Convatec Group plc (LON:CTEC), a global medical products and technologies company, has announced a trading update for the four months ended 30 April 2023. Revenue increased by 3.1% on an organic basis1. On a reported basis revenue decreased by 1.7%, as expected, following the exit of the hospital care activities and related industrial sales in 2022. On a constant currency basis revenue increased by 0.8%. Given the good organic growth so far this year against tough comparatives coupled with the improving momentum and confidence in the outlook, we now expect organic revenue growth for 2023 to be between 5.0% and 6.5% (previously 4.5%-6.0%).
In Advanced Wound Care, organic growth was mid-single digit, with a strong performance in Global Emerging Markets and good growth in Europe and North America, the latter supported by a strong contribution from ATT2.
In Ostomy Care, organic growth compared to the same category last year was mid-single digit, with strong growth in Global Emerging Markets, good growth in North America and key European markets. In the new combined category, which includes Flexi-Seal3, growth was flat, with the positive performance in Ostomy products offset by expected declines in Flexi-Seal. This was owing to phasing of sales which are expected to normalise across the year.
In Continence Care, organic growth was mid-single digit, benefitting from an increase in reimbursement levels in the US. Organic growth was mid-single digit both including and excluding industrial sales4, which was added to the category at the start of this year.
In Infusion Care, organic growth was flat for the first four months, due to the phasing of customer orders and strong prior year comparators, as anticipated. Underlying demand for Convatec’s infusion sets remains strong. We continue to expect high single-digit growth from this category over time.
Strategic progress over the last four months
· Acquisition of a highly innovative anti-infective nitric oxide technology platform: a unique natural antimicrobial and antibiofilm mode of action, backed by compelling scientific and clinical data. Convatec is well positioned to commercialise this technology across a variety of medtech device applications starting with Advanced Wound Care, with the first product expected to be launched in 2025
· Plant Network Optimisation: announced plan to move manufacturing operations from EuroTec facility in Roosendaal, the Netherlands, to our larger site in Michalovce, Slovakia, which already manufactures similar Ostomy products. The intended move will take place later this year and is part of our simplification and productivity agenda
· New product innovation
o ConvaFoamTM launched in the US in January, and we are pleased with the initial positive customer feedback
o InnovaMatrixTM continued to demonstrate strong momentum in the large and rapidly growing wound biologics segment5 and contributed to organic growth from April
o Regulatory approval was received in the US for the sale of Medtronic’s 780G with our MioAdvanceTM Extended Wear Infusion Set
o On track for further new product and customer launches in 2023:
· GentleCathTM Air for Women, our compact catheter offering, in France in Q4 2023
· Tailored infusion set for Tandem Mobi, for launch in H2 2023 in the US, subject to regulatory approval
· insetTM and contactTM infusion sets for the Beta Bionics iLet Bionic Pancreas in the US, subject to regulatory approval
· NeriaTM guard infusion set for AbbVie’s ABBV-951 Parkinson’s disease therapy which has been submitted for regulatory approval across global markets
Revenue guidance increased
Given the good organic revenue growth so far this year against tough comparatives coupled with the improving momentum and confidence in the outlook, we now expect organic revenue growth for 2023 to be between 5.0% and 6.5% (previously 4.5%-6.0%). We continue to expect to increase our operating profit margin on a constant currency basis to at least 19.7% (FY2022: 19.5%).
Footnotes
1 Organic growth is calculated by applying the applicable prior period average exchange rates to the Group’s actual performance in the respective period and excluding acquired and disposed/discontinued businesses
2Triad Life Sciences, now known as Advanced Tissue Technologies (ATT), included in organic growth from 1 April 2023
3 Faecal management system, which was moved to Ostomy Care at the start of this year
4 B2B catheter sales, which was moved to Continence Care at the start of the year
5 SmartTRAK wound biologics segment includes skin substitutes, active collagen dressings and topical drug delivery
