average number of ordinary shares in issue during
the year. The presentation of headline earnings is not an IFRS requirement, but is required by JSE Listings Requirements
and Circular 2 of 2015.
Weighted average number of shares in issue is calculated as the number of shares in issue at the beginning of the period,
increased by shares issued during the period weighted on a time basis for the period during which they have participated
in the profit of the Group. Shares which are held by a subsidiary company as treasury shares have been adjusted on a
time basis when determining the weighted average number of shares in issue.
The Group has determined no instruments exist in the period that will give rise to the issue of ordinary shares that results
in a dilutive effect. Based on this assessment, basic earning per share also represents diluted earnings per share.
2017 2016
R'000 R'000
Continuing Discontinued Continuing Discontinued
operations operations Total operation operations Total
(a) Basic earnings per share
Profit attributable to owners of
the parent 354 107 (70 976) 283 131 158 868 (135) 158 733
Earnings 354 107 (70 976) 283 131 158 868 (135) 158 733
Weighted average number of
ordinary shares in issue 412 323 054 277 861 370
Earnings per share (cents) 85.9 (17.2) 68.7 57.1 - 57.1
(b) Headline earnings per share
Profit attributable to owners of
the parent 354 107 (70 976) 283 131 158 868 (135) 158 733
Adjusted for:
Profit/(loss) on the sale of
property, plant and equipment 937 - 937 (943) - (943)
Profit/(loss) on investment
disposal 165 - 165 (7 535) - (7 535)
Goodwill and intangible asset
impairment 21 730 26 860 48 590 - - -
IFRS 3 bargain purchase (1 938) - (1 938) - - -
Non-controlling interest portion
allocation (340) - (340) 3 055 - 3 055
Tax effect thereof (269) - (269) 1 062 - 1 062
Headline earnings 374 392 (44 116) 330 276 154 507 (135) 154 372
Weighted average number of
shares in issue 412 323 054 277 861 370
Headline earnings per share
(cents) 90.8 (10.7) 80.1 55.6 - 55.6
(c) Normalised headline earnings per share
Since Ascendis Health is a health and care company and not an investment company, normalised headline
earnings is calculated by excluding amortisation and certain costs from the Group's earnings. Costs excluded
for normalised headline earnings purposes include restructuring costs to streamline, rationalise and structure
companies in the Group. It also includes the cost incurred to acquire and integrate the business combinations into
the Group and the listed environment.
2017 2016
R'000 R'000
Continuing Discontinued Continuing Discontinued
operations operations Total operations operations Total
Reconciliation of normalised
headline earnings
Headline earnings 374 392 (44 116) 330 276 154 507 (135) 154 372
Adjusted for
Business combination costs 89 722 - 89 722 130 306 - 130 306
Refinancing costs 27 730 - 27 730 - - -
Finance cost of deferred vendor
liability 47 556 - 47 556 - - -
Restructuring costs 19 066 - 19 066 22 605 - 22 605
Tax effect thereof (6 272) - (6 272) (6 329) - (6 329)
Amortisation 115 857 - 115 857 48 194 - 48 194
Tax effect thereof (23 328) - (23 328) (12 796) - (12 796)
Normalised headline earnings 644 723 (44 116) 600 607 336 487 (135) 336 352
Weighted average number of
shares in issue 412 323 054 277 861 370
Normalised headline earnings per
share (cents) 156.4 (10.7) 145.7 121.1 - 121.1
Normalised diluted headline earnings per share is calculated on the same basis used for calculating diluted earnings per
share, other than normalised headline earnings being the numerator.
3. Events after reporting period
Debt facilities
Post year end, Ascendis increased their existing revolving credit facilities as follows:
- R50 million from Nedbank. This facility bears interest at a rate of 8.25%;
- R150 million from ABSA. This facility bears interest at a rate of 8.75% and is repayable on 28 November 2017.
Treasury shares
The Group also disposed of 3 425 202 treasury shares at a transaction price equal to the 30 day volume weighted
average price of the share ("VWAP").
4. Business Combinations
During the period Ascendis acquired the following businesses:
- Remedica Group 100%
- Scitec Group 100%
- Cipla Group 100%
- Sun Wave Pharma Group 100%
- Ortho-Xact 100%
- Juniva Proprietary Limited 78 % (Obtained effective control)
A purchase price allocation has been performed on all business acquisitions which have been included in the financial
results with the exception of Cipla and Sun Wave Pharma. Due to the timing of these acquisitions being close to year-end,
a preliminary purchase price allocation has been performed.
The following table illustrates the consideration paid and net assets for each material subsidiary acquired during the
year. All assets and liabilities are measured at fair value on the date of acquisition. No goodwill amount recognised
is deductible for tax purposes. The 2016 comparative period has been restated as a result of a measurement period
adjustment, for more information refer to the restatement note.
2016
2017 Restated
R'000 R'000
Sun Wave
Remedica Scitec Pharma Cipla Other Total Total
Cash 2 643 993 2 332 935 599 265 330 728 69 200 5 976 121 537 035
Foreign exchange hedging loss 57 118 62 395 - - - 119 513 -
Equity instruments 24 332 - - - - 24 332 213 516
Vendor loans 1 262 507 311 058 260 456 132 385 74 800 2 041 206 195 017
3 987 950 2 706 388 859 721 463 113 144 000 8 161 172 945 568
Cash and cash equivalents 242 161 213 884 31 652 33 723 540 521 960 96 875
Property, plant and equipment 525 247 178 598 25 532 864 434 730 675 129 447
Intangible assets within the
acquired entity 1 246 534 1 114 816 716 932 159 651 34 313 3 272 246 526 209
Other financial assets 37 42 541 - - - 42 578 37 700
Inventories 301 487 196 289 35 017 69 946 38 124 640 863 135 877
Trade and other receivables 343 547 137 822 109 354 79 871 10 534 681 128 195 685
Provisions - - - 227 - 227 (29 396)
Trade and other payables (100 197) (154 716) (33 717) (34 182) (4 611) (327 423) (245 841)
Finance leases - - (24 813) - - (24 813) -
Borrowings - (144 642) - - (40) (144 682) (81 847)
Current tax (payable)/receivable 20 016 (17 136) - (1 742) - 1 138 (670)
Provision for doubtful debt - - - - - - (42 277)
Deferred tax liabilities (158 956) (95 264) - (48 810) (9 597) (312 627) (140 986)
Total identifiable net assets 2 419 876 1 472 192 859 957 259 548 69 697 5 081 270 580 776
Non-controlling interest - - - - (476) (476) (101 145)
Resultant goodwill 1 568 074 1 234 196 (236) 203 565 74 779 3 080 378 465 937
Total cash paid for acquisitions (2 643 993) (2 332 935) (599 265) (330 728) (69 200) (5 976 121) (537 035)
Cash available in acquired
company 242 161 213 884 31 652 33 723 540 521 960 96 875
Cash flow relating to business
combinations (2 401 832) (2 119 051) (567 613) (297 005) (68 660) (5 454 161) (440 160)
Ascendis completed three new platform acquisitions. These acquisitions will allow Ascendis to significantly grow its
European footprint which is currently serviced by Farmalider S.A. The establishment of a sizeable European platform will
support further international growth and expansion into new geographies both through acquisitions and organically as
the newly acquired international sales and distribution platforms can be utilised to channel existing Ascendis products.
Ascendis will contribute favourably towards the growth of both Remedica and Scitec, as synergies are achieved in shared
services, cross-licensing of pharmaceutical dossiers, product manufacturing and established routes to the European
and developing markets.
The geographical diversification offered by these transactions and their predominant invoicing in US Dollar and Euro will
create a natural Rand hedge. The conclusion of these transactions ensures that Ascendis maintains its defensive segment
mix of over-the-counter and pharmaceutical operations while enhancing diversification of its sales portfolio across
products, channels, geographies and currencies. The international growth, synergies and natural hedge contribute to
the goodwill amount recognised as part of the Remedica, Scitec and Sun Wave Pharma acquisition.
International platform acquisition - The Remedica Group (1 August 2016)
Remedica has been operating for over 50 years and is dedicated to the development, production and sale of high
quality, safe and efficacious generic pharmaceuticals. Remedica provides an international platform with its diversified
portfolio of products, markets and clients to transform the Ascendis Pharma-Med Europe segment.
The Group has acquired the entire share capital of Remedica, a pharmaceutical company based in Cyprus. The purchase
consideration of between EUR261.5 million and EUR335 million (R3 988 million - R5 210.2 million) was settled as follows:
- EUR170 million to be paid on completion which assumes a target working capital of EUR50 million and at least EUR5 million
of surplus cash earmarked for future acquisitions.
- EUR90 million deferred for three years (present value of EUR81.175 million based on a pre-discount rate of 3.5%); and
- EUR1.5 million to be paid in share issued.
- an amount to be determined based on the average EBITDA achieved for the three financial years post completion
of the Remedica transaction subject to certain targets being achieved with the total payment limited to EUR75 million.
R28 million of the business combination costs relates to the Remedica acquisition.
The revenue included in the statement of comprehensive income since 1 August 2016 contributed by Remedica was
R982.4 million. Remedica also contributed profit after tax of R243.0 million over the same period.
If the subsidiary was acquired on the first day of the financial year, revenue and profits for the year would have been
R1 072.1 million and R248.2 million respectively.
International platform acquisition - The Scitec Group (1 August 2016)
The acquisition of Scitec complements Ascendis' Consumer Brands product strategy, as it provides an international
platform in the sports nutrition and nutraceutical industry. Scitec is focused on the marketing, production and distribution
of a wide variety of sports nutrition products targeted at strength training, functional fitness and well-being forming part
of the Consumer Brands Europe segment.
The Group has acquired the entire share capital of Scitec a European sports nutrition company. The purchase
consideration of EUR170 million (R2 706.3 million) was settled in cash as follows:
- EUR150 million, adjusted for agreed working capital, debt and operating cash, paid on completion of the transaction.
- EUR20 million, deferred for one year.
R30.6 million of the business combination costs relates to the Scitec acquisition.
The revenue included in the statement of comprehensive income since 1 August 2016 contributed by Scitec was
R1 247 million. Scitec also contributed profit after tax of R121.3 million over the same period.
If the subsidiary was acquired on the first day of the financial year, revenue and profits for the year would have been
R1 363.4 million and R125.8 million respectively.
Included in the purchase consideration of Scitec and Remedica is a R119.5 million loss on the foreign exchange hedges
taken out on the foreign purchase consideration.
International platform acquisition - The Sun Wave Pharma Group (1 June 2017)
The acquisition of Sun Wave Pharma complements Ascendis' Consumer Brands Europe product strategy, as it provides
an international platform in the food supplements and over-the-counter ("OTC") industry. Sun Wave Pharma specialises
in marketing its products directly to the doctor community, through a sales force of approximately 290 effective and
well-trained individuals forming part of the Consumer Brands Europe segment.
The Group has acquired the assets and liabilities of Sun Wave Pharma a European based OTC company. The purchase
consideration between EUR40.8 million and EUR63.8 million (R600 million and R938.2 million) was settled in cash as follows:
- EUR40.8 million, adjusted for agreed working capital, debt and operating cash, paid on completion of the transaction.
- EUR5 million, payable after one year if the performance target for the period is achieved.
- EUR8 million, payable after two years if the performance target for the period is achieved.
- EUR6 million, payable after three years if the performance target for the period is achieved.
- EUR4 million, payable after three years if the performance target for the average 3 periods are achieved.
R13.5 million of the business combination costs relates to the Sun Wave Pharma acquisition.
The revenue included in the statement of comprehensive income since 1 June 2017 contributed by Sun Wave Pharma
was R37.1 million. Sun Wave Pharma also contributed profit after tax of R17.7 million over the same period.
If the subsidiary was acquired on the first day of the financial year, revenue and profits for the year would have been
R420.8 million and R70.4 million respectively.
South African bolt-on acquisition - The Cipla Group (1 June 2017)
The acquisition of Cipla complements Phyto-Vet strategy, as it offers a presence in therapeutic areas in which Ascendis did
not previously have strong representation. Cipla is an integrated biosciences and veterinary science business, leveraging
expertise in the areas of entomology, horticulture, agronomy and veterinary sciences to drive competitive advantage.
The Group has acquired the entire share capital of Cipla, an integrated biosciences and veterinary science business.
The purchase consideration of R345 million was settled in cash as follows:
- R295 million paid on completion of the transaction.
- R50 million, payable after one year.
- R86.7 million, payable in July 2017 relating the agreed working capital, debt and operating cash adjustment.
R5 million of the business combination costs relates to the Cipla acquisition.
The revenue included in the statement of comprehensive income since 1 June 2017 contributed by Cipla was
R19.5 million. Cipla also contributed profit after tax of R2.1 million over the same period.
If the subsidiary was acquired on the first day of the financial year, revenue and profits for the year would have been
R250.5 million and R49.1 million respectively.
The other acquisitions consists of the following:
The other acquisitions were bolt on acquisitions in the Pharma-Med Africa and Consumer Brands Africa segments. This
included the acquisition of Ortho-Xact (April 2017) and Juniva (April 2017). R3.9 million of the business combination
costs relates to the other acquisitions.
The revenue included in the statement of comprehensive income since acquisition contributed by the other acquisitions
was R33.1 million. The other acquisitions also contributed profit after tax of R8.8 million over the same period.
If the subsidiaries were acquired on the first day of the financial year, revenue and profits for the year would have been
R38.1 million and R5.9 million respectively.
GENERAL INFORMATION
Country of incorporation and domicile South Africa
Directors JA Bester (Chairman)*
MS Bomela*
CD Dillon#
K Futter (CFO)
B Harie*
Dr KS Pather*
GJ Shayne#
CB Sampson (MD)
Dr KUHH Wellner (CEO)
*Independent non-executive
#Non-executive
Registered office 31 Georgian Crescent East
Bryanston
Gauteng
2191
Business address 31 Georgian Crescent East
Bryanston
Gauteng
2191
Postal address PostNet Suite #252
Private Bag X21
Bryanston
2021
Bankers The Standard Bank of South Africa Limited
Sponsor Investec Bank Limited
Auditors PricewaterhouseCoopers Inc
Chartered Accountants (SA)
Secretary A Sims CA(SA)
These annual financial statements have been audited in
compliance with the applicable requirements of the Companies
Act 71 of 2008.
Preparer The annual financial statements were internally compiled by:
K Futter CA(SA)
Chief financial officer
ASCENDIS HEALTH LTD
31 Georgian Crescent East
Bryanston
Johannesburg
Gauteng
South Africa
t: +27 11 036 9600
e: info@ascendishealth.com
www.ascendishealth.com
Date: 12/09/2017 02:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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