Global Medical Products group Convatec (CTEC) reported flat organic Q1 revenues as it continued to see a drag from its legacy Advanced Wound Care (AWC) portfolio, offsetting signs of recovery in other parts of the business.
Shares fell 3% initially but have recovered to positive territory, up 1% to 137p.
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A weak performance from skincare and continuing under-performance in the US market were the main disappointments in the AWC division.
On the plus side, Continence & Critical Care and Ostomy Care continued their growth paths, delivering organic growth of 3.1% and 0.9% respectively.
To turn the US around, the company has installed a specialist salesforce model focussing on the larger opportunities. The financial benefits from these actions are expected to see an improving revenue performance throughout the rest of 2019.
Moreover, Infusion Devices has recovered strongly, increasing by 28% compared to Q4, giving some credence to the prior claim that destocking was temporary.
The company continues to see challenging market dynamics in the UK, despite some stocking by the NHS in preparation for Brexit.
The Transformation initiative, announced in February, is gaining momentum as evidenced by the company training almost 300 leaders in the 'ConvaTec way'. In addition, new CEO Karim Bitar is due to start in September, bringing fresh impetus to the business.
Guidance is unchanged with organic revenue growth expected to be between 1% and 2.5% and a margin on Earnings Before Interest and Taxation (EBIT) in the 18% to 20% range.
