Convatec Group Plc reports broad-based, sustainable and profitable growth

Convatec Group Plc (LON:CTEC) has announceed its preliminary results for the year ended 31 December 2024.

Operational and strategic delivery drives double-digit adjusted EPS and cashflow growth

Confidence in FY25 outlook & medium-term guidance

Key financial highlights for year to 31 December	Reported			Adjusted⁵
Key financial highlights for year to 31 December	2024	2023	*Change*	2024	2023	*Change*	*CC change*
Revenue	$2,289m	$2,142m	6.9%	$2,289m	$2,142m	6.9%	7.6%
Operating profit	$325m	$263m	23.7%	$485m	$432m	12.4%	16.4%
Operating profit margin	14.2%	12.3%	1.9%pts	21.2%	20.2%	1.0%pts	1.6%pts
Diluted EPS	9.3 cents	6.3 cents	45.9%	15.2 cents	13.4 cents	13.7%
Free cash flow to equity	$302m	$228m	32.2%	$302m	$228m	32.2%
Dividend per share	6.416c	6.229c	3.0%

Percentage movements throughout this release are calculated on actual unrounded numbers.

FY24 highlights: we have pivoted to broad-based, sustainable and profitable growth

· Our FISBE strategy continued to deliver strongly, with organic revenue growth of 7.7%¹ (6.9% reported). This was our sixth consecutive year of accelerating, broad-based organic growth

· Adjusted operating margin² increased to 21.2% (+160 bps YoY in constant currency to 21.8%; +350 bps since 2021) driven by strong execution of our FISBE strategy and improved productivity

· 14% adjusted EPS² growth, 32% free cash flow to equity⁵ growth and 97% equity cash conversion

Broad-based growth in all four chronic care categories

· AWC⁴: 7.4%¹ driven by Aquacel Ag+ Extra^TM and InnovaMatrix^®, plus a growing contribution from ConvaFoam^TM

· OC⁴: 5.3%¹ driven by Convatec ostomy products, including a strong contribution from the Esteem Body^TM launch

· CC⁴: 8.3%¹ driven by US volume and share growth, excellent customer service and accelerating international sales

· IC⁴: 11.2%¹ driven by customers leveraging our innovative infusion sets in new products, plus sales to new customers

· Group organic growth excluding InnovaMatrix^{® 3} was 6.8% (note: in FY24 this represented 96% of Group revenues)

Successful product launches and our strongest-ever new product pipeline

We are actively targeting the fastest growing segments by developing innovative new products. These include:

· In AWC, positive clinician feedback and high success rate in new customer product evaluations in ConvaFoam^TM

· Also in AWC, On-track to obtain EU regulatory approval for ConvaNiox^TM, our highly innovative advanced wound dressing powered by nitric oxide, in H1 25

· In OC, excellent customer response to Esteem Body^TM and in CC GentleCath Air^TM for Women

· In IC, broadening customers and applications including partnerships with AbbVie (Parkinson’s disease), plus Beta Bionics and Ypsomed (Diabetes). Continued growth with Medtronic and Tandem in Diabetes

Confidence in FY25 outlook: reiterating guidance for double-digit adjusted EPS growth

· We continue to expect 5-7% organic growth in non-InnovaMatrix® 3 revenues (FY24: 96% of Group revenue), based on our broadening product portfolio, strongest-ever innovation pipeline and focused commercial execution

· InnovaMatrix^® was 4% of Group revenues in 2024 ($99m). Based on implementation of the LCDs³ in April 2025, we expect a reduction in revenue of approximately $50m, approximately 2% of Group revenue

· Irrespective of the LCD, we expect adjusted operating profit margin² of 22.0-22.5%, underpinned by detailed productivity improvement programmes across operations, commercial and G&A

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· Another year of double-digit growth in adjusted EPS², and strong operating cash conversion (>80%)

On-track to deliver our medium-term guidance

· We are well positioned to deliver sustainable 5-7% p.a. organic revenue growth, underpinned by our broadening new product pipeline and enhanced commercial execution. We are also on-track to reach mid-20’s% adjusted operating profit margin² by 2026 or 2027, supported by further productivity improvements and operating leverage

Karim Bitar, Chief Executive Officer, commented:

“Our FY24 results demonstrate that Convatec has successfully pivoted to broad-based, sustainable and profitable growth. Our FISBE strategy is delivering strongly, evidenced by our sixth year of accelerating revenue growth, further operating profit margin expansion, double digit growth in adjusted EPS and strong cash conversion.

“We expect FY25 to be another year of strong strategic progress. This will be driven by our strongest-ever innovative, new product pipeline and further simplification and productivity improvements. We are on-track to deliver our medium-term guidance of 5-7% annual organic revenue growth, mid-20’s operating margin by 2026 or 2027 and double-digit compound annual growth in adjusted EPS and free cash flow to equity⁽⁵⁾. This is underpinned by our leading positions in structurally growing chronic care markets, our specific targeting of the fastest growing market segments and a clear focus on execution excellence by our dedicated team of over 10,000 colleagues worldwide.”

FY24 financial summary & dividend

· Adjusted operating profit margin2 of 21.2% (21.8% in constant currency). Expansion of 100 bps (160 bps at constant currency) driven by our FISBE strategy and productivity improvements

· Adjusted operating profit² up 12% to $485m. Reported operating profit of $325m (2023: $263m)

· Adjusted EPS² increased 14% to 15.2 cents. Reported EPS increased 46% to 9.3 cents

· Free cash flow to equity⁵ up 32% to $302 (2023: $228m). Equity cash conversion⁵ of 97% (2023: 83%)

· Net debt to adjusted EBITDA ratio of 1.8x (FY23: 2.1x). This was after investing $122m in capex, c.$23m in transformation and $90m in M&A

· As a sign of confidence in our outlook and strategy, the Board recommends a final dividend of 4.594 cents, resulting in a full year dividend of 6.416 cents, an increase of 3%. The payout ratio of 42% (2023: 46%) of adjusted net profit is within our target range of 35-45%

· Our capital allocation priorities are: 1) organic investment to drive future revenue growth and innovation, 2) annual dividend consistent with 35-45% payout ratio 3) focused M&A to strengthen our competitive position 4) any surplus capital would be available for return to shareholders

Additional FY25 modelling and guidance

We expect the following organic revenue growth for each category:

– AWC⁴: mid-single digit growth excluding InnovaMatrix^{® 3}

– OC⁴: mid-single digit growth

– CC⁴: mid-to-high single digit growth

– IC⁴: high single digit growth

We expect adjusted net finance expense for 2025 will be $70-75m (2024: $78m), assuming no material changes in US interest rates. Our adjusted book tax rate is expected to be c.24%, with the cash tax rate again materially lower. Reflecting our ongoing investments in innovation and efficiency programmes, we expect capex of $130-150m, opex R&D spend of c.$100-110m and transformation costs of c.$20m.

Investor and analyst presentation

The results presentation will be held at 09:00hrs (UK time) today. The event will be simultaneously webcast and the link can be found here. The full text of this announcement and the presentation for the analyst and investors meeting can be found on the ‘Results, Reports & Presentations’ page of the Convatec website www.convatecgroup.com/investors/reports.