Medical group forecasts second half revenue recovery
Deeside-based medical products and technologies group, ConvaTec, reported lower sales and profits for the half year to June 30, today, but said it expects revenues to rise in the second half.
Sales for the reporting period fell 3.5% from $921.3m to $888.9m, while pre-tax profits of $61.3m compared with $88.5m. The dividend of 1.717 cents remains the same.
The group said revenues in the second quarter showed an improving trend, with positive organic revenue growth across all franchises and group growth of 2.1%.
ConvaTec is currently in the middle of a three-year transformation initiative, which it says is on track.
It involves a $150m investment, including around $45m of capital expenditure, but is anticipated to deliver gross benefits in 2021 of $130-$150m per annum. The group spent $14m on transformation costs in the first half.
ConvaTec said the fall in profits was due to a one-off rebate provision of $8.9m taken in the first quarter to revise the estimate of the distributor rebates accrual, foreign exchange fluctuations, plus investment in commercial areas and regions, and the transformation initiative.
Executive chairman Rick Anderson said: “All of our franchises delivered organic revenue growth in the second quarter, indicating positive progress against our performance improvement plans.
“There is more work to do, but we are well positioned to deliver on our objectives for the full year and consequently our revenue and adjusted EBIT margin guidance is maintained.
“Throughout the second half of the year our priority remains improving execution. In addition, I look forward to welcoming Karim Bitar as our new chief executive on 30 September.”
He added: “We expect to see further revenue growth for the group in the second half.
“A key focus area is our US Wound business, where a more targeted and effective salesforce is already showing encouraging signs.
“Ostomy is continuing to deliver a slow but steady recovery, and within continence and critical care our home distribution group continues to outgrow the market in the US, albeit at a lower rate. Infusion devices saw strong orders from customers in the second quarter.
“Our transformation initiative has made good progress in many areas, but there is much more to do.
“Launched in February, we invested $14m in the first half to establish the programme, identify opportunities and begin execution of the first wave of projects, with detailed tracking of key milestones and weekly reviews by the executive team.
“Our transformation office provides a model to embed more discipline and better execution into the business: initial progress is encouraging and a “ConvaTec Way” is emerging.”
He said: “We expect a significant increase in transformation spend in the second half, in line with previous guidance of $40m spend for the year, as more projects move from planning into execution.
“We will continue to ‘forward invest’ for growth and efficiency, to enable us to capture more opportunities for value creation over the medium to long term for all our stakeholders.”
