Convatec Group Plc · LSE:CTEC
Convatec — H1 2022 Earnings Presentation
25 slides from Convatec's earnings presentation, Aug 4, 2022
Slide 1: Pivoting to sustainable & profitable growth
i) convatec — forever caring — Pivoting to sustainable & profitable growth Interim results ended 30 June 2022 4 August 2022
Slide 2: Important notice
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 forever carin <
Slide 4: H1 2022 highlights
Strong organic revenue growth Stable profit despite inflation & investment Strengthening competitive position On track to deliver full year guidance 3
Slide 5: Financial review
Financial review € ) convatec
Slide 6: H1 2022 financial headlines
Constant Currency Organic Revenue Growth Adjusted EBIT Margin Revenue Growth +8.01% +6.42% 19.6% Revenue $1,045m (H1 2021: 7.4%) Adjusted EBIT of $204m (H1 2021: $1,008m) (H1 2021: $204m @ 20.3%) Adjusted PBT Adjusted FCF Pre Tax Leverage $174m $99m 2.3x (H1 2021: $181m) (H1 2021: $142m) Net Debt /
Slide 7: Revenue growth 8.0% at constant currency
Growth 8.0% @ Constant Currency 6.4% Organic1 ($m) 10.6% 6.1% 2.7% 14.5% 1,080 14.4% 26 * organic 3.0% 43 organic 9* 3.6% 9 organic 6 1,030 7.3% 21 organic + Cure + PCM 10 – Incontinence 1,045 -- Hospital care 1,008 + Triad 980 H1 2021 Advanced Wound Continence & Ostomy Infusion FX H1 2022 Care Crit
Slide 8: Advanced Wound Care and Continence & Critical Care
Organic 350 growth1 -1.8% 2.7% -4.8% -0.8% 16.3% 3.4% 7.3% • Organic growth in GEM and Europe more than offset North American decline Advanced 250 • Strong performance enhanced by the 307 Wound Care Total 271 299 251 296 294 298 acquisition of Triad Sales $m • Total CC growth 10.6% 150 H1'19 H2'19 H
Slide 9: Ostomy Care and Infusion Care
300 Organic -0.2% 4.1% 3.1% -0.5% 3.7% -0.1% 3.0% • Strong growth in GEM and good growth1 performance in Europe • North America –performance impacted Ostomy 252 273 252 274 273 274 by continued SKU rationalization Care Total 265 (80bps), but HSG gaining traction Sales $m • Revenue from ConvaTec prod
Slide 10: Adjusted EBIT margin movement
Adjusted EBIT margin movement 0.9% 2.9% 0.6% 1.3% 1.9% 1.3% 20.3% 20.3%% 19.6% 19.0% 18.3% 18.3% 17.7% 17.7% H1 2021 Price COGS Operations S&M and R&D G&A FX H1 2022 Mix Inflation Productivity Investment 9
Slide 11: Cost lines and adjusted EBIT
$1,008m $1,045m Increased 3.6% COGS $398m Increased 5% $416m 39.4% 39.9% S,M&D $253m $275m Increased 9% 25.1% 26.3% R&D $41m 4.1% $47m 4.5% Increased 15% G&A $112m $102m 11.1% 9.7% Adjusted 20.3% 19.6% - EBIT $204m $204m 2021 2022 10
Slide 12: Tax rates, adjustments and diluted EPS
Tax rates Adjustments to reported profit 19.1% 19.0% 66 67 18.3% 2 21 2 40 (9) (45) FY20 FY21 FY22 (E) Diluted EPS (cents) 25.0% (10.0)% (2.7)% 19.1% 7.4 (43.9)% 6.5 15.0% 2.4 Reported Adjusted Adjusted (ex non- cash DTA adjustment FY20 FY21 FY22 (E) prompted by acquisition) 11
Slide 13: Net debt and free cash flow
(500) (600) (89) (700) 881 +252 (64) ($ millions) (800) 1,077 (179) (900) $99m FCF (Pre-tax) (H1’21: $142m) (1,000) (57) (59) (1,100) Net Debt EBITDA Working capital CAPEX M&A Interest, Dividends Net Debt Dec-21 & FX derivs Tax, Other Jun-22 Variance vs (1) (22) (21) (94) - (5) H1’21 12
Slide 14: Capex over time
Capex over time H1 Capex $100m- $120m $64m $94m $86m $43m Digital $61m Automation Innovation Capacity & growth Maintenance & Compliance 2019 2020 2021 2022 (E) H1'21 H1'22 13
Slide 15: FY 2022 guidance and H1 rationale
FY H1 2022 Rationale Guidance 4.0- - IC: H2 slower with FY slightly ahead of market 6.4% 5.5% - Some light headwinds in AWC, CCC and OC - Flatter H1:H2 phasing than ’21 because: 19.6% >18.0% - COGS inflation impact lagged (FY 8-9%) 19.0% - Operating costs flatter than 2021 @CC @CC • Adjusted interes
Slide 16: Strategic update
Strategic update 15
Slide 17: Focus, Innovate, Simplify, Build, Execute
Focus Innovate Simplify Build Execute on our key markets in our work and our organisation “mission-critical” with excellence and categories trusted solutions capabilities H1 progress Strengthening Initiatives Effectively Launching new Positively impacting through acquisitions beginning to implementi
Slide 18: Four chronic care categories, 12 key markets
Four chronic care categories 12 key markets Exits Entries H1 Constant Currency Growth 2020 13% 7% Skin Care 2021 Incontinence 93% 87% Care 9.7% 8.0% 2022 Hospital Care 2019 2022E (excl. Hospital Care) Non-chronic Chronic Chronic Non-chronic Group Top12 1 Wound Biologics Market segment as defined by
Slide 19: Product launches 2022-2024
2022 2023 2024 Rapid iteration ✓ Gentle Cath Air Male Launching Infusion Set for Tandem Mobi Avelle 2.0 MioAdvance Gentle New platforms Esteem Extended ConvaFoam Cath Air 2.0 Wear (US) Female ✓ Innova Transformative Matrix AC Launching CC IC AWC OC 18
Slide 20: G&A efficiencies and portfolio simplification
G&A efficiencies 114 12.5% 12.0% 112 12.0% • IT hub consolidation Adjusted G&A 110 11.5% 108 11.1% 11.0% expense 106 10.5% 104 112 10.0% • Finance team consolidation 109 9.7% 102 9.5% 100 9.0% • HR processes and systems refresh 102 98 8.5% 96 8.0% 2020 H1 2021 H1 2022 H1 OC portfolio simplification
Slide 21: Customer response to brand refresh
$ Customer response 100k Impressions for Brand refresh posts 70% Positive Sentiment vs. Benchmark 49% Health care professionals very positive WOCNext 2022 5-8 June, Texas, US 1 Impact on EBIT margin 20 2 “Sales Force Excellence” CoE
Slide 22: Embedding our ESG framework
Embedding our ESG framework: Execution excellence across Convatec ‘Convatec Cares’ Equipment Efficiency Setting targets Continuous improvement initiatives decreased annual production costs of Natura By 2045 pouch by >$800k Net Zero Target Process improvement Standardisation and By 2025 consolidation
Slide 23: Summary and guidance
• Strong revenue growth • Stable profit despite inflation and investment • Strengthening competitive position in attractive chronic care markets • Organic revenue growth: 4.0 to 5.5% • CC Adjusted EBIT margin: > 18% 22
Slide 24: Q&A dial-in details
If you would like to ask a question during the Q&A please dial into: United Kingdom – 0330 165 4012 United States – 800-289-0720 Access code: 9879873 23
Slide 25: Adjusted profit and EPS bridge
H1 2021 H1 2022 Variance Adjusted operating 204.4 204.3 $(0.1)m profit Impacted by Adjusted Net accounting (19.8) (23.0) $(3.2)m treatment of Finance expense (3.6) (7.0) $(3.4)m acquisition Non-operating expense Adjusted Income (35.8) (43.2) $(7.4)m tax expense Impacted by Adjusted ETR % 19.8% 24.8%