REG - ConvaTec Group PLC - Trading Update for ten months to 31 October 2023

ConvaTecAnnouncement

14/11/2023 07:15

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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

 Analysts & Investors      Kate Postans, Vice President, Investor Relations & Corporate                  +44 (0) 7826 447807
                           Communications
                           Sheebani Chothani, Investor Relations & Corporate Communications Manager      +44 (0) 7805 011046

                                                                                                         ir@convatec.com (mailto:ir@convatec.com)
 Media                     Buchanan: Charles Ryland / Chris 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 (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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