- Good start to 2023 against tough prior year comparison
- Full year organic sales guidance increased
- On track with new product launches
Medical products group ConvaTec (CTEC) said it has made a good start to the year after registering organic sales growth of 3.1% in the first four months to 30 April, against a tough prior year comparative.
The company said improving momentum and confidence in the outlook means it now expects full year organic revenue growth of between 5% and 6.5%, up from 4.5% to 6% previously while achieving an improved operating margin of 19.7%.
The upgrade was warmly received, taking the shares towards the top pf the FTSE 100 leaderboard with gains approaching 4% to 223.2p.
Today’s positive news could arrest the downtrend in consensus earnings expectations which have dropped by around a third over the last year, according to Refinitiv data.
Numis said increased sales guidance implies the potential for ‘small’ upgrades to consensus sales forecasts.
HOW DID THE COMPANY PERFORM?
Advanced Wound care, Ostomy (surgery that makes a temporary or permanent opening in the skin) and Continence care all delivered mid-single digit growth, while Infusion care (such as intravenous delivery of drugs) was flat due to phasing of customer orders and a tough prior year comparison.
Global emerging markets made a ‘strong’ contribution to growth in Advanced Wound Care and Ostomy and an increase in reimbursements in the US was a key driver of growth in Continence care.
The company said it has made ‘solid’ progress on new product innovation and expects further launches in 2023 which should underpin its medium-term growth ambitions.
WHAT ARE THE EXPERTS SAYING?
Numis raised its estimates ‘marginally’ and now expects sales growth of 5.8%, up from 5.5%, with margin assumptions unchanged.
‘This is essentially a sales update, and we would expect greater colour on margins at the interims in August.’
‘The shares have underperformed the market year-to-date, and we think 13-times EV/EBITDA continues to reflect good value for highly defensive non-discretionary Medtech products,’ the broker said.
EV/EBITDA is a ratio of enterprise value to earnings before interest, tax, depreciation and amortisation.
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