Slide 1: 2020 Annual Results & Strategic Update
2020 Annual Results & Strategic Update 5 March 2021
Slide 2: Disclaimer
Disclaimer 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 do
Slide 3: Hosts and agenda
Hosts and agenda Karim Bitar Frank Schulkes Chief Executive Officer Chief Financial Officer Introduction & Financial review Strategic update 2
Slide 4: Financial review
Financial review Frank Schulkes, Chief Financial Officer 3
Slide 5: Robust financial performance during a year of continued investment
Robust financial performance during a year of continued investment Revenue Adjusted operating profit Diluted adjusted EPS +4.01% $350m +2.6% Revenue increased 0.9%1 growth in EBIT, Diluted adjusted to $1,894m 18.5% margin EPS 12.0 cents (2019: $1,827m) (2019: $354m with 19.4% margin) (2019: 11.7 cen
Slide 6: Attractive diversified portfolio – COVID impact broadly neutral
Attractive diversified portfolio – COVID impact broadly neutral Constant Currency growth 4.0% (3.8)% 1.2% 9.3% 16.7% (6) 46 +ve COVID ($m) 43 -ve +ve COVID 1,894 ( 22 ) 6 COVID 1,827 1,827 2019 Advanced Wound Ostomy Continence & Infusion FX 2020 Care Care Critical Care Care • Overall COVID broadly n
Slide 7: AWC negatively & CCC positively impacted by COVID
AWC negatively & CCC positively impacted by COVID 30 4.5 10 -0.6 -1.1 -13.2 -10 Advanced Wound Care • Reduced elective surgeries & restricted access -30 • Good growth in LATAM and certain EU countries FY 201 (2.7)% 148 151 132 119 149 147 -50 • AQUACELTM Ag+Extra grew and successful ConvaMaxTM launc
Slide 8: IC delivering significant growth and OC limited growth
IC delivering significant growth and OC limited growth 26.7 20 12.6 12.6 15.3 0 Infusion • Leading position combined with growth in “smart glycaemic -20 control” segment Care -40 69 63 82 79 88 74 • Some COVID-driven stocking activity with Q4 stronger than -60 expected FY 201 16.7% FY 20 CC 16.7% 30
Slide 9: Continuing to invest in strategic transformation to pivot to sustainable and profitable growth
Continuing to invest in strategic transformation to pivot to sustainable and profitable growth Strategic investments Strategic progress ~$110m+ Investments included in Adjusted P&L • Transformation on track $93m • Gross benefits: $42m ~$75m+ ‐ 2019: ~$25m $52m Primarily Quality & Recurring Operation
Slide 10: Increasing gross margin while investing in R&D and commercial
Increasing gross margin while investing in R&D and commercial Gross margin1 rate % Opex2,3 excluding non-recurring transformation investment YoY change 37.7% $689m 38.4% $728m Movement 50 bps FX (20) bps Operational 70 bps Selling & 24.9% 24.2% Distribution $459m $455m 59.0% 59.5% 10.0% 9.9% G&A $18
Slide 11: Strong cash generation – deleveraging the Group
Strong cash generation – deleveraging the Group $89m $92m $503m $71m $30m $63m $1,100m $86m $55m $891m $49m $820m $820m $787m $701m $646m $598m $598m 1 2019 Net Cash Interest Tax Capex Dividends Disposal Other 2020 Net Debt generated Net Debt from operations Lease Liabilities 10 1. Primarily relates
Slide 12: Strengthening balance sheet
Strengthening balance sheet $1,700m 3.0x $1,600m $1,500m Net debt @ 31 December 2020 $1,400m 2.5x $1,300m $900m Oct 2024 non-amortising debt $1,200m (multi-currency) $1,100m 2.0x $1,456m1 $1,000m $600m Oct 2024 amortising debt $900m (multi-currency) $800m 1.5x $1,533m $1,305m $200m Revolving Credit
Slide 13: 2021 Guidance
2021 Guidance • 3 – 4.5% Organic revenue growth • AWC returns to growth Revenue • OC similar growth as 2020 as we continue to rationalise the portfolio Growth • CCC to reflect normalisation of ICU bed usage and tough comps • IC to continue to grow well although against tough comps 18% - CC Adjusted
Slide 14: Strategic update
Strategic update Karim Bitar, Chief Executive Officer Transforming ConvaTec - Pivoting to Sustainable and Profitable Growth 13
Slide 15: Agenda – strategic update
Agenda – strategic update Stabilising & Investing Positive Growth Strategic Prospects Transformation on track 14
Slide 16: Context - responding to the COVID-19 challenge
Context - responding to the COVID-19 challenge Rapid Response Team Outcomes Strong Strongperformance performance Safeguarding employees • Strong employee engagement Strengthening supply chain • Effectively delivered products and services to customers Embracing digital • Solid financial performance T
Slide 17: Context - ConvaTec competes primarily in attractive chronic care markets
Context - ConvaTec competes primarily in attractive chronic care markets Market size1 Market growth Historical challenges (circa $bn) (circa) Advanced Wound 7.4 4% Care2 Ostomy Care3 2.3 4% Organisational complexity Continence Care4 2.0 4% Limited core Underinvestment Infusion Care5 1.0+ 7% capabili
Slide 18: Strategic transformation focused on pivoting to sustainable & profitable growth
Strategic transformation focused on pivoting to sustainable & profitable growth Strategic Transformation Strategic Intent Stabilising the business Sustainable & Investing in the Profitable Growth foundation & capabilities Strengthening the innovation pipeline 17
Slide 19: Stabilising the business and investing for sustainable & profitable growth
Stabilising the business and investing for sustainable & profitable growth Financial Performance Investing for growth 600 4.2% • Invested $131m in 2020 4.0% 2.3% 2.3% • >100 transformation initiatives 500 2.0% 0.2% 0.0% • Key areas: 400 ‐ R&D -2.0% ‐ Sales & Marketing 300 350 -4.0% 457 429 354 ‐ Cen
Slide 20: Strategic transformation is on track
Strategic transformation is on track Progress Outcome Vision Vision established Strategy FISBE Strategy embraced Improving execution Operating Model New operating model Values being embedded Values 19
Slide 21: The strategic transformation focuses on five pillars
The strategic transformation focuses on five pillars Vision: Pioneering trusted medical solutions to improve the lives we touch Focus Innovate Simplify Build Execute on key markets in our work and our organisation core capabilities with excellence and categories trusted solutions 20
Slide 22: Focus – on key categories & markets
Focus – on key categories & markets 2020 Progress 2021 Priorities • Exited 26 markets and serving • Accelerate growth in top 12 more markets indirectly markets • Divested US Skincare • Continue product rationalisation product line • Explore partnerships/acquisitions • Rationalising the product to st
Slide 23: Innovate – to provide differentiated patient-centric trusted solutions
Innovate – to provide differentiated patient-centric trusted solutions 2020 Progress 2021 Priorities 100 5.0% • Further 4.3% strengthen 81 4.0% capabilities 2.9% Advanced Biomaterials 2 2.7% 3.0% 2.3% • Roll out new and Design for Manufacturing 54 49 2.0% single product Mechatronics and sensors 40 d
Slide 24: Simplify – for a more customer-centric, agile & accountable model
Simplify – for a more customer-centric, agile & accountable model 2020 Progress 2021 Priorities From complex New operating model: • Migrate more activities to country-led Business Units + Global Business Services matrix functional expertise Established Global Business Service Centre in Lisbon: - Ove
Slide 25: Build – strengthen capabilities across the group
Build – strengthen capabilities across the group 2020 Progress 2021 Priorities Further progress - CoEs • Strengthened leadership • Salesforce Excellence Dr. Divakar Ramakrishnan Natalia Kozmina Mani Gopal Evelyn Douglas • Marketing • Established Salesforce Excellence CoE Establish new CoEs • Phase 2
Slide 26: Execute with excellence
Execute with excellence 2020 Progress 2021 Priorities • Continue to embed • Embedded Transformation Execution Office execution methodology Examples of Execution Excellence • Expand “Ability2Execute” Quality & Operations Medical Education training more broadly • Value engineering – • >200k HCPs train
Slide 27: Summary and Outlook
Summary and Outlook Strategic transformation on track Solid 2020 performance • Grew revenue despite pandemic challenge • Increased investment in strategic transformation & sustained operating profits • Strong cash generation & continued delevering Outlook • Organic revenue growth: 3.0% to 4.5% • CC
Slide 28: Q&A
Q&A If you would like to ask a question during the live Q&A please dial into: United Kingdom: +44 (0)330 336 9411 United States: +1 929-477-0324 Access code: 8535951 27
Slide 29: Appendix
Appendix @ ConvaTec
Slide 30: Key financial metrics
Key financial metrics 2020 2019 Growth Comments • $6.4m FX headwind, $2.7m acquisition, $(6.2)m Revenue $1,894m $1,827m 3.7% / 4.0%1 disposals Gross margin2 59.5% 59.0% 50 bps • +70 bps operational, -20 bps FX EBIT2 $350m $354m (1.1)% • Transformation investment driven EBIT margin2 18.5% 19.4% (90)
Slide 31: Opex excluding non-recurring transformation investment
Opex excluding non-recurring transformation investment 2020 2019 excluding non excluding non Non recurring recurring Non recurring recurring Adjusted Opex2 transformation1 transformation Adjusted Opex2 transformation1 transformation Selling & Distribution $463m $3m $460m $457m $2m $455m % to sales 2
Slide 32: Exchange rate sensitivity
Exchange rate sensitivity ▪ ConvaTec’s geographic profile can lead to transactional currency impacts. ▪ We monitor key rates against the US dollar. ▪ 29th January 2021 spot rates would indicate a ~$42m gain on revenue and ~$6m reduction in EBIT compared with average FY20 rates. This would equate to
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