REG - ConvaTec Group PLC - Trading update for ten months to 31 October 2022

ConvaTecAnnouncement

10/11/2022 07:00

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RNS Number : 9073F  ConvaTec Group PLC  10 November 2022

10 November 2022

Convatec Group Plc

Trading update for the ten months ended 31 October 2022

 

Good sales growth sustained Organic growth guidance increased for 2022

 

Convatec Group Plc ("Convatec" or the "Group"), a global medical products and
technologies company, today announces a trading update for the ten months
ended 31 October 2022. Group revenue increased by 2.4% on a reported basis
(H1: 3.6%) impacted by foreign exchange movements. On a constant currency
basis revenue was up 7.8% (H1: 8.0%) and was up 6.3% on an organic basis(1)
(H1: 6.4%). Following sustained good sales growth, guidance for 2022 organic
revenue growth has been increased to 5.4% to 5.8% (previously 4.0% to 5.5%.)

 

In Advanced Wound Care, organic revenue growth was high single-digit for the
first 10 months, broadly in line with the first half year. In North America
the limited position in foam continued to impact performance ahead of the
launch of ConvaFoam in Q4. The strong performance in Global Emerging Markets
and good performance in Europe continued.

 

In Ostomy Care, organic revenue growth was low single-digit for the first 10
months, as expected and consistent with the first half year. Good growth in
Convatec products was achieved, particularly in the Global Emerging Markets.
The growth in Europe and North America continued to be impacted by planned
rationalization, leading to improvements in mix and consequently margin.

 

In Continence and Critical Care, organic revenue growth for the first 10
months was mid single-digit, in line with the first half year. The growth in
Continence Care improved in the second half with better supply chain
management. The organic growth in the critical care component (which is only
the Flexi-seal(TM) portfolio following the exit of hospital care), declined in
the second half. This was as expected, given it is against strong COVID-19
driven comparatives.

 

In Infusion Care, organic revenue growth was double-digit for the first 10
months, slightly lower than in the first half year. Underlying demand for our
infusion sets remains strong and we continue to expect at least high
single-digit growth for the full year. Growth in the remainder of the year
will be lower reflecting the order phasing and strong demand seen year to
date.

 

Strategic progress over the last 4 months

 

The exit from Hospital Care and related industrial sales is proceeding as
planned. As previously indicated, we closed our Belarus plant on 31 May 2022
and the related production at other sites will cease by the end of this year.

 

The integration of Triad Life Sciences and our entry into the attractive wound
biologics segment(2) is progressing well. It is still early days but we are
pleased with the performance. Following the new reimbursement code for the
InnovaMatrix FS product and the recent regulatory clearance of the
InnovaMatrix powder product, we have now paid both of the two $25 million
transaction milestones.

 

In the spring we started launching Gentle Cath(TM) Air Male in France and the
UK to enter the large and rapidly growing compact segment in Europe; with
performance in line with expectations. Furthermore, we are on track to start
launching ConvaFoam in the USA this quarter.

 

We continue to strengthen Convatec's position by effectively executing our
FIBSE strategy and will update the market further at the Capital Markets Event
on 17(th) November.

 

1 Organic growth is calculated by applying the applicable prior period average
exchange rates to the Group's actual performance in the respective period and
excluding acquired and disposed/discontinued businesses.

2 SmartTRAK Wound Biologics segment includes skin substitutes, active collagen
dressings and topical drug delivery

Full year guidance updated

 

Given the sustained good sales growth so far this year, we now expect organic
revenue growth for 2022 to be between 5.4% and 5.8% (previously 4-5.5%.)

 

Inflation in raw materials and freight has moderated in recent months, but
inflation in utilities and labour has increased. Overall, we continue to
expect COGS inflation of 8-9% for the year and we continue to expect to
deliver constant currency adjusted operating profit margin of at least 18%.

 

Foreign exchange rate movements have been volatile in recent months. The FX
impact on 2022 is currently estimated to be a ~6% headwind on revenue growth
with a ~90bps tailwind to the EBIT margin. These estimates are based on actual
rates to 31 October and spot rates for the remainder of the year. On this
basis, we expect to publish an adjusted operating profit margin of over 19%.

 

***

Contacts

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

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

 

Details about our Capital Markets Event - 17(th) November 2022

 

Convatec will be hosting a Capital Markets Event for sell-side analysts and
institutional holders on Thursday, 17 November 2022 at 2:00pm. The event will
be held at The Auditorium - UBS, 5 Broadgate, London, EC2M 2QS

 

Presentations from CEO Karim Bitar, CFO Jonny Mason and other members of
Convatec's Executive Leadership Team

(CELT) will provide insight into:

§ FISBE strategy

§ Markets and future growth opportunities

§ Plans on how the company will deliver its medium-term targets

 

Places are limited so if you would like to attend in-person please contact
IR@convatec.com. (mailto:IR@convatec.com) The event will also be webcast live.

 

About Convatec

Pioneering trusted medical solutions to improve the lives we touch: Convatec
is a FTSE 100 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 and critical care, and infusion
care. Group revenues in 2021 were over $2 billion. With around 10,000
colleagues, we provide our products and services in over 100 countries, united
by a promise to be forever caring. Our products provide a range of benefits,
from infection prevention and protection of at-risk skin, to improved patient
outcomes and reduced care costs. To learn more about Convatec, please visit
http://www.convatecgroup.com (http://www.convatecgroup.com/)

 

Forward Looking Statements

This document includes certain forward-looking statements with respect to the
operations, performance and financial condition of the Group. Forward-looking
statements are generally identified by the use of terms such as "believes",
"estimates", "aims", "anticipates", "expects", "intends", "plans", "predicts",
"may", "will", "could", "targets", continues", or their negatives or other
similar expressions. These forward-looking statements include all matters that
are not historical facts.

 

Forward-looking statements are necessarily based upon a number of estimates
and assumptions that, while considered reasonable by the Company, are
inherently subject to significant business, economic and competitive
uncertainties and contingencies that are difficult to predict and many of
which are outside the Group's control. As such, no assurance can be given that
such future results, including guidance provided by the Group, will be
achieved. Forward-looking statements are not guarantees of future performance
and such uncertainties and contingencies, including the factors set out in the
"Principal Risks" section of the Strategic Report in our Annual Report and
Accounts, could cause the actual results of operations, financial condition
and liquidity, and the development of the industry in which the Group
operates, to differ materially from the position expressed or implied in the
forward-looking statements set out in this document. Past performance of the
Group cannot be relied on as a guide to future performance.

Forward-looking statements are based only on knowledge and information
available to the Group at the date of preparation of this document and speak
only as at the date of this document. The Group and its directors, officers,
employees, agents, affiliates and advisers expressly disclaim any obligations
to update any forward-looking statements (except to the extent required by
applicable law or regulation).

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