Interim Results for the six months ended 30 June 2022

04 August 2022

Convatec Group Plc
Interim Results for the six months ended 30 June 2022

Strong revenue growth, stable adjusted operating profit and continued strategic progress

• Good financial performance in H1 2022 notwithstanding the challenging inflationary backdrop and continued investment in Innovation, Sales & Marketing
• Continued execution of FISBE (Focus, Innovate, Simplify, Build, Execute) strategy in H1, notably:
  
  o Entry into Wound Biologics1 segment; exit from non-core hospital care and related industrial sales activities
  
  o Further progress with our new product pipeline; launch of GentleCath Air Male in France and InnovaMatrix in US; acquired a minority stake in BlueWind Medical
  
  o Simplification and efficiency initiatives supporting reduction in adjusted G&A to 9.7% of sales (H1 2021: 11.1%)
  
  o Positive pricing performance and new Convatec masterbrand launched
  
  o Progress embedding ‘Convatec Cares’, our new Environmental, Social & Governance (ESG) framework
  
  
• On track to deliver full year guidance – further demonstration Convatec is pivoting to sustainable and profitable growth

Key financial highlights

;

• Strong revenue growth: Reported +3.6% although significant FX headwind. +8.0% on a constant currency4 basis and +6.4% on an organic4 basis with positive performances across all divisions
• Reported operating profit 35.7% lower primarily reflecting hospital care exit costs
• Stable adjusted2 operating profit: +0.0% and +1.1% on a constant currency3 basis despite significant COGS inflation of c.7% and investments in Sales & Marketing and R&D operating
  expense of 15% on a constant currency basis
• Adjusted2 operating profit margin was 19.6% (H1 2021: 20.3%) with price/mix, productivity improvement, G&A reduction and FX tailwind more than offset by inflation and the
  operating expense investments. Operating costs will be more evenly phased across the year in 2022 than in 2021.
• Reported diluted EPS down 43.9% principally owing to the hospital care exit cost. Adjusted2 diluted EPS down 10.0% primarily owing to treatment of US deferred tax; excluding the recognition of deferred tax assets post the acquisitions, the adjusted EPS would have been down 2.7%
• Net debt2 increased by $196 million largely owing to strategic M&A investments: leverage of 2.3x net debt2/adjusted EBITDA2 (FY 2021: 1.9x)
• Interim dividend of 1.717 cents declared (H1 2021: 1.717)

2022 outlook confirmed

Convatec is on track to deliver organic4 revenue growth of 4.0-5.5% and constant currency
adjusted operating profit3 margin of at least 18%, as indicated in March 2022, notwithstanding
the current inflationary backdrop.

Karim Bitar, Chief Executive Officer, commented:

“This performance demonstrates that Convatec is continuing to pivot to sustainable and profitable growth. Our competitive position and financial performance are strengthening as we successfully execute our FISBE strategy. Convatec has achieved strong sales growth and,
despite the significant inflationary back drop, a robust profit performance. We are confirming our guidance for the full year.”

“We remain focused on executing our strategy and are confident in Convatec’s ability to grow in line or faster than its markets and to improve its operating margin to mid-20% over time.”

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(1) Wound Biologics segment as defined by SmartTRAK. Includes skin substitutes, active collagen dressings and topical drug delivery.
(2) Certain financial measures in this document, including adjusted results above, are not prepared in accordance with International Financial Reporting
Standards ("IFRS"). All adjusted measures are reconciled to the most directly comparable measure prepared in accordance with IFRS in the Non‐IFRS Financial Information below (pages 37 to 43).
(3) Constant currency growth is calculated by applying the applicable prior period average exchange rates to the Group's actual performance in the respective period.
(4) Organic growth presents period over period growth at constant currency, adjusted for: Triad Life Sciences (Mar’22), Cure Medical (Mar’21) and Patient Care Medical (Dec’21) acquisitions; Incontinence divestment (Dec’21) and, from 31st May, the discontinuation of Hospital care and related industrial sales and the reconfigured business in Russia.

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