Global medical solutions group Convatec (CTEC) said it has made a good start to the 2022 financial year with organic revenues up 6% year-on-year.

Despite raising guidance on cost inflation to between 8% and 9% compared with 5% previously, the company reiterated full-year guidance.

That is, organic revenues are anticipated to grow between 4% and 5% with an operating margin of at least 18%.

HOSPITAL CARE SERVICES JETTISONED

Following a strategic review of the Critical Care business Convatec has decided to exit from hospital care activities and related industrial sales during the remainder of 2022.

These lower margin activities generated revenues of $101 million last year. On a reported basis 2022 revenues are now expected to be $20 million to $30 million lower with operating profit $3 million to $5 million lower.

The company expects to take a one-off adjusted charge to profit of around $55 million and a cash cost of approximately $25 million.

The remaining group will now be focused on higher growth chronic care markets with higher margins and greater recurring revenues.

Today’s AGM (annual general meeting) update was a mixture of positive and negative items which on balance investors interpreted as neutral, leaving the shares flat at 205p.

STRATEGIC PROGRESS

Convatec confirmed the team, portfolio and product pipeline of the acquired wound biologics company Triad Life Sciences has transitioned to be part of the Advanced Wound Care business.

The company will change its name to Convatec Advanced Tissue Technologies. The integration was said to be progressing well including a first $25 million milestone payment.

The company has invested $30 million in BlueWind Medical, an innovative developer of ‘cutting-edge’ treatments for bladder conditions.

The investment supports the company’s strategy to partner with a company which is developing an innovative solution for the US incontinence market.

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Issue Date: 12 May 2022