ConvaTec Group PLC · LSE:CTEC
ConvaTec — FY2016 Earnings Presentation
37 slides from ConvaTec's earnings presentation, Mar 2, 2017
Slide 1: 2016 Full Year Results - Executing on our Strategy
2016 Full Year Results - Executing on our Strategy 2 March 2017 0
Slide 2: Disclaimer
Disclaimer THIS PRESENTATION IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES OF AMERICA, ITS TERRITORIES OR POSSESSIONS, OR TO ANY RESIDENT THEREOF OR ANY OTHER JURISDICTION WHERE SUCH DISTRIBUTION WOULD BE UNLAWFUL OR TO ANY OTHER PERSON. This pres
Slide 3: 2016: Executing on Our Strategy
2016: Executing on Our Strategy Strong franchise performances with financial results in line with guidance Significant margin development based on MIP execution ahead of plan Continued strong performance in AWC supported by our differentiated AQUACEL® portfolio Ostomy Care showing solid grow
Slide 4: Full Year 2016 Financial Highlights
Full Year 2016 Financial Highlights FY2016 ($m) FY2016 ($m) Reported growth Reported growth CER1 Revenues Revenues 1,688 +2.3% +4.0% Adj. Adj.Gross Margin Gross Margin 60.9% +130bps +90bps Adj. Adj. EBITDA EBITDA 508 +7.1% +6.5% Adj. Adj.EBIT margin EBIT margin 28.0% +150bps Note 1 CER is Constant E
Slide 5: Operational review
Operational review Paul Moraviec 4
Slide 6: Franchise Results Overview
Franchise Results Overview Strong performances with financial results in line with guidance FY2016 Revenue ($m) CER Growth1 Advanced 559 6.5% Wound Care Ostomy Care 512 1.7% Continence & 357 3.6% Critical Care Infusion 260 4.0% Devices Total Revenue 1,688 4.0% Note 1 CER is Constant Exchange Rate 5
Slide 7: Advanced Wound Care
Advanced Wound Care A strong year and initial entry into NPWT market Strong growth in AQUACEL® Growth across all product lines: significant progress with AQUACEL® Foam Pro and Foam Lite Innovating to strengthen our position as market leader Award winning silver anti-bio film & accessing new indicati
Slide 8: Executing a Clear Growth Strategy
Executing a Clear Growth Strategy 1 EXPAND • Widen geographic distribution of anti-biofilm Ag+ Core technology AQUACEL • Take share in new surgical indications in offering c-sections and lumbar-spine surgery 2 • Continued momentum, advancing our position into ACCELERATE new geographies Foam • Penetr
Slide 9: Ostomy Care: 2016 was a pivotal year
Ostomy Care 2016 was a pivotal year – finalising turnaround fundamentals and maintaining growth momentum 2016 Strategic Objectives Hospital and nurse engagement Direct to consumer engagement platform Fill portfolio gaps Revenue CER Growth % Group Revenue $512.1m 1.7% 30.3% 8
Slide 10: Ostomy Care: 2016 was a pivotal year
Ostomy Care 2016 was a pivotal year – finalising turnaround fundamentals and maintaining growth momentum Building hospital and nurse engagement Renewed Vizient and Premier GPO contracts, NPNC1 growth, new account wins in US, Germany. New sponsored account wins in the UK, German homecare partner esta
Slide 11: Executing Clear Strategy to Accelerate Growth
Executing Clear Strategy to Accelerate Growth 1 • Leverage our share of voice and clinical value Nurse • Invest in nurse training and tools, being a partner Engagement in patient care • Leverage our GPO and distributor position 2 • Drive consumer loyalty DTC / me+ • Engage directly and frequently wi
Slide 12: Continence & Critical Care
Continence & Critical Care Well Positioned to Continue Strong Growth Strong growth in GentleCath intermittent catheter portfolio US launch of GentleCath Glide Expansion of me+ platform for continence care Taking share with 180 Medical Strengthens position in the US Retailer market Global roll out Fl
Slide 13: Executing a Focused C&CC Strategy
Executing a Focused C&CC Strategy, Driving Growth in the Attractive Continence Care Segment 1• Innovate and expand GentleCath™ portfolio to cover a wider range of needs Continence 2• Leverage 180 Medical to support new product Care adoption in the US 3• Transfer GentleCath™ success to global markets
Slide 14: Infusion Devices
Infusion Devices Strong end-market demand for infusion pumps Strengthened key partner relationships with leading pump manufacturers Product development strategy on track Ulysses on track for H2 launch with partner Revenue CER Growth % Group Revenue $260.2m 4.0% 15.4% 13
Slide 15: Leveraging Infusion Devices Technologies to Accelerate Growth
Leveraging Infusion Devices Technologies to Accelerate Growth in Existing and New Markets 1 Secure Long-Term • Maintain strong and long-term partnerships with insulin pump manufacturers through cost, innovation & quality Business 2 • Develop new products for insulin and other drug delivery Innovatio
Slide 16: Continued Focus on R&D and Innovation
Continued Focus on R&D and Innovation R&D Phase 1 / Concept Phase 2 / Development Phase 3 / Launch Innovation Bank Launched Skin & Tissue Healing and Protection 4 2 3 4 1 3 1 AWC Infection Prevention Ostomy 3 2 2 3 1 1 4 Care Adhesives C&CC 1 2 9 3 1 1 Advanced Mechanical 2 2 2 1 2 ID Designs Next #
Slide 17: Margin Improvement Program Update
Margin Improvement Program Update Nigel Clerkin 16
Slide 18: The Margin Improvement Program – a Reminder
The Margin Improvement Program – a Reminder Targeting minimum 300bps improvement by 2020 Phase II Phase III Phase I Realisation of Continued activities to Diagnostic opportunity drive transformation 1 Footprint • Plant rationalisation Optimisation • Rationalise C&CC portfolio 2 LEAN / • LEAN deploym
Slide 19: MIP Update – 2016 Progress
MIP Update – 2016 Progress Delivering ahead of schedule 1 Footprint • Closure of operations at C&CC plants in Mexico and Malaysia Optimisation 2 LEAN / • Completed facility expansions in Dominican Republic (Haina) and Productivity Slovakia and commenced transfer of production lines 3 Wound Foam • Tr
Slide 20: MIP Update – Key Focus Areas
MIP Update – Key Focus Areas Expect to deliver circa half of 300bps target during 2017 Close Greensboro facility by end Q1 Complete Dominican Republic (Haina) process qualifications by end-Q3 Complete key Slovakia validation milestones including Ostomy adhesives equipment by end-Q3, and new APS clos
Slide 21: Financial Overview
Financial Overview Nigel Clerkin
Slide 22: Financial Highlights
Financial Highlights 2016 2016 2015 2015 Growth Growth Comments Comments • Revenue growth +4% at constant currency Revenues $1,688m $1,650m +4.0%1 • Reported revenue +2.3% Revenue • $29m currency headwind, primarily from GBP ($23m) Adj. Adj. Gross Margin Gross Margin 60.9% 59.6% +130bps • Gross Marg
Slide 23: FY2015A – FY2016A Revenue Bridge
FY2015A – FY2016A Revenue Bridge Growth Rates: 4.0% (1.7)% 2.3% 6.5% 1.7% 3.6% 4.0% 10 13 9 35 1,688 (29) 1,650 FY2015A AWC Ostomy C&CC Infusion Devices FX FY2016A 22
Slide 24: Gross Margin Overview
Gross Margin Overview Adjusted Gross Margin Comments • Improved by 130bps in the period • 90bps due to MIP, delivering ahead of 62.9% schedule • 40bps FX benefit (primarily GBP) • Benefits weighted towards second half of year 60.9% 59.6% Reported to Adjusted Bridge 58.9% % of Revenue FY2016A (%) FY2
Slide 25: Opex Overview
Opex Overview Adjusted Opex (% of Revenue) Comments • Opex well controlled and below our historical 33- 33.9% 33.2% 32.9% 34% of revenue range • Constant currency growth 4.4% 1.8% 2.4% 2.1% • Reported growth 1.8%; FX benefit $14m, primarily due to GBP ($10m) 9.3% 9.8% 9.7% Reported to Adjusted Bridg
Slide 26: Adjusted FY2015A – FY2016A EBITDA Bridge
Adjusted FY2015A – FY2016A EBITDA Bridge 55 232 508 4 474 (23) (2) 200 FY2015A Gross Opex Depreciation FX FY2016A Margin Adjusted 437 472 EBIT ($m) 25
Slide 27: Good Cash Conversion and a Stronger Balance Sheet
Good Cash Conversion and a Stronger Balance Sheet FY2016A Pre-Tax Cash Conversion: 80% Net Debt Adjusted 508 EBITDA FY2016A FY2015A ($m) ($m) Capex (67) Long-term borrowings (1,774) (3,529) Cash and cash equivalents 264 273 Δ NWC (37) Net Debt (1,510) (3,256) Cashflow 404 Net Debt / EBITDA (x) 3.0 6
Slide 28: 2017 Guidance
2017 Guidance Group constant currency organic revenue growth rate greater than the 2016 rate • Includes a circa negative 1% impact from MIP initiatives (c.$15m full year effect) Additional benefit of Eurotec acquisition (2016 revenues of €10m) Revenue growth to be weighted towards second half • Refl
Slide 29: Summary and Outlook
Summary and Outlook Paul Moraviec 28
Slide 30: Summary and Outlook
Summary and Outlook Delivered strategic goals and financial results Well positioned for further progress in 2017 Good pipeline of new products, together with contributions from 2016 launches Defined MIP objectives; expecting to have delivered half of target by year end 29
Slide 31: Appendix
Appendix 30
Slide 32: Quarterly Revenue Performance
Quarterly Revenue Performance Quarterly reported revenues by franchise CER1 growth rate by franchise $m Q1 Q2 Q3 Q4 FY16 % Q1 Q2 Q3 Q4 FY16 AWC 131.3 137.7 142.9 147.6 559.5 AWC 8.9 7.5 4.0 6.1 6.5 Ostomy Ostomy 121.1 128.7 129.3 133.0 512.1 2.3 1.1 2.6 1.0 1.7 Care Care C&CC 86.5 92.1 86.8 91.1 356
Slide 33: Revenues by Geography
Revenues by Geography FY2016 ($m) Reported growth CER Growth1 Americas 829 +5.3% +5.8% EMEA 726 (1.2%) +2.5% APAC 133 +4.3% +2.1% Group 1,688 +2.3% +4.0% Note 1 CER is Constant Exchange Rate 32
Slide 34: FX Rates and Sensitivities
FX Rates and Sensitivities FX Rates 2016 2015 Average Year End Average Year End USD/GBP 1.36 1.23 USD/GBP 1.53 1.47 USD/EUR 1.11 1.05 USD/EUR 1.11 1.09 Revenue Split Sensitivities 2016 2016 2015 USD 46% 44% • 1% move in GBP/USD average rate would have impacted revenue by ~$2m and be EUR/DKK 26% 24%
Slide 35: 2016 Reported to Adjusted EBIT and EPS Reconciliation
2016 Reported to Adjusted EBIT and EPS Reconciliation Adjustments 2016 ($MM) Reported (a) (b) (c) (d) (e) (f) (g) Adjusted Revenue 1,688.3 – – – – – – – 1,688.3 Cost of goods sold (821.0) 136.8 23.8 – – – – 0.2 (660.2) Gross profit 867.3 136.8 23.8 – – – – 0.2 1,028.1 Gross margin (%) 51.4 60.9 Sell
Slide 36: 2015 Reported to Adjusted EBIT and EPS Reconciliation
2015 Reported to Adjusted EBIT and EPS Reconciliation Adjustments 2016 ($MM) Reported (a) (b) (c) (d) (e) (f) (g) Adjusted Revenue 1,650.4 – – – – – – – 1,650.4 Cost of goods sold (799.9) 130.0 2.5 – – – – – (667.4) Gross profit 850.5 130.0 2.5 – – – – – 983.0 Gross margin (%) 51.5 59.6 Selling and
Slide 37: Adjusted to Pro-forma EPS Reconciliation
Adjusted to Pro-forma EPS Reconciliation Pro-forma basic earnings per share is computed as pro-forma adjusted net profit allocated to each outstanding share of common stock as if the Group’s shares outstanding at 31 December 2016 were outstanding for the entire year for both 2016 and 2015. Pro-forma