Convatec Group Plc · LSE:CTEC
Convatec — H1 2018 Earnings Presentation
28 slides from Convatec's earnings presentation, Aug 2, 2018
Slide 1: 2018 Interim Results
2018 Interim Results Solid performance in line with expectations and guidance confirmed 2 August 2018 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: Solid Group Performance in H1
Solid Group Performance in H1 Group revenue growth in line with expectations: +2.6% organic1, +10.8% reported Good operational progress • Backorders now at normal level • Cost out programmes building momentum Franchises • Strong performance from AWC growth platforms AQUACELTM Foam and Silver (Ag+) o
Slide 4: H1 2018: Group Key Financial Metrics
H1 2018: Group Key Financial Metrics H1 2018 ($m) Reported growth CER growth +6.4% total Revenues 921.3 +10.8% +2.6%1 organic Gross Margin2 59.3% -100 bps -70 bps Adj. EBIT 22.1% -120 bps margin2 1 Organic growth is growth at constant exchange rates (“CER”), excluding M&A activities 2 Results are ad
Slide 5: H1 2018: Franchise Summary
H1 2018: Franchise Summary H1 2018 Revenue ($m) H1 Organic Growth1 Advanced 290.0 +1.0% Wound Care Ostomy Care 266.0 -1.0% Continence & 220.1 +5.7% Critical Care Infusion 145.2 +9.2% Devices Total Revenue 921.3 +2.6% 1 Organic growth is growth at constant exchange rates (“CER”), excluding M&A activi
Slide 6: Advanced Wound Care
Advanced Wound Care Mixed results but strong performance in Silver and Foam • Strong demand for AQUACELTM Silver driven by Ag+ Anti-biofilm platform Q1 18 Q2 18 • Strong growth in AQUACELTM Foam portfolio +2.2%1 -0.2%1 • AQUACELTM Surgical Cover Dressing momentum returning • AQUACELTM Ag Advantage2
Slide 7: Ostomy Care
Ostomy Care Recovering momentum ahead of plan • Backorders now at normal level, as expected Q1 18 Q2 18 +0.3%1 • Good performance in Latin America, Asia Pacific and positive trends in -2.5%1 some European markets • me+TM momentum continues • Strong performance from new products: Esteem™+ Flex Convex
Slide 8: Continence & Critical Care
Continence & Critical Care Strong momentum continues, driven by HDG3 Q1 18 • Strong performance from US Home Distribution Group3 Q2 18 +5.6%1 +5.9%1 • H1 growth negatively impacted c. $1m from product rationalisation2 • GentleCathTM Glide performing well in US • Increasing momentum from recent acqui
Slide 9: Infusion Devices
Infusion Devices Performance boosted by significant tailwinds Q1 18 Q2 18 +16.3%1 +2.7%1 • Successful launch of MiniMedTM MioTM Advance* • Good underlying demand in insulin pump market • Good traction with new sub-cutaneous indications and new partners H1 +9.2%1 Priorities for H2: Expand our strong
Slide 10: Positive Response to New Products
Positive Response to New Products EsteemTM Flex Convex & NaturaTM AQUACELTM Ag+ AvelleTM MiniMedTM MioTM Advance* Accordion Flange “Remarkable results...”1 “Esteem Flex Convex has “Fantastic – wounds looking “It was quicker and easier to changed my life!”2 great – cleaner and smaller”4 use…the retra
Slide 11: Financial Overview
ibdroot\projects\IBD-LN\ecmallclients2016\588389_1\ConvaTec\2018\Jul-2018 Slides\ConvaTec Interims 2018 slides v6 17-7-18 WIDE.pptx Financial Overview Frank Schulkes 10
Slide 12: Progress Update
Progress Update Fundamental strengths Improvement areas - good progress Attractive markets Project management Operations Franchise positioning Business intelligence Cash generative Data warehouse delivered Strong executive team Cost out culture Project funnel management Output
Slide 13: Financial Highlights
Financial Highlights Performance in line with expectations H1 2018 H1 2017 Growth1 Comments +6.4%1 Revenues $921m $831m • Organic growth2 Q1 3.7%, Q2 1.7% +2.6%2 Gross margin3 59.3% 60.3% -70 bps1 • 59.6% exc. FX, -70 bps performance • Investment in go-to-market and R&D, offset by Opex3 % revenue 37
Slide 14: H1 2017 – H1 2018 Revenue Bridge
H1 2017 – H1 2018 Revenue Bridge Revenue ($m) Organic1 growth +2.6% +1.0% -1.0% +5.7% +9.2% • Reported revenue grew 10.8%, or 6.3% at CER • $37m currency tailwind, principally Euro and GBP • M&A contribution of $33.0m, Woodbury $29.5m, J&R $3.5m. Respiratory disposal $2.0m in H1 prior year2 Re-itera
Slide 15: Gross Margin Overview – In Line With Plan
Gross Margin1 Overview – In Line With Plan Adjusted gross margin rate Gross margin1 rate performance drivers H1 2018 v H1 2017 Price = / (-) Mix (-) Programmes ++ Cost/headwinds (-) (-) Operational -70bps YoY change • Price / mix … In line with expectations Reported -100 bps • Programmes … Driving e
Slide 16: Opex Overview
Opex Overview Increases reflect planned business investments and M&A Opex1 % of revenue 37.2% 37.0% Planned investments to support 2.7% • Regional growth 2.6% • Recent acquisitions 11.5% 11.9% • R&D Tightly managing costs 11.5% increase reported 23.0% 22.4% • FX accounts for $16m 6.4% increase CER –
Slide 17: H1 2017 – H1 2018 EBIT Bridge
H1 2017 – H1 2018 EBIT1 Bridge $26m gross margin Performance drivers EBIT1 margin 23.3% 22.1% FY 2018 v FY 2017 EBIT1 (m) 2017 EBIT1% 25.9% Price / Mix (-) Programmes ++ Infl/Cost (-) OPEX (-) FX (-) 2018 EBIT1% 24-25% Confirm 24% - 25% for FY 2018 1 Results are adjusted unless otherwise stated. A r
Slide 18: Good Cash Conversion and Strong Balance Sheet
Good Cash Conversion and Strong Balance Sheet H1 2018 Cash Flow ($m) Net Debt EBITDA1 30 Jun 31 Dec 2018 2017 ($m) ($m) Capex Long-term borrowings (1,795) (1,816) 11.4% 11.9% Cash and cash equivalents 339 289 Δ NWC Net Debt (1,455) (1,526) Cash flow Net Debt / EBITDA1 (x) 2.82 3.0 23.1% 22.4% • 75%
Slide 19: 2018 Guidance – Confirmed
2018 Guidance – Confirmed Organic revenue growth EBIT1 margin 2.5% - 3.0% 24.0% - 25.0% Guidance2 assumptions Guidance2 assumptions EMEA wound market softness 1% price erosion 11.4% assumed across business 1% price erosion 11.9% Modest productivity contribution to gross margin3 Product mix neutral D
Slide 20: Summary and Outlook
Summary and Outlook Paul Moraviec 19
Slide 21: Summary and Outlook
Summary and Outlook Overall solid performance across the Group AWC strong growth in Foam and Silver, H2 actions to drive improvement Continue to drive Ostomy momentum Leverage HDG and GentleCathTM as growth drivers in CCC; good traction in ID 11.4% 11.9% Operational progress – backorders normal, cos
Slide 22: Natura"@ @ Wo esnremnnce AQUACEL
186 Natura"@ @ Wo esnremnnce AQUACEL Foamlite — syacetas) Avelle” ~~ NY ™ GentleCath’ (ene ESTEEM © Flex Convex 21
Slide 23: Appendix
Appendix 22
Slide 24: Quarterly Revenue Performance
Quarterly Revenue Performance Quarterly reported revenues by franchise Organic1 growth rate by franchise (%) 2017 2018 2017 2018 $m Q1 Q2 Q3 Q4 Q1 Q2 Q1 Q2 Q3 Q4 Q1 Q2 AWC 133.7 138.4 147.9 157.8 147.1 142.9 4.2 2.6 1.4 2.3 2.2 (0.2) 11.4% 121.8 Ostomy 132.9 11.9% 132.1 142.2 128.0 138.0 1.1 3.6 (1.
Slide 25: Revenues By Geography
Revenues By Geography H1 2018 H1 2017 Reported Organic reported ($m) reported ($m) growth growth1 EMEA 378.3 349.2 +8.3% (1.5)% Americas 475.1 417.5 +13.8% +6.0% APAC 67.9 64.6 +5.1% +1.1% Group 921.3 831.3 +10.8% +2.6% 1 Organic growth presents year on year growth at constant exchange rates (“CER”)
Slide 26: Reconciliation To Adjusted Earnings
Reconciliation To Adjusted Earnings Six Months Ended 30 June 2018 Adjustments Reported (a) (b) (c) (d) (e) Adjusted Six months ended 30 June 2018 $m $m $m $m $m $m $m Revenue 921.3 — — — — — 921.3 Cost of goods sold (440.9) 63.6 2.6 — — — (374.7) Gross profit 480.4 63.6 2.6 — — — 546.6 Gross Margin
Slide 27: Reconciliation To Adjusted Earnings
Reconciliation To Adjusted Earnings Six Months Ended 30 June 2017 Adjustments Reported (a) (b) (c) (d) (e) Adjusted Six months ended 30 June 2017 $m $m $m $m $m $m $m Revenue 831.3 — — — — — 831.3 Cost of goods sold (402.3) 63.3 8.7 0.2 — — (330.1) Gross profit 429.0 63.3 8.7 0.2 — — 501.2 Gross Mar
Slide 28: Technical Guidance
Technical Guidance Tax • Effective tax rate c.15% 11.4% Capex • 2018 in line 11.9% with 2017 spend • Investment in growth and productivity 23.1% Foreign • Movement22.4% of US dollar on revenue and EBIT, $US weakens 1%: exchange Currency Revenue Adjusted EBIT impacts EUR/DKK ~$5 million ~$2 million G