TIDMCTEC
RNS Number : 4019D
ConvaTec Group PLC
28 October 2020
28 October 2020
ConvaTec Group Plc
Trading update for the three months ended 30 September 2020
Good Q3 performance and ongoing strategic progress
Key Points:
-- Q3 Group reported revenue of $493 million was 6.5% higher
year on year; up 5.6%(1) in constant currency.
o Driven by significant growth in Infusion Care, continued
strong growth in Continence & Critical Care, an improved
performance in Advanced Wound Care and a flat performance in Ostomy
Care.
o COVID continued to drive less predictable demand, particularly
in Advanced Wound Care and Critical Care, although underlying
customer demand for the Group was encouraging.
o Revenue for 9 months to 30 September 2020 was up 4.8% in
constant currency.
-- We continued to progress our transformation initiatives as we
pivot to sustainable and profitable growth and implement our FISBE
(Focus, Innovate, Simplify, Build, Execute) strategy.
o We proactively chose to defer a further c.$10m of recurring
transformation investments to 2021 given the ongoing COVID
backdrop.
-- Operating expenses continued to benefit from temporary
COVID-related cost reductions; this is expected to phase out in due
course.
-- Better than expected Q3 performance has enabled us to revise our 2020 full year guidance(1) :
o We now expect to be towards the higher end of our constant
currency revenue growth range of 2-3.5%.
-- We do not currently anticipate Q4 year-on-year revenue growth
due to the impact of the skincare business disposal, challenging
2019 comparatives together with increasing uncertainty linked to
rising global COVID infection rates.
o We now expect our constant currency adjusted EBIT margin to be
between 18.5-19% reflecting, in light of COVID, the proactive
deferral of some recurring transformation investments into 2021 and
certain operating expenses continuing to be lower, coupled with
some operational gearing.
Karim Bitar, Chief Executive Officer, commented:
"We delivered a good trading performance in the third quarter.
We continued to respond well to stronger than anticipated customer
and patient demand, particularly in our Infusion Care and
Continence and Critical Care businesses. We now expect to deliver
revenue growth at the higher end of our guidance range and to
exceed our previous margin guidance for 2020.
"Throughout this COVID pandemic our priority has been, and
remains, to support and protect the patients and care givers we
serve and our employees. I want to thank our people for the
dedication and resilience they are showing during these demanding
times. I am proud of how the business has reacted to the challenge,
responding to the heightened needs of our customers and
successfully improving the strength of our supply chain. This has
been achieved whilst also executing on our transformation
initiatives and embedding the new operating model. Notwithstanding
our decision to proactively defer some additional investments to
2021, I am pleased with the strategic progress we have made.
"There is still significant work ahead of us as we pivot to
sustainable and profitable growth, but I am confident in ConvaTec's
long-term growth prospects."
Revenue summary
Q3 2020 Q3 2019 Reported Constant currency 9 months constant
Reported Reported growth growth(1) currency growth(1)
$'m $'m % % %
----------------------- ---------- ---------- --------- --------------------
Advanced Wound
Care 149 147 0.8 (0.6) (3.3)
Ostomy Care 132 132 0.4 0.1 2.1
Continence & Critical
Care 124 115 7.7 7.2 10.0
Infusion Care 88 69 28.2 26.7 17.2
Total revenue 493 463 6.5 5.6 4.8
Constant currency Q1 2020 Q2 2020 Q3 2020 9 months
growth % 2020
----------------------- -------- -------- --------
Advanced Wound Care 4.5 (13.2) (0.6) (3.3)
Ostomy Care 9.5 (2.7) 0.1 2.1
Continence & Critical
Care 10.9 12.0 7.2 10.0
Infusion Care 12.6 12.6 26.7 17.2
Group 8.9 0.0 5.6 4.8
Advanced Wound Care r evenue of $149 million increased 0.8% on a
reported basis and declined 0.6%(1) in constant currency. Although
still down, this was a better than expected sequential improvement
from Q2. The business saw continued strength in Latin America,
progress in certain Asia Pacific markets and improved performance
in certain European markets coupled with beneficial phasing. In the
US, a rebound in elective surgeries resulted in surgical revenues
growing however, the chronic care segment remains challenging as
COVID continues to inhibit activity in the community setting.
Ostomy Care revenue of $132 million increased 0.4% on a reported
basis and 0.1%(1) in constant currency. G ood growth in Global
Emerging Markets, in both Latin America and key Asia Pacific
markets such as China, was offset by continuing challenges in
certain European markets and the US and the planned
rationalisation.
Continence & Critical Care revenue of $124 million increased
7.7% on a reported basis and 7.2%(1) in constant currency. As
expected, we saw some moderation in growth from Q2 although demand
for Critical Care products remained strong. Our Home Services Group
in the US continued to achieve good growth.
Infusion Care revenue of $88 million increased 28.2% on a
reported basis and 26.7%(1) in constant currency driven by the
increased use of our innovative infusion sets by diabetes patients.
We have added capacity to respond to strong demand. Some of this
demand is due to our customers building resilience in their supply
chains although the primary driver is our leadership position in
serving the fast-growing "smart glycemic control" segment of the
diabetes market.
Transformation
Progress with implementation of our strategic transformation has
continued at pace.
We completed the skincare disposal at the end of Q3 and have
continued the transition of our financial processes to our Global
Business Services Centre in Lisbon. We have continued to build
talent in the organisation and welcomed new leadership including
Evelyn Douglas who is joining us from Becton Dickinson as the new
Chief of Corporate Strategy & Development and will be part of
the ConvaTec Executive Leadership Team.
As previously highlighted given the persistence of COVID, we
chose to modify the phasing of some transformation investment. We
now expect an additional c$10m of recurring investment to be
deferred to 2021 such that full year recurring transformation
investment for 2020 is expected to be c.$40-45m down from $50-55m
communicated at H1. The other elements remain broadly in line with
earlier guidance(3) . Our guidance on the range of annualised gross
benefits remains unchanged(4) .
Outlook
We have revised our full year constant currency revenue guidance
and now expect to be towards the top end of the 2-3.5% growth
range. We do not currently anticipate year on year revenue growth
in Q4 due to the impact of the skincare disposal, challenging 2019
comparatives coupled with the uncertainty arising from increasing
COVID infection rates.
We now expect our constant currency adjusted EBIT margin to be
between 18.5-19% reflecting , in light of COVID, the proactive
deferral of some recurring transformation investments into 2021 and
certain operating expenses continuing to be lower than expected,
coupled with some operational gearing.
Footnotes
(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) Previous 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.$50-55m of non-recurring cost
investment associated with the transformation, $50-55m of recurring
transformation investment and c.$18m of costs related to MDR.
(3) Previous expectations of non-recurring transformation
investment for 2020 of $105-110m: c.$50-55m of operational costs
(largely opex), c.$30m of capex, $20-25m of cost items to be
excluded from adjusted EBIT, in line with our policy. In addition,
recurring transformation investment of $50-55m.
(4) Annual gross benefits in 2021 expected to be between
$130-150m.
Foreign exchange rates
Q3 2020 Average Q3 2019 Average
--------- ---------------- ----------------
USD/GBP 1.31 1.23
USD/EUR 1.18 1.11
This announcement contains inside information for the purposes
of article 7 of the Market Abuse Regulation (EU) 596/2014
****
Investor and analyst audio webcast
There will be an audio webcast for investors and analysts at
8:30am GMT, 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 - 775883
Enquiries:
Analysts and Investors
Kate Postans, Vice President, Investor Relations
+44 (0)7826 447 807
ir@convatec.com
Media
Buchanan: Charles Ryland / Chris Lane / Hannah Ratcliffe +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 vision, which
encompasses our purpose, is: Pioneering trusted medical solutions
to improve the lives we touch. 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
Forward Looking Statements
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