Convatec Group Plc · LSE:CTEC
Convatec — FY2022 Earnings Presentation
33 slides from Convatec's earnings presentation, Mar 9, 2023
Slide 1: Strong financial performance and continued strategic progress
9 March 2023 Strong financial performance and continued strategic progress Annual results for the twelve months ended 31 December 2022 & convatec
Slide 2: Disclaimer
For the purposes of this notice, “Presentation” means this document, its contents or any part of it, any oral presentation, any question or answer session and any written or oral material discussed or distributed before, during or after the Presentation meeting. This information, which does not purp
Slide 3: Hosts
Hosts Karim Bitar Jonny Mason Chief Executive Officer Chief Financial Officer convatec
Slide 4: Strong financial performance despite a challenging backdrop
Strong financial performance despite a challenging backdrop Strengthened competitive position On track to make further progress in 2023 Attractive medium-term prospects 4
Slide 5: Financial review 2022
Financial review 2022 5
Slide 6: FY 2022 financial highlights
Adjusted operating Revenue growth1 Organic revenue growth 2 profit margin expansion +6.9% +5.6% +180 bps Revenue $2,073m Adj. operating profit of $404m @ 19.5% (FY 2021: 5.3%) (FY 2021: $2,038m) (FY 2021: $362m @ 17.7%) Adjusted PBT growth Adjusted EBITDA Strong balance sheet +9.1% $500m 2.1x Adj. P
Slide 7: Revenue growth bridge
Growth 6.9% @ Constant Currency 5.6% Organic1 Total 12.7% 2.6% 2.8% 10.2% (5.2)% ($m) Organic 6.8% 3.6% 3.4% 9.8% 37 15 14 106 40 35 + ATT 2,073 2,038 FY 2021 Advanced Continence & Ostomy Infusion FX FY 2022 Wound Critical Care Care Care Care 7 1. Organic growth presents period over period growth at
Slide 8: Advanced Wound Care and Continence & Critical Care
750 2000000.0% Organic 0.5% -2.7% 9.2% 6.8% 0.0% 650 growth 1 -2000000.0% • Strong growth in GEM and Europe more than offset North American performance 550 -4000000.0% (impacted by limited foam position) Advanced 592 621 -6000000.0% • Entry into wound biologics segment2 with Wound Care Total 450 570
Slide 9: Ostomy Care and Infusion Care
700 20000000.0% Organic 600 1.9% 1.2% 1.7% 3.4% 0.0% growth 1 • Strong growth in GEM and robust -20000000.0% performance in Europe Ostomy 500 -40000000. 0% • In North America, New Patient Starts stabilised supported by HSG Care Total 546 525 526 • Revenue from Convatec products up 5.5% -60000000.0%
Slide 10: Adjusted operating profit margin movement
Adjusted operating profit margin movement +180 bps +0.8% +1.7% -3.2% +2.6% +0.7% -0.8% 19.5% 18.7% 17.7% 17.7%% -0.8% in Gross Margin 16.2% 16.2% 16.1% 16.1% FY 2021 Mix / COGS Operations S&M and R&D G&A FX FY 2022 Price Inflation Productivity Investment 10
Slide 11: Operating profit to net profit
Operating profit 362 404 +11.6% Finance expense (44) (52) Higher base rates Non-operating expense (9) (14) FX-related movements Profit Before Tax 309 338 +9.1% Income tax expense (46) (81) Non-cash deferred tax expenses Effective Book Tax Rate 15.0% 23.9% Increase in book rate (cash rate: 15.7%) Net
Slide 12: Net debt and cash flow
$0 (100) (200) ~$400m invested (300) (42) ($ millions) (400) (58) (500) 881 (144) 1,068 (600) +500 (700) (204) (800) (900) (77) (74) (1,000) $256m FCF (Pre-tax) (88) (1,100) (FY’21: $334m) (1,200) Net Debt Adjusted Other Inventory CAPEX M&A Debt Tax & other Dividends Net Debt Dec-21 EBITDA Working s
Slide 13: Capex
Capex Key projects $144m • Digital: omnichannel and CRM • Automation: including Deeside woundcare facility • Innovation: expanding product portfolio* & pipeline • Capacity: Expansion for infusion care $94m • Maintenance: Constant at c.1% of sales Digital Capex over time Automation Innovation* Capaci
Slide 14: COGS breakdown and current expectations
COGS breakdown Current expectations ~40% Packaging Chemicals Raw materials Resins Labour ~20% Labour (COGS) Other factory costs Utilities ~20% Freight & logistics Freight ~5% ~15% 3rd party products 3rd party products COGS inflation 1.5-2% 8.6% 5-7% Opex Labour ~60% Labour (opex) 2-3% 3%+ 5-7% 14
Slide 15: 2023 guidance
- Consistent with medium-term 4.5-6.0% guidance - Continuing high inflation offset >19.7% @CC by price, mix and productivity Capex: $120–140m Inventory: +$20m - Sustained investment Leverage*: 2.0-2.2x * Includes expected earnout on Triad 15
Slide 16: Bridge to mid-20s operating profit margin
Bridge to mid-20s operating profit margin (mia20s 20s Mix portfolio — ion Mix across categories Mix within categories Commercial excellence Global quality & ops G&A FY 2022 Simplification Mix Inflation Operating Medium term & productivity leverage convatec i Adjuster
Slide 17: Strategic update
Strategic update 17
Slide 18: Strong financial performance despite a challenging backdrop
Strong financial performance despite a challenging backdrop Strengthened competitive position On track to make further progress in 2023 Attractive medium-term prospects 18
Slide 19: Focus, Innovate, Simplify, Build, Execute
More chronic Increased Increased Stronger Embedding focused innovation productivity capabilities ESG Innova Matrix AC Refreshed brand G&A to >90% Gentle Cath Air Male 8.9% of sales of revenue Pioneering trusted medical solutions MioAdvance EWIS to improve the lives we touch Pricing discipline Co
Slide 20: 2022 progress and 2023 priorities: Advanced Wound Care
2022 progress 2023 priorities Sustained strong growth with Successfully launch ConvaFoam Aquacel AG+ Extra globally in the US and prepare for 2024 European launch Entered attractive wound biologics1 segment through Triad Life Sciences (‘ATT’) Grow the InnovaMatrix InnovaMatrix® PD platform in the US
Slide 21: 2022 progress and 2023 priorities: Ostomy Care
2022 progress 2023 priorities CTEC product growth Improve +5.5% driven by Global consistency of Emerging Markets and commercial Europe execution - continuum of care Stabilised new patient starts in the US Prepare to launch Esteem 2.0 in H1 2024 Refreshed Esenta “essential” accessories - growing doub
Slide 22: 2022 progress and 2023 priorities: Continence Care
2022 progress 2023 priorities Continue to drive US growth via Increased new patient starts and - Exceptional service sustained high customer retention - Broaden portfolio – GentleCath & Cure Grew portfolio - entered discreet segment by launching GentleCath Expand further in Air for Men in France and
Slide 23: 2022 progress and 2023 priorities: Infusion Care
2022 progress 2023 priorities Sustained leadership in infusion sets, Scaling up production of delivering >110 million sets to over 1 EWIS million patients Launch NeriaGuard as part of Capacity expansion in Denmark, AbbVie’s new Parkinson’s sub-Q increased resilience treatment post approval Launch in
Slide 24: Embedding our Convatec Cares ESG framework
We are embedding our ‘Convatec Cares’ ESG framework Pioneering trusted medical solutions to improve the lives we touch ) convatec 24
Slide 25: Attractive sustainable growth
Attractive sustainable Margin beginning to Adjusted operating profit growth expand growth 5.4% 5.6% 23.4% 11.6% 4.2% 5.4% 19.4% 19.5% 18.5% 0.9% 17.7% 2.3% -7.8% 0.2% -14.3% 2018 2019 2020 2021 2022 2018 2019 2020 2021 2022 2018 2019 2020 2021 2022 Organic revenue growth Adjusted operating profit ma
Slide 26: Medium-term targets
Medium-term targets Opportunity Medium-term outcome Expanding Sustainable Potential M&A to Sustainable & operating profit1 top-line growth enhance growth profitable growth margin Strengthen positions 4-6% Mid-twenties Double-digit - Technology organic revenue operating profit1 EPS1 and FCF1 - Geogra
Slide 27: 2023 outlook and summary
• Good organic revenue growth & operating margin expansion • Double digit operating profit growth • Organic revenue growth of 4.5-6.0% consistent with medium-term target • Constant currency adjusted operating profit margin: > 19.7% • Strong competitive position in attractive chronic care markets • F
Slide 28: Appendix
Appendix & , col nvatec
Slide 29: Pioneering trusted medical solutions to improve the lives we touch
Pioneering trusted medical solutions to improve the lives we touch *Against a 2021 baseline 29
Slide 30: Finance expense, non-operating expense and income tax expense
• Amortisation of acquired intangibles 207.3 403.7 196.4 • Acquisition and divestiture related costs • Discount unwind related to Triad and Cure Finance expense (67.7) (52.1) 15.6 earn out • Remeasurement of earn out related to Triad Non-operating expense (57.7) (14.0) 43.7 and Cure; impact of dives
Slide 31: Revenue reclassification between categories
620.7 - - - 522.1 (4.9) +65.8 - 546.3 (71.8) (65.8) +16.7 383.4 (25.6) - (16.7) 2,072.5 (102.3) - - * The remaining Critical Care product Flexi-SealTM, which is a product for faecal management, will move to OC ** The remaining industrial sales, which are predominantly continence related supplies for
Slide 32: Half-year Advanced Wound Care and Continence & Critical Care
2000000.0% Organic 350 -4.8% -0.8% 16.3% 3.4% 7.3% 6.3% 0.0% growth1 -2000000.0% • Significant FX headwind offset by ATT contribution and strong organic growth -4000000.0% Advanced 250 • H1 - Very strong organic performance 307 314 • -6000000.0% 296 294 298 ATT contribution to reported revenue from
Slide 33: Half-year Ostomy Care and Infusion Care
20000000.0% 300 Organic 3.1% -0.5% 3.7% -0.1% 3.0% 3.7% 0.0% growth1 -20000000.0% • Significant FX headwind -40000000. 0% • Minor impact from discontinuation of Russia Ostomy activities associated with hospital care exit – 274 273 274 -60000000.0% Care Total 252 265 257 largely in H2 Sales $m -80000