Ascendis (ASC) delivered top line growth of +66% in 1H17, fuelled by recent acquisitions in Europe. ASC EUR exposed revenue now accounts for 41% of total revenue. We are concerned about the continual downward trend in organic sales growth. Organic sales grew at 4.6% y-y impacted largely by drought (R50m impact) and destocking by a key retailer (3.9% of total ASC revenue derived in 1H17 vs. 6.5% in 1H16). Although we believe the recent rains will provide short-term reprieve to organic sales growth, we are worried about management’s ability to replace original owners of acquired businesses post their earn-out payments, with appropriately skilled staff.
