REG - Convatec Group PLC - Convatec FY24 Results
26/02/2025 07:15
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RNS Number : 4517Y Convatec Group PLC 26 February 2025
26 February 2025
Preliminary results for the year ended 31 December 2024
Operational and strategic delivery drives double-digit adjusted EPS and
cashflow growth
Confidence in FY25 outlook & medium-term guidance
Key financial highlights for year to 31 December Reported Adjusted(5)
2024 2023 Change 2024 2023 Change CC change
Revenue $2,289m $2,142m 6.9% $2,289m $2,142m 6.9% 7.6%
Operating profit $325m $263m 23.7% $485m $432m 12.4% 16.4%
Operating profit margin 14.2% 12.3% 1.9%pts 21.2% 20.2% 1.0%pts 1.6%pts
Diluted EPS 9.3 cents 6.3 cents 45.9% 15.2 cents 13.4 cents 13.7%
Free cash flow to equity $302m $228m 32.2% $302m $228m 32.2%
Dividend per share 6.416c 6.229c 3.0%
Percentage movements throughout this release are calculated on actual
unrounded numbers.
FY24 highlights: we have pivoted to broad-based, sustainable and profitable
growth
· Our FISBE strategy continued to deliver strongly, with organic revenue
growth of 7.7%(1) (6.9% reported). This was our sixth consecutive year of
accelerating, broad-based organic growth
· Adjusted operating margin(2) increased to 21.2% (+160 bps YoY in
constant currency to 21.8%; +350 bps since 2021) driven by strong execution of
our FISBE strategy and improved productivity
· 14% adjusted EPS(2) growth, 32% free cash flow to equity(5) growth and
97% equity cash conversion
Broad-based growth in all four chronic care categories
· AWC(4): 7.4%(1) driven by Aquacel Ag+ Extra(TM) and InnovaMatrix(®),
plus a growing contribution from ConvaFoam(TM)
· OC(4): 5.3%(1) driven by Convatec ostomy products, including a strong
contribution from the Esteem Body(TM) launch
· CC(4): 8.3%(1) driven by US volume and share growth, excellent
customer service and accelerating international sales
· IC(4): 11.2%(1) driven by customers leveraging our innovative infusion
sets in new products, plus sales to new customers
· Group organic growth excluding InnovaMatrix(® 3) was 6.8% (note: in
FY24 this represented 96% of Group revenues)
Successful product launches and our strongest-ever new product pipeline
We are actively targeting the fastest growing segments by developing
innovative new products. These include:
· In AWC, positive clinician feedback and high success rate in new
customer product evaluations in ConvaFoam(TM)
· Also in AWC, On-track to obtain EU regulatory approval for ConvaNiox(TM),
our highly innovative advanced wound dressing powered by nitric oxide, in H1
25
· In OC, excellent customer response to Esteem Body(TM) and in CC
GentleCath Air(TM) for Women
· In IC, broadening customers and applications including partnerships
with AbbVie (Parkinson's disease), plus Beta Bionics and Ypsomed (Diabetes).
Continued growth with Medtronic and Tandem in Diabetes
Confidence in FY25 outlook: reiterating guidance for double-digit adjusted EPS
growth
· We continue to expect 5-7% organic growth in non-InnovaMatrix® 3
revenues (FY24: 96% of Group revenue), based on our broadening product
portfolio, strongest-ever innovation pipeline and focused commercial execution
· InnovaMatrix(®) was 4% of Group revenues in 2024 ($99m). Based on
implementation of the LCDs(3) in April 2025, we expect a reduction in revenue
of approximately $50m, approximately 2% of Group revenue
· Irrespective of the LCD, we expect adjusted operating profit margin(2)
of 22.0-22.5%, underpinned by detailed productivity improvement programmes
across operations, commercial and G&A
· Another year of double-digit growth in adjusted EPS(2), and strong
operating cash conversion (>80%)
On-track to deliver our medium-term guidance
· We are well positioned to deliver sustainable 5-7% p.a. organic
revenue growth, underpinned by our broadening new product pipeline and
enhanced commercial execution. We are also on-track to reach mid-20's%
adjusted operating profit margin(2) by 2026 or 2027, supported by further
productivity improvements and operating leverage
Karim Bitar, Chief Executive Officer, commented:
"Our FY24 results demonstrate that Convatec has successfully pivoted to
broad-based, sustainable and profitable growth. Our FISBE strategy is
delivering strongly, evidenced by our sixth year of accelerating revenue
growth, further operating profit margin expansion, double digit growth in
adjusted EPS and strong cash conversion.
"We expect FY25 to be another year of strong strategic progress. This will be
driven by our strongest-ever innovative, new product pipeline and further
simplification and productivity improvements. We are on-track to deliver our
medium-term guidance of 5-7% annual organic revenue growth, mid-20's operating
margin by 2026 or 2027 and double-digit compound annual growth in adjusted EPS
and free cash flow to equity((5)). This is underpinned by our leading
positions in structurally growing chronic care markets, our specific targeting
of the fastest growing market segments and a clear focus on execution
excellence by our dedicated team of over 10,000 colleagues worldwide."
FY24 financial summary & dividend
· Adjusted operating profit margin2 of 21.2% (21.8% in constant
currency). Expansion of 100 bps (160 bps at constant currency) driven by our
FISBE strategy and productivity improvements
· Adjusted operating profit(2) up 12% to $485m. Reported operating
profit of $325m (2023: $263m)
· Adjusted EPS(2) increased 14% to 15.2 cents. Reported EPS increased
46% to 9.3 cents
· Free cash flow to equity(5) up 32% to $302 (2023: $228m). Equity cash
conversion(5) of 97% (2023: 83%)
· Net debt to adjusted EBITDA ratio of 1.8x (FY23: 2.1x). This was after
investing $122m in capex, c.$23m in transformation and $90m in M&A
· As a sign of confidence in our outlook and strategy, the Board
recommends a final dividend of 4.594 cents, resulting in a full year dividend
of 6.416 cents, an increase of 3%. The payout ratio of 42% (2023: 46%) of
adjusted net profit is within our target range of 35-45%
· Our capital allocation priorities are: 1) organic investment to drive
future revenue growth and innovation, 2) annual dividend consistent with
35-45% payout ratio 3) focused M&A to strengthen our competitive position
4) any surplus capital would be available for return to shareholders
Additional FY25 modelling and guidance
We expect the following organic revenue growth for each category:
- AWC(4): mid-single digit growth excluding InnovaMatrix(® 3)
- OC(4): mid-single digit growth
- CC(4): mid-to-high single digit growth
- IC(4): high single digit growth
We expect adjusted net finance expense for 2025 will be $70-75m (2024: $78m),
assuming no material changes in US interest rates. Our adjusted book tax rate
is expected to be c.24%, with the cash tax rate again materially lower.
Reflecting our ongoing investments in innovation and efficiency programmes, we
expect capex of $130-150m, opex R&D spend of c.$100-110m and
transformation costs of c.$20m.
Investor and analyst presentation
The results presentation will be held at 09:00hrs (UK time) today. The event
will be simultaneously webcast and the link can be found here
(https://www.investis-live.com/convatec/679cbf5a0164ff000f7bdc3c/jtrf) . 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) .
Scheduled events
AGM & trading update for the 4 months ending 30 April 2025: 22 May 2025
Interim results for the 6 months ended 30 June 2025: 29 July 2025
Dividend calendar
Ex-dividend 17 April 2025 Payment date 29 May 2025
Record date 22 April 2025
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 more than
10,000 colleagues, we provide our products and services in around 90
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
2024 were over $2 billion. The company is a constituent of the FTSE 100 Index
(LSE:CTEC). To learn more please visit http://www.convatecgroup.com
(http://www.convatecgroup.com)
Contacts
Analysts & Investors David Phillips, Head of Investor Relations & Treasury +44 (0) 7909 324994
Sheebani Chothani, Director, Investor Relations +44 (0) 7805 011046
ir@convatec.com (mailto:ir@convatec.com)
Media FGS Global Convatec-UK@fgsglobal.com
(1) Organic growth of 7.7% 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.
Acquisitions and disposals added 10 bps to organic growth in FY24, shown on
page 3.
(2) Consistent with prior years, management present adjustments to the
reported figures, to produce more meaningful measures in monitoring the
underlying performance of the business. These are set out in the table on page
12
(3) In November 2024, Medicare Administrative Contractors published Local
Coverage Determinations (LCDs) for Skin Substitute Grafts/Cellular and
Tissue-Based Products for the Treatment of Diabetic Foot Ulcers (DFU) and
Venous Leg Ulcers (VLU). Convatec's InnovaMatrix® was not covered by Medicare
for DFU/VLU treatments in the LCDs. As stated in our regulatory news
announcement of 14 November 2024
(https://otp.tools.investis.com/Utilities/PDFDownload.aspx?Newsid=1885186) ,
we believe this reduces patient and practitioner choice and availability of
effective medical solutions in the near-term. We continue to build our
clinical evidence portfolio in DFU/VLU including through real-world evidence
and have already initiated randomised controlled trials which we expect to
report in 2026. See page 4 of this statement for further InnovaMatrix®
guidance.
(4) AWC is Advanced Wound Care; OC is Ostomy Care; CC is Continence Care and
IC is Infusion Care.
(5) Certain financial measures in this document, including adjusted results,
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 18 to 23.
Chief Executive Officer's review - delivering, sustainable and profitable
growth
2024 represented another year of strong operational and strategic delivery for
Convatec, evidenced by accelerating organic revenue growth, improving
operating margin, 14% adjusted EPS2 growth and strong cash conversion.
We announced our FISBE strategy in 2020, having just reported 2019 organic
revenue growth of 2.3%. Our annual R&D spend was c.$50m, and our
innovation pipeline was very limited. Our adjusted operating margin(2) was
19.4%, and we had no mid-term targets. In 2024, organic revenue growth
accelerated to 7.7%, the sixth consecutive year of accelerating growth and
exceeding the top end of our target range for the second year running. We
invested over $100m in R&D, our product portfolio is systematically
broadening to enhance our offering, and we have our strongest-ever innovative,
new product pipeline. Adjusted operating margin(2) was 21.2%, and we are on
track to deliver our mid-20s% target by 2026 or 2027. Given these strong
results and consistent delivery of our strategy, we can now say that we have
successfully pivoted to sustainable and profitable growth.
Looking ahead, we have leading positions in structurally growing, recurring
revenue, chronic care markets. We are targeting the fastest growing segments
by developing innovative and differentiated new products. Our resilient
business model is highly scalable and is well-positioned to deliver
sustainable double-digit compound annual growth in adjusted EPS(2) and free
cash flow to equity(5).
Outperforming our structurally growing markets
Convatec operates in four chronic care categories. These have a combined
market size of c.$15.5 billion p.a. and market growth rates varying between
4-8% p.a. We are among a small number of leaders in the categories in which we
operate and expect to consistently grow revenue faster than each market.
We sell over 900 million high-quality consumable products for a diverse range
of chronic conditions annually. There are notable synergies across the
Convatec categories in areas such as polymer and biomaterial sciences,
adhesive technologies, product and clinical development, automated
manufacturing, supply chain capabilities and sales & marketing. In recent
years we have been rationalising our production network while automating and
expanding capacity in the most appropriate locations and increasing our
business resilience and efficiency.
Increasing margins, driven by simplification and productivity improvements
We delivered another strong year of adjusted operating margin(2) improvement,
up 100 bps to 21.2% (21.8% on a constant FX basis). Operating margin has now
increased by 350 bps since 2021 (+390 bps in constant currency). Our strong
cash generation is supporting continued organic and inorganic investment for
growth, consistent with our capital allocation priorities and broader
strategy.
In FY24 we remained focused on delivering for our customers and patients. New
product innovation accelerated, including four key new products launches or
major geographic expansions in 2024. In addition to the R&D spend noted
above, we invested $122m in capex and increased our emphasis on clinical and
regulatory engagement. Additionally, we invested c.$90m in earn-outs and one
small acquisition in France in our Home Services Group.
Our simplification and productivity initiatives continued to progress well. In
Global Quality & Operations, we increased automation in our facilities and
continued to optimise our plant network for scale and efficiency by completing
the closure of our EuroTec facility in the Netherlands and closing our small
Herlev site in Denmark. In commercial areas, we created an integrated Global
Marketing & Sales Centre of Excellence, further developed our Market
Access & Reimbursement CoE, and rationalised our use of marketing agencies
globally. We are encouraged by the potential for AI to drive productivity
improvements in areas such as customer service, marketing content generation
and translation. In addition, we delivered further G&A savings by
expanding the scope of our Global Business Services centres across Finance, IT
and HR activities. Adjusted G&A(2) declined by 4.7% to $165m (2023:
$173m), representing 7.2% of revenue (2023: 8.1%). Further details on the
progress made under each pillar can be found on pages 6 and 7.
Revenue and category details
Revenue increased by 6.9% on a reported basis, and by 7.6% on a constant
currency basis. On an organic basis, Group revenue rose 7.7%, which was
broad-based across all categories.
2024 2023 Reported growth / (decline) Foreign exchange impact Constant currency(2) growth / (decline) Organic(4) growth
$m $m
Revenue by Category
Advanced Wound Care 742.7 695.3 6.8% (0.6)% 7.4% 7.4%
Ostomy Care 634.0 608.3 4.2% (1.4)% 5.6% 5.3%
Continence Care 501.4 457.2 9.7% (0.1)% 9.8% 8.3%
Infusion Care 410.9 370.9 10.8% (0.4)% 11.2% 11.2%
Revenue excluding hospital care exit 2,289.0 2,131.7 7.4% (0.7)% 8.1% 7.7%
Exit of hospital care and related industrial 0.2* 10.7* (98.1)% n/a n/a n/a
Total 2,289.2 2,142.4 6.9% (0.7)% 7.6% 7.7%
(*) Relates solely to residual stock sales following exit of this business
Advanced Wound Care
Revenue of $743m increased by 6.8% on a reported basis, and 7.4% on both a
constant currency and organic basis. This included $99m of InnovaMatrix(®)
revenue, up 34% YoY, demonstrating the clinical efficacy and popularity with
HCPs and patients of our product. Excluding InnovaMatrix(®,) AWC growth was
4.2% on an organic basis.
Geographically, growth was supported by good performance in North America and
GEM. By product type, in antimicrobials, Aquacel(TM) Ag+ Extra continued to
perform strongly. In foam, recently launched ConvaFoam(TM) started to take
market share in the US and our European launch progressed well, including
Germany and the UK.
AWC key focus areas are:
· Building on our strong positions and rolling out recent launches to
new markets:
· Continuing to grow Aquacel(TM) Ag+ Extra globally
· Ongoing launch of ConvaFoam(TM) in the US, Europe and GEM
· Progressing InnovaMatrix(®) randomised controlled trials and
starting to launch outside the USA
· Continuing to develop new products and develop the AWC pipeline with:
· ConvaNiox(TM), our break-through nitric oxide dressing, launching
in Europe in 2026
· ConvaFiber(TM), our new enhanced hydrofibre dressing, launching in
Europe in 2026
· ConvaVac(TM), our single-use negative pressure wound therapy
product, launching in 2026
Update on InnovaMatrix(®)
InnovaMatrix(®) performed well in FY24, with revenue up 34% YoY to $99m.
In November 2024, US Medicare Administrative Contractors published Local
Coverage Determinations (LCDs) for Skin Substitute and Tissue-Based Products
for the Treatment of Diabetic Foot Ulcers (DFU) and Venous Leg Ulcers (VLU)
removing coverage under Medicare for the majority of products, including
InnovaMatrix(®). Implementation of the LCDs was subsequently postponed from
12 February until 13 April 2025.( ) Medicare DFU/VLU sales represented c.75%
of overall InnovaMatrix(®) sales in 2024. If the LCDs are implemented,
InnovaMatrix(®) would no longer be covered for these indications.
InnovaMatrix(®) is an excellent product with strong real-world evidence and
significant clinical benefits. It has 510k clearance from the US Food &
Drug Administration based on an established predicate product and offers a
popular and effective choice to patients and HCPs. We believe the LCDs, if
implemented, would reduce patient and HCP choice, and availability of
effective medical solutions in the near-term.
We published real-world evidence of the effectiveness of InnovaMatrix(®) for
DFU and VLU treatment in December 2024 and we are making good progress in our
two InnovaMatrix(®) randomised controlled trials, which we expect to report
in 2026. Convatec remains confident of securing DFU/VLU coverage in the future
and is committed to working collaboratively with the new US Administration,
including at the Centers for Medicare & Medicaid Services (CMS), and their
contractors, in the best interests of patients.
The outlook for InnovaMatrix(®) revenue in FY25 is therefore uncertain:
· In DFU/VLU indications, the implementation of LCDs in April 2025 would
lead to Medicare sales being removed. This would create a revenue hiatus while
we complete our clinical data generation and re-apply for coverage
· Non-DFU/VLU indications are outside the scope of the LCDs. Revenue in
these indications grew strongly in FY24, up 70% to c.$25m. Non-DFU/VLU
comprise c.55% of the US wound biologics segment and we expect further strong
growth in our non DFU/VLU sales in 2025
· Overall, based on implementation of the LCDs(3) in April 2025, we
expect a reduction in revenue of approximately $50m, approximately 2% of Group
revenue
Ostomy Care
Revenue of $634m grew by 4.2% on a reported basis, by 5.6% in constant
currency and 5.3% on an organic basis.
Esteem Body(TM), our first new ostomy product launch in over a decade, proved
to be very successful with patients and clinicians and took Convatec into the
one-piece soft convex segment in the US and Europe. Growth was also strong in
our existing Plus(TM) product range, and in accessories. In North America, we
grew sales, supported by our Home Services Group (HSG) with continued
increased new patient starts. We delivered double-digit growth in Global
Emerging Markets, outpacing market growth.
Key focus areas are:
· Continuing to progress our innovation pipeline:
· Broadening the launch of new Esteem Body(TM) globally
· Developing Natura(®) Body, our two-piece soft convex product
launching in 2027
· Launching Flexi-Seal(TM) Air, a refresh of our market-leading fecal
management product, in the US in H2 25
· Further improving commercial execution across the continuum of care
(acute, post-acute and community):
· Improving US new patient starts, with continued close collaboration
with HSG and strategic partners
· Enhancing digital engagement with patients, through our me+
Companion(TM) service, and increased interactions with healthcare
professionals (HCPs) in our education and training programmes
Continence Care
Revenue of $501m increased by 9.7% on a reported basis and 9.8% on a constant
currency basis. Organic revenue growth was 8.3%.
Performance was led by growing volume and market share in the US. This was
further supported by a modest increase in reimbursed pricing and increasing
patient adoption of Convatec-manufactured products (including Cure Medical and
GentleCath(TM)), which now represent over 50% of our 180 Medical sales.
Hydrophilic catheters represented 60% of our sales, having increased by c.5%
percentage points in our mix since 2020.
Our GentleCath Air(TM) for Women 2.0 has been very well-received by HCPs and
customers, launching in key markets in Europe and the US. We also made further
progress starting to build our international presence, resulting in
accelerating growth in GEM and Europe.
Key focus areas are:
· Rolling out launches to new markets:
· Extending the launch of GentleCath Air(TM) for Women
internationally
· Introducing Cure(TM) products in Europe and GEM
· Developing GentleCath Air(TM) for Men Pocket and Set in 2026/27
· Further improving commercial execution globally:
· Continuing to build out and strengthen commercial teams in Europe
and GEM
Infusion Care
Revenue of $411m increased 10.8% on a reported basis, and by 11.2% on both a
constant currency and organic basis. Growth was driven by strong demand for
Convatec infusion sets in both diabetes and non-diabetes treatments.
In diabetes, durable insulin pump penetration accelerated led by increasing
adoption of automated insulin delivery and continuing innovation. This
included Medtronic's 780G, Beta Bionics iLet, Tandem Mobi and YpsoMed's
YpsoPump. Diversification of our products and customers progressed very well,
both within and outside diabetes.
For non-insulin therapies, our Neria(TM) brand infusion sets achieved
excellent double-digit growth and included the launch of AbbVie's new
Parkinson's medicine therapy, which is approved in 35 countries, including the
US where approval was received in October 2024.
Key focus areas are:
· Supporting customer expansion in diabetes:
· Medtronic's 780G extended wear infusion set, Tandem Mobi, Beta
Bionics iLet
· Continuing to diversify patient base outside diabetes
· Supporting AbbVie's Parkinson's launch globally; preparing for the
Mitsubishi Tanabe launch
· Increasing penetration of infusion sets for other therapies such as
pain management
· Enhancing operations:
· Increasing production capacity to meet accelerating demand
Historical category revenue data
FY24 represented Convatec's sixth year of accelerating Group organic revenue
growth:
Reported revenue $m 2019 2020 2021 2022 2023 2024
Advanced Wound Care 570 547 592 621 695 743
Ostomy Care 569 590 615 583 608 634
Continence Care 342 363 405 426 457 501
Infusion Care 238 283 316 341 371 411
Group 1,719 1,783 1,928 1,971 2,131 2,289
Discontinued: Hospital care & industrial 108 112 110 102 11 0
Total reported revenue 1,827 1,895 2,038 2,073 2,142 2,289
Organic(1) growth/(decline) % 2019 2020 2021 2022 2023 2024
Advanced Wound Care 0.5% (2.7)% 9.2% 6.8% 9.5% 7.4%
Ostomy Care 1.0% 4.5% 2.0% 1.7% 4.2% 5.3%
Continence Care 5.4% 5.4% 3.4% 5.1% 6.5% 8.3%
Infusion Care 2.2% 18.5% 11.5% 9.2% 8.7% 11.2%
Group 2.3% 4.2% 5.3% 5.6% 7.2% 7.7%
Group ex-InnovaMatrix (acquired in 2022) - - - 5.6% 5.9% 6.8%
FISBE strategy: FY24 progress
Our FISBE (Focus, Innovate, Simplify, Build, Execute) strategy again delivered
strongly in 2024.
Focus
We continued to drive focus in our four chronic care categories and 12 focus
markets. Over 90% of our revenues arise from supporting patients with chronic
illnesses, resulting in high recurring revenues. The US was our largest market
and grew strongly, supported by the contribution from recent launches
(InnovaMatrix(®), ConvaFoam(TM), Esteem Body(TM) and GentleCath Air(TM) for
Women).
In 2024, we continued to strengthen our focus on customer centricity and
advanced the use of customer Net Promoter Score (cNPS) as the key measure of
customer satisfaction and loyalty within Convatec, rolling out the programme
across 20 countries, including all our FISBE markets. We are working towards
capturing cNPS for all our main customer groups, initially starting with
Healthcare Professionals (HCPs) and expanding to users and our key B2B
customers. Acting on customer feedback is critical to the success of our
business, as we look to deliver a frictionless experience from our front-line
clinical colleagues to customer support functions.
Innovate
Innovation is a key part of our strategy and is helping to drive growth in the
fastest growing segments of our markets. We continued to strengthen our
Technology & Innovation capabilities; adjusted R&D expenditure of
$102m (2023: $104m) was equivalent to c.5% of revenue.
New product innovation accelerated with a broadening pipeline across our
chronic care markets, including eight new products launched between 2022-24.
Our vitality index, which measures the percentage of Group revenues generated
from new or significantly upgraded products launched in the last five-years,
reached our target of 30%, a year ahead of target.
Products launched since 2022 are:
· InnovaMatrix(®) in the US and starting to launch in Latin America
· Esteem Body(TM) in the US and key European markets
· ConvaFoam(TM) in the US and key European markets
· GentleCath Air(TM) for Women in the US and key European markets
· 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
· Neria(TM) Guard Infusion set for AbbVie Parkinson's therapy
We expect continued momentum from future launches including:
· In AWC, ConvaVac(TM), a single use negative pressure treatment on
track to launch in 2026; ConvaNiox(TM), which is expected to obtain EU
regulatory approval in H1 2025, and to launch in Europe in 2026; and
ConvaFiber(TM), our new enhanced hydrofibre dressing, launching in Europe in
2026
· In OC, Natura Body(TM), our two-piece convex product launching in
2026/27, and FlexiSeal(TM) Air, a new market-leading fecal management product
in the US in H2 2025
· In CC, GentleCath Air(TM) for Men Pocket & Set and Cure Aqua in
2026; and
· In IC, infusion technology innovations including a potential new
Parkinson's therapy for Mitsubishi Tanabe
Simplify
We continued to make progress simplifying the organisation and improving
productivity.
In operations, as part of our Plant Network Optimisation programme, for scale
and efficiency, we completed the closure of our EuroTec facility in the
Netherlands and closed our small Herlev site in Denmark in December 2024. Our
Global Quality & Operations function continued to introduce smart factory
tools and automation to the manufacturing footprint to drive enhanced
productivity.
In commercial, the newly created Global Marketing & Sales Centre of
Excellence (GMS CoE) drove supplier consolidation across research, advertising
and media agencies, delivering cost efficiencies and simplified ways of
working.
In G&A, costs reduced to 7.2% of revenue (2023: 8.1%), declining by $8m to
$165m (2023: $173m). We continued to improve, standardise and automate
processes, build internal expertise and reduce external third party spend. We
also continued to transition activities to our Global Business Services (GBS)
centres, which has helped enable a reduction in G&A costs from c.12% of
revenue to 7% in three years. In Finance, our initiative in procure-to-pay has
enhanced process, reduced cost, improved cash generation and improved employee
experience, with transactional NPS (tNPS) up significantly. In IT, we
insourced our service desk capability, at a lower cost and resulting in higher
colleague satisfaction scores. In HR, we made significant progress with our
transformation, refreshing our operating model and transitioning certain
activities (e.g. payroll) to our GBS centres to align to standardised
processes and ways of working.
Build
During the year we established our Market Access & Reimbursement CoE. This
team supports access and reimbursement for our existing brands and new product
pipeline. Our GMS CoE brings together separate legacy Marketing and Salesforce
teams to nurture and drive customer engagement, provide sales leadership
training and further improve commercial productivity.
Our focus remains on strengthening employee engagement and building
high-performing teams. We launched a new employee engagement platform to
support ongoing dialogue and feedback. We achieved a top decile employee
engagement score during the year, with 95% of colleagues sharing feedback.
Execution
Our Strategic Pricing Centre of Excellence (CoE), in collaboration with our
business units, supported the delivery of 60 bps of pricing improvement,
included in our gross margin.
Our GMS CoE continued to leverage the single CRM platform to drive enhanced
salesforce productivity. We increased call rates and improved targeting, with
c.70% of calls made to priority (A,B,X) accounts (2023: c.60%).
We continued to focus on execution excellence within our Global Quality &
Operations function. This was through continuous improvement initiatives such
as our further automation of production lines at Deeside, UK, and our global
packaging project to improve terms and pricing.
We also made further progress embedding 'Convatec Cares', which underpins our
commitment to generating value responsibly and 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 14% in 2024 and continued to make progress
towards our near-term targets. We also received a B-rating from the Carbon
Disclosure Project (CDP) and a Silver award from EcoVadis in their 2024
ratings, recognising our continued progress.
More than 230,000 HCPs and patients participated in Convatec's educational
programmes in 2024, across categories and geographies. This has been a key
execution pillar helping the success of new product launches such as Esteem
Body(TM). We also supported more than 2,300 HCPs with medical education
grants.
Consistent with our commitment to building an inclusive business, we finished
2024 with 45% of the senior management team being women.
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 mature, 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 are set out in the Group's 2024
Annual Report and Accounts to be published in early March.
The Board has reviewed the principal risks as at 31 December 2024 and made a
number of changes to reflect our assessment of their movement from those
identified in 2023, 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 economic pressures that are impacting all businesses
at present and the wider uncertain geopolitical climate. The overall profile
of our risks remains consistent with the position presented in the Group's
2023 Annual Report and Accounts. Our principal risks are set out below and
listed in order of their potential impact on our ability to successfully
deliver on our strategy:
1. Operational Resilience & Quality; 5. Innovation & Regulatory;
2. Customer & Markets; 6. Legal, Compliance & Privacy;
3. Cyber & Information Security; 7. People; and,
4. Political & Economic Environment; 8. Environment & Communities
The risk landscape has changed for the following principal risks since the
publication of the 2023 Annual Report and Accounts:
· Customer & Markets - elevated due to the consequences of global
macroeconomic factors that may manifest themselves through financial
constraints impacting healthcare pricing and reimbursement models
· Tax and Treasury - removed as a principal risk as it was not
assessed as having a high residual impact or likelihood but still underpins
and is a key component to the delivery of the Group's strategic objectives. We
do not forecast any significant issues in this area over the next three years
as we have limited tax uncertainties and a robust financial balance sheet with
no debt maturities due until 2027
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.
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).
Financial Review
Revenue grew by 6.9% on a reported basis, 7.6% on a constant currency basis
and 7.7% on an organic basis.
Adjusted operating profit margin was 21.2%, representing an increase of 100bps
over the previous year. On a constant currency basis, adjusted operating
profit margin expanded by 160bps to 21.8%, with improved productivity, cost
control, pricing and mix benefits more than offsetting inflation and continued
investment in commercial and R&D capabilities. Adjusted operating profit
margin has increased by 350bps over the past three years.
Adjusted diluted EPS increased by 13.7% year-on-year to 15.2 cents per share
(2023: 13.4 cents per share). Reported diluted EPS increased by 45.9% to 9.3
cents per share (2023: 6.3 cents per share).
Net cash generated from operations improved by 17.3% to $575.5 million (2023:
$490.6 million), with free cash flow to equity increasing by 32.2% to $301.8
million (2023: $228.3 million), primarily driven by higher EBITDA. Equity cash
conversion improved to 96.6% (2023: 83.3%).
For 2025, we expect further expansion of Group adjusted operating margin to
22.0-22.5% and to deliver another year of double-digit growth in adjusted EPS.
This will be driven by 5-7% organic growth in non-InnovaMatrix® sales based
on our broadening product portfolio, strongest ever innovative pipeline and
focused commercial execution.
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 24 to 40 and referred to 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 18 to 23.
Revenue and revenue growth on constant currency and organic bases
are non-IFRS financial measures and should not be viewed as replacements of
IFRS reported revenue and revenue growth. Constant currency and organic growth
are defined in the Glossary to the Annual Report and Accounts. Percentage
movements throughout this report are calculated on actual unrounded numbers.
Group financial performance
Reported Reported Adjusted(1) Adjusted(1) Adjusted @ CC(2)
2024 2023 2024 2023 2024 Change
$m $m $m $m $m %
Revenue 2,289.2 2,142.4 2,289.2 2,142.4 2,304.6 7.6%
Gross profit 1,283.6 1,200.6 1,396.4 1,320.7
Operating profit 324.9 262.7 485.3 431.8 502.4 16.4%
Profit before income taxes 245.9 167.4 410.9 357.2
Net profit 190.5 130.3 312.4 274.1
Basic earnings per share 9.3¢ 6.4¢ 15.3¢ 13.4¢
(cents per share)
Diluted earnings per share 9.3¢ 6.3¢ 15.2¢ 13.4¢ 15.8¢ 18.5%
(cents per share)
Dividend per share (cents) 6.416¢ 6.229¢
(1) These non-IFRS financial measures are explained and reconciled to the most
directly comparable financial measures prepared in accordance with IFRS on
pages 18 to 23.
(2) Adjusted 2024 at constant currency is calculated on 2024 adjusted results
translated at 2023 actual FX rates.
Revenue
2024 2023 Reported growth Foreign Constant currency growth Organic growth
exchange
impact
$m $m % % % %
Advanced Wound Care (AWC) 742.7 695.3 6.8% (0.6)% 7.4% 7.4%
Ostomy Care (OC) 634.0 608.3 4.2% (1.4)% 5.6% 5.3%
Continence Care (CC) 501.4 457.2 9.7% (0.1)% 9.8% 8.3%
Infusion Care (IC) 410.9 370.9 10.8% (0.4)% 11.2% 11.2%
Revenue excluding hospital care exit 2,289.0 2,131.7 7.4% (0.7)% 8.1% 7.7%
Exit of hospital care and related industrial sales 0.2 10.7 (98.1)% n/a n/a n/a
Total 2,289.2 2,142.4 6.9% (0.7)% 7.6% 7.7%
Group reported revenue for 2024 of $2,289.2 million (2023: $2,142.4 million)
increased 6.9% year-on-year on a reported basis and 7.6% on a constant
currency basis.
Adjusting for foreign exchange and acquisition and divestiture-related
activities(3), Group revenue grew by 7.7% on an organic basis. This was driven
by broad-based growth across Advanced Wound Care, Ostomy Care, Continence Care
and Infusion Care. For more details about category revenue performance, refer
to the Operational reviews on pages 4 to 5.
(3) Acquisitions in 2024 related to Livramedom whilst in 2023, acquisitions
related to Starlight Science, A Better Choice Medical Supply and All American
Medical Supply. Divestitures related to the 2022 discontinuation of hospital
care, related industrial sales and associated Russia operations. The Group
discontinued operations (including all sales and marketing activities) in
Russia in 2022. We are in the process of managing our exit from the Group's
dormant entity, and from 1 March 2025, will have no remaining employees in the
country. We have no plans to recommence operations.
Net profit
Adjusted gross profit increased by 5.7% to $1,396.4 million (2023: $1,320.7
million) and adjusted gross profit margin decreased by 60bps to 61.0%. The
Group delivered pricing and mix benefits of 100bps and productivity
improvements of 50bps. These were more than offset by inflationary pressures
of 160bps and foreign exchange headwinds of 50bps. On a reported basis, gross
profit increased by 6.9% to $1,283.6 million (2023: $1,200.6 million).
Adjusted operating expenses saw a net increase of $22.2 million to $911.1
million (2023: $888.9 million), with increases in adjusted selling and
distribution (S&D) expenses partially offset by reductions in adjusted
general and administrative (G&A) expenses.
Increases in adjusted S&D of $31.8 million to $643.7 million (2023: $611.9
million), were primarily driven by higher investment in the sales force
associated with growing the business. Reported S&D increased by $32.7
million to $645.2 million (2023: $612.5 million). Adjusted R&D of $102.4
million (2023: $103.9 million) remained consistent year-on-year and, combined
with an increase in R&D capital expenditure, reflected the ongoing
investment in our future pipeline of new products and new R&D talent
joining the business through recent acquisitions. On a reported basis, R&D
increased by 1.5% to $111.7 million (2023: $110.0 million).
Adjusted G&A decreased by $8.1 million year-on-year to $165.0 million
(2023: $173.1 million), reflecting the Group's focus on simplification and
productivity, notably as we continued to standardise technology and processes,
build internal expertise and reduce external third party spend and expand the
scope of our Global Business Services (GBS). Adjusted G&A as a percentage
of revenue fell to 7.2% (2023: 8.1%) - over the past three years, adjusted
G&A expenses as a percentage of revenue has fallen by 450bps. Reported
G&A decreased by 8.4% to $195.0 million (2023: $212.9 million).
A reconciliation between reported and adjusted operating expenses is provided
in the Non-IFRS financial information section on pages 18 to 23.
The Group delivered adjusted operating profit of $485.3 million (2023: $431.8
million), representing an adjusted operating margin of 21.2% (2023: 20.2%).
This was equivalent to 21.8% on a constant currency basis, an increase of
160bps versus 2023. Reported operating profit increased by 23.7% to $324.9
million (2023: $262.7 million).
Adjusted net profit increased by 14.0% to $312.4 million (2023: $274.1
million), with the increase in adjusted income tax expense (explained below)
more than offset by the increase in adjusted operating profit as explained
above.
On a reported basis, net profit increased by 46.2% to $190.5 million (2023:
$130.3 million). Adjusting items are explained below.
Earnings per share (EPS)
Adjusted basic EPS for 2024 was 15.3 cents (2023: 13.4 cents) and adjusted
diluted EPS was 15.2 cents (2023: 13.4 cents), representing increases of 13.5%
and 13.7% respectively.
Basic reported EPS rose 45.6% to 9.3 cents (2023: 6.4 cents), reflecting the
reported net profit divided by the basic weighted average number of ordinary
shares of 2,047,643,498 (2023: 2,038,653,228).
Taxation
Year ended 31 December
2024 2023
$m Effective tax rate $m Effective tax rate
Reported income tax expense (55.4) 22.5% (37.1) 22.2%
Tax effect of adjustments (40.2) (38.5)
Other discrete tax items (2.9) (7.5)
Adjusted income tax expense (98.5) 24.0% (83.1) 23.3%
The Group's reported income tax expense was $55.4 million (2023: $37.1
million). The increase in the reported effective tax rate was due to the
variance of profit mix between jurisdictions, an increase in uncertain tax
positions and the impact of the 2023 benefit from a successful resolution of
an uncertain tax position. The increase was net of a reduction due to the
release of a $2.9 million tax liability relating to business restructuring and
a benefit from prior year tax filings in the UK.
The adjusted effective tax rate of 24.0% for the year ended 31 December 2024
(2023: 23.3%) 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 20). The increase in the adjusted effective tax
rate was due to the variance of profit mix between jurisdictions in which the
Group had a taxable presence and an increase in uncertain tax positions. This
increase was net of a benefit from prior year tax filings in the UK.
Alternative Performance Measures (APMs)
Management and the Board 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). These
are also referred to as adjusting items in the Annual Report and Accounts. The
Group's APM policy can be found in the Non-IFRS financial information section
on pages 18 to 19 and 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
2024 2023 2024 2023 2024 2023 2024 2023
Reported 324.9 262.7 (4.6) (24.6) 3.7 4.8 (55.4) (37.1)
Amortisation of acquired intangibles 136.3 136.2 - - - - (33.6) (32.6)
Acquisitions and divestitures 1.8 10.1 4.6 24.6 - (3.9) (1.3) (0.7)
Termination benefits and related costs 6.3 9.5 - - - - (1.5) (2.0)
Other adjusting items 16.0 13.3 - - - - (3.8) (3.2)
Other discrete tax items - - - - - - (2.9) (7.5)
Adjusted 485.3 431.8 - - 3.7 0.9 (98.5) (83.1)
Adjustments made to derive adjusted operating profit in 2024 included the
amortisation of acquired intangibles of $136.3 million (2023: $136.2 million),
of which $94.1 million (2023: $93.2 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 $1.8 million consisted of costs
in respect of the Livramedom acquisition and certain prior acquisitions
partially offset by the release of previously recognised provisions in respect
of the hospital care exit.
Termination costs of $6.3 million were in respect of one-off, fundamental
transformation projects in line with our simplification and productivity
initiatives. Other adjusting items of $16.0 million largely consisted of the
impairment of right-of-use assets and property, plant and equipment, inventory
write offs and charges wholly related to the office footprint optimisation
programme and closure of certain manufacturing sites as previously announced.
Of the total $160.4 million of adjusting items recognised within operating
profit (excluding tax impact), only $10.8 million was cash-impacting in 2024
(2023: $16.1 million). There was also a cash outflow of $11.7 million (2023:
$7.5 million) during the year in respect of adjusting items recorded as
accruals in the prior year. In 2025, the total cash impact of adjusting items
to be recognised within operating profit (including amounts accrued in
previous years), is currently expected to be similar to 2024. For further
information on Non-IFRS financial information, see pages 18 to 23.
In 2024, other discrete tax items related to a tax benefit of $2.9 million
resulting from the release of a tax liability relating to restructuring
activities in Switzerland. In 2023, other discrete tax items related to a 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 in
Switzerland.
The Board, through the Audit and Risk Committee, annually reviews the Group's
APM policy to ensure that it remains appropriate, aligns with regulatory
guidance and reflects the way in which the performance of the Group is
managed.
Acquisitions
In 2024, the Group completed the acquisition of Livramedom - a homecare
service provider, based in France, for a net cash outflow of $13.6 million to
further strengthen our Home Services Group. There was no contingent
consideration associated with this acquisition.
During the year, the Group paid $70.9 million in respect of final earn out
amounts associated with the acquisitions of Cure Medical in 2021 and Triad
Life Science in 2022 (of which $69.7 million had been provided at 31 December
2023). As at 31 December 2024, the discounted fair value of contingent
consideration arising on acquisitions was $70.3 million (2023: $138.0
million). Refer to Note 7 - Acquisitions of the Condensed Consolidated
Financial Statements for further details.
Dividends
Dividends are distributed based on the realised 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 realised distributable reserves of the Company at 31
December 2024 were $1,474.7 million (2023: $1,539.4 million).
The Board declared an interim dividend of 1.822 cents per share in July 2024
and has recommended a final 2024 dividend of 4.594 cents per share, which
would bring the full-year dividend to 6.416 cents per share (2023: 6.229 cents
per share), an increase of 3.0% and a pay-out ratio when compared to adjusted
net profit of 42% (2023: 46%). 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.
Refer to Note 6 - Dividends of the Condensed Consolidated Financial Statements
for further information.
Cash Flow and Net Debt
Adjusted Adjusted
2024 2023
$m $m
Adjusted EBITDA(1,6) 590.5 527.1
Working capital inflow/(outflow)(1,6) 7.5 (12.9)
Adjusting items(2,6) (22.5) (23.6)
Capital expenditure (122.1) (129.2)
Operating cash flow(1) 453.4 361.4
Tax paid (52.1) (35.9)
Free cash flow to capital(1) 401.3 325.5
Net interest paid (79.1) (65.6)
Lease payments (24.7) (22.7)
Other(3) 4.3 (8.9)
Free cash flow to equity(1) 301.8 228.3
Dividends(4) (130.2) (110.7)
Acquisitions and other(5) (89.5) (178.8)
Purchase of own shares (10.9) -
Movement in net debt 71.2 (61.2)
Net debt(1) at 1 January (excluding lease liabilities) (1,129.3) (1,068.1)
Net debt(1) at 31 December (excluding lease liabilities) (1,058.1) (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 on pages 18 to 23.
2. Details of adjusting items are provided in the adjusting items cash
movement table in the Non-IFRS financial information section on page 23. Of
the total cash outflow of $22.5 million during the year, $11.7 million related
to accruals recorded in the prior year.
3. Other consisted of financing fees amortisation $3.0 million (2023:
$2.8 million) offset by a net FX gain on cash and borrowings of $4.6 million
(2023: $6.7 million FX loss) and proceeds from PP&E sales of $2.7 million
(2023: $0.6 million).
4. Dividend cash payments of $130.2 million (2023: $110.7 million)
were made to shareholders during the year.
5. Acquisition and other payments of $89.5 million consisted of the
consideration payment of $13.6 million in respect of the acquisition of
Livramedom, a $5.0 million SAFE note investment in BlueWind Medical and $70.9
million in respect of the final earn out payments associated with the
acquisitions of Cure Medical in 2021 and Triad Life Sciences in 2022.
6. Excluding the impact of adjusting items of $22.5 million (2023:
$23.6 million) on adjusted EBITDA and adjusted working capital movements,
EBITDA was $573.2 million (2023: $496.7 million) and the reported working
capital movement was a $6.5 million outflow (2023: $0.6 million inflow).
Adjusted EBITDA
Adjusted EBITDA increased by $63.4 million to $590.5 million (2023: $527.1
million), with the increase in adjusted gross profit of $75.7 million more
than offsetting the increase in adjusted operating expenses of $22.2 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 18 to 23.
Free cash flow to capital
Free cash flow to capital increased by $75.8 million to $401.3 million (2023:
$325.5 million), largely driven by the increase in adjusted EBITDA of $63.4
million and improved year-on-year working capital movements of $20.4 million.
These were partly offset by an increase in cash tax paid of $16.2 million.
The Group invested $122.1 million in capital expenditure (2023: $129.2
million) to increase manufacturing capacity and automation, develop new
products and improve information technology and digital tools.
The adjusted working capital inflow of $7.5 million (2023: $12.9 million
outflow) improved year-on-year, with reduced inventory levels of $25.7 million
on an adjusted basis and a realised gain on the settlement of FX derivatives
held to manage foreign exchange risk in our working capital of $8.8 million
(2023: $6.7 million loss) partially offset by a $26.9 million increase in
trade and other receivables based on higher sales.
Free cash flow to capital is reconciled to its nearest IFRS measure in the
Non-IFRS financial information section - see page 22. The nearest IFRS measure
is net cash generated from operations, which has increased by $84.9 million to
$575.5 million (2023: $490.6 million) and is derived from reported net profit
of $190.5 million (2023: $130.3 million).
Operating cash conversion was 93.4% (2023: 83.7%). The improvement in the
ratio primarily reflected the improvement in working capital and net FX gains
on derivatives. Refer to page 22 in the Non-IFRS financial information
section.
Free cash flow to equity
Free cash flow to equity increased by $73.5 million or 32.2% to $301.8 million
(2023: $228.3 million). This was driven by an increase in free cash flow to
capital of $75.8 million as explained above and net foreign exchange gains of
$11.3 million on borrowings and cash, partly offset by higher finance expense
payments of $13.5 million primarily due to the timing of interest payments
associated with the revolving credit facility. Free cash flow to equity is
reconciled to its nearest IFRS measure in the Non-IFRS financial information
section - see page 22. Equity cash conversion was 96.6% (2023: 83.3%) - refer
to page 22 in the Non-IFRS financial information section.
Borrowings and net debt
2024 2023
$m $m
Senior notes(1) (495.1) (494.1)
Credit facilities(1) (627.7) (732.8)
Lease liabilities (78.8) (85.5)
Total borrowings including lease liabilities (1,201.6) (1,312.4)
Cash and cash equivalents 64.7 97.6
Total borrowings including lease liabilities, net of cash (1,136.9) (1,214.8)
Net debt(2) (excluding lease liabilities) (1,058.1) (1,129.3)
Net debt(2) (excluding leases)/adjusted EBITDA(2) 1.8 2.1
1. Senior notes and credit facilities are stated net of unamortised
financing fees of $4.9 million and $5.8 million respectively (2023: $5.9
million and $7.8 million).
2. These non-IFRS measures are explained and reconciled to the most
directly comparable financial measures prepared in accordance with IFRS on
pages 18 to 23.
As at 31 December 2024, the Group's cash and cash equivalents were $64.7
million (2023: $97.6 million) and total borrowings (net of deferred financing
fees) were $1,122.8 million (2023: $1,226.9 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, maturing in 2028
and 2027 respectively. 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 2024, $566.5 million of the multicurrency revolving credit
facility remained undrawn.
The Group ended the period with total borrowings, including IFRS 16 lease
liabilities, of $1,201.6 million (2023: $1,312.4 million). Offsetting cash of
$64.7 million (2023: $97.6 million) and excluding lease liabilities, net debt
was $1,058.1 million (2023: $1,129.3 million), equivalent to 1.8x adjusted
EBITDA (2023: 2.1x adjusted EBITDA). We continue to target leverage of 2x over
time but are comfortable to temporarily go above or below this, dependent on
M&A and other investment opportunities.
For further information on borrowings see Note 8 - Borrowings of the Condensed
Consolidated Financial Statements.
Covenants
At 31 December 2024, 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 2024 and 2023.
Maximum covenant net leverage Actual covenant net leverage Minimum covenant interest cover(1) Actual covenant interest cover(1)
31 December 2024 3.50x 1.9x 3.5x 7.6x
31 December 2023 3.50x 2.3x 3.5x 7.0x
*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 18 to 23 and applied in the commentary in this Financial review.
Group financial position
2024 2023 Change
At 31 December $m $m $m
Intangible assets and goodwill 2,096.1 2,234.1 (138.0)
Other non-current assets 625.6 609.6 16.0
Cash and cash equivalents 64.7 97.6 (32.9)
Other current assets 728.6 772.4 (43.8)
Total assets 3,515.0 3,713.7 (198.7)
Current liabilities (512.3) (536.4) 24.1
Non-current liabilities (1,313.8) (1,484.6) 170.8
Equity (1,688.9) (1,692.7) 3.8
Total equity and liabilities (3,515.0) (3,713.7) 198.7
Intangible assets and goodwill
Intangible assets and goodwill decreased by $138.0 million to $2,096.1 million
(2023: $2,234.1 million) and was primarily driven by the in-year amortisation
of intangible assets of $157.0 million partially offset by intangible asset
additions of $31.4 million.
Following the Local Coverage Determinations (LCDs) announcement in November
2024, management considered whether there was an indication of impairment in
respect of the InnovaMatrix® product-related intangible asset held on the
balance sheet. Using latest approved forecasts, the recoverable amount was
calculated, and this demonstrated significant headroom over the carrying
amount. A similar exercise was carried out on the goodwill balance associated
with the Advanced Wound Care CGU and there was significant headroom remaining.
Management therefore concluded that the intangible asset and goodwill balance
were not impaired at 31 December 2024.
No other triggers of impairments were identified during 2024.
Other non-current assets
Other non-current assets, including property, plant and equipment (PP&E),
right-of-use assets, investment in financial assets, deferred tax assets,
restricted cash and other assets increased by $16.0 million to $625.6 million
(2023: $609.6 million), with the increase largely due to an increase in
PP&E reflecting the continued investment in our manufacturing facilities.
Current assets excluding cash and cash equivalents
Current assets, excluding cash and cash equivalents, decreased by $43.8
million to $728.6 million (2023: $772.4 million), primarily driven by a
reduction in inventories of $46.5 million.
As a result of the LCDs announcement, consideration was also given to the
recoverability of related debtors and inventory valuation. No issues were
noted and management concluded that there were no risks of material
misstatement in respect of these balances as at 31 December 2024.
Current liabilities
Current liabilities decreased by $24.1 million to $512.3 million (2023: $536.4
million), with decreases in trade and other payables of $6.0 million,
provisions of $9.7 million and contingent consideration of $16.4 million
partially offset by an increase in current tax payable of $5.3 million.
Non-current liabilities
Non-current liabilities decreased by $170.8 million to $1,313.8 million (2023:
$1,484.6 million). This was primarily due to reductions in non-current
borrowings of $104.1 million, contingent consideration of $51.3 million
(following the final earn out payments made for the Cure Medical and Triad
acquisitions), deferred tax liabilities of $5.5 million and lease liabilities
of $8.0 million.
Going concern
In assessing going concern, the Directors considered available cash resources,
access to committed undrawn funding, financial performance and forecast
performance, including continued implementation of the FISBE 2.0 strategy,
together with the Group's financial covenant compliance requirements and
principal risks and uncertainties.
The same severe but plausible downside scenarios utilised in the preparation
of the Viability statement were also applied in assessing going concern. 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. For further information on Going Concern, see Note 1.3 of the
Condensed Consolidated Financial Statements.
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. The
outcome of this test 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.
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 (our reported measures).
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 intangible 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.
Revenue measures
Revenue growth on a constant currency basis represents reported revenue, as
determined under IFRS, and applying the applicable prior period average
exchange rates to the Group's actual performance in the respective period.
Organic revenue growth is calculated by adjusting this to exclude the impact
of acquisitions and divestitures.
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 22 for details on how these measures are calculated.
Net debt and leverage ratio are two other measures used and these are
explained on page 23.
Reconciliation of reported earnings to adjusted earnings for the years ended
31 December 2024 and 2023
Year ended 31 December 2024 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 2,289.2 1,283.6 (958.7) 324.9 (78.1) (4.6) 3.7 245.9 (55.4) 190.5
Amortisation of acquired intangibles - 109.0 27.3 136.3 - - - 136.3 (33.6) 102.7
Acquisition-related costs - - 3.5 3.5 - 4.6 - 8.1 (1.7) 6.4
Divestiture-related costs/(income) - (1.1) (0.6) (1.7) - - - (1.7) 0.4 (1.3)
Termination benefits and related costs - 0.9 5.4 6.3 - - - 6.3 (1.5) 4.8
Other adjusting items - 4.0 12.0 16.0 - - - 16.0 (3.8) 12.2
Other discrete tax items - - - - - - - (2.9) (2.9)
Adjusted 2,289.2 1,396.4 (911.1) 485.3 (78.1) - 3.7 410.9 (98.5) 312.4
Amortisation 20.7
Depreciation 63.8
Impairment of assets 0.9
Share-based payments 19.8
Adjusted EBITDA 590.5
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
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 of assets 2.1
Share-based payments 14.6
Adjusted EBITDA 527.1
Refer to the Financial review on pages 11 to 12 for commentary on the Group's
adjusting items.
Adjusted operating profit margin of 21.2% (2023: 20.2%) is calculated as
adjusted operating profit of $485.3 million (2023: $431.8 million) divided by
revenue of $2,289.2 million (2023: $2,142.4 million). A reconciliation of
adjusted operating profit to its closest IFRS measure is shown in the table
above.
Adjusted operating profit at constant currency, determined by applying the
applicable prior period average exchange rates to the adjusted operating
profit, was $502.4 million, with adjusted operating profit margin growth of
16.4% on a constant currency basis.
The adjusted operating profit margin was 21.8% on a constant currency basis,
calculated as the adjusted operating profit of $502.4 million on a constant
currency basis divided by revenue of $2,304.6 million on a constant currency
basis.
Reconciliation of reported operating costs to adjusted operating costs for the
years ended 31 December 2024 and 2023
2024 2023
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 (645.2) (195.0) (111.7) (6.8) (958.7) (612.5) (212.9) (110.0) (2.5) (937.9)
Amortisation of acquired intangibles 0.6 19.0 7.7 - 27.3 - 19.8 6.0 - 25.8
Acquisition-related costs - 2.8 - 0.7 3.5 - 6.8 - - 6.8
Divestiture-related costs/(income) (0.6) - - - (0.6) (1.0) (0.4) - (0.4) (1.8)
Termination benefits and related costs 1.2 2.6 1.6 - 5.4 1.6 5.7 0.1 - 7.4
Other adjusting items 0.3 5.6 - 6.1 12.0 - 7.9 - 2.9 10.8
Adjusted (643.7) (165.0) (102.4) - (911.1) (611.9) (173.1) (103.9) - (888.9)
Reconciliation of reported basic and diluted earnings per share to adjusted
earnings per share for the years ended 31 December 2024 and 2023
2024 Adjusted 2024 2023 Adjusted 2023
$m $m $m $m
Net profit attributable to the shareholders of the Group 190.5 312.4 130.3 274.1
Number Number
Basic weighted average ordinary shares in issue(1) 2,047,643,498 2,038,653,228
Diluted weighted average ordinary shares in issue(1) 2,056,797,417 2,052,589,260
Cents per share Cents per share Cents per share Cents per share
Basic earnings per share 9.3 15.3 6.4 13.4
Diluted earnings per share 9.3 15.2 6.3 13.4
1. See Note 5 - Earnings per share of the Condensed Consolidated Financial Statements.
Adjusted diluted EPS has increased by 13.7% 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.
Cash flow conversion
Year ended 31 December
2024 2023
$m $m
Operating cash conversion(1) 93.4% 83.7%
Equity cash conversion(1) 96.6% 83.3%
1. Operating cash conversion is calculated by Operating cash flow/Adjusted
operating profit. Equity cash conversion is calculated by Free cash flow to
equity/Adjusted net profit.
Reconciliation of Operating cash flow, Free cash flow to capital, Free cash
flow to equity
Year ended 31 December
2024 2023
$m $m
Net cash generated from operations 575.5 490.6
Less: acquisition of PP&E and intangible assets (122.1) (129.2)
Operating cash flow 453.4 361.4
Tax paid (52.1) (35.9)
Free cash flow to capital 401.3 325.5
Net interest paid (79.1) (65.6)
Payment of lease liabilities (24.7) (22.7)
Financing fee amortisation (3.0) (2.8)
Foreign exchange gain/(loss) on cash and borrowings 4.6 (6.7)
Proceeds from sale of PP&E 2.7 0.6
Free cash flow to equity 301.8 228.3
Free cash flow to equity has increased by 32.2% to $301.8 million (2023:
$228.3 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
2024 2023
$m $m
Reported working capital movement(2) (6.5) 0.6
Increase in respect of acquisitions and divestitures 3.1 3.1
Increase/(decrease) in termination benefits 4.2 (6.1)
(Decrease) in respect of other adjusting items (2.1) (3.8)
Realised gain/(loss) on settlement of FX derivatives held to manage foreign 8.8 (6.7)
exchange risk in working capital(3)
Adjusted working capital movement 7.5 (12.9)
2.The comparatives have been re-presented as outlined in Note 1.5 of the
Condensed Consolidated Financial Statements.
3. Realised gains and losses arising from the settlement of FX derivatives
held to manage foreign exchange risk in our working capital have been included
in this reconciliation as management believe this provides a more accurate
view of the underlying movement in working capital.
Cash outflows from adjusting items
Year ended 31 December
2024 2023
$m $m
Acquisition and divestitures adjustments (4.2) (13.6)
Termination benefits and related costs adjustments (10.7) (3.4)
Other adjusting items (7.6) (6.6)
Cash outflows from adjusting items (22.5) (23.6)
Net debt
Monitoring net debt is important to the Group as it is an indicator of the
Group's financial health and its available liquidity. It is an important
decision-making tool for investment decisions and strategic planning.
Net debt is calculated as borrowings less cash and excluding lease
liabilities.
2024 2023
$m $m
Senior notes(1) 495.1 494.1
Credit facilities(1) 627.7 732.8
Lease liabilities 78.8 85.5
Total borrowings including lease liabilities 1,201.6 1,312.4
Less: cash and cash equivalents (64.7) (97.6)
Less: lease liabilities (78.8) (85.5)
Net debt excluding leases 1,058.1 1,129.3
1. See Note 8 - Borrowings of the Condensed Consolidated Financial Statements.
Leverage
Leverage is an important performance measurement metric for the Group as it is
an indicator of financial risk, credit worthiness and operational flexibility.
It is also an important consideration in strategic decision-making.
This is calculated as net debt excluding leases divided by adjusted EBITDA.
2024 2023
$m $m
Net debt excluding leases(2) 1,058.1 1,129.3
Adjusted EBITDA(3) 590.5 527.1
Leverage ratio 1.8x 2.1x
2. Net debt excluding leases is defined and reconciled to the closest IFRS
measure in the Net debt table above.
3. Adjusted EBITDA is reconciled to the closest IFRS measure in the
Reconciliation of reported earnings to adjusted earnings table on page 20 of
this section.
Condensed Consolidated Financial Statements
Consolidated Income Statement
For the year ended 31 December 2024
2024 2023
Notes $m $m
Revenue 2 2,289.2 2,142.4
Cost of sales (1,005.6) (941.8)
Gross profit 1,283.6 1,200.6
Selling and distribution expenses (645.2) (612.5)
General and administrative expenses (195.0) (212.9)
Research and development expenses (111.7) (110.0)
Other operating expenses (6.8) (2.5)
Operating profit 324.9 262.7
Finance income 3 4.8 5.2
Finance expense 3 (82.9) (80.7)
Fair value movement of contingent consideration 7 (4.6) (24.6)
Non-operating income, net 3.7 4.8
Profit before income taxes 245.9 167.4
Income tax expense 4 (55.4) (37.1)
Net profit 190.5 130.3
Earnings per share
Basic earnings per share (cents per share) 5 9.3¢ 6.4¢
Diluted earnings per share (cents per share) 5 9.3¢ 6.3¢
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 2024
2024 2023
Notes $m $m
Net profit 190.5 130.3
Items that will not be reclassified subsequently to the Consolidated Income
Statement
Remeasurement of defined benefit pension plans, net of tax (0.3) (0.2)
Changes in fair value of equity investments (6.0) (7.8)
Items that may be reclassified subsequently to the Consolidated Income
Statement
Foreign currency translation (47.3) 54.9
Effective portion of changes in fair value of cash flow hedges (11.1) 0.7
Changes in fair value of cash flow hedges reclassified to the Consolidated 2.1 (0.8)
Income Statement
Costs of hedging 0.6 (0.5)
Income tax in respect of items that may be reclassified 0.1 0.1
Other comprehensive (expense)/income (61.9) 46.4
Total comprehensive income 128.6 176.7
All amounts are attributable to shareholders of the Group and wholly derived
from continuing operations.
Consolidated Statement of Financial Position
As at 31 December 2024
2024 2023
Notes $m $m
Assets
Non-current assets
Property, plant and equipment 502.6 473.8
Right-of-use assets 67.5 74.7
Intangible assets 805.9 935.3
Goodwill 1,290.2 1,298.8
Investment in financial assets 16.9 22.9
Deferred tax assets 22.7 21.2
Restricted cash 3.4 5.3
Other non-current receivables 12.5 11.7
2,721.7 2,843.7
Current assets
Inventories 349.6 396.1
Trade and other receivables 335.0 333.7
Current tax receivable 16.8 16.5
Derivative financial assets 18.4 13.6
Restricted cash 8.8 12.5
Cash and cash equivalents 64.7 97.6
793.3 870.0
Total assets 3,515.0 3,713.7
Equity and liabilities
Current liabilities
Trade and other payables 382.7 388.7
Lease liabilities 22.0 20.7
Current tax payable 31.9 26.6
Derivative financial liabilities 18.1 16.7
Contingent consideration(1) 7 53.3 69.7
Provisions(1) 4.3 14.0
512.3 536.4
Non-current liabilities
Borrowings 8 1,122.8 1,226.9
Lease liabilities 56.8 64.8
Deferred tax liabilities 82.7 88.2
Contingent consideration(1) 7 17.0 68.3
Provisions(1) 3.5 3.0
Derivative financial liabilities 0.3 0.9
Other non-current liabilities 30.7 32.5
1,313.8 1,484.6
Total liabilities 1,826.1 2,021.0
Net assets 1,688.9 1,692.7
Equity
Share capital 251.5 251.5
Share premium 181.0 181.0
Own shares (16.4) (0.6)
Retained deficit (828.4) (888.7)
Merger reserve 2,098.9 2,098.9
Cumulative translation reserve (169.5) (122.2)
Other reserves 171.8 172.8
Total equity 1,688.9 1,692.7
Total equity and liabilities 3,515.0 3,713.7
1. The comparatives have been re-presented as outlined in Note 1.5
of the Condensed Consolidated Financial Statements.
Consolidated Statement of Changes in Equity
For the year ended 31 December 2024
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 2023 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 income/(expense):
Foreign currency translation adjustment - - - - - 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 - - - - - - (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 - - - (110.7) - - - (110.7)
Scrip dividend 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
Net profit - - - 190.5 - - - 190.5
Other comprehensive income/(expense):
Foreign currency translation adjustment - - - - - (47.3) - (47.3)
Remeasurement of defined benefit pension plans, net of tax - - - - - - (0.3) (0.3)
Changes in fair value of cash flow hedges, net of tax - - - - - - (8.3) (8.3)
Changes in fair value of equity investments - - - - - - (6.0) (6.0)
Other comprehensive income/(expense) - - - - - (47.3) (14.6) (61.9)
Total comprehensive income/(expense) - - - 190.5 - (47.3) (14.6) 128.6
Dividends paid 6 - - - (130.2) - - - (130.2)
Purchase of shares by Employee Benefit Trust - - (22.8) - - - - (22.8)
Share-based payments - - - - - - 19.7 19.7
Share awards vested - - 7.0 - - - (5.3) 1.7
Excess deferred tax benefit from share-based payments - - - - - - (1.5) (1.5)
Changes in fair value of cash flow hedges transferred to inventory - - - - - - 0.7 0.7
At 31 December 2024 251.5 181.0 (16.4) (828.4) 2,098.9 (169.5) 171.8 1,688.9
Consolidated Statement of Cash Flows
For the year ended 31 December 2024
2024 2023
Notes $m $m
Cash flows from operating activities
Net profit 190.5 130.3
Adjustments for:
Depreciation of property, plant and equipment 40.6 37.5
Depreciation of right-of-use assets 23.2 22.7
Amortisation of intangible assets 157.0 154.6
Income tax 4 55.4 37.1
Non-operating income/(expense), net(1) 5.1 (11.5)
Fair value movement of contingent consideration 7 4.6 24.6
Finance costs, net 3 78.1 75.5
Share-based payments 19.8 14.6
Impairment of intangible assets 0.9 -
Impairment of property, plant and equipment 6.5 2.7
Impairment of right-of-use assets 0.3 1.9
Change in assets and liabilities:
Inventories 27.5 (49.4)
Trade and other receivables (26.9) 18.7
Other non-current receivables - (1.1)
Restricted cash 0.2 7.8
Trade and other payables 1.2 21.1
Provisions (9.8) 4.8
Other non-current payables 1.3 (1.3)
Net cash generated from operations 575.5 490.6
Interest received 5.4 5.2
Interest paid (84.5) (70.8)
Payment of contingent consideration arising from acquisitions 7 (48.1) (21.7)
Income taxes paid (52.1) (35.9)
Net cash generated from operating activities 396.2 367.4
Cash flows from investing activities
Acquisition of property, plant and equipment and intangible assets (122.1) (129.2)
Proceeds from sale of property, plant and equipment 2.7 0.6
Acquisitions, net of cash acquired 7 (13.6) (84.4)
Payment of contingent consideration arising from acquisitions 7 (22.8) (73.0)
Net cash inflow arising from divestitures - 0.3
Investment in other financial assets (5.0) -
Net cash used in investing activities (160.8) (285.7)
Cash flows from financing activities
Repayment of borrowings 8 (98.0) -
Proceeds from borrowings 8 - 9.4
Payment of lease liabilities (24.7) (22.7)
Dividends paid 6 (130.2) (110.7)
Purchase of own shares (10.9) -
Net cash used in financing activities (263.8) (124.0)
Net change in cash and cash equivalents (28.4) (42.3)
Cash and cash equivalents at beginning of the year 97.6 143.8
Effect of exchange rate changes on cash and cash equivalents (4.5) (3.9)
Cash and cash equivalents at end of the year 64.7 97.6
1. The comparatives have been re-presented as outlined in Note 1.5
of 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 IFRS Accounting Standards 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 2024 and 2023 but is
derived from those accounts. Statutory accounts for 2023 have been delivered
to the Registrar of Companies and those for 2024 will be delivered following
the Company's Annual General Meeting. The auditor's reports on the 2024 and
2023 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 IFRS Accounting Standards,
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, management has determined
that there are no areas of estimation uncertainty that have a significant risk
of resulting in a material adjustment to the carrying amount of assets and
liabilities within the next financial year or critical judgements in applying
accounting policies that have a significant effect on the amounts recognised
in the consolidated and company financial statements.
1.3 Going concern
As discussed in the Financial Review on pages 9 to 17, the overall financial
performance of the business remains very strong with a robust liquidity
position.
In preparing their assessment of going concern, the Directors have considered
available cash resources, financial actual and forecast performance, including
strategy delivery, together with the Group's financial covenant compliance
requirements and principal risks and uncertainties. The Group's liquidity
remains strong as management continues to monitor its liquidity requirements
to ensure there is sufficient cash to meet operational needs and maintain
adequate headroom.
The Directors have used actual performance in 2024, the Board approved 2025
budget (and related cash flow forecasts) 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 30 June 2026, which is more than 12 months from the date of
approval of the Consolidated Financial Statements.
In accordance with FRC guidance, management applied severe but plausible
downside scenarios linked to the Group's principal and emerging risks,
including supply chain disruption, cyber security disruption, significant
regulatory breaches, financial market distress and geopolitical events.
Scenarios combining certain risks were also considered. The Board has reviewed
these scenarios as part of the going concern assessment and has concluded that
these scenarios are in line with the Group's principal and emerging risks and
continue to reflect the potential financial risk of severe but plausible
downside events and circumstances during the going concern period. Under each
scenario, the Group is forecast to retain significant liquidity and covenant
headroom throughout the going concern period.
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. The
outcome of 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, at the time of approving the 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 the Group's business model,
strategy and operations and remain solvent for a period of at least 12 months
from 25 February 2025.
1.4 Accounting standards
New standards, interpretations and amendments applied for the first time
On 1 January 2024, the Group adopted the following amendments which are
mandatorily effective for the period beginning 1 January 2024:
· Liability in a Sale and Leaseback - Amendments to IFRS 16
· Classification of Liabilities as Current or Non-Current -
Amendments to IAS 1
· Non-Current liabilities with Covenants - Amendments to IAS 1
· Supplier Finance Arrangements - Amendments to IAS 7 and IFRS 7
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
At the date of authorisation of these financial statements, the Group has not
applied the following new and revised IFRS Accounting Standards that have been
issued but are not yet effective:
· Lack of exchangeability - Amendment to IAS 21 (effective for the
period beginning 1 January 2025)
· IFRS 18 - Presentation and Disclosures in Financial Statements
(effective for the period beginning 1 January 2027)
· IFRS 19 - Subsidiaries without Public Accountability: Disclosures
(effective for the period beginning 1 January 2027)
The amendments to IAS 21 are not expected to have a material impact on the
Group's financial statements.
The Group is currently working to identify all impacts that IFRS 18 will have
on the primary financial statements and notes to the Group's consolidated
financial statements. As the Group's equity instruments are publicly traded,
it is not eligible to elect to apply IFRS 19 for the purposes of the
consolidated financial statements of 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 been adopted by the
Group because application is not yet mandatory, or they are not relevant for
the Group.
1.5 Prior year re-presentations
Certain lines in the primary statements have been disaggregated to provide
greater clarity, and accordingly, the corresponding 2023 comparative amounts
have been re-presented for consistency and comparability between periods.
Within the Consolidated Statement of Financial Position, contingent
consideration of $138.0 million (of which $69.7 million was current and $68.3
million was non-current) at 31 December 2023 is disclosed separately from
provisions.
Within the Consolidated Statement of Cash Flows, the non-operating income for
the year ended 31 December 2023, has been re-presented to be disclosed net of
unrealised losses on derivatives of $1.9 million. This was previously
recognised separately as derivative financial assets ($11.5 million) and
derivative financial liabilities ($13.4 million).
There is no impact on net profit, net assets, cash flows or any subtotals
presented previously.
2. Revenue and segmental information
Convatec's Executive Leadership Team (CELT) is the Group's Chief Operating
Decision Maker (CODM). 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.
Group financial information is provided to CELT for decision-making purposes
with revenue included by category as disclosed below. 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.
Revenue by category
The Group generates revenue across four major product categories. The
following table sets out the Group's revenue for the year ended 31
December by category:
2024 2023
$m $m
Advanced Wound Care 742.7 695.3
Ostomy Care 634.0 608.3
Continence Care 501.4 457.2
Infusion Care 410.9 370.9
Revenue excluding hospital care exit 2,289.0 2,131.7
Revenue from hospital care exit 0.2 10.7
Total 2,289.2 2,142.4
Geographic information
Geographic markets
The following chart sets out the Group's revenue by geographic market in which
third party customers are located:
2024 2023
$m $m
Europe 661.1 647.8
North America 1,295.6 1,186.0
Rest of World (RoW)(1) 332.5 308.6
Total 2,289.2 2,142.4
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. Finance income and expense
Finance costs, net for the year ended 31 December were as follows:
2024 2023
$m $m
Finance income
Interest income on cash and cash equivalents 4.8 5.2
Total finance income 4.8 5.2
Finance expense
Interest expense on borrowings (76.1) (75.2)
Other financing-related fees(2) (8.9) (7.2)
Interest expense on interest rate derivatives (0.2) -
Interest expense on lease liabilities (3.6) (3.5)
Capitalised interest(3) 6.4 5.4
Other finance costs (0.5) (0.2)
Total finance expense (82.9) (80.7)
Finance costs, net (78.1) (75.5)
2. Other financing-related fees include the amortisation of
deferred financing fees associated with the multicurrency revolving credit
facilities, term loan facilities and senior notes.
3. Capitalised interest was calculated using the Group's weighted
average interest rate over the year of 6.0% (2023: 5.7%) and will be treated
as tax deductible.
4. Income taxes
4.1 Taxation
The Group's income tax expense is the sum of the total current and deferred
tax expense.
2024 2023
$m $m
Current tax
UK corporation tax 2.1 -
Overseas taxation 66.0 46.1
Adjustment to prior years (4.2) (5.5)
Total current tax expense 63.9 40.6
Deferred tax
Origination and reversal of temporary differences (4.6) 2.0
Change in tax rates 3.6 1.6
Adjustment to prior years (7.2) (4.5)
Benefit from previously unrecognised tax losses (0.3) (2.6)
Total deferred tax benefit (8.5) (3.5)
Income tax expense 55.4 37.1
In 2023, the deferred tax movement included a net tax benefit of $15.1 million
following the successful resolution of an uncertain tax position.
4.2 Reconciliation of effective tax rate
The effective tax rate for the year ended 31 December 2024 was 22.5% (2023:
22.2%).
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:
2024 2023
$m $m
Profit before income taxes 245.9 167.4
Profit before income taxes multiplied by rate of corporation tax in the UK of 61.5 39.4
25.0% (2023: 23.52%)
Difference between UK and overseas tax rates(1) (0.3) 1.6
Non-deductible/non-taxable items 5.2 7.2
Change in recognition of deferred tax assets - 2.6
Recognition of previously unrecognised US deferred tax assets - (2.6)
Movement in provision for uncertain tax positions 3.7 (17.5)
Other(2) (14.7) 6.4
Income tax expense and effective tax rate 55.4 22.5% 37.1 22.2%
1. This includes changes in tax rates based on substantively
enacted legislation across various tax jurisdictions as of 31 December.
2. Includes the release of a $2.9 million tax liability relating to
restructuring activities in Switzerland and the $11.4 million impact of prior
year corporate income tax filings.
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 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.
5. Earnings per share
2024 2023
Net profit attributable to the shareholders of the Group ($m) 190.5 130.3
Basic weighted average ordinary shares in issue (number) 2,047,643,498 2,038,653,228
Dilutive impact of share awards (number) 9,153,919 13,936,032
Diluted weighted average ordinary shares in issue (number) 2,056,797,417 2,052,589,260
Basic earnings per share (cents per share) 9.3¢ per share 6.4¢ per share
Diluted earnings per share (cents per share) 9.3¢ per share 6.3¢ per share
The calculation of diluted earnings per share does not contain any share
options that were non-dilutive for the year, because the average market price
of the Group's ordinary shares exceeded the exercise price (2023: average
market price of the Group's ordinary shares exceeded the exercise price).
6. 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
$m cash $m
$m
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 3.517 4.460 91.5 91.5 - -
Interim dividend 2024 1.422 1.822 38.7 38.7 - -
Paid in 2024 4.939 6.282 130.2 130.2 - -
Final dividend 2024 proposed 3.639 4.594 94.2
The final dividend proposed for 2024 is to be distributed on 29 May 2025 to
shareholders on the register at the close of business on 22 April 2025 and is
subject to shareholder approval at the Annual General Meeting on 22 May 2025.
The dividend will be declared in US dollars and will be paid in Sterling at
the chosen exchange rate of $1.262/£1.00 determined on 25 February 2025.
The interim and final dividends for 2024 give a total dividend for the year of
6.416 cents per share (2023: 6.229 cents per share).
7. Acquisitions
Livramedom
On 17 September 2024, the Group completed its acquisition of 100% of the share
capital of Livramedom, a France-based retailer of equipment for the treatment
of continence, wound healing, and stoma therapy disorders, which will
strengthen our direct-to-consumer capabilities in Continence Care and Ostomy
Care. The company was founded in 2006, and is based in Marseille, France. The
total consideration for the acquisition was $12.8 million (€11.5 million).
There is no contingent consideration associated with this acquisition.
Assets acquired and liabilities assumed
The transaction meets the definition of a business combination and has 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 date:
Livramedom
Provisional
$m
Non-current assets
Right-of-use assets 1.0
Intangible assets 1.3
Other non-current receivables 0.1
Current assets
Inventories 0.9
Trade and other receivables 1.5
Cash and cash equivalents 0.9
Total assets acquired 5.7
Current liabilities
Trade and other payables (3.0)
Lease liabilities (0.3)
Deferred tax liabilities (0.2)
Non-current liabilities
Lease liabilities (0.7)
Deferred tax liabilities (0.2)
Total liabilities assumed (4.4)
Net assets acquired 1.3
Goodwill 11.5
Total 12.8
Initial cash consideration 14.5
Working capital adjustment(1) (1.5)
Gross indebtedness adjustment(1) (0.2)
Total consideration 12.8
1. These are the Group's calculations of the working capital and
gross indebtedness adjustments in accordance with the terms of the Merger
Agreement. These were not finalised or paid by the reporting date.
Analysis of cash outflow in the Consolidated Statement of Cash Flows
Livramedom
Provisional
$m
Initial cash consideration 14.5
Cash and cash equivalents acquired (0.9)
Net cash outflow from acquisitions, net of cash acquired 13.6
The fair values of the assets acquired and liabilities assumed are provisional
at 31 December 2024. 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 date.
The provisional fair value of trade and other receivables amounted to $1.5
million, with a gross contractual amount of $1.6 million. At the acquisition
date, the Group's best estimate of the contractual cash flows expected not be
collected amounted to $0.1 million.
Goodwill amounting to $11.5 million was recognised on acquisition and is
underpinned by a number of elements, which individually could not be
quantified. Most significant amongst these is the premium attributable to a
pre-existing, well-positioned business in the important Direct to Consumer
market in France that will now allow Convatec to be more competitive.
Additionally, Livramedom has a highly skilled workforce and established
reputation. The Group expects cost savings, operational synergies and future
growth opportunities to arise from combining the operations of the business to
those of the Group. The Livramedom acquisition is included in the Continence
Care CGU.
Acquisition-related costs
The Group incurred $3.5 million of acquisition-related costs in the year,
primarily relating to legal and professional fees in respect of completed or
aborted acquisitions in both the current year and previous years. The
acquisition-related costs have been recognised in general and administrative
expenses in the Consolidated Income Statement.
Revenue and profit
The revenue of Livramedom for the period from the acquisition date to 31
December 2024 was $4.8 million and net loss for the period was $0.6 million.
If the acquisition had been completed on 1 January 2024, reported Group
revenue would have been $11.4 million higher and Group profit for the year
would have been $0.1 million higher.
Contingent consideration
As at 31 December 2024, the discounted fair value of the contingent
consideration payable in respect of the Group's acquisitions was $70.3
million. During the year, final earn out payments totalling $70.9 million were
made in respect of the Cure Medical and Triad Life Sciences acquisitions
($22.8 million recognised within cash flows from investing activities and
$48.1 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 2024) was $4.6
million. In addition, there was a foreign exchange movement of $1.4 million
from the re-translation of non-USD denominated balances.
The movement in contingent consideration to 31 December was as follows:
2024 2023
$m $m
1 January 138.0 140.0
Contingent consideration from acquisitions - 66.7
Fair value movement of contingent consideration 4.6 24.6
Utilised (70.9) (94.7)
Foreign exchange (1.4) 1.4
31 December 70.3 138.0
Current 53.3 69.7
Non-current 17.0 68.3
The expected payment profile of the contingent consideration at 31 December
was as follows:
2024 2023
$m $m
Within 1 year 53.3 69.7
2 to 5 years 0.4 55.8
More than 5 years 16.6 12.5
Total 70.3 138.0
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 2024, the discounted fair value of the contingent
consideration payable in respect of the Group's acquisitions was $70.3 million
(2023: $138.0 million).
Management has determined that the potential range of undiscounted outcomes at
31 December 2024 is between $58.8 million and $163.9 million, from a maximum
undiscounted amount of $163.9 million.
The table below shows an indicative basis of the sensitivity to the income
statement and balance sheet at 31 December 2024.
Sales forecast Discount rate
5% 10% -5% -10% 1% 2% -1% -2%
Increase/(decrease) in financial liability and loss/(gain) in income statement 0.5 1.0 (0.5) (1.1) (1.8) (3.3) 2.0 4.0
8. Borrowings
The Group's borrowings as at 31 December were as follows:
2024 2023
Year of Face value Face value
Currency maturity $m $m
Revolving Credit Facility(1) USD/Euro 2028 383.5 490.6
Term Loan USD 2027 250.0 250.0
Senior Notes USD 2029 500.0 500.0
Interest-bearing borrowings 1,133.5 1,240.6
Financing fees(2) (10.7) (13.7)
Total carrying value of borrowings 1,122.8 1,226.9
Current portion of borrowings - -
Non-current portion of borrowings 1,122.8 1,226.9
1. Included within the Revolving Credit Facility was €106.0
million ($109.8 million) and £7.0 million ($8.8 million) at 31 December 2024
(2023: €100.0 million ($110.4 million) and £8.0 million ($8.2 million)),
representing 28.6% of RCF debt denominated in Euros, 2.3% of RCF debt
denominated in GBP and 69.1% denominated in US dollars.
2. Financing fees of $10.7 million (2023: $13.7 million) related to
the remaining unamortised fees incurred on the credit facilities of $5.8
million (2023: $ 7.8 million) and on the senior notes of $4.9 million (2023:
$5.9 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 comprises of a
$250.0 million term loan and a $950.0 million multicurrency revolving credit
facility. As at 31 December 2024, the term loan was fully drawn and $383.5
million (2023: $490.6 million) of the revolving credit facility was drawn,
with $566.5 million undrawn (2023: $459.4 million).
Financial covenants
The principal financial covenants are based on a permitted net debt to
covenant-adjusted EBITDA3 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 2024, the permitted net debt to covenant-adjusted EBITDA3 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 EBITDA3 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 2024, with significant available headroom on the financial
covenants (in excess of $887.5 million debt headroom on net debt to
covenant-adjusted EBITDA3).
Excluding the impact of interest rate swaps, the weighted average interest
rate on borrowings for the year ended 31 December 2024 was 6.0% (2023: 5.7%).
3. 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 18
to 23.
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.
Borrowings measured at fair value
The senior notes are listed and their fair value at 31 December 2024 of $456.9
million (2023: $450.1 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 2024, the
estimated fair value of the Group's other borrowings was $678.9 million (2023:
$774.9 million).
9. Commitments and contingencies
Capital commitments
At 31 December 2024, the Group had non-cancellable commitments for the
purchase of property, plant and equipment, capitalised software and
development of $42.6 million (2023: $22.3 million).
Contingent liabilities
The Company and its subsidiaries are party to various legal claims and
disputes which arise in the normal course of business. Provisions are
recognised for outcomes that are deemed probable and can be reliably
estimated. Management believe that any material liability in respect of legal
actions and claims not already provided for, is remote.
10. Subsequent events
The Group has evaluated subsequent events through to 25 February 2025, the
date the Consolidated Financial Statements were approved by the Board of
Directors.
On 25 February 2025, the Board proposed the final dividend in respect of 2024
subject to shareholder approval at the Annual General Meeting on 22 May 2025,
to be distributed on 29 May 2025. See Note 6 - Dividends of the Condensed
Consolidated Financial Statements for further details.
11. Responsibility Statement of the directors on the Annual Report
The Responsibility Statement below has been prepared in connection with the
2024 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 and IFRS Accounting Standards 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 25
February 2025 and is signed on its behalf by:
Karim Bitar
Jonny Mason
Chief Executive Officer
Chief Financial Officer
25 February 2025
25 February 2025
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