TIDMCTEC
RNS Number : 3944L
ConvaTec Group PLC
30 April 2020
30 April 2020
ConvaTec Group Plc
Trading update for the three months ended 31 March 2020
Q1 robust, full year risks increased due to COVID-19
Key Points:
-- Group reported revenue of $460 million increased 6.9% year on
year, up 8.9%(1) in constant currency.
o Group demonstrated operational strength in challenging
environments to meet robust demand.
o Growth included the impact of customers increasing their
inventories to ensure supply chain resilience, and a weak prior
year comparator due to the rebate provision (220bps).
-- 2020 full year outlook(2) maintained, but risk increased due to COVID-19.
o Advanced Wound Care revenues expected to be negatively
affected particularly by reduced elective surgeries.
o External risks across the business, including in supply chain,
but monitoring carefully.
-- The Transformation Initiative, focused on Pivoting to
Sustainable and Profitable Growth, remains core and continues to be
implemented at pace.
o Actively managing investments; accelerating certain
initiatives, others are being deferred.
o Overall investment in 2020 expected to be moderately
lower.
Q1 2020 Q1 2019 Reported Constant
Reported Reported growth % currency
$'m $'m growth(1)
%
----------------------- ---------- ---------- ----------
Advanced Wound Care 132 130 1.8 4.5
Ostomy Care 127 120 6.6 9.5
Continence & Critical
Care 119 108 9.9 10.9
Infusion Care 82 73 11.8 12.6
Total revenue 460 431 6.9 8.9
Karim Bitar, Chief Executive Officer, commented:
"As COVID-19 continues to spread, we are committed to doing
everything we can to support and protect our employees and the
people and care givers we serve; whilst taking every opportunity to
reinforce our supply chain.
We had a solid Q1 with the Group delivering well against robust
demand and we are continuing to drive forward with our
transformation as we Pivot to Sustainable and Profitable
Growth.
We are maintaining our 2020 guidance; however, it is clear that
risks across the business have increased and the operating
environment contains a greater level of uncertainty and volatility
in the months ahead. Nevertheless, and whilst we still have much to
do, the Group is performing, both operationally and financially,
and we will continue to focus on executing against our clear
strategy and priorities."
Revenue summary by Business Unit
Advanced Wound Care r evenue of $132 million increased 1.8% on a
reported basis and 4.5%(1) in constant currency. Growth was driven
by an improved performance in the US, which benefited from
customers increasing inventories, and Global Emerging Markets,
notwithstanding COVID-19 related demand headwinds in China and
Korea. This was partly offset by lower revenues in Europe resulting
from French reimbursement cuts and lower UK growth.
Ostomy Care revenue of $127 million increased 6.6% on a reported
basis and 9.5%(1) in constant currency driven by broad based growth
across regions and products, as customers increased inventory
levels.
Continence & Critical Care revenue of $119 million increased
9.9% on a reported basis and 10.9%(1) in constant currency driven
by strong demand for Critical and Hospital Care products. Home
Services Group in the US achieved good growth, with increased
orders due to COVID-19.
Infusion Care revenue of $82 million increased 11.8% on a
reported basis and 12.6%(1) in constant currency driven by
continued strong orders from customers, in part due to building
resilience in their supply chains.
Outlook
Q1 included the impact of customers increasing their inventories
to ensure supply chain resilience and a weak prior year comparator.
However, COVID-19 has introduced more uncertainty into the
environment in which we operate. We expect Advanced Wound Care
revenue, which is more exposed to elective procedures and hospital
visits, to be adversely impacted. We are aware of external risk
factors, particularly in relation to the supply chain, and we are
focused on proactive mitigation.
We are maintaining our 2020 guidance of 2.0% to 3.5% constant
currency revenue growth and between 16% and 18% constant currency
adjusted EBIT margin, but we are cautious about the increased
risks.
Transformation
Progress with implementation of our Transformation Initiative is
encouraging, and we are committed to sustaining the momentum. In
light of the current situation, we have accelerated some
initiatives, such as enhancing our digital capabilities, which is
leading to new ways of serving our customers and of working
internally. Conversely, some initiatives are being prudently
deferred. Overall, we expect our investment in 2020 to be
moderately lower than previously communicated(3) .
Liquidity and leverage
The Group continues to be cash generative and has strong
liquidity, with a cash position and leverage in line with 2019 year
end.
In the latter half of 2019, the Group completed a refinancing of
its debt and now has in place a committed 5-year bank facility
comprising a $1.5 billion term debt and an undrawn $200 million
revolving credit facility, both of which mature in October 2024.
The bank facility has financial covenants that provide significant
headroom.
Dividend
Notwithstanding the uncertainty due to COVID-19, the Board
continues to propose that the 2019 final dividend is paid, subject
to approval at the AGM on 7(th) May 2020. This reflects the Board's
confidence in the future performance of the Group and its
underlying financial strength and cash generation.
--------------------------------------------------------------------------------------------------------------------------------------
(1) Constant currency growth is calculated by applying the
applicable prior period average exchange rates to the Group's
actual performance in the respective period.
(2) 2020 Outlook: Constant currency revenue growth expected to
be 2.0% to 3.5%. Constant currency adjusted EBIT margin between
16.0% and 18.0%, including c.$50m of cost investment associated
with the transformation and c.$18m of costs related to MDR.
(3) Previous expectations of transformation investment of $105m
to $110m: c.$50m of operational costs (largely opex), c.$30m of
capex, $25m to $30m of cost items to be excluded from adjusted
EBIT, in line with our policy. Recurring transformation investment
of $60m to $65m.
Investor and analyst audio webcast
There will be an audio webcast for investors and analysts at
9.00am BST, details of which can be found below and on the ConvaTec
website, www.convatecgroup.com/investors/reports.
Dial-in details:
United Kingdom - 020 3936 2999
United States - 1 646 664 1960
All other locations - +44 20 3936 2999
Access code - 266064
Enquiries:
Analysts and Investors
Mark Reynolds, Director, Investor Relations +44 (0)7551 036
625
ir@convatec.com
Media
Buchanan: Charles Ryland / Chris Lane / Vicky Haynes +44 (0)207
466 5000
About ConvaTec
ConvaTec is a global medical products and technologies company
focused on therapies for the management of chronic conditions, with
leading market positions in advanced wound care, ostomy care,
continence and critical care, and infusion care. Our products
provide a range of clinical and economic benefits including
infection prevention, protection of at-risk skin, improved patient
outcomes and reduced total cost of care. To learn more about
ConvaTec, please visit www.convatecgroup.com
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END
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