Wrap Text
Unaudited interim results for the six months ended 31 December 2018
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" or "the Company")
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2018
Key features
Group revenue up 3% to R3.96 billion
International revenue up 7%
Gross margin strengthened 260 bps to 44.9%
Normalised EBITDA up 1% to R684 million
Normalised headline earnings down 6% to R351 million
Commentary
Financial performance
The group is reporting normalised results from continuing operations which have been adjusted for once-off transaction-related
and restructuring costs in the current and prior reporting period.
Group revenue increased by 3% to R3.96 billion (H1 2018: R3.85 billion). International revenue increased by 7% to R1.96 billion
and accounts for 50% (H1 2018: 48%) of the group's total sales. Revenue generated in South Africa declined by 1%.
The group's gross margin strengthened by 260 basis points to 44.9%, mainly due to improved raw material pricing through
strategic sourcing in Farmalider and Remedica, the discontinuation of low margin products in Wellness, Biosciences and Pharma,
the acquisition of the high margin Kyron Laboratories (Kyron) business and improved selling prices in Biosciences owing to Rand
weakness.
Operating expenses grew by 15% owing to increased investment in sales, marketing, distribution and head office, and the costs
of Kyron which was acquired in March 2018.
Normalised earnings before interest, tax, depreciation and amortisation (EBITDA), increased by 1% to R684 million. The EBITDA
margin contracted by 20 basis points due to the higher operating expenses.
Higher depreciation and finance costs resulted in normalised profit after tax for the six months being down by 4.4%. Normalised
headline earnings from continuing operations, which excludes capital profits of R19.6 million from the sale of the Isando
manufacturing facility, declined by 6% to R351 million. Normalised headline earnings per share were 10% lower at 72.5 cents.
The weighted average number of shares in issue increased by 4.3% during the reporting period.
Cash generated from operations totaled R502 million. The group invested R262 million in capital projects (including R171 million
in property, plant and equipment, and R91 million in intangibles), repaid deferred vendor liabilities of R228 million and incurred
R156 million in investing and financing activities, with cash and cash equivalents totaling R239 million at the end of the period.
The cash conversion rate at 73% improved from 46% in H1 2018.
Gearing levels increased from the 2018 year end, with the net debt: EBITDA ratio at 3.9 times (2018 year end: 3.5 times) due to
Rand weakness at the period end and increased short-term debt facilities.
The directors have again elected not to declare a dividend and to retain the cash to settle debt obligations.
Segmental performance
Consumer Health Pharma Medical Animal Health Biosciences
Revenue R1 299m R1 289m R636m R234m R497m
Revenue growth 5% 0% (9%) 54% 4%
Revenue contribution 33% 32% 16% 6% 13%
EBITDA R153m R317m R133m R46m R84m
EBITDA growth (7%) 13% (21%) 48% 10%
EBITDA margin 11.8% 24.6% 20.9% 19.7% 16.9%
EBITDA contribution 21% 43% 18% 6% 12%
In Consumer Health, which is the largest contributor to group revenue, Sun Wave Pharma again delivered strong revenue (+21%)
and EBITDA (+38%) growth. This was partially offset by the performance of the Consumer Health business in South Africa which
was impacted by the increasingly challenging consumer environment in the country. Sales growth was supported by the good
performance from the Solal skin brand and the launch of the Solal RestorX range. The Scitec sports nutrition business maintained
sales volumes but selling prices were 5% lower owing to increased competitor activity. Profitability was negatively impacted by
pricing pressure and increased marketing investments.
In the Pharma division, which contributed 43% of the group's EBITDA, Remedica and Farmalider showed solid growth and
improved margins. Revenue in the South African Pharma business was impacted by supplier issues and low market growth, while
profitability was affected by factory and supply issues which negatively impacted costs.
The Medical division reported lower sales owing primarily to supply constraints while margins were impacted by foreign exchange movements.
Revenue in Biosciences benefited from the agri-business recovering from the drought while cost savings and synergies from the
restructuring of the pet accessories business contributed to EBITDA growth. Animal Health delivered strong sales growth following
the launch of a new vaccine range and improved performance in the compounding segment. However, the margin was impacted
by increased marketing costs relating to the vaccine launch and higher sales from the low margin compounding business. The
Animal Health business continues to realise synergies from the acquisition and integration of Kyron.
Divestments
Selected businesses and assets were identified as non-core to the group's strategy and classified for divestment. Negotiations
are at a very advanced stage for the sale of the Efekto, Marltons and Afrikelp businesses which form part of the Biosciences
division. The remaining business within Biosciences, Avima/KlubM5, may be considered for disposal in the short to medium term.
An agreement was concluded with Mylan Proprietary Limited on 20 December 2018 for the sale of the group's Isando
manufacturing facility for a total cash consideration of R130 million. The Group realised a profit on sale of R19.6 million.
As announced in the group's 2018 annual results in September 2018, the South African Sports Nutrition business was sold with
effect from 1 September 2018 for R54 million, reporting a loss on sale of R0.5 million. Agreement was reached for the sale of
Ascendis Direct on 10 September 2018, however the sale did not materialise and negotiations with a potential buyer are
continuing.
After the end of the reporting period, the group received an unsolicited offer for the Remedica business unit in Cyprus. The board
is involved in ongoing negotiations regarding the potential disposal of Remedica and has extended the process to include other
potential bidders.
Focus areas
In the months ahead management will maintain its strong focus on organic revenue and EBITDA growth as well as cash
conversion, while addressing areas of underperformance in the South African operations and accelerating the Scitec plans. The
group is committed to implementing a more efficient capital structure to refinance debt and improve the health of the balance
sheet. The completion of the Biosciences transaction and progressing the Remedica offer are major priorities, while the group's
strategy will be revised should the Remedica business be sold.
Thomas Thomsen Kieron Futter
Chief Executive Officer Chief Financial Officer
Johannesburg
18 March 2019
Condensed group statement of financial position at 31 December 2018
Restated*
31 December 31 December 30 June
2018 2017 2018
Unaudited Unaudited Audited
R'000 R'000 R'000
Property, plant and equipment 1 244 569 1 098 193 1 126 632
Intangible assets and goodwill 5 10 029 785 9 038 862 9 833 747
Investments accounted for using the equity method 1 633 11 185 1 621
Derivative financial assets 118 1 136 114
Other financial assets 61 566 31 239 55 751
Deferred tax assets 100 268 50 450 91 700
Non-current assets 11 437 939 10 231 065 11 109 565
Inventories 1 857 338 1 726 055 1 619 441
Trade and other receivables 2 196 139 2 018 951 1 871 775
Other financial assets 15 863 23 470 1 112
Current tax receivable 141 996 36 819 116 781
Derivative financial assets 17 210 6 575 30 848
Cash and cash equivalents 385 469 502 426 767 924
Assets held for sale 8 130 075 - 359 625
Current assets 4 744 090 4 314 296 4 767 506
Total assets 16 182 029 14 545 361 15 877 071
Stated capital 6 507 529 6 560 751 6 512 930
Other reserves (553 623) (932 953) (626 225)
Retained income 967 524 666 622 745 889
Equity attributable to equity holders of parent 6 921 430 6 294 420 6 632 594
Non-controlling interest 183 168 155 848 161 515
Total equity 7 104 598 6 450 268 6 794 109
Borrowings and other financial liabilities 6 4 478 600 4 480 532 4 554 138
Deferred tax liabilities 483 342 458 009 491 908
Deferred vendor liabilities 7 179 011 640 101 876 386
Put-option on equity instrument 15 920 113 967 14 309
Derivative financial liabilities - 12 651 -
Finance lease liabilities 24 734 23 615 26 976
Long-term employee benefits 5 866 9 120 4 714
Non-current liabilities 5 187 473 5 737 995 5 968 431
Trade and other payables 1 524 554 1 229 493 1 321 784
Derivative financial liabilities 2 225 38 247 4 711
Borrowings and other financial liabilities 6 1 038 731 512 076 939 272
Current tax payable 85 559 12 628 83 128
Deferred vendor liabilities 7 937 169 373 903 422 969
Put-option on equity instrument 80 555 - 78 108
Provisions 31 331 25 775 92 854
Finance lease liabilities 13 001 9 728 15 099
Long-term employee benefits - 2 730 12 180
Bank overdraft 146 611 152 518 81 301
Current liabilities held for sale 8 30 222 - 63 125
Current liabilities 3 889 958 2 357 098 3 114 531
Total liabilities 9 077 431 8 095 093 9 082 962
Total equity and liabilities 16 182 029 14 545 361 15 877 071
* The comparative information were restated as a result of the change in plan to sell the Wynberg manufacturing facility and intercompany
profit elimination. Refer to Note 4 and Note 8 for more details.
Condensed group statement of profit and loss and other comprehensive income
for the six months ended 31 December 2018
Restated*
Six months Six months
ended ended Year ended
31 December 31 December 30 June
2018 2017 2018
R'000 R'000 R'000
Revenue 3 955 324 3 853 523 7 736 552
Cost of sales (2 177 970) (2 222 788) (4 267 091)
Gross Profit 1 777 354 1 630 735 3 469 461
Other income 37 607 8 563 34 412
Selling and distribution costs (404 466) (345 524) (769 056)
Administrative expenses (726 039) (645 323) (1 341 600)
Other operating expenses (209 453) (166 715) (453 455)
Operating profit 475 003 481 736 939 762
Finance income 4 628 2 446 16 422
Finance expenses (208 851) (196 888) (394 836)
Gain from equity accounted investments - 13 164 2 687
Profit before taxation 270 780 300 458 564 035
Tax expense 10 (33 653) (41 280) (68 471)
Profit from continuing operations 237 126 259 178 495 564
Loss from discontinued operations 8 (16 738) (51 948) (193 409)
Profit for the period 220 388 207 230 302 155
Other comprehensive income:
Items that may be reclassified to profit and
loss net of tax
Foreign currency translation reserve 115 594 (162 749) 128 924
Effects of cash flow hedges 2 488 (3 445) 4 495
Fair value adjustments (981) (5 964) (1 617)
Recycled to profit and loss 3 469 2 519 6 112
Items that will not be reclassified to profit and
loss net of tax
Revaluation of property, plant and equipment - - (4 196)
Other comprehensive income for the period 118 082 (166 194) 129 223
Total comprehensive income for the period 338 470 41 036 431 378
Profit attributable to:
Owners of the parent 204 892 190 977 277 171
Non-controlling interest 15 496 16 253 24 984
220 388 207 230 302 155
Total comprehensive income attributable to:
Owners of the parent 321 522 40 074 412 937
Non-controlling interest 16 948 962 18 441
338 470 41 036 431 378
Earnings per share from continuing operations
Basic and diluted earnings per share (cents) 2 45.8 52.3 101.9
Total earnings per share
Basic and diluted earnings per share (cents) 2 42.3 41.1 60.0
* The comparative information were restated as a result of the change in plan to sell the Wynberg manufacturing facility, restatement of
discontinued operations and intercompany profit elimination. Refer to Note 4 and Note 8 for more details.
Condensed group statement of changes in equity
for the six months ended 31 December 2018
non- attributable
Foreign controlling to equity Non-
Stated translation Revaluation Hedging interest Other Retained holders of controlling Total
R'000 capital reserve reserve reserve reserve reserves income the group interest equity
Balance at 1 July 2017 (Audited) 5 447 899 (210 323) 15 848 (10 155) (111 794) (465 664) 475 645 5 141 456 154 886 5 296 342
Profit for the period - - - - - - 190 977 190 977 16 253 207 230
Other comprehensive income - (147 458) - (3 445) - - - (150 903) (15 291) (166 194)
Total comprehensive income for the period - (147 458) - (3 445) - - 190 977 40 074 962 41 036
Issue of ordinary shares 1 035 027 - - - - - - 1 035 027 - 1 035 027
Raising fees capitalised (519) - - - - - - (519) - (519)
Net movement of treasury shares 78 344 - - - - - - 78 344 - 78 344
Foreign currency translation reserve - 5 765 - - 5 746 (11 473) - 38 - 38
Total contributions by and distributions to owners of
the Group recognised directly in equity 1 112 852 5 765 - - 5 746 (11 473) - 1 112 890 - 1 112 890
Balance at 30 December 2017 (Unaudited) 6 560 751 (352 016) 15 848 (13 600) (106 048) (477 137) 666 622 6 294 420 155 848 6 450 268
Profit for the period - - - - - - 86 194 86 194 8 731 94 925
Other comprehensive income - 282 925 (4 196) 7 940 - - - 286 669 8 748 295 417
Total comprehensive income for the period - 282 925 (4 196) 7 940 - - 86 194 372 863 17 479 390 342
Issue of ordinary shares 5 478 - - - - - - 5 478 - 5 478
Raising fees capitalised (869) - - - - - - (869) - (869)
Net movement in treasury shares (52 430) - - - - - - (52 430) - (52 430)
Dividends - - - - - - - - (7 879) (7 879)
Foreign currency translation reserve - (5 765) (141) - (8 602) 21 098 - 6 590 2 609 9 199
Acquisition of non controlling interest - - - - - (667) - (667) 667 -
Statutory reserve: Farmalider allocation to reserve - - - - - 14 136 (6 927) 7 209 (7 209) -
Total contributions by and distributions to owners of
the Group recognised directly in equity (47 821) (5 765) (141) - (8 602) 34 567 (6 927) (34 689) (11 812) (46 501)
Balance at 30 June 2018 (Audited) 6 512 930 (74 856) 11 511 (5 660) (114 650) (442 570) 745 889 6 632 594 161 515 6 794 109
IFRS 9 adjustment - - - - - - (3 778) (3 778) - (3 778)
IFRS 15 adjustment - - - - - - (206) (206) - (206)
Adjusted opening balance as at 30 June 2018
(Unaudited) 6 512 930 (74 856) 11 511 (5 660) (114 650) (442 570) 741 905 6 628 610 161 515 6 790 125
Profit for the period - - - - - - 204 892 204 892 15 496 220 388
Other comprehensive income - 114 142 - 2 488 - - - 116 630 1 452 118 082
Total comprehensive income for the period - 114 142 - 2 488 - - 204 892 321 522 16 948 338 470
Net movement in treasury shares (5 401) - - - - - - (5 401) - (5 401)
Dividends - - - - - - - - (13 205) (13 205)
Foreign currency translation reserve - - (124) - (3 281) 1 677 - (1 728) (1 971) (3 699)
Acquisition of subsidiary - - - - - - - - (1 692) (1 692)
Statutory reserve: Farmalider allocation to reserve - - - - - (42 300) 20 727 (21 573) 21 573 -
Total contributions by and distributions to owners of
the Group recognised directly in equity (5 401) - (124) - (3 281) (40 623) 20 727 (28 702) 4 705 (23 997)
Balance at 31 December 2018 (Unaudited) 6 507 529 39 286 11 387 (3 172) (117 931) (483 193) 967 524 6 921 430 183 168 7 104 598
Condensed group cash flow statement
for the six months ended 31 December 2018
Restated*
Six months Six months
ended ended Year ended
31 December 31 December 30 June
2018 2017 2018
R'000 R'000 R'000
Cash generated from operations 9 502 203 309 782 1 232 723
Cash generated from/(utilised by) operations - discontinued
operations 8 1 338 4 127 (52 553)
Finance income received 3 238 2 446 16 422
Finance costs paid (183 703) (172 193) (381 904)
Income taxes paid 11 (75 095) (63 303) (128 790)
Net cash inflow from operating activities 247 981 80 859 685 898
Cash flows from investing activities
Additions to property, plant and equipment (196 402) (86 868) (255 407)
Proceeds on the sale of property, plant and equipment 25 910 5 400 6 315
Additions to intangible assets 5 (94 646) (104 959) (163 837)
Proceeds on the sale of intangible assets 3 561 4 473 -
Payment for acquisition of subsidiaries - net of cash - - (96 268)
Repayments of deferred vendor liabilities 12 (228 219) (1 093 193) (1 220 305)
Payments for the settlement of financial instruments (39 340) (96 452) (120 229)
Proceeds of loans advanced to related parties - - 16 445
Receivable for disposal of a disposal group (130 000) - -
Loans advanced to related parties (19 006) - (18 446)
Proceeds from disposal of disposal group 54 183 - -
(Repayment of)/proceeds from loans advanced to external
parties (12 180) 7 220 -
Proceeds from disposal of other financial assets - - 7 844
Net cash flow from investing activities - discontinued
operations 8 (7 875) 2 695 (67 142)
Net cash utilised in investing activities (644 014) (1 361 684) (1 911 030)
Cash flows from financing activities
Proceeds from issue of shares - 1 035 027 1 039 117
Proceeds on the sale of treasury shares - 67 357 67 357
Payments made to acquire treasury shares (5 401) - (44 163)
Proceeds from borrowings raised 12 214 223 388 880 449 362
Repayment of borrowings 12 (278 954) (395 240) (288 688)
Finance lease movement 12 (5 224) 1 884 10 695
Net cash flow from financing activities - discontinued
operations 8 7 685 35 115 588
Net cash(outflow)/inflow from financing activities (67 671) 1 097 943 1 349 268
Net (decrease)/increase in cash and cash equivalents (463 704) (182 882) 124 136
Net increase/(decrease) in cash and cash equivalents -
discontinued operations 8 1 148 6 857 (4 107)
Cash and cash equivalents at beginning of period 686 623 527 175 527 175
Effect of exchange difference on cash balances 14 791 (1 242) 39 419
Cash and cash equivalents at end of period 238 858 349 908 686 623
* The comparative information were restated as a result of the change in plan to sell the Wynberg manufacturing facility, restatement of
discontinued operations and intercompany profit elimination. Refer to Note 4 and Note 8 for more details.
Notes to the condensed group interim financial statements
for the six months ended 31 December 2018
Corporate information
Ascendis Health Limited is a health and care brands company. The Group operates through the following health care areas:
Consumer Health, Pharma, Medical, Animal Health and Biosciences. Consumer Health consists of health and personal care
products sold to the public, primarily at the retail store level. The division offers over-the-counter (OTC) medicine and consumer
brands products, including vitamins and minerals, homeopathic products, herbal products, dermaceuticals functional foods,
functional super foods, sports nutrition, health beverages, weight management and therapeutic cosmetics. Pharma consists of
the sale of prescription and selected OTC pharmaceuticals. Medical offers sale and rental of medical devices including the related
consumables to health care institutions. Animal Health supplies products to the animal care and health markets. Biosciences
supplies plant products. The Animal Health and Biosciences divisions manufacture and supply over 3 500 different products to
over 4 500 retail stores.
These condensed consolidated Group interim financial results as at 31 December 2018 comprise of the Company and its
subsidiaries (together referred to as the Group) and the Group's interest in equity accounted investments. The condensed
consolidated interim financial statements have not been externally reviewed or audited.
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 condensed consolidated Group interim financial statements for the six months ended 31 December 2018 are prepared in
accordance with the requirements of the JSE Limited Listings Requirements, and the requirements of the Companies Act, 2008
applicable to summary financial statements. The JSE Limited Listings Requirements requires interim results to be prepared in
accordance with International Accounting Standard ("IAS") 34 Interim Financial Reporting and the SAICA Financial Reporting
Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting
Standards Council.
The condensed consolidated Group interim financial statements should be read in conjunction with the annual financial statements
for the year ended 30 June 2018, which have been prepared in accordance with the International Financial Reporting Standards
(IFRS).
The unaudited condensed interim Group financial statements for the six months ended 31 December 2018 have been prepared
under the supervision of Chief Financial Officer, Kieron Futter (CA) SA. The interim 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.
All the amounts have been rounded off to the nearest thousand Rand unless otherwise stated.
Items included in the interim 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 interim 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 that are different to the Group:
- Farmalider - Spain
- Remedica - Cyprus
- Scitec - Hungary
- Ascendis Wellness (Sun Wave) - Romania
- Ascendis Health International Holdings - 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 Group's presentation currency they are translated upon consolidation in terms of the requirements of IFRS.
Principal Accounting Policies
The accounting polices applied in the preparation of the condensed consolidated Group interim financial statements are in terms
of IFRS and are consistent with those accounting policies applied in the preparation of the consolidated annual financial
statements for the year ended 30 June 2018.
New standards adopted by the Group
The Group has adopted all the new, revised or amended accounting pronouncements as issued by the International Accounting
Standards Board (IASB) which were effective for the Group from 1 July 2018.
The following standards had an impact on the Group:
- IFRS 9 Financial Instruments
- IFRS 15 Revenue from Contracts with Customers
Refer to Note 3 Changes in Accounting Policies for more details on the impact of the new Standards.
Impact of standards issued but not yet applied by the Group
- IFRS 16 Leases
IFRS 16 was issued in January 2016. It will result in almost all leases being recognised on the balance sheet, as the distinction
between operating and finance leases is removed. Under the new standard, a right of use asset and a financial liability are
recognised. The only exceptions are short-term and low-value leases.
The accounting for lessors will not significantly change. The new standard mainly affects the accounting for operating leases. As
at 31 December 2018, the Group has non-cancellable operating lease commitments of R39.7 million. The Group is in the process
of determining to what extent these commitments will result in the recognition of the right of use asset and liability for future
payments and how this will affect the Group's profit and classification of cash flows. Some commitments may relate to exceptions
or arrangements that will not qualify as leases under IFRS 16. More disclosures will be provided in the June 2019 annual financial
statements.
The Group does not intend to early adopt the standard, therefore IFRS 16 will be applied in the annual financial period beginning
on 1 July 2019.
Judgements and estimates
In preparing these interim 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.
Significant estimates and judgements were made on the following items:
- 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
On 25 September 2018, the Group adopted a new strategic focus which would be achieved through the implementation of
the new Target Operating Model ("TOM"). The new strategy is focused on strengthening the core of the business in order to
create and achieve a sustainable and leading market position for the business. As a result, the segment analysis was
changed with a view to focus on the core health care areas and to strengthen operational oversight.
Five core health care areas have been identified, namely Pharma, Medical, Consumer Health, Animal Health and
Biosciences. The core health care areas have been split into nine new reportable segments that are used by the Group
executive committee (Chief operating decision maker ("CODM")) to make key operating decisions, allocate resources and
assess performance. The new reportable segments were split taking into account the nature of the products, production
process, distribution channels, types of customers and the regulatory environment in which the business units operate.
The new reportable segments are as follows:
- Consumer 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 three reportable segments:
- Consumer Health Africa segment: operating predominantly in the South African market.
- Scitec segment: operating predominantly in the European market.
- Sun Wave segment: operating predominantly in Romania.
- Pharma, incorporating Ascendis' pharmaceutical products. This division includes three reportable segments:
- Pharma Africa segment: operating predominantly in the South African market.
- Remedica segment: operating predominantly in the European market.
- Farmalider segment: operating predominantly in Spain.
- Medical, incorporating the supply of medical devices and consumables. The segment is operating predominantly in South
Africa.
- Animal Health, incorporating manufacturing and distribution of animal health products. The segment is operating
predominantly in South Africa.
- Biosciences, incorporating manufacturing and distribution of crop protection, public pesticides and equipment. The
segment is operating predominantly in South Africa.
Due to the change in segment reporting, the comparative information has been restated.
(a) Statement of profit and loss and other comprehensive income measures applied
Restated Restated
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2018 2017 2018
Unaudited Unaudited Unaudited
Revenue split by segment R'000 R'000 R'000
Consumer Health 1 298 488 1 241 170 2 491 230
Africa 336 270 346 048 658 491
Scitec 624 943 625 318 1 278 644
Sun Wave 337 275 269 804 554 095
Pharma 1 289 174 1 284 911 2 643 174
Africa 293 699 372 795 758 562
Remedica 701 233 643 194 1 325 308
Farmalider 294 242 268 922 559 304
Medical 636 462 699 343 1 336 734
Animal Health 234 112 152 082 365 004
Biosciences 497 088 476 017 900 410
Total revenue 3 955 324 3 853 523 7 736 552
Revenue by geographical location
South Africa 1 997 631 2 015 623 3 998 613
Cyprus 701 233 643 194 1 325 308
Spain 294 242 273 202 559 203
Other Europe 954 584 894 333 1 853 135
Other Africa 7 634 27 171 293
Total revenue 3 955 324 3 853 523 7 736 552
Revenue by destination
Africa 2 094 380 2 143 613 4 181 908
South Africa 1 791 451 1 865 154 3 525 465
Rest of Africa 302 929 278 459 656 443
Europe 1 490 141 1 394 812 2 882 021
Romania 349 666 278 869 573 931
Spain 271 632 268 593 523 930
Germany 159 449 118 259 290 305
Hungary 104 654 140 493 287 370
France 99 704 91 271 242 458
Cyprus 40 096 49 634 116 809
Other 464 940 447 693 847 218
Asia Pacific 283 726 234 045 490 978
Asia 259 668 212 363 424 248
Australia 18 533 15 739 55 148
New Zealand 5 525 5 943 11 582
United Kingdom 37 684 52 454 103 268
South America 33 199 12 224 43 151
North America 16 194 16 375 35 226
Total revenue 3 955 324 3 853 523 7 736 552
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 (December 2017: 51%). In this market,
6% (December 2017: 4%) of the total Group revenue is derived from a single customer and 10% of the Group's revenue
is generated from government institutions (local and international) (December 2017: 12%).
The Group evaluates the performance of its reportable segments based on normalised EBITDA (earnings before interest,
tax, depreciation and amortisation) and further adjusted for business combinations, integration and restructuring costs.
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/revenue margin.
Restated
Six months ended Six months ended Year ended
31 December 2018 31 December 2017 30 June 2018
Normalised EBITDA Unaudited Unaudited Unaudited
split by segment R'000 % R'000 % R'000 %
Consumer Health 153 469 165 337 15% 315 690 13%
Africa 47 321 14% 53 827 16% 101 575 15%
Scitec 12 275 2% 46 697 7% 88 557 7%
Sun Wave 93 873 28% 64 813 24% 125 558 23%
Pharma 317 011 26% 279 740 22% 588 943 22%
Africa 18 485 13% 25 201 7% 79 511 10%
Remedica 230 676 33% 206 431 32% 407 360 31%
Farmalider 67 850 23% 48 108 18% 102 072 18%
Medical 132 778 21% 167 619 24% 318 208 24%
Animal Health 46 250 20% 30 522 20% 68 060 19%
Biosciences 84 197 17% 76 435 16% 131 413 15%
Headoffice (49 976) (43 873) (82 889)
Total normalised EBITDA 683 729 675 780 1 339 425
Non-controlling interest
proportionate share (27 798) (15 364) (39 087)
Total normalised EBITDA
attributable to the parent 655 931 660 416 1 300 338
Reconciliation of normalised
EBITDA to consolidated results
Consolidated operating profit 475 002 481 736 939 762
Total impairment, amortisation
and depreciation 167 320 142 487 344 767
Business combination costs * 526 21 804 29 655
Restructuring costs * 39 684 6 952 7 150
Isando manufacturing operations
loss * 20 754 22 801 45 602
Profit on disposal of Isando
factory * (19 557) - -
Put/call option remeasurement * - - (32 532)
Impairment of investment * - - 5 021
Non-controlling interest
proportionate share (27 798) (15 364) (39 087)
Total normalised EBITDA
attributable to the parent 655 931 660 416 1 300 338
*These reconciling items are excluded from EBITDA for performance measurement purposes.
Restated Restated
Six months ended Six months ended Year ended
31 December 2018 31 December 2017 30 June 2018
Unaudited Unaudited Unaudited
Finance Finance Finance Finance Finance Finance
Net finance cost income expense income expense income expense
split by segment R'000 R'000 R'000 R'000 R'000 R'000
Consumer Health 396 (76 925) (2 280) (79 048) (2 985) (146 153)
Africa 91 (455) 384 (3 611) 1 332 (784)
Scitec 10 (70 744) (2 704) (70 118) 105 (139 533)
Sun Wave 295 (5 726) 40 (5 319) (4 422) (5 836)
Pharma 208 (17 147) (604) (9 474) 2 336 (21 941)
Africa 4 (251) (263) (95) 1 735 (664)
Remedica 54 (15 470) (466) (6 762) 269 (14 606)
Farmalider 150 (1 426) 125 (2 617) 332 (6 671)
Medical 317 (47) 733 (18) 1 841 (139)
Animal Health 108 (71) 438 (256) 739 (472)
Biosciences 253 (320) 317 (6 310) 893 (10 407)
Head Office 3 346 (114 341) 3 842 (101 782) 13 598 (215 724)
Total finance income/(cost) 4 628 (208 851) 2 446 (196 888) 16 422 (394 836)
Finance income and finance costs are managed centrally through the Group's Treasury function housed within Ascendis
Financial Services (included in Head office) and Scitec (Consumer Health Europe). The EXCO evaluates the finance income
and expenses based on utilisation within subsidiaries as illustrated above.
(b) Statement of financial position measures applied
Restated Restated
31 December 2018 31 December 2017 30 June 2018
Unaudited Unaudited Unaudited
Assets and liabilities Assets Liabilities Assets Liabilities Assets Liabilities
split by segment R'000 R'000 R'000 R'000 R'000 R'000
Consumer Health 5 487 049 (5 372 481) 5 263 362 (3 837 747) 5 423 567 (5 348 139)
Africa 1 194 004 (1 370 931) 1 139 574 (97 664) 1 246 650 (1 399 555)
Scitec 3 116 770 (2 917 988) 3 193 316 (3 379 630) 3 071 827 (2 883 958)
Sun Wave 1 176 275 (1 083 562) 930 472 (360 453) 1 105 090 (1 064 626)
Pharma 6 477 387 (6 455 308) 5 797 482 (3 549 333) 6 509 299 (6 411 316)
Africa 924 741 (968 777) 1 015 702 (138 071) 1 067 985 (1 101 695)
Remedica 4 622 113 (4 821 100) 3 975 569 (3 042 736) 4 551 789 (4 658 696)
Farmalider 930 533 (665 431) 806 211 (368 526) 889 525 (650 925)
Medical 1 747 638 (1 327 782) 1 557 566 (289 355) 1 599 948 (1 201 566)
Animal Health 847 099 (801 411) 173 647 (39 704) 845 321 (814 679)
Biosciences 971 045 (893 969) 1 255 912 (287 163) 1 007 239 (933 283)
Head office 651 811 5 773 520 497 392 (91 791) 491 697 5 626 021
Total assets and
liabilities 16 182 029 (9 077 431) 14 545 361 (8 095 093) 15 877 071 (9 082 962)
The fixed assets presented below represent the non-current assets held in various geographic locations.
Restated
31 December 31 December 30 June
Unaudited Unaudited Audited
Fixed assets per geographic location R'000 R'000 R'000
South Africa 359 311 385 539 266 900
Cyprus 581 145 486 961 572 600
Other Europe 304 113 225 693 287 132
Total fixed assets per geographic location 1 244 569 1 098 193 1 126 632
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 the JSE Listings Requirements and the
SAICA Circular 4/2018.
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 that no instruments existed during the period that will result in a potential dilutive effect. Based on
this assessment, basic earnings per share also represents diluted earnings per share.
Restated
Six months ended Six months ended Year ended
31 December 2018 31 December 2017 30 June 2018
Unaudited Unaudited Audited
Continuing Discontinued Continuing Discontinued Continuing Discontinued
operations operations Total operations operations Total operations operations Total
R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000
Basic earnings per share
Profit attributable to owners of the
parent 221 630 (16 738) 204 892 242 925 (51 948) 190 977 470 580 (193 409) 277 171
Earnings 221 630 (16 738) 204 892 242 925 (51 948) 190 977 470 580 (193 409) 277 171
Weighted average number of
ordinary shares in issue 484 827 324 464 796 223 461 996 223
Basic earnings per share (cents) 45.8 (3.5) 42.3 52.3 (11.2) 41.1 101.9 (41.9) 60.0
Headline earnings per share
Profit attributable to owners of the
parent 221 630 (16 738) 204 892 242 925 (51 948) 190 977 470 580 (193 409) 277 171
Adjusted for:
Net (profit)/loss on the sale of
property, plant and equipment (4 592) - (4 592) 4 923 - 4 923 (739) - (739)
(Profit)/loss on investment disposal (19 557) - (19 557) - - - 580 - 580
Goodwill and intangible asset
impairment - - - - - - 30 269 71 319 101 588
Put-option remeasurement - - - - - - (32 532) - (32 532)
Impairment of investment - - - - - - 5 021 - 5 021
Non-controlling interest portion - - - (429) - (429) - - -
Tax effect thereof 3 002 - 3 002 (1 442) - (1 442) 9 128 - 9 128
Headline earnings 200 483 (16 738) 183 745 245 977 (51 948) 194 029 482 307 (122 090) 360 217
Weighted average number of shares
in issue 484 827 324 464 796 223 461 996 223
Headline earnings per share
(cents) 41.4 (3.5) 37.9 52.9 (11.2) 41.7 104.4 (26.4) 78.0
(c) Normalised headline earnings per share
Since Ascendis 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. The Group's effective tax rate is applied to normalised earnings adjustments except if a specific item relates to a specific country, then that tax
jurisdiction's tax rate is used. Costs excluded for normalised headline earnings purposes include restructuring costs to streamline, rationalise and structure companies in
the Group as well as costs relating to capital structure changes. It also includes the costs incurred to acquire and integrate the business combinations into the Group and
the listed environment. A normalised earnings adjustment is also made for operations that will not form part of the future of the Group that have not been recognised as a
discontinued operation in terms of IFRS.
Restated
Six months ended Six months ended Year ended
31 December 2018 31 December 2017 30 June 2018
Unaudited Unaudited Audited
Continuing Discontinued Continuing Discontinued Continuing Discontinued
Reconciliation of normalised operations operations Total operations operations Total operations operations Total
headline earnings R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000
Headline earnings 200 483 (16 738) 183 745 245 977 (51 948) 194 029 482 307 (122 090) 360 217
Adjusted for:
Business combination costs 526 - 526 21 804 - 21 804 29 655 - 29 655
Isando manufacturing operation loss 20 754 - 20 754 22 801 - 22 801 45 602 - 45 602
Restructuring costs 39 684 - 39 684 6 952 334 7 286 7 150 17 000 24 150
Tax effect thereof - - - (1 834) - (1 834) - - -
Amortisation 102 581 - 102 581 95 646 - 95 646 196 453 - 196 453
Tax effect thereof (12 751) - (12 751) (18 727) - (18 727) (23 221) (4 760) (27 981)
Normalised headline earnings 351 277 (16 738) 334 539 372 619 (51 614) 321 005 737 946 (109 850) 628 096
Weighted average number of shares in
issue 484 827 324 464 796 223 461 996 223
Normalised headline earnings per
share (cents) 72.5 (3.5) 69.0 80.2 (11.1) 69.1 159.7 (23.8) 136.0
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. Changes in accounting policies
Adoption of IFRS 15 Revenue from contracts with customers
IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It
replaced IAS 18 Revenue, IAS 11 Construction Contracts and related interpretations. Under IFRS 15 revenue is recognised
at an amount that reflects the consideration an entity expects to receive for transferring goods or services to a customer.
The core principle of IFRS 15 is that any entity should recognise revenue to depict the transfer of promised goods or services
to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those
goods or services. The standard requires the apportionment of revenue earned from contracts to identified performance
obligations in the contracts on a relative stand-alone selling price basis based on a five-step model. The standard also requires
the capitalisation of costs incremental to obtaining the contract and recognition of these costs as an expense over the term
of the contracts.
The Group principally generates revenue from manufacturing and distribution of consumer and animal health products,
pharmaceutical products, biosciences products and supplying of medical devices and consumables. Revenue is measured
based on the consideration agreed with the customer excluding indirect taxes, estimated returns and trade discounts and
rebates.
In accordance with the transition provisions in IFRS 15, the Group has adopted the new standard using the modified
retrospective approach and has processed an adjustment to the opening balance of retained earnings at 1 July 2018 (date
of initial application). The modified retrospective approach is applied only to contracts that are not completed as at
1 July 2018.
The Group sells goods with a right of return in line with the current consumer legislation and the company policy, where
applicable. The sales are cancelled when the right of return is exercised. IFRS 15 requires the recognition of a refund liability
and refund asset for the expected returns given that there will be a significant reversal of revenue as a result. This results in
an adjustment to revenue, cost of sales, trade receivables, trade payables and deferred tax.
The adjustment to opening retained earnings on the adoption of IFRS 15 as at 1 July 2018 is as follows:
31 December
2018
Unaudited
R'000
Gross amount (286)
Increase in other receivables 5 741
Increase in other payables (6 027)
Deferred tax 80
Impact on retained earnings (206)
Adoption of IFRS 9 Financial Instruments
The new IFRS 9 includes the final classification and measurement model for financial assets and liabilities as well as the new
expected credit loss (ECL) model for the impairment of financial assets that replaces the incurred loss model prescribed in
IAS 39. The IAS 39 classification model for financial liabilities has been retained, however changes in own credit risk will be
presented in other comprehensive income for liabilities designated at fair value through profit or loss. IFRS 9 also includes
new requirements for general hedge accounting.
Initial classification and measurement
The Group has assessed the implications and concluded that the new standard has no impact on the initial classification and
measurement of financial instruments.
Impairment
Before the adoption of IFRS 9, the Group calculated the allowance for credit loss using the incurred loss model. Under this
model, the Group assessed whether there was any objective evidence of impairment at the end of each reporting period. The
allowance for credit losses was calculated on an individual basis based on payment history, adjusted for national and industry-
specific economic conditions and other indicators such as the credit terms of the customer, financial difficulties that correlate
with the defaults of the individual receivable.
IFRS 9 requires the Group to record expected credit losses on all of its receivables, either on 12-month or lifetime basis. The
expected credit losses (ECLs) are a probability weighted estimate of credit losses. The Group applies the simplified approach
to determine the ECL for trade receivables and contract assets. This results in calculating lifetime expected credit losses for
these trade receivables. ECL for trade receivables is calculated using a combination of the simplified parameter based
approach and provision matrix.
Provision matrix
ECLs are calculated by applying a loss ratio to the aged balance of trade receivables at each reporting date. The loss ratio is
calculated according to the ageing/payment profile of sales by applying historic/proxy write-offs to the payment profile of the
sales population. In instances where there was no evidence of historical write-offs, management used a proxy write-off based
on the previous provision for bad debts that was raised. Trade receivable balances have been grouped so that the ECL
calculation is performed on groups of receivables with similar risk characteristics and ability to pay. Similarly, the sales
population selected to determine the ageing/payment profile of the sales is representative of the entire population and in line
with future payment expectations. The historic loss ratio is then adjusted for forward looking information to determine the ECL
for the portfolio of trade receivables at the reporting period to the extent that there is a strong correlation between the forward
looking information and the ECL.
Simplified parameter-based approach
ECLs are calculated using a formula incorporating the following parameters: exposure at default (EAD), probability of default
(PD), loss given default (LGD) (i.e. PD x LGD x EAD = ECL). Exposures are mainly segmented by the size of the customer.
This is done to allow for risk differentiation. The probability of a customer defaulting as well as the realised loss with defaulted
accounts have been determined using historical data.
The adjustment to opening retained earnings for the transition to the expected credit loss model (impairment of trade
receivables) as at 1 July 2018 is as follows:
31 December
2018
Unaudited
R'000
Decrease in trade receivables (5 247)
Attributable deferred tax 1 469
Impact on retained earnings (3 778)
4. Restatements
Restatements relating to 31 December 2017 unaudited results:
Discontinued operations
In the June 2018 annual financial statements, Ascendis presented Direct Selling and Sports Nutrition as discontinued
operations and represented the Wynberg manufacturing facility as a continuing operation, which was previously classified
as a discontinued operation. The December 2018 unaudited interim financial statements comparative information have been
restated in terms of IFRS 5. Refer to Note 8 for more details.
Intercompany profit in inventory
Intercompany profit in inventory amounting to R25.5 million relating to intercompany sales between Sun Wave and Remedica
IP for the six months ended 31 December 2017 was not eliminated on consolidation . Cost of sales and inventory as at
31 December 2017 have been restated in terms of IAS 8. The impact on basic and diluted earnings per share is a decrease
of 5.5 cents per share. All intercompany profit in inventory elimination have already been recorded for the year ended
30 June 2018.
The impact of the restatements are set out below:
31 December 2017
Unaudited
Reversal of Discontinued Intercompany Total
Wynberg facility Operations Profit Restatement
Statement of Profit and Loss R'000 R'000 R'000 R'000
Revenue - (108 575) - (108 575)
Cost of sales - 15 178 (25 518) (10 340)
Gross Profit - (93 397) (25 518) (118 915)
Expenses (27 436) 151 481 - 124 045
Net finance cost (3 171) 211 - (2 960)
Income tax 1 797 (6 347) - (4 550)
Net impact on profit from
continuing operations (28 810) 51 948 (25 518) (2 380)
Net impact on loss from
discontinued operations 28 810 (51 948) - (23 138)
Net impact on profit for the period - - (25 518) (25 518)
Impact on basic and diluted
earnings per share - - (5.5) (5.5)
Reversal of Discontinued Intercompany Total
Wynberg facility Operations Profit Restatement
Statement of Financial Position R'000 R'000 R'000 R'000
Property, plant and equipment 68 320 - - 68 320
Inventory - - (25 518) (25 518)
Asset held for sale (68 320) - - (68 320)
Retained earnings - - 25 518 25 518
Net Impact - - - -
5. Intangible assets and goodwill
Licence and Intangible
Brands and computer assets under Customer Contractual Drug master
R'000 Goodwill trademarks software development relationships agreements files Total
Opening balance
Cost 5 496 124 2 209 556 55 901 24 651 1 068 389 335 107 1 241 242 10 430 970
Accumulated amortisation and impairment (134 614) (145 904) (22 895) - (194 327) (21 687) (77 796) (597 223)
Carrying value as at 30 June 2018 (Audited) 5 361 510 2 063 652 33 006 24 651 874 062 313 420 1 163 446 9 833 747
Additions - 7 128 6 078 1 478 130 - 79 832 94 646
Disposals - (43) - - - - (3 518) (3 561)
Transfers between categories - 8 427 (3 972) - - - (4 455) -
Transfers from discontinued operations 4 944 1 750 - - 3 847 - - 10 541
Amortisation - (36 832) (6 204) - (37 120) (4 920) (17 505) (102 581)
Exchange rate differences 89 732 55 858 1 192 22 16 400 - 33 789 196 993
Carrying value as at 31 December 2018 (Unaudited) 5 456 186 2 099 940 30 100 26 151 857 319 308 500 1 251 589 10 029 785
Made up as follows:
Cost 5 590 806 2 282 585 63 500 26 151 1 092 012 335 107 1 348 057 10 738 218
Accumulated amortisation and impairment (134 620) (182 645) (33 400) - (234 693) (26 607) (96 468) (708 433)
Carrying value (Unaudited) 5 456 186 2 099 940 30 100 26 151 857 319 308 500 1 251 589 10 029 785
Impairment tests for goodwill
Management reviews the business performance based on type of business and products. While the valuation is based on
the projected sustainable cash flows methodology, the latest budgets and forecasts are utilised. A five-year time horizon is
used to project the cash flows. Cash flows are discounted using a discounting factor, which was determined taking into
account both systematic and unsystematic risks.
The Group's share price has decreased significantly over the past 6 months resulting in an impairment indication. The Group
performed impairment assessments on all goodwill balances as at 31 December 2018. The following is a summary of
goodwill allocation for each reporting segment:
Goodwill reconciliation Transfer
31 December 2018 from Foreign
Unaudited Opening discontinued currency Closing
R'000 balance Additions Impairment operations translation balance
Consumer Health Africa 465 150 - - 4 944 - 470 094
Scitec 1 283 585 - - - 36 737 1 320 322
Sunwave 95 210 - - - 3 004 98 214
Pharma Africa 426 806 - - - - 426 806
Remedica 1 631 398 - - - 45 970 1 677 368
Farmalider 140 497 - - - 4 021 144 518
Medical 545 100 - - - - 545 100
Animal Health 474 780 - - - - 474 780
Biosciences 298 984 - - - - 298 984
Total 5 361 510 - - 4 944 89 732 5 456 186
Goodwill reconciliation
Restated*
30 June 2018 Transfer to Foreign
Unaudited Opening discontinued currency Closing
R'000 balance Additions Impairment operations translation balance
Consumer Health Africa 608 633 - (96 535) (46 948) - 465 150
Scitec 1 185 227 - - - 98 358 1 283 585
Sun Wave 93 180 - - - 2 030 95 210
Pharma Africa 426 806 - - - - 426 806
Remedica 1 505 679 - - - 125 719 1 631 398
Farmalider 130 842 - - - 9 655 140 497
Medical 545 100 - - - - 545 100
Animal Health 225 499 249 281 - - - 474 780
Biosciences 298 984 - - - - 298 984
Total 5 019 950 249 281 (96 535) (46 948) 235 762 5 361 510
* Due to the change in segment reporting, the comparative information has been restated. Refer to Note 1 for more details.
The key assumptions used for value-in-use calculations are as follows:
Restated*
31 December 2018 30 June 2018
Unaudited Unaudited
Revenue Revenue Discount
growth rate Discount rate growth rate rate
Consumer Health Africa 7.3% - 14.1% 11.4% - 12.4% 5.0% - 14.0% 10.9% - 12.7%
Scitec 3.0% 7.4% 3.1% 7.4%
Sun Wave 2.5% 8.8% 2.5% 8.8%
Pharma Africa 4.8% - 10.8% 12.9% 6.0% - 10.0% 12.9%
Remedica 2.5% 10.3% 2.5% 10.3%
Farmalider 6.2% - 7.2% 8.8% 2.0% - 3.0% 8.8%
Medical 4.8% 12.7% 5.1% - 5.3% 12.6% - 13.2%
Animal Health 4.8% 11.7% 5.1% - 5.3% 13.3% - 14.3%
Biosciences 4.8% - 8.0% 11.7% - 12.2% 5.1% - 8.0% 11.4% - 12.5%
* The comparative information were restated due to the changes in segment reporting. Refer to Note 1 for more details.
6. Borrowings and other financial liabilities
For the purposes of financing the acquisition of international businesses, as well as to allow for a structure that supports
growth and an integrated treasury function, Ascendis implemented a debt structure arranged and underwritten by
ABSA Bank Ltd and HSBC Bank Plc. The structure consists of a syndicated facility denominated in local currency and
Euro term and revolving credit facilities.
In terms of the existing debt structure, the total facilities drawn down amounts to R1 660 million and EUR238 million.
International loans
The Group has a EUR180 million secured term facility which matures in August 2021, the outstanding balance as at period end
amounts to EUR163 million. The debt balance consists of the ZAR translated amount of R2 657 million net of debt capitalisation
costs of R28.4 million. Capital repayments commenced on 30 June 2017 on a bi-annual basis. Interest is charged at 4% per
annum and is repayable quarterly. The Group has a facility with the Bank of Cyprus of EUR10 million, interest is charged at
Euribor rate and is repayable quarterly. The Group also has access to a EUR47 million revolving credit facility.
Syndicated South African facility
The secured syndicated facility is administered through ABSA Bank with various local registered financial institutions. The
Group has two facilities of R850 million and R810 million. As at period end R850 million and R493.2 million was outstanding
from the two facilities respectively. The R850 million facility matures in 2021 with the full capital amount due at maturity date.
Interest is charged at JIBAR plus 4.2% per annum and is payable quarterly. The R810 million facility is payable bi-annually
with a maturity date of December 2020. Interest is charged at JIBAR plus 3.75% per annum and is payable quarterly. Included
with this balance are debt capitalisation fees of R35 million. Additional facilities relating to letters of credit and performance
guarantees exist.
The above facilities are subject to financial covenants based on key financial ratios. For the period ended
31 December 2018, the lenders required that the Group maintain a normalised leverage ratio below 4.0, a minimum of 1.2
cash cover ratio and a minimum of 3.0 interest cover ratio. None of these were breached during the period.
The table below provides a detailed breakdown of the individual balances making up the total balance.
31 December 31 December 30 June
2018 2017 2018
Unaudited Unaudited Audited
R'000 R'000 R'000
Borrowings at amortised cost
Term loan - South Africa debt 1 308 235 1 385 777 1 390 291
Term loan - European debt 2 667 830 3 025 893 2 660 853
Cyprus loan facility* 145 451 - 158 271
Revolving credit facility 769 405 157 591 758 922
Farmalider debt 131 230 121 413 143 112
Short-term loans with financial institutions 372 000 293 188 297 000
Other financial liabilities at amortised cost
Other South African borrowings 74 544 8 746 38 013
Other European borrowings 48 636 - 46 948
5 517 331 4 992 608 5 493 410
Made up as follows:
Non-current 4 478 600 4 480 532 4 554 138
Current 1 038 731 512 076 939 272
5 517 331 4 992 608 5 493 410
* Cyprus loan facility is secured by buildings with a fair value of EUR6 million (R99 million)
7. Deferred vendor liabilities
The Group structures its acquisitions to include contingent and deferred consideration that is included in the cost of the
business combination at the fair value on the date of the acquisitions. Subsequent changes in the fair value of contingent
consideration is recognised in profit and loss. Deferred consideration is subsequently measured at amortised cost. No
new businesses were acquired during the period under review.
Detailed breakdown of the individual vendor liabilities:
31 December 31 December 30 June
2018 2017 2018
Unaudited Unaudited Audited
R'000 R'000 R'000
Remedica Group 643 190 558 512 614 388
Sun Wave Pharma Group 286 165 266 729 353 267
Cipla Group - 67 421 50 000
Ortho-Xact - 54 600 -
Klub M5 Proprietary Limited 55 000 53 677 55 000
Afrikelp Group - 9 913 -
Umecom Proprietary Limited 2 874 3 152 2 792
Kyron Group 128 951 - 223 908
1 116 180 1 014 004 1 299 355
Current 937 169 373 903 422 969
Non-current 179 011 640 101 876 386
1 116 180 1 014 004 1 299 355
Deferred consideration 646 065 693 631 767 180
Contingent consideration 470 115 320 373 532 175
1 116 180 1 014 004 1 299 355
During the period under review, the following payments were made in relation to deferred vendors: EUR5 million for the
Sun Wave acquisition, R50 million for the Cipla acquisition and R99 million (R100 million less R1 million discount) for
the Kyron acquisition.
8. Discontinued operations
Ascendis initiated a strategic business review in March 2018 following the appointment of Thomas Thomsen as chief
executive officer ("CEO"). The strategic review is primarily aimed at creating a leading market position for the business,
accelerating organic growth across the Group following the completion of several local and international acquisitions,
improving cash generation and enhancing profitability. As a result, the board decided to dispose of certain non-core assets.
8.1 Discontinued operations
Supply chain manufacturing - Change of plan
In May 2017 the Ascendis management made a decision to dispose of the Group's Supply Chain business with its
manufacturing plant in Wynberg. This was disclosed as a discontinued operation, and as a result, the relevant assets and
liabilities were classified as being held for sale. However, following key changes in management and consequently a
strategic review of the business, the Group has undertaken to retain its good manufacturing practice ("GMP") approved
pharmaceutical manufacturing facility located in Wynberg, Johannesburg, rather than the Isando facility as initially planned.
As a result of the change in the strategic direction of the business, the discontinued operation as disclosed during December
2017 period, will no longer be disposed of and the losses are included in continuing operations. The comparatives have
been represented
Ascendis Direct
Ascendis Direct ("AD") is the Group's direct selling and network marketing business selling Sportron and Swissgarde
products, operating in Southern Africa and Nigeria. AD has limited integration with Ascendis as it operates its own
management structure, head office and supply chain. The AD business model is not applied anywhere else in the Group.
The sale-purchase agreement was concluded with a potential buyer on 10 September 2018. However, the transaction did
not materialize and negotiations are continuing with another potential buyer.
Ascendis Sports Nutrition
Following a review of the Sports Nutrition business the Group decided to focus solely on its biggest sports nutrition brand,
Scitec, in targeted consumer segments and geographies. The Group concluded the sale of the business, which includes
Evox, SSN, Supashape, Muscle Junkie and Nutrimax, effective 1 August 2018.
The Sports Nutrition business was sold for a consideration of R54 million, a loss on sale of R0.5 million was recognised in
the statement of profit and loss.
8.2 Held for sale
Isando manufacturing
The Group planned to dispose of the Isando pharmaceutical manufacturing operations and its 23 000 m(2) GMP
pharmaceutical manufacturing facility. The manufacturing facility was acquired through the Group's purchase of Akacia
Healthcare during the June 2016 financial period.
Going forward the Group will manufacture its pharmaceutical products, currently manufactured at Isando through a third-
party manufacturing agreement since the other manufacturing facilities within South Africa do not meet the relevant
requirements. The manufacturing facility did not qualify to be classified as a discontinued operation in terms of IFRS 5.
However, the assets and liabilities have been reclassified to assets and liabilities held for sale.
On 20 December 2018, Ascendis concluded a sale agreement with Mylan Proprietary Limited (Mylan) for the sale of the
manufacturing facility. The manufacturing facility was sold for a consideration of R130 million and a profit on sale of R19.6
million was recognised in the statement of profit or loss.
Inventory and liabilities for Isando manufacturing facility will be disposed separately during the second half of the year.
Comparative information has been represented for the discontinued operations and segmental reporting in note 1 has also
been restated to reflect comparative information relating to continuing operations.
Financial performance and cash flow information
Financial performance and cash flow information of the discontinued operations presented for the period ended 31 December 2018:
Six months ended Six months ended Year ended
31 December 2018 31 December 2017 30 June 2018
Unaudited Unaudited Audited
Ascendis Ascendis Ascendis
Ascendis Sport Ascendis Sport Ascendis Sport
R'000 Direct Nutrition Total Direct Nutrition Total Direct Nutrition Total
Revenue 46 787 3 077 49 864 34 554 74 021 108 575 89 824 128 609 218 433
Expenses (51 648) (12 273) (63 921) (46 249) (120 621) (166 870) (96 546) (232 923) (329 469)
Loss before impairments (4 861) (9 196) (14 057) (11 695) (46 600) (58 295) (6 722) (104 314) (111 036)
Impairments - - - - - - (12 000) (59 319) (71 319)
Loss before tax (4 861) (9 196) (14 057) (11 695) (46 600) (58 295) (18 722) (163 633) (182 355)
Tax (2 681) - (2 681) 3 238 3 109 6 347 (4 384) (6 670) (11 054)
Loss after tax expense
of discontinued
operations (7 542) (9 196) (16 738) (8 457) (43 491) (51 948) (23 106) (170 303) (193 409)
Total comprehensive
loss (7 542) (9 196) (16 738) (8 457) (43 491) (51 948) (23 106) (170 303) (193 409)
Net cash inflow/(outflow)
from operating activities 2 214 (876) 1 338 435 3 692 4 127 (17 013) (35 540) (52 553)
Net cash (outflow)/inflow
from investing activities (6 380) (1 495) (7 875) 182 2 513 2 695 (10 011) (57 131) (67 142)
Net cash inflow/(outflow)
from financing activities 6 097 1 588 7 685 611 (576) 35 31 117 84 471 115 588
Net increase/(decrease)
in cash generated by
discontinued operations 1 931 (783) 1 148 1 228 5 629 6 857 4 093 (8 200) (4 107)
Assets and liabilities classified as held for sale
The following assets and liabilities were classified as held for sale in the periods reported:
31 December 2018 30 June 2018
Unaudited Audited
Ascendis Ascendis
Ascendis Sport Ascendis Sport
R'000 Isando Direct Nutrition Total Isando Direct Nutrition Total
Property, plant and equipment 1 496 5 632 - 7 128 113 037 6 025 298 119 360
Intangible assets & Goodwill - 48 450 - 48 450 - 48 688 39 160 87 848
Deferred tax asset 711 2 136 - 2 847 14 2 582 137 2 733
Inventories 20 875 14 287 - 35 162 9 300 14 379 31 776 55 455
Current Income tax receivable 96 839 - 935 - 840 832 1 672
Trade and other receivables 3 192 27 643 - 30 835 418 28 956 3 663 33 037
Cash and cash equivalents - 4 718 - 4 718 125 2 585 704 3 414
Other financial assets - - - - - 56 006 100 56 106
Assets held for sale 26 370 103 705 - 130 075 122 894 160 061 76 670 359 625
Borrowings - - - - - (18 270) - (18 270)
Finance lease liabilities - - - - - (326) (76) (402)
Deferred tax liability (15 846) (1 130) - (16 976) (14 648) (942) (638) (16 228)
Trade and other payables (1 977) (6 503) - (8 480) (3 078) (14 630) (2 373) (20 081)
Provisions (950) (1 776) - (2 726) (1 637) (2 279) (2 294) (6 210)
Current Income tax payable - (2 040) - (2 040) (226) (1 707) (1) (1 934)
Liabilities held for sale (18 773) (11 449) - (30 222) (19 589) (38 154) (5 382) (63 125)
9. Cash generated from operations
Restated*
Six months ended Six months ended Year ended
31 December 31 December 30 June
2018 2017 2018
Unaudited Unaudited Audited
R'000 R'000 R'000
Profit after tax 220 388 259 178 302 155
Adjustments for:
Tax 36 334 34 933 79 525
Depreciation and amortisation 167 320 145 245 318 129
Impairment on intangible assets - - 101 588
Net loss on sale of assets (4 592) 4 923 739
Net profit on disposal of investment (19 557) - (580)
Net loss on foreign exchange 3 412 57 020 1 555
Put-option remeasurement - - (32 532)
Fair value measurement of financial assets and liabilities - (15 982) 14 520
Movement in provisions (36 868) 5 704 70 140
Finance income (4 628) (2 446) (16 422)
Finance expense 208 851 196 888 394 836
Income from equity accounted investments - (13 164) (2 687)
Long-term incentive adjustment 1 152 - 1 706
Changes in working capital:
(Increase)/decrease in inventory (187 747) (141 575) 10 292
(Increase)/decrease in trade and other receivables (145 355) (142 951) 85 885
Increase/(decrease) in trade and other payables 263 493 (77 991) (96 126)
Cash generated from operations 502 203 309 782 1 232 723
* The comparative information were restated as a result of the change in plan to sell the Wynberg manufacturing facility, restatement of
discontinued operations and intercompany profit elimination. Refer to Note 4 and Note 8 for more details.
10. Income tax expense
Major components of the tax expense
Restated*
Six months ended Six months ended Year ended
31 December 31 December 30 June
2018 2017 2018
Unaudited Unaudited Audited
R'000 R'000 R'000
South African taxation
Current tax 28 005 41 781 72 850
Current tax on profits for the period 20 428 43 360 76 665
Recognised in current tax for prior periods 7 577 (1 579) (3 815)
Deferred tax (10 201) (13 829) (21 110)
Originating and reversing temporary differences 16 259 (1 638) (15 552)
Increase in tax loss (27 604) (12 949) (8 633)
Measurement period adjustment 1 144 758 3 075
South African income tax expense 17 804 27 952 51 740
Foreign taxation
Current tax 23 238 14 242 45 186
Current tax on profits for the period 23 995 14 338 48 930
Fiscal tax credits (757) - (3 744)
Recognised in current tax for prior periods - (96) -
Deferred tax (4 708) (7 261) (17 401)
Originating and reversing temporary differences (223) (9 473) (16 858)
(Increase in)/utilisation of tax loss (995) 22 41
Measurement period adjustment (3 490) 2 190 (584)
Foreign income tax expense 18 530 6 981 27 785
Total income tax expense 36 334 34 933 79 525
Income tax expense attributable to:
Profit from continuing operations 33 653 41 280 68 471
Profit from discontinued operations 2 681 (6 347) 11 054
36 334 34 933 79 525
* The comparative information were restated as a result of the change in plan to sell Wynberg manufacturing facility and restatement of
discontinued operations. Refer to Note 8 for more details.
Restated*
Six months ended Six months ended Year ended
31 December 31 December 30 June
2018 2017 2018
Unaudited Unaudited Audited
Tax at the South Africa tax rate 28.00% 28.00% 28.00%
Amortisation and impairments 0.92% 1.45% 0.66%
Disallowable charges - consulting / legal fees 0.02% 1.95% 0.02%
Disallowable charges - donations / sponsorships 0.02% 0.90% 0.88%
Effect of prior year adjustments (2.65%) 1.88% (0.68%)
Exempt dividend income (10.06%) (15.32%) 0.00%
Fines and penalties 0.36% 0.18% 0.18%
(Utilisation of)/ increase in tax losses (4.45%) 1.41% 1.47%
Local tax incentives (0.51%) (0.94%) (0.41%)
Foreign tax incentives (1.08%) 11.94% (5.17%)
Lower foreign tax rates (9.08%) (1.41%) (6.11%)
Other disallowable charges 11.84% (16.99%) 0.31%
Unrealised gains on revaluation of foreign loans (0.90%) 0.00% (7.01%)
Average effective tax rate 12.43% 13.05% 12.14%
* The comparative information were restated as a result of the change in plan to sell Wynberg manufacturing facility and restatement of
discontinued operations. Refer to Note 8 for more details.
11. Tax paid
Restated*
Six months ended Six months ended Year ended
31 December 31 December 30 June
2018 2017 2018
Unaudited Unaudited Audited
Balance at the beginning of the period 33 653 18 585 18 585
Current tax for the period recognised in profit or loss (51 244) (56 023) (118 036)
Adjustments in respect of businesses sold and acquired
during the year including exchange rate movements (1 067) (1 674) 4 314
Balance at the end of the period (56 437) (24 191) (33 653)
Tax paid (75 095) (63 303) (128 790)
* The comparative information were restated as a result of the change in plan to sell Wynberg manufacturing facility and restatement of
discontinued operations. Refer to Note 8 for more details.
12. Liabilities from financing activities
Liabilities from financing Other
activities
Deferred
Financial lease Vendor
R'000 Borrowings liabilities Liabilities*
Closing balance as at 30 June 2018 5 493 410 42 075 1 299 355
Cash flows (64 731) (5 224) (228 219)
New loans raised 214 223 6 190 -
Capital repayments made (278 954) (11 414) (228 219)
Non cash movements 88 652 884 45 044
Foreign exchange adjustments 108 505 808 23 640
Interest capitalised 2 825 - 21 404
Other non cash movements (22 678) 76 -
Closing balance as at 31 December 2018 5 517 331 37 735 1 116 180
* The Group notes that the cash flows from deferred vendor liabilities are included as investing activities in the cash flow statement,
however this information is considered to be useful to the users of the financial statements, since deferred vendor liabilities are included
in the Group's net debt position and is therefore included in the above disclosure.
13. Dividends paid
The directors have elected not to declare an interim dividend and to retain cash to fund working capital requirements and
settle debt obligations.
14. Events after reporting period
Unsolicited offer for purchase of Remedica
On 14 January 2019, Ascendis received an unsolicited offer in respect of its business unit based in Cyprus. The Group is
involved in ongoing negotiations regarding the potential disposal of Remedica and has extended the offer to include other
potential bidders.
Sale of Biosciences
Selected businesses and assets were identified as non-core to the Group's strategy and classified for divestment.
Negotiations are at a very advanced stage for the sale of Efekto, Marltons and Afrikelp businesses which form part of the
Biosciences division. The remaining businesses within Biosciences, Avima/Klub M5, may be considered for disposal in the
short to medium term.
Administration
Country of Incorporation and domicile South Africa
Registered office 31 Georgian Crescent East
Bryanston
Gauteng
2191
Postal address PostNet Suite(#) 252
Private Bag X21
Bryanston
2021
Contact details +27 (0)11 036 9600
info@ascendishealth.com
www.ascendishealth.com
Auditors PricewaterhouseCoopers Inc.
Transfer secretaries Computershare Investor Services Proprietary Limited
Rosebank Towers, 15 Biermann Avenue,
Rosebank, Johannesburg, 2196
PO Box 61051, Marshalltown, 2107
Telephone: +27 (0)11 370 5000
Company secretary A Sims CA (SA)
andy.sims@ascendishealth.com
Directors JA Bester (Chairman)*
MS Bomela*
K Futter (Chief Financial Officer)
B Harie*
Dr NY Jekwa*
Dr KS Pather*
J Sebulela* (Appointed 2 Oct 2018)
GJ Shayne(#)
TB Thomsen^ (Chief Executive Officer)
* Independent non-executive
(#) Non-executive
^ Danish
JSE sponsor Questco Corporate Advisory (Pty) Ltd
Date: 18/03/2019 07:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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