Convatec Group Plc Trading update for the ten months ended 31 October 2022
10 November 2022
Good sales growth sustained
Organic growth guidance increased for 2022
Convatec Group Plc ("Convatec" or the "Group"), a global medical products and technologies company, today announces a trading update for the ten months ended 31 October 2022. Group revenue increased by 2.4% on a reported basis (H1: 3.6%) impacted by foreign exchange movements. On a constant currency basis revenue was up 7.8% (H1: 8.0%) and was up 6.3% on an organic basis1 (H1: 6.4%). Following sustained good sales growth, guidance for 2022 organic revenue growth has been increased to 5.4% to 5.8% (previously 4.0% to 5.5%.)
In Advanced Wound Care, organic revenue growth was high single-digit for the first ten months, broadly in line with the first half year. In North America the limited position in foam continued to impact performance ahead of the launch of ConvaFoam in Q4. The strong performance in Global Emerging Markets and good performance in Europe continued.
In Ostomy Care, organic revenue growth was low single-digit for the first ten months, as expected and consistent with the first half year. Good growth in Convatec products was achieved, particularly in the Global Emerging Markets. The growth in Europe and North America continued to be impacted by planned rationalization, leading to improvements in mix and consequently margin.
In Continence and Critical Care, organic revenue growth for the first ten months was mid single-digit, in line with the first half year. The growth in Continence Care improved in the second half with better supply chain management. The organic growth in the critical care component (which is only the Flexi-sealTM portfolio following the exit of hospital care), declined in the second half. This was as expected, given it is against strong COVID-19 driven comparatives.
In Infusion Care, organic revenue growth was double-digit for the first ten months, slightly lower than in the first half year. Underlying demand for our infusion sets remains strong and we continue to expect at least high single-digit growth for the full year. Growth in the remainder of the year will be lower reflecting the order phasing and strong demand seen year to date.
Strategic progress over the last four months
The exit from Hospital Care and related industrial sales is proceeding as planned. As previously indicated, we closed our Belarus plant on 31 May 2022 and the related production at other sites will cease by the end of this year.
The integration of Triad Life Sciences and our entry into the attractive wound biologics segment2 is progressing well. It is still early days but we are pleased with the performance. Following the new reimbursement code for the InnovaMatrix FS product and the recent regulatory clearance of the InnovaMatrix powder product, we have now paid both of the two $25 million transaction milestones.
In the spring we started launching Gentle CathTM Air Male in France and the UK to enter the large and rapidly growing compact segment in Europe; with performance in line with expectations. Furthermore, we are on track to start launching ConvaFoam in the USA this quarter.
We continue to strengthen Convatec’s position by effectively executing our FIBSE strategy and will update the market further at the Capital Markets Event on 17 November.
Full year guidance updated
Given the sustained good sales growth so far this year, we now expect organic revenue growth for 2022 to be between 5.4% and 5.8% (previously 4-5.5%.)
Inflation in raw materials and freight has moderated in recent months, but inflation in utilities and labour has increased. Overall, we continue to expect COGS inflation of 8-9% for the year and we continue to expect to deliver constant currency adjusted operating profit margin of at least 18%.
Foreign exchange rate movements have been volatile in recent months. The FX impact on 2022 is currently estimated to be a ~6% headwind on revenue growth with a ~90bps tailwind to the EBIT margin. These estimates are based on actual rates to 31 October and spot rates for the remainder of the year. On this basis, we expect to publish an adjusted operating profit margin of over 19%.
1 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 SmartTRAK Wound Biologics segment includes skin substitutes, active collagen dressings and topical drug delivery
Analysts & Investors
Kate Postans, Vice President of Investor Relations & Corporate Communications
+44 (0) 7826 447807 firstname.lastname@example.org
Buchanan: Charles Ryland / Chris Lane
+44 (0)207 466 5000
Details about our Capital Markets Event – 17 November 2022
Convatec will be hosting a Capital Markets Event for sell-side analysts and institutional holders on Thursday, 17 November 2022 at 2:00pm. The event will be held at The Auditorium – UBS, 5 Broadgate, London, EC2M 2QS
Presentations from CEO Karim Bitar, CFO Jonny Mason and other members of Convatec’s Executive Leadership Team (CELT) will provide insight into:
▪ FISBE strategy
▪ Markets and future growth opportunities
▪ Plans on how the company will deliver its medium-term targets
Pioneering trusted medical solutions to improve the lives we touch: Convatec is a FTSE 100 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 and critical care, and infusion care. Group revenues in 2021 were over $2 billion. With around 10,000 colleagues, we provide our products and services in over 100 countries, united by a promise to be forever caring. Our products provide a range of benefits, from infection prevention and protection of at-risk skin, to improved patient outcomes and reduced care costs. 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 applicable law or regulation).
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