Wound care and medical products company ConvaTec (CTEC) reported full-year revenue growth of 2.3% to $1.8bn and core operating profit down 17.5% at $354m, after making a $105m impairment charge.
However the result was slightly ahead of market expectations, pushing the shares up 2% to 212p.
Chief executive Karim Bitar explained, ‘the ConvaTec Executive Leadership Team (CELT) and I have undertaken a strategic assessment and concluded that we need to move to a new operating model. The new model is customer-centric, more agile, focuses on innovation and ensures clear accountability.’
The company’s products provide infection protection of at risk skin and reduce total care costs for patients.
INCREASING INVESTMENT
The firm is increasing investment in its transformation project by $60m to $210m over 2019 and 2021. As a consequence management has upgraded the expected benefits from the project to between $150m and $170m a year, up $20m on prior guidance.
Constant currency revenue growth is now expected to be between 2% and 3.5% (consensus is at 2.8%) for 2020 with adjusted operating margins between 16% and 18% (consensus at 17.9%).
ConvaTec is planning to it introduce a new operating model, moving from four business units to six, with the addition of Emerging markets and Home services. Research and development spending will increase significantly in a drive to make the business more innovative.
HEALTHY ORGANIC GROWTH
Continence and Critical Care reported organic growth of 4.1% with a strong performance from the US market which continued to outgrow the overall continence market. Infusion Care also reported growth of 4.1% amid strong orders.
Revenues at Advanced Wound Care fell 3%, and even on an organic basis were only ahead by 0.5%, impacted by disruption in the US business moving to a more specialised salesforce.
Revenues also declined at Ostomy Care but grew 1.9% organically with good traction following recent new product launches.
The dividend was maintained at 5.7 cents per share, paid from adjusted earnings of 12 cents. The payout represents a higher proportion of net profit than the stated policy, (35% to 45%) but reflects management’s confidence in the future growth of the business.
