Interim Results for the six months ended 30 June 2023

02 August 2023

Accelerating revenue growth and expanding operating margin
Raising full year guidance

Accelerating organic revenue growth of 6.6%¹, broad-based across all four categories:

• AWC: 8.7%¹ with significant growth in ATT² and strong performance in Global Emerging Markets
• OC: 3.1%¹ driven by 6.5%¹ growth in Convatec ostomy products, moderated by Flexi-SealTM phasing
• CC: 7.6%¹ good operating performance supported by higher reimbursement pricing in the US
• IC: 7.5%¹ ongoing strong demand for our innovative infusion sets, as expected

Reported revenue growth was 1.1% and 2.7% on a constant currency⁴ basis reduced by the strategic exit of the hospital care activities and related industrial sales in 2022

Further expansion of the adjusted operating margin by 70 bps to 20.3%:

• Improved mix of profitability across and within categories, stronger pricing and increased productivity more than offset COGS inflation, resulting in 220bps of gross margin expansion
• Continued good progress in simplification and productivity, particularly in G&A, was more than offset by targeted investments for future growth and inflationary headwinds

Adjusted operating profit was $214.1m (H1 2022: $204.3m). Reported operating profit was $123.4m (H1 2022: $87.1m)

Further strengthening of competitive position

• Successfully launching Innovamatrix® and ConvaFoamTM in the US – positive clinical feedback
• Acquired innovative anti-infective nitric oxide technology platform – potential applications across categories
• Broadening customers and applications in IC – partnerships with Beta Bionics (iLet insulin pump in the US), AbbVie and Mitsubishi Tanabe (Parkinson’s), Medtronic (780G in the US) and Tandem (Mobi in the US)

Raising 2023 guidance to reflect growth across all categories and acceleration in AWC

• Expect organic revenue growth to be between 6.0-7.5% (previously 5.0-6.5%) and;
• Adjusted operating profit margin of at least 20.5% on a constant currency basis (previously at least 19.7%)

Karim Bitar, Chief Executive Officer, commented:

“This performance demonstrates the momentum Convatec is building - revenue growth is accelerating and we are expanding our operating margin, despite ongoing investments to drive future growth and the challenging inflationary back drop. Given the strength of performance and the encouraging outlook, particularly in AWC, we are increasing our guidance for the full year.

“We remain focused on further strengthening the business as we execute our FISBE 2.0 strategy. We have now pivoted to sustainable revenue growth and are expanding our operating margin. We are increasingly confident of delivering sustainable future growth and an operating margin in the mid-20s.”

Key Financial Highlights

• Reported diluted EPS 2.7 cents. Adjusted³ diluted EPS 6.8 cents up 4.6% with higher adjusted net finance expense3 offset by lower non-operating and tax expenses  
• Net debt3 increased by $229 million following strategic M&A investments, capex and working capital.  Leverage was 2.5x net debt3/adjusted EBITDA3 (FY 2022: 2.1x)
• Interim dividend of 1.769 cents declared – a 3% increase (H1 2022: 1.717 cents)

(1) Organic growth presents period over period growth at constant currency, adjusted for: Triad Life Sciences acquisition (Mar’22) the exit of hospital care and related industrial sales and the reconfigured business in Russia (May’22)  

(2) Triad Life Sciences was renamed Advanced Tissue Technologies (ATT) following its acquisition in mid-March 2022.  It produces products in the Wound Biologics segment, as defined by SmartTRAK.  This segment includes skin substitutes, active collagen dressings and topical drug delivery.  ATT began to contribute to the organic growth rate following the anniversary of the deal completion.  ATT accounted for 29% of AWC’s organic growth during the first half

(3) 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 33 to 38)

(4) Constant currency growth is calculated by applying the applicable prior period average exchange rates to the Group's actual performance in the respective period.

Investor and analyst presentation

The results presentation will be held in person at UBS, 5 Broadgate Circle, London, EC2M 2QS at 9am (UK time). The event will be simultaneously webcast and the link can be found here.

The full text of this announcement and the presentation for the analyst and investors meeting can be found on the ‘Results, Reports & Presentations’ page of the Convatec website www.convatecgroup.com/investors/reports.

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 https://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).