Interim Results for the six months ended 30 June 2021

30 July 2021

Strong growth & continued strategic progress

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 (1) All adjusted measures are reconciled to the most directly comparable measure prepared in accordance with IFRS (see Non-IFRS financial information section).

(2) Constant currency growth is calculated by applying the prior period average exchange rates to the Group's actual performance in the respective period.

(3) Adjusted EBIT is equivalent to adjusted operating profit and reported EBIT is equivalent to statutory operating profit.

(4) Organic growth presents period over period growth at constant currency, excluding acquisitions and disposals.

(5) Items referred to as reported measures are equivalent to statutory measures.

 

H1 2021 key highlights:

• Strong revenue growth ahead of our expectations: +7.4% organic⁴ growth, +7.0% on a constant currency² and +11.0% on a reported basis
  • H1 2021 performance was driven by particularly strong growth in Advanced Wound Care, against the weak COVID-depressed comparative, coupled with good growth in Infusion Care and solid performances in Continence & Critical Care and Ostomy Care
• Continued progress with our transformation by executing on our FISBE (Focus, Innovate, Simplify, Build, Execute) strategy:
  • Strengthened Continence Care with acquisition of Cure Medical
  • Launched innovative and differentiated extended wear infusion set
  • Establishing Marketing and Quality Centres of Excellence
• Reported operating profit of $136m, 19.9% higher year on year, with adjusted EBIT of $204m, 17.0% higher on a constant currency basis, reflecting the strong revenue growth together with gross margin improvement and beneficial opex phasing.
• Reported Free Cash Flow (‘FCF’) of $106m (H1 2020: $145m) with adjusted FCF¹ of $114m (H1 2020: $148m). Adjusted cash conversion¹ of 56.6% (H1 2020: 72.9%) primarily reflecting working capital movements during the period and increased capital investment.
• Strong balance sheet: leverage of 2.0x Net Debt/Adjusted EBITDA¹ (H1 2020: 2.2x; FY 2020: 2.0x).
• Interim dividend of 1.717 cents declared, in line with prior year.
• 2021 full year outlook is updated: organic⁴ revenue growth of between 3.5-5% (previously: 3-4.5%) and a constant currency adjusted EBIT margin of 18-19% (previously: 18-19.5%).  Based on current FX this would equate to guidance of between 17.1-18.1% for the published adjusted EBIT margin.   

Karim Bitar, Chief Executive Officer, commented:

“I am pleased with our continued strategic progress, on delivering another semester of good growth and on the underlying performance of the Group, notwithstanding that the financial performance was helped by the COVID impacted Q2 comparative. Our ongoing strategic transformation remains on track, and we have made progress during the period.      

“Whilst we are mindful of relatively tougher comparatives in the second half and the continuing COVID uncertainty, particularly in Asia Pacific and Latin America, we are updating our full year organic revenue growth expectations. Our constant currency margin guidance has been tightened against a backdrop of higher than anticipated cost inflation and a planned increase in transformation investments, primarily in R&D and sales and marketing, given our confidence in our strategy.

“We will continue to strengthen our foundations as we pivot to sustainable and profitable growth, and I am confident in the inherent attractiveness of the markets we serve and in Convatec’s growth prospects.”

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