Trading update for the three months ended 30 September 2020

28 October 2020

Good Q3 performance and ongoing strategic progress

Key Points:

• Q3 Group reported revenue of $493 million was 6.5% higher year on year; up 5.6%¹ in constant currency.
  • Driven by significant growth in Infusion Care, continued strong growth in Continence & Critical Care, an improved performance in Advanced Wound Care and a flat performance in Ostomy Care.
  • COVID continued to drive less predictable demand, particularly in Advanced Wound Care and Critical Care, although underlying customer demand for the Group was encouraging.
  • Revenue for 9 months to 30 September 2020 was up 4.8% in constant currency.
• We continued to progress our transformation initiatives as we pivot to sustainable and profitable growth and implement our FISBE (Focus, Innovate, Simplify, Build, Execute) strategy.
  • We proactively chose to defer a further c.$10m of recurring transformation investments to 2021 given the ongoing COVID backdrop.
• Operating expenses continued to benefit from temporary COVID-related cost reductions; this is expected to phase out in due course.
• Better than expected Q3 performance has enabled us to revise our 2020 full year guidance¹:
  • We now expect to be towards the higher end of our constant currency revenue growth range of 2-3.5%.
    • We do not currently anticipate Q4 year-on-year revenue growth due to the impact of the skincare business disposal, challenging 2019 comparatives together with increasing uncertainty linked to rising global COVID infection rates.
  • We now expect our constant currency adjusted EBIT margin to be between 18.5-19% reflecting, in light of COVID, the proactive deferral of some recurring transformation investments into 2021 and certain operating expenses continuing to be lower, coupled with some operational gearing.

Karim Bitar, Chief Executive Officer, commented:

“We delivered a good trading performance in the third quarter.  We continued to respond well to stronger than anticipated customer and patient demand, particularly in our Infusion Care and Continence and Critical Care businesses.  We now expect to deliver revenue growth at the higher end of our guidance range and to exceed our previous margin guidance for 2020.

“Throughout this COVID pandemic our priority has been, and remains, to support and protect the patients and care givers we serve and our employees.  I want to thank our people for the dedication and resilience they are showing during these demanding times.  I am proud of how the business has reacted to the challenge, responding to the heightened needs of our customers and successfully improving the strength of our supply chain.  This has been achieved whilst also executing on our transformation initiatives and embedding the new operating model.   Notwithstanding our decision to proactively defer some additional investments to 2021, I am pleased with the strategic progress we have made. 

“There is still significant work ahead of us as we pivot to sustainable and profitable growth, but I am confident in Convatec’s long-term growth prospects.”  

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