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Ascendis Health said on Friday it has placed one of its most important subsidiaries into business as it seeks relief amid an ongoing dispute with the South African Revenue Service (SARS).
The group had raised a R67 million provision to fully cover its potential liability of its Surgical Innovations business, which distributes life-saving surgical and acute care medical equipment and consumables, during its six months to end-December. It said on Friday despite a formal objection it had been found liable for the full amount, which was payable "short order".
The provision was related to value added tax for the 2018 to 2020 tax period.
"This approach from SARS, together with the actions of another non-operational creditor, has placed significant financial strain on the business to the extent where the board of directors of Surgical Innovations ... has had no alternative but to resolve to voluntarily business rescue proceedings," Ascendis said.
Daniel Terblanche from DT Consult RSA has been appointed as the business rescue practitioner, with the board of the division confident it will emerge from business rescue. Surgical Innovations had a "a multi-period history of double-digit revenue growth, a defensible business model and a leading portfolio of products", the group said.
"The business rescue process will provide Surgical Innovations with a temporary reprieve to resolve these disputes with SARS and the non-operational creditor and will enable the operational business to continue functioning without any significant disruption," it said.
Ascendis, valued at less than R400 million on the JSE, has been battling for years to escape a crippling debt pile, board battles, but had recently announced it had finally got a handle on its debt, and was in a position to focus on its operations and growth.
READ | Ascendis slashes costs, but hints of JSE delisting
Surgical Innovations is the largest division within the group's medical devices segment, which made up almost 70% of its total revenue in its half-year to end-December. The group's other segment is consumer brands, which includes vitamin and supplement offerings under Solal, Bettaway, Vitaforce and MenaCal.
In March, CEO Carl Neethling had said during an investor presentation that business rescue was a potential option for the Surgical Innovations division.
"We have not seen a collaborative approach with SARS, we've experienced obstructive behaviour that has been extremely disappointing and destructive for the group," said Neethling at the time. "There are audits that are ongoing, this has been an all-consuming process for the management teams."
The group also said it was locked into a historical R22-million annual ease expense for its Surgical Innovations business, which was "three times the market rate, something that we cannot absorb any longer".
"Several options are being considered, these include litigation, and or business rescue, arbitration, and continued negotiations."
