ConvaTec posts strong results on broad-based chronic care growth

(Sharecast News) - ConvaTec shares were rising on Wednesday morning after it reported a strong set of financial results for 2024, with revenue rising 6.9% to $2.29bn, supported by broad-based growth across its chronic care categories.

The FTSE 100 wound care specialist said its adjusted operating profit increased 12.4% to $485m, with an operating margin of 21.2%, up one percentage point from the prior year.

Free cash flow to equity grew 32.2% to $302m, while adjusted diluted earnings per share rose 13.7% to 15.2 cents.

The company recommended a final dividend of 4.594 cents, bringing the full-year payout to 6.416 cents, a 3% increase.

The company's 'FISBE' strategy, which focuses on innovation, sustainability, and operational efficiency, continued to drive results, the board said.

Organic revenue growth excluding 'InnovaMatrix' was 6.8%, with all four chronic care segments contributing.

Advanced wound care grew 7.4%, driven by demand for 'Aquacel Ag+ Extra' and 'ConvaFoam', while ostomy care rose 5.3% on strong uptake of 'Esteem Body'.

Continence care grew 8.3% on the back of US market share gains and international expansion, while infusion care led growth at 11.2%, supported by partnerships with key players in diabetes and Parkinson's treatment.

ConvaTec reaffirmed its confidence in its 2025 outlook and medium-term targets.

The firm said it expected organic revenue growth of 5% to 7% in non-InnovaMatrix revenues, though the implementation of Medicare's Local Coverage Determinations in April was expected to reduce InnovaMatrix revenue by around $50m.

Adjusted operating profit margins were projected to rise to between 22% and 22.5%, supported by productivity improvements.

The firm also reiterated its goal of achieving a mid-20s% adjusted operating margin by 2026 or 2027.

Net debt-to-adjusted EBITDA improved to 1.8x from 2.1x a year earlier, reflecting strong cash generation and disciplined capital allocation.

ConvaTec said it was prioritising organic investment, dividends, and targeted mergers and acquisitions while maintaining flexibility for potential shareholder returns.

"Our 2024 results demonstrate that ConvaTec has successfully pivoted to broad-based, sustainable and profitable growth," said chief executive officer Karim Bitar.

"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 2025 to be another year of strong strategic progress."

Bitar said it would be driven by the company's "strongest-ever" new product pipeline and further simplification and productivity improvements.

"We are on-track to deliver our medium-term guidance of 5% to 7% annual organic revenue growth, mid-20's operating margin by 2026 or 2027 and double-digit compound annual growth in adjusted earnings per share and free cash flow to equity.

"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."

At 0822 GMT, shares in ConvaTec Group were up 5.1% at 259.6p.

Reporting by Josh White for Sharecast.com.

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