Once written off as a lost cause by most, Ascendis Health – which specialises in wellness products and medical devices – has achieved an improbable recovery.
Image: Supplied
By Carl Neethling
Once written off as a lost cause by most, Ascendis Health – which specialises in wellness products and medical devices – has achieved an improbable recovery. However, while coming back from the brink, it faced unprecedented social media attacks by a handful of disgruntled individuals with negligible shareholdings in 2024. Now profitable and growing, its road to recovery is a story of resilience, which happened after much persistence and dedication shown by a loyal team of staff from private equity firm ACN Capital. It is a story that all management teams can learn from, but especially those in companies facing financial challenges.
The turnaround has not been without its setbacks. An attempt to delist Ascendis in late 2023 sparked a social media firestorm, with the disgruntled individuals accusing the firm’s leadership of undervaluing the company. Ultimately, the delisting vote sailed through, comfortably surpassing the required 75% threshold, but the bad publicity ultimately halted the process.
It is time to be fair about the firm – how it has recovered – and what its prospects are. Ascendis doesn’t deserve to be tainted by the actions of a small and misguided shareholder minority.
In 2023, with leadership turmoil, a share price in freefall, and a debt burden of over R600 million, while running at a loss, Ascendis’s collapse was imminent. One journalist even dubbed it “Descendis,” reflecting market sentiment that the stock may plummet to zero.
Yet, unusually for businesses that stared down bankruptcy, Ascendis is now a debt-free, profitable, albeit smaller, entity, trading at around 90 cents per share. The root of Ascendis’s initial troubles lay in a combination of bad management and the speed and intensity of its expansion as it bought up multiple firms, leaving it saddled with unmanageable debt of R8 billion. To stay afloat, the company was forced into an aggressive asset sell-off of all its international assets. Still, by late 2022, it teetered on the brink of losing its Medical Devices business – its most valued division – as lenders required immediate payment of R600m.
Emergency funding was secured just hours before the division was forfeited. This was just the start of a long and arduous restructuring process, fraught with boardroom battles, relentless media scrutiny, and persistent and unfair criticism from a handful of activists on social media throughout 2024.
But activists owning less than 0.5% of Ascendis should not be able to defame a firm on X (formerly Twitter), undermine it, and ignore a story of success.
Instead, they could learn lessons from the turnaround and what the turnaround team did to rein in spending; humility and hard work was the order of the day.
At the helm of Ascendis in 2022, the transition team, which included experts from ACN Capital, wasted no time slashing excesses. Ascendis’s financials were bleeding, with head office salaries exceeding R60m while the firm posted losses of R250m annually before tax. The first order of business was dismantling the bloated corporate structure.
Head office rent – previously 70% above market rates – was renegotiated, and ultimately, the office was shut down altogether. Business-class travel was prohibited, and a salary review and reduction of a handful of top executives resulted in a R38m annualised cost-saving. We overhauled the bonus structure to reward financial performance and metrics such as free cash flow, which rewards the generation of cash.
Lihle Mbele was appointed as Chief Financial Officer (CFO) – the company’s first Black executive in the role. Having previously served as a financial manager, Mbele had left with the sale of a division but returned at my request and was promoted from divisional financial manager, to divisional head, and eventually to company CFO in a bid to recognise and develop talent from within the group.
Reliance on external consultants and advisory firms was reduced, saving an additional R38m per year. The organisation had been weighed down by a senior management structure at head office that managed operations across vastly different businesses – from surgical implants sold to hospitals to vitamins sold at retail stores. The transition team dismantled this top layer of leadership, granting the different businesses greater autonomy and promoting positive and constructive collaboration between head office and portfolio companies.
With turnaround efforts leading to the last R620m in debt repaid, Ascendis has been freed from the crippling 16.5% annual interest burden that had stifled its cash flow.
More publicised was the success in renegotiating the sale of Ascendis Pharma. At one stage set to be offloaded to Imperial Group, a revised deal with Austell Pharmaceuticals was secured, extracting an additional R57m for shareholders in 2022 for an overall sale price of R410m. Another significant milestone came when Ascendis, once deemed “unbankable,” secured a banking facility from Rand Merchant Bank (RMB) – a crucial step in restoring credibility.
As Ascendis prepares to release its half-year results in March 2025, it stands on firm financial ground – completely debt-free. The company may be smaller, but it is leaner, more focused, and profitable. What was once a cautionary tale of corporate mismanagement is now a testament to the power of decisive leadership, financial discipline, and private equity principles in reviving a failing business.
Leaving behind a past of unfettered expansion and social media lies, Ascendis is now an example of an improbable but remarkable turnaround from near-bankruptcy to profitability.
Carl Neethling is the CEO of Ascendis Health.
Image: Social media
Carl Neethling is the CEO of Ascendis Health.
** The views expressed do not necessarily reflect the views of IOL or Independent Media.
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