REG - ConvaTec Group PLC - Annual Results
06/03/2024 07:00
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RNS Number : 7216F ConvaTec Group PLC 06 March 2024
Annual Results for the twelve months ended 31 December 2023
Accelerating revenue growth, strong profit and cash generation
Raising medium term revenue guidance
Accelerating organic revenue growth of 7.2%(1), broad-based across all four
chronic care categories
· AWC(2): 9.5%(1) driven by strong performance in antimicrobials and
growing position in wound biologics segment(3)
· OC(2): 4.2%(1) driven by 6% growth in Convatec ostomy products with
strength in Global Emerging Markets
· CC(2): 6.5%(1) excellent customer service and higher reimbursement
pricing in the US
· IC(2): 8.7%(1) continued strong demand for infusion sets with
multiple product launches in 2023
Reported revenue was $2,142m (2022: $2,073m), up 3.4% and 3.2% on a constant
currency(4) basis, lower than organic because of the strategic exit of the
non-core hospital care activities and related industrial sales in 2022
Further operating margin expansion
· Strong adjusted gross margin expansion of 150bps to 61.6% principally
driven by improved mix and stronger pricing coupled with further productivity,
partially offset by inflation and FX
· Adjusted operating profit margin of 20.2% (20.8% on a constant
currency basis). Expansion of 70 bps (130 bps on a constant currency basis)
with further progress in simplification and productivity of operating costs
· Adjusted operating profit up 7.0% to $432m. Reported operating
profit increased to $263m (2022: $207m)
Delivering EPS and cashflow growth
· Adjusted diluted EPS increased 6.1% to 13.4 cents. Reported diluted
EPS increased 106% to 6.3 cents
· Free cash flow to equity(5) rose to $228m (2022: $105m) resulting in
equity cash conversion(5) of 83%
Strong new product pipeline - further strengthening competitive position
· Growing InnovaMatrix(®) and ConvaFoam(TM) in the US - positive
clinician feedback
· Acquired innovative anti-infective nitric oxide technology platform
· Launching new compact hydrophilic catheter, GentleCath(TM) Air for
Women, in Europe
· 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)
Confidence in outlook - improving earnings and cash generation
· In 2024: we expect 5-7% organic revenue growth, adjusted operating
profit margin of at least 21.0% on a constant currency basis and double-digit
growth in EPS and free cash flow to equity
· Medium-term: Based on the strength of the new product pipeline and
improvements in commercial execution we have raised our organic revenue growth
expectation to 5-7% p.a. (previously 4-6%), we also expect to reach a mid
20's% adjusted operating profit margin by 2026 or 2027 and to deliver
double-digit compound annual growth in EPS and free cash flow to equity
Karim Bitar, Chief Executive Officer, commented:
"Convatec's revenue growth accelerated and was broad-based across all our
categories. We further expanded our operating margin and increased earnings
per share and free cash flow to equity.
"We remain focused on executing our FISBE 2.0 strategy. Given our innovative
new product pipeline and strengthened competitive position, Convatec has
pivoted to a higher level of organic sales growth. We are on track to deliver
our medium-term margin guidance leading to double-digit compound growth in EPS
and free cash flow to equity."
Key financial highlights
Reported Adjusted
FY 2023 FY 2022 Change FY 2023 FY 2022 Change CC Change
Revenue $2,142m $2,073m 3.4% $2,142m $2,073m 3.4% 3.2%
Operating profit $263m $207m 26.7% $432m $404m 7.0% 10.2%
Operating profit margin 12.3% 10.0% 2.3%pts 20.2% 19.5% 0.7%pts 1.3%pts
Diluted EPS 6.3 cents 3.1 cents 105.9% 13.4 cents 12.6 cents 6.1%
Dividend per share 6.229 6.047 3.0%
· Net debt(4) increased by $61m to $1,129m. Net debt to EBITDA ratio
was maintained at 2.1x after $179m of M&A investment and $129m in capex
investment to drive future growth, coupled with $111m dividend payment
· The Board recommends a final dividend of 4.460 cents resulting in
full year dividend of 6.229 cents, an increase of 3%
Percentage movements throughout this release are calculated on actual
unrounded numbers.
(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) and the acquisition of A Better Choice Medical (Jul'23)
(2) AWC is Advanced Wound Care; OC is Ostomy Care; CC is Continence Care and
IC is Infusion Care
(3) Wound Biologics segment, as defined by SmartTRAK. This segment includes
skin substitutes, active collagen dressings and topical drug delivery. Triad
Life Sciences was renamed Advanced Tissue Technologies (ATT) following its
acquisition in mid-March 2022. ATT began to contribute to the organic growth
rate following the anniversary of the deal completion.
(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.
(5) 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 21 to 26). Equity cash conversion is a new
non-IFRS financial measure introduced in the year and is calculated as Free
cash to equity/Adjusted net profit.
Contacts
Analysts & Investors Kate Postans, Vice President of Investor Relations & Corporate +44 (0) 7826 447807
Communications
+44 (0) 7805 011046
Sheebani Chothani, Investor Relations & Corporate Communications Manager
ir@convatec.com (mailto:ir@convatec.com)
Media Buchanan: Charles Ryland / Chris Lane +44 (0)207 466 5000
Investor and analyst presentation
The results presentation will be held in person at The Auditorium, Chartered
Accountants' Hall, One Moorgate Place, London EC2R 6EA at 9.00am (UK time)
today. The event will be simultaneously webcast and the link can be found here
(https://stream.brrmedia.co.uk/broadcast/65c368753fb3f51bf67d309c) .
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
(http://www.convatecgroup.com/investors/reports) .
Forthcoming events
Trading update for the 4 months ending 30 April 2024: 16 May 2024
Interim results: 30 July 2024
Dividend calendar
Ex Dividend 25 April 2024
Record Date 26 April 2024
AGM 16 May 2024
Payment date 23 May 2024
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. Convatec's revenues in 2023
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).
Chief Executive's Review
Convatec continued to successfully execute its FISBE 2.0 strategy,
strengthening its competitive position and delivering on our forever caring
promise for patients and customers. The various strategic initiatives actioned
during the period enhanced the quality of the business and improved our
financial performance and prospects.
Attractive growth prospects
Convatec operates in four categories of the structurally-growing, attractive
chronic care markets. These have a combined market size of $14 billion p.a.
and market growth rates of between 4-8% p.a. We are among the leaders in the
categories in which we operate and expect to grow revenue in line with or
faster than each market.
We serve a diverse set of chronic care markets, producing high-volume,
high-quality consumables which our customers rely on, resulting in attractive
recurring revenue. This diversity provides resilience and synergies, notably
in areas such as biomaterial sciences, product and clinical development,
automated manufacturing and shared supply chain capabilities. Consistent with
our FISBE 2.0 strategy we have been investing in our innovation pipeline,
building mission-critical capabilities, expanding capacity and increasing our
resilience.
A chronic care focused business delivering sustainable and profitable growth
We continued to execute our FISBE strategy, strengthening our competitive
position and our ability to consistently deliver sustainable and profitable
growth. After a period of catch-up investment, equity cash conversion(5) has
now normalised and this strong cash generation will support continued organic
and inorganic investment for growth, consistent with our capital allocation
priorities.
Over the course of 2023, we remained focused on delivering for our customers.
Our continued focus on innovation resulted in six new products launching and
the R&D function was strengthened by an increased emphasis on clinical and
regulatory. We enhanced both our innovation pipeline and service proposition
using cash generated to acquire three businesses.
We further simplified our organisation, closed a small factory in the
Netherlands and opened a new Global Business Services centre in Kuala Lumpur,
which in combination with Lisbon and Bogota, will provide 24x7 support. Our
Centres of Excellence continued to positively impact the business, with better
pricing and greater salesforce productivity as the Customer Relationship
Management platform roll-out was completed for our top 12 markets.
Further details on the progress made under each pillar can be found on pages 6
and 7.
We achieved a strong financial performance
Group reported revenue of $2,142m rose 3.4% (2022: $2,073m), and 3.2% on a
constant currency basis, lower than organic growth because of the strategic
exit of the non-core hospital care activities and related industrial sales in
2022. Organic revenue growth was 7.2%, in line with our latest guidance.
Adjusted operating profit rose 7.0% (10.2% on a constant currency basis).
Adjusted operating profit margin was 20.2% (2022: 19.5%) with mix/price,
operations productivity and G&A spend reduction more than offsetting
significant inflation, continued investment in R&D and commercial
capabilities, as well as a 60 bps foreign exchange headwind. Over a two-year
period Convatec has delivered 250bps of improvement in its adjusted operating
profit margin.
In 2022, the Group incurred costs relating to the exit of the hospital care
business. As a result, and also benefitting from a higher gross margin, the
reported operating profit increased 26.7% over the previous year.
Adjusted diluted EPS increased by 6.1% primarily due to improvements in
adjusted operating profit and a reduction in non-operating expenses more than
offsetting an increase in finance costs from higher market interest rates.
Reported diluted EPS increased by 105.9% as the prior year was impacted by
higher adjusting items mostly relating to the exit of hospital care and the
Triad acquisition.
Capital expenditure during 2023 was $129m (2022: $144m) as we continued to
invest for future growth, expanding our manufacturing lines and developing new
digital technologies to deliver enhanced customer experiences .
Free cash flow to equity increased to $228m (2022: $105m). Equity cash
conversion (free cash flow to equity as a proportion of adjusted net profit)
was 83% (2022: 41.0%) primarily driven by a significantly lower working
capital outflow, the increase in EBITDA and lower capital expenditure.
Net debt increased by $61m to $1,129m, following three acquisitions and the
payment of the first year earnout for Triad Life Sciences acquisition,
together totaling $179m. Our net debt to EBITDA ratio remained unchanged at
2.1x. We continue to target leverage of 2x over time but are comfortable
temporarily going higher for appropriate M&A opportunities.
Revenue
Revenue increased by 3.4% on a reported basis, and by 3.2% on a constant
currency basis. Adjusting for M&A and business restructuring(1) Group
revenue rose 7.2% on an organic basis. This growth was broad-based with strong
growth in Advanced Wound Care, Infusion Care and Continence Care and good
growth in Ostomy Care.
2023 2022 Reported growth / (decline) Foreign Exchange impact Constant Currency(2) growth / (decline) Organic(4) growth
$m $m
Revenue by Category
Advanced Wound Care 695.3 620.7 12.0% 0.4% 11.6% 9.5%
Ostomy Care 608.3 583.0 4.3% 0.1% 4.2% 4.2%
Continence Care 457.2 425.4 7.5% 0.1% 7.4% 6.5%
Infusion Care 370.9 341.1 8.7% 0.0% 8.7% 8.7%
Revenue excluding hospital care exit 2,131.7 1,970.2 8.2% 0.2% 8.0% 7.2%
Exit of hospital care and related industrial sales(5) 10.7 102.3 (89.5)% n/a n/a n/a
Total 2,142.4 2,072.5 3.4% 0.2% 3.2% 7.2%
(5) Relates to residual stock being sold during 2023
Advanced Wound Care
Revenue of $695 million increased 12.0% on a reported basis or 11.6% on a
constant currency basis. On an organic basis revenue rose by 9.5%. This
performance was enhanced by InnovaMatrix(®), which contributed to organic
growth from April.
The business achieved strong sales growth in North America supported by the
growing position in the wound biologics segment(3), broad-based double-digit
growth in GEM despite some market softness in China in H2 and good growth in
Europe. Continued leadership in the antimicrobial segment enhanced the overall
performance of the division.
We continued to make strategic progress in AWC during 2023, strengthening our
position in the US with the launch of ConvaFoam(TM). Reaction from healthcare
professionals has been encouraging with a number of ongoing evaluations as
well as conversions from competitor product to ConvaFoam. InnovaMatrix(®)
continued to achieve strong momentum in the large and rapidly growing wound
biologics segment(3). Feedback from clinicians has been positive.
In 2024 we will focus on:
· Rolling-out recent launches to new markets:
o Launching ConvaFoam(TM) in Europe
o Launching new iterations of InnovaMatrix(®) in the US
· Continuing to develop the future 2025+ AWC pipeline with:
o a new nitric oxide dressing, a new enhanced hydrofibre dressing and
ConvaVac(TM)
· Improving commercial performance:
o Further leverage Salesforce Effectiveness Centre of Excellence (CoE) in
our focus markets
o Further expand ATT salesforce and build synergies with existing AWC sales
team
Ostomy Care
Revenue of $608 million was up 4.3% on a reported basis and increased 4.2% on
constant currency and organic bases. The Ostomy Care category comprises
Convatec ostomy products, our Flexi-Seal(TM) sales (fecal management system
product) and non-Convatec ostomy products.
We are making positive progress with the turnaround in Ostomy Care,
particularly with Convatec ostomy products, where revenue grew 6.3%. The
business achieved double-digit growth in the Global Emerging Markets as it
continued to win share. In North America 180 Medical grew ostomy sales well
from a small base and New Patient Starts remained stable. There was a good
performance in Europe although, as expected, further planned declines in
non-Convatec product sales via Amcare(TM) UK partially offset this positive
performance. The launch of the ESENTA(TM) brand of accessories continued to
progress well. As anticipated, Flexi-Seal(TM) finished close to flat for the
full year, having declined in the first half when it was lapping tough
comparatives.
Strategic progress continued in the ostomy business, as the team prepared for
the launch of our new one-piece convex pouching system, Esteem Body(TM) with
Leak Defense(TM) in the US and Europe. Leak Defense(TM) refers to the
exclusive combination of Convatec's gold-standard adhesives (Durahesive(®)
and Modified Stomahesive(®)) coupled with the comprehensive, soft convexity
range, which together are designed to adapt to the body for a secure seal that
can help prevent leaks and achieve the desired wear time.
In 2024 we will focus on:
· Continuing to progress our innovation pipeline:
o Launching our new Esteem Body(TM) in the US and certain European markets
o Developing a new Flexi-Seal(TM ) Air product
o Developing a 2-piece Body portfolio for the future
· Further improving commercial execution across the continuum of care:
o Bringing all the products we sell in the fast-growth accessories market
under the ESENTA(TM) brand
o Improving new patient starts in the US, with continued collaboration with
Home Service Group ('HSG')
o Enhancing engagement with patients, through Me+, and the interactions with
healthcare professionals
Continence Care
Revenue of $457 million rose 7.5% on a reported basis and 7.4% on a constant
currency, with modest incremental contribution from the two acquisitions. On
an organic basis revenue rose 6.5%.
A strong operating performance was supported by higher reimbursement pricing
in the US during the year and increasing patient adoption of Convatec products
(Cure Medical and GentleCath(TM)). The quality and breadth of the Convatec
product portfolio have resulted in it growing as a proportion of overall
sales, which is beneficial to the gross margin. In the US home service market
(direct to consumer) we continued to gain share by providing world-class
customer service.
We further strengthened the Home Service Group by acquiring A Better Choice
Medical Supply LLC (Michigan) and All American Medical Supply Corp (New York),
two North American continence care service businesses.
We made further progress building international sales and management teams,
which has resulted in incremental sales in GEM and Europe which, although
modest, were supportive to overall growth. We launched our new and improved
GentleCath(TM) Air for Women 2.0 in Q4 2023 in France which has been well
received by healthcare professionals and customers.
In 2024 we will focus on:
· Rolling-out launches to new markets:
o Launching GC Air for Women in additional European markets and the US
o Introducing Cure products into European and GEM markets
· Further improving commercial execution globally:
o Integrating recent HSG acquisitions in the US
o Continuing to build out and strengthen commercial teams in Europe
o Leveraging improved customer service performance at Amcare UK
Infusion Care
Revenue of $371 million increased 8.7% on reported, constant currency and
organic bases. This growth was primarily driven by sustained strong demand for
our innovative infusion sets for people with diabetes. We supported our
customers with multiple product launches during 2023: Medtronic's 780G insulin
pump approval in the US, Beta Bionics iLet bionic pancreas system launch in
the US and soft launch of Tandem's Mobi pump.
Our neria(TM) brand infusion sets, for non-insulin therapies, achieved strong
double-digit growth, and included the launch of AbbVie's new Parkinson's drug
therapy in Japan.
In 2024 we will focus on:
· Delivering for our diabetes customers given the continued strong
demand for our infusion sets:
o Scaling up MioAdvance Extended Wear Infusion Set following US launch of
Medtronic's 780G
o Supporting Tandem with the full launch of Mobi in the US
o Supporting Beta Bionics following its iLet launch in the US
o Supporting Ypsomed as they grow their durable pumps business
· Continuing to diversify patient base
o Providing Neria sets for AbbVie Parkinson's launch in Europe and preparing
for US launch, expected in 2024
o Increasing penetration with European distributors of infusion sets for
European palliative care and pain management
· Enhancing operations:
o Increasing production capacity for future demand
o Optimising existing production lines and further improving quality
Historical revenue data*
* Provided to reflect revised category definitions announced in March'23 ,
following the exit of hospital care.
Reported Revenue $m 2019 2020 2021 2022 2023
Advanced Wound Care 570 547 592 621 695
Ostomy Care 569 590 615 583 608
Continence Care 342 363 405 426 457
Infusion Care 238 283 316 341 371
Group 1,719 1,783 1,928 1,971 2,131
Revenue from hospital care and industrial sales 108 112 110 102 11
Total Reported Group 1,827 1,895 2,038 2,073 2,142
Organic(4) growth/(decline) % 2019 2020 2021 2022 2023
Advanced Wound Care 0.5% (2.7)% 9.2% 6.8% 9.5%
Ostomy Care 1.0% 4.5% 2.0% 1.7% 4.2%
Continence Care 5.4% 5.4% 3.4% 5.1% 6.5%
Infusion Care 2.2% 18.5% 11.5% 9.2% 8.7%
Group 2.3% 4.2% 5.3% 5.6% 7.2%
Executing on our FISBE strategy
The execution of our FISBE (Focus, Innovate, Simplify, Build, Execute)
strategy is progressing well.
Focus
We continued to focus on our top 12 markets, achieving organic revenue growth
of 8.4% compared with 7.2% globally. The US was our largest market and grew
strongly, supported by the contribution from InnovaMatrix(®). China, whilst
still a small part of the overall group, remained a key strategic market where
we continued to strengthen our position, growing double-digit and winning
market share in both Ostomy Care and Advanced Wound Care.
Having laid the foundations for customer net promoter score (NPS) insight
gathering, through a series of pilots in 2023, during 2024 we will focus on
embedding actionable NPS insight more broadly across the business.
Innovate
We continued to invest to strengthen our Technology & Innovation
capabilities and advance our pipeline; we increased adjusted R&D
expenditure by 12.9% to $104 million (2022: $92 million), equivalent to 4.8%
of sales.
We started launching ConvaFoam(TM) in the US, which is strengthening our
competitive position in the very large and growing foam segment. Feedback from
evaluations has been encouraging, with healthcare professionals particularly
positive about its exudate and adhesion properties.
In April, we acquired a highly innovative anti-infective nitric oxide
technology platform with a unique natural antimicrobial mode of action, backed
by compelling scientific and clinical data. We will be looking to secure the
first regulatory approvals for the first wound care product in 2025.
We began launching our new compact catheter, GentleCath(TM) Air for Women with
FeelClean(TM) Technology in France in Q4. This technology is designed for
urethral protection and to reduce the risk of UTIs.
In Infusion Care we continued to collaborate with a number of partners within
and outside diabetes and launched a number of products during the period:
- Infusion set with Beta Bionics new iLet bionic pancreas system
- Extended Wear Infusion Set in US with Medtronic 780G
- Infusion set for new Tandem Mobi pump, cleared by the FDA in
July
- Infusion set for AbbVie Parkinson's therapy launch in Japan
Looking into 2024 we expect continued momentum with product launches. In Q1 we
have begun to launch our new one-piece convex pouching system, Esteem Body(TM)
with Leak Defense(TM) in Europe and the US. It is very early days but we are
encouraged by the reaction from healthcare professionals so far.
We will also be leveraging our recent product launches by rolling them out in
key geographies:
- InnovaMatrix(®) in certain GEM markets and, in the US, with new
iterations;
- Begin the roll-out of ConvaFoam(TM) in Europe;
- GentleCath Air(TM) for Women in Europe and the US;
supporting AbbVie's Parkinson's drug launch in Europe and, later in the year,
in the US.For 2025 and beyond we are also developing a richer pipeline with
exciting new innovations, including:
- AWC: an enhanced hydrofibre, Nitric oxide wound dressing and
ConvaVac (a single use negative pressure treatment);
- OC: Natura Body(TM);
- CC: GentleCath(TM) Air for Men v2.0; and
- IC: Further customer pump technology innovations including a
potential new Parkinson's therapy
Simplify
We continued to make progress simplifying the organisation.
Adjusted G&A reduced to 8.1% of sales (2022: 8.9%), declining 6.4% to $173
million (2022: $185 million) as we continued to transition activities to our
Global Business Services centres; allowing us to improve, standardise and
automate processes, build internal expertise and consolidate our corporate
office facilities footprint.
We opened a new GBS facility in Kuala Lumpur to provide 24-7 business service
support to the Group in conjunction with Lisbon and Bogota, started the
migration of HR services and created a new IT Centre of Excellence.
As part of our Plant Network Optimisation initiative, we closed a small
factory in Roosendaal, the Netherlands, and migrated machines to our larger
and more efficient site in Michalovce, Slovakia, which already manufactures
similar Ostomy products.
In 2024, we intend to continue to embed our Global Business Services network,
driving further efficiencies in finance, IT and HR. Our Global Quality and
Operations function will continue to introduce smart factory tools and
automation to the manufacturing footprint to drive enhanced productivity.
Build
Our Pricing Centre of Excellence (CoE), in collaboration with our business
units, supported the delivery of 100 bps of pricing improvement on gross
margin.
During the year we further developed our clinical and regulatory functions
with a step up in clinical evidence generation and in scientific publications,
and another year with more than 80 patent filings.
In 2024, we will continue to embed our CoEs within the business and drive
commercial excellence. For example our Marketing CoE will drive our NPS
customer loyalty measurement programme.
Execution
Our Salesforce CoE has continued to roll out the single CRM platform to all of
our Top 12 markets. This is driving enhanced salesforce productivity by
increasing call rates and improving targeting to priority (A,B,X) accounts.
Through improved commercial execution we are winning share in the Global
Emerging Markets in both AWC and OC. Our sales in GEM continued to grow double
digit, with revenue in China growing 30% notwithstanding the broader industry
slow-down since the summer.
We have continued to focus on execution excellence within our Global Quality
and Operations function, expanding capacity in IC, increasing automation on
certain AWC product lines and further reducing complaints per million by c.12%
during 2023.
We also made further progress embedding our Convatec Cares responsible
business strategy, which underpins our commitment to embedding environmental,
social and governance (ESG) practices.
In line with our goal to achieve net zero by 2045, we reduced Scope 1 and
Scope 2 greenhouse gas emissions by 35% in 2023. We are pleased that our
manufacturing sites now use 100% renewable electricity. In addition, our Scope
1, 2 and 3 (near term) targets were validated by Science-Based Targets
Initiative (SBTi). We also received a 'B' from the Carbon Disclosure Project
(CDP) in their 2023 ratings, recognising our progress.
Consistent with our commitment to diversity, equity and inclusion (DE&I)
and wellbeing, we finished 2023 with 44% of the senior management team 1
(#_ftn1) being women, exceeding our 40% target.
Dividend
The Board recommends a 3% increase in the full year dividend to 6.229 cents
per share (2022: 6.047 cents). The payout ratio of 46% (2022: 48%) of
adjusted EPS remains modestly ahead of the target range of 35-45%. The Board
remains confident of the Group's future prospects and this progressive
dividend recommendation is consistent with the approach over the last 3 years.
Taking into consideration the recent trends in take up and the cost of
operating, the Board has taken the decision to terminate the scrip dividend
option.
2024 guidance and upgraded medium term outlook
In 2024, we expect organic revenue growth of 5-7%. We are also raising our
medium-term organic revenue growth to 5-7% p.a. (previously 4-6% p.a.), given
growing confidence in both the new product pipeline and improved commercial
execution. This reflects our expectations of high single-digit growth in AWC
and IC and mid single-digit growth in OC and CC.
We remain focused on expanding our operating margin by growing revenue,
improving our mix/price and delivering on our simplification and productivity
agenda. In 2024 we expect further improvement in the adjusted operating margin
to at least 21%, on a constant currency, based on the current geo-political
backdrop and an inflation expectation of 3-5%.
We expect adjusted net finance expense for 2024 to be $75-85 million. The
adjusted book tax rate is expected to be approximately 24% with the cash tax
rate at approximately 18%. We expect capex of $120-140million reflecting the
continued investments we are making across the Group.
In the medium term, we are on track to deliver a mid-20s% adjusted operating
margin in 2026 or 2027. This requires on average 100bps or more of expansion
per annum, compared to the delivery of 125bps expansion per year over the last
2 years in a high inflation environment.
We have now pivoted to sustainable revenue growth, have started to deliver
margin expansion and expect to achieve double digit compound growth in EPS and
free cash flow to equity over the medium term.
Principal risks
The Board reviews and agrees our principal risks on a bi‐annual basis,
taking account of our risk appetite together with our evolving strategy,
current business environment and any emerging risks that could impact the
business. Our system of risk management and internal control continues to
develop, and updates to the principal risks and mitigation plans are made as
required in response to changes in our risk landscape. Details of our
enterprise risk management framework will be set out in the Group's 2023
Annual Report and Accounts to be published later in the month.
The Board has reviewed the principal risks as at 31 December 2023 and made a
number of changes to reflect our assessment of their movement from those
identified in 2022, the effect on the Group, our evolving strategy and the
current business environment. The principal risks have been assessed against
the context of the global inflationary cost pressures that are impacting all
businesses at present and the wider uncertain geopolitical climate. The
overall profile for the risks set out below remains largely unchanged over the
financial year in terms of their potential impact on our ability to
successfully deliver on our strategy:
· Operational Resilience and Quality;
· Information Systems, Security and Privacy;
· Innovation and Regulatory;
· People;
· Legal and Compliance;
· Environment and Communities; and,
· Tax and Treasury.
The risk landscape has changed for the following principal risks, since the
publication of the 2022 Annual Report and Accounts:
· Strategy and Execution Delivery - strategically we are pivoting
into FISBE 2.0 and, with work carried out to date, this principal risk is now
considered normal business activity.
· Customer and Markets - has been elevated as the consequences of
global macroeconomic factors may manifest themselves through financial
constraints impacting healthcare pricing and reimbursement models.
· Political and Economic Environment - has been elevated reflecting
the continuing global inflationary pressure challenges on all aspects of our
cost base, as well as ongoing global supply chain constraints and volatile
geopolitical environment.
The Board assesses the overall risk profile of the Group to ensure it is
within our risk appetite. In making this assessment the Board considered the
broader risk landscape (including the sustained levels of inflation and
interest rates, ongoing supply chain challenges and the continuing impacts of
the wars in Ukraine and the Middle East) on the business environment and any
continued or additional impact on the Group's business and principal risks,
coupled with the controls and mitigations in place to address these
challenges. In the main, as our processes and risk mitigations further develop
and mature, we have continued to manage the challenges facing the wider
business landscape and build further resilience into our operations. Principal
risks continue to be appropriately mitigated and we work to ensure that each
risk remains within our risk appetite.
Financial review
Revenue grew by 3.4% on a reported basis, 3.2% on a constant currency basis
and 7.2% on an organic basis. Constant currency growth was lower than organic
growth due to the exit from the low-margin, low-growth hospital care
activities during 2022.
The adjusted operating profit margin was 20.2%, representing an increase of
70bps over the previous year. Adjusting for foreign exchange headwinds, the
expansion was 130bps, with pricing and mix benefits more than offsetting
inflation and continued investment in commercial and R&D capabilities.
Adjusted operating profit margin has increased by 250bps over the past two
years.
Adjusted diluted earnings per share increased by 6.1% year-on-year to 13.4
cents per share, primarily due to improvements in adjusted operating profit
and a reduction in adjusted non-operating expenses more than offsetting an
increase in finance expenses. Reported diluted EPS more than doubled to 6.3
cents per share (2022: 3.1 cents per share).
Net cash generated from operations improved by 27.6% to $490.6 million ($384.5
million), with free cash flow to equity increasing by 116.8% to $228.3 million
(2022: $105.3 million), driven by higher EBITDA and significantly better
changes in working capital compared to the previous year. Equity cash
conversion improved to 83.3% (2022: 41.0%).
We further enhanced the competitive position of the Group during the year,
with the acquisition of an innovative anti-infective nitric oxide technology
platform to strengthen our Advanced Wound Care portfolio, and two bolt-on
acquisitions to strengthen our Home Services Group in the US.
In November 2023, the Group extended the term of its multicurrency revolving
credit facility by one year and this is now committed to November 2028. The
Group's term loan and $500.0 million senior unsecured notes remain in place
and are committed until 2027 and 2029 respectively.
We remain confident of delivering sustainable future revenue growth and an
adjusted operating margin in the mid-20s by 2026 or 2027, with double-digit
compound annual growth in adjusted diluted EPS and free cash flow to equity.
Reported and Adjusted results
The Group's financial performance, measured in accordance with IFRS, is set
out in the Condensed Consolidated Financial Statements and Notes thereto on
pages 27 to 48 and referred to in this Annual Report as "reported" measures.
The commentary in this Financial review includes discussion of the Group's
reported results and alternative performance measures (or adjusted measures)
(APMs). Management and the Board use APMs as meaningful measures in monitoring
the underlying performance of the business. These measures are disclosed in
accordance with the ESMA guidelines and are explained and reconciled to the
most directly comparable reported measures prepared in accordance with IFRS
on pages 21 to 26.
Revenue and the revenue growth on constant currency and organic
bases are non-IFRS financial measures and should not be viewed as
replacements of IFRS reported revenue. Percentage movements throughout this
report are calculated on actual unrounded numbers.
Group financial performance
Reported Reported Adjusted(1) Adjusted(1)
2023 2022 2023 2022
$m $m $m $m
Revenue 2,142.4 2,072.5 2,142.4 2,072.5
Gross profit 1,200.6 1,103.9 1,320.7 1,245.6
Operating profit 262.7 207.3 431.8 403.7
Profit before income taxes 167.4 81.9 357.2 337.6
Net profit 130.3 62.9 274.1 256.8
Basic earnings per share (cents per share) 6.4¢ 3.1¢ 13.4¢ 12.7¢
Diluted earnings per share (cents per share) 6.3¢ 3.1¢ 13.4¢ 12.6¢
Dividend per share (cents) 6.229¢ 6.047¢
(1) These non-IFRS financial measures are explained and reconciled to the most
directly comparable financial measures prepared in accordance with IFRS on
pages 21 to 26.
Revenue
Group reported revenue for the year ended 31 December 2023 of $2,142.4 million
(2022: $2,072.5 million) increased 3.4% year-on-year on a reported basis and
3.2% on a constant currency basis.
Adjusting for foreign exchange and acquisition and divestiture-related
activities(2), Group revenue grew by 7.2% on an organic basis. This was driven
by strong growth in Advanced Wound Care, Infusion Care and Continence Care and
good growth in Ostomy Care. For more details about category revenue
performance, refer to pages 4 to 5.
(2) Acquisitions were Starlight Science, A Better Choice Medical Supply and
All American Medical Supply in 2023 and Triad Life Sciences in 2022.
Divestitures related to the 2022 discontinuation of hospital care, related
industrial sales and associated Russia operations (with the final
discontinuances in early 2023).
Reported net profit
Reported gross margin increased from 53.3% to 56.0%. This was largely driven
by pricing and mix benefits being partly offset by inflationary pressures and
foreign exchange headwinds. Prior year comparatives also included higher
one-time divestiture and termination costs primarily as a result of the
hospital care and related industrial sales exit in 2022.
Reported operating profit increased by 26.7% to $262.7million, driven by
improvements in the reported gross margin being partially offset by an
increase in reported operating expenses of $41.3 million to $937.9 million.
Increases in selling and distribution expenses of $36.6 million to $612.5
million and R&D of $18.0 million to $110.0 million were partly offset by a
reduction in other operating expenses of $11.3 million (down from $13.8
million in 2022).
Reported net finance costs increased by $23.4 million to $75.5 million,
primarily due to an additional $28.8 million of interest expense on borrowings
due to higher market interest rates.
During the year, the fair value movement of the contingent consideration
arising on acquisitions was $24.6 million (2022: $45.1 million).
Reported non-operating income/(expense), net decreased by $33.0 million to
$4.8 million income (2022: $28.2 million expense) and principally consisted of
foreign exchange gains of $0.2 million (2022: $14.2 million loss) and a gain
of $3.9 million on divestiture-related activities relating to the sale of the
Unometer™ trademarks during the year. The prior year also included the
recycling of $12.2 million of cumulative translation losses following the
closure activities associated with the hospital care exit and a $2.0 million
loss on divestitures.
The reported income tax expense for the year ended 31 December 2023 was $37.1
million (2022: $19.0 million) and this is explained further in the Taxation
section below. The reported net profit was $130.3 million (2022: $62.9
million).
The basic reported earnings per share rose 105.6% to 6.4 cents (2022: 3.1
cents), reflecting the reported net profit divided by the basic weighted
average number of ordinary shares of 2,038,653,228 (2022: 2,023,839,657).
Adjusted net profit
Adjusted gross profit increased by 6.0% to $1,320.7 million (2022: $1,245.6
million). The adjusted gross margin increased year-on-year from 60.1% to 61.6%
due to a combination of price, mix and productivity benefits of 460bps being
partially offset by inflation and foreign exchange headwinds of 250bps and
60bps respectively. The Group benefited from the impact of reduced volumes of
low-margin and low-growth products following the hospital care exit in 2022
and the growing contribution from Advanced Tissue Technology (ATT).
Adjusted operating expenses saw a net increase of $47.0 million to $888.9
million, with increases in adjusted selling and distribution expenses and
adjusted R&D partly offset by a reduction in adjusted general and
administrative expenses.
Increases in adjusted selling and distribution expenses of $47.0 million to
$611.9 million, primarily driven by higher headcount associated with growing
the business, expansion in the acquired ATT business and higher labour
inflation, were only partially offset by the exit of hospital care.
Increases in adjusted R&D of $11.9 million to $103.9 million reflected the
continued investment in our future pipeline of new products and new R&D
talent joining the business through the recent acquisitions over the past few
years.
Adjusted G&A decreased by $11.9 million year-on-year to $173.1 million,
reflecting the Group's focus on simplification and productivity, notably as we
continued to build internal expertise and reduce external third party spend
whilst also seeing the benefits of transitioning more activities to our Global
Business Services (GBS) centre in Lisbon. Adjusted G&A as a percentage of
revenue fell to 8.1% (2022: 8.9%)
A reconciliation between reported and adjusted operating expenses is provided
in the Non-IFRS financial information section on pages 21 to 26. The Group
achieved an adjusted operating profit of $431.8 million (2022: $403.7
million), delivering an adjusted operating margin of 20.2% (2022: 19.5%)
despite ongoing inflationary headwinds and continued investments for growth.
Adjusted net profit increased 6.7% to $274.1 million (2022: $256.8 million).
The increases in adjusted operating expenses (as explained above), finance
expenses (driven by higher market interest rates) and adjusted income tax
expense (which is explained below) were more than offset by strong adjusted
gross margin improvement and a reduction in adjusted non-operating expenses of
$14.9 million (driven by favourable foreign exchange impacts on intercompany
transactions).
Adjusted basic and diluted EPS at 31 December 2023 were 13.4 cents and 13.4
cents respectively (2022: 12.7 cents and 12.6 cents).
Taxation
Year ended 31 December
2023 2022
$m Effective tax rate $m Effective tax rate
Reported income tax expense (37.1) 22.2% (19.0) 23.2%
Tax effect of adjustments (38.5) (41.7)
Other discrete tax items (7.5) (20.1)
Adjusted income tax expense (83.1) 23.3% (80.8) 23.9%
The Group's reported income tax expense was $37.1 million (2022: $19.0
million). The decrease in the reported effective tax rate was mainly driven by
a one-off net tax benefit following the successful resolution of an uncertain
tax position, which for the purpose of calculating the adjusted income tax
expense, was treated as an adjusting item.
The adjusted effective tax rate of 23.3% for the year ended 31 December 2023
(2022: 23.9%) was after reflecting the tax impact of items treated as
adjusting items (further details can be found in the Reconciliation of
reported earnings to adjusted earnings table in the Non-IFRS financial
information section on page 23). The decrease in the adjusted effective tax
rate was principally driven by the impact of profit mix between jurisdictions
in which the Group had a taxable presence.
Adjusting items
Management and the Board will make adjustments to the reported figures, where
appropriate, to produce more meaningful measures in monitoring the underlying
performance of the business - Alternative performance measures (APMs). The
Group's APM policy can be found in the Non-IFRS financial information section
on page 21 and in line with this, the following adjustments were made to
derive adjusted operating profit and adjusted net profit.
Operating profit Fair value movement of contingent consideration Non-operating income/(expense) Income tax
$m $m $m $m
2023 2022 2023 2022 2023 2022 2023 2022
Reported 262.7 207.3 (24.6) (45.1) 4.8 (28.2) (37.1) (19.0)
Amortisation of acquired intangibles 136.2 131.3 - - - - (32.6) (29.2)
Acquisitions and divestitures 10.1 56.6 24.6 45.1 (3.9) 14.2 (0.7) (11.3)
Termination benefits and related costs 9.5 7.1 - - - - (2.0) (1.2)
Impairment of assets - 1.4 - - - - - -
Other adjusting items 13.3 - - - - - (3.2) -
Other discrete tax items - - - - - - (7.5) (20.1)
Adjusted 431.8 403.7 - - 0.9 (14.0) (83.1) (80.8)
Adjustments made to derive adjusted operating profit in 2023 included the
amortisation of acquired intangibles of $136.2 million (2022: $131.3 million),
of which $93.2 million (2022: $93.0 million) resulted from intangible assets
arising from the spin-out from Bristol-Myers Squibb in 2008 and will be fully
amortised by December 2026.
Acquisition and divestiture-related costs of $10.1 million (2022: $56.6
million) consisted of acquisition-related costs of $8.3 million (2022: $16.9
million) and divestiture-related costs of $1.8 million (2022: $39.7 million).
Acquisition-related costs, which primarily consisted of deal-related fees,
also included the inventory fair value release of $1.5 million (2022: $8.7
million) in respect of the Triad acquisition in 2022. Divestiture-related
costs of $1.8 million were incurred as a result of the exit from the hospital
care and related industrial sales activities.
Termination costs of $9.5 million were in respect of one-off, fundamental
transformation projects and primarily due to the migration of HR services to
our Global Business Services, the closure of the EuroTec factory in the
Netherlands and a restructuring of activities in Switzerland. The latter two
projects, in addition to the office footprint optimisation programme
previously announced, contributed to other adjusting items of $13.3 million.
These costs largely consisted of legal and professional fees, the impairment
of right-of-use assets and property, plant and equipment and charges related
to certain office closures.
During the year, the fair value movement of the contingent consideration
arising on acquisitions was S24.6 million (2022: $45.1 million).
Net adjustments of $3.9 million made to non-operating income in 2023 wholly
related to a gain made from the sale of the UnoMeter™ trademarks, previously
part of hospital care. This is disclosed within Note 5 - Non-operating
income/(expense), net to the Condensed Consolidated Financial Statements.
Of the total $169.1 million of adjusting items recognised within operating
profit in the Consolidated Income Statement in the year (excluding tax
impact), $16.1 million was cash-impacting in 2023 (2022: $11.1million). There
was also a cash outflow of $7.5 million during the year in respect of
adjusting items recorded as accruals in the prior year. In 2024, the total
cash impact of adjusting items recognised within operating profit (including
amounts accrued in previous years), is currently expected to be of a similar
quantum to the 2023 total. For further information on Non-IFRS financial
information, see pages 21 to 26.
In the year to 31 December 2023, other discrete tax items related to the tax
benefit of $15.1 million resulting from a provision release following the
successful resolution of an uncertain tax position, partially offset by tax
expenses of $7.6 million in respect of a restructuring of activities
Switzerland. In the year to 31 December 2022, other discrete tax items related
to the tax benefit of $20.1 million resulting from the recognition of deferred
tax assets following the acquisition of Triad Life Sciences. For further
details on deferred taxation see Note 6 - Income taxes to the Condensed
Consolidated Financial Statements.
The Board, through the Audit and Risk Committee, continuously reviews the
Group's APM policy to ensure that it remains appropriate, aligns with
regulatory guidance and represents the way in which the performance of the
Group is managed.
Acquisitions
During the year, the Group completed three acquisitions. The acquisition of
Starlight Science Limited in April 2023 included the highly innovative
anti-infective nitric oxide technology platform, which complements the Group's
Advanced Wound Care portfolio and has potential applications across the
Group's other categories. In addition to the initial consideration of $56.7
million (£45.3 million), the sellers may earn contingent consideration up to
a maximum of $163.9 million (£131.0 million), in the form of (i) a milestone
payment of $58.8 million (£47.0 million) due upon regulatory clearances in
the US and Europe; and (ii) earnout payments based on sales of products over
the lifetime of the acquired patents, with the maximum earnout payable capped
at $105.1 million (£84.0 million). The provisional discounted fair value of
the contingent consideration recognised at the date of acquisition was $66.7
million.
We also completed two small bolt-on acquisitions in 2023 (A Better Choice
Medical Supply LLC and All American Medical Supply Corp) for a combined net
cash outflow of $27.7 million to further strengthen our US Home Services
Group. There was no contingent consideration associated with these two
acquisitions.
During the year, $94.7 million was paid in respect of contingent consideration
associated with the Triad Life Sciences acquisition, in addition to the $50.0
million paid in 2022 following achievement of two short-term milestones. As at
31 December 2023, the discounted fair value of the contingent consideration
payable in respect of the Group's acquisitions was $138.0 million (2022:
$140.0 million). Refer to Note 10 - Acquisitions to the Condensed Consolidated
Financial Statements for further details.
Reasonably possible changes in certain key assumptions and forecasts may cause
the calculated fair value of the contingent consideration to vary materially
within the next financial year and accordingly, this has been identified as a
key source of estimation uncertainty. Refer to Note 1.2 - Critical accounting
judgements and key sources of estimation uncertainty to the Condensed
Consolidated Financial Statements for further details.
Dividends
Dividends are distributed based on the distributable reserves of the Company,
which are primarily derived from the dividends received from subsidiary
companies and are not based directly on the Group's consolidated retained
earnings. The distributable reserves of the Company at 31 December 2023 were
$1,539.4 million (2022: $1,562.9 million).
The Board declared an interim dividend of 1.769 cents per share in August 2023
and has recommended a final 2023 dividend of 4.460 cents per share, which
would bring the full year dividend to 6.229 cents per share (2022: 6.047 cents
per share), an increase of 3% and a pay-out ratio when compared to adjusted
net profit of 46% (2022: 48%). Our stated policy is a pay-out ratio of 35% to
45% of adjusted net profit but this is interpreted flexibly over time to
reflect the underlying performance of the business and the Board's confidence
in its future growth prospects. The Board has also taken the decision to
terminate the scrip dividend option.
Refer to Note 8 - Dividends to the Condensed Consolidated Financial Statements
for further information.
Cash Flow and Net Debt
Adjusted
2023
$m
EBITDA(1) 527.1
Working capital movement(1) (8.1)
(Loss) on foreign exchange derivatives (4.8)
Adjusting items(2) (23.6)
Capital expenditure (129.2)
Operating cash flow(1,3) 361.4
Tax paid (35.9)
Free cash to capital(1,3) 325.5
Net interest paid (65.6)
Payment of lease liabilities (22.7)
Other(4) (8.9)
Free cash to equity(1,3) 228.3
Dividends(5) (110.7)
Acquisitions & divestitures(6) (178.8)
Movement in net debt (61.2)
Net debt(1) at 1 January (excluding lease liabilities) (1,068.1)
Net debt(1) at 31 December (excluding lease liabilities) (1,129.3)
1. These non-IFRS financial measures are explained and
reconciled to the most directly comparable financial measure prepared in
accordance with IFRS in the Non-IFRS financial information section.
2. Details of adjusting items are provided in the adjusting
items cash movement table in the Non-IFRS financial information section. Of
the total cash outflow of $23.6 million during the year, $7.5 million related
to accruals recorded in the prior year.
3. Compared to 2022, the cash flow measures have been simplified
in respect of their title. 'Net cash for cash conversion' has been renamed
'Operating cash flow' and 'Free cash flow (post-tax)' has been renamed 'Free
cash flow to capital'. In addition, a new measure has been introduced, 'Free
cash flow to equity' (as defined in the Reconciliation of Operating cash flow,
free cash to capital and free cash to equity' table on page 25. The Directors
consider that these changes result in consistency of cash flow measures and
provide improved definition, clarity and insight.
4. Other consisted of financing fees amortisation $2.8 million
(2022: $6.6 million) and net FX loss on cash and borrowings of $6.7 million
(2022: $4.9 million) offset by proceeds from PPE sales of $0.6 million (2022:
nil).
5. Dividend cash payments of $110.7 million were made to
shareholders during the year. This represented 87.3% of total dividends
declared in the period, with the remaining 12.7% electing to settle via scrip
dividends. The Board took the decision to terminate the scrip dividend option
during the year.
6. Net acquisition and divestiture payments of $178.8 million
consisted of the initial consideration payment of $56.7 million in respect of
the acquisition of Starlight Sciences Limited, $27.7 million in respect of the
acquisitions of A Better Choice Medical Supply LLC and All American Medical
Supply Corp and $94.7 million in respect of the Year 1 earn out associated
with the 2022 acquisition of Triad Life Sciences. These were offset by $0.3
million of income arising from divestiture-related activities.
EBITDA
Adjusted EBITDA increased by $27.1 million to $527.1 million (2022: $500.0
million), with the increase in adjusted gross profit of $75.1 million more
than offsetting the increase in adjusted operating expenses of $47.0 million.
These are explained in the adjusted net profit commentary section. A
reconciliation of adjusted EBITDA to the closest IFRS measure is provided in
the Non-IFRS financial information section on pages 21 to 26.
Free cash flow to capital
Free cash flow to capital increased by $138.1 million to $325.5 million (2022:
$187.4 million), largely driven by a significantly lower working capital
outflow (resulting in a movement year-on-year of $90.5 million), the increase
in adjusted EBITDA of $27.1 million as explained above, a reduction in capital
expenditure spend of $15.0 million and a reduction in cash tax paid of $17.0
million. These were partly offset by an increase in adjusting cash outflow
items of $8.4 million, of which details are provided in the Non-IFRS financial
information section on page 25.
The Group invested $129.2 million in capital expenditure (2022: $144.2
million) to increase manufacturing capacity and automation and improve
information technology and digital tools.
The adjusted working capital outflow of $8.1 million (2022: $98.6 million
outflow) improved significantly year-on-year, with increased inventory levels
of $53.9 million on an adjusted basis largely offset by a $30.2 million
decrease in trade and other receivables, a $10.5 million increase in trade and
other payables and a $7.8 million reduction in restricted cash.
Increased inventory levels reflected strategic decisions to continue to build
supply chain resilience across the Group, which was achieved in the first half
of the year. There was a modest decline in inventory in the second half of the
year.
The decrease in trade and other receivables reflected improving cash
collections, coupled with a receivables financing arrangement entered by the
Group during the year to normalise receivable terms for certain major
customers, equating to $27.4 million, and favourable movements in the
mark-to-market valuation of derivative financial assets.
The increase in trade and other payables of $10.5 million reflected
standardisation of supplier payment terms implemented in the year as part of
our simplification and productivity initiatives, coupled with some favourable
timing impacts which will partly reverse in 2024. The increase was partially
offset by a decrease in derivative financial liabilities as a result of the
mark-to-market valuation at the year end.
Operating cash conversion(1) was 83.7% (2022: 59.5%). The increase in the
ratio primarily reflected the significantly lower working capital outflow as
commented on above. Further details are provided in the Non-IFRS financial
information section.
1. The previous ratio called 'Adjusted cash conversion',
calculated as Operating cash flow/Adjusted EBITDA, has been replaced by
'Operating cash conversion' and is now calculated as Operating cash
flow/Adjusted operating profit. The Directors consider that this change
results in consistency of cash flow measures and provides improved definition,
clarity and insight.
Free cash flow to equity
Free cash flow to equity increased by $123.0 million to $228.3 million (2022:
$105.3 million). This was driven by an increase in free cash flow to capital
of $138.1 million as explained above and a decrease in the amortisation of
financing fees of $3.8 million. These favourable movements were partly offset
by higher finance expense payments of $15.7 million due to higher market
interest rates.
Equity cash conversion(2) was 83.3% (2022: 41.0%).
2. A new measure has been introduced. 'Equity cash conversion'
is calculated as Free cash flow to equity/Adjusted net profit. The Directors
consider that this change results in consistency of cash flow measures and
provides improved definition, clarity and insight.
Borrowings and net debt
2023 2022
$m $m
Borrowings (1,226.9) (1,211.9)
Lease liabilities (85.5) (88.3)
Total borrowings including lease liabilities (1,312.4) (1,300.2)
Cash and cash equivalents 97.6 143.8
Total borrowings including lease liabilities, net of cash (1,214.8) (1,156.4)
Net debt (excluding lease liabilities) (1,129.3) (1,068.1)
Net debt (excluding leases)/adjusted EBITDA 2.1 2.1
As at 31 December 2023, the Group's cash and cash equivalents were $97.6
million (31 December 2022 $143.8 million) and the debt outstanding on
borrowings (net of deferred financing fees) was $1,226.9 million (31 December
2022: $1,211.9 million).
The Group's banking facilities comprise of a multicurrency revolving credit
facility of $950.0 million and a term loan of $250.0 million. In November
2023, the Group extended the term of its multicurrency revolving credit
facility by an additional year and this is now committed to November 2028. The
term loan remains committed to November 2027.
The Group's $500.0 million senior unsecured notes, issued in October 2021,
remain in place with maturity in October 2029.
As at 31 December 2023, $459.4 million of the multicurrency revolving credit
facility remained undrawn. This, combined with cash of $97.6 million, provided
the Group with total liquidity of $557.0 million at 31 December 2023 (31
December 2022: $616.6 million). Of this, $21.1 million was held in territories
where there are restrictions related to repatriation (31 December 2022: $19.2
million).
The Group ended the period with total borrowings, including IFRS 16 lease
liabilities, of $1,312.4 million (2022: $1,300.2 million). Offsetting cash of
$97.6 million (2022: $143.8 million) and excluding lease liabilities, net debt
was $1,129.3 million (2022: $1,068.1 million), equivalent to 2.1x adjusted
EBITDA (2022: 2.1x adjusted EBITDA). For further information on borrowings see
Note 11 - Borrowings to the Condensed Consolidated Financial Statements.
Covenants
At 31 December 2023, the Group was in compliance with all financial and
non-financial covenants associated with the Group's outstanding debt.
The Group has two financial covenants, being net leverage and interest cover,
each of which is defined, where applicable, within the borrowing
documentation. The table below summarises the Group's most restrictive
covenant thresholds and position as at 31 December 2023 and 2022.
Maximum covenant net leverage Actual covenant net leverage Minimum covenant interest cover(1) Actual covenant interest cover(1)
31 December 2023 3.50x 2.30x 3.5x 7.0x
31 December 2022 3.50x 2.28x 3.5x 9.9x
*Interest cover is adjusted EBITDA/interest expense (net) and net leverage is
net debt/adjusted EBITDA in accordance with the definitions contained in
underlying borrowing documentation and are not the same as the definitions of
these measures presented in the Non-IFRS financial information section on
pages 21 to 26 and applied in the commentary in this Financial review.
Group financial position
2023 2022 Change
At 31 December $m $m $m
Intangible assets and goodwill 2,234.1 2,149.5 84.6
Other non-current assets 609.6 553.2 56.4
Cash and cash equivalents 97.6 143.8 (46.2)
Other current assets 772.4 745.5 26.9
Total assets 3,713.7 3,592.0 121.7
Current liabilities (536.4) (533.1) (3.3)
Non-current liabilities (1,484.6) (1,449.2) (35.4)
Equity (1,692.7) (1,609.7) (83.0)
Total equity and liabilities (3,713.7) (3,592.0) (121.7)
Intangible assets and goodwill
Intangible assets and goodwill increased by $84.6 million to $2,234.1 million
(2022: $2,149.5 million). This increase was primarily driven by intangible
assets and goodwill arising from the acquisitions during the year of $162.7
million, combined with intangible asset additions of $37.6 million and the net
effect of foreign exchange of $38.9 million, being partially offset by the
in-year amortisation of intangible assets of $154.6 million.
No triggers of impairments were identified during 2023.
Other non-current assets
Other non-current assets, including property, plant and equipment (PP&E),
right-of-use assets (ROU assets), investment in financial assets, deferred tax
assets, restricted cash and other assets increased by $56.4 million to $609.6
million (2022: $553.2 million). The increase reflected the continued
investment in our manufacturing facilities, with additions in PP&E of
$97.3 million and the net effect of foreign exchange of $16.5 million being
partly offset by depreciation of $37.5 million and impairments of $2.7
million.
Included within other non-current assets was the investment made in the
preference shares of BlueWind Medical in 2022. The fair value at 31 December
2023 decreased to $22.9 million (2022: $30.7 million) due to a downgrade in
revised forecasts as a result of delays in obtaining regulatory approvals,
with the movement taken to Other Comprehensive Income. Restricted cash reduced
by $2.0 million primarily due to movements in amounts held in escrow arising
from the Group's acquisitions, whilst ROU assets reduced by $4.7 million.
Current assets excluding cash and cash equivalents
Current assets, excluding cash and cash equivalents, increased by $26.9
million to $772.4 million (2022: $745.5 million), primarily driven by an
increase in inventories of $59.2 million. Excluding a foreign exchange effect
of $9.8 million, inventory increased on a reported basis by $49.4 million and
was largely to build resilience across the Group. This was partly offset by
reductions in trade and other receivables of $5.6 million (net of foreign
exchange effect of $9.8 million), current tax receivable of $8.2 million,
derivative financial assets of $12.8 million and restricted cash of $5.7
million.
Derivative financial assets decreased by $12.8 million due to movements in the
mark-to-market valuations at the year end, whilst restricted cash fell by $5.7
million, driven by movements in cash held in escrow that arose from the
Group's acquisitions.
Current liabilities
Current liabilities increased modestly by $3.3 million to $536.4 million
(2022: $533.1 million), with an increase in trade and other payables of $42.1
million largely offset by decreases in derivative financial liabilities of
$15.8 million, provisions of $16.5 million and current tax payable of $6.9
million.
Trade and other payables increased due to an extension to supplier payment
terms following standardisation as part of our simplification and productivity
initiatives, coupled with some favourable timing impacts which will partly
reverse in 2024. Derivative financial liabilities decreased due to movements
in the mark-to-market valuations at the year end.
Overall, provisions increased by $1.7 million, with provisions amounts less
than one year decreasing by $16.5 million and amounts greater than one year
increasing by $18.2 million. The overall increase was primarily due to an
increase in restructuring provisions of $3.7 million offset by a reduction in
contingent consideration payable of $2.0 million. Refer to Note 13 -
Provisions to the Condensed Consolidated Financial Statements for further
commentary.
Non-current liabilities
Non-current liabilities increased by $35.4 million to $1,484.6 million (2022:
$1,449.2 million). This included an increase in non-current borrowings of
$15.0 million, an increase in provisions of $18.2 million (see comments in
current liabilities above) and an increase in deferred tax liabilities of $5.0
million primarily due to deferred tax recognised on the acquisition of
Starlight Science Limited in the year.
These were partially offset by a reduction in lease liabilities of $3.2
million, as a result of the office footprint optimisation programme that
commenced in 2023 as part of our simplification and productivity initiatives.
Going concern
In preparing their assessment of going concern, the Directors considered
available cash resources, access to committed undrawn funding, financial
performance and forecast performance, including continued implementation of
the FISBE strategy, together with the Group's financial covenant compliance
requirements and principal risks and uncertainties.
Management also applied the same severe but plausible downside scenarios
utilised in the preparation of the Viability statement. Under each scenario,
the Group retained significant liquidity and covenant headroom throughout the
going concern period, i.e. 12 months from the date of this report. A reverse
stress test, before corporate level mitigations, was also considered to
demonstrate what reduction in revenue would be required in the next 12 months
to create conditions which may lead to a potential covenant breach. For a
breach of covenants to occur in the next 12 months, before corporate
mitigation, the Group would need to experience a sustained revenue reduction
of more than 10% across all categories and markets. This was considered
implausible given the Group's strong global market position, diversified
portfolio of products and the corporate mitigations available to the Board and
management.
Accordingly, the Directors continue to adopt the going concern basis in
preparing the Condensed Consolidated Financial Statements.
Financial control environment
The Group closely monitors the financial and IT general control environment
(in respect of those IT controls that have an implication on the financial
processes) using a formal control programme to confirm the effectiveness of
key reporting and IT controls across our global operations, including
self-certifications from control owners. Compliance was high throughout the
year.
The Internal Controls team acts as the second of line of defence monitoring
the controls framework, including monitoring responses, undertaking random
sample testing of responses to supporting evidence and reviewing all notified
financial and IT control failures to ensure that appropriate mitigating
actions are taken to safeguard against risk of material financial
misstatement.
Independent assurance on the control framework is given by the Internal Audit
team, including key controls in their reviews of specific markets and GBS. In
addition, key controls in the framework were tested by the external audit team
as part of their controls reliance approach in 2023.
In response to the developments in corporate governance in the UK, the scope
of the formal control programme was extended to include key non-financial
metrics reported in the ARA, notably the ESG metrics currently in scope for
limited assurance.
Non-IFRS financial information
Non-IFRS financial information or alternative performance measures (APMs) are
those measures used by the Board and management on a day-to-day basis in their
assessment of profit and performance and comparison between periods. The
adjustments applied to IFRS measures reflect the effect of certain cash and
non-cash items that the Board believes distort the understanding of the
quality of earnings and cashflows as, by their size or nature, they are not
considered part of the core operations of the business. Adjusted measures also
form the basis of performance measures for remuneration, e.g. adjusted
operating profit.
It should be noted that the Group's APMs may not be comparable to other
similarly titled measures used by other companies and should not be considered
in isolation or as a substitute for the equivalent measures calculated and
presented in accordance with IFRS.
In determining whether an item should be presented as an allowable adjustment
to IFRS measures, the Group considers items which are significant either
because of their size or their nature and arise from events that are not
considered part of the core operations of the business. These tend to be
one-off events but may still cross more than one accounting period. Recurring
items may be considered, particularly in respect of the amortisation of
acquisition-related intangibles assets. If an item meets at least one of these
criteria, the Board, through the Audit and Risk Committee, then exercises
judgement as to whether the item should be classified as an allowable
adjustment to IFRS performance measures.
The tax effect of the adjustments is reflected in the adjusted tax expense to
remove the tax impact from adjusted net profit and adjusted earnings per
share.
Amortisation of acquisition-related intangible assets
The Group's strategy is to grow both organically and through acquisition,
with acquisitions being targeted to strengthen our position in
key geographies and/or business categories or which provide access to new
technology. The nature of the businesses acquired includes the acquisition of
significant intangible assets, which are required to be amortised. The Board
and management regard the amortisation as a distortion to the quality of
earnings and it has no cash implications in the year. The amortisation also
distorts comparability with peer groups where such assets may have been
internally generated and, therefore, not reflected on their balance sheet.
Amortisation of acquisition-related intangible assets is, by its nature, a
recurring adjustment.
Acquisition-related activities
Costs directly related to potential and actual strategic transactions which
have been executed, aborted or are in-flight are deemed adjusting items.
Acquisition-related costs relate to deal costs, integration costs and earn-out
adjustments, including the discounting impact which are incurred directly as a
result of the Group undertaking or pursuing an acquisition. Deal costs are
wholly attributable to the deal, including legal fees, due diligence fees,
bankers' fees/commissions and other direct costs incurred as a result of the
actual or potential transaction. Integration costs are wholly attributable to
the integration of the target and based on integration plans presented at the
point of acquisition, including the cost of retention of key people where this
is in excess of normal compensation, redundancy of target staff and early
lease termination payments.
Adjusted measures in relation to acquisitions also include aborted deal costs.
Divestiture-related activities
Divestiture-related activities comprise the gains or losses resulting from
disposal or divestment of a business as a result of a sale, major business
change or restructuring programme. These include write-down of non-current
assets, provisions to recognise inventories at realisable value, provisions
for costs of exiting contracts and associated legal fees, and any other
directly attributable costs. Any income from the ultimate disposal of a
business or subsidiary is included in the gain or loss.
Adjusted measures in relation to divestitures also include aborted deal costs.
Impairment of assets
Impairments, write-offs and gains and losses from defined programmes and where
the Group considers the circumstances of such event are not reflective of
normal business trading performance or when transactions relate to
acquisition-related intangible assets where the amortisation is already
excluded from the calculation of adjusted measures.
Termination benefits and related costs
Termination benefits and other related costs arise from material, one-time
Group-wide initiatives to reduce the ongoing cost base and improve efficiency
in the business, including divestitures from non-strategic activities. The
Board considers each project individually to determine whether its size and
nature warrants separate disclosure. Qualifying items are limited to
termination benefits (including retention) without condition of continuing
employment in respect of major Group-wide change programmes. Where discrete
qualifying items are identified these costs are highlighted and excluded from
the calculation of adjusted measures. Due to their nature, these adjusted
costs may span more than one year.
Other adjusting items
Other adjusting items relate to material, one-time initiatives which are part
of the Group's strategy to improve productivity in the business and optimise
cash flows. The Board considers each project individually to determine whether
its size and nature warrants separate disclosure. Qualifying costs are limited
to directly attributable costs of the initiatives and any realignment costs.
Due to the nature of the initiatives, these adjusted costs may span more than
one year.
Organic revenue growth
Organic revenue growth represents the change in organic revenue year on year.
Organic revenue represents reported revenue, as determined under IFRS, and
excludes the impact of acquisitions, divestitures and currency exchange
movements.
Cash flow measures
Operating cash flow is the net cash generated from operations, as determined
under IFRS, less capital expenditure. Free cash flow to capital is defined as
operating cash flow less tax paid. Free cash flow to equity reflects how
effectively we are converting the profit we generate into cash (after
accounting for working capital, capital investments, adjusting items, tax and
interest).
Refer to page 25 for details on how these measures are calculated.
Reconciliation of reported earnings to adjusted earnings for the years ended
31 December 2023 and 2022
Year ended 31 December 2023 Revenue Gross profit Operating costs Operating profit Finance expense, net Fair value movement of contingent consideration Non-operating income, net PBT Income tax Net profit
$m $m $m $m $m $m $m $m $m $m
As reported 2,142.4 1,200.6 (937.9) 262.7 (75.5) (24.6) 4.8 167.4 (37.1) 130.3
Amortisation of acquired intangibles - 110.4 25.8 136.2 - - - 136.2 (32.6) 103.6
Acquisition-related costs - 1.5 6.8 8.3 - 24.6 - 32.9 (1.4) 31.5
Divestiture-related costs/(income) - 3.6 (1.8) 1.8 - - (3.9) (2.1) 0.7 (1.4)
Termination benefits and related costs - 2.1 7.4 9.5 - - - 9.5 (2.0) 7.5
Other adjusting items - 2.5 10.8 13.3 - - - 13.3 (3.2) 10.1
Total adjustments including tax effect - 120.1 49.0 169.1 - 24.6 (3.9) 189.8 (38.5) 151.3
Other discrete tax items - - - - - - - (7.5) (7.5)
Adjusted 2,142.4 1,320.7 (888.9) 431.8 (75.5) - 0.9 357.2 (83.1) 274.1
Amortisation 18.4
Depreciation 60.2
Impairment/write-off of assets 2.1
Share-based payments 14.6
Adjusted EBITDA 527.1
Year ended 31 December 2022 Revenue Gross profit Operating costs Operating profit Finance expense, net Fair value movement of contingent consideration Non-operating (expense), net PBT Income tax Net profit
$m $m $m $m $m $m $m $m $m $m
As reported(1) 2,072.5 1,103.9 (896.6) 207.3 (52.1) (45.1) (28.2) 81.9 (19.0) 62.9
Amortisation of acquired intangibles - 111.6 19.7 131.3 - - - 131.3 (29.2) 102.1
Acquisition-related costs(1) - 8.7 8.2 16.9 - 45.1 - 62.0 (3.5) 58.5
Divestiture-related costs - 16.6 23.1 39.7 - - 14.2 53.9 (7.8) 46.1
Termination benefits and related costs - 4.8 2.3 7.1 - - - 7.1 (1.2) 5.9
Impairment of assets - - 1.4 1.4 - - - 1.4 - 1.4
Total adjustments including tax effect - 141.7 54.7 196.4 - 45.1 14.2 255.7 (41.7) 214.0
Other discrete tax items - - - - - - - (20.1) (20.1)
Adjusted 2,072.5 1,245.6 (841.9) 403.7 (52.1) - (14.0) 337.6 (80.8) 256.8
Amortisation 16.1
Depreciation 61.8
Impairment/write-off of assets 1.7
Share-based payments 16.7
Adjusted EBITDA 500.0
1. The comparatives have been re-presented, as outlined in Note
1.5 to the Financial Statements.
Adjusted operating profit margin of 20.2% (2022: 19.5%) is calculated as
adjusted operating profit of $431.8 million (2022: $403.7 million) divided by
revenue of $2,142.4 million (2022: $2,072.5 million). A reconciliation of
adjusted operating profit to its closest IFRS measure is shown in the table
above.
Reconciliation of reported operating costs to adjusted operating costs for the
years ended 31 December 2023 and 31 December 2022
2023 2022
S&D G&A R&D Other Operating costs S&D G&A R&D Other Operating costs
$m $m $m $m $m $m $m $m $m $m
As reported (612.5) (212.9) (110.0) (2.5) (937.9) (575.9) (214.9) (92.0) (13.8) (896.6)
Amortisation of acquired intangibles - 19.8 6.0 - 25.8 - 19.7 - - 19.7
Acquisition-related costs - 6.8 - - 6.8 - 8.2 - - 8.2
Divestiture-related costs/(income) (1.0) (0.4) - (0.4) (1.8) 9.0 1.7 12.4 23.1
Impairment of assets - - - - - - - - 1.4 1.4
Termination benefits and related costs 1.6 5.7 0.1 - 7.4 2.0 0.3 - - 2.3
Other adjusting items - 7.9 - 2.9 10.8 - - - - -
Adjusted (611.9) (173.1) (103.9) - (888.9) (564.9) (185.0) (92.0) - (841.9)
Reconciliation of reported basic and diluted earnings per share to adjusted
earnings per share for the years ended 31 December 2023 and 31 December 2022
2023 Adjusted 2023 2022 Adjusted 2022
$m $m $m $m
Net profit attributable to the shareholders of the Group 130.3 274.1 62.9 256.8
Number Number
Basic weighted average ordinary shares in issue 2,038,653,228 2,023,839,657
Diluted weighted average ordinary shares in issue 2,052,589,260 2,040,247,468
Cents per share Cents per share Cents per share Cents per share
Basic earnings per share 6.4 13.4 3.1 12.7
Diluted earnings per share 6.3 13.4 3.1 12.6
Adjusted diluted EPS has increased by 6.1% and is calculated as adjusted
diluted EPS for the current period less adjusted diluted EPS for the prior
year, divided by the prior year adjusted diluted EPS. This is calculated on
actual unrounded numbers.
Reconciliation of Operating cash flow, Free cash flow to capital, Free cash
flow to equity
Year ended 31 December
2023 2022
$m $m
Net cash generated from operations 490.6 384.5
Less: acquisition of property, plant and equipment and intangible assets (129.2) (144.2)
Operating cash flow(1) 361.4 240.3
Tax paid (35.9) (52.9)
Free cash flow to capital(1) 325.5 187.4
Net interest paid (65.6) (49.9)
Payment of lease liabilities (22.7) (20.7)
Financing fee amortisation (2.8) (6.6)
Foreign exchange (loss) on cash and borrowings (6.7) (4.9)
Proceeds from sale of property, plant and equipment 0.6 -
Free cash flow to equity(1) 228.3 105.3
1. The cash flow measures have also been simplified. 'Net cash for
cash conversion' has been renamed 'Operating cash flow' and 'Free cash flow
(post-tax)' has been renamed 'Free cash flow to capital'. In addition, a new
measure has been introduced, 'Free cash flow to equity' (as defined in the
table above). The Directors consider that these changes result in consistency
of cash flow measures and provide improved definition, clarity and insight.
Free cash flow to equity has increased by 116.8% to $228.3 million (2022:
$105.3 million) and is calculated as the movement in free cash flow to equity
year-on-year divided by the free cash flow to equity in the prior year. A
reconciliation of free cash flow to equity to its closest IFRS measure is
shown in the table above.
Reconciliation of reported and adjusted working capital movement
Year ended 31 December
2023 2022
$m $m
Reported working capital movement (1.3) (62.5)
Increase/(decrease) in respect of acquisitions and divestitures 3.1 (39.2)
(Decrease)/increase in termination benefits (6.1) 3.1
(Decrease) in respect of other adjusting items (3.8) -
Adjusted working capital movement (8.1) (98.6)
Cash outflows from adjusting items
Year ended 31 December
2023 2022
$m $m
Acquisition and divestitures adjustments (13.6) (5.0)
Termination benefits and related costs adjustments (3.4) (10.2)
Other adjusting items (6.6) -
Cash outflows from adjusting items (23.6) (15.2)
Cash flow conversion
Year ended 31 December
2023 2022
$m $m
Operating cash conversion(1) 83.7% 59.5%
Equity cash conversion(1) 83.3% 41.0%
1. 'Adjusted cash conversion', previously calculated as
Operating cash flow/Adjusted EBITDA, has been replaced by 'Operating cash
conversion' and is calculated as Operating cash flow/Adjusting operating
profit. In addition, a new measure has been introduced. 'Equity cash
conversion' is calculated as Free cash flow to equity/Adjusted net profit. The
Directors consider that these changes result in consistency of cash flow
measures and provide improved definition, clarity and insight.
Condensed Consolidated Financial Statements
Consolidated Income Statement
For the year ended 31 December 2023
2023 2022
Notes $m $m
Revenue 2 2,142.4 2,072.5
Cost of sales (941.8) (968.6)
Gross profit 1,200.6 1,103.9
Selling and distribution expenses (612.5) (575.9)
General and administrative expenses (212.9) (214.9)
Research and development expenses (110.0) (92.0)
Other operating expenses 3 (2.5) (13.8)
Operating profit 262.7 207.3
Finance income 4 5.2 5.5
Finance expense(1) 4 (80.7) (57.6)
Fair value movement of contingent consideration(1) 13 (24.6) (45.1)
Non-operating income/(expense), net(1) 5 4.8 (28.2)
Profit before income taxes 167.4 81.9
Income tax expense 6 (37.1) (19.0)
Net profit 130.3 62.9
Earnings per share
Basic earnings per share (cents per share) 6.4¢ 3.1¢
Diluted earnings per share (cents per share) 6.3¢ 3.1¢
(1) The comparatives have been re-presented as outlined in Note 1.5 to the
Condensed Consolidated Financial Statements.
All amounts are attributable to shareholders of the Group and wholly derived
from continuing operations.
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2023
2023 2022
Notes $m $m
Net profit 130.3 62.9
Items that will not be reclassified subsequently to the Consolidated Income
Statement
Remeasurement of defined benefit pension plans, net of tax (0.2) 8.4
Fair value movement on equity investments 9 (7.8) -
Items that may be reclassified subsequently to the Consolidated Income
Statement
Foreign currency translation 54.9 (113.6)
Realisation of cumulative translation adjustments - 12.2
Effective portion of changes in fair value of cash flow hedges 12 0.7 (7.7)
Changes in fair value of cash flow hedges reclassified to the Consolidated 12 (0.8) 16.5
Income Statement
Costs of hedging 12 (0.5) (1.1)
Income tax in respect of items that may be reclassified 0.1 2.4
Other comprehensive income/(expense) 46.4 (82.9)
Total comprehensive income/(expense) 176.7 (20.0)
All amounts are attributable to shareholders of the Group and wholly derived
from continuing operations.
Consolidated Statement of Financial Position
As at 31 December 2023
2023 2022
Notes $m $m
Assets
Non-current assets
Property, plant and equipment 473.8 400.4
Right-of-use assets 74.7 79.4
Intangible assets(1) 935.3 924.9
Goodwill(1) 1,298.8 1,224.6
Investment in financial assets 9 22.9 30.7
Deferred tax assets 6 21.2 26.6
Derivative financial assets 12 - 0.2
Restricted cash 5.3 7.3
Other non-current receivables 11.7 8.6
2,843.7 2,702.7
Current assets
Inventories 396.1 336.9
Trade and other receivables(1) 333.7 339.3
Current tax receivable(1) 16.5 24.7
Derivative financial assets 12 13.6 26.4
Restricted cash 12.5 18.2
Cash and cash equivalents 97.6 143.8
870.0 889.3
Total assets 3,713.7 3,592.0
Equity and liabilities
Current liabilities
Trade and other payables 388.7 346.6
Lease liabilities 20.7 20.3
Current tax payable 26.6 33.5
Derivative financial liabilities 12 16.7 32.5
Provisions 13 83.7 100.2
536.4 533.1
Non-current liabilities
Borrowings 11 1,226.9 1,211.9
Lease liabilities 64.8 68.0
Deferred tax liabilities 88.2 83.2
Provisions 13 71.3 53.1
Derivative financial liabilities 12 0.9 0.3
Other non-current liabilities 32.5 32.7
1,484.6 1,449.2
Total liabilities 2,021.0 1,982.3
Net assets 1,692.7 1,609.7
Equity
Share capital 251.5 250.7
Share premium 181.0 165.7
Own shares (0.6) (1.5)
Retained deficit (888.7) (892.2)
Merger reserve 2,098.9 2,098.9
Cumulative translation reserve (122.2) (177.1)
Other reserves 172.8 165.2
Total equity 1,692.7 1,609.7
Total equity and liabilities 3,713.7 3,592.0
(1) The comparatives have been re-presented as outlined in Note 1.5 to the
Condensed Consolidated Financial Statements.
Consolidated Statement of Changes in Equity
For the year ended 31 December 2023
Share capital Share premium Own shares Retained deficit Merger reserve Cumulative translation reserve Other reserves Total
Notes $m $m $m $m $m $m $m $m
At 1 January 2022 247.0 142.3 (2.2) (842.0) 2,098.9 (75.7) 126.5 1,694.8
Net profit - - - 62.9 - - - 62.9
Other comprehensive (expense)/income:
Foreign currency translation adjustment, net of tax - - - - - (113.6) - (113.6)
Realisation of cumulative translation adjustments - - - - - 12.2 - 12.2
Remeasurement of defined benefit pension plans, net of tax - - - - - - 8.4 8.4
Changes in fair value of cash flow hedges, net of tax - - - - - - 10.1 10.1
Other comprehensive (expense)/income - - - - - (101.4) 18.5 (82.9)
Total comprehensive (expense)/income - - - 62.9 - (101.4) 18.5 (20.0)
Dividends paid - - - (88.1) - - - (88.1)
Scrip dividend 1.1 23.4 - (24.5) - - - -
Allotment of shares to Employee Benefit Trust 2.6 - (2.6) - - - - -
Share-based payments - - - - - - 16.6 16.6
Share awards vested - - 3.3 - - - 2.9 6.2
Excess deferred tax benefit from share-based payments - - - - - - 0.2 0.2
Transfer between reserves - - - (0.5) - - 0.5 -
At 31 December 2022 250.7 165.7 (1.5) (892.2) 2,098.9 (177.1) 165.2 1,609.7
Net profit - - - 130.3 - - - 130.3
Other comprehensive (expense)/income:
Foreign currency translation adjustment, net of tax - - - - - 54.9 - 54.9
Remeasurement of defined benefit pension plans, net of tax - - - - - - (0.2) (0.2)
Changes in fair value of cash flow hedges, net of tax - - - - - - (0.5) (0.5)
Changes in fair value of equity investments 9 - - - - - - (7.8) (7.8)
Other comprehensive income/(expense) - - - - - 54.9 (8.5) 46.4
Total comprehensive income/(expense) - - - 130.3 - 54.9 (8.5) 176.7
Dividends paid 8 - - - (110.7) - - - (110.7)
Scrip dividend 8 0.8 15.3 - (16.1) - - - -
Share-based payments - - - - - - 14.5 14.5
Share awards vested - - 0.9 - - - 1.5 2.4
Excess deferred tax benefit from share-based payments - - - - - - 0.1 0.1
At 31 December 2023 251.5 181.0 (0.6) (888.7) 2,098.9 (122.2) 172.8 1,692.7
Consolidated Statement of Cash Flows
For the year ended 31 December 2023
2023 2022
Notes $m $m
Cash flows from operating activities
Net profit 130.3 62.9
Adjustments for
Depreciation of property, plant and equipment 37.5 39.7
Depreciation of right-of-use assets 22.7 22.1
Amortisation of intangible assets 154.6 147.4
Income tax 6 37.1 19.0
Non-operating (income)/expense, net(1) 5 (9.6) 26.5
Fair value movement of contingent consideration 13 24.6 45.1
Finance costs, net(1) 4 75.5 52.1
Share-based payments 14.6 16.7
Impairment/write-off of intangible assets - 6.3
Impairment/write-off of property, plant and equipment 2.7 9.2
Impairment/write-off of right-of-use assets 1.9 -
Change in assets and liabilities:
Inventories (49.4) (36.3)
Trade and other receivables 18.7 (54.3)
Derivative financial assets 11.5 (9.3)
Other non-current receivables (1.1) 3.0
Restricted cash 7.8 (11.8)
Trade and other payables(1) 21.1 14.7
Derivative financial liabilities (13.4) 20.7
Provisions(1) 4.8 9.8
Other non-current payables(1) (1.3) 1.0
Net cash generated from operations 490.6 384.5
Interest received 5.2 5.5
Interest paid (70.8) (55.4)
Payment of contingent consideration arising from acquisitions 13 (21.7) -
Income taxes paid (35.9) (52.9)
Net cash generated from operating activities 367.4 281.7
Cash flows from investing activities
Acquisition of property, plant and equipment and intangible assets (129.2) (144.2)
Proceeds from sale of property, plant and equipment 0.6 -
Acquisitions, net of cash acquired 10 (84.4) (123.3)
Payment of contingent consideration arising from acquisitions 13 (73.0) (50.0)
Net cash inflow/(outflow) arising from divestitures 0.3 (0.1)
Investment in financial assets 9 - (30.7)
Net cash used in investing activities (285.7) (348.3)
Cash flows from financing activities
Repayment of borrowings - (842.5)
Proceeds from borrowings 11 9.4 714.2
Payment of lease liabilities (22.7) (20.7)
Dividends paid 8 (110.7) (88.1)
Net cash used in financing activities (124.0) (237.1)
Net change in cash and cash equivalents (42.3) (303.7)
Cash and cash equivalents at beginning of the year 143.8 463.4
Effect of exchange rate changes on cash and cash equivalents (3.9) (15.9)
Cash and cash equivalents at end of the year 97.6 143.8
(1) The comparatives have been re-presented as outlined in Note 1.5 to the
Condensed Consolidated Financial Statements.
1. Basis of preparation
1.1 General information
Convatec Group Plc (the Company) is a public limited company incorporated in
the United Kingdom under the Companies Act of 2006. The Company's registered
office is 7th Floor 20 Eastbourne Terrace, London, W2 6LG, United Kingdom.
The Company and its subsidiaries (collectively, the Group) are a global
medical products and technologies group focused on therapies for the
management of chronic conditions, with leading market positions in advanced
wound care, ostomy care, continence care and infusion care.
The announcement is based on the Group's Consolidated Financial Statements
which have been prepared in accordance with United Kingdom adopted
international accounting standards and International Financial Reporting
Standards (IFRS) as issued by the International Accounting Standards Board
(IASB).
The Financial Statements are presented in US dollars (USD), reflecting the
profile of the Group's revenue and operating profit, which are primarily
generated in US dollars and US dollar-linked currencies. All values are
rounded to $0.1 million except where otherwise indicated.
The financial information set out in this announcement does not constitute the
Group's statutory accounts for the year ended 31 December 2023 and 2022 but is
derived from those accounts. Statutory accounts for 2022 have been delivered
to the Registrar of Companies and those for 2023 will be delivered following
the Company's Annual General Meeting. The auditor's reports on the 2023 and
2022 accounts were unqualified, did not draw attention to any matters by way
of emphasis without qualifying their report and did not contain a statement
under section 498(2) or (3) of the Companies Act 2006.
1.2 Critical accounting judgements and key sources of estimation uncertainty
The preparation of financial statements, in conformity with United Kingdom
adopted international accounting standards and International Financial
Reporting Standards (IFRS), requires management to make judgements, estimates
and assumptions that affect the application of accounting policies and the
reported value of assets and liabilities, income and expense. Actual results
may differ from these estimates or judgements of likely outcome. Management
regularly reviews, and revises as necessary, the accounting judgements that
significantly impact the amounts recognised in the Consolidated Financial
Statements and the sources of estimation uncertainty that are considered to be
key estimates due to their potential to give rise to material adjustments in
the Group's Consolidated Financial Statements within the next financial year.
In preparing the Consolidated Financial Statements, no critical accounting
judgements have been identified. Management have identified one key source of
estimation uncertainty in respect of the provision for contingent
consideration on acquisitions. The nature of the uncertainty arises from
both the estimation of the undiscounted amounts expected to be paid and the
estimation of the timing of discrete payments.
The underlying drivers of the contingent consideration are determined in
accordance with the contractual terms of the purchase agreements for each
relevant acquisition and may vary depending on the amounts or timing of
product revenues (including future revenues, which are inherently uncertain),
particularly when it relates to products which are relatively new to market or
not yet launched), the future achievement of regulatory clearance for new
products, or other uncertainties deriving from the purchase agreement, which
may be subject to negotiation. The Group estimates provisions for contingent
consideration based on information available at the balance sheet date that
includes forecasts that run up to 20 years into the future and expectations of
when future events that trigger payments will happen. Future payment forecasts
are discounted to present value in accordance with the requirements of IAS 37
Provisions, Contingent Liabilities and Contingent Assets.
Actual results may differ from estimates or there may be delays to estimated
timetables for regulatory clearances which would lead to a change in estimate
of provisions for contingent consideration and may vary materially within the
next financial year. At 31 December 2023 the discounted estimate of
provisions for contingent consideration was $138.0 million (see Note 10 -
Acquisitions). Management has determined that a reasonable possible range of
discounted outcomes within the next financial year is $50.0 million to $156.0
million.
1.3 Going concern
As discussed in the Financial review on pages 9 to 20, the overall financial
performance of the business remains strong with a robust liquidity position.
As at 31 December 2023, the Group held cash and cash equivalents of $97.6
million (31 December 2022: $143.8 million), and borrowings of $1,226.9 million
(31 December 2022: $1,211.9 million). The borrowings as at 31 December 2023
comprised of senior notes of $500.0 million, term loan of $250.0 million, and
drawn multicurrency revolving credit facilities of $490.6 million, net of
unamortised financing fees of $13.7 million. During the year, the term of the
$950.0 million multicurrency revolving credit facility was extended by an
additional year and is now committed to November 2028. The term loan and
senior notes remain repayable in 2027 and 2029 respectively. $459.4 million of
the multicurrency revolving credit facilities remained undrawn as at 31
December 2023, which together with cash and cash equivalents of $97.6 million,
provided the Group with total liquidity of $557.0 million as at that date
(2022: $616.6 million). The principal financial covenants remain unchanged and
as at 31 December 2023, the Group was in compliance with its financial
covenants.
In preparing their assessment of going concern, the Directors have considered
available cash resources, financial performance and forecast performance,
including strategy delivery, together with the Group's financial covenant
compliance requirements and principal risks and uncertainties. The Directors
have used cash flow forecasts and actual performance in 2023, the Board
approved 2024 budget and longer-term strategic plan as foundations. The
forecasts reflected the full potential funding requirements in relation to the
remaining estimated contingent consideration payable in relation to the
Group's acquisitions. The Directors have considered a going concern period to
31 December 2025, which is at least 12 months from the date of approval of the
Consolidated Financial Statements.
Accordingly, at the time of approving these Consolidated Financial Statements,
the Directors have a reasonable expectation that the Group and the Company
will have adequate liquid resources to meet their respective liabilities as
they become due and will be able to sustain its business model, strategy and
operations and remain solvent for a period of at least 12 months from 5 March
2024.
1.4 Accounting standards
New standards, interpretations and amendments applied for the first time
On 1 January 2023, the Group adopted the following amendments which are
mandatorily effective for the period beginning 1 January 2023:
· Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS
Practice Statement 2);
· Definition of Accounting Estimates (Amendments to IAS 8);
· Deferred Tax Related to Assets and Liabilities arising from a
Single Transaction (Amendments to IAS 12);
· IFRS 17 - Insurance contracts; and
· International Tax Reform - Pillar Two Model Rules (Amendments to
IAS 12).
The adoption during the year of the amendments and interpretations has not had
a material impact on the Consolidated Financial Statements.
Apart from these changes, the accounting policies set out in the Notes have
been applied consistently to both years presented in these Consolidated
Financial Statements.
New standards, interpretations and amendments not yet effective
There are a number of standards, amendments to standards and interpretations
which have been issued by the IASB that are effective in future accounting
periods that the Group has decided not to adopt early.
The following amendments are effective for the period beginning 1 January
2024:
· IFRS 16 Leases (Amendment - Liability in a Sale and Leaseback);
· IAS 1 Presentation of Financial Statements (Amendment -
Classification of Liabilities as Current or Non-current); and
· IAS 1 Presentation of Financial Statements (Amendment -
Non-current liabilities with Covenants).
The Group is currently assessing the impact of these new accounting standards
and amendments and does not believe these will have a material impact on the
Group.
Other interpretations and amendments
In addition to these issued standards, there are a number of other
interpretations, amendments and annual improvement project recommendations
that have been issued but not yet effective that have not yet been adopted by
the Group because application is not yet mandatory, or they are not relevant
for the Group.
1.5 Prior year re-presentation
Certain line items in the primary statements have been disaggregated to
provide greater clarity, and accordingly, the corresponding 2022 comparative
amounts have been re-presented for consistency and comparability between
periods.
Within the Consolidated Income Statement, the fair value movement of
contingent consideration has been presented separately. The 2022 comparative
amount includes $15.6 million that was previously included within finance
expense, and $29.5 million previously included within non-operating
income/(expense), net.
Within the Consolidated Statement of Financial Position, intangible assets of
$924.9 million and goodwill of $1,224.6 million are now disclosed separately;
and current tax receivable of $24.7 million is disclosed separately from trade
and other receivables.
Within the Consolidated Statement of Cash Flows, trade and other payables and
other non-current payables have been re-presented to separately disclose the
cash impact of movements in provisions of $9.8 million.
There is no impact on net profit, net assets, cash flows or any subtotals
presented previously.
2. Revenue and segmental information
The Board considers the Group's business to be a single segment entity engaged
in the development, manufacture and sale of medical products, services and
technologies. R&D, manufacturing and central support functions are managed
globally for the Group, supporting all categories of sales. Revenues are
managed both on a category and regional basis. This note presents the
performance and activities of the Group as a single segment.
Pages 4 to 5 of the Chief Executive's Review provide further detail of
category revenue.
During the year ended 31 December 2023, management reassessed its Chief
Operating Decision Maker (CODM) and determined that Convatec's Executive
Leadership Team (CELT) is now the CODM and no longer the Chief Executive
Officer. The CODM is the function that allocates resources and evaluates the
Group's global product portfolios on a revenue basis and evaluates
profitability and associated investment on an enterprise-wide basis due to
shared infrastructures and support functions between the categories. The
financial information provided to CELT for decision-making purposes is
produced on both a category and geographic basis. Resources are allocated on a
Group-wide basis, with a focus on both category and the key markets but
primarily based on the merits of individual proposals. The change in CODM does
not impact the Group's single segment assessment.
Revenue by category
The Group generates revenue across four major product categories. The
following chart sets out the Group's revenue for the year ended 31
December by category:
2023 2022
$m $m
Advanced Wound Care 695.3 620.7
Ostomy Care 608.3 583.0
Continence Care 457.2 425.4
Infusion Care 370.9 341.1
Revenue excluding hospital care exit 2,131.7 1,970.2
Revenue from hospital care exit(1) 10.7 102.3
Total 2,142.4 2,072.5
1. Following the exit of hospital care in 2022, effective from 1
January 2023, Flexi-Seal(TM), our faecal management system, moved from the
Continence & Critical Care category to the Ostomy Care category. The
remaining industrial sales, predominantly continence-related supplies for B2B
customers, moved from Infusion Care to Continence Care. Continence &
Critical Care has been renamed to Continence Care. The 2022 comparatives have
been re-presented to reflect these changes and to separately disclose revenue
associated with the hospital care exit.
Geographic information
Geographic markets
The following chart sets out the Group's revenue by geographic market in which
third party customers are located:
2023 2022
$m $m
Europe 647.8 688.6
North America 1,186.0 1,090.3
Rest of World (RoW)(1) 308.6 293.6
Total 2,142.4 2,072.5
1. Rest of World (RoW) comprises all countries in Asia Pacific, Latin
America (including Mexico and the Caribbean), the Middle East (including
Turkey) and Africa.
3. Other operating expenses
Other operating expenses were as follows:
2023 2022
$m $m
Impairment of intangible assets - 1.4
Impairment of property, plant and equipment and right-of-use assets 2.5 12.4
2.5 13.8
Other operating expenses in the year consisted of $2.9 million of impairments
in respect of property, plant and equipment and right-of-use assets as a
result of the Group's transformation projects, offset by $0.4 million reversal
of property, plant and equipment that was impaired in 2022 from the hospital
care exit. The $13.8 million in the year ended 31 December 2022 related to the
impairments of property, plant and equipment and intangible assets arising
from the exit from hospital care and industrial sales-related activities.
4. Finance income and expense
Finance expenses arise from interest on the Group's borrowings and lease
liabilities. Finance income arises from interest earned on investment of
surplus cash.
Finance costs, net for the year ended 31 December were as follows:
2023 2022
$m $m
Finance income
Interest income on cash and cash equivalents 5.2 5.5
Total finance income 5.2 5.5
Finance expense
Interest expense on borrowings (75.2) (46.4)
Other financing-related fees(1) (7.2) (8.2)
Interest expense on interest rate derivatives - (1.4)
Interest expense on lease liabilities (3.5) (3.3)
Capitalised interest(2) 5.4 2.0
Other finance costs (0.2) (0.3)
Total finance expense (80.7) (57.6)
Finance costs, net (75.5) (52.1)
1. Other financing-related fees include the amortisation of
deferred financing fees associated with the multicurrency revolving credit
facilities, term loan facilities and senior notes.
2. Capitalised interest was calculated using the Group's
weighted average interest rate over the year of 5.7% (2022: 3.4%), and will be
treated as tax deductible.
5. Non-operating income/(expense), net
Non-operating income/(expense), net was as follows:
2023 2022
Notes $m $m
Net foreign exchange gain/(loss)(1) 3.7 (13.5)
Realisation of cumulative translation adjustments - (12.2)
(Loss)/gain on foreign exchange forward contracts 12 (4.3) 15.8
Gain/(loss) on foreign exchange cash flow hedges 12 0.8 (16.5)
Gain/(loss) on divestiture(2) 3.9 (2.0)
Other non-operating income 0.7 0.2
Non-operating income/(expense), net(3) 4.8 (28.2)
1. The foreign exchange gain in 2023 primarily relate to the
foreign exchange impact on intercompany transactions, including loans
transacted in non-functional currencies. The Group uses foreign exchange
forward contracts to manage these exposures in accordance with the Group's
foreign exchange risk management policy.
2. As part of the hospital care exit, the UnoMeter™ trademarks
were sold during the year, resulting in a gain of $3.9 million (2022: loss of
$2.0 million arose from the sale of a subsidiary as part of the hospital care
exit).
3. Of the total net non-operating expense, $4.8 million (2022:
$1.7 million) relates to mark-to-market derivatives, the cash flow impact of
which has been shown within the changes in working capital section of the
Consolidated Statement of Cash Flows.
6. Income taxes
The note below sets out the current and deferred tax charges, which together
comprise the total tax expense in the Consolidated Income Statement.
6.1 Taxation
The Group's income tax expense is the sum of the total current and deferred
tax expense.
2023 2022
$m $m
Current tax
Overseas taxation 46.1 46.8
Adjustment to prior years (5.5) (2.0)
Total current tax expense 40.6 44.8
Deferred tax
Origination and reversal of temporary differences 2.0 (3.7)
Change in tax rates 1.6 (3.2)
Adjustment to prior years (4.5) 1.2
Benefit from previously unrecognised tax losses (2.6) (20.1)
Total deferred tax benefit (3.5) (25.8)
Income tax expense 37.1 19.0
The adjustment to prior years included a net tax benefit of $15.1 million
following the successful resolution of an uncertain tax position.
In 2022, the deferred tax movement included a benefit of $20.1 million in
respect of the recognition of previously unrecognised tax losses in the US
following the acquisition of Triad Life Sciences Inc.
6.2 Reconciliation of effective tax rate
The effective tax rate for the year ended 31 December 2023 was 22.2%, as
compared with 23.2% for the year ended 31 December 2022.
Tax reconciliation to UK statutory rate
The table below reconciles the Group's profit before income taxes at the UK
statutory rate to the Group's total income tax expense:
2023 2022
$m $m
Profit before income taxes 167.4 81.9
Profit before income taxes multiplied by rate of corporation tax in the UK of 39.4 15.6
23.52% (2022: 19.0%)
Difference between UK and overseas tax rates(1) 1.6 3.0
Non-deductible/non-taxable items 7.2 14.4
Change in recognition of deferred tax assets 2.6 1.0
Recognition of previously unrecognised US deferred tax assets (2.6) (20.1)
Movement in provision for uncertain tax positions (17.5) 2.5
Other(2) 6.4 2.6
Income tax expense and effective tax rate 37.1 22.2% 19.0 23.2%
1. This includes changes in tax rates based on substantively
enacted legislation across various tax jurisdictions as of 31 December.
2. Includes tax on unremitted earnings and prior year
adjustments.
The Group has worldwide operations and therefore is subject to several factors
that may affect future tax charges, principally the levels and mix of
profitability in different tax jurisdictions, transfer pricing regulations,
tax rates imposed and tax regime reforms. The calculation of the Group's tax
expense involves a degree of estimation and judgements in respect of certain
items for which the tax treatment cannot be finally determined until
resolution has been reached with the relevant tax authority, specifically in
relation to open tax and transfer pricing matters. Due to the high volume of
intercompany transactions, the Group's evolving business model and the
increasing complexity in interaction between multiple tax laws and
regulations, transfer pricing requires judgement in determining the
appropriate allocation of profits between jurisdictions. The Group assessed
the impact of ongoing changes to the Group's operating model, the supporting
documentation for the tax and transfer pricing positions, existing tax
authority challenges, and the likelihood of new challenges by tax authorities.
The Group continues to believe it has made adequate provision for uncertain
tax positions on open issues in accordance with IFRIC 23 Uncertainty over
Income Tax Treatments. The ultimate liability for such matters may vary from
the amounts provided and is dependent upon the outcome of discussions with
relevant tax authorities or, where applicable, appeal proceedings. The
movement includes resolutions of uncertain tax positions in the year.
The Group is monitoring tax reforms driven by the OECD's BEPS Pillar One and
Pillar Two to reform international taxation rules. The Group has assessed the
potential tax impact based on OECD model rules and draft and substantively
enacted legislation in jurisdictions in which the Group operates and expects
the tax impact to not be material in the foreseeable future. The United
Kingdom enacted Pillar Two rules in the UK Finance (No.2) Act 2023 in 2023.
This has no impact on the Group's results for the year ended 31 December 2023.
The Group has applied the temporary exception as detailed in the IASB
announcement "International Tax Reform - Pillar Two Model Rules", which
amended IAS 12 Income Taxes, and therefore has not recognised nor disclosed
information about deferred tax assets and liabilities related to Pillar Two
income taxes.
7. Earnings per share
Basic earnings per share is calculated based on the Group's net profit for the
year attributable to shareholders divided by the weighted average number of
ordinary shares in issue during the year. The weighted average number of
shares is net of shares purchased by the Group and held as own shares.
Diluted earnings per share take into account the dilutive effect of all
outstanding share options priced below the market price in arriving at the
number of shares used in its calculation.
2023 2022
Net profit attributable to the shareholders of the Group ($m) 130.3 62.9
Basic weighted average ordinary shares in issue (number) 2,038,653,228 2,023,839,657
Dilutive impact of share awards (number) 13,936,032 16,407,811
Diluted weighted average ordinary shares in issue (number) 2,052,589,260 2,040,247,468
Basic earnings per share (cents per share) 6.4¢ per share 3.1¢ per share
Diluted earnings per share (cents per share) 6.3¢ per share 3.1¢ per share
The calculation of diluted earnings per share does not contain any share
options that were non-dilutive for the year (2022: 404,241), because the
average market price of the Group's ordinary shares exceeded the exercise
price (2022: the exercise price exceeded the average market price of the
Group's ordinary shares).
8. Dividends
Dividends paid and proposed were as follows:
Pence per share Cents per share Total Settled in Settled via scrip No of scrip shares issued
cash
$m $m $m
Final dividend 2021 3.161 4.154 77.8 58.9 18.9 7,192,010
Interim dividend 2022 1.410 1.717 34.8 29.2 5.6 2,107,103
Paid in 2022 4.571 5.871 112.6 88.1 24.5 9,299,113
Final dividend 2022 3.657 4.330 92.4 87.7 4.7 1,717,549
Interim dividend 2023 1.380 1.769 34.4 23.0 11.4 4,199,962
Paid in 2023 5.037 6.099 126.8 110.7 16.1 5,917,511
Final dividend 2023 proposed 3.517 4.460 91.4
The Company previously operated a scrip dividend scheme, allowing shareholders
to elect to receive their dividend in the form of new fully paid ordinary
shares. During 2023, the Board took the decision to terminate the scrip
dividend option.
The final dividend proposed for 2023, to be distributed on 23 May 2024 to
shareholders on the register at the close of business on 26 April 2024, is
based upon the issued and fully paid share capital as at 31 December 2023 and
is subject to shareholder approval at the Annual General Meeting on 16 May
2024. The dividend will be declared in US dollars and will be paid in Sterling
at the chosen exchange rate of $1.268/£1.00 determined on 5 March 2024.
The interim and final dividends for 2023 give a total dividend for the year of
6.229 cents per share (2022: 6.047 cents per share).
9. Investment in financial assets
The investment is in relation to the Group's investment in BlueWind Medical
Limited in 2022 and the Group considers this investment to be strategic in
nature and it is not held for trading.
The Group made an irrevocable election on initial recognition to designate the
investment at fair value through other comprehensive income (FVOCI). It was
initially recorded at fair value plus transaction costs and will be remeasured
at subsequent reporting dates to fair value. The fair value of the investment
at 31 December 2023 was $22.9 million (31 December 2022: $30.7 million), with
the movement of $7.8 million taken to the Statement of Other Comprehensive
Income, within the 'Fair value movement on equity investments' line. No
dividends were recognised during the period.
In line with IFRS 13 Fair Value Measurement, this investment has been
classified as Level 3 in the fair value hierarchy as its measurement is
derived from significant unobservable inputs by reference to available
information, including the current market value of similar instruments, recent
financing rounds and discounted cash flows of the underlying net assets.
The fair value of the investment has been determined by using an average of
three valuation methodologies, those being the precedent transaction method,
the income approach method and the probability-weighted expected return model.
The table below summarises the various methodologies used by the Group to fair
value the investment, the inputs and the sensitivities applied.
10. Acquisitions
During the year to 31 December 2023, the Group completed the acquisitions of:
(1) Starlight Science Limited (Starlight), a pre-commercial UK-based
company.
(2) A Better Choice Medical Supply LLC (ABCMS), a US-based intermittent
catheter provider.
(3) All American Medical Supply Corp (AAMS), a New York home supplier of
urinary catheters and compression stockings.
This note provides details of the transactions and the acquisition accounting
that has been recorded to reflect the fair value of assets acquired and
liabilities assumed as well as the intangible assets and goodwill recognised
upon acquisition. This note also provides details of any fair value changes
identified post-acquisition in respect of previous acquisitions that the Group
has completed.
Starlight Science Limited (Starlight)
On 18 April 2023, the Group completed its acquisition of 100% of the share
capital of Starlight Science Limited (Starlight), a UK-based company owned by
30 Technology Limited. The acquisition of Starlight included the
anti-infective nitric-oxide technology platform and new product pipeline,
which complements the Group's Advanced Wound Care portfolio and strengthens
the Group's ability to provide best-in-class solutions for patients.
In addition to the initial consideration of $56.7 million (£45.3 million),
the sellers may earn contingent consideration up to a maximum of $163.9
million (£131.0 million), in the form of (i) milestone payment of $58.8
million (£47.0 million) due upon regulatory clearances in the US and Europe;
and (ii) earnout payments based on sales of products over the lifetime of the
acquired patents, with the maximum earnout capped at $105.1 million (£84.0
million).
The provisional discounted fair value of the contingent consideration at the
date of acquisition was $66.7 million, discounted at 19.1%. Following
completion of acquisition accounting, any changes in the fair value of the
contingent consideration will be recorded in the Consolidated Income Statement
in accordance with the Group's accounting policies.
A Better Choice Medical Supply LLC (ABCMS)
On 5 July 2023, the Group completed its acquisition of 100% of the share
capital of A Better Choice Medical Supply LLC (ABCMS), a US-based intermittent
catheter provider, to further strengthen the Group's Home Service Group. The
company was founded in 2008 and is based out of White Lake, Michigan. The
consideration for the acquisition was $26.6 million which included $3.0
million of deferred consideration paid into escrow. There is no earn out
associated with this acquisition.
All American Medical Supply Corp (AAMS)
On 4 October 2023, the Group completed its acquisition of 100% of the share
capital of All American Medical Supply Corp (AAMS), New York-focused home
supplier of urinary catheters and compression stockings, to further strengthen
the Group's Home Service Group. The company was founded in 2009 and is based
out of Long Island, New York. The consideration for the acquisition was $1.5
million which included $0.3 million of deferred consideration paid into
escrow. There is no earn out associated with this acquisition.
Assets acquired and liabilities assumed
Each of the transactions meet the definition of a business combination and
have been accounted for under the acquisition method of accounting. The
following table summarises the provisional fair values of the assets acquired
and liabilities assumed as at the acquisition dates:
Starlight ABCMS All American Total
Provisional Provisional Provisional Provisional
$m $m $m $m
Non-current assets
Property, plant & equipment 0.4 - - 0.4
Right-of-use assets 1.3 0.3 - 1.6
Intangible assets 112.5 4.3 - 116.8
Current assets -
Trade and other receivables 0.1 0.6 0.1 0.8
Cash and cash equivalents - 0.2 - 0.2
Total assets acquired 114.3 5.4 0.1 119.8
Current liabilities
Trade and other payables (0.1) (0.2) - (0.3)
Lease liabilities (0.2) - - (0.2)
Non-current liabilities -
Lease liabilities (1.1) (0.3) - (1.4)
Deferred tax liabilities (12.5) - - (12.5)
Total liabilities assumed (13.9) (0.5) - (14.4)
Net assets acquired 100.4 4.9 0.1 105.4
Goodwill 23.0 21.5 1.4 45.9
Total 123.4 26.4 1.5 151.3
Initial cash consideration 56.7 23.5 1.2 81.4
Deferred purchase consideration paid into escrow(1) - 3.0 0.3 3.3
Working capital adjustment(2) - (0.1) - (0.1)
Contingent consideration 66.7 - - 66.7
Total consideration 123.4 26.4 1.5 151.3
Analysis of cash outflow in the Consolidated Statement of Cash Flows
Starlight ABCMS All American Total
Provisional Provisional Provisional Provisional
$m $m $m $m
Initial cash consideration 56.7 23.5 1.2 81.4
Deferred purchase consideration paid into escrow(1) - 3.0 0.3 3.3
Working capital adjustment(2) - (0.1) - (0.1)
Cash and cash equivalents acquired - (0.2) - (0.2)
Net cash outflow from acquisitions, net of cash acquired 56.7 26.2 1.5 84.4
1. $3.0 million for the acquisition of ABCMS and $0.3 million for
the acquisition of All American was paid on closing into escrow as security
and indemnity by the sellers for their obligations under the Merger
Agreements. The escrow amounts are expected to be released within 2 years of
the respective acquisition dates, subject to terms specified in the Merger
Agreements.
2. This is the Group's calculation of the working capital
adjustment and forms part of the initial consideration. The final amount was
determined in accordance with the terms of the Merger Agreement and was
finalised and paid by the reporting date.
The fair values of the assets acquired and liabilities assumed are provisional
at 31 December 2023. The Group will finalise these amounts as it obtains the
information necessary to complete the measurement process. Any changes
resulting from facts and circumstances that existed as of the acquisition
dates may result in retrospective adjustments to the provisional amounts
recognised at the acquisition date. The Group will finalise these amounts no
later than one year from the acquisition dates.
The provisional fair value of trade and other receivables amounted to $0.8
million, with a gross contractual amount of $0.9 million. At the acquisition
date, the Group's best estimate of the contractual cash flows expected not be
collected amounted to $0.1 million.
The goodwill recorded, which is not deductible for tax purposes, represents
the cost savings, operating synergies and future growth opportunities expected
to result from combining the operations of the acquisitions with those of the
Group.
The Starlight acquisition is included in the Advanced Wound Care CGU group,
whilst ABCMS and AAMS are included in the Continence Care CGU group.
Acquisition-related costs
The Group incurred $6.2 million of acquisition-related costs directly related
to the acquisitions completed or aborted in the year ended 31 December 2023,
primarily in respect of legal and advisers' fees. The acquisition-related
costs have been recognised in general and administrative expenses in the
Consolidated Income Statement.
Revenue and profit
As Starlight is in a pre-commercial state, there is no revenue to date. The
loss for the period from the acquisition date to 31 December 2023 was $2.5
million, before recognising acquisition-related intangible asset amortisation
charges of $6.0 million. If the acquisition had been completed at 1 January
2023, reported Group revenue would have remained unchanged and the Group
profit for the period would have been $0.6 million lower for the year ended 31
December 2023, before recognising acquisition-related intangible asset
amortisation additional charges of $6.0 million.
The revenue of ABCMS for the period from the acquisition date to 31 December
2023 was $3.5 million and net profit for the period was $1.6 million, before
recognising acquisition-related intangible asset amortisation charges of $0.7
million. If the acquisition had been completed on 1 January 2023, reported
Group revenue would have been $4.3 million higher and Group profit for the
year would have been $0.8 million higher, before recognising
acquisition-related intangible asset amortisation charges of $0.7 million.
The revenue of AAMS for the period from the acquisition date to 31 December
2023 was $0.9 million and net profit for the period was $0.4 million. No
intangible assets were identified during the purchase price allocation
therefore there is no acquisition-related intangible asset amortisation
charge. If the acquisition had been completed at 1 January 2023, reported
Group revenue would have been $0.7 million higher and net profit would have
remained unchanged.
Fair value of contingent consideration at reporting date
Contingent consideration arising on business combinations is classified as a
recurring fair value measurement within Level 3 of the fair value hierarchy,
in line with IFRS 13 Fair Value Measurements. Key unobservable inputs in
respect of the Group's acquisitions include actual results, management
forecasts and an appropriate discount rate.
As at 31 December 2023, the discounted fair value of the contingent
consideration payable in respect of the Group's acquisitions was $138.0
million (2022: $140.0 million).
Management has determined that the potential range of undiscounted outcomes at
31 December 2023 is between $52.4 million and $265.4 million, from a maximum
undiscounted amount of $354.2 million.
The table below shows an indicative basis of the sensitivity to the income
statement and balance sheet at 31 December 2023.
Sales forecast Discount rate
5% 10% -5% -10% 1% 2% -1% -2%
Increase/(decrease) in financial liability and loss/(gain) in income statement 8.3 16.9 (8.3) (16.5) (2.3) (4.4) 2.4 5.0
11. Borrowings
The Group's sources of borrowing for funding and liquidity purposes derive
from senior notes and credit facilities including a committed revolving credit
facility.
The Group's borrowings as at 31 December were as follows:
2023 2022
Year of Face value Face value
Currency maturity $m $m
Revolving Credit Facility(1) USD/Euro 2028 490.6 477.2
Term Loan USD 2027 250.0 250.0
Senior Notes USD 2029 500.0 500.0
Interest-bearing borrowings 1,240.6 1,227.2
Financing fees(2) (13.7) (15.3)
Total carrying value of borrowings 1,226.9 1,211.9
Current portion of borrowings - -
Non-current portion of borrowings 1,226.9 1,211.9
1. Included within the Revolving Credit Facility was €100.0
million ($110.4 million) and £8.0 million ($8.2 million) at 31 December 2023
(2022: €145.0 million ($155.2 million)), representing 22.5% of RCF debt
denominated in Euros, 2.1% of RCF debt denominated in GBP and 75.4%
denominated in US dollars.
2. Financing fees of $13.7 million (2022: $15.3 million) related
to the remaining unamortised fees incurred on the credit facilities of $7.8
million (2022: $8.4 million) and on the senior notes of $5.9 million (2022:
$6.9 million).
Credit facilities
The credit facilities held by the Group are committed and available for the
refinancing of certain existing financial indebtedness and general corporate
purposes. The Group's bank credit facility of $1.2 billion, which was
refinanced in November 2022, comprises of a $250.0 million term loan and a
$950.0 million multicurrency revolving credit facility. As at 31 December
2023, the term loan was fully drawn and $490.6 million of the revolving credit
facility was drawn, with $459.4 million undrawn. During the year, the Group
extended the term of its multicurrency revolving credit facility by an
additional year and this is now committed to November 2028 (originally
committed for a five-year term to November 2027). Transaction costs directly
attributable to the extension have been capitalised and are amortised over the
term of the facility using the effective interest rate method. The term loan
remains committed for a five-year term to November 2027.
Senior notes
Unsecured senior notes of $500.0 million are subject to an interest cover
financial covenant as defined in the indentures which is a minimum of 2.0
times, with testing required annually at 31 December on the last 12 calendar
months' financial performance.
Financial covenants
The principal financial covenants are based on a permitted net debt to
covenant-adjusted EBITDA(1) ratio and interest cover test as defined in the
credit facilities agreement. Testing is required on a semi-annual basis, at
June and December, based on the last 12 months' financial performance. At 31
December 2023, the permitted net debt to covenant-adjusted EBITDA(1) ratio was
a maximum of 3.50 times and the interest cover a minimum of 3.50 times, terms
as defined by the credit facilities agreement. In accordance with the credit
facilities agreement, the net debt to covenant-adjusted EBITDA(1) ratio can
increase to a maximum 4.00 times for permitted acquisitions or investments.
The Group was in compliance with all financial and non-financial covenants at
31 December 2023, with significant available headroom on the financial
covenants (in excess of $603.3 million debt headroom on net debt to
covenant-adjusted EBITDA(1 2 (#_ftn2) )).
Excluding the impact of interest rate swaps, the weighted average interest
rate on borrowings for the year ended 31 December 2023 was 5.7% (2022: 3.4%).
The increase in the weighted average interest rate was due to rising
underlying reference base rates on debt with floating rates.
Borrowings measured at fair value
The senior notes are listed and their fair value at 31 December 2023 of $450.1
million (2022: $430.8 million) has been obtained from quoted market data and
therefore categorised as a Level 1 measurement in the fair value hierarchy
under IFRS 13, Fair Value Measurements. For the Group's other borrowings, the
fair value is based on discounted cash flows using a current borrowing rate
and is categorised as a Level 2 measurement. At 31 December 2023, the
estimated fair value of the Group's other borrowings was $774.9 million (2022:
$762.4 million).
12. Financial instruments
A derivative financial instrument is a contract that derives its value from
the performance of an underlying variable, such as foreign exchange rates or
interest rates. The Group uses derivative financial instruments to manage
foreign exchange and interest rate risk arising from its operations and
financing. Derivative financial instruments used by the Group are foreign
exchange forwards and interest rate swaps.
The Group utilises interest rate swap agreements, designated as cash flow
hedges, to manage its exposure to variability in expected future cash outflows
attributable to the changes in interest rates on the Group's committed
borrowing facilities.
The Group holds interest rate swap agreements to fix a proportion of variable
interest on US dollar and EURO denominated debt, in accordance with the
Group's risk management policy. The interest rate swaps are designated as
hedging instruments in a cash flow hedging relationship.
In accordance with Group policy, the Group uses forward foreign exchange
contracts, designated as cash flow hedges, to hedge certain forecast
third-party foreign currency transactions. When a commitment is entered into a
layered approach is taken when hedging the currency exposure, ensuring that no
more than 100% of the transaction exposure is covered. The currencies hedged
by forward foreign exchange contracts are US dollars, Swiss francs, Pound
sterling, Danish krone and Japanese yen.
The Group further utilises foreign exchange contracts and swaps classified as
FVTPL to manage short-term foreign exchange exposure.
Cash flow hedges
The fair values are based on market values of equivalent instruments at 31
December. The following table presents the Group's outstanding interest rate
swaps, which were designated as cash flow hedges at 31 December:
2023 2022
Currency Effective date Maturity date Notional amount Fair value(1) Notional amount Fair value(1)
assets/ (liabilities) assets/ (liabilities)
$m $m $m $m
3 Month LIBOR Float to Fixed Interest Rate Swap USD 24 Jan 2020 24 Jan 2023 - - 275.0 2.0
6 Month term SOFR Float to Fixed Interest Rate Swap USD 23 Jan 2023 23 Jan 2024 90.0 0.4 90.0 0.2
6 Month term SOFR Float to Fixed Interest Rate Swap USD 23 Jan 2023 23 Jul 2024 40.0 0.1 40.0 -
6 Month term SOFR Float to Fixed Interest Rate Swap USD 23 Jan 2023 23 Jan 2025 50.0 0.2 50.0 (0.3)
6 Month term SOFR Float to Fixed Interest Rate Swap USD 3 Aug 2023 3 Aug 2024 50.0 - - -
6 Month term SOFR Float to Fixed Interest Rate Swap USD 3 Aug 2023 3 Feb 2025 50.0 - - -
6 Month term SOFR Float to Fixed Interest Rate Swap USD 3 Aug 2023 4 Aug 2025 50.0 - - -
6 Month term EURIBOR Float to Fixed Interest Rate Swap EUR 29 Sep 2023 29 Sep 2024 55.2 (0.2) - -
6 Month term SOFR Float to Fixed Interest Rate Swap USD 29 Sep 2023 29 Sep 2025 40.0 (0.5) - -
1. The fair values of the interest rate swaps were disclosed
in non-current derivative financial liabilities, current derivative financial
liabilities and current derivative assets in the Consolidated Statement of
Financial Position. There was no ineffectiveness recognised in the
Consolidated Income Statement.
Foreign exchange forward contracts
The following table presents the Group's outstanding foreign exchange forward
contracts valued at FVTPL and foreign currency forward contracts designated as
cash flow hedges, disclosed in current derivative financial assets and
liabilities, at 31 December:
2023 2022
Term Notional amount Fair value assets/ (liabilities) Notional amount Fair value assets/ (liabilities)
$m $m $m $m
Foreign exchange contracts ≤ 3 months 453.0 8.0 996.6 21.3
Foreign currency forward exchange contracts designated as cash flow hedges ≤ 12 months 195.9 4.4 72.7 3.1
Derivative financial assets 648.9 12.4 1,069.3 24.4
Foreign exchange contracts ≤ 3 months 760.7 (15.2) 703.7 (30.2)
Foreign currency forward exchange contracts designated as cash flow hedges ≤ 12 months 53.3 (1.3) 132.8 (2.3)
Derivative financial liabilities 814.0 (16.5) 836.5 (32.5)
During the year ended 31 December 2023, the Group realised a net loss of $4.3
million (2022: $15.8 million gain) on foreign exchange forward contracts
designated as FVTPL in Note 5 - Non-operating income/(expenses), net in the
Consolidated Income Statement.
Impact of hedging on other comprehensive income
The following table presents the impact of hedging on other comprehensive
income:
2023 2022
$m $m
Recognised in other comprehensive income:
Effective portion of changes in fair value of cash flow hedges:
Interest rate swaps (1.3) 3.3
Foreign currency forward exchange contracts designated as cash flow hedges 2.0 (11.0)
Changes in fair value of cash flow hedges reclassified to the Consolidated (0.8) 16.5
Income Statement
Cost of hedging (0.5) (1.1)
Total (0.6) 7.7
13. Provisions
A provision is an obligation recognised when there is uncertainty over the
timing or amount that will be paid. Provisions recognised by the Group are
primarily in respect of restructuring, decommissioning, dilapidations, legal
liabilities and contingent consideration. The contingent consideration
provision recognised by the Group is in respect of acquisitions and includes
amounts contingent on future events such as development milestones and sales
performance.
The movements in provisions are as follows:
Dilapidations Restructuring Legal Contingent consideration Total
$m $m $m $m $m
1 January 2023 2.8 10.3 0.2 140.0 153.3
Contingent consideration from acquisitions - - - 66.7 66.7
Charged to income statement 1.0 13.9 0.4 - 15.3
Fair value movement of contingent consideration - - - 24.6 24.6
Released to income statement - (2.2) - - (2.2)
Utilised (1.3) (8.3) - (94.7) (104.3)
Foreign exchange (0.1) 0.3 - 1.4 1.6
31 December 2023 2.4 14.0 0.6 138.0 155.0
Current 83.7
Non-current 71.3
The expected payment profile of the discounted provisions at 31 December was
as follows:
2023 2022
$m $m
Within 1 year 83.7 100.2
2 to 5 years 58.8 53.1
More than 5 years 12.5 -
Total 155.0 153.3
Dilapidation provisions
Dilapidation provisions are in respect of contractual obligations, on the
expiry of a lease, to return leased properties in the condition which is
specified in the individual leases.
Restructuring provisions
Restructuring provisions are in respect of the Group's strategic
transformation activities. All restructuring provisions are supported by
detailed plans and a valid expectation has been raised in those affected as
required by the Group's accounting policy.
Legal provision
The legal provision of $0.6 million is in respect of ongoing cases. Legal
issues are often subject to uncertainties over the timing and the final
amounts of any settlement.
Contingent consideration
As at 31 December 2023, the discounted fair value of the contingent
consideration payable in respect of the Group's acquisitions was $138.0
million. During the year, contingent consideration of $66.7 million was
recognised in respect of the Starlight acquisition and payments of $94.7
million were made in respect of the Triad Life Sciences acquisition ($73.0
million recognised within cash flows from investing activities and $21.7
million recognised within cash flows from operating activities in the
Consolidated Statement of Cash Flows). The net charge to the income statement
in respect of changes in the fair value of contingent consideration (based on
the best estimates of the amounts payable as at 31 December 2023) was $24.6
million. In addition, there was a foreign exchange movement of $1.4 million
from the re-translation of non-USD denominated balances.
Refer to Note 10 - Acquisitions for further details.
14. Commitments and contingencies
Capital commitments
At 31 December 2023, the Group had non-cancellable commitments for the
purchase of property, plant and equipment, capitalised software and
development of $22.3 million (2022: $39.3 million).
Contingent liabilities
Other than disclosed elsewhere in these financial statements, there were no
contingent liabilities recognised as at 31 December 2023 and 31 December 2022.
15. Subsequent events
The Group has evaluated subsequent events through to 5 March 2024, the date
the Consolidated Financial Statements were approved by the Board of Directors.
On 5 March 2024, the Board proposed the final dividend in respect of 2023
subject to shareholder approval at the Annual General Meeting on 16 May 2024,
to be distributed on 23 May 2024. See Note 8- Dividends to the Condensed
Consolidated Financial Statements for further details.
16. Responsibility statement of the directors on the Annual Report
The Responsibility Statement below has been prepared in connection with the
2023 Annual Report. Certain parts thereof are not included within this
announcement.
We confirm to the best of our knowledge:
· The Financial Statements, prepared in accordance with United
Kingdom adopted international accounting standards which have been prepared in
accordance with United Kingdom adopted international accounting standards and
International Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board (IASB), give a true and fair view of
the assets, liabilities, financial position and profit and loss of the Company
and the undertakings included in the consolidation taken as a whole;
· The Strategic Report includes a fair review of the development
and performance of the business and the position of the Company and the
undertakings included in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties they face; and
· The Annual Report and Financial Statements, taken as a whole, are
fair, balanced and understandable and provide the information necessary to
assess the Group's and Company's performance, business model and strategy.
This Responsibility Statement was approved by the Board of Directors on 5
March 2024 and is signed on its behalf by:
Karim Bitar
Jonny Mason
Chief Executive Officer
Chief Financial Officer
5 March 2024
5 March 2024
1 (#_ftnref1) Convatec Executive Leadership Team and their direct reports,
excluding administrative support
(#_ftnref2) 1. Covenant-adjusted EBITDA is calculated based on
terms as defined in the credit facilities agreement. This is different to
adjusted EBITDA, which is an alternative performance measure (APM) as
disclosed on pages 21 to 26..
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