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LONDON (Alliance News) - Medical products maker ConvaTec Group PLC on Friday said a one-off accounting charge, unfavourable foreign exchange rate movements, and a weak performance by its Advanced Wound Care division led to 6.0% year-on-year drop in first quarter revenue.
The company also said that 2019 outlook remains unchanged with organic revenue growth anticipated between 1.0% and 2.5% and adjusted earnings before interest and tax margin 18% to 20%.
The annual margin guidance includes USD50 million of operational spend associated with the company's Transformation Initiative programme and with medical device regulation, meaning the cost of getting products approved and dealing with recalls. Excluding these costs, margin is estimated to be between 21.0% to 22.5%.
"Trading in the first quarter was in-line with our expectations, which reflect the challenges we outlined at our full-year results in February," said outgoing interim chief executive Rick Anderson.
Anderson became the company's interim head after the departure of Paul Moraviec in October 2018 following a profit warning. The company in March appointed Genus PLC chief executive Karim Bitar in the same role on a permanent basis.
Shares in the FTSE 250 listed wound dressings maker were down 4.2% at 130.90 pence each in early morning trade.
For the three months to March 31, ConvaTec recorded revenue of USD430.6 million, down from USD458.2 million in the year ago period.
Revenue for the period included an additional one-off provision of USD8.9 million arising from a change of accounting methodology. Excluding the provision, first quarter revenue was broadly flat on an organic basis.
The company's biggest Advanced Wound Care business posted revenue of USD129.7 million, down 12% from USD147.1 million a year ago. The drop in the unit's revenue was attributed to weak performance by the skincare business, continuing underperformance in the US, and negative inventory movements in the UK.
The Ostomy Care unit recorded a 6.5% drop in revenue to USD119.6 million. Continence & Critical Care revenue were flat at USD108.4 million and Infusion Devices posted a 2.4% revenue drop to USD72.9 million.
"Momentum is building in our Transformation Initiative, the single most important programme within ConvaTec, engaging our people through 75 workshops in the past 2 months and bringing more discipline to our business model, with almost 300 leaders now trained in transformation. We will provide more detail with our interim results in August," Anderson said.
"My priority remains improving execution. Our focus on this, along with our solid fundamentals and robust cash flows, mean that I am confident we can deliver the improved performance that shareholders and other stakeholders rightly expect," he added.
