REG - ConvaTec Group PLC - ConvaTec Group Plc First Half 2017 Results <Origin Href="QuoteRef">CTEC.L</Origin> - Part 3
03/08/2017 07:07
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Six months ended 30 June
2017 2016
Geographic regions $m $m
U.S. 276.9 260.4
Denmark 140.5 151.4
UK 69.9 79.5
Switzerland 54.5 54.4
France 43.1 43.2
Other(1) 246.4 240.0
831.3 828.9
_______________________________
(1) Other consists primarily of countries in Europe, APAC, Latin America and Canada.
The following table sets forth the Group's long-lived assets at 30 June 2017 and 31 December 2016 by geographic regions:
30 June 2017 31 December 2016
Long-lived assets(1) $m $m
U.S. 1,071.0 1,125.0
UK 445.7 432.9
Denmark 132.7 124.8
Slovakia 51.6 45.0
Other(2) 92.5 58.5
Total long-lived assets 1,793.5 1,786.2
_______________________________
(1) Long-lived assets consist of property, plant and equipment and intangible assets.
(2) Other consists primarily of countries in Europe and Latin America.
Major Customers
No single customer generated more than 10% of the Group's revenue for the six months ended 30 June 2017 and 2016.
3. Finance costs
Finance costs for the six months ended 30 June 2017 and 2016 were as follows:
Six months ended 30 June
2017 2016
$m $m
Interest expense on long-term borrowings(1) (26.7 ) (126.6 )
Amortisation of deferred financing fees and OID (2.4 ) (4.9 )
Interest expense on finance leases (0.8 ) -
Other income 0.6 0.4
Finance costs (29.3 ) (131.1 )
________________________
(1) Refer to note 12 - Long-term borrowings for further details.
4. Other (expense) income, net
Other (expense) income, net for the six months ended 30 June 2017 and 2016 was as follows:
Six months ended 30 June
2017 2016
$m $m
Foreign exchange (losses) gains(1) (20.0 ) 22.5
Gain on sale of assets(2) 2.6 0.4
Other (0.6 ) 0.9
Other (expense) income, net (18.0 ) 23.8
________________________
(1) Primarily relates to the foreign currency impact on intercompany transactions, including loans transacted in
non-functional currencies and foreign exchange losses as a result of hyperinflation accounting. Additionally, foreign
exchange gain for the six months ended 30 June 2016 includes foreign currency impact on re-measurement of the Group's
long-term borrowings denominated in non-functional currency.
(2) The gain on sale of assets during the six months ended 30 June 2017 relates to the sale of fully depreciated
assets in Malaysia.
5. Income taxes
The Group's income tax expense is accrued using the tax rate that would be applicable to expected total annual earnings
(i.e., the estimated average annual effective income tax rate applied to the income or loss before tax). For the six
months ended 30 June 2017, the Group recorded an income tax expense of $21.3 million and for the six months ended 30 June
2016, the Group recorded an income tax expense of $24.1 million. The $2.8 million decrease in income tax expense for the
six months ended 30 June 2017 as compared to the six months ended 30 June 2016 was impacted by change in profit or loss
before tax mix of jurisdictions with different tax rates.
The Group conducts business in various countries throughout the world and is subject to tax in numerous jurisdictions. As
a result of its business activities, the Group files a significant number of tax returns that are subject to examination by
UK and various overseas tax authorities. Tax examinations are often complex, as tax authorities may disagree with the
treatment of items reported by the Group and may require several years to resolve.
The Group operates globally and is required to submit tax returns to the relevant tax authorities in numerous tax
jurisdictions. While the Group policy is to submit tax returns on a timely basis, at any given time tax authorities have
years outstanding to make additional tax assessments, or initiate tax audits. This may result in tax disputes, and
significant issues may take several years to resolve. The assessment and recognition of tax charges and benefits requires
management judgement supplemented by views of external advisors, as needed. Tax charges related to tax risks are included
within deferred tax liabilities, or current tax liabilities where applicable. The ultimate tax liability may differ from
the amount provided depending on interpretation of (or changes in) tax laws, regulations and other authoritative tax
guidance in the various tax jurisdictions in which the Group operates. The Group defines an 'uncertain tax treatment' or
'uncertain tax position' as an item, the tax treatment of which is either unclear or is a matter of unresolved dispute
between the Group's reporting entities and the relevant tax authority. Uncertain tax treatments occur where there is an
uncertainty as to the meaning of the law, or to the applicability of the law to a particular transaction, or both. The
Group measures uncertain tax positions as "the single likely amount" of the expenditure required to settle the present
obligation at the end of the reporting period. The single likely amount approach utilises the single most likely amount of
a range of possible outcomes. With respect to "detection risk", the Group assumes that where a taxation authority has a
right to examine amounts reported to it, they will do so; and that when it performs those examinations, the taxation
authority will have full knowledge of all relevant information.
6. Dividends
The Company's dividend policy is set out in the 2016 Annual Report. Any decision to declare and pay dividends will be made
at the discretion of the directors and will depend on, among other things, applicable law, regulation, restrictions, the
Group's financial position, working capital requirements, restrictions on dividends in the Group's banking facilities,
finance costs, general economic conditions and other factors the directors deem significant. As of 30 June 2017, no
dividends were declared.
At the Company's Annual General Meeting held in May 2017, shareholders approved the implementation of a Scrip Dividend
Scheme (the "Scrip Scheme"). The Scrip Scheme enables ordinary shareholders to elect to receive new fully paid ordinary
shares instead of cash. The operation of the Scrip Scheme is always subject to the directors' decision to make the Scrip
Scheme offer available in respect of any particular dividend. Should the directors decide not to offer the Scrip Scheme in
respect of any particular dividend, cash will be paid automatically instead. Under the current authority, the operation of
the Scrip Scheme will cease on the date of the third annual general meeting of the Company, which will take place in 2019.
On 2 August 2017, the Board declared the first interim dividend to be distributed on 20 October 2017 to shareholders
registered at the close of business on 8 September 2017 in the total amount of $27.7 million, representing 1.4 cents per
share based upon the issued and fully paid share capital as at 30 June 2017. The dividend on ordinary shares was declared
in USD and will be paid in Sterling at the chosen exchange rate of $1.32/£1.00 determined on 2 August 2017. A scrip
dividend alternative shall be offered in respect of the first interim dividend, allowing shareholders to elect by 29
September 2017 to receive their dividend in the form of new ordinary shares.
7. Earnings per share
Basic and diluted earnings (loss) per ordinary share for the six months ended 30 June 2017 and 2016 was calculated as
follows:
Six months ended 30 June
2017 2016
$m $m
(except share data)
Net profit (loss) attributable to the equity holders of the Group 24.2 (72.7 )
Basic weighted average ordinary shares in issue 1,951,472,651 1,261,343,801
Dilution(1) 2,966,548 -
Diluted weighted average ordinary shares in issue 1,954,439,199 1,261,343,801
Basic earnings (loss) per share ($ per share) 0.01 (0.06 )
Diluted earnings (loss) per share ($ per share) 0.01 (0.06 )
________________________
(1) Represents dilutive effect of share awards granted in November 2016 and during the six months ended 30 June
2017.
8. Acquisition of subsidiary
Description of the transaction
On 3 January 2017, the Group acquired the entire share capital of EuroTec for a total cash consideration of approximately
$30.4 million (E29.3 million), including $5.0 million (E4.9 million) of the cash and cash equivalents acquired. EuroTec
manufactures ostomy care systems and commercialises its products directly in the Benelux region and through distributor
partners in other markets. The acquisition was made to complement the product portfolio and services provided to ostomy
market.
Assets acquired and liabilities assumed
The transaction has been accounted for as a business combination under the acquisition method of accounting. The following
table summarises the fair values of the assets acquired and liabilities assumed as of acquisition date:
AmountsRecognised as ofAcquisition Date$m
Non-current assets
Property, plant and equipment 6.1
Intangible assets(a) 12.5
Current assets
Inventories(b) 4.4
Trade and other receivables(c) 1.3
Cash and cash equivalents 5.0
Total assets 29.3
Current liabilities
Trade and other payables (0.7 )
Accrued expenses and other current liabilities (0.2 )
Non-current liabilities
Deferred tax liabilities (4.1 )
Total liabilities (5.0 )
Net assets acquired 24.3
Initial cash consideration(d) 26.3
Contingent purchase consideration paid into escrow(e) 4.1
Total consideration 30.4
Goodwill arising on acquisition(f) 6.1
Six months ended
30 June 2017
Analysis of cash outflow in the Condensed Consolidated Cash Flow Statement $m
Initial cash consideration 26.3
Cash acquired on acquisition (5.0 )
Contingent purchase consideration paid into escrow 4.1
Net cash outflow on acquisition (per Condensed Consolidated Cash Flow Statement) 25.4
________________________
(a) The following table summarises the amounts and useful lives assigned to identifiable intangible assets:
Weighted Average Useful Lives(Years) AmountsRecognised as ofAcquisition Date$m
Finite-lived intangible assets:
Technology, one-piece ostomy system 8 years 8.4
Technology, two-piece ostomy system 8 years 3.1
Technology, accessories 7 years 1.0
Total intangible assets 12.5
(b) Includes the fair value adjustment to inventory of $1.5 million.
(c) The fair value of receivables acquired approximate the gross contractual amounts receivable. The amount of
gross contractual receivables not expected to be recovered is immaterial.
(d) The initial cash consideration includes cash at closing of $5.0 million (E4.9 million).
(e) E4.0 million ($4.1 million) was paid on closing into escrow as security for the due and punctual fulfilment by
the seller of its obligations under the Share Purchase Agreement. The escrow account will be maintained for 3 years, of
which 50% (E2.0 million) will be released to seller on 3 July 2018 and the remaining balance will be released after the
third year.
(f) Goodwill is calculated as the difference between the acquisition date fair value of the consideration
transferred and the values assigned to the assets acquired and liabilities assumed. None of the goodwill is deductible for
tax purposes. The goodwill recorded represents the following:
• costs savings and operating synergies expected to result from combining the operations of EuroTec with those of the
Group; and
• intangible assets that do not qualify for separate recognition (for instance, EuroTec's assembled workforce).
Goodwill has been allocated to the Group's EMEA cash generated unit ("CGU").
Acquisition-related costs
The Group incurred $0.6 million of transaction costs directly related to the EuroTec acquisition through 31 December 2016,
which includes expenditures for advisory, legal, valuation, accounting and other similar services. These costs have been
expensed as acquisition-related costs. There were no transaction costs related to the EuroTec acquisition in the six
months ended 30 June 2017.
Revenue and net loss of EuroTec
The revenue of EuroTec for the period from the acquisition date to 30 June 2017 was $5.3 million and net loss, net of tax,
was $0.9 million. The net loss, net of tax, includes the effects of the acquisition accounting adjustments.
9. Property, plant and equipment
The major categories of property, plant and equipment ("PP&E") and movement in the carrying value of each category is as
follows:
Land & land improvements Building, building equipment, and leasehold improvements Machinery, equipment and fixtures Construction in progress Total
Property, plant & equipment at cost $m $m $m $m $m
At 1 January 2017 14.9 116.3 323.8 62.5 517.5
Additions - 0.1 1.9 30.8 32.8
Acquisitions (see note 8) 1.1 2.1 2.9 - 6.1
Write-offs - (0.1 ) (3.4 ) - (3.5 )
Disposals (0.5 ) (2.1 ) (6.7 ) (1.0 ) (10.3 )
Transfers - 6.4 12.9 (19.3 ) -
Foreign exchange 1.2 5.4 17.6 3.3 27.5
At 30 June 2017 16.7 128.1 349.0 76.3 570.1
Land & land improvements Building, building equipment, and leasehold improvements Machinery, equipment and fixtures Construction in progress Total
Accumulated depreciation $m $m $m $m $m
At 1 January 2017 1.2 44.1 207.4 - 252.7
Depreciation(1) 0.1 4.2 12.9 - 17.2
Write-offs - (0.1 ) (3.4 ) - (3.5 )
Disposals (0.5 ) (2.1 ) (6.4 ) - (9.0 )
Foreign exchange 0.1 1.8 10.4 - 12.3
At 30 June 2017 0.9 47.9 220.9 - 269.7
________________________
(1) Includes accelerated depreciation of $1.3 million for the six months ended 30 June 2017 related to the closure
of certain manufacturing facilities.
Land & land improvements Building, building equipment, and leasehold improvements Machinery, equipment and fixtures Construction in progress Total
Net carrying amount $m $m $m $m $m
At 31 December 2016 13.7 72.2 116.4 62.5 264.8
At 30 June 2017 15.8 80.2 128.1 76.3 300.4
Included within Building, building equipment, and leasehold improvements and Machinery, equipment and fixtures are finance
leases with a net carrying value of (i) $20.4 million and $0.4 million, respectively, at 30 June 2017 and (ii) $22.2
million and $0.4 million, respectively, at 31 December 2016.
10. Intangible assets
The major categories of intangible assets and the changes in the carrying value of each category were as follows:
Patents, trademarks & licences Technology Acquired capitalised software Internally generated software Contracts & customer relationship Non-compete agreements Trade names Development costs(1) Total
Intangibles at cost $m $m $m $m $m $m $m $m $m
At 1 January 2017 1,853.5 200.3 73.0 13.1 238.6 5.6 255.1 8.2 2,647.4
Additions - - - 2.8 - - - 0.9 3.7
Acquisitions (see note 8) - 12.5 - - - - - - 12.5
Foreign exchange(2) 28.8 12.4 0.1 - 8.0 - 1.2 0.7 51.2
At 30 June 2017 1,882.3 225.2 73.1 15.9 246.6 5.6 256.3 9.8 2,714.8
________________________
(1) Development costs have been internally generated.
(2) Primarily related to intangible assets denominated in British Pound sterling.
Accumulated amortisation Patents, trademarks & licences Technology Acquired capitalised software Internally generated software Contracts & customer relationship Non-compete agreements Trade names Development costs Total
$m $m $m $m $m $m $m $m $m
At 1 January 2017 865.7 97.4 58.5 2.8 90.1 4.4 2.1 5.0 1,126.0
Amortisation 51.9 7.0 2.5 1.1 7.6 0.5 0.2 0.1 70.9
Foreign exchange 13.9 6.0 0.1 - 4.6 (0.1 ) - 0.3 24.8
At 30 June 2017 931.5 110.4 61.1 3.9 102.3 4.8 2.3 5.4 1,221.7
Patents, trademarks & licences Technology Acquired capitalised software Internally generated software Contracts & customer relationship Non-compete agreements Trade names Development costs Total
Net carrying amounts $m $m $m $m $m $m $m $m $m
At 31 December 2016 987.8 102.9 14.5 10.3 148.5 1.2 253.0 3.2 1,521.4
At 30 June 2017 950.8 114.8 12.0 12.0 144.3 0.8 254.0 4.4 1,493.1
The carrying amount of indefinite-lived trade names was $251.5 million and $250.3 million at 30 June 2017 and 31 December
2016, respectively.
Amortisation expense related to finite-lived intangible assets was as follows:
Six months ended 30 June
2017 2016
$m $m
Cost of goods sold 61.0 63.1
General and administrative expenses 9.8 9.3
Research and development expenses 0.1 -
Total amortisation expense 70.9 72.4
11. Goodwill
The change in the carrying value of goodwill for the six months ended 30 June 2017 was as follows:
Total
$m
At 1 January 2017 921.0
Additions(1) 6.1
Effect of foreign currency translation rates 44.1
At 30 June 2017 971.2
________________________
(1) Relates to the EuroTec acquisition (as described in note 8).
The carrying value of goodwill for each respective CGU at 30 June 2017 and 31 December 2016 was as follows:
30 June 2017 31 December 2016
CGUs $m $m
Americas 15.3 15.2
180 Medical 239.9 237.6
EMEA(1) 625.7 582.9
ID 51.1 47.4
IS 39.2 37.9
Goodwill 971.2 921.0
________________________
(1) Includes goodwill from the EuroTec acquisition (as described in note 8).
12. Long-term borrowings
A summary of the Group's consolidated long-term borrowings at 30 June 2017 and 31 December 2016 is outlined in the table
below:
30 June 2017 31 December 2016
$m $m
Credit Facilities Agreement:
Revolving Credit Facility - -
US Dollar Term A Loan Facility 751.9 760.5
Euro Term A Loan Facility 609.4 567.5
US Dollar Term B Loan Facility 422.8 424.6
Total Credit Facilities 1,784.1 1,752.6
Finance Lease Obligations 24.8 23.0
Total long-term borrowings 1,808.9 1,775.6
Less: Current portion of long-term borrowings 57.3 38.5
Total non-current long-term borrowings 1,751.6 1,737.1
The terms and conditions of total long-term borrowings outstanding at 30 June 2017 and 31 December 2016 are as follows:
30 June 2017 31 December 2016
Year ofmaturity Face value Carrying amount Face value Carrying amount
Currency $m $m $m $m
Revolving Credit Facilities 2021 - - - -
US Dollar Term A Loan Facility USD 2021 760.4 751.9 770.0 760.5
Euro Term A Loan Facility(1) EURO 2021 616.1 609.4 574.2 567.5
US Dollar Term B Loan Facility USD 2023 427.8 422.8 430.0 424.6
Finance lease obligations EURO/USD - 24.8 24.8 23.0 23.0
Total interest-bearing liabilities 1,829.1 1,808.9 1,797.2 1,775.6
_______________________________
(1) Total face value of the borrowings outstanding under the Euro Term A Loan Facility denominated in euros was E539.2
million ($616.1 million) at 30 June 2017 and E546.0 million ($574.2 million) at 31 December 2016, respectively.
The Group's Credit Facilities contain customary operating and negative covenants, including, among other things, covenants
limiting: (i) incurrence of indebtedness; (ii) incurrence of liens; (iii) mergers, consolidations, liquidations,
dissolutions and other fundamental changes; (iv) sales of assets; (v) dividends and other payments in respect of capital
stock or junior debt subject to an available amount built by consolidated net income; (vi) acquisitions; (vii) transactions
with affiliates; (viii) changes in fiscal year; (ix) negative pledge clauses and clauses restricting subsidiary
distributions; and (x) holding companies.
The Group's Credit Facilities also contain a financial covenant, various customary affirmative covenants and specified
events of default.
At 30 June 2017, the Group was in compliance with all financial covenants associated with the Group's outstanding debt.
In June 2017, the Group made scheduled June 2017 amortisation payments of $19.6 million, in the aggregate, related to the
Credit Facilities.
Interest Related Information
Accrued interest related to the Group's long-term borrowings was $0.2 million and $8.7 million at 30 June 2017 and 31
December 2016, respectively, and is recorded in Accrued expenses and other current liabilities. Interest expense for the
six months ended 30 June 2017 and 2016 associated with the Group's long-term borrowings was as follows:
Six months ended 30 June
2017 2016
$m $m
Revolving Credit Facility(1) 0.5 0.8
US Dollar Term A Loan Facility 12.2 -
Euro Term A Loan Facility 6.7 -
US Dollar Term B Loan Facility 7.3 16.9
Euro Term B Loan Facility(2) - 17.7
US Dollar Senior Notes(2) - 39.1
Euro Senior Notes(2) - 15.0
PIK Notes(2) - 37.1
Total interest expense on long-term borrowings 26.7 126.6
_______________________________
(1) Represents the commitment fees in respect of the unutilised commitments under the Revolving Credit Facility.
(2) On 25 October 2016, the Group entered into the Credit Agreement and immediately following the listing redeemed all of
the outstanding (i) PIK Notes, (ii) US Dollar Senior Notes, and (iii) Euro Senior Notes and repaid all amounts outstanding
under the existing credit facilities at that time.
The weighted average interest rate for borrowings under the Group's outstanding long-term borrowings was 3.0% and 7.1% for
the six months ended 30 June 2017 and 2016, respectively.
13. Derivatives and other financial instruments
Cash flow hedges
The Group has variable rate debt instruments and is exposed to market risks resulting from interest rate fluctuations. In
order to manage its exposure to variability in expected future cash outflows attributable to the changes in LIBOR rates on
the US Dollar Term A and B Loan Facility, in May 2017, the Group entered into interest rate swap agreements. The Group
interest rate swaps do not contain credit-risk related contingent features and are not subject to master netting
arrangements. The interest rate swaps are designated as hedging instruments in a cash flow hedging relationship. As such,
changes in the fair value will be recognised in other comprehensive income and accumulated in the other reserve, with the
fair value of the interest rate derivatives recorded in the statement of financial position.
The following table presents the Group's outstanding interest rate swaps agreements, notional amounts and related fair
values at 30 June 2017. The fair values are based on market values of equivalent instruments at 30 June 2017. These
financial instruments are classified as level 2 based upon the degree to which the fair value movements are observable.
Level 2 fair value measurements are defined as those derived from inputs other than quoted prices that are observable for
the asset or liability, either directly (prices from third parties) or indirectly (derived from third party prices).
Notional Amount Fair Value(3)Assets/(Liabilities)
Effective Date Maturity Date $m $m
3 Month LIBOR Float to Fixed Interest Rate Swap(1) 30 June 2017 30 June 2020 592.5 (0.4 )
3 Month LIBOR Float to Fixed Interest Rate Swap(2) 30 June 2017 30 June 2020 298.5 (0.3 )
Amounts recognised in Condensed Consolidated Statement of Profit or Loss -
Amounts recognised in Condensed Consolidated Comprehensive Income (0.7 )
_______________________________
(1) Under the interest rate swap agreement, commencing on 29 September 2017, the Group is entitled to receive quarterly
interest payments at a variable rate equal to the 3 month LIBOR, subject to an interest rate floor of 0% and is required to
make quarterly interest payments at a fixed rate of 1.709%. In addition, the notional amount is split into six equal
tranches of approximately $98.8 million for hedging purposes.
(2) Under the interest rate swap agreement, commencing on 29 September 2017, the Group is entitled to receive quarterly
interest payments at a variable rate equal to the 3 month LIBOR, subject to an interest rate floor of 0.75% and is required
to make quarterly interest payments at a fixed rate of 1.749%. In addition, the notional amount is split into three equal
tranches of $99.5 million for hedging purposes.
(3) The fair values of the interest rate swaps are included in non-current Other liabilities in the Condensed
Consolidated Statement of Financial Position.
Other financial instruments
The carrying amounts reflected in the Condensed Consolidated Statement of Financial Position at 30 June 2017 and 31
December 2016 for cash and cash equivalents, trade and other receivables, restricted cash, trade and other payables, and
certain accrued expenses and other current liabilities approximate fair value due to their short-term maturities. There are
no other assets or liabilities measured at fair value on a recurring or non-recurring basis.
Liabilities not Measured at Fair Value
The long-term borrowings are initially carried at fair value less any directly attributable transaction costs and
subsequently at amortised cost. At 30 June 2017 and 31 December 2016, the estimated fair value of the Group's long-term
borrowings, excluding finance leases approximated $1,803.8 million and $1,775.2 million, in the aggregate, respectively.
The fair values were estimated using the quoted market prices and current interest rates offered for similar debt
issuances. Long-term borrowings are categorised as Level 2 measurement in the fair value hierarchy under IFRS 13 Fair Value
Measurements. See note 12 - Long-term borrowings for the face and carrying values of the Group's long-term borrowings.
14. Provisions
Legal provisions(1) Restructuring provisions(1) Decommissioning provisions(2) Total
$m $m $m $m
At 1 January 2016 0.2 3.4 1.1 4.7
Charges(3) - 15.6 - 15.6
Utilisation(3) (0.3 ) (9.6 ) - (9.9 )
Changes in estimate 0.2 (0.3 ) - (0.1 )
Foreign exchange impact - 0.2 - 0.2
At 31 December 2016 0.1 9.3 1.1 10.5
Charges - 0.4 - 0.4
Utilisation (0.1 ) (4.5 ) - (4.6 )
Changes in estimate - (1.1 ) - (1.1 )
Foreign exchange impact - - 0.1 0.1
At 30 June 2017 - 4.1 1.2 5.3
_______________________________
(1) Legal provisions and restructuring provisions at 30 June 2017 and 31 December 2016 are included as current Provisions
on the Condensed Consolidated Statement of Financial Position.
(2) Decommissioning provisions at 30 June 2017 and 31 December 2016 are included as non-current Provisions on the
Condensed Consolidated Statement of Financial Position.
(3) The Group recognised restructuring charges of $14.0 million and made aggregate payments of $4.0 million for the six
months ended 30 June 2016. Refer to the table below for additional information related to restructuring charges for the
six months ended 30 June 2016.
Restructuring provisions
The details of restructuring initiatives are given in the 2016 Annual Report.
For the six months ended 30 June 2017, the additional restructuring charges of $0.4 million were related to employee
termination costs and were recorded in General and administrative expenses in the Condensed Consolidated Statement of
Profit or Loss. The changes in estimate of $1.1 million for the six months ended 30 June 2017 were related to the 2016
Initiatives and were recorded in Cost of goods sold in the Condensed Consolidated Statement of Profit or Loss.
Charges and changes in estimate recorded for the six months ended 30 June 2016 related to the restructuring initiatives
were as follows:
Employee termination costs Asset write-offs Accelerated depreciation Total
$m $m $m $m
2016 Initiatives 14.1 3.9 4.7 22.7
2015 Initiatives 0.1 - 1.1 1.2
2014 Initiatives (0.2 ) - - (0.2 )
Total 14.0 3.9 5.8 23.7
Classified in the Condensed Consolidated Statement of Profit or Loss:
Cost of goods sold 14.0 3.9 5.8 23.7
15. Related party transactions
Full details of the Group's related party transactions and balances are given in the 2016 Annual Report. Other than as set
out below, there have been no material changes to the Group's related party transactions.
For the six months ended 30 June 2016, the Group paid $1.5 million in contractual fees for certain management advisory
services to its former equity sponsors under the Management Agreement as described in the 2016 Annual Report. The
Management Agreement was terminated in October 2016.
The Group's revenue included $4.1 million and $3.4 million, for the six months ended 30 June 2017 and 2016, respectively,
of revenue to a related party (customers affiliated with Nordic Capital, former equity sponsor and shareholder). The
accompanying Condensed Consolidated Statement of Financial Position includes a receivable from the Group's related party
revenue recorded in Trade and other receivables in the amount of $1.8 million at 30 June 2017. In addition, during the six
months ended 30 June 2017, the Group purchased inventory product totaling $2.6 million from a related party (vendors
affiliated with Nordic Capital, former equity sponsor and principal shareholder) of which $0.3 million remained unpaid at
30 June 2017.
16. Subsequent events
The Group has evaluated subsequent events through 2 August 2017, the date the Condensed Consolidated Financial Statements
were approved by the board of directors.
On 20 July 2017, the Group has agreed to acquire Woodbury, a U.S.-based independent national distributor of incontinence
and catheter-related supplies, from MTS Health Investors LLC for an enterprise value of $120.5 million. Woodbury provides
an extensive array of incontinence and catheter products, as well as nutritional, enteral feeding and vascular compression
supplies. The transaction is subject to certain closing conditions and is expected to close in the third quarter of 2017.
On 2 August 2017, the Board declared the first interim dividend to be distributed on 20 October 2017. Refer to note 6 -
Dividends for further details.
Directors' Responsibilities Statement
The Directors confirm that to the best of their knowledge:
• the Condensed Consolidated Financial Statements have been prepared in accordance with IAS 34 as adopted by the
European Union; and
• the interim management report includes a fair review of the information required by:
a. DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred
during the first six months of the financial year and their impact on the Condensed Consolidated Financial Statements; and
a description of the principal risks and uncertainties for the remaining six months of the year; and
b. DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the
first six months of the current financial year and that have materially affected the financial position or performance of
the entity during that period, and any changes in the related party transactions described in the last annual report that
could do so.
The Board of Directors of ConvaTec Group Plc on 2 August 2017 are the same as those listed in the 2016 Annual Report with
the exception of Thomas Vetander and Kunal Pandit both of whom stepped down on 31 March 2017. Kasim Kutay was appointed on
31 March 2017 and Dr Ros Rivaz was appointed on 20 June 2017.
By order of the Board:
Paul Moraviec Chief Executive Officer 2 August 2017
Nigel Clerkin Chief Financial Officer 2 August 2017
Forward Looking Statements
This document includes statements that are, or may be deemed to be, "forward looking statements". These forward-looking
statements involve known and unknown risks and uncertainties, many of which are beyond the Group's control.
"Forward-looking statements" are sometimes identified by the use of forward-looking terminology, including the terms
"believes", "estimates", "aims", "anticipates", "expects", "intends", "plans", "predicts", "may", "will", "could", "shall",
"risk", "targets", "forecasts", "should", "guidance", "continues", "assumes" or "positioned" or, in each case, their
negative or other variations or comparable terminology. These forward-looking statements include all matters that are not
historical facts. They appear in a number of places and include, but are not limited to, statements regarding the Group's
intentions, beliefs or current expectations concerning, amongst other things, results of operations, financial condition,
liquidity, prospects, growth, strategies and dividend policy of the Group and the industry in which it operates.
By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on
circumstances that may or may not occur in the future. These 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. As such, no assurance can be given that such future results, including
guidance provided by the Group, will be achieved; actual events or results may differ materially as a result of risks and
uncertainties facing the Group. Such risks and uncertainties could cause actual results to vary materially from the future
results indicated, expressed, or implied in such forward-looking statements. Forward-looking statements are not guarantees
of future performance and the actual results of operations, financial condition and liquidity, and the development of the
industry in which the Group operates, may differ materially from those made in or suggested by the forward-looking
statements set out in this Presentation. Past performance of the Group cannot be relied on as a guide to future
performance. Forward-looking statements speak only as at the date of this document and the Group and its directors,
officers, employees, agents, affiliates and advisers expressly disclaim any obligations or undertaking to release any
update of, or revisions to, any forward-looking statements in this document.
This information is provided by RNS
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