TIDMCTEC
RNS Number : 3051T
ConvaTec Group PLC
14 November 2023
14 November 2023
Convatec Group Plc
Trading update for the ten months ended 31 October 2023
Strong sales growth continued with margin expansion on track
Convatec, a global medical products and technologies company,
announces its trading update for the ten months ended 31 October
2023. Revenue increased by 6.7% on an organic basis(1) . On a
reported basis revenue rose by 2.5%, impacted by the strategic exit
of the hospital care activities and related industrial sales in
2022. On a constant currency basis revenue increased by 2.6%.
In Advanced Wound Care ('AWC'), organic growth was high-single
digit, consistent with the performance in the first half of the
year, with a strong performance in Global Emerging Markets, good
growth in Europe and North America enhanced by the contribution of
InnovaMatrix(2) , our next-generation placental extracellular
matrix product.
In Ostomy Care ('OC') organic growth was mid-single digit. Sales
growth from Convatec's Ostomy products performed in line with the
first half, with strong growth in Global Emerging Markets, good
growth in North America and key European markets. As expected, the
negative impact of Flexi-Seal(3) moderated to a mid-single digit
decline for the year to date, as the tough COVID comparatives
normalised and as the business became sole supplier to the
HealthTrust Performance Group, a major GPO, in the US.
In Continence Care ('CC'), organic growth was mid to high-single
digit with continued strong performance on customer satisfaction,
retention and pricing in the US. The lower rate of growth than the
first half was phasing, as expected, and in line with our guidance
of mid to high-single digit growth for the year.
In Infusion Care ('IC'), organic growth was high-single digit,
building on the first half performance. Underlying demand for
Convatec's infusion sets remained strong with the market responding
positively to recent new insulin pump launches, and as the business
continued to expand outside of diabetes. We note the recent
extensive coverage regarding GLP1s and confirm that we do not
expect any material impact on our business. GLP1s(4) are deemed
effective for patients who retain the ability to produce insulin,
whereas our products serve patients on insulin-intensive therapy
who no longer produce sufficient insulin endogenously.
Strategic progress over the last four months
-- In AWC, our new product portfolio continued launching
successfully and drove our organic growth as expected.
-- In OC, the development of our new one-piece convex pouching
system, Esteem Body(TM) , is on track to start launching in early
2024 in the US and Europe.
-- In CC, in France we began the launch of our new compact
catheter, GentleCath Air(TM) for Women with FeelClean(TM)
Technology. This technology is designed for urethral protection and
to reduce the risk of UTIs.
-- In IC, we continued to diversify, supporting several new
launches. BetaBionics' iLet pump and Medtronic's 780G pump are
progressing well, while Tandem's Mobi pump began rolling out in the
US in Q3. AbbVie's Parkinson's disease therapy launched in Japan
and regulatory approvals for other key global markets are in
process.
-- In quality and operations, our plant network optimisation is
progressing well, with the migration from the EuroTec facility, in
the Netherlands, to Slovakia and a restructuring of activities in
Switzerland.
-- Two acquisitions were completed in the period, for a combined
consideration of $28 million, to further strengthen our Home
Services Group in the US.
-- To accelerate our simplification and productivity agenda, in
our Global Business Services, we opened a new facility in Kuala
Lumpur to provide 24-7 support to the group, started the migration
of HR services and created a new IT Centre of Excellence.
On track to deliver guidance
We now expect organic revenue growth for 2023 to be between
6.75% and 7.5% (previously 6.0%-7.5%). Adjusted operating profit
margin is expected to expand to at least 20.5%, on a constant
currency basis.
Karim Bitar, the Chief Executive Officer, commented:
"We are pleased with the execution of our FISBE strategy this
year. Convatec has pivoted to a higher level of organic sales
growth over recent years. We are on track to deliver a mid-20s
adjusted operating margin in 2026 or 2027, and double-digit
compound growth in EPS and free cash flow, from 2024 onwards."
***
Notes
Technical guidance
- Based on FX rates to date and spot for the remainder of the
year, the foreign exchange impact on 2023 revenue growth is
currently not material but there is a headwind to 2023 adjusted
operating margin of 60bps.
- Guidance on interest expense, tax rate and debt leverage is unchanged:
o Interest expense towards the top of the $70-80m range.
o Adjusted book tax rate at c.24%.
o Net debt/adjusted EBITDA leverage at year end to be
approximately 2.3x.
Conference Call details
A conference call to discuss the trading update will be held for
analysts and investors at 8:30am GMT. Details are included
below:
-- UK Wide: +44 (0) 33 0551 0200
-- USA Local: +1 786 697 3501
-- Password: Quote " Convatec - Trading Update" when prompted by the operator
Footnotes
Organic growth is calculated by applying the applicable prior
period average exchange rates to the Group's actual performance in
the respective period and excluding acquired and
disposed/discontinued businesses
2 Triad Life Sciences, now known as Advanced Tissue Technologies
(ATT), included in organic growth from 1 April 2023
3 Faecal management system, which was moved to Ostomy Care at
the start of this year
(4) At the moment Glucagon-like Peptide-1 receptor agonists
(GLP1s) are not FDA or EMA approved for patients with type 1
diabetes. The ADA (American Diabetes Association) does not advocate
their use in type 1 diabetes.
Contacts
Kate Postans, Vice President,
Analysts & Investor Relations & Corporate
Investors Communications +44 (0) 7826 447807
Sheebani Chothani, Investor +44 (0) 7805 011046
Relations & Corporate Communications ir@convatec.com
Manager
Buchanan: Charles Ryland / Chris
Media Lane +44 (0)207 466 5000
About Convatec
Pioneering trusted medical solutions to improve the lives we
touch: Convatec is a global medical products and technologies
company, focused on solutions for the management of chronic
conditions, with leading positions in advanced wound care, ostomy
care, continence care, and infusion care. With around 10,000
colleagues, we provide our products and services in almost 100
countries, united by a promise to be forever caring. Our solutions
provide a range of benefits, from infection prevention and
protection of at-risk skin, to improved patient outcomes and
reduced care costs. Group revenues in 2022 were over $2 billion.
The company is a constituent of the FTSE 100 Index (LSE:CTEC). To
learn more about Convatec, please visit
http://www.convatecgroup.com
Forward Looking Statements
This document includes certain forward-looking statements with
respect to the operations, performance and financial condition of
the Group. Forward-looking statements are generally identified by
the use of terms such as "believes", "estimates", "aims",
"anticipates", "expects", "intends", "plans", "predicts", "may",
"will", "could", "targets", continues", or their negatives or other
similar expressions. These forward-looking statements include all
matters that are not historical facts.
Forward-looking statements are necessarily based upon a number
of estimates and assumptions that, while considered reasonable by
the Company, are inherently subject to significant business,
economic and competitive uncertainties and contingencies that are
difficult to predict and many of which are outside the Group's
control. As such, no assurance can be given that such future
results, including guidance provided by the Group, will be
achieved. Forward-looking statements are not guarantees of future
performance and such uncertainties and contingencies, including the
factors set out in the "Principal Risks" section of the Strategic
Report in our Annual Report and Accounts, could cause the actual
results of operations, financial condition and liquidity, and the
development of the industry in which the Group operates, to differ
materially from the position expressed or implied in the
forward-looking statements set out in this document. Past
performance of the Group cannot be relied on as a guide to future
performance.
Forward-looking statements are based only on knowledge and
information available to the Group at the date of preparation of
this document and speak only as at the date of this document. The
Group and its directors, officers, employees, agents, affiliates
and advisers expressly disclaim any obligations to update any
forward-looking statements (except to the extent required by
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