REG - ConvaTec Group PLC - AGM Trading Update

ConvaTecAnnouncement

12/05/2022 07:00

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RNS Number : 1879L  ConvaTec Group PLC  12 May 2022

12 May 2022

ConvaTec Group Plc

AGM trading update for the four months ended 30 April 2022

 

Good start to 2022 - No change to guidance

Further strategic progress achieved

 

ConvaTec Group Plc ("ConvaTec" or the "Group"), a global medical solutions
company, today announces a trading update for the four months ended 30 April
2022.  Group revenue increased by 4.1% on a reported basis, up 7.5% on a
constant currency basis and up 6.0% on an organic basis 1  (#_ftn1) .
ConvaTec has made a good start to the year with good underlying growth in each
of its four categories in line with our expectations.

 

In Advanced Wound Care we achieved mid-single digit organic revenue growth
overall, with a strong performance in Global Emerging Markets, good
performance in Europe and stable performance in North America.

 

In Ostomy Care, organic revenue growth was low-single digit.  Good growth in
ConvaTec products, particularly in the Global Emerging Markets, was partially
offset by further planned SKU rationalisation including at our UK AmCare
business.  Overall we are improving the mix and consequently the margins.

 

Our Continence and Critical Care category achieved low-single digit organic
revenue growth.  We achieved mid-single digit organic growth in Continence
Care, driven by the recovery in new patient starts coupled with a good
performance from the Cure portfolio.  This was moderated by a slightly
negative performance within our Critical Care category.  This was anticipated
given the strong performance in 2021 when there was high demand owing to
COVID-19.

 

Infusion Care continued to deliver strong double-digit organic revenue
growth.  The performance was driven by continued high levels of demand for
our differentiated infusion sets used in Automated Insulin Delivery systems.

Strategic decision to exit from hospital care

Consistent with the Group's FISBE (Focus-Innovate-Simplify-Build-Execute)
strategy and following a strategic review of the Critical Care business, today
ConvaTec announces it will be withdrawing from its hospital care activities 2 
(#_ftn2) and related industrial sales 3  (#_ftn3) during the remainder of
2022.  These low margin activities being exited, generated $101m of revenue
in 2021.

 

The hospital care and industrial sales production at the Group's sites will be
phased out over the remainder of the year. Given the geopolitical situation in
the region, it has become increasingly difficult for the Group to continue
manufacturing in Belarus; therefore, the factory there, which manufactures
products almost entirely for hospital care, will close on 31 May 2022.

 

Given this phased exit of the hospital care and related industrial sales
products, reported revenue in 2022 is expected to be approximately $20-30m
lower than 2021 and adjusted EBIT is expected to reduce by $3-5m. There is
also expected to be a one-off adjusted P&L charge of approximately $55m,
which will be incurred in 2022, and a cash cost of approximately $25m arising
mainly in 2022.

 

Following the exit of Hospital Care, Convatec will be almost entirely focused
on higher-growth chronic care markets with improved margins and higher levels
of recurring revenue.

 

Additional strategic progress

On 14 March we completed the acquisition of Triad Life Sciences enabling us to
enter the large and rapidly growing wound biologics segment 4  (#_ftn4) (see
RNS dated 28 January 2022).  The Triad team, current portfolio and product
pipeline have now transitioned to be part of our Advanced Wound Care business
and the name has been changed to ConvaTec Advanced Tissue Technologies.  The
integration is progressing well including payment of the first $25m milestone
(triggered by the effective date of the new reimbursement code for the
InnovaMatrix FS product).

 

In March we launched Gentle Cath(TM) Air Male in France.   The product is a
compact version of our Gentle Cath(TM) brand, that incorporates our
proprietary Feel Clean(TM) technology, designed for discretion and enhanced
user experience.  Although still early days the initial reaction from
healthcare providers and consumers has been positive.

 

On 9 May we announced we had invested $30m in BlueWind Medical, an innovative
developer of the RENOVA iStim implantable tibial neuromodulation device.
Neuromodulation is a cutting-edge treatment for overactive bladder
conditions.  The investment supports ConvaTec's FISBE strategy by securing a
relationship with a company developing an innovative solution for the US
continence market.

Full Year Guidance

We continue to expect organic revenue growth of between 4.0% and 5.5% and a
constant currency EBIT margin of at least 18%.  Our expectations for
inflation have increased, with COGS inflation now estimated at approximately
8-9% (previously expected 5%). However, we are managing these cost challenges
by driving our simplification and efficiency agenda, leveraging our pricing
center of excellence and proactively managing our mix.  Consequently, our
full year 2022 guidance is unchanged.

 

Our growth prospects are attractive and are underpinned by continued
improvement in execution and a more robust new product pipeline.  Please join
us at our Technology & Innovation event on 17 May at 2pm to learn more
about our innovation pipeline and capabilities.   If you would like to
receive the webcast details please email IR@Convatec.com
(mailto:IR@Convatec.com)

 

***

Contacts

 Analysts & Investors      Kate Postans, Vice President of Investor Relations & Corporate      +44 (0) 7826 447807
                           Communications

                                                                                               ir@convatec.com (mailto:ir@convatec.com)
 Media                     Buchanan: Charles Ryland / Chris Lane                               +44 (0)207 466 5000

 

About ConvaTec

ConvaTec is a global medical products and technologies company focused on
solutions for the management of chronic conditions, with leading market
positions in advanced wound care, ostomy care, continence and critical care,
and infusion care. Our products provide a range of clinical and economic
benefits including infection prevention, protection of at-risk skin, improved
patient outcomes and reduced total cost of care. To learn more about ConvaTec,
please visit www.convatecgroup.com (http://www.convatecgroup.com)

 

 

 1  (#_ftnref1) 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  (#_ftnref2) The higher margin highly differentiated Flexi-Seal™ FMS
portfolio of products in Critical Care will be retained (2021 Revenue: $77m).

 3  (#_ftnref3) These Industrial Sales previously featured in Infusion Care
category given B2B in nature.  (2021 Revenue: $22m)

 4  (#_ftnref4) SmartTRAK Wound Biologics segment includes skin substitutes,
active collagen dressings and topical drug delivery

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