Pioneering
trusted medical solutions
to improve the lives we touch
Convatec Group Plc
Annual Report and Accounts 2024
Welcome
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We are
Convatec
Our strongest-ever
innovation pipeline
Read more about our innovation on pages 39 to 43.
A strategy that
continues to deliver
Read more about our FISBE strategy
on pages 7, 10 and 11.
Strongly positioned to
continue to create value
for all our stakeholders
Pioneering trusted medical
solutions to improve the lives
we touch
Convatec is an innovative global medical
products and technologies company,
focused on solutions for the management
of chronic conditions. We have leading
positions in Advanced Wound Care,
Ostomy Care, Continence Care and
Infusion Care.
With more than 10,000 colleagues,
we provide our products and services
in around 90 countries, united by our
promise to be forever caring. Our
solutions provide a range of clinical and
economic benefits, including infection
prevention, protection of at-risk skin,
improved patient outcomes and reduced
total costs of care.
FINANCIAL HIGHLIGHTS
Group revenue
$2,289m
(2023: $2,142m)
Adjusted
1
operating
profit
$485m
(2023: $432m)
Reported operating
profit
$325m
(2023: $263m)
Adjusted
1
diluted
earnings per share
15.2¢
(2023: 13.4¢)
Reported diluted
earnings per share
9.3¢
(2023: 6.3¢)
Adjusted
1
operating
profit margin
21.2%
(2023: 20.2%)
Pioneering
trusted medical solutions
to improve the lives we touch
Convatec Group Plc
Annual Report and Accounts 2024
1. Certain financial measures in this document, including adjusted results
above, are not prepared in accordance with International Financial
Reporting Standards (IFRS). See the Non-IFRS financial information section
on pages 28 to 31.
We have pivoted
to sustainable and
profitable growth
Read more about our record performance and double-
digit adjusted EPS and free cash flow to equity growth
in our CEO’s review on pages 9 to 11.
1
Convatec Group Plc Annual Report and Accounts 2024
Overview
2
About us
Strategic report
5
Megatrends
6
Chair’s statement
7
How we realise our vision
8
Business model
9
Chief Executive Officer’s review
10
Investment case
12
Key performance indicators
14
Operational review
22
Financial review
28
Non-IFRS financial information
32
Responsible business review
60
Task Force on Climate-related
Financial Disclosures
72
Risk management
76
Principal risks
81
Non-financial and sustainability
information statement
82
Viability statement
Governance
85
Governance at a glance
86
Chair’s governance letter
88
Board statements
89
How we have applied the Code's
core principles
92
Board of Directors
94
Convatec Executive Leadership Team
96
Board activity and actions
99
Board performance evaluation
101 Nomination Committee report
104 Audit and Risk Committee report
114 Directors’ Remuneration report
145 Directors’ report
148 Directors’ responsibilities statement
Financial statements
150
Independent auditor’s report
157 Consolidated financial statements
201 Company financial statements
Additional information
210 Shareholder information
211 Glossary
213 Important information for
readers of this Annual Report
WHAT'S INSIDE THIS REPORT
INNOVATION IS A
CORNERSTONE OF OUR
STRATEGY
Stories throughout this
report highlight our deep
commitment to innovation
and delivering solutions to
improve people’s lives
Strategic report
Governance
Financial statements
Additional information
Overview
Convatec at a glance
About us
OUR CATEGORIES
Convatec at a glance
About us
Advanced dressings for the management of acute and
chronic wounds resulting from ongoing conditions, such
as diabetes, and acute conditions resulting from traumatic
injury and burns.
Read more on page 14
Devices, accessories and services for people with a stoma
(a surgically created opening where bodily waste is discharged),
commonly resulting from causes such as colorectal cancer,
bladder cancer, inflammatory bowel disease and trauma.
Read more on page 16
Products and services for people with urinary continence issues
related to spinal cord injury, neurological disease, prostate
enlargement or other causes.
Read more on page 18
Disposable infusion sets used with insulin pumps for diabetes
or with continuous infusion treatments for conditions such as
Parkinson’s disease.
Read more on page 20
we serve – patients living with chronic conditions,
their families and caregivers, and the healthcare
#3 globally
1
#1 in the US
1
#1 globally
1
#3 globally
1
Advanced Wound Care (AWC)
Ostomy Care (OC)
Continence Care (CC)
Infusion Care (IC)
1. Market dynamics, segment size, growth rates and positions based on internal analysis and publicly available sources.
2
Convatec Group Plc Annual Report and Accounts 2024
Overview
OUR BUSINESS
Group-reported revenue by category
Group-reported revenue by geography
Organic revenue growth¹
Adjusted operating profit margin²
2019
2020
2021
2022
2023
2024
19.4%
21.2%
20.2%
19.5%
17.7%
18.5%
2019
2020
2021
2022
2023
2024
2.3%
7.7%
7.2%
5.6%
5.3%
4.2%
conditions. Convatec has leading market positions in Advanced Wound Care,
$2,289
1
m
$2,289
1
m
Europe
29%
$661m
North America
57% $1,296m
Rest of world
14%
$332m
Advanced
32%
$743m
Wound Care
Ostomy Care
28% $634m
Continence Care
22%
$501m
Infusion Care
18%
$411m
1. Includes $0.2m of hospital care and related industrial sales.
~900m
finished products
in 2024
~10,000
colleagues in 2024
12
key markets
7
manufacturing
locations
KEY FACTS
OUR PERFORMANCE
1. Revenue growth at constant currency, adjusted for acquisitions, divestments and discontinuations.
2. Definitions of adjusted measures are shown in the reconciliation tables on pages 29 to 31.
3
Convatec Group Plc Annual Report and Accounts 2024
Strategic report
Governance
Financial statements
Additional information
Overview
Convatec Group Plc Annual Report and Accounts 2024
What’s inside
Strategic
report
5
Megatrends
6
Chair’s statement
7
How we realise our vision
8
Business model
9
Chief Executive Officer’s review
10
Investment case
12
Key performance indicators
14
Operational review
22 Financial review
28
Non-IFRS financial information
32
Responsible business review
60
Task Force on Climate-related Financial Disclosures
72 Risk management
76
Principal risks
81
Non-financial and sustainability information statement
82 Viability statement
Convatec Group Plc Annual Report and Accounts 2024
4
Strategic report
Megatrends
Chronic care markets are driven
by global healthcare megatrends
Ageing populations, rising per-capita
gross domestic product (GDP) and
urbanisation will drive healthcare
demand in emerging markets. This
demand is set to outpace overall GDP
growth in emerging economies and
healthcare spending growth in
developed countries.
Global population
aged 65+
2060
2020
1.6bn
0.8bn
Average life expectancy
globally (years)
2022
1950
72
47
Source: United Nations, World
Population Prospects.
Source: United Nations, Population
Divisions estimates.
INCREASED LIFE EXPECTANCY AND AGEING POPULATIONS
CHRONIC CONDITIONS ARE INCREASING
IMPROVING ACCESS TO HEALTHCARE IN EMERGING MARKETS
1 in 3
Adults affected by chronic
conditions globally
(Cardiovascular, cancer, diabetes)
Source: The global burden of multiple chronic
conditions, Cother Hajat and Emma Stein.
As people live longer, the prevalence
and cost of chronic disease continues
to grow.
2019 healthcare spending
(% of GDP)
Emerging markets
5.2%
OECD
12.5%
US
16.8%
Source: World Bank, UBS, March 2023.
More than 90% of our revenues arise from serving chronic care patients,
and these revenues are often recurring in nature
Three global healthcare megatrends drive structural growth and demand
for our solutions
1
3
2
5
Convatec Group Plc Annual Report and Accounts 2024
Governance
Financial statements
Additional information
Overview
Strategic report
The payout ratio of 42% of adjusted
net profit remains modestly ahead
of the target range of 35-45%. This
progressive dividend recommendation
is consistent with the approach over
the last three years.
We have also set out proposals for
a revised Remuneration Policy within
our Directors’ Remuneration Report
on pages 114 to 134. Our plans have
been developed following significant
shareholder engagement and the Board
is confident that they will support the
next phase of Convatec’s growth.
Culture and values
During the year, we have continued to
make progress on senior management
diversity, sustaining strong performance
on gender targets set by the FTSE
Women Leaders Review. We are also
committed to a race and ethnicity target,
encouraged by the Parker Review,
including meeting the diversity targets
in the FCA Listing Rules. We continue
to recruit on merit and ensure that we
appoint the best candidate for the role.
Further information on this, including
our targets for gender and ethnic
diversity within senior management,
can be found on pages 44 to 48.
Our values guide our everyday
behaviours. The Board is determined to
foster a culture that is shaped by these
values as we strive to deliver our vision
of pioneering trusted medical solutions
to improve the lives we touch. We are
delivering our forever caring promise,
and this Annual Report sets out our
progress in nurturing a responsible,
engaging, inclusive and high-
performing culture.
Dear Shareholder
I am pleased to report that Convatec
delivered strong results in 2024, and
has continued to enhance our trusted
medical solutions with a rich stream of
innovation and successful new product
launches. As we have continued to
transform Convatec, driven by strong
execution of our Focus, Innovate,
Simplify, Build, Execute (FISBE) strategy,
we have pivoted to sustainable and
profitable growth. Our target is to
consistently produce double-digit
adjusted earnings per share (EPS)
and free cash flow to equity growth.
Strong execution of our strategy
During 2024, we continued to strengthen
our product portfolio, led by research
and development, innovation and the
successful launch of new products. We
launched or significantly expanded the
regional presence of four new products
including ConvaFoam™ in Europe and
GentleCath Air™ for Women in the US.
Looking ahead, ConvaNiox™, our new
advanced wound dressing technology
powered by nitric oxide, is on track to
launch in 2026, following EU regulatory
approval in 2025. This game-changing
solution is highly complementary to
our Advanced Wound Care portfolio.
We continued to drive operational and
commercial improvements as part of
our focus on driving simplification and
productivity. During the year, we closed
manufacturing operations at our smaller
Danish facility as planned. We also
launched new centres of excellence
(CoEs) for Global Marketing & Sales
and Market Access & Reimbursement,
supplementing our existing CoEs which
are helping to achieve better pricing
and salesforce productivity, particularly
following the roll out of a new single
customer relationship management
platform in our FISBE markets.
We also continued to increase our
operational resilience with further
investments in infrastructure,
automation and capacity across our
manufacturing network. We are ready
to respond to growth opportunities.
2024 trading and dividend
Convatec reported revenue was
$2,289 million, up 6.9% YoY (7.7% higher
on a constant currency basis). Operating
profit was $324.9 million on a reported
basis (2023: $262.7 million) and $485.3
million on an adjusted basis (2023:
$431.8 million). Our adjusted operating
profit margin increased by 100 basis
points to 21.2% (2023: 20.2%), despite
significant inflationary headwinds in
H1 2024, although as we expected, these
eased substantially in H2 2024. Higher
profits and strong cash generation led
to net debt decreasing, with net debt
to EBITDA leverage at 31 December
2024 of 1.8x, 0.3x below FY23.
In November 2024, Medicare
Administrative Contractors in the
US published Local Coverage
Determinations (LCDs) for Skin Substitute
Grafts. Convatec’s InnovaMatrix
®
was
not covered by Medicare for treatments
in the LCDs. The situation remains
changeable, with implementation of
the LCDs subsequently postponed until
April 2025. On the basis that the LCDs
are implemented, we expect a hiatus
in Medicare InnovaMatrix
®
revenues
in FY25, discussed further on page 11.
Given our strong financial performance,
robust balance sheet and the Board’s
continuing confidence in future growth
prospects and cash generation, the
Board recommends a final dividend
of 4.594 cents per share, resulting in
a full-year dividend of 6.416 cents per
share, an increase of 3%. If approved at
our Annual General Meeting on 22 May
2025, the final dividend will be paid on
29 May 2025 to shareholders on the
register at the close of business on
22 April 2025.
Delivering our
forever caring
promise
Chair’s statement
6
Convatec Group Plc Annual Report and Accounts 2024
Strategic report
Convatec Cares
Convatec Cares, our approach to
environmental, social and governance
(ESG), sets out the commitments and
actions which enable us to integrate
ESG practices throughout the organisation.
Convatec Cares is integrated within our
FISBE strategy and supports our ability to
deliver sustainable and profitable growth
and underpins our long-term success.
The framework is built around four pillars:
–
Delivering for our customers
–
Enabling our people to thrive
–
Behaving ethically and transparently
–
Protecting the planet and supporting
communities
The Responsible business review (pages
32 to 59) provides commentary on ESG
governance pillars, metrics and targets,
together with information on our
stakeholders and why it is important for
Convatec to actively engage with them.
Convatec remains committed to
the highest standards of corporate
governance. The Governance report on
pages 84 to 148 provides detail on our
wider governance framework, plus the
Board’s stakeholder engagement activities.
Thank you to all our stakeholders
Convatec’s turnaround since 2019 would
not have been possible without the hard
work, drive and unwavering commitment
of our colleagues and leadership team,
and I would like to thank them on behalf
of the Board.
I would also like to thank shareholders
for their support, many of whom met
with me or other members of the Board
over the last year. The Board remains
focused on the continued execution
of our FISBE strategy.
Despite ongoing macroeconomic
uncertainties, Convatec is very well placed
to continue to deliver sustainable double-
digit compound growth in adjusted EPS
and free cash flow to equity.
Dr John McAdam CBE
Chair
25 February 2025
Read more on page 45
OUR PROMISE
Forever caring
OUR VALUES
OUR ESG FRAMEWORK: CONVATEC CARES
Customers
Delivering for
our customers
Colleagues
Enabling our
people to thrive
Commerce
Behaving
ethically and
transparently
Communities
Protecting the
planet and
supporting
communities
OUR STRATEGY: FISBE
Focus
on strengthening
customer loyalty in key
markets
Innovate
to increase vitality of
trusted medical
solutions
Simplify
to improve
productivity across
our organisation
Read more on pages 10 and 11
Read more on pages 32 to 59
HOW WE REALISE OUR VISION
Build
and embed mission-critical
capabilities and winning culture
Execute
with excellence, while integrating
environmental, social & governance
Pioneering
trusted medical solutions
to improve the lives we touch
Improve
care
Deliver
results
Grow
together
Own
it
Do what’s
right
7
Convatec Group Plc Annual Report and Accounts 2024
Governance
Financial statements
Additional information
Overview
Strategic report
Our business model
Delivering our
forever caring
promise
Convatec is a global medical products
and technologies company focused
on solutions for the management
of chronic conditions
Every year, we sell over 900 million
products, helping millions of customers,
including patients, consumers and
healthcare professionals
OUR EXPERTISE
Deep sector
knowledge
Talented
workforce
Innovation
mindset
Strong quality
brands
Manufacturing
capability &
robust supply
chain
Relationships
with customers
OUR BUSINESS MODEL
Benefit chronic
care patients
and society
Deliver double-
digit EPS & free
cash flow to
equity
2
CAGR
Reinvest for
future growth
Distribute to
shareholders
RESEARCH &
DEVELOPMENT
QUALITY &
OPERATIONS
SALES, MARKETING
& SERVICE
Identify unmet needs
Manufacture with
quality and at scale
Commercialise globally
Usability and human
factor design
Drive productivity and
increase gross margin
Measure loyalty
and learn
Customer support across
the continuum of care
Process and solution
development
Clinical development
Regulatory submission
$102m
investment in 2024
~5,000
manufauring colleagues
across seven locations
cNPS
in 20 countries
Enhance efficiency
across our supply chain
8
Convatec Group Plc Annual Report and Accounts 2024
Strategic report
Footnotes within the CEO review are defined as follows
1. Consistent with prior years, management present adjustments to the reported figures, to produce more meaningful measures in monitoring the underlying
performance of the business. These are set out in the tables on pages 29 to 31.
2. Certain financial measures in this document, including adjusted results, are not prepared in accordance with International Financial Reporting Standards
(IFRS). All adjusted measures are reconciled to the most directly comparable measure prepared in accordance with IFRS in the Non-IFRS Financial Information
(see pages 28 to 31).
Delivering
sustainable
and profitable
growth
Chief Executive Officer’s review
2024 represented another year of strong
operational and strategic delivery for
Convatec, evidenced by accelerating
organic revenue growth, improving
operating margin, 14% adjusted EPS¹
growth and strong cash conversion.
We announced our FISBE strategy in 2020,
having just reported 2019 organic revenue
growth of 2.3%. Our annual R&D spend
was c.$50m, and our innovation pipeline
was very limited. Our adjusted operating
margin¹ was 19.4%, and we had no
mid-term targets. In 2024, organic
revenue growth accelerated to 7.7%,
the sixth consecutive year of accelerating
growth and exceeding the top end of our
target range for the second year running.
We invested over $100m in R&D, our
product portfolio is systematically
broadening to enhance our offering, and
we have our strongest-ever innovative,
new product pipeline. Adjusted operating
margin¹ was 21.2%, and we are on track
to deliver our mid-20s% target by 2026
or 2027. Given these strong results and
consistent delivery of our strategy, we can
now say that we have successfully pivoted
to sustainable and profitable growth.
Looking ahead, we have leading positions
in structurally growing, recurring revenue,
chronic care markets. We are targeting the
fastest growing segments by developing
innovative and differentiated new
products. Our resilient business model
is highly scalable and is well-positioned to
deliver sustainable double-digit compound
annual growth in adjusted EPS¹ and free
cash flow to equity².
Out performing our structurally
growing markets
Convatec operates in four chronic care
categories. These have a combined
market size of c.$15.5 billion p.a. and
market growth rates varying between
4-8% p.a. We are among a small number
of leaders in the categories in which we
operate and expect to consistently grow
revenue faster than each market.
We sell over 900 million high-quality
consumable products for a diverse range
of chronic conditions annually. There are
notable synergies across the Convatec
categories in areas such as polymer
and biomaterial sciences, adhesive
technologies, product and clinical
development, automated manufacturing,
supply chain capabilities and sales &
marketing. In recent years we have been
rationalising our production network
while automating and expanding
capacity in the most appropriate
locations and increasing our business
resilience and efficiency.
Increasing margins, driven by
simplification and productivity
improvements
We delivered another strong
year of adjusted operating margin¹
improvement, up 100 bps to 21.2%
(21.8% on a constant FX basis). Operating
margin¹ has now increased by 350 bps
since 2021 (+390 bps in constant
currency. Our strong cash generation
is supporting continued organic and
inorganic investment for growth,
consistent with our capital allocation
priorities and broader strategy.
“Our FY24 results
demonstrate that
Convatec has
successfully pivoted
to broad-based,
sustainable and
profitable growth.
Our FISBE strategy
is delivering strongly,
evidenced by our sixth
year of accelerating
revenue growth, further
operating profit margin
expansion, double-digit
growth in adjusted EPS
and strong cash
conversion.”
Read more about our FISBE
strategy on pages 10 and 11
9
Convatec Group Plc Annual Report and Accounts 2024
Governance
Financial statements
Additional information
Strategic report
Overview
Strategic report
In FY24 we remained focused on
delivering for our customers and
patients. New product innovation
accelerated, including four key new
products launches or major geographic
expansions in 2024. In addition to the
R&D spend noted above, we invested
$122m in capex and increased our
emphasis on clinical and regulatory
engagement. Additionally, we invested
c.$90m in earn-outs and one small
acquisition in France in our Home
Services Group.
Our simplification and productivity
initiatives continued to progress well.
In Global Quality & Operations (GQO), we
increased automation in our facilities and
continued to optimise our plant network
for scale and efficiency by completing
the closure of our EuroTec facility in the
Netherlands and closing our small Herlev
site in Denmark. In commercial areas,
we created an integrated Global Marketing
& Sales (GMS) Centre of Excellence (CoE),
further developed our Market Access
& Reimbursement CoE, and rationalised
our use of marketing agencies globally.
We are encouraged by the potential for
AI to drive productivity improvements
in areas such as customer service,
marketing content generation and
translation. In addition, we delivered
further general and administrative (G&A)
savings by expanding the scope of our
Global Business Services centres across
Finance, IT and HR activities. Adjusted
G&A¹ declined by 4.7% to $165m (2023:
$173m), representing 7.2% of revenue
(2023: 8.1%).
FISBE strategy: FY24 progress
Our FISBE (Focus, Innovate, Simplify,
Build, Execute) strategy again delivered
strongly in 2024.
Focus
We continued to drive focus in our four
chronic care categories and 12 focus
markets. Over 90% of our revenues arise
from supporting patients with chronic
illnesses, resulting in high recurring
revenues. The US was our largest market
and grew strongly, supported by the
contribution from recent launches
(InnovaMatrix
®
, ConvaFoam™, Esteem
Body™ and GentleCath Air™ for Women).
In 2024, we continued to strengthen
our focus on customer centricity and
advanced the use of customer Net
Promoter Score (cNPS) as the key
measure of customer satisfaction
and loyalty within Convatec, rolling
out the programme across 20 countries,
including all our FISBE markets. We are
working towards capturing cNPS for
all our main customer groups, initially
starting with Healthcare Professionals
(HCPs) and expanding to users and our
key B2B customers. Acting on customer
feedback is critical to the success of
our business, as we look to deliver
a frictionless experience from our
front-line clinical colleagues to customer
support functions.
Innovate
Innovation is a key part of our strategy
and is helping to drive growth in the fastest
growing segments of our markets. We
continued to strengthen our Technology
& Innovation capabilities; adjusted R&D
expenditure of $102m (2023: $104m) was
equivalent to c.5% of revenue.
New product innovation accelerated with
a broadening pipeline across our chronic
care markets, including eight new products
launched between 2022-24. Our vitality
index, which measures the percentage
of Group revenues generated from new or
significantly upgraded products launched
in the last five-years, reached our target
of 30%, a year ahead of target.
Products launched since 2022 are:
–
InnovaMatrix
®
in the US and starting
to launch in Latin America
–
Esteem Body™ in the US and key
European markets
–
ConvaFoam™ in the US and key
European markets
–
GentleCath Air™ for Women in the
US and key European markets
–
Infusion set with Beta Bionics new
iLet Bionic Pancreas system
–
Extended Wear Infusion Set in US
with Medtronic 780G
–
Infusion set for new Tandem
Mobi pump
–
Neria™ Guard Infusion set for AbbVie
Parkinson’s therapy
We expect continued momentum from
future launches including:
–
In Advanced Wound Care (AWC),
ConvaVac™, a single use negative
pressure treatment on track to launch
in 2026; ConvaNiox™, which is
expected to obtain EU regulatory
approval in H1 2025, and to launch
in Europe in 2026; and ConvaFiber™,
our new enhanced hydrofibre dressing,
launching in Europe in 2026
–
In Ostomy Care (OC), Natura Body™,
our two-piece convex product
launching in 2026, and FlexiSeal™ Air, a
new market-leading fecal management
product in the US in H2 2025
–
In Continence Care (CC), GentleCath
Air™ for Men Pocket & Set in 2026; and
–
In Infusion Care (IC), infusion
technology innovations including
a potential new Parkinson’s therapy
for Mitsubishi Tanabe
Simplify
We continued to make progress
simplifying the organisation and
improving productivity.
Chief Executive Officer’s review
continued
Our resilient business is designed
to sustainably deliver double-digit
CAGR in adjusted EPS & free cash
flow to equity:
OUR INVESTMENT CASE
2
We have delivered six years of
accelerating organic revenue
growth, and our target is to grow
sales by 5-7% every year. This will
be driven by our investment in
innovation which is broadening
our product portfolio
Refer to operational reviews on
pages 14 to 21 for further detail.
GROWING FASTER
THAN OUR CATEGORIES
2
Adjusted operating margin has
increased by 350bps to 21.2% since
2021 and we remain on-track to
deliver a mid-20s% margin¹ by 2026
or 2027. This will be driven by further
operational and commercial
productivity, an increasing mix
of Convatec-manufactured products
and positive operating leverage
arising from the delivery of 5-7%
per annum organic revenue growth
Refer to operational reviews on
pages 14 to 21 for further detail.
3
INCREASING
PROFITABILITY
VIA INNOVATION,
SIMPLIFICATION
AND SCALE
3
We target high cash conversion
while consistently investing in
capex and R&D to grow our sales
and sustainably increase operating
margin, plus selective bolt-on
M&A. We are committed to paying
a progressive dividend
STRONG CASH FLOW
4
Convatec has leading positions
in four chronic care categories,
with market growth rates varying
between 4% and 8% p.a. and high
levels of recurring revenue
Refer to operational reviews on
pages 14 to 21 for further detail.
FOCUSED ON LARGE
AND GROWING CHRONIC
CARE CATEGORIES
1
10
Strategic report
In operations, as part of our Plant Network
Optimisation programme, for scale and
efficiency, we completed the closure of
our EuroTec facility in the Netherlands
and closed our small Herlev site in
Denmark in December 2024. Our GQO
function continued to introduce smart
factory tools and automation to the
manufacturing footprint to drive enhanced
productivity.
In commercial, the newly created GMS CoE
drove supplier consolidation across
research, advertising and media agencies,
delivering cost efficiencies and simplified
ways of working.
In G&A, costs reduced to 7.2% of revenue
(2023: 8.1%), declining by $8m to $165m
(2023: $173m). We continued to improve,
standardise and automate processes, build
internal expertise and reduce external
third-party spend. We also continued to
transition activities to our GBS centres,
which has helped enable a reduction in
G&A costs from 13% of revenue to 7% in
three years. In Finance, our initiative in
procure-to-pay has enhanced process,
reduced cost, improved cash generation
and improved employee experience, with
transactional NPS (tNPS) up significantly.
In IT, we insourced our service desk
capability, at a lower cost and resulting in
higher colleague satisfaction scores. In HR,
we made significant progress with our
transformation, refreshing our operating
model and transitioning certain activities
(e.g. payroll) to our GBS centres to align
to standardised processes and ways of
working.
Build
During the year we established our
Market Access & Reimbursement
CoE. This team supports access and
reimbursement for our existing brands
and new product pipeline. Our GMS
CoE brings together separate legacy
Marketing and Salesforce teams to
nurture and drive customer engagement,
provide sales leadership training and
further improve commercial productivity.
Our focus remains on strengthening
employee engagement and building
high-performing teams. We launched
a new employee engagement platform
to support ongoing dialogue and feedback.
We achieved a top decile employee
engagement score during the year, with
95% of colleagues sharing feedback.
Execution
Our Strategic Pricing CoE, in collaboration
with our business units, supported the
delivery of 60 bps of pricing improvement,
included in our gross margin.
Our GMS CoE continued to leverage the
single CRM platform to drive enhanced
salesforce productivity. We increased call
rates and improved targeting, with c.70%
of calls made to priority (A,B,X) accounts
(2023: c.60%).
We continued to focus on execution
excellence within our GQO function. This
was through continuous improvement
initiatives such as our further automation
of production lines at Deeside, UK, and our
global packaging project to improve terms
and pricing.
We also made further progress
embedding ‘Convatec Cares’, which
underpins our commitment to
generating value responsibly and
embedding ESG practices.
In line with our goal to achieve net zero
by 2045, we reduced Scope 1 and Scope 2
greenhouse gas emissions by 14% in 2024
and continued to make progress towards
our near-term targets. We also received
a B-rating from the Carbon Disclosure
Project (CDP) and a Silver award from
EcoVadis in their 2024 ratings,
recognising our continued progress.
More than 230,000 HCPs and patients
participated in Convatec’s educational
programmes in 2024, across categories
and geographies. This has been a key
execution pillar helping the success of new
product launches such as Esteem Body™.
We also supported more than 2,300 HCPs
with medical education grants.
Consistent with our commitment to
building an inclusive business, we finished
2024 with 45% of the senior management
team being women.
Update on InnovaMatrix
®
InnovaMatrix
®
performed well in FY24,
with revenue up 34% YoY to $99m.
In November 2024, US Medicare
Administrative Contractors published Local
Coverage Determinations (LCDs) for Skin
Substitute and Tissue-Based Products for
the Treatment of Diabetic Foot Ulcers (DFU)
and Venous Leg Ulcers (VLU) removing
coverage under Medicare for the majority
of products, including InnovaMatrix
®
.
Implementation of the LCDs was
subsequently postponed from 12 February
until 13 April 2025. Medicare DFU/VLU
sales represented c.75% of overall
InnovaMatrix
®
sales in 2024. If the LCDs
are implemented, InnovaMatrix
®
would
no longer be covered for these indications.
InnovaMatrix
®
is an excellent product with
strong real-world evidence and significant
clinical benefits. It has 510k clearance from
the US Food & Drug Administration based
on an established predicate product and
offers a popular and effective choice to
patients and HCPs. We believe the LCDs,
if implemented, would reduce patient and
HCP choice, and availability of effective
medical solutions in the near-term.
We published real-world evidence of the
effectiveness of InnovaMatrix
®
for DFU
and VLU treatment in December 2024
and we are making good progress in our
two InnovaMatrix
®
randomised controlled
trials, which we expect to report in 2026.
Convatec remains confident of securing
DFU/VLU coverage in the future and is
committed to working collaboratively with
the new US Administration, including at the
Centers for Medicare & Medicaid Services,
and their contractors, in the best interests
of patients.
The outlook for InnovaMatrix
®
revenue
in FY25 is therefore uncertain:
–
In DFU/VLU indications, the
implementation of LCDs in April
2025 would lead to Medicare sales
being removed. This would create
a revenue hiatus while we complete
our clinical data generation and
re-apply for coverage
–
Non-DFU/VLU indications are outside
the scope of the LCDs. Revenue in these
indications grew strongly in FY24, up
70% to c.$25m. Non-DFU/VLU comprise
c.55% of the US wound biologics
segment and we expect further strong
growth in our non DFU/VLU sales in 2025
–
Overall, based on implementation
of the LCDs in April 2025, we
expect a reduction in revenue of
approximately $50m, approximately
2% of Group revenue
Confidence in FY25 outlook
We continue to expect 5-7% organic
growth in non-InnovaMatrix
®
sales
1
(FY24: 96% Group sales) based on our
broadening product portfolio, strongest
ever innovation pipeline and focused
commercial execution.
Adjusted operating profit margin¹ of
22.0%-22.5%, underpinned by detailed
productivity improvement programmes
across operations, commercial and G&A.
Another year of double-digit growth in
adjusted EPS¹, underpinned by strong
cash conversion.
On-track to deliver our medium-
term guidance
We are positioned to deliver sustainable
5-7% p.a. organic revenue growth,
underpinned by innovation, our
broadening pipeline and enhanced
commercial execution. We are also
on-track to reach mid-20s% adjusted
operating profit margin¹ by 2026 or 2027,
supported by productivity improvements
and positive operating leverage.
Karim Bitar
Chief Executive Officer
25 February 2025
11
Convatec Group Plc Annual Report and Accounts 2024
Governance
Financial statements
Additional information
Overview
Strategic report
Tracking our
progress
Key performance indicators
FINANCIAL METRICS
Organic revenue
growth (%)
Adjusted operating
profit margin (%)
Adjusted diluted EPS
growth (%)
Free cash flow to equity
growth (%)
Metric
Year-on-year (YoY) revenue
growth at constant currency,
adjusted for acquisitions,
divestments and discontinuations.
Relevance
Sustainable top-line growth
is a key strategy pillar and
a metric by which investors
judge our progress.
Our medium-term revenue
growth target is 5-7% every year.
Remuneration linkage
Organic revenue growth has a
weighting of 25% of the annual
bonus for Executive Directors
and is used as a metric for all
colleagues in our annual bonus
plan.
Organic revenue growth has
25% weighting within the 2024
LTIP plan.
2024 performance
We delivered broad-based organic
growth of 7.7%, ahead of our
target. This was driven by
improved performance across all
our categories: high single-digit
organic growth in Advanced
Wound Care, Continence Care and
Infusion Care and mid single-digit
organic growth in Ostomy Care.
Metric
Adjusted operating profit
as a % of Group revenue.¹
Relevance
Adjusted operating profit margin
reflects how effective we are at
running our business. Increasing
profitability is a key metric by
which investors judge
our strategic progress.
Our target is to deliver a
sustainable mid-20s% adjusted
operating margin by 2026 or 2027.
Remuneration linkage
Adjusted operating profit ($m) has
a weighting of 40% of the annual
bonus for Executive Directors and
is a metric used for all colleagues
in our annual bonus plan.
2024 performance
Our adjusted operating profit
margin increased by 100bps
to 21.2% (21.8% in constant
currency). This was driven
by sales growth, productivity
initiatives and reduction in G&A.
Metric
YoY growth of adjusted
diluted EPS.¹
Relevance
Growth in adjusted diluted EPS
illustrates our ability to deliver
sustainable and profitable growth
overall, including the impact of
any M&A undertaken to further
strengthen the business. It is
a key metric by which investors
judge our strategic progress.
In 2023, we indicated a target of
growing adjusted diluted EPS by
a double-digit compound annual
growth rate each year.
Remuneration linkage
Adjusted PBT growth has a
weighting of 50% within the 2024
LTIP awarded to Executive
Directors and senior leaders
across the business.
For LTIP awards from March 2025
onwards we will move to use
adjusted EPS within LTIP
assessment.
2024 performance
Adjusted diluted EPS rose strongly
in 2024, up 13.7%.
Growth in adjusted operating
profit of 12.4%, and was
supported by a slightly lower
tax rate.
Metric
YoY growth of Free cash
flow to equity.¹
Relevance
Free cash flow to equity reflects
how effectively we convert the
profit we generate into cash
(after accounting for working
capital, capital investments,
adjusting items, tax and interest).
This cash is then available for
reinvestment (i.e. through M&A)
to distribute to shareholders
or to pay down debt. It is a key
metric by which investors
judge our strategic progress.
We expect to grow our free cash
flow to equity by a double-digit
compounded annual growth
rate over the medium term.
Remuneration linkage
Free cash flow to equity has a
15% weighting within the annual
bonus for Executive Directors and
all colleagues who participate in
our annual bonus plan.
2024 performance
Free cash flow to equity increased
32.2% YoY, primarily driven by
the increase in EBITDA, strong
working capital management
and lower capital expenditure.
1. Definitions of adjusted measures are shown in the reconciliation tables on pages 29 to 31.
2020
7.7%
2021
7.2%
2022
5.6%
2023
5.3%
2024
4.2%
2020
21.2%
2021
20.2%
2022
19.5%
2023
17.7%
2024
18.5%
2020
13.7%
2021
6.1%
2022
(3.1)%
2023
8.3%
2024
2.6%
32.2%
2024
116.8%
2020
(49.4)%
2021
(14.2)%
2022
(18.4)%
2023
12
Convatec Group Plc Annual Report and Accounts 2024
Strategic report
NON-FINANCIAL METRICS
1
Quality – Complaints
per million
2,3
Product innovation
– Vitality index
Environmental progress –
In Scope 1 and 2 greenhouse
gas (GHG) emissions
2
Diversity, Equity & Inclusion
(DE&I) – proportion of
female representation
at leadership level
2,4
Metric
YoY reduction in the number of
complaints received per million
(CPM) products sold. In 2024,
in collaboration with our major
partners, we commenced a
process to re-evaluate CPM in
our business-to-business (B2B)
category. As a result, CPM has
been restated from 2021 onwards
to remove our B2B data.
Relevance
CPM is a strong indication of
manufacturing quality. It is a
reflection of our core capabilities
and our ability to execute
effectively.
Connected to both safety and
efficacy of our solutions, CPM
features as an ESG metric. We
targeted to reduce CPM by 8%
during 2024.
Remuneration linkage
Executive Directors, plus certain
members of CELT and the Quality
leadership team, are incentivised
to deliver improvement as part
of their objectives.
2024 performance
YoY reduction of 17% in our
direct-to-consumer categories,
as our Quality function continues
to have a positive impact,
delivering for our customers.
The CPM numbers have been
restated to represent our
direct-to-consumer categories,
excluding our B2B products. See
page 40 for further details on our
approach to quality.
Metric
YoY reduction in our combined
Scope 1 and 2 GHG emissions.
Relevance
Convatec has set an ambition to
reach net zero carbon emissions
by 2045.
Reduction in our Scope 1 and 2
emissions are an ESG metric, with
a target to reduce them by 70%
by 2030.
Remuneration linkage
Executive Directors, plus certain
members of CELT and the Global
Operations leadership team, are
incentivised to deliver
improvement as part of their
objectives.
2024 performance
We reduced emissions by
installing additional on-site
renewable energy generation,
and implementation of energy
efficiency projects to reduce fossil
fuel use.
We restated our Scope 3
emissions using material specific
emission factors and updated
spend-based factors to support
prioritisation of key initiatives.
See pages 53 and 54 for more
detail about carbon emissions
across all categories.
Metric
Proportion of females in combined
CELT and senior management.
Relevance
We recognise that by
building a diverse and inclusive
company we can deliver more
for our customers.
This features as an ESG metric.
In 2024, we set a target to achieve
50% females in senior
management by Q4 2027.
Remuneration linkage
Executive Directors, plus
members of CELT and members
of the HR leadership team,
are incentivised to deliver
improvement as part of their
objectives.
2024 performance
We achieved 45% women in
senior management positions,
progressing towards our 2027
target. Baseline population
numbers are subject to
YoY variation.⁴
Metric
The percentage of total revenues
that are generated from new or
significantly upgraded products
and services launched by
Convatec in the preceding
five-year period.
Relevance
The vitality index is a measure
of how effective our innovation
efforts are at meeting patients’
needs and delivering
for customers, and features
as an ESG metric.
In 2022, we set a target to reach
a vitality index of 30% by Q4 2025.
Remuneration linkage
Executive Directors, plus certain
members of CELT and the Global
Operations leadership team,
are incentivised to deliver
improvement as part of their
objectives.
2024 performance
Our vitality index reached
our target of 30%, a year
ahead of plan.
1. As our ESG journey continues and our metrics and measurement mature, it is possible we may modify
our non-financial KPIs.
2. A set of non-financial metrics received limited assurance, as described on page 59. These included
CPM absolute value for 2024 only, on the revised basis, see footnote 3; Scope 1 and 2 absolute emissions,
intensity and % reduction; and proportion of female representation at leadership level.
3. Percentage movements are calculated on actual unrounded numbers. Restated to represent direct-to-
consumer categories.
4. Defined as Convatec Executive Leadership Team (CELT) and their direct reports, excluding executive assistants.
Total population in 2024 was 78 (2023: 79).
(9.3)%
2022
2023
(23)%
2024
30.2
27.4
(16.8)%
22.8
2021
39.2
2021
30%
2022
26%
2024
25%
2023
27%
2020
4%
2021
20%
2022
(32)%
2023
(35)%
2024
(14)%
2020
45%
2021
44%
2022
38%
2023
32%
2024
30%
13
Convatec Group Plc Annual Report and Accounts 2024
Governance
Financial statements
Additional information
Overview
Strategic report
Operational review
Advanced Wound Care
1. Based on Convatec estimates and external study:
Human Wound and Its Burden: Updated 2020 Compendium
of Estimates.
2. Based on Convatec estimates and external study: Cohort
study evaluating the burden of wounds to the UK’s National
Health Service in 2017/2018.
3. Guest et al. Cohort study evaluating the Burden of wounds
to the UK’s NHS in 2017/2018. BMJ, 2020.
SOURCES:
4. Wound biologics includes: skin substitutes, collagen dressings and topical delivery drugs;
uncertainty related to LCD impacts size and growth rate of wound biologics segment
(Convatec estimates based on SmartTRAK).
5. Other segment includes: Alignates & fibre, superabsorbers, hydrocolloids, Hydrogels,
Contact Layers, Composite/ Island Dressings, Films.
6. Segment size based on SmartTRAK projections for Q3 2024 Last Twelve Months (LTM);
including all sub-segments, total advanced wound care market size is c.$8.5bn.
7. Segment growth as projected by SmartTRAK and Convatec estimates for 5 yr CAGR ‘24-’29.
8. Segment positions based on SmartTrak YTD Q3 2024 reported revenues across companies.
David Shepherd
President & Chief Operating Officer,
Advanced Wound Care
2024 performance
Revenue of $743m increased by 6.8%
on a reported basis, and 7.4% on both
a constant currency and organic basis.
This included $99m of InnovaMatrix
®
revenue, up 34% YoY, demonstrating the
clinical efficacy and popularity with HCPs
and patients of our product. Excluding
InnovaMatrix
®
, AWC growth was 4.2%
on an organic basis.
Geographically, growth was supported
by good performance in North
America and Global Emerging Markets
(GEM). By product type, in antimicrobials,
Aquacel™ Ag+ Extra continued to
perform strongly. In foam, recently
launched ConvaFoam™ started to take
market share in the US and our European
launch progressed well, including
Germany and the UK.
AWC key focus areas are:
–
Building on our strong positions
and rolling out recent launches
to new markets:
•
Continuing to grow Aquacel™
Ag+ Extra globally
•
Ongoing launch of ConvaFoam™
in the US, Europe and GEM
•
Progressing InnovaMatrix
®
randomised controlled trials and
starting to launch outside the US
–
Continuing to develop new products
and develop the AWC pipeline with:
•
ConvaNiox™, our break-through
nitric oxide dressing, launching
in Europe in 2026
•
ConvaFiber™, our new enhanced
hydrofibre dressing, launching
in Europe in 2026; and
•
ConvaVac™, our single-use negative
pressure wound therapy product,
launching in 2026
2021
2023
2024
2022
2020
2019
Total Sales $m
Organic growth %
0.5
570
592
621
695
743
9.2
547
-2.7
9.5
7.4
6.8
Performance
A large growing market
Convatec has leading market positions and strong brands
in fast-growing segments
100m patients¹ every
year globally
~50% unhealed
despite therapy²
Now 2-4% of
healthcare budgets³
Prevalence of hard-to-heal
wounds is increasing
Wound healing rates
need to improve
Wound-care related
costs are increasing
Wound biologics⁴
Foam
Anti-microbials
Single-use
Negative pressure
wound therapy
(NPWT)
Other⁵
Segment size⁶
Segment growth⁷
Convatec brands
Our segment position⁸
$3.0bn
~6%
#7
#5
#1
#3
#1
~6%
~6%
~10%
~4%
$2.1bn
$1.1bn
$0.4bn
$1.9bn
Extra
Aquacel
®
Ag+
14
Convatec Group Plc Annual Report and Accounts 2024
Strategic report
Exudate
management
Superior absorption,
retention and
handling of fluid⁶
Strong, skin-
friendly adhesion
Superior adhesive
strength balanced
with gentle,
atraumatic removal
Skin protection
Vertical wicking reduces
peri-wound skin maceration³
Patient comfort
Designed to minimise
pain on removal⁴
Lasting wear time
Seven-day wear time means
fewer dressing changes –
saving time and resources¹
Efficiency
Can be cut to size and
repositioned on application,
helping to reduce wastage²
,
³
Versatility
Suitability across an
extensive range of wound
types, from minor to more
complex wounds⁵
1.
WHRI9478 MS186_DHF1093 ConvaFoam™ Superiority Report Testing between May 2021 and June 2022.
2.
WHRI8050 MS172 Adhesion Characteristics of ConvaFoam™.
3.
WHRI8051 MS173 In-vitro Performance Characteristics of ConvaFoam™.
4.
Soft Silicone Dressings Made Easy, Meuleneire F, Rucknagel H, Wounds International, May 2013
5. ConvaFoam™ IFU.
6.
Versus selected dressings tested in vitro for absorption, retention, fluid handling and adhesion.
Redefining
The only foam dressing that combines our three technologies – Aquacel
©
Hydrofiber™, Superabsorber Fibers and ConvaTac™ silicone – to deliver superior
exudate management¹ with skin friendly adhesion for longer lasting wear times
which optimises healthcare efficiency.
REDEFINING SUPERIOR
PERFORMANCE
¹
REDEFINING
MY CARE
“As a tissue viability nurse caring for people
with complex oncology wounds, I cannot
overstate the value of a dressing that not only
promotes comfort but also adheres gently to
challenging areas while effectively managing
exudate. ConvaFoam has brought hope to
both me and my patients by addressing our
needs, reducing the frequency of dressing
changes, and providing reassurance that
the dressings stay securely in place.”
Susy Pramod
Tissue Viability Matron
The Christie NHS Foundation Trust
15
Convatec Group Plc Annual Report and Accounts 2024
Governance
Financial statements
Additional information
Overview
Strategic report
Operational review
Ostomy Care
Bruno Pinheiro
President & Chief Operating Officer,
Ostomy Care
Source: Market dynamics, segment size, growth rates and positions based on internal analysis and publicly available sources.
1.
llsop M, et al. Quality of life profiles and their association with clinical and demographic characteristics and physical activity in people with a stoma: a latent
profile analysis. Qual Life Res. 2022;31(8):2435-2444. doi:10.1007/s11136-022-03102-5.
Performance
2024 performance
Revenue of $634m grew by 4.2% on a
reported basis, by 5.6% in constant
currency and 5.3% on an organic basis.
Esteem Body™, our first new ostomy
product launch in over a decade, proved
to be very successful with patients and
clinicians and took Convatec into the
one-piece soft convex segment in the US
and Europe. Growth was also strong in
our existing Plus™ product range, and in
accessories. In North America, we grew
sales, supported by our Home Services
Group (HSG) with continued increased
new patient starts. We delivered
double-digit growth in GEM,
outpacing market growth.
Key focus areas are:
–
Continuing to progress
our innovation pipeline:
•
Broadening the launch of
new Esteem Body™ globally
•
Developing Natura
®
Body, our
two-piece soft convex product
launching in 2027
•
Launching Flexi-Seal™ Air, a
refresh of our market-leading fecal
management product, in the US
in H2 25
–
Further improving commercial execution
across the continuum of care (acute,
post-acute and community):
•
Improving US new patient starts,
with continued close collaboration
with HSG and strategic partners
•
Enhancing digital engagement
with patients, through our me+
Companion™ service, and increased
interactions with healthcare
professionals (HCPs) in our education
and training programmes
~2.8m patients¹
~50% lifelong conditions
Growing ~2x faster than
developed markets
Ageing population and
increase in life expectancy
Rise in underlying conditions
(e.g. cancer)
Improved access in
emerging markets
Global trends
driving growth
2021
2023
2024
2022
2020
2019
1.0
569
615
583
608
634
2.0
590
4.5
4.2
5.3
1.7
Total Sales $m
Organic growth %
Large and growing
segment with attractive
recurring revenue
Global market
by region
Europe
US
GEM
c. $3.2bn segment
c. 4-5% growth p.a.
Supporting patients across
the continuum of care is
critical to achieving growth
Services
Products
16
Convatec Group Plc Annual Report and Accounts 2024
Strategic report
A GAME CHANGER FOR MY PATIENTS
“As a nurse, I love that I can use a more scientific approach when
choosing from a standardised system of soft convexity. It’s very
flexible and compressible (or “squishable” as I like to call it), tension
location and depth/slope to make it a truly custom fit for my patients,
that can be used immediately post-op or years after their surgery.
This appliance is truly versatile – from retracted stomas in a crease
to a well budded stoma and everything in between, it has been
a game changer for my outpatient ostomy clinic.”
Stacy Thomlison
Certified Ostomy Care Nurse
Leakage problem?
Problem solved
Leak Defense™ combines gold-standard adhesives
with a comprehensive soft-convexity range that
adapts to the body for a secure, longer-lasting seal.
Strategic report
Additional information
Financial statements
Governance
Overview
17
Convatec Group Plc Annual Report and Accounts 2024
Operational review
Continence Care
Mark Jassey
President & Chief Operating Officer,
Continence Care & Home Services Group
Source: Market dynamics, segment size, growth rates and positions based on internal analysis & publicly available sources including Medicare/CMS.
Large and growing segment
with recurring revenues
Delivering products
and service
2024 performance
Revenue of $501m increased by 9.7% on
a reported basis and 9.8% on a constant
currency basis. Organic revenue growth
was 8.3%.
Performance was led by growing volume
and market share in the US. This was
further supported by a modest increase in
reimbursed pricing and increasing patient
adoption of Convatec-manufactured
products (including Cure Medical and
GentleCath™), which now represent
over 50% of our 180 Medical sales.
Hydrophilic catheters represented 60%
of our sales, having increased by c.5%
percentage points in our mix since 2020.
Our GentleCath Air™ for Women 2.0 has
been very well-received by HCPs and
customers, launching in key markets in
Europe and the US. We also made further
progress starting to build our
international presence, resulting in
accelerating growth in GEM and Europe.
Key focus areas are:
–
Rolling out launches to new markets:
•
Extending the launch of GentleCath
Air™ for Women internationally
•
Introducing Cure™ products in
Europe and GEM
•
Developing GentleCath Air™ for Men
Pocket and Set in 2026/27
–
Further improving commercial
execution globally:
•
Continuing to build out and
strengthen commercial teams in
Europe and GEM
Performance
2021
2023
2024
2022
2020
2019
5.4
342
405
426
457
501
3.4
363
5.4
6.5
8.3
5.1
Total Sales $m
Organic growth %
c. $2.3bn segment
c. 4% growth p.a.
3-6x per day
Customers require manual
intervention to void their
bladders daily
>95% at home
In-home usage, typically
without any assistance
Average 3-5 year
relationship with end-user
Enduring relationships via
chronic conditions and
distinctive services
Catheter usage is largely
at home
Global market
by region
Expansive and
growing portfolio
Forward integrated
solutions for high retention
Europe
US
GEM
18
Convatec Group Plc Annual Report and Accounts 2024
Strategic report
GentleCath Air™ for Women are hydrophilic catheters with FeelClean
Technology™, which integrates hydrophilic, lubricating properties
within the catheter material to remove the risk of sticking that occurs
with the chemicals used to coat other catheters.
Designed to minimise damage to the urethral mucosa and protect
the first line of defence against urinary tract infections (UTI).
MY JOURNEY TO CONFIDENT
CATHETERISATION
Kiera thought she’d found the best possible option for her,
but clicking on a link online one day led her to a new possibility:
GentleCath Air™ for Women. She was understandably hesitant
to try something new. “I’d gone through that difficult process at
the beginning; I didn’t want to disrupt things.” Kiera almost
didn’t try it, but the chance to free herself from the stickiness
and discomfort she felt was worth another roll of the dice.
“That immediately made sense to me. There was not that
sticky solution you have on some catheters. It has never been
uncomfortable, which is unbelievable because before, I thought
it was a normal part of using catheters. There was no irritation.”
“That doesn’t sound like much, but it was the biggest thing
for me. I haven’t had a UTI for a year and a half or longer.
I don’t like saying that out loud,” she laughs, crossing her
fingers. “Normal”, she says, can be a loaded word for people
who use catheters – she doesn’t like the idea that there is
anything ‘abnormal’ about her. “For me, it’s just about finding
the new normal that works for me. And I’m happy with my
new normal.”
Kiera McGarrity
an intermittent catheter user and
Psychological Wellbeing Practitioner
Gentle protection.
Confident living
Strategic report
Additional information
Financial statements
Governance
Overview
19
Convatec Group Plc Annual Report and Accounts 2024
Operational review
Infusion Care
Diabetes
Other therapies
Parkinson’s disease
Pain management
Immunoglobulin
deficiency
–
10m patients and 8%
market growth²
–
AbbVie or Mitsubishi Tanabe
targeting advanced patients
–
7.5m patients³ and 8%
market growth⁴
–
Morphine and combinations-
pallative care
–
6m patients⁵ and 10%
market growth⁶
–
IgG antibodies for e.g.
autoimmune and cancer
1. Seagrove (December 2024).
2. WHO 2022 fact sheet and Convatec estimates based on latest market research.
3. WHO 2020 – Palliative Care fact sheet.
4. Center to Advance Palliative Care facts and stats.
5. Bousfiha et al. Primary Immunodeficiency Diseases Worldwide: More Common than Generally Thought. JClin Immunol. 2013; 33:1-7.
6. MEGAN A. COOPER et al. Primary Immunodeficiencies Am Fam Physician. 2003;68(10):2001-2009.
Kjersti Grimsrud
President & Chief Operating Officer,
Infusion Care
Increasing penetration as pumps displace users
currently on multiple daily injections¹
Subcutaneous drug delivery is relevant to multiple therapeutic areas
2024 performance
Revenue of $411m increased 10.8% on
a reported basis, and by 11.2% on both
a constant currency and organic basis.
Growth was driven by strong demand for
Convatec infusion sets in both diabetes
and non-diabetes treatments.
In diabetes, durable insulin pump
penetration accelerated led by increasing
adoption of automated insulin delivery
and continuing innovation. This included
Medtronic’s 780G, Beta Bionics iLet,
Tandem Mobi and YpsoMed’s YpsoPump.
Diversification of our products and
customers progressed very well,
both within and outside diabetes.
For non-insulin therapies, our Neria™
brand infusion sets achieved excellent
double-digit growth and included the
launch of AbbVie’s new Parkinson’s
medicine therapy, which is approved
in 35 countries, including the US where
approval was received in October 2024.
Key focus areas are:
–
Supporting customer expansion
in diabetes:
•
Medtronic’s 780G extended wear
infusion set, Tandem Mobi, Beta
Bionics iLet
–
Continuing to diversify patient base
outside diabetes
•
Supporting AbbVie’s Parkinson’s
launch globally; preparing for the
Mitsubishi Tanabe launch
•
Increasing penetration of infusion
sets for other therapies such as
pain management
–
Enhancing operations:
•
Increasing production capacity
to meet accelerating demand
Performance
2021
2023
2024
2022
2020
2019
2.2
238
316
341
371
411
11.5
283
18.5
8.7
11.2
9.2
Total Sales $m
Organic growth %
2020
3.8%
Durable pump
Patch pump
0.9%
4.0%
1.0%
4.1%
1.2%
4.2%
1.4%
4.7%
1.7%
2021
2022
2024
2023
20
Convatec Group Plc Annual Report and Accounts 2024
Strategic report
Making everyday
life easier
Neria™ Guard is an all-in-one infusion set with fully automatic insertion
at the touch of a button that can make it easier to use especially for
those with dexterity issues. The set connects to a pump on one end
and the user’s infusion site on the other end. The retractable needle
can provide increased comfort (compared to a steel needle) during
insertion of the soft cannula. Neria™ Guard’s easy and intuitive
insertion technique protects against insertion technique errors
and can encourage independence in patients’ everyday lives.
LIFE-CHANGING
EFFECT
Damian Gath, aged 52, lives in the East Midlands in the UK and has
advanced Parkinson’s disease. Before his treatment, Damian had to
consume four different drugs orally six times a day in order to gain
control of involuntary movements. Damian experienced pain during
the night and fluctuations of his condition due to reduced effects
of the drugs at nighttime.
Shortly after his first Produodopa
®
treatment in July, Damian
experienced extraordinary and life-changing improvements to
his Parkinson’s symptoms. His quality of life has been transformed
through increased independence, absence of fluctuations and
better sleep, making everyday activities like making a cup of
coffee much easier.
“Using the infusion therapy through Neria™ Guard has been life-
changing for managing Parkinson’s disease. Just shortly after having
the first treatment, I was able to do everyday tasks much more easily,
such as make a cup of coffee or go to the supermarket. The fact that
Neria™ Guard enables the infusion therapy to be delivered 24 hours
a day has meant a huge improvement in my sleep which has
dramatically enhanced my quality of life.”
Damian Gath
Convatec Group Plc Annual Report and Accounts 2024
21
Financial statements
Additional information
Strategic report
Governance
Overview
“Our strong financial
performance clearly
demonstrates the success
of our FISBE strategy. We have
delivered six consecutive years
of accelerating organic revenue
growth, three years of adjusted
operating margin expansion
and our first year of double-
digit growth in adjusted EPS.”
$2,289.2m
$2,142.4m
2023
2024
+7.7%
+7.2%
2023
2024
Net cash generated
from operations
+17.3%
$575.5m
$490.6m
2023
2024
Equity cash
conversion²
,
³
96.6%
$301.8m
$228.3m
2023
2024
15.2¢
13.4¢
2023
2024
9.3¢
6.3¢
2023
2024
Revenue grew by 6.9% on a reported basis, 7.6% on a constant
currency basis and 7.7% on an organic¹ basis.
Adjusted operating profit margin was 21.2%, representing
an increase of 100bps over the previous year. On a constant
currency basis, adjusted operating profit margin expanded
by 160bps to 21.8%, with improved productivity, cost control,
pricing and mix benefits more than offsetting inflation and
continued investment in commercial and R&D capabilities.
Adjusted operating profit margin has increased by 350bps over
the past three years.
Adjusted diluted EPS increased by 13.7% year-on-year to 15.2
cents per share (2023: 13.4 cents per share). Reported diluted
EPS increased by 45.9% to 9.3 cents per share (2023: 6.3 cents
per share).
Net cash generated from operations improved by 17.3%
to $575.5 million (2023: $490.6 million), with free cash flow
to equity increasing by 32.2% to $301.8 million (2023: $228.3
million), primarily driven by higher EBITDA. Equity cash
conversion improved to 96.6% (2023: 83.3%).
For 2025, we expect further expansion of Group adjusted
operating margin to 22.0-22.5% and to deliver another year of
double-digit growth in adjusted EPS. This will be driven by 5-7%
organic growth in non-InnovaMatrix
®
sales based on our
broadening product portfolio, strongest ever pipeline and
focused commercial execution.
1. Organic revenue growth is calculated by applying the applicable prior
period average exchange rates to the Group’s actual performance in
the respective period and excluding acquired and disposed/discontinued
businesses. Acquisitions and disposals which impact this measure are
shown in the Glossary on page 212.
2. These non-IFRS financial measures are explained and reconciled to the
most directly comparable financial measures prepared in accordance
with IFRS on pages 28 to 31.
3. Equity cash conversion is calculated as free cash flow to equity divided
by adjusted net profit.
Free cash flow to equity²
Reported and Adjusted results
The Group’s financial performance, measured in accordance with
IFRS, is set out in the Consolidated Financial Statements and Notes
thereto on pages 157 to 200 and referred to in this Annual Report
as “reported” measures.
The commentary in this Financial review includes discussion of the
Group’s reported results and alternative performance measures (or
adjusted measures) (APMs). Management and the Board use APMs
as meaningful measures in monitoring the underlying performance
of the business. These measures are disclosed in accordance with
the ESMA guidelines and are explained and reconciled to the most
directly comparable reported measures prepared in accordance
with IFRS on pages 28 to 31.
Revenue and revenue growth on constant currency and organic
bases are non-IFRS financial measures and should not be viewed
as replacements of IFRS reported revenue and revenue growth.
Constant currency and organic growth are defined in the Glossary
to the Annual Report and Accounts. Percentage movements
throughout this report are calculated on actual unrounded
numbers.
Financial review
Reported
operating profit
margin growth
+190bps
14.2%
12.3%
2023
2024
Adjusted
operating profit
margin growth²
+100bps
*
21.2%
20.2%
2023
2024
*
+160bps on a constant
currency basis
Adjusted diluted
earnings per share²
+13.7%
Reported diluted
earnings per share
+45.9%
Reported revenue
growth
+6.9%
Organic revenue
growth¹
,
²
+7.7%
22
Convatec Group Plc Annual Report and Accounts 2024
Strategic report
Group financial performance
Reported
2024
$m
Reported
2023
$m
Adjusted¹
2024
$m
Adjusted¹
2023
$m
Adjusted @ CC²
2024
$m
Change
%
Revenue
2,289.2
2,142.4
2,289.2
2,142.4
2,304.6
7.6%
Gross profit
1,283.6
1,200.6
1,396.4
1,320.7
Operating profit
324.9
262.7
485.3
431.8
502.4
16.4%
Profit before income taxes
245.9
167.4
410.9
357.2
Net profit
190.5
130.3
312.4
274.1
Basic earnings per share (cents per share)
9.3¢
6.4¢
15.3¢
13.4¢
Diluted earnings per share (cents per share)
9.3¢
6.3¢
15.2¢
13.4¢
15.8¢
18.5%
Dividend per share (cents)
6.416¢
6.229¢
1. These non-IFRS financial measures are explained and reconciled to the most directly comparable financial measures prepared in accordance with IFRS
on pages 28 to 31.
2. Adjusted 2024 at constant currency is calculated on 2024 adjusted results translated at 2023 actual FX rates.
Revenue
2024
$m
2023
$m
Reported
growth
%
Foreign
exchange
impact
%
Constant
currency
growth
%
Organic
growth
%
Advanced Wound Care (AWC)
742.7
695.3
6.8%
(0.6)%
7.4%
7.4%
Ostomy Care (OC)
634.0
608.3
4.2%
(1.4)%
5.6%
5.3%
Continence Care (CC)
501.4
457.2
9.7%
(0.1)%
9.8%
8.3%
Infusion Care (IC)
410.9
370.9
10.8%
(0.4)%
11.2%
11.2%
Revenue excluding hospital care exit
2,289.0
2,131.7
7.4%
(0.7)%
8.1%
7.7%
Exit of hospital care and related industrial sales
0.2
10.7
(98.1)%
n/a
n/a
n/a
Total
2,289.2
2,142.4
6.9%
(0.7)%
7.6%
7.7%
Group reported revenue for 2024 of $2,289.2 million (2023: $2,142.4 million) increased 6.9% year-on-year on a reported basis and
7.6% on a constant currency basis.
Adjusting for foreign exchange and acquisition and divestiture-related activities³, Group revenue grew by 7.7% on an organic basis.
This was driven by broad-based growth across Advanced Wound Care, Ostomy Care, Continence Care and Infusion Care. For more
details about category revenue performance, refer to the Operational reviews on pages 14 to 21.
Net profit
Adjusted gross profit increased by 5.7% to $1,396.4 million (2023: $1,320.7 million) and adjusted gross profit margin decreased
by 60bps to 61.0% (2023: 61.6%). The Group delivered pricing and mix benefits of 100bps and productivity improvements of 50bps.
However, these were more than offset by inflationary pressures of 160bps and foreign exchange headwinds of 50bps. On a
reported basis, gross profit increased by 6.9% to $1,283.6 million (2023: $1,200.6 million).
Adjusted operating expenses saw a net increase of $22.2 million to $911.1 million (2023: $888.9 million), with increases in adjusted
selling and distribution (S&D) expenses partially offset by reductions in adjusted general and administrative (G&A) expenses.
Increases in adjusted S&D of $31.8 million to $643.7 million (2023: $611.9 million), were primarily driven by higher investment in the
sales force associated with growing the business. Reported S&D increased by $32.7 million to $645.2 million (2023: $612.5 million).
Adjusted R&D of $102.4 million (2023: $103.9 million) remained consistent year-on-year and, combined with an increase in R&D
capital expenditure, reflected the ongoing investment in our future pipeline of new products and new R&D talent joining the
business through recent acquisitions. On a reported basis, R&D increased by 1.5% to $111.7 million (2023: $110.0 million).
Adjusted G&A decreased by $8.1 million year-on-year to $165.0 million (2023: $173.1 million), reflecting the Group’s focus on
simplification and productivity, notably as we continued to standardise technology and processes, build internal expertise and
reduce external third party spend and expand the scope of our Global Business Services (GBS). Adjusted G&A as a percentage
of revenue fell to 7.2% (2023: 8.1%) – over the past three years, adjusted G&A as a percentage of revenue has fallen by 450bps.
Reported G&A decreased by 8.4% to $195.0 million (2023: $212.9 million).
A reconciliation between reported and adjusted operating expenses is provided in the Non-IFRS financial information section
on pages 28 to 31.
The Group delivered adjusted operating profit of $485.3 million (2023: $431.8 million), representing an adjusted operating margin
of 21.2% (2023: 20.2%). This was equivalent to 21.8% on a constant currency basis, an increase of 160bps versus 2023. Reported
operating profit increased by 23.7% to $324.9 million (2023: $262.7 million).
Adjusted net profit increased by 14.0% to $312.4 million (2023: $274.1 million), with the increase in adjusted income tax expense
(explained on page 24) more than offset by the increase in adjusted operating profit as explained above. On a reported basis,
net profit increased by 46.2% to $190.5 million (2023: $130.3 million). Adjusting items are explained on page 24.
3. Acquisitions in 2024 related to Livramedom whilst in 2023, acquisitions related to Starlight Science, A Better Choice Medical Supply and All American Medical
Supply. Divestitures related to the 2022 discontinuation of hospital care, related industrial sales and associated Russia operations. The Group discontinued
operations (including all sales and marketing activities) in Russia in 2022. We are in the process of managing our exit from the Group’s dormant entity, and
from 1 March 2025, will have no remaining employees in the country. We have no plans to recommence operations.
23
Convatec Group Plc Annual Report and Accounts 2024
Governance
Financial statements
Additional information
Overview
Strategic report
Financial review
continued
Earnings per share (EPS)
Adjusted basic EPS for 2024 was 15.3 cents (2023: 13.4 cents) and adjusted diluted EPS was 15.2 cents (2023: 13.4 cents),
representing increases of 13.5% and 13.7% respectively.
Reported basic EPS rose 45.6% to 9.3 cents (2023: 6.4 cents), reflecting the reported net profit divided by the basic weighted
average number of ordinary shares of 2,047,643,498 (2023: 2,038,653,228).
Taxation
Year ended 31 December
2024
$m
Effective tax
rate
2023
$m
Effective tax
rate
Reported income tax expense
(55.4)
22.5%
(37.1)
22.2%
Tax effect of adjustments
(40.2)
(38.5)
Other discrete tax items
(2.9)
(7.5)
Adjusted income tax expense
(98.5)
24.0%
(83.1)
23.3%
The Group’s reported income tax expense was $55.4 million (2023: $37.1 million). The increase in the reported effective tax rate was
due to the variance of profit mix between jurisdictions, an increase in uncertain tax positions and the impact of the 2023 benefit from
a successful resolution of an uncertain tax position. The increase was net of a reduction due to the release of a $2.9 million tax liability
relating to business restructuring and a benefit from prior year tax filings in the UK.
The adjusted effective tax rate of 24.0% for the year ended 31 December 2024 (2023: 23.3%) was after reflecting the tax impact of
items treated as adjusting items (further details can be found in the reconciliation of reported earnings to adjusted earnings table
in the Non-IFRS financial information section on page 29). The increase in the adjusted effective tax rate was due to the variance
of profit mix between jurisdictions in which the Group had a taxable presence and an increase in uncertain tax positions. This
increase was net of a benefit from prior year tax filings in the UK.
Alternative Performance Measures (APMs)
Management and the Board will make adjustments to the reported figures, where appropriate, to produce more meaningful
measures to monitor the underlying performance of the business – Alternative Performance Measures (APMs). The Group’s APM
policy can be found in the Non-IFRS financial information section on page 28 and the following adjustments were made to derive
adjusted operating profit and adjusted net profit.
Operating
profit
$m
Fair value movement of
contingent consideration
$m
Non-operating
income/(expense)
$m
Income
tax
$m
2024
2023
2024
2023
2024
2023
2024
2023
Reported
324.9
262.7
(4.6)
(24.6)
3.7
4.8
(55.4)
(37.1)
Amortisation of acquired intangibles
136.3
136.2
–
–
–
–
(33.6)
(32.6)
Acquisitions and divestitures
1.8
10.1
4.6
24.6
–
(3.9)
(1.3)
(0.7)
Termination benefits and related costs
6.3
9.5
–
–
–
–
(1.5)
(2.0)
Other adjusting items
16.0
13.3
–
–
–
–
(3.8)
(3.2)
Other discrete tax items
–
–
–
–
–
–
(2.9)
(7.5)
Adjusted
485.3
431.8
–
–
3.7
0.9
(98.5)
(83.1)
Adjustments made to derive adjusted operating profit in 2024 included the amortisation of acquired intangibles of $136.3 million
(2023: $136.2 million), of which $94.1 million (2023: $93.2 million) resulted from intangible assets arising from the spin-out from
Bristol-Myers Squibb in 2008 and will be fully amortised by December 2026.
Acquisition and divestiture-related costs of $1.8 million consisted of costs in respect of the Livramedom acquisition and certain
prior acquisitions partially offset by the release of previously recognised provisions in respect of the hospital care exit.
Termination costs of $6.3 million were in respect of one-off, fundamental transformation projects in line with our simplification
and productivity initiatives. Other adjusting items of $16.0 million largely consisted of the impairment of right-of-use assets
and property, plant and equipment, inventory write offs and charges wholly related to the office footprint optimisation programme
and closure of certain manufacturing sites as previously announced.
Of the total $160.4 million of adjusting items recognised within operating profit (excluding tax impact), only $10.8 million was
cash-impacting in 2024 (2023: $16.1 million). There was also a cash outflow of $11.7 million (2023: $7.5 million) during the year in
respect of adjusting items recorded as accruals in the prior year. In 2025, the total cash impact of adjusting items to be recognised
within operating profit (including amounts accrued in previous years), is currently expected to be similar to 2024. For further
information on Non-IFRS financial information, see pages 28 to 31.
In 2024, other discrete tax items related to a tax benefit of $2.9 million resulting from the release of a tax liability relating
to restructuring activities in Switzerland. In 2023, other discrete tax items related to a tax benefit of $15.1 million resulting from
a provision release following the successful resolution of an uncertain tax position, partially offset by tax expenses of $7.6 million
in respect of a restructuring of activities in Switzerland. For further details on deferred taxation, see Note 6 – Income taxes in the
Consolidated Financial Statements.
The Board, through the Audit and Risk Committee, annually reviews the Group’s APM policy to ensure that it remains appropriate,
aligns with regulatory guidance and reflects the way in which the performance of the Group is managed.
24
Convatec Group Plc Annual Report and Accounts 2024
Strategic report
Acquisitions
In 2024, the Group completed the acquisition of Livramedom – a homecare service provider, based in France, for a net cash outflow of
$13.6 million to further strengthen our Home Services Group. There was no contingent consideration associated with this acquisition.
During the year, the Group paid $70.9 million in respect of final earn out amounts associated with the acquisitions of Cure
Medical in 2021 and Triad Life Science in 2022 (of which $69.7 million had been provided at 31 December 2023). As at 31 December
2024, the discounted fair value of contingent consideration arising on acquisitions was $70.3 million (2023: $138.0 million). Refer
to Note 26 – Acquisitions in the Consolidated Financial Statements for further details.
Dividends
Dividends are distributed based on the realised distributable reserves of the Company, which are primarily derived from
the dividends received from subsidiary companies and are not based directly on the Group’s consolidated retained earnings.
The realised distributable reserves of the Company at 31 December 2024 were $1,474.7 million (2023: $1,539.4 million).
The Board declared an interim dividend of 1.822 cents per share in July 2024 and has recommended a final 2024 dividend of
4.594 cents per share, which would bring the full-year dividend to 6.416 cents per share (2023: 6.229 cents per share), an increase
of 3% and a pay-out ratio when compared to adjusted net profit of 42% (2023: 46%). Our stated policy is a pay-out ratio of 35% to
45% of adjusted net profit but this is interpreted flexibly over time to reflect the underlying performance of the business and the
Board’s confidence in its future growth prospects.
Further information about the Group’s dividend policy and dividends paid can be found on page 145 and information on capital
maintenance and the available realised distributable reserves position can be found on page 185.
Cash Flow and Net Debt
Adjusted
2024
$m
Adjusted
2023
$m
Adjusted EBITDA¹
,
⁶
590.5
527.1
Working capital inflow/(outflow)¹
,
⁶
7.5
(12.9)
Adjusting items²
,
⁶
(22.5)
(23.6)
Capital expenditure
(122.1)
(129.2)
Operating cash flow¹
453.4
361.4
Tax paid
(52.1)
(35.9)
Free cash flow to capital¹
401.3
325.5
Net interest paid
(79.1)
(65.6)
Lease payments
(24.7)
(22.7)
Other³
4.3
(8.9)
Free cash flow to equity¹
301.8
228.3
Dividends⁴
(130.2)
(110.7)
Acquisitions and other⁵
(89.5)
(178.8)
Purchase of own shares
(10.9)
–
Movement in net debt
71.2
(61.2)
Net debt¹ at 1 January (excluding lease liabilities)
(1,129.3)
(1,068.1)
Net debt¹ at 31 December (excluding lease liabilities)
(1,058.1)
(1,129.3)
1. These non-IFRS financial measures are explained and reconciled to the most directly comparable financial measure prepared in accordance with IFRS in the
Non-IFRS financial information section on page 30.
2. Details of adjusting items are provided in the adjusting items cash movement table in the Non-IFRS financial information section on page 31. Of the total cash
outflow of $22.5 million during the year, $11.7 million related to accruals recorded in the prior year.
3. Other consisted of financing fees amortisation $3.0 million (2023: $2.8 million) offset by a net FX gain on cash and borrowings of $4.6 million (2023: $6.7
million FX loss) and proceeds from PP&E sales of $2.7 million (2023: $0.6 million).
4. Dividend cash payments of $130.2 million (2023: $110.7 million) were made to shareholders during the year.
5. Acquisition and other payments of $89.5 million consisted of the consideration payment of $13.6 million in respect of the acquisition of Livramedom,
a $5.0 million SAFE note investment in BlueWind Medical and $70.9 million in respect of the final earn out payments associated with the acquisitions of Cure
Medical in 2021 and Triad Life Sciences in 2022.
6. Excluding the impact of adjusting items of $22.5 million (2023: $23.6 million) on adjusted EBITDA and adjusted working capital movements, EBITDA was
$573.2 million (2023: $496.7 million) and the reported working capital movement was a $6.5 million outflow (2023: $0.6 million inflow).
Adjusted EBITDA
Adjusted EBITDA increased by $63.4 million to $590.5 million (2023: $527.1 million), with the increase in adjusted gross profit of
$75.7 million more than offsetting the increase in adjusted operating expenses of $22.2 million. These are explained in the adjusted
net profit commentary section. A reconciliation of adjusted EBITDA to the closest IFRS measure is provided in the Non-IFRS financial
information section on pages 28 to 31.
Free cash flow to capital
Free cash flow to capital increased by $75.8 million to $401.3 million (2023: $325.5 million), largely driven by the increase in adjusted
EBITDA of $63.4 million and improved year-on-year working capital movements of $20.4 million. These were partly offset by an
increase in cash tax paid of $16.2 million.
The Group invested $122.1 million in capital expenditure (2023: $129.2 million) to increase manufacturing capacity and automation,
develop new products and improve information technology and digital tools.
25
Convatec Group Plc Annual Report and Accounts 2024
Governance
Financial statements
Additional information
Overview
Strategic report
The adjusted working capital inflow of $7.5 million (2023: $12.9 million outflow) improved year-on-year, with reduced inventory levels
of $25.7 million on an adjusted basis and a realised gain on the settlement of FX derivatives held to manage foreign exchange risk in
our working capital of $8.8 million (2023: $6.7 million loss) partially offset by a $26.9 million increase in trade and other receivables
based on higher sales.
Free cash flow to capital is reconciled to its nearest IFRS measure in the Non-IFRS financial information section – see page 30.
The nearest IFRS measure is net cash generated from operations, which has increased by $84.9 million to $575.5 million
(2023: $490.6 million) and is derived from reported net profit of $190.5 million (2023: $130.3 million).
Operating cash conversion was 93.4% (2023: 83.7%). The improvement in the ratio primarily reflected the improvement in working
capital and net FX gains on derivatives. Refer to page 31 in the Non-IFRS financial information section.
Free cash flow to equity
Free cash flow to equity increased by $73.5 million or 32.2% to $301.8 million (2023: $228.3 million). This was driven by an increase
in free cash flow to capital of $75.8 million as explained above and net foreign exchange gains of $11.3 million on borrowings and
cash, partly offset by higher finance expense payments of $13.5 million primarily due to the timing of interest payments associated
with the revolving credit facility. Free cash flow to equity is reconciled to its nearest IFRS measure in the Non-IFRS financial
information section – see page 30.
Equity cash conversion was 96.6% (2023: 83.3%) – refer to page 31 in the Non-IFRS financial information section.
Borrowings and net debt
2023
2024
2023
2024
2023
2024
2023
2024
Net debt
2
excluding leases $1,058.1m
(2023: $1,129.3m)
500
250
0
-1,000
-750
-250
-500
Net debt
2
/
adjusted EBITDA
2
At 31 December 2023
2.1x
Net debt
2
/
adjusted EBITDA
2
At 31 December 2024
1.8x
($627.7m)
$97.6m
($732.8m)
($85.5m)
($494.1m)
$64.7m
($78.8m)
($495.1m)
Cash and cash equivalents
Lease liabilities
Senior notes¹
Credit facilities drawn¹
1. Senior notes and credit facilities are stated net of unamortised financing fees of $4.9 million and $5.8 million respectively (2023: $5.9 million and $7.8 million).
2.
These non-IFRS measures are explained and reconciled to the most directly comparable financial measures prepared in accordance with IFRS on
pages 28 to 31.
As at 31 December 2024, the Group’s cash and cash equivalents were $64.7 million (2023: $97.6 million) and total borrowings
(net of deferred financing fees) were $1,122.8 million (2023: $1,226.9 million). The Group’s banking facilities comprise of a
multicurrency revolving credit facility of $950.0 million and a term loan of $250.0 million, maturing in 2028 and 2027 respectively.
The Group’s $500.0 million senior unsecured notes, issued in October 2021, remain in place with maturity in October 2029. As at
31 December 2024, $566.5 million of the multicurrency revolving credit facility remained undrawn.
The Group ended the period with total borrowings, including IFRS 16 lease liabilities, of $1,201.6 million (2023: $1,312.4 million).
Offsetting cash of $64.7 million (2023: $97.6 million) and excluding lease liabilities, net debt was $1,058.1 million (2023: $1,129.3
million), equivalent to 1.8x adjusted EBITDA (2023: 2.1x adjusted EBITDA). We continue to target leverage of 2x over time but are
comfortable to temporarily go above or below this, dependent on M&A and other investment opportunities.
For further information on borrowings see Note 21 – Borrowings in the Consolidated Financial Statements.
Covenants
At 31 December 2024, the Group was in compliance with all financial and non-financial covenants associated with the Group’s
outstanding debt. The Group has two financial covenants, being net leverage and interest cover, each of which is defined, where
applicable, within the borrowing documentation. The table below summarises the Group’s most restrictive covenant thresholds
and position as at 31 December 2024 and 2023.
Maximum covenant
net leverage
Actual covenant
net leverage
Minimum covenant
interest cover
3
Actual covenant
interest cover
3
31 December 2024
3.50x
1.9x
3.5x
7.6x
31 December 2023
3.50x
2.3x
3.5x
7.0x
3. Interest cover is adjusted EBITDA/interest expense (net) and net leverage is net debt/adjusted EBITDA in accordance with the definitions contained in
underlying borrowing documentation and are not the same as the definitions of these measures presented in the Non-IFRS financial information section
on pages 28 to 31 and applied in the commentary in this Financial review.
Financial review
continued
26
Convatec Group Plc Annual Report and Accounts 2024
Strategic report
Group financial position
At 31 December
2024
$m
2023
$m
Change
$m
Intangible assets and goodwill
2,096.1
2,234.1
(138.0)
Other non-current assets
625.6
609.6
16.0
Cash and cash equivalents
64.7
97.6
(32.9)
Other current assets
728.6
772.4
(43.8)
Total assets
3,515.0
3,713.7
(198.7)
Current liabilities
(512.3)
(536.4)
24.1
Non-current liabilities
(1,313.8)
(1,484.6)
170.8
Equity
(1,688.9)
(1,692.7)
3.8
Total equity and liabilities
(3,515.0)
(3,713.7)
198.7
Intangible assets and goodwill
Intangible assets and goodwill decreased by $138.0 million to $2,096.1 million (2023: $2,234.1 million) and was primarily driven by
the in-year amortisation of intangible assets of $157.0 million partially offset by intangible asset additions of $31.4 million. Further
detail is provided in Note 9 – Intangible assets and goodwill in the Consolidated Financial Statements.
Following the Local Coverage Determinations (LCDs) announcement in November 2024, management considered whether there
was an indication of impairment in respect of the InnovaMatrix
®
product-related intangible asset held on the balance sheet. Using
latest approved forecasts, the recoverable amount was calculated, and this demonstrated significant headroom over the carrying
amount.
A similar exercise was carried out on the goodwill balance associated with the Advanced Wound Care CGU and there was
significant headroom remaining. Management therefore concluded that the intangible asset and goodwill balance were not
impaired at 31 December 2024.
No other triggers of impairments were identified during 2024.
Other non-current assets
Other non-current assets, including property, plant and equipment (PP&E), right-of-use assets, investment in financial assets,
deferred tax assets, restricted cash and other assets increased by $16.0 million to $625.6 million (2023: $609.6 million), with the
increase largely due to an increase in PP&E reflecting the continued investment in our manufacturing facilities.
Current assets excluding cash and cash equivalents
Current assets, excluding cash and cash equivalents, decreased by $43.8 million to $728.6 million (2023: $772.4 million), primarily
driven by a reduction in inventories of $46.5 million. As a result of the LCDs announcement, consideration was also given to the
recoverability of related debtors and inventory valuation. No issues were noted and management concluded that there were no
risks of material misstatement in respect of these balances as at 31 December 2024.
Current liabilities
Current liabilities decreased by $24.1 million to $512.3 million (2023: $536.4 million), with decreases in trade and other payables
of $6.0 million, provisions of $9.7 million and contingent consideration of $16.4 million partially offset by an increase in current tax
payable of $5.3 million.
Non-current liabilities
Non-current liabilities decreased by $170.8 million to $1,313.8 million (2023: $1,484.6 million). This was primarily due to reductions
in non-current borrowings of $104.1 million, contingent consideration of $51.3 million (following the final earn out payments made
for the Cure Medical and Triad acquisitions), deferred tax liabilities of $5.5 million and lease liabilities of $8.0 million.
Going concern
In assessing going concern, the Directors considered available cash resources, access to committed undrawn funding, financial
performance and forecast performance, including continued implementation of the FISBE 2.0 strategy, together with the Group’s
financial covenant compliance requirements and principal risks and uncertainties.
The same severe but plausible downside scenarios utilised in the preparation of the Viability statement were also applied in
assessing going concern. Under each scenario, the Group retained significant liquidity and covenant headroom throughout the
going concern period, i.e. 12 months from the date of this report. For further information on the Viability statement see pages
82 and 83 and for Going Concern, see Note 1.2 to the Consolidated Financial Statements.
A reverse stress test, before corporate level mitigations, was also considered to demonstrate what reduction in revenue would be
required in the next 12 months to create conditions which may lead to a potential covenant breach. The outcome of this test was
considered implausible given the Group’s strong global market position, diversified portfolio of products and the corporate
mitigations available to the Board and management.
Accordingly, the Directors continue to adopt the going concern basis in preparing the Consolidated Financial Statements.
Jonny Mason
Chief Financial Officer
25 February 2025
27
Convatec Group Plc Annual Report and Accounts 2024
Governance
Financial statements
Additional information
Overview
Strategic report
KPI
Please see page 12
KEY
Non-IFRS financial
information
Non-IFRS financial information
Non-IFRS financial information or
alternative performance measures
(APMs) are those measures used by the
Board and management on a day-to-day
basis in their assessment of profit and
performance and comparison between
periods. The adjustments applied to
IFRS measures reflect the effect of
certain cash and non-cash items that the
Board believes distort the understanding
of the quality of earnings and cashflows
as, by their size or nature, they are not
considered part of the core operations
of the business. Adjusted measures also
form the basis of performance measures
for remuneration, e.g. adjusted
operating profit.
It should be noted that the Group’s
APMs may not be comparable to
other similarly titled measures used
by other companies and should not be
considered in isolation or as a substitute
for the equivalent measures calculated
and presented in accordance with IFRS
(our reported measures).
In determining whether an item should
be presented as an allowable adjustment
to IFRS measures, the Group considers
items which are significant either
because of their size or their nature and
arise from events that are not considered
part of the core operations of the
business. These tend to be one-off events
but may still cross more than one
accounting period. Recurring items may
be considered, particularly in respect of
the amortisation of acquisition-related
intangible assets. If an item meets at
least one of these criteria, the Board,
through the Audit and Risk Committee,
then exercises judgement as to whether
the item should be classified as an
allowable adjustment to IFRS
performance measures. The tax effect
of the adjustments is reflected in the
adjusted tax expense to remove the
tax impact from adjusted net profit
and adjusted earnings per share.
Amortisation of acquisition-
related intangible assets
The Group’s strategy is to grow both
organically and through acquisition, with
acquisitions being targeted to strengthen
our position in key geographies and/or
business categories or which provide
access to new technology. The nature
of the businesses acquired includes
the acquisition of significant intangible
assets, which are required to be
amortised. The Board and management
regard the amortisation as a distortion to
the quality of earnings and it has no cash
implications in the year. The amortisation
also distorts comparability with peer
groups where such assets may have
been internally generated and, therefore,
not reflected on their balance sheet.
Amortisation of acquisition-related
intangible assets is, by its nature,
a recurring adjustment.
Acquisition-related activities
Costs directly related to potential and
actual strategic transactions which have
been executed, aborted or are in-flight
are deemed adjusting items.
Acquisition-related costs relate to deal
costs, integration costs and earn-out
adjustments, including the discounting
impact which are incurred directly as
a result of the Group undertaking or
pursuing an acquisition. Deal costs are
wholly attributable to the deal, including
legal fees, due diligence fees, bankers’
fees/commissions and other direct costs
incurred as a result of the actual or
potential transaction. Integration costs
are wholly attributable to the integration
of the target and based on integration
plans presented at the point of
acquisition, including the cost of
retention of key people where this
is in excess of normal compensation,
redundancy of target staff and early
lease termination payments. Adjusted
measures in relation to acquisitions
also include aborted deal costs.
Divestiture-related activities
Divestiture-related activities comprise
the gains or losses resulting from disposal
or divestment of a business as a result
of a sale, major business change or
restructuring programme. These include
write-down of non-current assets,
provisions to recognise inventories at
realisable value, provisions for costs of
exiting contracts and associated legal
fees, and any other directly attributable
costs. Any income from the ultimate
disposal of a business or subsidiary is
included in the gain or loss. Adjusted
measures in relation to divestitures also
include aborted deal costs.
Impairment of assets
Impairments, write-offs and gains
and losses from defined programmes
and where the Group considers the
circumstances of such event are not
reflective of normal business trading
performance or when transactions
relate to acquisition-related intangible
assets where the amortisation is already
excluded from the calculation of
adjusted measures.
Termination benefits
and related costs
Termination benefits and other related
costs arise from material, one-time
Group-wide initiatives to reduce the
ongoing cost base and improve efficiency
in the business, including divestitures
from non-strategic activities. The Board
considers each project individually to
determine whether its size and nature
warrants separate disclosure. Qualifying
items are limited to termination benefits
(including retention) without condition
of continuing employment in respect of
major Group-wide change programmes.
Where discrete qualifying items are
identified these costs are highlighted and
excluded from the calculation of adjusted
measures. Due to their nature, these
adjusted costs may span more than
one year.
Other adjusting items
Other adjusting items relate to material,
one-time initiatives which are part of the
Group’s strategy to improve productivity
in the business and optimise cash flows.
The Board considers each project
individually to determine whether its size
and nature warrants separate disclosure.
Qualifying costs are limited to directly
attributable costs of the initiatives and
any realignment costs. Due to the nature
of the initiatives, these adjusted costs
may span more than one year.
Revenue measures
Revenue growth on a constant currency
basis represents reported revenue, as
determined under IFRS, and applying the
applicable prior period average exchange
rates to the Group’s actual performance
in the respective period. Organic revenue
growth is calculated by adjusting this to
exclude the impact of acquisitions and
divestitures (see details in the Glossary
on page 212).
KPI
Cash flow measures
Operating cash flow is the net cash
generated from operations, as
determined under IFRS, less capital
expenditure. Free cash flow to capital
is defined as operating cash flow less
tax paid. Free cash flow to equity
reflects how effectively we are converting
the profit we generate into cash (after
accounting for working capital, capital
investments, adjusting items, tax and
interest). Refer to page 30 for details
on how these measures are calculated.
Net debt and leverage ratio are two other
measures used and these are explained
on page 31.
28
Convatec Group Plc Annual Report and Accounts 2024
Strategic report
Reconciliation of reported earnings to adjusted earnings for the years ended 31 December 2024 and 2023
Year ended 31 December 2024
Revenue
$m
Gross profit
$m
Operating
costs
$m
Operating
profit
$m
Finance
expense,
net
$m
Fair value
movement of
contingent
consideration
$m
Non-
operating
income,
net
$m
PBT
$m
Income tax
$m
Net profit
$m
As reported
2,289.2
1,283.6
(958.7)
324.9
(78.1)
(4.6)
3.7
245.9
(55.4)
190.5
Amortisation of acquired
intangibles
–
109.0
27.3
136.3
–
–
–
136.3
(33.6)
102.7
Acquisition-related costs
–
–
3.5
3.5
–
4.6
–
8.1
(1.7)
6.4
Divestiture-related costs/
(income)
–
(1.1)
(0.6)
(1.7)
–
–
–
(1.7)
0.4
(1.3)
Termination benefits and
related costs
–
0.9
5.4
6.3
–
–
–
6.3
(1.5)
4.8
Other adjusting items
–
4.0
12.0
16.0
–
–
–
16.0
(3.8)
12.2
Other discrete tax items
–
–
–
–
–
–
–
(2.9)
(2.9)
Adjusted
2,289.2
1,396.4
(911.1)
485.3
(78.1)
–
3.7
410.9
(98.5)
312.4
Amortisation
20.7
Depreciation
63.8
Impairment of assets
0.9
Share-based payments
19.8
Adjusted EBITDA
590.5
Year ended 31 December 2023
Revenue
$m
Gross profit
$m
Operating
costs
$m
Operating
profit
$m
Finance
expense,
net
$m
Fair value
movement of
contingent
consideration
$m
Non-
operating
income, net
$m
PBT
$m
Income tax
$m
Net profit
$m
As reported
2,142.4
1,200.6
(937.9)
262.7
(75.5)
(24.6)
4.8
167.4
(37.1)
130.3
Amortisation of acquired
intangibles
–
110.4
25.8
136.2
–
–
–
136.2
(32.6)
103.6
Acquisition-related costs
–
1.5
6.8
8.3
–
24.6
–
32.9
(1.4)
31.5
Divestiture-related costs/
(income)
–
3.6
(1.8)
1.8
–
–
(3.9)
(2.1)
0.7
(1.4)
Termination benefits and
related costs
–
2.1
7.4
9.5
–
–
–
9.5
(2.0)
7.5
Other adjusting items
–
2.5
10.8
13.3
–
–
–
13.3
(3.2)
10.1
Other discrete tax items
–
–
–
–
–
–
–
(7.5)
(7.5)
Adjusted
2,142.4
1,320.7
(888.9)
431.8
(75.5)
–
0.9
357.2
(83.1)
274.1
Amortisation
18.4
Depreciation
60.2
Impairment of assets
2.1
Share-based payments
14.6
Adjusted EBITDA
527.1
Refer to the Financial Review on page 24 for commentary on the Group’s adjusting items.
Adjusted operating profit margin of 21.2% (2023: 20.2%) is calculated as adjusted operating profit of $485.3 million (2023: $431.8
million) divided by revenue of $2,289.2 million (2023: $2,142.4 million). A reconciliation of adjusted operating profit to its closest IFRS
measure is shown in the table above.
KPI
Adjusted operating profit at constant currency, determined by applying the applicable prior period average exchange rates to the
adjusted operated profit, was $502.4 million, with adjusted operating profit margin growth of 16.4% on a constant currency basis.
The adjusted operating profit margin was 21.8% on a constant currency basis, calculated as the adjusted operating profit of $502.4
million on a constant currency basis divided by revenue of $2,304.6 million on a constant currency basis.
Reconciliation of reported operating costs to adjusted operating costs for the years ended 31 December 2024
and 2023
2024
2023
S&D
$m
G&A
$m
R&D
$m
Other
$m
Operating
costs
$m
S&D
$m
G&A
$m
R&D
$m
Other
$m
Operating
costs
$m
As reported
(645.2)
(195.0)
(111.7)
(6.8)
(958.7)
(612.5)
(212.9)
(110.0)
(2.5)
(937.9)
Amortisation of acquired
intangibles
0.6
19.0
7.7
–
27.3
–
19.8
6.0
–
25.8
Acquisition-related costs
–
2.8
–
0.7
3.5
–
6.8
–
–
6.8
Divestiture-related income
(0.6)
–
–
–
(0.6)
(1.0)
(0.4)
–
(0.4)
(1.8)
Termination benefits and
related costs
1.2
2.6
1.6
–
5.4
1.6
5.7
0.1
–
7.4
Other adjusting items
0.3
5.6
–
6.1
12.0
–
7.9
–
2.9
10.8
Adjusted
(643.7)
(165.0)
(102.4)
–
(911.1)
(611.9)
(173.1)
(103.9)
–
(888.9)
29
Convatec Group Plc Annual Report and Accounts 2024
Governance
Financial statements
Additional information
Overview
Strategic report
Reconciliation of reported basic and diluted earnings per share to adjusted earnings per share for the years
ended 31 December 2024 and 2023
2024
$m
Adjusted
2024
$m
2023
$m
Adjusted
2023
$m
Net profit attributable to the shareholders of the Group
190.5
312.4
130.3
274.1
Number
Number
Basic weighted average ordinary shares in issue¹
2,047,643,498
2,038,653,228
Diluted weighted average ordinary shares in issue¹
2,056,797,417
2,052,589,260
Cents per
share
Cents per
share
Cents per
share
Cents per
share
Basic earnings per share
9.3
15.3
6.4
13.4
Diluted earnings per share
9.3
15.2
6.3
13.4
1.
See Note 7 – Earnings per share to the Consolidated Financial Statements.
Adjusted diluted EPS has increased by 13.7% and is calculated as adjusted diluted EPS for the current period less adjusted diluted
EPS for the prior year, divided by the prior year adjusted diluted EPS. This is calculated on actual unrounded numbers.
KPI
Reconciliation of Operating cash flow, Free cash flow to capital, Free cash flow to equity
Year ended 31 December
2024
$m
2023
$m
Net cash generated from operations
575.5
490.6
Less: acquisition of PP&E and intangible assets
(122.1)
(129.2)
Operating cash flow
453.4
361.4
Tax paid
(52.1)
(35.9)
Free cash flow to capital
401.3
325.5
Net interest paid
(79.1)
(65.6)
Payment of lease liabilities
(24.7)
(22.7)
Financing fee amortisation
(3.0)
(2.8)
Foreign exchange gain/(loss) on cash and borrowings
4.6
(6.7)
Proceeds from sale of PP&E
2.7
0.6
Free cash flow to equity
301.8
228.3
Free cash flow to equity has increased by 32.2% to $301.8 million (2023: $228.3 million) and is calculated as the movement in free
cash flow to equity year-on-year divided by the free cash flow to equity in the prior year. A reconciliation of free cash flow to equity
to its closest IFRS measure is shown in the table above.
KPI
Reconciliation of reported and adjusted working capital movement
Year ended 31 December
2024
$m
2023
$m
Reported working capital movement
²
(6.5)
0.6
Increase in respect of acquisitions and divestitures
3.1
3.1
Increase/(decrease) in termination benefits
4.2
(6.1)
(Decrease) in respect of other adjusting items
(2.1)
(3.8)
Realised gain/(loss) on settlement of FX derivatives held to manage foreign exchange risk in working capital³
8.8
(6.7)
Adjusted working capital movement
7.5
(12.9)
2.
The comparatives have been re-presented as outlined in Note 1.6 to the Consolidated Financial Statements.
3.
Realised gains and losses arising from the settlement of FX derivatives held to manage foreign exchange risk in our working capital have been included
in this reconciliation as management believe this provides a more accurate view of the underlying movement in working capital.
Non-IFRS financial information
continued
30
Convatec Group Plc Annual Report and Accounts 2024
Strategic report
Cash flow conversion
Year ended 31 December
2024
2023
Operating cash conversion¹
93.4%
83.7%
Equity cash conversion¹
96.6%
83.3%
1. Operating cash conversion is calculated as Operating cash flow / Adjusted operating profit. Equity cash conversion is calculated as Free cash flow to equity/
Adjusted net profit.
Cash outflows from adjusting items
Year ended 31 December
2024
$m
2023
$m
Acquisition and divestitures adjustments
(4.2)
(13.6)
Termination benefits and related costs adjustments
(10.7)
(3.4)
Other adjusting items
(7.6)
(6.6)
Cash outflows from adjusting items
(22.5)
(23.6)
Net debt
Monitoring net debt is important to the Group as it is an indicator of the Group’s financial health and its available liquidity. It is
an important decision-making tool for investment decisions and strategic planning. Net debt is calculated as borrowings less cash
and excluding lease liabilities.
2024
$m
2023
$m
Senior notes²
495.1
494.1
Credit facilities²
627.7
732.8
Lease liabilities³
78.8
85.5
Total borrowings including lease liabilities
1,201.6
1,312.4
Less: cash and cash equivalents⁴
(64.7)
(97.6)
Less: lease liabilities³
(78.8)
(85.5)
Net debt excluding leases
1,058.1
1,129.3
2 . See Note 21 – Borrowings of the Consolidated Financial Statements.
3. See Note 24 – Leases of the Consolidated Financial Statements.
4. See Note 22 – Cash, cash equivalents and restricted cash of the Consolidated Financial Statements.
Leverage
Leverage is an important performance measurement metric for the Group as it is an indicator of financial risk, credit worthiness
and operational flexibility. It is also an important consideration in strategic decision-making. The leverage ratio is calculated as net
debt excluding leases divided by adjusted EBITDA.
2024
$m
2023
$m
Net debt excluding leases⁵
1,058.1
1,129.3
Adjusted EBITDA⁶
590.5
527.1
Leverage
1.8x
2.1x
5. Net debt excluding leases is defined and reconciled to the closest IFRS measure in the Net debt table above.
6. Adjusted EBITDA is reconciled to the closest IFRS measure in the Reconciliation of reported earnings to adjusted earnings table on page 29 of this section.
31
Convatec Group Plc Annual Report and Accounts 2024
Governance
Financial statements
Additional information
Overview
Strategic report
Responsible business review
Sustainable
growth
Generating value, responsibly.
Doing what’s right for all stakeholders.
Convatec Cares
“As we deliver results for
customers and patients,
we are committed to
undertaking our business
responsibly. By focusing
on the most important
issues for us and our
stakeholders, and
integrating sustainable
business practices into
our core processes, we
will continue to generate
value for the long term.”
→ To find out more about Convatec Cares,
watch our short video
www.convatecgroup.com/
sustainability/our-frameworks-and-targets/
Our dedicated colleagues around the
world strive to ensure that customers
can trust us to deliver products, services
and solutions that improve lives. Our
FISBE strategy continues to deliver,
underpinned by responsible business
practices that are core to who Convatec
is today, and who we aspire to be in
the future.
Our product pipeline is the healthiest and
most innovative in the company’s history,
with safety, efficacy and quality at its
core. We have expanded our customer
loyalty programme, in order to become
an increasingly customer-centric
company. We have also enhanced
our employee engagement efforts
to strengthen our culture of listening
and learning. We are engaging with
our supply chain partners on their
environmental and social commitments
more meaningfully than ever before;
we continue to reduce our environmental
footprint year-on-year.
As we have transformed Convatec,
we have carefully considered important
topics for our stakeholders and assessed
our impacts. Responsible, sustainable
practices have been integrated into the
way we do business, and this allows us
to stay the course as we navigate change
against the backdrop of a dynamic
external landscape.
We are well positioned to capitalise
on sustainability-related opportunities
– in all pillars of Convatec Cares – and
continue to prioritise long-term
thinking and actions.
Karim Bitar, CEO
Chair, ESG Steering Committee
OUR ESG TARGETS
→ For a short summary of
our ESG journey click here
www.marketingworld.convatec.com/
MarketingZone/MZDirect/Source/5a8cfc1f-be5e-
4c97-82fc-015a019fae7c
Within each of our ESG pillars, we set
and regularly review targets to guide
our commitments. We track our
progress throughout the year and
report to management and the Board.
These targets are listed within each pillar
on pages 39, 44, 49, and 52 and can be
found at www.convatecgroup.com/
sustainability/our-frameworks-and-
targets/.
Progress made in 2024, against a
select set of target metrics has been
reviewed as part of the external
assurance process. For further details
see the assurance statement on page
59 and basis of reporting at www.
convatecgroup.com/sustainability/
esg-reports-and-data.
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CONVATEC CARES: OUR ESG FRAMEWORK
ESG PILLARS
Delivering for
our customers
Innovative patient-centric
products, services and
solutions that improve lives
(see page 39)
Enabling our people
to thrive
Ensuring the health, safety
and wellbeing of our
people and using their
talent for good
(see page 44)
Behaving ethically and
transparently
Protecting and enhancing our
reputation with all our
stakeholders
(see page 49)
Protecting the planet and
supporting communities
How we operate and
our contribution to the
world around us
(see page 52)
Integrated within our FISBE strategy and informed
by a materiality assessment (page 38), Convatec
Cares sets out our commitments and activities
that support sustainable and profitable growth. It
focuses on the topics that are material for Convatec
and our stakeholders and considers a dynamic range
of societal and planetary needs.
ESG mission
Underpinned by our values (page 45), our ESG
mission is to drive progress towards our vision of
Pioneering trusted medical solutions to improve the
lives we touch
by aligning and enabling ESG-related
initiatives for the benefit of our customers,
colleagues, communities and shareholders.
V
A
L
U
E
S
F
I
S
B
E
S
T
R
A
T
E
G
Y
C
U
S
T
O
M
E
R
S
C
O
L
L
E
A
G
UE
S
C
O
M
M
UN
I
T
I
E
S
C
O
M
M
E
R
C
E
F
O
R
E
V
E
R
C
A
R
I
N
G
Pioneering
trusted medical
solutions
to improve the
lives we touch
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Convatec Group Plc Annual Report and Accounts 2024
Governance
Financial statements
Additional information
Overview
Strategic report
Responsible business review
continued
ESG GOVERNANCE: BOARD AND MANAGEMENT
ESG Steering
Committee
Human Rights Committee
DE&I and Wellbeing Council
TCFD working group
Product sustainability
working group
CSRD taskforce
Audit and
Risk
Committee
Board
Strategic planning and
investment cycle
Stakeholders
drive progress,
performance,
compliance and
metrics
Responsibilities
–
Custodian of ESG strategy and commitments, including
our approach to key sustainability topics such as:
–
Environment and communities
–
Workforce engagement, DE&I and Wellbeing
and human rights
–
Sustainable supply chain
–
Key stakeholder engagement
–
Oversees sub-groups to drive focus and execution
Members
1
CEO (Chair)
5
EVP, Chief Technology
Officer and Head of R&D
2
CFO
6
EVP, Chief People Officer
3
EVP, Chief Quality
& Operations Officer
7
EVP, General Counsel
& Company Secretary
4
EVP, Chief Strategy & Business
Development Officer
8
VP, Head of Global
Corporate Affairs*
* Not CELT member.
See CELT member skills and experience on pages 94 and 95.
The VP, Financial Controller & Transformation; VP, Internal
Audit, Enterprise Risk & Insurance; and VP, Head of Investor
Relations support the work of the Committee. Sub-groups
are comprised of leaders from across the business.
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ROLE OF
THE BOARD
ROLE OF
MANAGEMENT
INTEGRATION
INTO OUR
FISBE STRATEGY
Role of the Board
Our Board has ultimate oversight of ESG, including climate-related risks and opportunities,
at Convatec. The Executive Director responsible for these issues is our CEO, Karim Bitar. As a
Board member, he brings together continuity and responsibility for our ESG strategy. The Board
reviews progress of ESG strategy execution, including at least two formal updates annually.
See page 97 for information about the Board’s activities in this area during 2024.
Role of the Audit and Risk Committee
The Board’s Audit and Risk Committee (ARC) met five times during the year and is responsible
for reviewing and approving our ESG assurance approach and compliance with the requirements
of the Task Force on Climate-related Financial Disclosures (TCFD), in terms of data integrity and
compliance with regulatory requirements.
See page 110 for more information on the ARC’s activities in this area.
Our ESG Steering Committee is chaired by the CEO and includes six other members of our
Convatec Executive Leadership Team (CELT). Committee members provide ESG stewardship
across a range of areas.
The Committee oversees the formulation and delivery of the ESG strategy and meets three times
a year. It drives progress and actions to manage our ESG-related risks, impacts and opportunities.
This is reported to CELT for discussion, review and challenge. The Committee updates the Board
at least twice a year. Together, these measures ensure that all those charged with governance
understand our business response to ESG topics and are committed to delivering against our
commitments to become a more sustainable business.
The Committee oversees a series of sub-groups, comprised of leaders from across the business.
The Scope 3 and Product Sustainability working group met three times in 2024 to progress
workstreams around Scope 3 emissions reduction levers. The TCFD working group meets
regularly to advance the work needed to meet TCFD requirements. The Human Rights Committee
monitors progress on protecting labour and human rights in our operations and supply chain and
met twice in 2024. The Diversity, Equity & Inclusion (DE&I) and Wellbeing Council meets annually,
alongside regular engagement with CELT and the Board’s Nomination Committee on relevant
DE&I and wellbeing topics.
In 2025, the ESG Steering Committee will continue to facilitate our ESG agenda, ensure
preparedness for forthcoming regulatory compliance considerations, including the EU Corporate
Sustainability Reporting Directive, and further integrate ESG practices across our direct
operations and value chain.
Our Global Corporate Affairs team brings together ESG stakeholder activities, initiatives and
priorities across Convatec, and supports the work of the Committee. We also have a dedicated
Environment, Health and Safety (EHS) team within our Global Quality & Operations function.
They work across our manufacturing and Research & Development (R&D) facilities to deliver
environmental management systems in line with our corporate requirements, aligned with ISO
14001. Group Financial Controls work across ESG activities to strengthen and evolve our control
environment for ESG data and processes.
ESG is a focus area during the company-wide strategic planning process. With emphasis on
‘execution’ of the FISBE strategy, leaders from each business unit and functional area scoped
ESG-related activities, initiatives and resources within their remit that will support our progress.
Given the importance, complexity and dynamic nature of ESG considerations, the strategic
planning process also clarifies various roles and responsibilities for positioning Convatec to meet
our targets, particularly related to our net zero transition plan, see pages 53 to 54. In 2025,
informed by an external benchmarking exercise completed last year, we will work with partners
across the business to evolve our approach further.
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Governance
Financial statements
Additional information
Overview
Strategic report
Understanding stakeholder perspectives and building positive relationships
to inform our strategy and decision-making
Engaging stakeholders
Stakeholder
group
Stakeholder
needs
How Convatec and
our Board engage
Outcomes
The people who use our products and rely on our services
Customers/
patients
Our products and services
are designed for and
delivered to our customers
and patients. They need:
–
Safe, effective, accessible
and innovative products
–
Support and information
Convatec:
–
Direct-to-consumer channels
–
Home delivery companies
–
Specialist nurses and call centres
–
Targeted consumer research
–
Responding to specific consumer questions,
feedback and complaints
–
Training and online support
Board:
–
The Board met a patient living with Type 1 diabetes,
and discussed their current infusion sets, benefits
and potential enhancements.
–
The Chair, Board workforce liaison, and the
Executive Directors met patients from each of
Convatec’s business categories at the Global
Leaders Meeting in April 2024 (see page 45)
Convatec
:
–
Incorporation of relevant consumer
feedback in our research and
development processes
–
Service provision reviews based on
customer feedback, and implementation
of enhancements as required
–
Tracking and management of
customer issues
Board:
–
Insight into patient needs and broader
perspectives on the market segment,
opportunities for innovation and new
therapy areas, informs our strategy,
decision-making and investment in
research and development,
manufacturing capacity and quality
Direct enablers who help us deliver
Healthcare
professionals
Healthcare professionals
provide valuable insight into
our product development
and help to ensure that our
products reach a wide range
of patients. They need:
–
Products and services that
meet patients’ needs and
benefit the healthcare
delivery system
–
Fair pricing
Convatec:
–
Ongoing clinical and commercial dialogue
–
Targeted research
–
Specialist training programmes
–
Advisory boards
–
Key opinion leader meetings
Board:
–
The annual Board agenda includes in-depth
discussions with leading healthcare professionals.
–
In 2024, the Board met with a Professor of
Neurology at Lund University specialising in
Parkinson’s disease
Convatec:
–
Product and service insights inform
our development processes and our
day-to-day operations
Board:
–
Insights gained from discussions
with patients, researchers and
healthcare professionals are
considered in Convatec’s strategy
and decision-making
Our people
Our employees bring our
vision, values and FISBE
strategy to life, fostering
an inclusive and supportive
culture that enables them
to deliver for customers
and patients. They need:
–
Safe, healthy, ethical and
fair working environment
–
DE&I and wellbeing
–
Ability to make a
difference to the people
who rely on our products
and services
–
Training and development
–
Career growth
opportunities
–
Attractive reward
and recognition
Convatec:
–
Group-wide interaction via our intranet, app and
regular town halls
–
Employee recognition activities
–
DE&I and wellbeing initiatives
–
Customer stories
–
Employee surveys
–
Union representation and works councils (where
relevant)
–
Performance reviews
–
Compliance helpline and website (Speak up)
Board:
–
Regular town halls led by the Executive Directors,
and employee focus groups and other forums
attended by the Board Workforce Liaison Champion
–
Board and Committee site visits (2024: Lisbon,
Portugal (Global Business Services), and Osted,
Denmark (Infusion Care)
Convatec:
–
Incorporation of insights to shape our
people strategy, talent processes and
development/training programmes
–
Ensure a cadence of communications
and engagement that encompasses
employee feedback
–
Read more about how we enable our
people to thrive on pages 45 and 46
Board:
–
Provides first-hand insight into culture
and sentiment within the business
–
Helps the Board make broader
strategic decisions
Suppliers and
other supply
chain partners
Our suppliers and partners
are critical to Convatec’s
ability to deliver our
products and services to
our customers and patients.
They need:
–
Long-term relationships
–
Fair pricing and
commercial terms
–
Predictable business
–
Transparency on suppliers’
expected ESG standards
Convatec:
–
Commercial dialogue
–
Supplier due diligence, assessments and audits
Board:
–
The Board is briefed on suppliers and supply chain
partners periodically through updates from the
Executive Directors and CELT
Convatec:
–
Development of valuable partnerships
to address consumers’ needs
–
Value chain emissions reporting
–
Supplier awards
–
Read more on behaving ethically and
transparently on pages 49 to 51
Board:
–
Provides assurance that Convatec is
operating responsibly and behaving
ethically and transparently.
–
Ongoing monitoring enables the
Board to weigh the benefits of plans
appropriately against any adverse
impacts on suppliers and ensure that
any potential environmental impact
is also considered
Responsible business review
continued
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1. Including distributors, large buying organisations, integrated delivery networks, hospitals and national and regional payors.
Stakeholder considerations in decision-making
As we continue our journey of sustainable and profitable growth, we are mindful of the importance of staying
aware and responsive to stakeholder needs. Our Section 172 statement and specific examples of how our Directors have discharged their duties pursuant to
Section 172 of the Companies Act 2006, by considering stakeholders in decision making can be found on pages 36 and 37.
Stakeholder
group
Stakeholder
needs
How Convatec and
our Board engage
Outcomes
Channel
partners
1
Our channel partners
are critical to ensure that
Convatec’s products and
services are available to
those with chronic
conditions. They need:
–
Effective, competitively
priced products
–
Fair pricing and
commercial terms
–
Continuity of supply
Convatec:
–
Commercial dialogue
–
Marketing activities
–
Tender processes
–
Distributor due diligence and compliance training
–
Quarterly reviews with partners
Board:
–
The Board is briefed on channel partners and B2B
customers periodically through updates from
the Executive Directors and CELT
Convatec:
–
Continued inclusion in tender processes
–
Development of valuable relationships
to address consumer needs
Board:
–
This enables the Board to consider the
views and needs of these stakeholders
given their importance to the Group’s
commercial strategy and its global
manufacturing and quality operations
B2B customers
Our B2B customers are
critical to ensuring that
Convatec’s innovative
products can be used
with other companies’ own
products to address patient
needs. They need:
–
Innovative products
for use with their
own products
–
Long-term relationships
–
Fair pricing and
commercial terms
Convatec and the Board:
–
Commercial dialogue and partnerships
Convatec:
–
Development of long-term partnerships
focused on addressing patient needs
Investors and
debt providers
Our investors and debt
providers are critical to
supporting and maintaining
Convatec’s ability to operate
and deliver. They need:
–
A clear corporate
strategy and delivery
on that strategy
–
Sustainable returns
–
Responsible business
practices
–
Cash flow to pay
dividends and service
debt obligations
Convatec:
–
Annual General Meeting
–
Active investor relations programme: in 2024, we
hosted more than 290 investor meetings, including
nine roadshows and participation in 14 conferences
–
Post-roadshow investor surveys plus feedback from
corporate brokers
–
Relationship-led engagement with debt providers
Board:
–
The Chair held two meetings with institutional
shareholders on governance, covering matters such
as risk, employee engagement, remuneration, board
composition and oversight, cyber and AI
–
The Board receives analysts’ notes published about
the Group and the sector and receives regular
updates on investor relations matters (IR)
–
The Board was provided with a presentation from
the brokers which considered investor sentiment
–
The Executive Directors participate in an active
IR programme, including investor roadshows
–
The Remuneration Committee Chair held meetings
with investors to discuss the proposed changes
to the Remuneration Policy
Convatec:
–
Quality materials to ensure the capital
markets appreciate the health of the
business and its future prospects
–
Strategy, Board composition and
succession planning and remuneration
policy considers investor feedback
–
Read more about our capital allocation
policy on page 10
Board:
–
Enables the Board to communicate
its strategy and financial performance
as well as how Convatec operates
responsibly
–
Investors’ feedback and insights
are taken into account by the Board in
our communications to shareholders
–
The 2025 Remuneration Policy can
be found on pages 128 to 134 and
shareholders will be asked to
approve this at the 2025 AGM
Evaluators who hold us to account for our performance
Regulators
Regulatory bodies are
critical to our licence to
operate and ability to deliver
for customers. They need:
–
Adherence to legislation
and regulation
–
Proactive engagement
when challenges arise
Convatec and the Board:
–
Regular and ad hoc dialogue in relation to product
approvals and other matters. We are committed
to working collaboratively with the new US
Administration, including at the Centers for
Medicare & Medicaid Services (CMS), and their
contractors, in the best interests of patients
Convatec and the Board:
–
Implementation of responsible
and diligent business practices
–
Compliance with legislation
and regulation
–
Input into relevant industry
consultations
Governments
National and multi-national
governments set out
requirements. They need:
–
Adherence to legislation
–
Responsible business
practices
–
Employment
–
Income generation
via taxes
Convatec and the Board:
–
Ad hoc dialogue in relation to specific matters,
including fiscal (e.g. taxation), employment
(e.g. apprenticeships) and corporate governance
Convatec and the Board:
–
Making a socio-economic contribution
to a range of stakeholders, including
through paying taxes as described
on page 57
Communities
Communities are core
to our people and planet
commitments. They need:
–
Employment
opportunities
–
Medical education
–
Active management of
environmental impact
Convatec and the Board:
–
Ad hoc dialogue in relation to specific matters
–
Support for a range of medical education initiatives
–
Charitable partnerships
Convatec and the Board:
–
Investing to enhance the communities
where we operate
–
Building our reputation in our
communities and across broader society
–
Decarbonisation/net zero plans
Industry
bodies
Industry bodies help us to
ensure that our interests are
understood and effectively
communicated. They need:
–
High-quality input into
industry policies and
standards development
–
Proactive engagement in
relation to relevant issues
Convatec and the Board:
–
Membership of industry bodies
–
Participation in discussions in relation to industry
issues, including best practice
Convatec and the Board:
–
Contributing to improved
understanding of key industry issues
–
Helping to shape relevant agendas
and standards
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Additional information
Overview
Strategic report
Our ESG focus is on the operational, people-led
and environmental issues that are most material
to us and our stakeholders.
We regularly engage with stakeholders (see pages
36 and 37) including through a periodic formal ESG
materiality assessment. This helps us to identify the
most important issues for Convatec as they relate to
business success and our impact on our value chain,
people and the planet (see right for priority list). The
process is guided by third-party expert support and
aligned to a range of good practice and standards.
Our most recent materiality assessment involved
document research (policies, industry trends, regulatory
horizon), engagement with more than 100 stakeholders
and an assessment of priority topics for Convatec, our
customers, colleagues, communities and shareholders.
The matrix was reviewed and approved by our Board.
Insights are aligned with corporate governance and
our approach to enterprise risk management.
Next year, we will publish the output of our
refreshed materiality assessment, consistent with
the requirements of the EU Corporate Sustainability
Reporting Directive (CSRD).
IDENTIFYING KEY ISSUES FOR STAKEHOLDERS
1
Product quality and
patient safety
10
Climate change
2
Responsible business
11
Corporate governance
3
Sustainable product
and packaging design
(circular economy)
12
Workers elsewhere in the
value chain (inc. health
and safety)
4
Developing user-centric
solutions
13
Waste (operational)
5
Customer access
and affordability
14
Water (operational)
6
Talent attraction
and development
15
Geopolitical risks and
value chain resilience
7
Human rights and labour
rights in own workforce
16
Local community
engagement
8
Diversity, equity &
inclusion and wellbeing
17
Natural capital and
biodiversity/ecosystems
9
Data privacy and
cybersecurity
SUPPORTING THE UNITED NATIONS SUSTAINABLE DEVELOPMENT GOALS
We support the United Nations Sustainable Development
Goals (SDGs) which aim to align governments, businesses
and the civil society sector in their efforts to end poverty,
fight inequality and address climate change. As a supporter
since 2018, Convatec joins over 15,000 companies as a
participant in the UN Global Compact (UNGC) in which
we pledge to follow the UNGC’s ten principles on human
rights, labour, environment and anti-corruption.
Though all 17 goals are interlinked and important to
stakeholders, we have prioritised six goals where we
can contribute to a more sustainable future: these are
SDG 3 (Good health and well-being), 5 (Gender equality),
8 (Decent work and economic growth), 10 (Reduced
inequalities), 12 (Responsible consumption and production)
and 13 (Climate action). A description of how our activity
contributes to SDG targets can be found on our website at
www.convatecgroup.com/sustainability/our-frameworks-
and-targets/.
Responsible business review
continued
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Responsible business review – customers
DELIVERING
FOR OUR
CUSTOMERS
Innovation journey
To fulfil our vision and drive growth,
we continue to strengthen our research
and development (R&D) capabilities,
alongside bringing new products to
market. In 2024, we invested $102 million
in adjusted R&D (2023: $104 million) and
reached our 2025 target of 30% vitality
index, a year ahead of plan. Our
approach to innovation continues to
build momentum in the following ways:
–
Increased investment:
We have more
than doubled spend on R&D
investment since 2019, enabling our
new operating model which integrates
R&D teams across functions to
leverage shared capabilities with
cross-functional reviews, new product
development process gate reviews and
semi-annual portfolio reviews.
–
Innovation mindset:
We recognise
that the users of our solutions are
people, not just patients, and we
must focus on the social, emotional
and functional needs in our solutions.
Our solutions therefore involve digital
and service offerings as well as our
products. We also understand that
many of our products are produced
and used in high volume and must
be of the highest quality.
–
Simplified processes:
We use a single
business and product development
process across all product categories,
from ideation through to launch, that
we refer to as IDEAL. This process goes
beyond R&D and involves commercial,
technical and operations teams.
–
Leadership and competencies:
We
have attracted global talent for R&D,
medical, regulatory, intellectual
property, digital health and portfolio
management. We have five technology
centres: one in the US (Boston), and the
others close to our manufacturing
facilities in the UK (Flintshire and
Oxfordshire), Denmark (Osted) and
Slovakia (Michalovce).
–
Portfolio management:
Our
investment is properly managed in
order to maximise value for all our
stakeholders. It starts with detailed
regular reviews as described above.
We prioritised projects where
resources are best deployed. In
between reviews, we have our budget
and strategic planning processes and
regular engagement with the Board.
Dr Divakar Ramakrishnan
EVP, Chief Technology Officer and
Head of Research & Development
“Convatec has the most exciting
innovation pipeline in our history.
Significant investment in research,
development and clinical evidence
is core to our vision. To ensure
we’re creating trusted medical
solutions, consistent with our
forever caring promise, we
are committed to the highest
standards for product quality,
safety, and efficacy. People are
counting on us to live their lives,
and we take that seriously.”
Innovative and patient-centric
products, services and solutions
that improve lives
Targets: Delivering for our customers
Target
Progress in 2024
Status Read more
1
Quality:
Reduce complaints per
million (CPM) by 8% for 2024 against
a 2023 baseline
17%
1
(2023: 10%
1
)
Page 40
Reduce our B2C CPM by 5% for 2025
against a 2024 baseline
See above
2
Product vitality:
Vitality index of
30% by Q4 2025
30% (2023: 27%)
Page 40
3
Product development:
Ensure we have complete and
actionable carbon intensity data
recorded in our digital product
sustainability tool for all Convatec
manufactured products’ raw
materials by Q4 2024. Ensure data is
incorporated into our new product
design process for carbon
footprinting by Q4 2024
Searchable digital carbon-
intensity database developed
Replacement target can be found
on page 52
Page 54
4
Customer centricity:
By Q4 2025, roll out cNPS surveys to
each of our main customer groups
(healthcare professionals, end
users, and key B2B customers)
across FISBE markets
Survey rolled out to HCPs in 17
markets, including all of our
FISBE markets
Page 40
1. Stated to represent direct-to-consumer categories
2024 highlights
2025 priorities
–
Four key new product launches or
significant geographical expansion
plus Convatec’s first digital health
solution
–
Rolled out new customer loyalty
programme
–
Enhanced quality system
–
Improved carbon data capture for raw
materials and components
–
Support roll out of new products and
continue to develop our product
pipeline
–
Continue to focus on product quality,
efficacy and safety
–
Enhance customer loyalty programme
–
Strengthen clinical and new product
research capabilities
PROGRESS KEY
Achieved
New
In progress
39
Convatec Group Plc Annual Report and Accounts 2024
Governance
Financial statements
Additional information
Overview
Strategic report
–
Continuous improvement:
While we
are building momentum and are now
developing and launching multiple
medical technology platforms each
year, we are also identifying learnings
to sustain our existing products and
continuously improve our overall new
product scale-up process. We continue
to incorporate these learnings into our
IDEAL process, as well as our overall
new product operating system
spanning capabilities, metrics,
governance, tools and infrastructure.
This is enabling us to rapidly and
effectively drive continuous
improvement in terms of quality,
speed and value across our portfolio.
Additionally, we have launched an
initiative to reduce cycle time for
developing, scaling up, and launching
our innovation portfolio while
prioritising safety and quality.
New products and solutions
In 2024, we continued to launch new
products with a particular focus on
our FISBE markets, including four key
new product launches or significant
geographic expansions. We also
launched Convatec’s first digital health
solution, offering significant benefits
for users.
Following its introduction in the US
in 2023, we launched ConvaFoam™
in Europe in 2024. ConvaFoam™
offers customers a broad portfolio of
dressings providing longer wear times
due to better absorption and adhesive
technology. In Ostomy Care, we launched
Esteem Body™, our new one-piece soft
convex ostomy system, in Europe and
the US – this launch marks a new chapter
in ostomy care management, and
Convatec’s return to leading with
data-driven solutions to address evolving
trends. We continued to scale GentleCath
Air™ for Women 2.0 in Europe and
launched our improved female compact
catheter offering in the US. Convatec’s
Neria™ Guard launched in Europe in
January 2024 with our partner, AbbVie,
to support the launch of Produodopa
®
,
a medicine for advanced Parkinson’s
disease. Convatec’s Neria™ Guard
infusion set supports continuous
subcutaneous infusion of this medicine.
We also launched Convatec’s me+
Companion™ app, our first digital health
solution in Continence Care to support
new intermittent catheter users and
healthcare professionals, enabling users
to log and record drink intake and urine
output, set hydration goals, log leaks,
and create customised summary reports
that can be shared with their healthcare
professionals to help manage their
condition. The app also offers direct
access to Convatec’s me+™ support
programme’s suite of educational
tools, resources, and support.
During 2024, a total of 38 patent
filings were made (2023: 82). The higher
number of patent filings in 2022 to 2023
was due to the significant changes we
made to R&D investment and closing
gaps in the historic patent portfolio. In
recent years, there has also been an
increase in the number of new platforms
developed for first generation products,
while in 2024, the number of new filings
is representative of our heightened focus
on filing product upgrades instead of
new platforms and adjusting our patent
filing strategy to encompass filing
applications that combine related
inventive concepts.
Strategic investments
In September 2024, consistent with
our FISBE strategy, we completed our
acquisition of Livramedom, a homecare
service provider based in France.
The acquisition will allow us to expand
our presence in Europe in the direct-to-
consumer market, while enabling us to
meet a wider range of needs for both
patients and healthcare professionals.
Product quality
We recognise the need for continued
progress, and the importance of quality
for our customers. We have established
ISO 13485 quality certifications in place
across the business, and since 2021, our
complaints per million (CPM) reduction
target has been leveraged as an ESG
target. In 2024, we set a target to reduce
CPM by 8% against a 2023 baseline. We
also commenced a process, working with
our major partners, to reevaluate CPM in
our business-to-business category. As a
result, we calculated CPM with data from
our three direct-to-consumer categories
and have restated previous calculations
for comparison (see page 13). We met
this target with a 17% reduction and are
working to develop a new methodology
for integration of business-to-business
data for CPM in future years. See page
59 for the scope of our ESG assurance,
basis of reporting and ESG definitions.
Furthermore, in 2025, we continued
to build on our commitment to improve
quality by:
–
Digitising more of our core quality
system processes, to enable ease
of execution and increase availability
of data for proactive analytics
–
Implementing automated inspections
systems to increase reaction speed
in our manufacturing processes
–
Embedding problem-solving
capabilities
–
Enhancing the quality culture via
increased connections with our
end customers and regular training,
including mandatory complaint
handling awareness training for
all employees
In 2025, we aim to reduce CPM by at
least 5% and will also further expand our
data segmentation capability to support
prioritisation and focus on targeted
improvements to maximise impact
on the experience of our customers.
Product safety is a priority for
Convatec and our customers. In 2024, we
successfully maintained the certification
of our quality system following a series
of external audits and inspections,
which required extensive preparation.
Regulators consider most of the products
and solutions we develop to be of low
risk to users. Nevertheless, we have
a rigorous supplier audit mechanism
and quality management system.
We conducted a total of 107 audits
on suppliers during 2024 (2023: 98).
Additional information on our supplier
engagement can be found on page 50.
From time to time, it may be necessary
to conduct a product recall, following
a detailed internal quality investigation
led by our Quality, Regulatory and
Medical and Clinical Affairs teams. In
2024, we executed eight product recalls
(2023: three), none of which have been
FDA Class 1. Each of the recalls in 2024
occurred where the distributed products
did not meet the requirements of our
quality system and we took all necessary
steps to voluntarily ensure customers
and patients were informed and
supported.
Customer centricity
In 2024, we continued to strengthen our
focus on customer centricity and advance
the use of customer Net Promoter Score
(cNPS) as the measure of customer
satisfaction and loyalty within Convatec.
We are working towards capturing cNPS
insights for all our main customer
groups, initially starting with healthcare
professionals and expanding to users
and our key B2B customers. Acting
on customer feedback is critical to
the success of our business. We have
processes in place to ensure that
action is taken to improve the
customer experience based on
feedback. We call this our Data >
Insights > Action approach.
As a responsible business, our approach
to marketing includes:
–
Governance: All externally facing
content follows a consistent approval
and regulatory review process, and
colleagues are regularly reminded
of this process.
–
Socially conscious principles: We are
committed to ensuring our marketing
is accessible, diverse and respectful.
We provide materials to remind our
marketers of the need to consider
accessibility, reflect all Convatec
customers and consider how we
sensitively show the lives of people
living with chronic conditions.
Responsible business review – customers
continued
40
Convatec Group Plc Annual Report and Accounts 2024
Strategic report
Access to healthcare
Access to healthcare is a basic human
right that should be available to all
who need it. This fundamental principle
is integrated in our vision and we run
our business to ensure the following:
1
Availability:
We continue to evolve
our sales channels to best meet our
customers’ needs. In Continence
Care, the Convatec me+ Companion™
app provides digital support, allowing
users to track catheterisation and
share progress with healthcare
professionals. Our me+ Wellbeing
programme further enhances access
to psychological support through
a ten-module online platform.
Our me+ nurses are able to enhance
the support they provide through
triaging challenging cases for
telehealth intervention. In Global
Emerging Markets (GEM), our
HCP medical educational training
programmes continue to expand
access to products through a
standardised protocol-of-care, such
as our Wound Hygiene Academy.
2
Adaptability:
Based on feedback
from users and healthcare
professionals, our products address
a broad range of patient needs
reflecting the different challenges
that individual users experience.
Getting the range of products right
relies on research and stakeholder
engagement. In Continence Care,
our Expert Consensus Clinical
Practice Principles and tools provide
evidence-based, product-agnostic
protocols for intermittent
catheterisation. These principles,
endorsed by multiple professional
bodies, enable HCPs to adapt care
approaches based on individual
patient needs.
3
Usability:
Products may ’do a job’
medically but given the social and
emotional context of the people we
serve, we need to provide solutions
which go beyond the provision of
a functional device. To lower access
barriers, we help patients identify
the device which best suits their
needs, provide easy-to-follow
resources and support. In
Continence Care, we provide
comprehensive product selection
guides and educational resources
to help users master catheterisation
techniques. Our evidence-based
approach facilitates patients to
confidently use their chosen catheter
products in various daily situations.
4
Affordability:
Affordability is a key
issue which we strive to address
through geography-based pricing,
patient segmentation, and volume-
based pricing. For example, the US,
Western Europe, and Japan usually
have higher pricing compared to
countries in Latin America (LATAM),
Eastern Europe, Asia, and Africa.
Segmentation pricing can be
divided into four segments:
private insurance, public insurance,
the underinsured, and low-income
patients. In China, we delivered an
Ostomy Patient Access Programme
that benefitted over 1,000 patients
from low-income backgrounds.
Convatec invests in developing
new solutions that will be available
globally, providing cost-effective
treatment options, while complying
with local pricing regulations.
Sustainable product design
Our IDEAL processes include a review
of the proposed materials against
certain externally compiled lists
of ’substances of concern’, including
the requirements of California
Proposition 65 and REACH25.
This approach is consolidated
within our ethical issues and
new product design policy:
www.convatec.com/marketingzone/
mediadownload/?id=f82fbf09-66c4-
4301-805f-fad37047cc0f&lid=en-GB.
We are focusing on key product
development priorities, while integrating
sustainability in line with our net zero
carbon transition plan (see page 53).
Where possible, we aim to lower the
carbon intensity of our products, guided
by data obtained through our digital
product sustainability database.
Primary packaging is an essential
component of our products, forming
a sterile barrier. We continually review
our primary packaging roadmap and
the role of primary, secondary and
tertiary packaging in reducing our
Scope 3 emissions (see page 54).
Due to significant regulatory restrictions
on our industry and our priority focus
on safety, quality and efficacy in our
solutions, manufacturing environmentally
sustainable products is a challenge we
face along with our industry peers.
Given the regulatory framework
for MedTech products, it is not
straightforward to change device
form and components. Extensive
requalification and reapproval of products
are necessary after any change before
modified products can be launched
to ensure patient safety. It can also be
problematic to include recycled content
in device materials due to regulatory
constraints regarding quality and
traceability. We are engaging with
industry alliances and partners in
our value chain to develop solutions
that support our net zero ambition.
Clinical studies
We have continued to make significant
progress in 2024 in clinical evidence
generation, with 26 active clinical
studies (2023: nine) including four
global randomised controlled trials
(RCTs) (2023: one). In 2024, we shared
our evidence generation work through
12 peer-reviewed publications and 69
scientific posters and presentations.
To increase diversity of our clinical
data, patients from our ConvaClinics
across LATAM are also included in our
clinical studies.
Hydrofiber™
PRODUCT SUSTAINABILITY
Hydrofiber™ was first launched as
Aquacel
®
almost three decades ago
in 1996. Hydrofiber™ is developed
from cellulose fibres, a natural material
which is compostable, biodegradable
and sourced from sustainable forests
across Europe and South America.
Hydrofiber™ is certified to world class
sustainability standards; FSC and PEFC.
When producing Hydrofiber™ for our
dressings, for every tree cut down
in a plantation forest (usually
a eucalyptus), one tree is replanted.
In a semi-natural forest, approximately
five to ten trees are replanted to
protect the forest and its biodiversity.
A video overview of the process can be
viewed here: www.vimeo.com/922485
570/788f5af410?share=copy.
1:1
Tree harvesting to tree planting
>100 million
Aquacel
®
dressings manufactured
in the UK in 2024
Protecting forests
and biodiversity
41
Convatec Group Plc Annual Report and Accounts 2024
Governance
Financial statements
Additional information
Overview
Strategic report
Use of animals in research
At Convatec, we seek to minimise the use
of animals in research. Consistent with
other leading organisations and
established practice, we have adopted
the 3Rs – replacement, refinement and
reduction of use of animals in research,
and continue to identify innovative
solutions to gain knowledge and support
regulatory submissions without the use
of live animal models.
Every effort is made to conduct as much
of our research with benchwork, cell
cultures, and where appropriate, ex-vivo
tissue models. When live animal models
are required, our research is highly
regulated to ensure responsible, ethical
and humane treatment by following
local ethical approval boards, laws and
regulations. Animal welfare is a priority
and we conduct our research at
reputable facilities and organisations
that are Assessment and Accreditation
of Laboratory Animal Care (AAALAC)
accredited (or equivalent) with fully
trained veterinarians and dedicated
welfare teams.
All medical devices are required to show
biocompatibility prior to approval and
use, per ISO 10993-1:2018. This
requirement is enforced by government
authorities and is part of the registration
process for medical devices. As part of this
requirement, certain biological risks are
required to be evaluated and mitigated
through the use of testing. In some cases,
some biological risks are only able to be
evaluated through the use of defined and
prescribed animal tests. As such, when
mandated we will execute the critical
biocompatible verification tests required
by the ISO standards to ensure patient
safety and registration requirements.
We do not willingly perform any animal
testing in the development or functional
verification of our devices, as described
in our Ethical Issues and New Product
Development Policy, which we refreshed
in 2023, and can be found at www.
convatecgroup.com/investors/
governance/our-policies-and-statements.
To avoid the use of living animal studies,
in 2024 we used porcine (pig) ex-vivo
tissue models to assess urethral tissue
damaged by novel urinary catheters.
All ex-vivo models were collected from
animals that were being slaughtered
for meat production. Our ex-vivo tissue
suppliers are either AAALAC accredited
or are UK registered to supply animal
by-products (EU Article 23, No. 1069/2009).
In 2024, as part of our biological risk
assessment to determine compatibility
of our devices within a biological system,
we conducted biocompatibility tests
using 13 swine, 120 guinea pigs, 38
rabbits and 209 rodents (2023: 9 rabbits
and 100 rodents). All studies were
approved by local animal welfare
committees and/or responsible
government authorities.
Convatec Advanced Tissue Technologies
(ATT) solutions are derived from porcine
placentas. These are derived naturally
through the birthing process and
provided in partnership with a farm.
The placentas are subsequently stored
at ultra-low temperatures until required.
No swine are destroyed or affected
in the process.
Reliability of supply
Exceeding our customer expectations
continues to be a top priority.
Throughout 2024, we continued to make
progress in ensuring product availability
and reliable delivery. Close collaboration
across all relevant teams enables us to
plan for short-, medium- and long-term
requirements, anticipating demand
scenarios and to ensure production,
inventory and logistics readiness.
This is supported by a rigorous
performance framework overseeing
end-to-end reliability.
2024 saw the post-pandemic supply
chain marketplace recovery continue,
notwithstanding present challenges to
shipping lanes in the Middle East and the
ongoing conflict in the region. We have
continued to focus on strengthening
resilience throughout our supply chain,
in the areas of manufacturing capacity
and strategic inventory. In 2024,
Convatec was the first MedTech company
globally to achieve the British Standards
Institution (BSI) Customer Service
Hard-to-heal wounds
RANDOMISED CONTROLLED TRIALS
Venous ulcers currently affect
a global population of over
143 million patients and pose a
significant burden on healthcare
systems worldwide, often requiring
prolonged treatment and causing
substantial morbidity.
In 2024, Convatec announced
significant clinical study results
from a multinational randomised
controlled trial (RCT) showcasing
remarkable advancements in the
healing of venous leg ulcers with
AQUACEL
®
Ag+ Extra™ compared
to standard of care dressing.¹ The
multicentre RCT was conducted
across 20 sites in Germany, UK
and Colombia and investigated
the effectiveness of AQUACEL
®
Ag+
Extra™ compared to standard of
care dressing in the management
of patients with venous leg ulcers.
The study found that venous leg
ulcers managed with AQUACEL
®
Ag+ Extra™ were 35% more likely
to heal completely at 12 weeks and
19% more likely to have satisfactory
clinical progress (
≥
40% reduction
in wound area) at four weeks,
compared to the standard of care
dressing. At 12 weeks, 74.8% of
venous leg ulcers managed with
AQUACEL
®
Ag+ Extra™ had
completely healed, compared
to 55.6% of those managed with
the standard of care dressing.
The compelling findings from this
RCT suggest that AQUACEL
®
Ag+
Extra™ may provide an effective
means of managing these hard-to-
heal wounds.
In 2024, Convatec also advanced
clinical evidence for InnovaMatrix
®
AC through two adaptive design RCTs
that will evaluate the efficacy
of InnovaMatrix
®
AC in the treatment
of patients with venous leg ulcers as
well as diabetic foot ulcers.
RCTs enable Convatec to accelerate
the execution process, ensuring that
these advancements can benefit
patients more quickly and efficiently.
We expect to publish further
information in 2025.
1. S Beraldo et al. J Wound Care 2025;
34(3):170–178
Responsible business review – customers
continued
42
Convatec Group Plc Annual Report and Accounts 2024
Strategic report
Kitemark for a number of geographies,
and we aim to expand this coverage to
all markets in the coming year.
Our delivery on-time, in-full service levels
have seen strong improvements across
all geographies. Our manufacturing
network has seen additional capacity
come online to support service and sales
growth. We are continuing our efforts to
establish dual sourcing for our strategic
raw materials. We continue to strengthen
our logistics capabilities in the way of
network design and the availability of
options to move our products globally
as such, supporting our agility to avoid
delays, satisfy our customer
expectations and balance cost.
Data privacy
The Audit and Risk Committee (ARC)
has oversight of our privacy governance
framework and continued programme
of improvements. Executive leadership,
accountability and sponsorship is in
place for critical personal data classes,
with four CELT members accountable
for ensuring that the use of personal
data across the organisation is
properly governed.
In 2024, we continued our focus on the
development of Convatec’s data privacy
function and maturing our data privacy
framework and controls under the
oversight of the ARC. We invested in
strengthening our data privacy team
by elevating the role of the VP, Chief
Data Privacy Officer, reporting to the EVP,
General Counsel & Company Secretary,
together with appointing regional
privacy officers and managers. Our
privacy team is supported by a network
of trained privacy champions and
provides local support to our people
and our business.
Our privacy governance framework
includes policies, procedures, controls
and records that are implemented
globally, and aligned to data protection
principles and requirements enshrined
in applicable privacy regulations,
including the European Union General
Data Protection Regulation (GDPR), the
California Consumer Privacy Act (CCPA)
and the Chinese Personal Information
Protection Law (PIPL). This framework
and its effectiveness is regularly assessed
by our internal audit team and reviewed
by our central privacy team to keep it up
to date with changes in our business, our
risk appetite and the laws and regulations
in the countries in which we operate.
Employees are informed of their
privacy obligations through a training
and awareness programme, including
mandatory induction training and
annual updates for existing employees.
We made significant progress during
the year in our four target areas of
Governance and Operating Model;
Process, Procedure and Technology;
Inventory and Data Mapping; and
Third-Party Management. In 2024,
there were no significant incidents
or issues reported to data protection
authorities. No significant volume
of data subject access requests were
received. For further information on
our legal, compliance and privacy risk,
see page 79.
Artificial intelligence
Convatec’s artificial intelligence (AI)
strategy aims to leverage the power
of AI to enable patient and customer
solutions, as well as to support our
teams to be at their best.
We are focused on responsibly
integrating AI into our day-to-day
operations and processes. An
executive AI steering committee
considers AI initiatives, ensuring its
application enhances current capabilities,
in alignment with our strategic objectives
and core values and appropriate
safeguards are implemented
consistently. The ARC oversees
governance and risk related to AI.
We are embracing opportunities of
well-managed AI technologies, in areas
like language translations, workplace
productivity tools and marketing efforts.
Key elements of Convatec’s AI strategy
include:
Innovation
AI presents significant opportunities to drive
innovation and we plan to explore the potential
of AI as a medical device to treat, diagnose,
inform and drive clinical management.
Productivity and efficiency
Leveraging available AI technology that
enhances productivity, without distracting
the organisation.
Governance and compliance
Integrating AI into our operations in
a sustainable and compliant way,
implementing appropriate governance
measures to safeguard Convatec and our
patients and customers from potential risks.
Harnessing AI has the potential to reshape
the way Convatec operates and delivers value;
by embracing AI in the right way, we have the
power to increase efficiency whilst driving
significant innovation.
43
Convatec Group Plc Annual Report and Accounts 2024
Governance
Financial statements
Additional information
Overview
Strategic report
ENABLING
OUR PEOPLE
TO THRIVE
2. Includes seven Non-Executive Directors. For full breakdown, see page 47.
3. This includes voluntary and involuntary turnover.
At the end of 2024 we employed
10,489
2
people (2023: 10,136). Employee
turnover in 2024 was 19.5%
3
(2023:
18.8%). Voluntary turnover in 2024 was
9.8% (2023: 10%). Information on our
employee profile is illustrated in the
graphs on the following pages, while
our definitions for employee count and
gender diversity are detailed on page 47.
While our employees are based in
45 countries, 57% of our workforce is
employed in countries where we have
manufacturing sites (2023: 55%). In
addition to our facilities in the Dominican
Republic, Mexico and Slovakia, we have
manufacturing operations in the UK
(two locations), Denmark and the US.
Consistent with our corporate theme
of simplification and productivity, in
2024, we closed our manufacturing site
in Herlev, Denmark, and outsourced
operations. Of countries with no direct
manufacturing operations, Colombia has
the largest concentration of employees.
Our people strategy
We have started to refresh our people
strategy to better meet the needs of
the business, as we continue to deliver
sustainable and profitable growth.
Our people mission is:
Creating a winning
organisation where our people can learn,
grow, thrive and make a real difference.
In
2024, our focus was on three core areas:
–
Build key capabilities:
Anticipate and
embed core capabilities to support
sustainable and profitable growth
through high-performing leadership,
talent and teams.
–
Shape our winning culture:
Bring
our vision, promise, strategy, values
and team principles to life so we can
attract, engage and retain the diverse
talent we need to win.
–
Unlock potential to enable change:
Strengthen our HR team, digital
capabilities and foundation that drives
simplification and productivity and
improves employee experience.
Ensuring the health, safety and
wellbeing of our people and using
their talent for good
Responsible business review – colleagues
Targets: Enabling our people to thrive
Target
Progress in 2024
Status Read more
5
Health and safety:
5.1 Maintain an annual Operations
Hazard Observation Rate above 200
per 200,000 hours worked
291 per 200,000 hours worked
(2023: 265)
Page 48
5.2 Sustain Operations Lost Time
Injury Rate below 0.22 by Q4 2025
0.16 per 200,000 hours worked
(2023: 0.22)
Page 48
6
Diversity, equity & inclusion and
wellbeing:
6.1 50% of senior management¹
positions are held by females by Q4
2027
45% (2023: 44%)
Page 47
6.2 At least 20% of senior
management is ethnically or racially
diverse by Q4 2027
Continued to advance self-ID in
markets we can where lawfully
able to do so
Page 46
6.3 Reduce voluntary turnover to
10% by Q4 2027
9.8% (2023: 10%)
Page 44
1. CELT and direct reports, excluding executive assistants.
“We’ve made important progress
this year to strengthen employee
engagement, support our leaders
to facilitate change, and continued
to embed a refreshed HR operating
model to ensure we’re building
a business that enables
our colleagues to bring to life
our forever caring promise.”
Emma Rose
EVP, Chief People Officer
2024 highlights
2025 priorities
–
Refreshed our HR operating model as
a foundation for our people strategy
–
Centralised and strengthened people
solutions and services
–
Launched a new employee
engagement platform to support
ongoing dialogue and feedback
–
Sustained momentum across key
health and safety, people and
culture initiatives
–
Refresh our people strategy
–
Integrate and embed our HR
operating model
–
Support colleague leadership and
development
–
Advance talent development practices
PROGRESS KEY
Achieved
New
In progress
44
Convatec Group Plc Annual Report and Accounts 2024
Strategic report
Our values
Our values ensure we all work and act
in ways that deliver our forever caring
promise, every day. These were shaped
by thousands of colleagues in 2020
and we continue to embed them
across Convatec.
Improve care
We are passionate about serving
and supporting people with
deeply personal and challenging
medical conditions
Deliver results
We consistently deliver excellent
work, say what we do and do
what we say
Grow together
We celebrate diversity and respect
one another. We help our colleagues
around us grow, develop and thrive,
so they can fulfil their potential
Own it
We take personal ownership of all our
work: taking the initiative, innovating
and never settling for second best
Do what’s right
We behave ethically, are honest and
trustworthy, operate with the highest
standards of integrity, uphold policies
and make a positive difference
Build key capabilities
Aligned with our FISBE strategy, we are
focused on building key capabilities and
integrated talent practices. We continue
to promote learning for all employees,
invest in leadership development, and
enhance manager capabilities.
In 2024, over 4,000 colleagues accessed
our on-demand learning platform,
engaging with over 150,000 pieces
of microlearning content. We launched
instructor-led virtual onboarding,
customised for new hires in different
parts of the business, to ensure their
success. Our mentoring programme
has engaged over 250 colleagues.
We also continued to embed high-
performing team principles through
workshops for leaders and their teams.
Shape our winning culture
Our people mission aims to foster an
engaging, inclusive and high-performing
culture centred on colleague feedback,
which enables colleagues to contribute
meaningfully and achieve their potential.
Our values guide our behaviours and how
we run our business. They are embedded
in our policies and processes, including
our performance reviews, which assess
both the ‘what’ and ‘how’ of each
employee’s contribution.
In 2024, we enhanced employee
engagement by scaling up our new
digital platform, Peakon Employee
Voice by Workday. We piloted the
platform, which uses employee Net
Promoter Score (eNPS) methodology,
in 2023, and throughout 2024 rolled out
the tool across the company achieving
a 95% aggregated participation rate. We
secured a top decile engagement score,
according to Peakon’s True Benchmark™
for Healthcare, Pharmaceutical,
Biotechnology & Life Sciences. We have
deployed comprehensive training and
support to people managers to engage
with the tool and to act on insights,
sparking thousands of conversations
via the platform. Feedback on the four
themes of engagement, transformation
and change, health and wellbeing, and
diversity and inclusion, is helping shape
our refreshed people strategy in 2025.
We continued our global town hall series,
engaging colleagues worldwide with our
progress, plans, and patient stories. Our
CELT Live virtual ‘coffee and conversation’
series enabled smaller group interactions
with our CEO and CFO. Our annual Big
Conversation initiative brought teams
together for leader-led discussions
around our vision, promise, strategy,
values and team principles – helping
colleagues see their role in the context
of the ‘big picture’.
Recognising colleagues and their
contribution is an important part
of our core value to ‘grow together’.
In 2024, Convatec Champions, our
way of celebrating colleague efforts,
surpassed 20,000 awards since its launch
in September 2022. Through a digital
platform, any colleague can make a
nomination for an award for good work
and behaviours aligned to our promise
and values. We also continued to
celebrate our annual Convatec Day
in 2024, aligned to World Mental Health
Day. Convatec Day gives colleagues
(whose roles allow) an extra day off
to focus on their wellbeing.
Reports are regularly provided to
the Board to help assess and monitor
workplace practices and culture,
including progress on our people
strategy, employee engagement,
and on talent development and
succession planning.
“At a recent Ostomy Care event
I met a new patient who was
overwhelmed aſter surgery and
unsure about life with a stoma.
I recommended the me+
programme for support. She
later sent a kind email thanking
me for my help and noting how
wonderful the customer care
team was in setting her up with
new products to try. This part
of my work is very rewarding.”
Feedback submitted through
our employee listening platform
Spotlight on leadership development
In 2024, we hosted our Global Leaders Meeting (GLM) at the Science Museum, London,
bringing together our top 100 leaders from around the world. The last meeting of its kind
was held in 2022 in Boston. Speakers included our Chair, Dr John McAdam CBE, Dave Ricks,
Chair & CEO of Eli Lilly and Company and Baroness Manningham-Buller LG, DCB, former head
of the UK Security Service (MI5) and Chair of the Wellcome Trust. GLM included immersion
learning with visits to patients and customers, including NHS Trusts and leading UK NGOs,
and sessions focused on catalysing our high-performing team principles.
45
Convatec Group Plc Annual Report and Accounts 2024
Governance
Financial statements
Additional information
Overview
Strategic report
→ For more on our DE&I and Wellbeing
journey visit
www.convatecgroup.com/sustainability/
enabling-our-people/dei-spotlight-page/
Unlock potential to enable change
Throughout 2024, we made significant
progress with our HR transformation,
and continued to strengthen our
employee experience by focusing on
simplification and standardisation of key
processes, including leveraging AI and
machine learning capabilities.
Over the last year, we have transitioned
almost all HR activity to align to global
processes and ways of working. This has
brought greater consistency to how HR
supports the business and has improved
colleague experience through:
–
Processes:
Standardised ways of
working and leveraging digital tools,
underpinned by data driven insights
–
Improving career pathways:
Bringing
to life a consistent career framework,
helping colleagues around the world
understand where their role fits and
future career development
–
Simplifying global payroll offering:
Strengthened payroll compliance,
efficiency and consistency, governance
and insight through improved
automation
–
Refreshing our HR operating model:
Bringing together our HR people
partners, Centres of Excellence, HR
Service Delivery, as well as our Global
Business Services (GBS) capability to
support day-to-day HR solutions that
benefit colleagues
We continued to navigate a dynamic
talent and labour market, including the
impact of flexible and hybrid working,
automation and digitalisation, cost of
living and employee wellbeing and
mental health.
Next generation talent
Part of building core capabilities is
engaging with and training the next
generation. In 2024, Convatec’s
programmes included apprenticeships,
internships, and graduate training across
several countries, as described at https://
marketingworld.convatec.com/
MarketingZone/MZDirect/
Source/85334ca0-5f45-4cf3-a281-
6c1522523a8f. In addition to hosting
placements, Convatec also partnered
with universities in Denmark, Slovakia,
Dominican Republic and the UK, offering
workshops and development
opportunities around topics from
finance to manufacturing.
In 2024, we welcomed 14 student interns
from the UK, Denmark, Slovakia, Mexico,
Dominican Republic and the US to assist
with the implementation of Convatec
Cares through actionable projects.
To facilitate their professional
development and continuity of the work,
each intern presented their project to
leaders at the end of their placement.
Diverse and inclusive teams
We have continued to integrate DE&I and
Wellbeing practices across the business
and recognise the multiple benefits
of ensuring our business reflects the
diversity of customers and patients we
serve, while ensuring that colleagues
feel included and able to be themselves.
As a part of our overall ESG governance,
our DE&I and Wellbeing Council brings
together a range of leaders involved in
our commitments. The Council is led by
our Chief People Officer, and includes
thematic sponsors from across CELT,
leaders of our Employee Resource Groups
(ERGs) and subject matter experts.
Our employee networks, or ERGs –
Women’s Network, Pride Network
(LGBTQIA+), Black Employee Network
(BEN), Latinx, and Ability Network –
continue to evolve. In 2025, we will
expand ERG activity around disability
and neurodiversity and ethnic and
racial diversity. ERGs help us learn as
a company. We mark key dates on the
calendar including Black History Month,
International Women’s Day, Pride
Month, Hispanic Heritage Month,
and UN International Day of Persons
with Disabilities.
We continued our self-ID campaign,
in countries where lawfully permitted,
to enable employees to self-identify
on a voluntary basis and provide their
demographic data for race and ethnicity.
This helps us measure progress so that
we can respond to a range of
stakeholder requirements.
We monitor employee diversity through
our HR systems, and the Board reviews
our diversity profile on an annual basis.
Colleagues are able to update their
personal information if they wish.
We have four pillars to our DE&I and
Wellbeing approach, with the following
key activities in 2024:
1
Cultivate an inclusive culture
for our colleagues
–
Strengthened our global DE&I
and Wellbeing Council
–
Expanded ERG membership to
support communities of interest.
–
Launched our Convatec mentoring
programme, engaging more than
250 colleagues
–
Delivered diversity-focused
training, aligned to our high
performing team principles
2
Build a diverse workforce
with greater gender and ethnic
diversity across our leadership
–
Progressed towards our ESG target
of 50% female representation in
senior management by 2027
–
Continued a campaign to enable
colleagues to self-identify on our
HR systems
–
Advanced talent acquisition
practices to better recruit and
retain diverse talent
3
Support wellbeing as a priority
for colleagues
–
Continued to embed flexible and
hybrid working as part of Our
Work Life
–
Celebrated our fifth annual
Convatec Day (page 45)
–
Strengthened our culture of
recognition with Convatec
Champions (page 45)
–
Made available over 150 colleagues
as Mental Health First Aiders to
support colleagues, focused in
our manufacturing sites
4
Enhance our reputation
through leveraging our scale,
partnerships and programmes
–
Consistent pay structure, benefits
and flexibility for employees
aligned to their role
–
Rolled out equalised parental
leave in regions covering over
70% of colleagues
–
Reviewed and updated our
mobility policy
Responsible business review – colleagues
continued
46
Convatec Group Plc Annual Report and Accounts 2024
Strategic report
Increasing diversity
At 31 December 2024, women represented 44% of our Board membership (2023: 44%) and 45% of our CELT and senior
management team (2023: 44%). Our gender diversity profile at 31 December 2024 is found below.
Gender diversity demographic data
Male
Female
Total
Number
%
Number
%
Board
1,2
9
5
56%
4
44%
CELT
2
12
8
67%
4
33%
Senior management
3
66
35
53%
31
47%
Other employees
10,404
3,941
38%
6,463
62%
Total
1, 2, 4
10,489
3,987
38%
6,502
62%
1. Includes seven Non-Executive Directors.
2. The CEO and the CFO are included as members of the Board and CELT. Stated total numbers in final row are adjusted to remove duplication.
3. Includes direct reports of CELT, excluding administrative staff. The percentage of women in CELT and senior management combined in 2024
is 45% (2023: 44%). Total population in 2024 is 78 (2023: 79).
4. Excludes freelancers, independent contractors or other outsourced and non-permanent workers who are hired on a project or temporary basis.
OUR PEOPLE: AT A GLANCE
Employees
Agency staff and independent
contractors
< 30
30-50
> 50
Geographical
areas 2020-2021
Americas
APAC
EMEA
Geographical
areas 2022-2024
Europe
North America
Rest of World
Employees and contractors
Employees by geography
Employees by age
2024
2023
2022
2021
2020
10,489
233
10,036
350
10,142
319
9,914
341
10,136
301
2024
2023
2022
2021
2020
51%
14%
35%
49%
15%
36%
48%
42%
41%
14%
8%
7%
38%
50%
52%
2024
2023
2022
2021
2020
20%
58%
22%
20%
59%
21%
21%
20%
17%
58%
60%
61%
21%
20%
22%
Hires and leavers by age
1
Hires and leavers by gender
1
< 30
30-50
> 50
Hires
2024
2023
2022
2021
2020
206
1,134
1,108
283
283
153
1,219
1,147
1,169
1,219
796
808
252
1,059
864
< 30
30-50
> 50
Leavers
365
1,013
706
569
319
221
1,514
989
750
862
683
436
2024
2023
2022
2021
2020
360
973
653
Male
Female
Hires
1,356
1,091
1,545
1,216
1,293
1,176
1,010
837
2024
2023
2022
2021
2020
1,287
888
Male
Female
Leavers
1,149
933
1,688
1,129
828
1,257
862
579
2024
2023
2022
2021
2020
1,163
823
1. Includes voluntary and non-voluntary turnover.
47
Convatec Group Plc Annual Report and Accounts 2024
Governance
Financial statements
Additional information
Overview
Strategic report
Our gender pay gap
The median hourly pay difference
between our UK-based male and
female employees as of 5 April 2024
was 1.93% (2023: 3.8%), significantly
below the UK median pay gap of 13.1%
(Source: Office for National Statistics).
This reduction reflects our ongoing
commitment to gender pay equity.
We made progress improving gender
balance, strengthening senior female
representation in the upper and upper
middle quartiles through strategic
promotions and inclusive hiring.
This shift was balanced by increased
male representation in the lower
quartiles, creating a more equitable
distribution overall. Our efforts to
narrow the gender pay gap include
implementing our job architecture
to ensure consistent role classification,
adjusting salaries to market levels,
and focusing on fair compensation and
promotion practices to support career
growth, particularly within senior roles.
Our Gender Pay Gap statement
encompasses all UK-based entities,
beyond statutory requirements. We also
report gender pay gap in other markets
where there is a regulatory requirement,
and we are actively working on routes
to provide enhanced levels of future
pay transparency to enhance visibility
and equity across our organisation.
We are pleased with our progress and
remain dedicated to further reducing the
gap. Further information about our pay
data is included in our Gender Pay Gap
Report, which can be found at www.
convatecgroup.com/sustainability/
esg-reports-and-data.
Paying a living wage
For the eighth consecutive year, we
have been accredited as a ’real living
wage’ employer in the UK. Every two
years we conduct a global living wage
assessment, which considers the local
total cost of living, as we work towards
all locations paying at or above the
national or local living wage. In 2024,
our regular assessment found that 92%
of our employee population were paid at
or above the prevailing living wage. The
residual gap was due to a sharp increase
in the local legal minimum wage in a small
number of our markets, which, in turn
had driven up the living wage level. We
are committed to increasing the salaries
of these identified employees to at or
above the living wage in 2025. For
employees globally we continue with our
annual salary review increases and are
committed to providing fair pay for our
employees. We require all our contractors
to comply with local laws on employment
rights and continue to work with our
contractors to ensure they pay their
employees at the same rates.
Employee assistance programme
We actively look at ways to support our
colleagues in line with our core values
and our forever caring promise. In
2024, as well as maintaining annual pay
awards, we continued to raise awareness
of wellbeing support available as part
of our global employee assistance
programme (EAP), which includes a
range of resources such as educational
sessions and personalised support on
topics such as mental health and
financial planning.
Health and safety
Our global Environment, Health
and Safety (EHS) team support the
development of strategy, policies and
standards, audit performance and
support company-wide teams improve
working practices, aligned to both
regulatory and company requirements.
The team report to the VP, Global
Manufacturing, who in turn reports to
the Chief Quality & Operations Officer,
who is a member of CELT and the ESG
Steering Committee. Performance
is reported to senior management
including CELT and the Board on
a regular basis. Manufacturing and
R&D sites have a dedicated EHS team
at their location.
During 2024, we completed the planned
activities associated with the electrical
safety programme and continued to target
further improvement across our key
initiatives: machinery and equipment
safety, developing safety-specific standard
work instructions, and enhancing our
safety culture programme, tailoring
delivery to site specific requirements.
Site reviews and targeted development
activities have supported improved
engagement, enhanced working
practices and improved performance.
Our Deeside, UK and Michalovce,
Slovakia sites maintained their ISO
45001 (Occupational Health & Safety
Management) certification, with plans in
place to expand to all primary operations
locations, reinforcing our commitment
and the added value of aligning our
practices to international standards.
There were no fatalities on our estate
in 2024, maintaining our record of
zero events. The target of keeping our
Operations Lost Time Injury Rate (LTIR)
per 200,000 hours worked below 0.22
by 2025 remains on track.
The continued focus on our proactive
approach to engagement and hazard
elimination has sustained our Operations
Hazard Observation Rate above the
target of 200 per 200,000 hours worked
for 2024, enabling the identification and
elimination of a significant number of
hazards across our sites, with in excess
of 16,000 potential hazards addressed
during 2024.
In addition, continued focus on
engagement, visible safety leadership
and behaviours has also contributed to
a reduction in the total number of lost
time injuries incurred, resulting in a
reduction of approximately 17% across
Convatec, compared to 2023. This year,
we also marked World Health and Safety
at Work Day, aligned to the theme of the
impact of climate change on occupational
safety and health.
Responsible business review – colleagues
continued
Our Health and Safety performance¹
2024
2023
2022
2021
2020
Fatalities
0
0
0
0
0
Convatec Lost Time Injury Rate
2
0.14
0.17
0.18
0.26
0.21
Convatec Hazard Observation Rate
2
230
227
196
148
138
Operations Lost Time Injury Rate
0.16
0.22
0.20
0.30
0.23
Operations Hazard Observation Rate
291
265
234
190
173
Lost Time Injuries
10
12
13
18
15
1
The data is based on OSHA definitions and rates are calculated based on 200,000 hours worked,
as described in our Basis of reporting (page 59).
2
Lower rates are desirable for Lost Time Injury Rates; higher rates are desirable for Hazard
Observation Rates.
48
Convatec Group Plc Annual Report and Accounts 2024
Strategic report
Responsible business review – commerce
BEHAVING
ETHICALLY AND
TRANSPARENTLY
Ethics and compliance governance
The Convatec Executive Leadership Team
(CELT) meets with our Chief Compliance
Officer on a quarterly basis to review the
ethics and compliance programme,
including its risk assessment and
mitigation efforts; investigative and
monitoring oversight; and policy
development and educational delivery.
The Audit and Risk Committee (ARC) also
meets with the Chief Compliance Officer
quarterly. This helps assure that ethics
and compliance concerns are discussed
and actioned at the highest levels of the
business. Regular company-wide and
localised communications and education
assure that all of our people are aware of
the ethical standards expected of them.
Our extensive ethics and compliance
programme incorporates several policies
and procedures including:
–
Maintaining a Code of Ethics and
Business Conduct (Code of Conduct)
that is updated regularly and
mandating annual training for
al employees either online, with
electronic acknowledgement of
completion, or through participation
in town hall meetings
–
Making available an independent
and confidential Compliance Helpline
(Speak up) and web link for employees
and third parties (www.convatec.
ethicspoint.com), to seek guidance
and to anonymously report suspected
deviations or policy breaches
–
Making it easy for issues to be
reported by colleagues, reviewed
by our Ethics & Compliance team and
where appropriate, ensuring that any
resulting investigation and outcome
of any significant issues are overseen
by the ARC (see page 109)
–
Regular onsite or computer-based
monitoring of business activities to
assure that they are consistent with
policy, including the Code of Conduct
–
Providing an additional line of defence
through our risk assessment process,
which involves direct engagement with
global market or functional leaders,
and our commitment, when areas of
concern are identified, to work with
those leaders on an ongoing basis
to improve business practices
Protecting and enhancing our
reputation with all our stakeholders
Targets: Behaving ethically and transparently
Target
Progress in 2024
Status Read more
7
Human rights:
7.1 Ensure at least 95% of
employees complete mandatory
annual Human Rights training by
Q4 2025 and in subsequent years
84% trained in first year of launch
Page 50
7.2 Procurement and supply chain:
Ensure that supplier sites covering
80% of spend across direct, external
manufacturing and logistics are
registered with our risk assessment
platform by end Q4 2025
Target update: Ensure 100% of high
risk suppliers are assessed on
Sedex by end of 2026
Suppliers representing 39%
of spend have been assessed
on Sedex.
Key suppliers representing 83%
of spend have been registered
and assessed with EcoVadis.
See page 54 for new targets
on procurement and Scope 3
emissions reduction.
Page 50
8
Code of conduct:
8.1 Ensure at least 95% of employees
complete mandatory annual training
by Q4 2023 and in subsequent years
99% trained in 2024 (2023: 90%)
Page 50
“Doing business responsibly
is key for all our stakeholders.
From ensuring labour standards
and environmental stewardship
to ethical marketing and
data privacy, our core value
‘Do what’s right’ applies to
everything we do. We hold
ourselves accountable for
the commitments we make,
and expect the same level
of transparency from partners.”
James Kerton
EVP, General Counsel & Company
Secretary
2024 highlights
2025 priorities
–
Increased the number of suppliers
assessed and audited
–
Enhanced and streamlined supply
chain risk management process
practices
–
Expanded mandatory human rights
training for employees
–
Standardise corrective action
engagement with high risk suppliers
–
Drive improvement of sustainability
practices of key suppliers
–
Increase engagement around human
rights training for colleagues
PROGRESS KEY
Achieved
New
In progress
49
Convatec Group Plc Annual Report and Accounts 2024
Governance
Financial statements
Additional information
Overview
Strategic report
84%
of colleagues trained
on human rights
94%
of our key suppliers completed
EcoVadis assessments
We have a target to ensure at least 95%
of employees are trained on our Code of
Conduct annually, which we met in 2024
with a completion rate of 99%.
Each year, we enhance our conflict of
interest measures by expanding the
number of team members that
participate in a web-based survey
mechanism that invites managers to
identify actual or potential conflicts of
interest, with plans to expand the scope
of survey participants to include all
management and senior commercial
roles by 2027.
Supplier due diligence and
contracting
Our suppliers are central to our
success. We work together to ensure
we have access to the products,
materials, components, and services
we need to meet the needs of our
customers. Our commitment to
responsible, ethical, and compliant
business practices extends to everyone
in our global supply chain. We believe our
suppliers are an extension of Convatec
and expect no less from them than we do
from ourselves. To help protect against
the risk of a third party acting unethically,
our teams conduct a range of due
diligence and related activities.
To ensure best in class human rights and
labour practices throughout the supply
chain, all of our suppliers are initially
screened by a third-party platform,
EcoVadis IQ. Suppliers identified as high
risk of modern slavery are required
to complete a Sedex self-assessment
questionnaire (SAQ) at locations that
manufacture Convatec products,
provide raw materials or store our goods.
Through the SAQ, suppliers with risks
identified that have potential to conflict
with our Code of Conduct are expected to
complete a Sedex Members Ethical Trade
Audit (SMETA). We operate processes that
are designed to facilitate corrective
actions after SMETAs, to ensure vendors
are engaged promptly when a risk event
occurs and that these events are tracked
through to satisfactory closure of the
potential risk. We will continue to build
on this progress in 2025. Our key
suppliers are audited by a Sedex
inherent risk assessment, with some
also completing a voluntary audit.
To drive sustainability improvements
through our supply chain, we also
require our key suppliers to complete
an EcoVadis assessment with the
expectation that they score above
our minimum accepted threshold.
Key suppliers are defined through
our supplier relationship management
programme, these suppliers are our
most important with high spend, strong
levels of collaboration and are involved
in driving innovation projects with
Convatec. 94% of our key suppliers
completed their EcoVadis assessment,
with the average score across our key
suppliers being 60. We aim to grow the
average EcoVadis score of our key
suppliers with the ambition for our key
suppliers to match our own silver rating.
Any key supplier scoring below
‘Committed’ on their EcoVadis
assessment by the end of 2025
will be required to complete a Sedex
SMETA in 2026. Our process of
reviewing scorecards and driving
corrective actions through EcoVadis
enables suppliers to improve their
own sustainability performance.
We require that new suppliers agree
to adhere to our third-party compliance
manual, or demonstrate adherence to
the principles stated therein, which may
derive from their own codes of conduct.
Our manual covers a range of topics
including commitments to the
International Labour Organisation
conventions and the Principles of
the UN Global Compact (UNGC) and
environmental protections. It extends
our Code of Ethics and Business Conduct
and our Human Rights and Labour
Standards Policy to the supply chain.
The manual is introduced to all existing
supplier contracts as these are renewed.
A copy of the manual is available at www.
convatecgroup.com/investors/
governance/our-policies-and-
statements/.
Working responsibly with partners
We aim to build long-term, mutually
beneficial relationships with third parties
along the value chain, including suppliers
of materials and services, contract
manufacturers, and transport and
logistics companies. Led by our Global
Procurement and Supply Chain teams,
we are clear that relationships with third
Responsible business review – commerce
continued
We are committed to creating a working environment where everyone is treated
fairly with respect, dignity and consideration and where there are opportunities
for all. We regularly review our Human Rights and Labour Standards Policy,
which incorporates principles and guidelines set out in the United Nations
Universal Declaration of Human Rights, Modern Slavery Act and the UN Guiding
Principles on Business and Human Rights, and addresses a range of issues,
including equal opportunities, anti-harassment and dignity at work. The policy
underpins the way we work with each other, partners and suppliers.
In 2024, our cross-functional Human Rights Committee, a sub-group of our
ESG Steering Committee, continued driving forward this important agenda.
Chaired by our Chief People Officer, and including our General Counsel &
Company Secretary, as well as colleagues from HR, legal, compliance, supply
chain and global corporate affairs, the Committee reviewed and updated our
human rights-related policies and practices and identified strategies to
strengthen supplier due diligence.
Consistent with our core values, we are passionate about embedding a culture
of respect within Convatec, with this in mind a Global Human Rights e-learning
module was developed and launched in 2023. Grounded on the principal areas
of focus in our Human Rights and Labour Standards Policy, this interactive
module guides all Convatec colleagues through important subjects such as
human trafficking prevention, compulsory labour, supply chain concerns,
speaking up and environmental issues. The training will be expanded each
year with additional topics, and apply to our global workforce.
Our Code of Conduct, Human Rights and Labour Standards Policy, and Modern
Slavery Act Statement can be found here: www.convatecgroup.com/investors/
governance/our-policies-and-statements/.
HUMAN RIGHTS
50
Convatec Group Plc Annual Report and Accounts 2024
Strategic report
parties must be consistent with our vision
and values, and the regulatory framework
which underpins our ethical business
practices. We believe that developing
a more sustainable supply chain will
benefit our business over the long term
through increased efficiency, product
improvements, reduced risk and deeper,
more collaborative relationships.
Building partnerships through
engagement with our key vendors is
key to driving sustainable best practice
across our value chain. In 2024, Convatec
hosted two webinars, engaging over
100 attendees representing over
50 companies. The webinars encouraged
ongoing dialogue around our commitments
to responsible, ethical and compliant
business practices, covering our
expectations of suppliers and emissions
reduction pathways (see page 54).
Our suppliers are an extension of
Convatec’s business and operations,
and we are committed to two-way
dialogue and engagement.
Like many MedTech companies,
our products are often sold by third
parties, such as distributors. We have
communicated our ambitions to our
partners, including setting out our
monitoring arrangements for sustainability
performance, expectations around
minimum standards and requirements
for annual disclosure of greenhouse gas
emissions (GHGs), commitment to setting
science-based targets and the publishing
of carbon reduction plans. We will continue
to embed these standards in 2025 across
Convatec, including our commitment
to monitor and ensure a risk-based
audit programme and monitoring
of corrective actions are in place.
Expectations vary based on their
industry and magnitude of the supply
relationship, taking a proportionate
approach so that we focus on the
suppliers and supply categories that
have the largest impact and influence
on our sustainability performance.
In Q4 2024, we requested emissions
information from suppliers that make
up over 60% of our Scope 3, category 1
emissions and our key logistic providers.
We are committed to working with our
suppliers to support them through
briefings, training, and other initiatives.
See page 56 for our Scope 3 emissions
reduction levers.
Convatec’s sustainability requirements
are now part of our standard request
for proposal and contract documentation
so that all new suppliers understand
and accept these at the start of our
trading relationship.
We also engage with stakeholders
on ethical topics within our sector.
During 2024, we continued to participate
in a number of industry meetings and
discussions regarding key legal, ethical,
compliance topics, including HCP
interactions, as well as other areas.
Ratings and disclosures
The landscape of ESG ratings and
disclosures continues to evolve, including
the forthcoming implementation of the
EU Corporate Sustainability
Reporting Directive (CSRD). We continue
to disclose against various reporting
schemes that we believe offer value
to our stakeholders and align with
our material ESG topics.
In 2024, we disclosed against Carbon
Disclosure Project (CDP), Sustainability
Accounting Standards Board (SASB) and
Global Reporting Initiative (GRI) (see
www.convatecgroup.com/sustainability/
esg-reports-and-data/), FTSE Women
Leaders Review, Workforce Disclosure
Initiative (WDI) and maintained UK Living
Wage Foundation accreditation. Our TCFD
disclosure is found on pages 60 to 71.
Memberships
We are pleased to have maintained
our participation in the UNGC since
2018, reporting annually against the
ten principles of the UNGC. We are
proud members of FTSE4Good,
a global sustainable investment
index series, designed to identify
companies that demonstrate strong
ESG practices measured against
international standards.
In the past year, we have engaged on
sustainability topics with the Advanced
Medical Technology Association
(AdvaMed), MedTech Europe, Asia
Pacific Medical Technology Association
(APACMed) and the Association of British
HealthTech Industries (ABHI). We are also
members of the All-Party Parliamentary
Corporate Responsibility Group.
Ratings
Rating organisation
2024
2023
2022
2021
2020
ISS
B-
B
B
B
B-
Sustainalytics Risk Rating
1
14.1
16.6
14.5
14.6
15.2
MSCI²
AAA
AAA
AAA
AA
AA
CDP
B
B
C
B
B
EcoVadis
Silver
Committed
–
–
–
WDI³
90%
73%
43%
54%
60%
1. As at December 2024, Convatec rated low risk. Lower scores are desirable for Risk Rating.
2. Disclaimer: The use by Convatec of any MSCI ESG Research LLC or its affiliates (MSCI) data, and the
use of MSCI logos, trademarks, service marks or index names herein, do not constitute a sponsorship,
endorsement, recommendation or promotion of Convatec by MSCI. MSCI services and data are the
property of MSCI or its information providers, and are provided ’as-is’ and without warranty. MSCI
names and logos are trademarks or service marks of MSCI.
3. Completion rate. Higher scores are desirable.
51
Convatec Group Plc Annual Report and Accounts 2024
Governance
Financial statements
Additional information
Overview
Strategic report
Responsible business review – planet and communities
PROTECTING THE
PLANET AND
SUPPORTING
COMMUNITIES
How we operate and our contribution
to the world around us
Targets: Protecting the planet and supporting communities
Target
Progress in 2024
Status Read more
9
Emission reduction:
9.1 Achieve net zero carbon (in line
with our SBTi target) by 2045
Scope 1, 2 and 3 reductions (see
below)
Page 54
9.2 Reduce our combined Scope 1
and 2 emissions by 70% against
a 2021 baseline, in line with our
SBTs, by 2030
62% (2023: 55%)
Page 55
9.3 Reduce our Scope 3 emissions
by 52% per sold product against a
2021 baseline, in line with our SBTs,
by 2030
2.5% in-year reduction of our SBT
Scope 3 emissions per product
Page 56
10
Product sustainability and
Scope 3 targets:
10.1 Procurement and supply chain:
Achieve 100% of key suppliers
attaining an EcoVadis score of
at least 45 by 2026
84% of our key suppliers have
scored at least 45 on EcoVadis
Page 54
10.2 Procurement and supply chain:
Ensure that suppliers covering 60%
of our Scope 3 category 1 emissions
have committed to set science-
based targets by end of 2026
Commenced new engagement
programme with suppliers and
held first workshop
Suppliers covering 27% of
our category 1 emissions have
committed to set near-term
science-based targets at end
of 2024
Page 53
10.3: Product development:
Establish a Product Stewardship
team to maintain our carbon
intensity database and green
design tools by 2026
The carbon intensity for Convatec
manufactured product raw
materials has been collected into
a searchable database. Data
informs the green design
assessment required at each
development stage of our new
product development process
Page 54
11
Community impact:
11.1 Contribute $2 million to our
community partners to improve
lives by end of 2025
Completed the second year of our
three-year partnership with
Partners In Health (PIH), with
$1.25m donated
Page 58
11.2 By 2027, touch one million
lives in our communities through
medical education programming
and support of strategic
community partners
Since 2023, touched over 80,000
lives through Community Health
Workers with PIH and over
475,000 HCPs trained through
medical education
Page 58
12
Medical education:
12.1 Reach more than 500,000
healthcare professionals (HCPs)
with medical education
programmes per year by 2027
Over 237,000 HCPs and patients
participated in educational
programming led by Convatec
Page 58
12.2 Expand HCP education
programmes through the
development of a global medical
education digital platform and
review of activity to enhance
impact by end of 2024
Ongoing development of Medical
& Clinical Affairs capabilities
Page 58
“We recognise the importance
many stakeholders place on
environmental stewardship and
remain committed to managing
our impact and reducing emissions,
working closely with partners and
our supply chain, and balancing the
various regulatory considerations.
Consistent with our core values,
we also continue to make a positive
social impact, through our
programmes in medical education,
volunteering, disaster relief and
charitable partnerships.”
John Haller
EVP, Chief Quality & Operations
Officer
2024 highlights
2025 priorities
–
95% renewable electricity procured
globally across all Convatec sites
–
Advanced our carbon transition plan
through a dedicated manufacturing
site energy audit programme
–
Held supplier webinars to advance
our engagement programme
–
Restated our Scope 3 emissions
footprint using materials specific
data for raw materials and semi-
finished product
–
100% of strategic buyers and category
managers trained on the topic of
sustainable procurement
–
Over 237,000 HCPs engaged in medical
education programme
–
Supported the training of 700
Community Health Workers with
Partners In Health
–
Advance our transition plan to net zero
–
Progress ISO 14001 (Environmental
Standard) Certification across all
manufacturing sites, with Group
certification by 2027
–
Enhance our water and waste
stewardship efforts
–
Continue expansion of medical
education programmes
PROGRESS KEY
Achieved
New
In progress
52
Convatec Group Plc Annual Report and Accounts 2024
Strategic report
Convatec is committed to
transitioning to a 1.5°C aligned
net zero economy, and achieving
net zero by 2045.
The global pressures on industries
to contribute meaningfully to the
low-carbon transition and align with
the critical objective of limiting global
temperature rise to 1.5°C. For the
Targets and levers
Our Greenhouse Gases (GHG) emissions
reduction pathway is guided by our
science-based targets that include
our Scope 1, 2 and 3 emissions. This is
supported by a set of specific sub-targets
across our key impact areas that help
drive investment into achieving our
climate strategic ambition.
MedTech sector, this transition presents
not only significant risks and challenges,
but is also coupled with transformative
opportunities to innovate, adapt, and
mitigate our impact.
Over the past year, we have continued
to focus on mitigation and adaptation
activities. To guide this journey, we have
grouped our efforts under six key
themes, designed to evolve as new risks
and opportunities emerge. By working
across our value chain and engaging
with stakeholders, we aim to maximise
our influence and impact, leveraging key
levers to accelerate meaningful progress
toward a net zero future.
WORKING TOGETHER
OUR CLIMATE AMBITION
We will work together with our
stakeholders to meet our ambition
and overcome sector challenges:
Our customers and patients
Understanding their needs to ensure
we can meet climate ambitions without
compromise on the availability, efficacy
and safety of products.
Our colleagues
Driving sustainable behaviours and
investment in climate-related digital
tools that allow teams to make informed
decisions that drive our ambition.
Our communities
Fostering responsible commerce,
minimising operational impacts and
championing local stewardship to
ensure our activities contribute
positively to our communities.
Our industry
Participate in opportunities for industry
collaboration, seeking ways to address
key sector challenges such as the need
to balance material and design
alternatives with product efficacy.
Our net zero and climate resilience objectives requires activating decarbonisation and
adaptation measures across our value chain, from product innovation to distribution.
Products
Delivering products and solutions
that meet the needs of our
patients and customers, ensuring
efficacy, quality and safety, whilst
exploring design and material
alternatives to continually
reduce climate impact.
Packaging and waste
Reducing the amount of
production waste and aligning
to waste hierarchy to focus
on prevention and recycling
for primary, secondary and
tertiary packaging.
Supply chain
Working closely with suppliers
to achieve shared goals and
raise ambition by encouraging
suppliers to set science-
based targets.
Logistics
Driving efficiency in logistics
through better data,
consolidating transportation
and switching to lower-carbon
modes of transport.
Operating process
Optimising lower carbon
or renewable energy use
to enhance efficiency,
lower emissions and drive
sustainable production
in our direct operations.
Adaptation
Responsibly managing natural
resources and investing in
solutions to strengthen
resilience to physical climate
impacts.
Implemented decarbonisation
HVAC replacements
Heat pumps
Steam & heat decarbonisation
Vehicle electrification
Renewable electricity increase
–
Total spend FY21–FY24: $5–10m
–
Spend in FY24: $2–5m
–
Committed spend FY25–FY30:
$20–35m
P
l
a
n
n
e
d
a
c
t
i
o
n
s
2
0
2
5
–
2
0
3
0
A
c
h
i
e
v
e
d
r
e
d
u
c
t
i
o
n
s
2
0
2
1
–
2
0
2
4
INVESTING IN
DECARBONISATION
Key targets
2025
2030
2035
2040
2045
SC:
Supply chain
P+W:
Packaging and waste
DO:
Direct operations
A:
Adaptation
Scope 1 and 2 emissions from 2021
70%
Scope 3 emissions per product sold from 2021
52%
Scope 1, 2 and 3 emissions, plus 100% neutralisation at 2045
90%
60% of Category 1 suppliers to set SBTs
SC
100% renewable energy
80%
DO
Deliver sustainable water withdrawal at high water-stressed locations and develop our water
management practices at all locations
A
Certify 100% our waste diversion from landfill practices
P+W
We have identified and begun to activate
key decarbonisation levers to reduce our
Scope 1 and 2 emissions, including
investing in renewable energy, enhancing
energy efficiency through technology
upgrades, and transitioning to lower-
carbon fuels where feasible. For further
information on our decarbonisation
activities see page 54.
53
Convatec Group Plc Annual Report and Accounts 2024
Governance
Financial statements
Additional information
Overview
Strategic report
Responsible business review – planet and communities
continued
Our plans to achieve a net zero transition will require broad stakeholder collaboration on a range challenges that affect
our ability to implement change, that must be considered within the context of industry-specific medical safeguards.
Engaging suppliers & procurement processes
Engagement across the whole value chain is essential for business to decarbonise and meet the net zero challenge.
In 2024, we held multiple supplier webinars to explain our Scope 3 challenge, targets and requirements, led by our
Chief Quality & Operations Officer. The webinars established the importance of our emissions reduction programme
and explained how sustainability is now part of our regular Supplier Review Meetings (SRMs). We are encouraged by
the efforts of our suppliers, including opportunities for shared learning. We continue to support our procurement
colleagues with resources to facilitate ongoing partnership.
Digital tools & baselining
We have refreshed our digital product sustainability
database to improve the accuracy of our emissions profile
through enhanced carbon intensity data and analytics. This
includes the identification of carbon hot spots across our
product raw materials to focus assessment of alternative
design options and monitor the impact of product changes.
Our focus in 2025 is to expand our Green Design Guidelines
which help us to consider the full lifecycle impact of our
products. This will include standard operating procedures
and expectations of product designers, which will help
to drive down the emission intensity of products to meet
our Scope 3 target.
Material challenges
Product safety and adherence to medical
safeguards is a top priority. This limits changes
that can be made to product and packaging
material and design.
Due to lengthy regulatory processes and long
lifetime of our products, there is a time lag to
realise product-related emission reductions.
Our digital tools and resources enable more
accurate lifecycle assessments, helping us pinpoint
opportunities to reduce environmental impact.
OUR VALUE CHAIN
RESPONDING TO CHALLENGES IN THE LOW-CARBON TRANSITION
Supply
chain
Products
Packaging
Direct
operations
Logistics
End of life
Data informed material and design changes
Primary packaging:
We continued focus in this area, including our efforts to remove PVC and reduce packaging
weight by almost 80% on all baseplates in our Ostomy Care portfolio. We intend to continue rolling out flow wrap
in additional geographies in 2025 and 2026.
Secondary and tertiary packaging:
100% of our cartons and shipping boxes continue to be paper-based and
recyclable. Our Esteem Body product line successfully launched with lightweight, size-optimised cartons, setting
a new standard for our packaging design which we are we are actively extending to other product lines.
Carbon calculations:
We are working with our packaging vendors to improve carbon emission evaluations through more
granular calculations of packaging weights and their associated carbon footprint, allowing us to make informed decisions
that consider both functionality with environmental impact.
Site specific decarbonisation planning
In 2024, energy audits at our manufacturing sites identified 10–20% potential energy savings per site through
initiatives like building management system controls optimisation, compressed air system improvements, heat
recovery, and motor upgrades using advanced technologies. Longer-term decarbonisation opportunities, including
heat pumps, hydrogen fuel, and onsite renewables, were also assessed. By evaluating energy savings, capex, and ROI,
site teams prioritised projects and integrated them into environmental roadmaps, driving utility reductions and
progress toward low-carbon goals.
End of product life management challenges
There are some key challenges in reducing emissions, including navigating a range of regulatory requirements,
ensuring safe disposal of hazardous materials, and addressing contamination risks that limit recyclability.
These challenges highlight the importance of design for end of life (EOL) strategies, fostering innovative
recycling solutions, and collaborating with stakeholders to develop scalable and sustainable EOL strategies.
Although EOL emissions are not a significant part of our emission profile (over which Convatec has limited
control), we will continue to drive and monitor progress in these areas.
Logistic planning and efficiency
Reduced air freight:
Through effective planning
and targeted emissions reduction activities, we have
successfully reduced Scope 3 Category 4 emissions
by 608 tCO
2
e in 2024.
Transport space utilisation:
We implemented a pilot
project with our third-party supply chain partner to
develop a new consolidation tool and increase transport
space utilisation. The project delivered a total savings
of 32 Transatlantic containers in 2024. An automated
transport optimisation tool is now in development to
scale up the project during 2025, with forecasted emissions
reduction from eliminating 52 transatlantic containers
shipped per year.
Data challenges
Accurate data is essential to effectively baseline
our emissions, identify impactful reduction
opportunities, and measure progress. Otherwise
we risk mis-prioritising investments into climate
mitigation and adaptation.
To address this, we have ongoing initiatives
across the business to improve the collection
of primary data, reduce dependence on estimates,
and ensure robust data management practices.
By investing in digital tools we can ensure climate
is appropriately considered in decision making
frameworks, to ensure strategic and financial
planning dedicates suitable resource which
is necessary to meet our targets.
Please see page 61 for ways in which we are adapting and strengthening physical climate resilience.
54
Convatec Group Plc Annual Report and Accounts 2024
Strategic report
Environment
Our manufacturing site in Reynosa,
Mexico achieved ISO14001 certification
in 2024, with our sites in Rhymney and
Deeside, UK and Michalovce, Slovakia
maintaining their ISO14001 certified
status. We are making progress on our
plans to expand the certification across
all of our manufacturing sites by 2027.
See also our Environmental Policy at
www.convatecgroup.com/sustainability/
esg-reports-and-data and our TCFD
disclosure on pages 60 to 71.
Scope 1 and 2 GHG emissions
Our 2024 Greenhouse Gas (GHG)
emissions under the market-based
method totalled 13,823 tonnes CO
2
e
(2023: 16,142), equating to an in-year
reduction of 14.4% (2023: 34.5%).
This reduction was achieved through
improved energy efficiency and sourcing
of renewable electricity at all our global
manufacturing sites. Our fleet of 1,179
vehicles (2023: 1,312) generated a total
emissions of 5,832 tonnes CO
2
e
(2023: 6,837), and our refrigerant gas
emissions amounted to 136 tonnes
CO
2
e (2023: 776).
Energy consumption
In 2024, total global energy
consumption was 127,114,380 kWh
(2023: 133,712,897 kWh), of which
UK specific energy consumption was
25,340,649 kWh (2023: 25,922,351).
Energy efficiency
In 2024, our overall energy intensity
ratio reduced by 10% (2023: 6%) through
implementation of our global energy
efficiency programme. We are prioritising
the reduction of our absolute energy
consumption as the key means for
reducing emissions. We continue to
identify and implement projects to
improve our energy efficiency by
leveraging sources such as mandatory
Energy Savings Opportunity Scheme
(ESOS) audits, voluntary internal energy
audits and best practice sharing across
our sites. In addition, we are committed
to obtaining ISO 50001 certification at
our manufacturing sites by 2030.
Energy efficiency projects to reduce our
Scope 1 and 2 emissions in 2024 included;
energy efficient chiller installation, chiller
efficiency improvements, smart
metering, air handling unit retrofits,
onsite renewables and LED lighting.
GHG (market-based method) (tonnes CO
2
e)
1,2
2024
2023
2022
2021
2020
Scope 1 (Global)
12,360
14,632
14,395
14,931
5,608
Scope 1 (UK)
2,702
2,867
3,202
3,107
2,012
Scope 2 (Global)
1,463
1,510
10,258
21,255
24,650
Scope 2 (UK)
26
72
70
29
-
Total GHG emissions
13,823
16,142
24,653
36,186
30,258
Total UK
2,728
2,939
3,272
3,136
2,012
GHG (location-based method) (tonnes CO
2
e)
1,2
2024
2023
2022
2021
2020
Scope 1 (Global)
12,360
14,632
14,395
14,931
5,608
Scope 1 (UK)
2,702
2,867
3,202
3,107
2,012
Scope 2 (Global)
23,324
23,430
23,210
25,872
27,169
Scope 2 (UK)
2,155
2,403
2,200
2,348
2,433
Total (Global) GHG emissions
35,684
38,062
37,605
40,803
32,777
Total UK
4,857
5,270
5,402
5,455
4,445
Scope 1 and 2 GHG emission intensity (tonnes/$m revenue)
1,2
2024
2023
2022
2021
2020
GHG emission intensity (location basis)
15.6
17.8
18.1
20.0
17.3
GHG emission intensity (location basis, UK)
2.1
2.5
2.6
2.7
2.3
GHG emission intensity (market basis)
6.0
7.5
11.9
17.8
16.0
GHG emission intensity (market basis, UK)
1.2
1.4
1.6
1.5
1.1
1. Please refer to our Basis of reporting for accounting methodologies (page 59).
2. In 2024, 3.5% of total Scope 1 and 2 emissions is estimated (2023: 3.0%).
Total energy consumption (by function) (MWh)
1,2
2024
2023
2022
2021
2020
Manufacturing locations
93,004
95,374
103,131
103,207
95,523
Non-manufacturing locations
8,647
9,969
9,770
10,736
6,205
Company vehicles
25,463
28,370
24,713
28,017
–
Total energy consumption
127,114
133,713
137,615
141,961
101,728
Total UK energy consumption
25,341
25,922
25,856
25,339
10,381
Total energy consumption (by fuel source) (MWh)
1,2
2024
2023
2022
2021
2020
Non-renewable electricity
3,391
3,451
22,748
43,252
66,047
Renewable electricity
63,610
64,464
50,999
31,869
10,607
Natural gas
33,452
35,218
38,609
38,130
24,766
Propane
3
1
–
–
–
District heating
834
1,538
464
642
254
Diesel
361
671
82
51
53
Company vehicles
25,463
28,370
24,713
28,017
–
Total energy consumption
127,114
133,713
137,615
141,961
101,728
Energy intensity (GWh/$m revenue)
1,2
2024
2023
2022
2021
2020
Energy intensity
0.056
0.062
0.066
0.070
0.054
1. 2.1% is estimated for 2024 data (2023: 2.5%).
2. See our Basis of reporting (page 59) for reporting methodology.
55
Convatec Group Plc Annual Report and Accounts 2024
Governance
Financial statements
Additional information
Overview
Strategic report
Renewable energy
As part of our Scope 1 and 2 science-
based targets, we have met and
exceeded our target to procure 80% of
our electricity from renewable sources by
2025, reaching 100% by 2030. As of 2024,
renewable electricity accounts for 95%
of total electricity consumed (2023: 95%)
with 100% renewable electricity procured
at all of our manufacturing sites.
During 2024, we generated 2,313
MWh (2023: 1,448 MWh) from on-site
renewable energy sources. We continue
to develop project feasibilities within
our efficiency project pipeline.
Information about the methodology we
use for disclosing renewable energy in
relation to our Scope 1 and 2 emissions
can be found in our Basis of reporting
document (page 59).
Scope 3 emissions
The provision of material specific carbon
emissions data, compiled in our digital
product sustainability tool has improved
the accuracy of our Scope 3 emissions
data. As such, replacing spend-based
emission factors in our footprint
data triggered the requirement for
a rebaseline and restatement of
our emissions, in line with our policy.
Updated Scope 3 data is provided
in the adjacent table.
During 2024, we continued to progress
engagement with our suppliers and
partners to collect primary data to
ensure accuracy of emissions data
and allow us to track our suppliers
decarbonisation efforts. During 2024,
we collected 10% of Scope 3 data from
primary sources (2023: 8%). These
numbers were collected through
direct engagement or use of third-
party platforms such as EcoVadis, which
we encourage our suppliers to use to
improve transparency and encourage
continuous improvement. Our supplier
webinars promoted engagement by
actively sharing our requirements whilst
promoting collaboration on emissions
reduction throughout the value chain.
In 2024, our Scope 3 GHG emissions
totalled 239,255 tonnes CO
2
e (2023:
246,771 tonnes), a 10% absolute
reduction from 2021. See our Basis
of reporting (page 59) for exclusions
and details of our re-baselining
and restatement.
Our GHG reporting follows the
methodologies set out in ’The GHG
Protocol: A Corporate Accounting and
Reporting Standard (Revised Edition)’,
developed by the World Business Council
for Sustainable Development and the
World Resources Institute.
Water
During 2024, we have continued our
high-level review of all our manufacturing
facilities using the WRI Aqueduct and
Ecolab Smart Water Navigator, based
on our 2023 operational data. This
allows us to track progress and maintain
understanding of the risk to our
operations. Our manufacturing
site in Reynosa, Mexico, remains the
only site with high baseline water stress
and consequently a medium water
withdrawal risk and we are continuing
our progression towards becoming
water stewards. Our Reynosa facility
has prepared a water stewardship plan,
setting out SMART targets to implement
and identify water efficiency projects,
to ensure delivery and review success.
Whilst our water use within Haina,
Dominican Republic, is indicated in
the high level review to be within a
sustainable water use, the Aqueduct
analysis indicated that it could be
impacted by water risks. We have
undertaken data gathering on specific
water risks and opportunities at this site.
A facility level assessment was completed
to identify opportunities to reduce our
clean water demands and improve water
efficiency, including considering
rainwater harvest. In addition, a survey
identified key water opportunities and
challenges within the local catchment
(both surface water and groundwater),
and key water stakeholders have been
identified and mapped.
In 2024, we withdrew approximately
163 megalitres of water (2023: 153
megalitres), all of which was provided
by municipal water suppliers or other
public or private water utilities. The
increase in water withdrawal is related
to the installation of sprinkler systems
for business continuity purposes. No
water is abstracted directly from lakes,
rivers or other bodies of water. Data is
compiled from invoiced amounts and
meter readings. In 2024, our focus will
remain on achieving our sustainability
water targets and becoming positive
water stewards at all of our plants. We
will continue to monitor water risks at
our facilities and we are committed to
achieve Alliance for water stewardship
certification at our priority sites by 2027.
5,781 tonnes of water (2023: 6,015
tonnes) are tankered offsite as hazardous
waste, the vast majority relating to our
Rhymney site in the UK, where as part
of the production process water becomes
contaminated with Industrial Denatured
Alcohol (IDA) and is segregated for
further processing. After processing,
a significant proportion of the IDA
is recovered and reused at the site.
The remaining treated water is
returned to the environment via
a sewer as part of a permitted
discharge. Other uncontaminated
wastewater is discharged via a sewer.
Scope 3 emissions (tCO
2
e)
1
2024
2023
2022
2021
Category 1: Purchased goods and services
113,190
119,537
119,473
142,591
Category 2: Capital goods
22,912
24,929
25,067
16,748
Category 3: Fuel and energy related activities
7,479
7,670
8,214
8,732
Category 4: Upstream transport and distribution
32,502
33,110
48,130
40,279
Category 5: Waste generated in operations
2,468
3,524
3,055
5,200
Category 6: Business travel
12,829
9,440
6,315
6,147
Category 7: Employee commuting
6,555
6,703
7,315
7,284
Category 12: End of life treatment of sold products
41,320
41,858
40,020
39,670
Total Scope 3 emissions
239,255
246,771
257,589
266,651
Total emissions (Scope 1, 2 and 3)
253,077
262,913
282,242
302,837
1. All Scope 3 data for 2021 to 2024 has been restated using updated emission factors and material-
specific data where available.
Responsible business review – planet and communities
continued
Water use
2021
2022
2023
2024
163
153
169
176
(megalitres purchased)
56
Convatec Group Plc Annual Report and Accounts 2024
Strategic report
Waste
Throughout 2024, we have advanced our
waste data analysis processes across all
global sites, leveraging our bespoke data
collection tool to assess site-specific waste
generation and disposal practices at a
greater level of granularity. This provides
us the opportunity to better understand
our waste and what we can do to reduce
its impact. This year’s efforts included
a comprehensive cross-analysis against
production workflows, allowing us to
establish normalised baselines for our
key waste-related metrics.
These metrics will be used to support
all sites on their journey towards Waste
Diverted from Landfill certification.
Alongside this, we have now appointed
our certifier and have begun pre-audits
at key strategic sites. The remaining sites
are scheduled over the next few years
with an overall ambition of achieving
certification globally by 2030.
Recycling continues to be the
predominant disposal route across our
sites, driven significantly by liquid waste
recycling at our manufacturing site in
Rhymney, which constitutes our largest
waste stream at 39% of total waste
generated (2023: 34%). However, landfill
ranks as the second-largest disposal route
at 31% of total waste generated (2023:
37%). This has highlighted our
manufacturing sites in Haina, Dominican
Republic, and Reynosa, Mexico, as key
targets for improvement. General waste
is one of our largest waste streams and
its treatment is country-specific, with 2%
recycled, 30% sent for energy recovery
and 68% either incinerated without energy
recovery or sent to landfill. We have active
projects currently underway to optimise
source-segregation, maximise recyclability
and find the most sustainable disposal
routes for all remaining residual waste.
In 2024, hazardous waste made up 40%
of total waste generated (2023: 35%). 99%
of this hazardous waste was recycled.
We are piloting reuse initiatives and
actively sharing best practices across
our manufacturing sites to facilitate
implementation and further minimise
our global environmental impact.
Waste generated (tonnes)
2024
2023
2022
2021
2020
Non-hazardous waste
Disposed of
6,962
8,499
9,655
13,599
11,806
Recycled
1,750
2,779
3,425
2,990
2,120
Generated
8,712
11,278
13,080
16,589
13,926
Hazardous waste
Disposed of
73
98
69
82
72
Recycled
5,855
6,073
5,789
5,606
5,337
Generated
5,928
6,171
5,858
5,688
5,409
Total generated
14,640
17,449
18,938
22,277
19,335
Fate of non-hazardous waste generated (%)
2024
2023
2022
2021
2020
Recycled
20%
25%
26%
18%
15%
Incineration (with energy recovery)
27%
18%
27%
16%
10%
Incineration (without energy recovery)
1%
1%
0%
0%
0%
Landfill
52%
56%
47%
66%
75%
Socio-economic contribution to society
Through running our business, we aim to make a socio-economic contribution
to society. This contribution, which is important to a range of stakeholders, is
summarised in the table below. We also recognise that there are a range of benefits
to communities and society as a result of our products, services and jobs directly
and indirectly created.
2024
$m
2023
$m
2022
$m
2021
$m
2020
$m
Direct economic value generated
2,289.2
2,142.4
2,072.5
2,038.3
1,910.8
Economic value distributed
Operating costs
1
947.6
937.1
990.4
962.3
891.7
Employee wages and benefits
767.2
701.3
648.5
650.1
579.7
Payments to providers of capital
2
349.2
223.2
312.8
262.7
254.0
Payments to governments
3
82.3
61.2
45.7
47.6
56.3
Community investment
4
1.8
1.3
0.7
1.5
0.7
Economic value retained
141.1
218.3
74.4
114.1
128.4
1. Operating costs exclude depreciation, amortisation, impairment charges, asset write-offs and
operating taxes. Employee wages and benefits, payments to governments and community
investments are normally part of operating costs, but have been excluded as they appear on
separate lines in the table.
2. Payments to providers of capital have been included on an accruals basis and include interest
paid on long-term debt, capital and interest payments on right-of-use assets, net debt repayment,
dividends and own share reserve purchase paid to Convatec shareholders.
3. Payments to governments include corporate income taxes, sales taxes, real estate taxes and
other taxes, but exclude employer portion of payroll taxes, as they are included in employee
wages and benefits.
4. Calculated as costs associated with charitable community donations. See page 59 for calculation
of value to communities.
Contribution to governments
We are fully committed to meeting our legal tax obligations in each of the countries
in which we operate. We fully support and embrace greater transparency with tax
authorities and the initiatives being introduced by the Organisation for Economic
Cooperation and Development (OECD) and governments to ensure clarity and
adherence to the tax laws of each jurisdiction in which we operate. Our Tax Strategy
is available at www.convatecgroup.com/investors/governance/our-policies-and-
statements/.
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Governance
Financial statements
Additional information
Overview
Strategic report
SUPPORTING COMMUNITIES
Our forever caring promise guides
how we engage with our communities.
Globally, our approach is to support
community partnerships on issues
that closely align with our vision
and values, and where the majority
of our people are based and their
impact is made. In recognising that
the way in which we operate enhances
the contribution we make to local
communities, we maintain partnerships
with select non-governmental
organisations (NGOs) to achieve
maximum impact. These partnerships
focus on issues of healthcare access/
equity, education and disaster relief.
Partnerships
Disaster relief
We continued our disaster relief
programmes throughout 2024. In May,
we worked with humanitarian partners
in response to catastrophic flooding in
South Brazil which displaced more than
160,000 people. We also helped support
those affected by the 7.6 magnitude
earthquake that hit the Noto peninsula in
Japan, contributing to a safety net system
to support ostomates in the areas who
may have difficulty accessing products
and supplies. We continued our support
for the Disasters Emergency Committee,
through a $150k donation to their Middle
East Appeal.
Health equity and education
In 2024, Convatec entered the second
year of a three-year collaboration with
the international NGO Partners In Health
(PIH). Focused on key geographies of
Mexico, Peru and the United States, the
partnership aims to advance innovative
methods for recruiting, training and
deploying Community Health Workers
(CHWs) and enhance treatment of chronic
conditions. The combination of financial
support, product donations, and medical
education has so far trained 700 CHWs in
underserved communities, by extension
touching over 80,000 lives. To see more
about the partnership, its objectives,
and impact numbers, see www.
convatecgroup.com/sustainability/
protecting-the-planet-and-supporting-
communities/supporting-communities/.
Engagement and volunteering
Throughout the year, Convatec
colleagues spent hundreds of hours
in their communities, participating in
volunteering activities on issues that
matter to them. For the third year,
we hosted ‘Forever caring month’ to
encourage colleagues to get involved
in their communities and utilise
company supported volunteering time.
Stories are shared and celebrated as
a way to witness our forever caring
promise for communities.
Our two-day volunteering policy
makes it easy for colleagues to engage
in community service. Business units,
functions and our ERGs contribute
to local market activities as well.
→
For a summary of Forever caring
month, watch this short video: www.
vimeo.com/1047416089/0fa70334a2?sha
re=copy
Medical education
In line with our forever caring promise,
we support HCPs through our medical
educational programme. We provide
grants to support HCPs and third parties
(such as scientific congresses,
regional bodies, medical associations,
educational and hospitals) supporting
their engagement with educational
and scientific meetings, programmes,
workshops, events, activities, and public
education, non-contingent on the use
of Convatec products. We progressed
on our target to reach more HCPs
with medical education programming
and patient education programmes –
supporting over 2,300 HCPs with
medical education grants and
engaging over 237,000 HCPs
in educational programmes.
FOREVER CARING IN ACTION
Wound care training
As part of our partnership with PIH, last year we kicked off a medical
education training programme in Liberia. The session, held at the J.J. Dossen
Hospital in Liberia, centred around the fundamentals of wound healing and
was designed to build on the current knowledge of healthcare providers at
the hospital. Managed by our Medical and Clinical Affairs team, the virtual
sessions addressed a series of topics around AWC for PIH HCPs in Haiti,
Liberia and Sierra Leone. The sessions were recorded and compiled in
a training library for the sites. For more information on PIH, visit their
website at www.pih.org.
Responsible business review – planet and communities
continued
Developing meaningful relationships with community partners is especially
important for colleagues at our manufacturing sites, where we have significant
footprints in the area. For years, colleagues near our sites have cleaned up
beaches and roadsides, fundraised through football, and spent time with
children with cancer and elderly residents at local care homes.
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2024 VALUE TO COMMUNITIES
In line with our forever caring promise and values,
we supported our communities through:
$1 million +
to community partners through
programming and disaster relief
$2.5 million
Product value donated to charity partners
1
237,000+
HCPs and patients participated in educational programmes
~$457,000
in medical education grants supporting over 2,300 HCPs
1. Product value calculated using regional average sale price. Includes
discounted contribution from products with shortened shelf lives.
STATEMENTS
Independent assurance
In line with our commitment to transparency, we commissioned Deloitte LLP for the third year to perform limited assurance
procedures on selected key performance indicators as detailed in our Responsible business review 2024. The assurance was
completed in accordance with the International Standard on Assurance Engagements 3000 (revised) (ISAE 3000) and 3410
(ISAE 3410). Details of the procedures performed are outlined in Deloitte’s independent assurance opinion, which can be
located at www.convatecgroup.com/investors/governance/our-policies-and-statements/.
Performance data
The scope of Deloitte’s work covered the following 2024 disclosures (performance data) from the review:
–
Greenhouse gas emissions: Scope 1 (12,360 tonnes CO
2
e); Scope 2 (market based) (1,463 tonnes CO
2
e); Scope 2 (location
based) (23,324 tonnes CO
2
e ) (page 55)
–
Emission intensity (location based: 15.6 tonnes CO
2
e/$million revenue and market based: 6.0 tonnes CO
2
e/$million
revenue) (page 55)
–
Energy consumption (127,114 MWh) (page 55)
–
Energy intensity (0.056 GWh/$million revenue) (page 55)
–
Health and safety: operations lost time injuries rate (0.16) and hazard observation rate (291) (page 48)
–
DE&I and Wellbeing: percentage of females in senior management and CELT (45%) (page 47)
–
Quality: Complaints per million (22.8) (page 13)
Deloitte’s full Assurance Statement, including opinion and basis of opinion is available
at www.convatecgroup.com/sustainability/esg-reports-and-data/.
Completeness of information
The information contained in the Responsible business review section of our 2024 Annual Report and Accounts covers
all operations over which we had financial control for the 2024 financial and calendar year. It also covers all of the issues
identified in our ESG framework and places emphasis on the most material issues.
Where a reported KPI does not relate to the entire organisation for the whole year, the scope of its boundaries is indicated.
Businesses acquired or disposed of during the year are not included in our reporting for that year except where disclosed
otherwise.
Basis of reporting and ESG definitions
We regularly assess the scope of our ESG assurance and covered metrics. Convatec’s basis of reporting for the above metrics
and all other ESG target definitions can be found at www.convatecgroup.com/sustainability/esg-reports-and-data/.
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Financial statements
Additional information
Overview
Strategic report
TCFD disclosure
Task Force on Climate-related
Financial Disclosures
Statement of Compliance
Convatec is committed to the continued adoption and alignment with the recommendations of the Task Force on Climate-related
Financial Disclosures (TCFD) as a means to effectively integrate climate considerations into our business. Our disclosure is compliant
with the UK Government’s Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations 2022 and the FCA Listing
Rule UKLR 6.6.6(8) on climate-related financial disclosure.
The table below summarises how we comply with the TCFD recommendations. Further supporting information can be viewed in our
ESG section of the annual report under the ‘Protecting the planet and supporting communities’ pillar on pages 52 to 59.
Recommendations
Relevant information
Status
Page ref
GOVERNANCE
a) Board oversight
–
Responsibility for the identification and management
of climate-related matters
–
Frequency of engagements on climate-related matters
Comply
Page 61
b) Management’s role
–
How climate is integrated across business processes
and frameworks
Comply
Page 61
STRATEGY
a) Climate-related risks
and opportunities
–
Description of time horizons used in the analysis
–
Climate risks and opportunities identified
Comply
Page 62
b) The impact of climate-related
risks and opportunities
–
Climate scenario analysis, including qualitative and
quantitative impact assessment results and the management
response measures
–
Climate integration in financial planning processes
and climate transition plan on alignment to net zero
Comply
Page 63
c) The resilience of the
organisation’s strategy
–
Description of climate scenarios used
–
Conclusion on climate resilience under different scenarios
Comply
Page 64
RISK MANAGEMENT
a) Describe the organisation’s
processes for identifying and
assessing climate-related risks
–
Process and methodology to identify and assess climate risks
and opportunities
Comply
Page 70
b) Managing climate-related risks
–
Process to identify and select risk controls
Comply
Page 70
c) Integration into overall
risk management
–
Overview of climate integration in Convatec enterprise risk
management framework
Comply
Page 70
METRICS AND TARGETS
a) Climate metrics
–
Overview of climate metrics and targets used to
monitor performance
–
Climate metrics used to monitor risk and opportunity exposure
Comply
Page 71
b) GHG emissions
–
Scope 1, 2 and 3 GHG emissions reported in responsible
business section
Comply
Page 71
c) Climate targets
–
Climate commitments to align with the low-carbon transition
and to reduce our exposure
Comply
Page 71
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Convatec Group Plc Annual Report and Accounts 2024
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GOVERNANCE
The responsibilities of the Board and
management on climate-related issues
are described on pages 34 and 35. The
CEO has overall responsibility for climate
matters, whilst the Board has strategic
oversight of Convatec’s climate ambition
and transition plan (see page 54). The
Board is supported by the following
governance bodies with climate-specific
roles relating to the identification,
assessment, management and disclosure
of climate risks and opportunities (R&Os):
–
ESG Steering Committee:
The Committee is chaired by the
CEO and discusses the progress of
Convatec’s Climate Transition Plan
including its Climate Strategic
Ambition, as well as supporting the
overall implementation of the Group’s
vision and ESG strategy through the
strategic planning process.
–
Audit and Risk Committee (ARC):
The ARC is responsible for ensuring
compliance with all relevant
regulations and laws, including
TCFD, and monitoring programmes
to achieve compliance. In addition,
the ARC is also responsible for
reviewing and approving Convatec’s
management of all risks, including
any material climate-related risks.
Risk controls are identified by affected
business units, with the support of the
TCFD working group and risk team.
In a bottom-up approach, risk owners
are identified in each business unit and
responsible for identifying appropriate
controls, monitoring risk exposure,
and providing two of four quarterly
updates. In addition, some controls are
defined as top-down as climate change
is managed under the Principal Risk
‘Environment and Communities’.
Convatec Executive Leadership
Team (CELT):
The CELT has delegated
responsibility from the Board to set the
direction of Convatec’s strategy,
ensure climate-related issues have
appropriate management in place, and
cascade this through the organisation.
–
Remuneration Committee: Responsible
for setting and monitoring variable
compensation performance metrics
for CELT members, which include
performance against ESG objectives.
The Remuneration Committee has a
close relationship with the ESG Steering
Committee for the preparation and
sign-off of public disclosures, which
include TCFD-related information.
Frequency of engagements on
climate-related matters:
ESG, including
climate-related matters, is a regular
agenda item across most Board and
management committees. In FY2024,
there were two formal updates on
climate-related matters in 2024 Board
meetings. For further details on the
frequency of meetings please see
page 35.
CLIMATE
AND BUSINESS
PROCESSES
Strategy management
Our strategy includes the
environment as an ESG priority
aspect. In our annual strategic
planning cycle, each business unit
considers actions and resources
required to meet our ESG objectives,
which includes climate. This helps
to inform the development of the
annual business plan and budget.
Risk management
Our in-depth climate scenario analysis
informs the Environment and Communities
Principal risk and ensures suitable resources
are allocated to risk controls. For example,
we are committed to implementing
decarbonisation initiatives to minimise our
environmental impact and reduce exposure
to transition risks. Additionally, we maintain
comprehensive insurance coverage across
our sites and have established dependency
flows to support business continuity in the
event of disruptions.
Goals and targets
We are committed to the net
zero transition, and reducing
our environmental impact across
emissions, waste, water and
product life cycles. We have updated
our climate strategic ambition, and
will use this to inform actions
required to deliver on our climate-
related targets.
Performance monitoring
We have KPIs associated with our
environmental ambition and report our
annual performance alongside multiple
years of historical data.
We are working on ways to improve data
collection and reporting processes by
assessing data sources and internal and
external reporting requirements. As part
of this process, we will also establish
additional metrics as relevant.
Decision-making frameworks
Climate considerations are included in M&A due diligence
as well as capital allocation. We have also developed tools
and resources like the Green Design Guidelines which
foster sustainability behaviours in day-to-day activities.
Our approach to climate resilience
Climate-related risks and opportunities have been assessed and managed as a Principal Risk since 2021. Since then, Convatec
has continued to embed climate change into its business practices and operations to strengthen climate resilience and help drive
actions to reduce our value chain GHG emissions.
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Governance
Financial statements
Additional information
Overview
Strategic report
TCFD disclosure
continued
STRATEGY
Our climate scenario
analysis approach
This is the third year we are reporting
against the TCFD recommendations, and
we have taken the opportunity to further
develop our climate scenario analysis
(CSA) approach with each iteration. In
this reporting period, we are compliant
across all TCFD recommendations, and
our climate scenario analysis combines
both qualitative and quantitative
assessment of potential physical
and transition impacts, the outputs of
which help to inform our management
response and better integrate climate
considerations into our business.
Summary of our climate scenario
analysis development:
–
FY2022: Established
process for our
first qualitative CSA of transition and
physical impacts (for material
manufacturing sites).
–
FY2023: Supplemented
our
assessment with quantitative CSA
including financial impacts from a
selection of transition and physical
value drivers.
–
FY2024:
Updated
our CSA with the
latest climate models and expanded
our physical climate assessment to
include all owned manufacturing sites.
Our analysis approach is reviewed
annually, and formally refreshed at least
every three years as part of our continual
monitoring and integration of climate
considerations within business processes
and operations. It will be fully refreshed
next in FY2026.
Our climate scenario
analysis approach
Risk identification:
By using the
TCFD guidance, climate scenarios and our
own industry perspective, we can identify
relevant climate impacts which we then
interpret and align to the specifics of
our business value chain. Information
sources include a review of regulatory
requirements related to climate change,
climate policy and climate scenario
research, a review of peer disclosures
and internal engagement with
business function leads.
Time horizons:
Climate impacts can
vary over time. For the assessment
of climate impacts, short-term time
horizon (zero to one year) aligns with
that of our risk management and
business planning near term period,
medium term (two to five years) aligns
with the strategic planning cycle in which
climate matters are integrated, and
long-term (six years to 2050) aligns with
Convatec’s goal of achieving net zero and
the longer term nature in which climate
issues may manifest.
Qualitative assessment methodology:
Identified climate-related risks have
been assessed qualitatively against
the likelihood of occurrence, magnitude
of impact and vulnerability, where
vulnerability is a function of exposure,
sensitivity and adaptive capacity.
Sensitivity reflects the predisposition
of organisations, assets, societies,
processes, or systems to be adversely
affected by risk. Adaptive capacity refers
to characteristics or actions that may
reduce the risk posed by a hazard and
alleviate vulnerability. Climate
opportunities have been scored based on
the potential size of opportunity through
avoided costs, increased revenue, and
the ability to realise the opportunity.
Scoring:
Semi-qualitative scoring allows
for the prioritisation of possible impacts
on which the business agrees to focus
control measures and investment. Each
term is scored on a five-point scale, and
scoring thresholds are defined for each
indicator to ensure a consistent and
comparable approach is applied across
all impacts, climate scenarios and time
horizons. Our materiality threshold is
determined by qualitative scoring of
1-5 across different criteria, informed by
stakeholder engagement and desk-based
research. Risks that are deemed to be
most significant to the business will
typically involve a critical asset, cause
disruption to multiple assets, or affect
a large portion of our supply chain or
customers. Significant opportunities
are those where we consider the
business to be in a good position
to realise the opportunity, either
due to alignment of business strategy
or low market competition. Where
methodologies allow, we have sought
to better understand the business
impact from a selection of priority
physical and transition impacts through
the quantification of potential financial
impact across different climate scenarios.
Risks and
opportunities based
on our business
operations and
market landscape
to better understand
the cause and
consequence.
Research on
potential financial
impact pathways
to select risks and
opportunities that
are feasible for
quantification.
Potential
financial impact
of transition risks
and opportunities
unmitigated
and considering
decarbonisation
actions.
Results of physical
risk analysis into
impairment testing,
as well as in business
continuity and risk
management plans.
Risk and opportunities
identification and
qualitative
assessment
Quantification of
financial impact
Integration of climate
scenario analysis in
business processes
Continued monitoring
and refresh of
assessments
Identify risks and
opportunities
through
cross-function
engagement and
climate scenario
desk-based
research on sector
trends, policy and
climate analytics.
A qualitative
climate scenario
analysis to
systematically
assess all risks and
opportunities
across timeframes
and climate
scenarios.
Potential financial
impact of physical
risks unmitigated
across climate
scenarios out
to the long term.
Priority transition
risks and
opportunities
into the strategic
planning process.
A robust and
integrated approach
to identify and assess
climate risks and
opportunities under
the Environment and
Communities
Principal Risk.
Perform
climate
scenario
analysis
periodically.
Efforts to identify
longer-term
actions required
to meet net zero
commitments and
iterate Transition
Plan accordingly.
Develop our
transition plan
considering the
key risks and
opportunities and
ensuring actions
are taken to
respond to these
and contribute to
a low-carbon and
climate resilient
economy.
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Financial assessment
methodology
Physical risk
This year, Convatec has refreshed its
financial assessment of potential losses
associated with physical climate risk to
include all manufacturing sites and apply
the latest climate data projections. The
forward-looking assessment modelled
the potential impact of productivity loss
and asset damage driven by various
climate indicators which are categorised
into the following hazards: flood, wildfire,
heat stress, storms, and water stress.
The climate analytics are sourced from
Climate Insights, a tool owned and
developed by ClimSystems (part of SLR).
The data from the Climate Insights tool
shows the potential future change in
climate variables based on global
climate models (GCMs), using the
scenarios described on page 64. The
climate data provided is correlated to our
business data, including building value
and revenue generation, to provide an
annual assessment of the potential value
at risk (VaR) experienced from repair
costs for asset damage, and revenue loss
due to decreased productivity driven by
the likes of employee efficiency and site
closures. As such, it is not a forecast of
potential annual costs or revenue losses
but is a helpful indication of the potential
impacts of physical climate change
events which are likely to increase over
time. The analysis does not consider any
mitigation actions that the business has
or would implement.
We have considered the potential
increase in losses over time, compared
to exposure in 2024 as a baseline. We
have presented this as the net present
value of the cumulative cash flow impact
for the period 2024 to 2050, discounted
at the Convatec WACC. The results
are presented for the 50th percentile,
indicating the ‘best guess’ on the
potential impact under each scenario.
To provide a ‘worst-case’ view for the
purpose of ensuring appropriate risk
controls we have not accounted for
physical risk mitigation or adaptation
measures that reduce our exposure.
The updated climate variable data
has resulted in an overall increase in
the unmitigated potential financial risk,
which is due to enhancements to data
models and methodologies used. Whilst
the financial values have increased, these
figures are only indicative and our overall
assessment outcomes in terms of site
exposure to climate variables and the
extent of this has not changed.
Transition risk
Our financial assessment of transition
risks has focused on the potential
increases in costs of direct operations
at our manufacturing sites – associated
with energy prices and carbon taxes,
as well as increases in costs from raw
material suppliers – using carbon tax
as a proxy. The potential impacts
are determined for two business
cases. A reference case where no
further decarbonisation action beyond
what is known and planned is taken,
and a mitigation case where Convatec
achieves its near- and long-term emission
reduction targets.
The climate-related information is
sourced from the IEA’s World Energy
Outlook which outlines current
trajectories as well as the required level
of policy action to limit global warming
to 1.5⁰C b y the end of the century.
This information is overlayed with
our business data on projected energy
consumption and emissions profile
to 2050.
The projections on our energy and
emissions correspond with the same
data used for our net zero and transition
plan modelling to ensure consistency
and alignment in the level of investment
required to mitigate risks, achieve
targets, seize opportunities, and align
with the low-carbon transition. As such,
our long-term emissions projections
have been updated. This reflects our
decarbonisation pathway modelling,
which highlights opportunities for
greater reductions due to technological
advancements and areas where we have
significant influence and control. The
outcome provides a climate-adjusted
view of cashflows. These are hypothetical
absolute costs which could affect the
cost base of our operations in the future.
To understand the potential downside,
we have assumed a ‘worst-case’ and
less likely scenario where our major
operations (all manufacturing assets
and material suppliers) are subjected
to carbon pricing as a proxy to transition
costs. Across the different scenarios
analysed, we used the price projections
to inform the range in ambition level
but assumed a start date of carbon tax
impact in 2030 for our raw materials
as there is uncertainty in the applicability
and likelihood of suppliers being subject
to additional transition costs that will
be wholly passed on to us.
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Governance
Financial statements
Additional information
Overview
Strategic report
TCFD disclosure
continued
Climate scenario modelling
We assess identified climate-related risks and opportunities across a range of forward-looking climate scenarios to account for future
uncertainty in regional mitigation and physical climate change. Our analysis draws upon multiple scenario sources that align with three
broad scenario pathways, including Ambitious Policy, Middle of the Road and High Warming. By using multiple climate scenario sources,
we can draw on a broader range of scenario indicators that help describe how future climate-related outcomes could impact the
business. The selected climate scenarios and the underlying scenario data sources are described in the table below.
In the risk and opportunity matrices (pages 65 to 67), we present the most significant risks and opportunities identified and show
the relative significance of the potential impact over the short to long term and across three climate scenarios.
Our climate scenario selection
Ambitious Policy Scenario
Middle of the Road Scenario
High Warming Scenario
Scenario
storyline
1.5°C aligned scenario, where global
CO
2
emissions are cut severely, with
ambitious and gradual efforts to limit
temperature rise.
Slow, less ambitious policy action or
a time lag before sudden ambitious
action. Emissions remain stagnant in the
near term with notable shifts occurring
between 2030 and 2050.
Limited to no action, with society
continuing along past trends and
emissions increasing significantly,
resulting in extreme warming.
Rationale for
selection
Analysis of a 1.5°C scenario is key to
understanding our business’s
compatibility with the commitments of
the Paris Agreement. In addition, it allows
us to consider how growing regulatory
pressure on energy systems, directly on
our operations and on our supply chains,
may generate or exacerbate transition
risks and opportunities.
Analysis of a ‘middle-of-the-road’ scenario
is useful for having a view that is consistent
with the pace of current climate regulation
but that anticipates that this may accelerate
as we reach a point of inevitable policy
response which could be disordered and
aggressive due to the delayed nature. As
temperatures are warmer, this scenario
indicates the potential blend between
significant physical and transition risks.
Analysis of a high warming scenario
provides us with a view on the upper
range of physical risk that might be
expected, should climate action
deteriorate or if the climate system is
more sensitive to GHG concentrations
than expected by current models.
Temperature
range outcome
by 2100
1.3°C – 2.4°C
2.1°C – 3.5°C
3.3°C – 5.7°C
Sets of climate
scenario
sources
NGFS Orderly transition
REMIND-MAgPie Net Zero scenario
IEA Net Zero scenario
IPPC’s SSP1-2.6
NGFS Disorderly transition
REMIND-MAgPie Delayed Action scenario
IEA Announced Pledges scenario
IPPC’s SSP2-4.5
NGFS Hot House World
REMIND-MAgPie Current Policy scenario
IEA Stated Policies scenario
IPPC’s SSP5 8.5
Our climate-related risks and opportunities described
The identified risks and opportunities are grouped into four themes that represent the value chain and impact drivers:
1.
Supply chain and raw materials used includes risks and opportunities related to material availability and price
2.
Direct operations and processes includes risks and opportunities related to our manufacturing and day-to-day operations
3.
Stakeholder expectations includes risks and opportunities related to corporate regulation as well as shifting requirements
from suppliers, customers, investors and other stakeholder groups
4.
Physical damage and disruption includes risks and opportunities related to changing weather conditions over time
Risk and
opportunity
themes
Ambitious Policy potential scenario impact
Middle of the Road potential
scenario impact
High Warming potential scenario impact
Supply chain
and
sustainable
design
Convatec will have access to sustainable
materials but will face high competition
to procure alternatives.
Investment into R&D will increase quickly
to adapt existing products and design
new products that align with a
transitioned economy.
Convatec will be investing in its R&D
of new products to use lower emission
materials if available.
Suppliers may increase their costs
to Convatec over time, as they are faced
with a surge in price due to transition
policies.
Sustainable and low emissions technology
will be limited. Convatec will focus on
creating lower emission products whilst
still producing its current portfolio to
meet customer needs.
Direct
operations
and processes
Direct operational costs will change,
predominantly driven by the energy
transition which brings volatility in purchase
agreements. There is also the possibility of
a global carbon pricing mechanism which
puts a cost on our carbon emissions.
Convatec will continue to decarbonise its
operations and will experience a significant
demand for renewable energy, increasing
competition and cost in 2030.
Convatec would continue to decarbonise
against its 2045 net zero target with no
surge of efforts required until 2045.
Stakeholder
expectations
To comply with new climate policies set
by governments and sectors, Convatec
will need to increase its resources in
sustainability management to meet
regulatory requirements and show
progress against ESG metrics and targets.
Strict climate policies and targets are
implemented suddenly, which require
Convatec to comply quickly. This would
result in a large request of resource and
allocated capital.
Convatec would have to comply with its
existing climate targets and stakeholder
expectations. Resource increase would
be minimal as Convatec would move
to a performance platform to measure
success against ESG metrics.
Physical
damage and
disruption
The physical climate will not significantly
divert from the climate we experience
today, as such Convatec sites will have
low exposure to key climate hazards.
Changes in climate would affect Convatec’s
high-exposure sites, resulting in expensive
building repairs and insurance premiums.
Convatec’s insurance may not be available
in specific locations, increasing the
potential exposure to losses and capital
costs. Disruption in production would
occur in high-exposure areas.
All Convatec sites will experience
high-frequency and high-damage events,
with large expenses dedicated to building
repairs and maintenance and making up
for lost time in production disruptions.
Production loss would be frequent, and
customers may not want to continue their
relationship with Convatec, if other
suppliers demonstrate better resilience.
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Climate scenario analysis results
The table below identifies the risks and opportunities which sit within each of the four themes (described on page 64).
Relative risk impact
Relative opportunity impact
Scenario
Time period
Low
Low
A = Ambitious
S = Short term (0–1 years)
Medium
Medium
M = Middle of the road
M = Medium term (2–5 years)
High
High
H = High warming
L = Long term (6+ years to 2050)
In the table of results (below), we include both qualitative and quantitative financial impact assessment results. The assessment
score for each risk and opportunity is our qualitative assessment of the relative potential financial impact to Convatec, showing how
the impacts may vary over time and climate scenarios. The methodology of the qualitative assessment is outlined on page 62, and
the quantitative assessment on page 63. To date, the quantitative financial impact assessment has included the impact from
physical risks at all key manufacturing assets and the potential costs associated with the low carbon transition on our material
procurement and site operations.
Supply chain and sustainable design
The largest proportion of emissions in our value chain are derived from the materials Convatec uses, the majority of which come from
petrochemicals. Exploring the feasibility of sustainable design options across our product portfolios and packaging, focusing on new product
development, is an essential activity required to reduce the embodied GHG emissions and manage transition risks associated with a change
in material availability and price.
Risk/opportunity
Assessment
Risk/opportunity
Assessment
HIGHER SUPPLIER COSTS:
Increase in
price for purchased goods and services
as suppliers transition costs may be
passed on to Convatec.
A
S
M
L
M
H
Scenarios
Time
ALTERNATIVE MATERIAL AVAILABILITY:
Lack of opportunity for sustainable
material alternatives and possible
bottlenecks in advanced materials
due to expected high demand.
A
S
M
L
M
H
Scenarios
Time
PETROCHEMICAL RELIANCE:
Period of
increased competition for petrochemical-
based materials as road transport demand
for oil declines.
A
S
M
L
M
H
Scenarios
Time
MATERIAL REGULATION:
Regulation
(e.g. taxes on single-use plastics) and
sudden shifts in consumer perception
of materials could inhibit the use of
certain materials.
A
S
M
L
M
H
Scenarios
Time
PRODUCT EFFICACY:
Limited options to use
sustainable materials without compromising
product efficacy, or restricted access to
solutions if competitors patent designs.
A
S
M
L
M
H
Scenarios
Time
SUPPLY DIVERSIFICATION:
Lower emission
materials may also increase diversity and
resilience of supply, e.g. by reducing
reliance on petrochemicals.
A
S
M
L
M
H
Scenarios
Time
Financial impact
The potential cost increase from raw material suppliers passing on
carbon-related costs is expected to range $40m – $55m across climate
scenarios. This represents the net present value for 2025 to 2050
assuming we achieve our net zero decarbonisation plan, refer to page 54
for calculation methodology.
Management and resilience response
We have created a supplier engagement strategy to increase the
number of suppliers with green credentials to improve our use of
sustainable materials. Our suppliers are encouraged to set an
emissions reduction target and provide its annual emissions to
Convatec to help strengthen our Scope 3 footprint and promote
positive action through our suppliers.
We are continuing the integration of the Green Design Guidelines
and the associated digital product sustainability tool that calculates
the emissions associated with materials used in Convatec’s product
library and our packaging solutions to reduce our product’s emissions
and environmental impact. In addition, we are collaborating across
our industry and lobbying of governments, to drive innovation and
identify sustainable solutions which support the decarbonisation
of the sector while meeting the needs of patients.
Strategic insights
Suppliers face increased costs during transition to a low-carbon economy
which increases procurement costs. This could impact profit margins or
result in a loss of sales if products are not priced competitively.
Increased competition for sustainable materials, as well as lack of these
alternatives, in addition to decline of petrochemical based materials,
could result in material shortages. This may disrupt production and
increasing investment in R&D, as well as costs to meet regulatory
compliance for any product design changes.
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Financial statements
Additional information
Overview
Strategic report
TCFD disclosure
continued
Direct operations and processes:
In transitioning to a low-carbon economy, Convatec will be affected by global and national policy interventions which will increase the cost of
emitting carbon. While Convatec is not currently subject to global carbon pricing mechanisms, it may face a change in the cost of energy as well as
restrictions on energy-intensive processes such as sterilisation. During the energy transition, there is uncertainty about how the supply of renewable
sources will meet the exponential increase in demand, and Convatec could be faced with reduced availability of renewable energy or price volatility.
Risk/opportunity
Assessment
Risk/opportunity
Assessment
ENERGY COSTS:
Change and volatility in
energy prices, increase the operating costs
of direct operations.
A
S
M
L
M
H
Scenarios
Time
CLIMATE INVESTMENT:
Cost to invest in
climate mitigation and adaptation of
operations.
A
S
M
L
M
H
Scenarios
Time
RENEWABLE ENERGY:
Limited availability of
renewable energy.
A
S
M
L
M
H
Scenarios
Time
ENERGY EFFICIENCY:
Implementing
energy efficiency projects in offices and
manufacturing plants.
A
S
M
L
M
H
Scenarios
Time
CARBON TAX:
Increased pricing of GHG
emissions applied to direct operations.
A
S
M
L
M
H
Scenarios
Time
SELF-GENERATION:
Investment in on-site
renewable generations or power purchase
agreement.
A
S
M
L
M
H
Scenarios
Time
MANUFACTURING REGULATION:
Increase
in regulations that affect our manufacturing
processes.
A
S
M
L
M
H
Scenarios
Time
HEAT DECARBONISATION:
Decarbonisation of heat to reduce reliance
on fossil fuels in manufacturing operations.
A
S
M
L
M
H
Scenarios
Time
Financial impact
The potential cost impact from changes to energy prices, renewable
energy procurement and potential introduction of carbon pricing
mechanisms is not expected to cause a negative financial impact on
our operational costs. This is due to our planned decarbonisation
which minimises potential costs from carbon taxation mechanisms,
whilst our procurement of low-carbon and renewable energy minimises
the potential risk of higher prices from fossil fuels and impacts of
volatility. We are aware that our decarbonisation plan requires upfront
capital expenditure as described on page 53, and that there could be
some financial impacts from energy costs due to volatility and
uncertainty during the energy transition. As such, we are committed to
the continual monitoring of this risk.
Management and resilience response
We have decarbonised a selection of our sites through improved
efficiency and renewable electricity procurement, as well as having
installed on-site renewable energy at three manufacturing sites,
and are currently procuring 95% renewable energy.
Switching from natural gas to lower-carbon or renewable energy
sources for heating will reduce Convatec’s exposure to future
increases in the cost of consumption of fossil fuels and volatility
of electricity prices.
We plan to introduce a bespoke carbon price to use within capital
allocation to support the investment direction towards projects that
avoid GHG emissions or deliver GHG reductions.
Strategic insights
Convatec may experience an increase in operational costs associated
with renewable energy procurement, changes to energy price driven
by the expansion of global carbon pricing mechanisms, as well as large
upfront costs to direct capital for decarbonisation initiatives.
However, Convatec is dedicated to reaching its emissions targets
by reducing its emissions across its manufacturing portfolio.
Implementing efficiency measures and avoiding transition costs will
achieve operational cost savings, which will help combat initial costs
associated with investments in mitigation activities.
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Stakeholder expectations:
Convatec recognises that managing climate-related risks and opportunities is essential for delivering long-term value and building climate resilience.
Stakeholder expectations on transparency, ambition level and performance against ESG and climate matters are evolving rapidly.
REGULATION COMPLIANCE:
Additional
costs to comply with evolving regulations
and exposure to climate-related litigation.
A
S
M
L
M
H
Scenarios
Time
SUPPLIER RESILIENCE:
Increase resilience
in the supply chain to be able to better
absorb climate-related shocks.
A
S
M
L
M
H
Scenarios
Time
INVESTOR TRANSPARENCY:
Increased
investor concern and scrutiny over climate
credentials.
A
S
M
L
M
H
Scenarios
Time
USING CLIMATE DATA:
Use of data
to manage climate risk and seize
opportunities.
A
S
M
L
M
H
Scenarios
Time
CUSTOMER REQUESTS:
Customers request
greater climate ambition and transparency.
A
S
M
L
M
H
Scenarios
Time
INDUSTRY COLLABORATION:
Collaboration in industry and lobbying of
governments to address climate impacts.
A
S
M
L
M
H
Scenarios
Time
Financial and strategic impacts
There is an increasing volume of legislation and reporting
requirements which require appropriate resources to respond to and
manage increasing stakeholder scrutiny. This could result in reduced
access to capital or increased cost of capital may occur if investors
switch to better climate-performing stocks.
Stakeholder (including investors and customers) requests for
climate information are rising, with high expectations on ambition,
transparency of disclosure, and management of risks and
opportunities. For example, the NHS has laid out a supplier roadmap
to net zero, which sets out requirements to 2030, such as reporting
progress against net zero and enhancing product-specific data. There
is the potential impact on tenders if Convatec does not meet the ‘rules
of engagement’. Customers may switch to alternative suppliers
demonstrating accelerated climate action, resulting in sales and
market share loss.
Management and resilience response
We are undertaking frequent reviews of investor priorities through
consistent engagement to ensure Convatec meets expectations. This
has involved reviewing performance and reporting on progress
against environmental targets using ESG rating indices to indicate
evolving investor expectations on climate performance.
Convatec is continuing its investment, use and roll out of data
management tools and software, e.g. increasing supplier engagement
through EcoVadis and TransVoyant to reduce and monitor distribution
costs and increase the efficiency of logistics to identify any hotspots
that require additional attention to continue our progress.
Physical damage and disruption:
In the future, gradual climate changes and the increased frequency of extreme weather events will impact global value chains. While Convatec is
aware of the physical climate hazards most prevalent across our manufacturing sites and can implement adaptation and control measures to reduce
the risk, Convatec has less influence over how suppliers manage climate risk.
DAMAGE AND PRODUCTIVITY LOSSES:
Increase in repair costs, and loss of
productivity at manufacturing sites due to
extreme and gradual climate changes.
A
S
M
L
M
H
Scenarios
Time
TRANSPORT DISRUPTION:
Disruption
in transportation both upstream and
downstream due to extreme weather
conditions.
A
S
M
L
M
H
Scenarios
Time
SUPPLIER DISRUPTION:
Delays in receiving
goods or unfilled orders from suppliers
disrupted by climatic events.
A
S
M
L
M
H
Scenarios
Time
WATER EFFICIENCY:
Reduce water
intensity of operations.
A
S
M
L
M
H
Scenarios
Time
Financial impact
The potential additional financial cost for repairs, maintenance
and loss revenue from decreased productivity is expected to
range $80m – $180m across climate scenarios. This represents
the unmitigated net present value for 2025 to 2050, refer to page
63 for calculation methodology.
Management and resilience response
Convatec has site-specific dependency flows and business
contingency plans for each manufacturing and distribution location.
We also have premium insurance coverage at our high-risk sites
to cover major climatic events.
Infrastructure investment is being made to mitigate potential
climate-related business disruption, e.g., back-up generators at
our plant in Mexico to address power disruption due to extreme cold
weather in the US and additional drainage measures at our plant
in Deeside, UK, to address flood risk.
We have implemented water efficiency measures, including
replenishment initiatives, and are exploring alternative water sources
at priority sites (especially those in high-water-risk regions, Haina and
Reynosa). This will mitigate the potential impact of degrading water
quality and water availability due to climate change.
Strategic insights
Increased costs to manage damage and disruption at manufacturing
sites and relocation of operations could result in reduced product
production, loss of sales, and an increase in insurance premiums.
Disruption in upstream and downstream transportation due to extreme
weather conditions, which, for example, may prevent travel on roads
(snowstorms) or unloading/loading at ports (storms), would result in
Convatec being unable to meet customer orders on time.
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Additional information
Overview
Strategic report
Using ClimSystems’ Climate Insights data, as described on page 63, we have assessed our value at risk across a range of climate
perils. This provides an initial view on the potential scale of unmitigated financial risk related to damage and repairs as well as
productivity losses. This view allows us to see what climate perils our manufacturing portfolio are most financially exposed to,
as well as which sites represent the greatest contribution to the unmitigated risk. This shows that our three largest manufacturing
sites represent the majority of the financial risk (85%) and our operations are most susceptible to heat stress, flooding and storms.
Actual impacts
Convatec’s assessment of actual impacts is based on experiences across its manufacturing sites over recent years. This includes
the closure of our plant in Haina, Dominican Republic, as a result of a severe tropical storm, and power disruption to our plant in
Reynosa, Mexico, as a result of extreme cold weather. In both examples, our business continuity plans were implemented to
carefully manage any impact on our business and the financial impact was negligible.
SIGNIFICANCE OF CLIMATE PERILS TO OUR MANUFACTURING SITES
Reynosa
25%
of total
financial risk
Memphis
5%
of total
financial risk
Deeside
28%
of total
financial risk
Rhymney
1%
of total
financial risk
Osted
4%
of total
financial risk
Michalovce
5%
of total
financial risk
20%
22%
56%
1% 1%
Key:
Heat stress
Flood
Storms
Water stress
Wildfire
Haina
32%
of total
financial risk
TCFD disclosure
continued
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Resilience assessment
The climate scenario analysis outcomes inform the assessment of both unmitigated and mitigated potential climate financial impact
which collectively provides a view on our overall climate resilience now and in the future.
Climate resilience
Our responses
TRANSITION IMPACTS
Our commitment to decarbonisation and the corresponding
climate action significantly reduces our exposure to potential
net zero transition financial impacts, and contributes to the
achievement of our climate strategy. However, sector specific
challenges (including the need to prioritise product efficacy and
adhere to lengthy regulatory review periods) limit the speed
at which we can implement product related carbon reductions.
We have quantified the financial impact across climate scenarios
for a selection of transition drivers, including raw material
supplier pass on of carbon-related costs, energy prices,
renewable energy procurement and potential introduction of
carbon pricing mechanisms. The results support our view that
the potential residual financial impact from these indicative
transition value drivers is within acceptable limits.
–
NET ZERO
: Our net zero targets drive carbon emission
reductions in the near and long term.
–
SUPPLIERS
: Increasing the number of suppliers with green
credentials, sustainable materials and emissions reduction
targets.
–
PRODUCT DESIGN:
Our Green Design Guidelines and the
associated digital product sustainability tool calculates product
material emissions.
–
PACKAGING:
Investment in packaging solutions reduces our
product’s emissions and environmental impact.
–
DISCLOSURE & TRANSPARENCY:
We review our performance
and report on progress using ESG rating indices and systems
monitoring across our value chain e.g. CDP, supplier
engagement through EcoVadis and TransVoyant to reduce
and monitor distribution costs and increase the efficiency
of logistics.
PHYSICAL HAZARDS
We believe Convatec is resilient to potential impacts under a
range of climate scenarios, from those limiting global warming
to 1.5°C to more extreme scenarios exceeding 4°C. Convatec’s
physical risk exposure reveals varying levels of vulnerability
across five key climatic hazards at our sites (see page 68).
Understanding the potential financial impact of physical
hazards is critical to evaluating whether adequate controls are
in place at our manufacturing sites. While our qualitative and
quantitative climate scenario analyses illustrate the potential
unmitigated financial impacts, in practice, our established
adaptation strategies and business continuity plans across
our manufacturing sites mitigate potential disruptions (see
page 67).
–
CONTINGENCY PLANS:
Convatec has site-specific dependency
flows and business contingency plans for each manufacturing
and distribution location.
–
INSURANCE:
We have insurance coverage at our high-risk sites
covering major climatic events.
–
ADAPTATION MEASURES:
Infrastructure investment is being
made to protect against climate-related events such as power
disruption and flood risk (see page 53).
–
WATER EFFICIENCY:
Replenishment initiatives and alternative
water sources at priority sites in high-water-risk regions,
to mitigate degrading water quality and water availability.
Climate change remains a cornerstone of our strategy, embedded within our ESG framework and business objectives, ensuring that
we continue to manage risks and capitalise on opportunities in the transition to a sustainable future.
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Additional information
Overview
Strategic report
TCFD disclosure
continued
RISK MANAGEMENT
Identifying, assessing, and managing climate risks using a climate scenario approach
Convatec has conducted a scenario based assessment of identified risks and opportunities, as described on pages 65 to 67. The
staged approach to assessment means we have a foundational understanding of all identified risks and opportunities to reference
to. This means that where, to date, we have not been able to quantify the potential financial impact we still have a comprehensive
assessment to reference.
Our climate resilience assessment and responses to both transition impacts and physical hazards are set out in the table on page 69.
Risk governance
Climate-related issues are embedded within the Environment and Communities Principal Risk, reflecting Convatec’s strategic
commitment to aligning with the net zero transition and integrating a low-carbon economy into our operations.
The Board conducts a bi-annual assessment of Convatec’s principal risks, supported by CELT, the risk management team,
and a network of risk champions across the organisation. This network ensures the continuous identification, assessment,
and management of key risks, as well as the implementation and monitoring of control measures throughout the year.
Relevant members of CELT are accountable for owning and managing risks, maintaining the effectiveness of internal control
processes, and implementing robust risk mitigation plans. Oversight of the Environment and Communities risk is led by the
Chief Quality & Operations Officer.
Integration of climate in risk management
Convatec’s approach to climate risk is fully integrated into our broader risk management framework, as outlined above. Beyond
company-wide assessments, we conduct climate scenario analysis to ensure a comprehensive evaluation of climate issues over
long-term horizons. Risks and opportunities are identified with consideration of the specific geographies, business units, functions,
and assets affected.
Our risk management processes combine top-down and bottom-up approaches to inform decisions on controlling, mitigating,
or accepting climate-related risks. The Environment and Communities Principal Risk sets the risk appetite, guiding the allocation
of resources and investments. This principal risk is further refined by bottom-up scenario analysis, which highlights the scale
of potential impacts across timeframes and climate scenarios.
Many of the measures we use to mitigate climate risks also present opportunities to strengthen resilience, achieve cost savings,
and drive revenue growth.
These opportunities align with our strategic commitment to the net zero transition. Each year, our strategic planning process
defines the commitments and actions of each business unit to address key risks and opportunities and contribute to net zero
alignment. Details on our current and planned responses to climate risks and opportunities are set out on page 69.
We refresh our quantitative climate scenario analysis annually, using the latest business data. Additionally, we commit
to updating our climate analytics for both qualitative and quantitative assessments at least every three years to maintain
alignment with evolving conditions.
CLIMATE RISK MANAGEMENT PROCESS
Identify
Assess and
prioritise
Quantify
gross/net
impact
Risk
tolerance
determined
Indentify
controls and
actions
Function
and category
risk register
Convatec
risk
register
CLIMATE SCENARIO
ANALYSIS
CLIMATE RISK
RESPONSE
CLIMATE RISK
REGISTER
Climate key risk
indicators
RISK MANAGEMENT GOVERNANCE
Board, CELT, ARC, Function leadership, Risk champions, Risk owners, ERM team, Internal Audit
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METRICS AND TARGETS
Convatec uses a range of metrics to assess our baseline environmental impact, focusing on four key areas: emissions, energy use,
waste, and water. Monitoring performance provides critical insights and having associated targets ensures accountability and
drives active management of climate impacts. Our commitments to minimising environmental impacts and supporting the
low-carbon transition are detailed on page 54, along with the actions we are taking to achieve these goals. Using advanced tools
and software, we identify the most significant impact areas and their underlying drivers for decarbonisation. This analysis enables
us to implement targeted solutions that address root causes and deliver the greatest environmental benefits.
TCFD Metric
Category
Metrics
Target
Unit
2023
2024
Link to climate-related
risks and opportunities
GHG Emissions
Scope 1, 2 and 3
emissions.
Reducing absolute Scope 1
and 2 GHG emissions by
70% by 2030 from a 2021
base year and Scope 3
GHG emissions from
Purchased Goods and
Services, Upstream
Transport and Distribution,
and Waste by 52% per
sold product by 2030
from a 2021 base year.
See carbon and energy
performance table page 55
Our value chain emissions
are a helpful indicator of
our exposure to transition
risks in our direct
operations (Scope 1 and 2)
and our supply chain
(Upstream Scope 3),
providing an indication on
the carbon intensity and
potential carbon costs pass
through in our cashflows.
Energy
Energy
consumption,
and renewable
sourcing.
Aim to reach 100%
renewable electricity
throughout the estate
by 2030.
See carbon and energy
performance table page 55
Increasing our consumption
of renewable energy, and
self-generation reduces
our reliance on fossil fuels
and exposure to volatility
in the market during the
energy transition.
Climate risks and
opportunities
Review of qualitative and quantitative climate scenario analysis results
annually to inform the appropriate response for priority risks and
opportunities.
Capital
deployment
Capital
expenditure on
carbon
decarbonisation
initiatives and
adaptation
activities.
We have an estimated
capex spend of around
$20-$35 million over the
next five years.
$m
$10m
$4m
The allocation of finance
and resources to climate
mitigation and adaptation
ensures that we minimise
our risk exposure and limit
the potential impact of risk
to the business, whilst
being able to benefit
from climate-related
opportunities.
Remuneration
Proportion of
overall CELT
bonus
remuneration
linked to
sustainability
performance.
Continued implementation
of climate in remuneration
policies.
%
5
5
Linking climate KPIs as
part of the ESG objectives
of CELT members helps
to cascade sustainable
behaviours across the
organisation, which means
we are more likely to
achieve our climate
commitments and meet
stakeholder expectations.
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Risk management
Understanding and managing our risks maximises potential opportunities to
deliver our strategy and realise our vision
Risk culture
The Board is responsible for risk
management. The Board promotes a
transparent and accountable culture,
which does not inhibit sensible risk-
taking, critical to growth and delivery of
the Group’s vision and strategy, but also
sets the boundaries for such risk-taking.
The Board and its committees set the
tone for CELT and other senior
management to promote and cascade
this culture through the Group and
with external stakeholders.
The Board, its committees and CELT
ensure that our risk management
framework and systems are robust,
effective and take account of appropriate
exposures. The Board supports effective
risk management across the Group by
implementing and overseeing a
framework of appropriate and effective
controls that enable risk to be assessed
and managed.
The risk-related responsibilities of
the Board’s committees
Audit and Risk Committee (ARC)
Monitors and reviews all risk management
processes, including the effectiveness of
risk identification, appetite, mitigation and
control measures.
Nomination Committee
Oversight to ensure that the Group has a
talented, diverse and effective Board and
CELT, combining extensive corporate
experience with knowledge of our
markets and regulatory environment, as
well as a pipeline of future senior talent
capable of identifying and managing risk
to enable effective strategy delivery.
Remuneration Committee
Oversees the implementation of
appropriate reward arrangements to drive
a high-performing culture that manages
risk in line with our risk appetite.
Our risk appetite
The Board sets the level of risk we are
prepared to accept to deliver our strategy
and realise our vision. In 2024, we
formally reviewed our risk appetite and
the risk tolerance levels of each principal
risk. Our risk appetite is defined through
four risk appetite statements, which are
detailed on this page, and each principal
risk is aligned to one of the four
statements, with risk tolerance levels set
in line with the current and forecast
business environment.
On an ongoing basis, the ARC monitors
the level of risk to which the Group is
exposed and how the business continues
to mitigate the risk and operate within
the stated risk appetite levels. In 2024,
we enhanced our risk appetite model
through implementing identified
group-level metrics (key risk indicators)
to measure actual business performance
against our agreed risk tolerance. In
2025, we will continue to enhance the
governance over each principal risk by
developing our assurance over key
material controls. These additional
enhancements further support the
Group to operate within our risk appetite,
and as a management tool for business
decision making.
Board risk appetite statements
Seek
Risk is taken in order to choose strategic
options that offer potentially higher
business rewards and/or there is
confidence in the level of robust systems
of internal control to respond effectively
and limit the duration of potential impact.
Accept
Risks that arise from events that are
outside realistic boundaries for
Convatec’s immediate direct influence
and control. A focus is required to build a
reasonable level of resilience to impacts
on strategic objectives.
Manage
Risk is accepted by Convatec in order to
achieve strategic objectives, and where
the risk is able to be managed to a level
that would not result in material impact
to strategic objectives.
Cautious
Risks arising from Convatec’s people,
processes, and systems that are
controllable and where there is no appetite
for risk taking in this area. The objective is
to eliminate the risk or to reduce it to an
absolute minimal level of tolerance.
Managing our risks
Strategic enterprise level
Operational exposure management
Board risk
appetite
statements
Business risks and tolerance
Articulation into principal risks
RISK MANAGEMENT FRAMEWORK
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Governance and oversight
The work of the Board and the ARC is underpinned by a formal structure of
delegated authority and supported by Group policies covering key areas of
operation, including risk management. The diagram below shows the key roles,
responsibilities and overall arrangements for collecting, monitoring and reviewing
risk information.
Risk management framework
We continue to strengthen our risk
management approach through the
development of a process that is based
upon ISO 31000, Risk Management, and
complies with the requirements of the UK
Corporate Governance Code.
Our process undertakes a continuous
bottom-up review of risk (current and
emerging), across each area of our
business, to identify the main threats to
delivery of our strategy. The resulting
business risk profile is used to inform our
biannual principal risk update process,
working with subject matter experts
from the business and supported by CELT
sponsor(s). We identify, assess and
prioritise our business and principal risks
in accordance with our defined risk
assessment criteria. Risk ratings are used
to prioritise our risks and are a product
of the expected impact and the likelihood
of that impact to occur as a result of an
event. Risk controls have been identified
and certain additional risk mitigation
measures implemented and monitored
to further reduce our risk exposure and
ensure alignment with our risk appetite.
Consequently, this process results in our
principal risks being managed at the
residual risk level rather than inherent
risk. The ARC oversees the risk
management process each quarter. For
further information see page 108.
Board
–
Sets the Group’s risk appetite
–
Ensures appropriate risk management and internal control frameworks and
systems are in place to enable the identification and robust assessment of the
principal and emerging risks
–
Ensures effective processes exist to manage the principal risks and takes a
balanced view of those risks against Convatec’s strategy and risk appetite
–
Assesses the Group’s prospects and resilience through the Viability statement
–
Sets the ‘tone from the top’ and the culture for managing risk
–
Sets strategic priorities in light of the Group’s risk profile
Audit and Risk Committee (ARC)
–
Considers the risk environment through reporting from management,
internal audit and the external auditor and considering external
developments (e.g. geopolitical events)
–
Reviews, and reports to the Board on the effectiveness of the internal control
environment and risk management framework and systems
–
Sets the internal audit annual plan and external audit scope to provide assurance
on a materiality basis that the Group operates within the Board’s approved risk
appetite through appropriate and effective controls and mitigations
Convatec Executive Leadership Team (CELT)
–
Sponsors a coordinated approach to establishing and embedding enterprise
risk management
–
Employs a central risk team to establish and facilitate the risk management
process across the Group to provide risk information for management
oversight and decision
–
Manages the principal risks appropriately to operate within the Group’s risk
appetite and monitors appropriate key risk indicators
–
Ensures that risk recognition and appetite are integral to determining strategy
–
Delivers strategy by managing risks
Leadership teams
–
Identify new and emerging risks to the Group’s strategy
–
Review management of their specific risks against the Group’s risk appetite
–
Identify additional mitigations to reduce risk exposure on an ongoing basis
–
Manage business performance in accordance with the key risk indicators
–
Assign senior business representatives (risk champions) for each category
and function to take a lead role in the identification of risk, and updating risk
information for senior management oversight
Principal risks:
Risks with potential material consequences at a Group level or
where the risk is connected and may trigger a succession of events that, in
aggregate, become material to the Group. Risks may materialise individually,
simultaneously or in combination to impact the delivery of our strategic
priorities and the long-term value of Convatec.
Business risks:
Risks identified from any aspect of the Group that are relevant to
one or more categories, functions and/or Centres of Excellence, and can be
owned at that level.
Emerging risks:
Risks with potential material consequences at a Group level as a
result of changes in the business environment that may impact over a longer
timeline than that of the current business objectives. Emerging risks may
materialise individually, simultaneously or in combination with other risks in one
or more areas of the business to impact the delivery of our strategic priorities
and the long-term value of Convatec.
Risk information top down
Risk information bottom up
Strategy and objectives
Risk analysis
Risk reporting
Monitoring and challenge
Risk response
Tolerate
Treat
Terminate
Transfer
Risk identification
Risk description
Risk assessment
Risk categorisation
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Financial statements
Additional information
Overview
Strategic report
2024 risk landscape
Our overall risk profile has moved to reflect
both the ongoing enhancement in our
business resilience capability and the
continuing challenges from the
macroeconomic and political environment.
Since 2020, the risk profile has been
elevated as a result of various global
forces, and we continue to manage the
challenges facing the wider business
landscape and build further resilience into
our operations. As such, we remain well
placed to successfully deliver our strategy.
To support our objectives and mitigate
specific external events we increased our
focus in certain areas as detailed below.
Strategic risks
In 2024, we continued to build
momentum whilst managing the broader
risk landscape. This included operating
within changing macroeconomic and
supply chain conditions, continuing
global uncertainties from the wars in
Ukraine and the Middle East and any
continued or additional impact from
geopolitics, in a year of national
elections, on regulatory and healthcare
reform. In our product development
pipeline, we successfully delivered four
key products and services to our target
markets and continue to improve
pipeline delivery through our defined
innovation framework. Our focus on
ESG continues to gain momentum as
we develop our transition plan to deliver
our net zero commitment.
Operational risks
While inflation lowered significantly
over the year, we continue to manage
sustained external supply chain cost
pressure on raw materials, freight,
utilities and all other aspects of the
business cost base. The business
continues to effectively manage and
respond to the issues faced, increase
operational productivity, execute an
efficiency agenda and work closely with
third parties on potential areas of
exposure to minimise any possible
impact, including through maintaining
sufficient levels of strategic resilience in
our inventory holding. We focused work
on delivering our people programmes
that support the right level of key talent,
roles and skills being in place to achieve
our strategic objectives now and in the
future. We remain focused on ensuring
that our diversity goals are met
sustainably, reflecting the customers,
countries and cultures that we serve;
and, that we are contemporary to social
movements and issues. Over the course
of 2024, we have further improved the
robustness of our IT infrastructure and
cybersecurity in line with the changing
business environment.
Financial risks
During 2024, we demonstrated strong
performance across the business with
robust organic revenue growth and
margin expansion as a result of our
dynamic competitive position and
portfolio mix across and within categories,
delivering simplification and productivity
initiatives through improving business
cost efficiencies and undertaking new
business acquisition to strengthen market
capability. Driven by our Strategic Pricing
Centre of Excellence (CoE), improving
Group pricing practices has continued
to positively impact our strong financial
performance. We also focused on
developing our Global Marketing & Sales
CoE to further improve commercial, sales
and marketing productivity. We received a
US market determination for our Advanced
Wound Care solution, InnovaMatrix
®
, that
withdrew its Medicare coverage for specific
treatments. We continue to build clinical
evidence as part of the reconsideration
process and are confident of success in
our reapplication. Our overall group
performance for the year and outlook
for 2025 is unchanged by this event.
We continue to maintain a strong balance
sheet, banking and credit facilities and
level of tax governance to reflect our
robust credit standing.
Compliance risks
Over the course of 2024, we strengthened
and adapted our compliance framework
sustainably as we grew in mature markets
and targeted investment in emerging
markets. We maintained ongoing
compliance in our markets, including
the continued provision of ethics training
and focused global compliance resources
and initiatives. We continued to improve
the robustness of our data management
and privacy framework in line with the
changing business environment. During
the period, we identified exposures and
addressed risks of non-compliance
through implementation of appropriate
mitigation programmes. We have
continued to progress improvements
in our third-party risk management
and contract procurement to maintain
expected standards of compliance within
our third-party partners. Third-party
activity is monitored and managed
through due diligence by our Compliance
team and an external, independent expert.
2025 anticipated risks
We expect certain risks to impact in 2025
and have put in place mitigation measures
to reduce any adverse implications for the
Group’s financial results, operations,
reputation and strategy. While these
specific risks are embedded in many of our
principal risks, further details are provided
as follows.
Geopolitical tensions
Volatility in the international political
climate increases pressure on our
operations. We are reliant on supply
chain partners predominantly in North
America and Europe, but also from
across the world. The integrity of our
supply chain depends on access to
and the reliability of raw material and
energy supply and the storage,
logistics, processing and manufacturing
infrastructure operated by us and
our third-party partners. The current
international political climate presents
increased possibility of commodity and
energy price volatility, unpredictable
populism, isolationism, interventionist
economics, transactional globalisation,
unstable exchange rates, implementation
of additional sanctions or other trade
limiting actions that could impact our
ability to source commodities and raw
materials, or maintain a presence in
current and future markets and
countries. Any break in this supply chain,
for example, as a result of interstate
conflict, regional tensions or terrorist
activity, including acts and threats to
shipping channels or cyber-attacks,
or as a result of heightening operating
costs, could jeopardise our revenues
and/or manufacturing productivity and
impact supply to customers and patients.
Global macroeconomic pressures
Our operating and financial performance
is influenced, amongst other factors, by
the economic conditions of the countries
and markets in which we operate, and
our ability to manage exposure to volatile
economic measures. Pressure from
economic deterioration, the persistence
of inflation, interest rate uncertainty,
recessionary impacts and the additional
challenge of transitioning to lower
carbon generation can all contribute to
challenging market conditions. Global
economic conditions have broadly
continued to improve, but we remain
focused on delivering simplification and
productivity through efficiencies to our
manufacturing and operating cost base
in response to the environment and the
reality of delivering, and the required
investment to achieve, net zero. Whilst
the management of our supply chain is a
core competence, we continue to monitor
the evolving situation and take
appropriate steps to prepare for
foreseeable challenges in the current
environment over persistent inflation
on commodities, lead times and
shortages for raw materials and
manufactured goods, potential tariff
reforms, fluctuations and adverse
movement in shipping costs, congestion
and capacity constraints, which are all
expected to have continued uncertainty
into 2025.
Risk management
continued
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FISBE market growth and product
delivery
We continue to focus on investing in and
growing market share across our FISBE
markets around the world. We support
the business in achieving this through
developing critical core capabilities in our
Global Marketing & Sales, Global Market
Access & Reimbursement, Medical
& Clinical Affairs and Strategic Pricing
CoEs. The external climate continues
to be challenging as a result of national
healthcare systems’ financial constraints
and reforms, and regulatory pressures
as seen more recently in the ongoing
impact of the market-wide Anti-Bribery
and Corruption campaign (ABAC) in
China. The capabilities within our
dedicated global CoEs allows us to
focus and respond to these market and
geographical movements and resultant
pressure on our future pricing and
reimbursement rates. We expect to
launch a new product for Ostomy Care
and leverage recent product launches
by rolling them out in key geographies
in 2025. We expect to continue launching
new products across all of our categories
into 2026 and beyond. Delivery of our
product pipeline is supported by our
product development and launch
process, which acts end-to-end to govern
our actions and milestones from ideation
through development to scale-up and
finally approval and launch in a
consistent manner. We will continue to
also strengthen our competitive position
by evaluating potential partnerships and
acquisitions. Any delays or failure to
meet market expectations in our growth
plans, however, may result in a lack of
stakeholder confidence to deliver against
stated plans.
Emerging risks
On a biannual basis, our risk management
process engages with senior management
to identify any emerging risks, which
represent a significant change in the
business environment that may impact
over a longer timeline than that of the
current business objectives. In 2024,
we continued to enhance our emerging
risk model to further develop our
measurement of the key exposures and
the resilience in place. In 2025, we will
develop this model further to enhance
our measurement of these key exposures,
the resilience in place and identify relevant
metrics to aid with detection. As at the date
of this report, the following emerging risks
have been identified:
Medical advances
Technology and innovation are essential
if we are to meet customer demands. If
we do not develop the right products,
have access to the right technology or
deploy it effectively within our FISBE
markets, or adjust to medical and surgical
advancements and improvements in
detection, cure and prevention (including
in the development of smart ‘artificial
device’ technology, the emergence of
new drugs to treat chronic conditions
and artificial intelligence), we may lose
market share in multiple FISBE markets
to existing and new-entrant competitors.
Future material and operational
restrictions
Our future business is dependent on
our ability to anticipate and/or adapt to
future health, safety and environmental
legislation, concerns, studies or the loss
of stakeholder confidence in the
materials and processes used in the
manufacture of current and future
products, or where there is a proven
greener alternative, for example,
to single-use plastics.
Long-term third-party
management
Our current and future products rely on
regulated manufacturing processes and
approved supply chains. We are
dependent on our ability to effectively
manage the security of supply in our key
raw materials and unfinished goods,
critical services and manufacturing
energy supply to avoid any future chronic
sourcing issues/cessation in service by
single or sole source suppliers for key
product lines.
Future market environment
Our ambition to drive growth and further
develop our business is reliant on our
ability to adapt to future market and
healthcare models, market competition
and major unforeseen economic events.
The value of customer data and the
emergence of artificial intelligence has
increased. Any shortfall in our ability to
adapt to an increase in the management
of customer data, expanding data
commercialisation capability and
technology and widening range of virtual
capability allows for potential
disintermediation and/or bundling of
other products and services by
emerging, non-traditional, competitors
entering the market.
Catastrophic loss risks
After an extended period of external
major global, industrial and financial
catastrophes, we had a growing need to
enhance our risk management framework
to meet the unpredictable and dynamic
challenges that we may face moving
forward. In 2024, we implemented a
formal strategy to review high impact,
low likelihood risks (catastrophic loss risks)
and move towards a resilience model for
the business to operate within.
Preventing, preparing and responding to
catastrophic loss events in a considered
manner and ensuring that when events
do occur the business emerges more
resilient from the experience is a critical
activity. Improved visibility should allow
for greater challenge and assurance that
the business is resilient and prepared for
such events and will also strengthen our
ability to properly consider the severe
but plausible scenarios used in building
our long-term Viability statement (pages
82 and 83).
Risks can be assessed through careful
crisis management planning as part of a
wider resilience framework to maintain
the support and confidence of
stakeholders, but the costs of risk
mitigation will need to be considered to
ensure any measures are proportionate
to the risk faced.
On a biannual basis, our risk
management process engages with
senior management to identify any
catastrophic loss risks, which are defined
as low-likelihood risks (derived from our
principal risk model) that lie outside the
realm of regular expectations; however,
carry an extreme impact, which in some
cases were perhaps predictable. As at the
date of this report, areas in which we
have identified catastrophic loss risk
scenarios are grouped as:
Pan-global risks
Worldwide events affecting the Group
indirectly and that sit largely outside of
our control, such as global financial crises
or major health events.
External threats
External events that directly affect the
Group and that we have a degree of
control over, such as major climate
events, man-made environmental
disaster, sustained public utilities failure,
major loss of IT systems or a complete
loss of critical national infrastructure.
Internal threats
Internal events that directly affect the
Group and that we have a degree of control
over, such as a complete loss of one of our
major assets, major product quality failure,
key loss of part of our supply chain, or a
severe market conduct incident.
We support this area of risk by working
with senior leadership across the
business to run crisis management
exercises. In 2024, we ran a significant
product recall scenario, with senior
leadership and CELT, to enhance our
preparedness and resilience within the
business.
Other factors
For further information relevant to our
risk profile see:
–
Our business model – page 8
–
Key performance indicators – pages 12
and 13
–
Operational review – pages 14 to 21
–
Responsible business review – pages
32 to 59
–
The Task Force on Climate-related
Financial Disclosures – pages 60 to 71
–
Viability statement – pages 82 and 83
–
Governance – pages 84 to 148
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Governance
Financial statements
Additional information
Overview
Strategic report
Principal risks
An overview of our principal risks, which could impact the delivery of our
strategy and the realisation of our vision, is given below in order of priority.
The Board has oversight of all principal risks that the Group faces
The Board reviews and agrees our principal risks on a biannual basis, taking account of our risk appetite and key risk indicators
together with our evolving strategy, current business environment and any emerging risks and catastrophic loss risks. The Board also
takes account of the effectiveness of our risk mitigation and controls. Our principal risks are set out over the following pages in
order of priority (based on the rating of residual likelihood and impact, as described previously). They are also reflected in the key
adverse scenarios underlying the Viability statement (see pages 82 and 83).
We have removed our principal risk relating to Tax and Treasury. At the year-end review, Tax and Treasury was not assessed as having
a high residual impact or likelihood but still underpins and is material to the delivery of the Group’s strategic objectives. We have
successfully implemented structural changes, controls and risk mitigation to our financial and tax frameworks and systems that have
demonstrated, during a period of volatile uncertainty, a good track record of robust financial performance, credit standing and
governance over reporting obligations and disclosure. We will continue to actively assess and monitor the remaining risk exposures and
drivers. We do not, however, forecast any material issues in this area over the next three years (reflected in the Viability statement) as we
have limited tax uncertainties and a robust financial balance sheet with no debt maturities due until 2027.
Risk heatmap
The graphic below summarises our assessment of the expected impact and the likelihood of that impact to happen as a result of
our principal risks occurring after taking into consideration the mitigating actions and effective controls in place to manage each
risk, with an indication of the change in the risk profile since December 2023.
KEY
1.
Operational Resilience and Quality
2.
Customer and Markets
3.
Cyber and Information Security
4.
Political and Economic Environment
5.
Innovation and Regulatory
6.
Legal, Compliance and Privacy
7.
People
8.
Environment and Communities
Risk category:
Strategic
Operational
Financial
Compliance
Increased
Unchanged
Decreased
Impact
Likelihood
1
2
3
5
4
6
7
8
Understanding our risks
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1. OPERATIONAL RESILIENCE AND QUALITY
Risk
Supply and manufacture of products and packaging are reliant on the resilience of supply chain partners and manufacturing assets, and robust
clinical and quality system processes. We invest in and develop our assets, systems and processes to provide a level of operational integrity
and performance. Failure to respond to events, including geopolitical issues and any increase in extreme weather patterns from climate change,
that result in production and/or supply chain delays, adverse product quality and health, safety and environmental incidents could result in
underperformance, a requirement to recall a product, reputational harm or a loss of stakeholder confidence in our ability to deliver our
strategic ambitions.
Risk details
Key risk indicators
Opportunity
Risk profile change
Category:
Operational
Appetite:
Manage
Accountability:
John Haller, EVP,
Chief Quality & Operations Officer
–
Lost time injury rate
–
Operations gross
productivity
Increase the efficiency and
effectiveness of operations to
support future market and
customer demands.
2024: decreased – further
strengthening and investment in
operational resilience and
advancement of simplification and
productivity initiatives.
Key drivers
Risk mitigation
–
Supply chain resilience capabilities
–
Single source or sole suppliers for raw materials and services
–
Business continuity management
–
Quality standards and resolution of existing and emerging
quality issues within the supply chain, manufacturing and
packaging processes
–
Health and safety of employees and contractors. Protection
of the environment
–
Maintaining manufacturing plant performance
–
Operational strategy in place to continuously enhance our operational
resilience response to external factors. Business continuity plans for
manufacturing facilities, inventory movement and our key supply chain
processes to maintain capability to respond rapidly and appropriately
to incidents
–
Procurement and supply chain processes to monitor, manage and provide
assurance to supply-based risk across our markets, inventory, energy
security, key suppliers and supply routes, ports and countries of operation
–
Dedicated health, safety and environment, and quality project teams,
management systems and processes to prioritise and address risk
to manufacturing processes, facilities and people
How the principal risk links to:
Strategy
Key stakeholders
see pages 36 and 37
ESG topics
Viability statement
Important to groups within:
–
Customers/patients
–
Direct enablers
–
Evaluators
Aligns with issues within:
–
Products & customer
–
Environmental
–
Social
–
Governance
Considered in scenarios:
–
Manufacturing incident
–
Business interruption
–
Cyber incident
–
Regulatory issue
Read more on pages 32 to 71
2. CUSTOMER AND MARKETS
Risk
Growth and value in our markets rely on our product portfolio, future innovation, M&A pipeline and digital strategy delivering to expectations and
meeting customer demands, in-line with our commercial policy. There is continued pressure on pricing and cost containment from global inflation
rates and large and consolidating buying groups, as well as on reimbursement rates for products sold into the home care setting from government
or commercial payers managing and reducing their costs. Competitor behaviour, attractiveness and effectiveness of our portfolio to market trends
or public perception, and maintaining a low-cost base, all increase competition for sales and reduce prices and margins. Failure to identify, react or
plan effectively to changes in market conditions, competition, customer demand, expectations and behaviours or a deterioration in counterparty
exposure, cash-flow and liquidity could result in suboptimal decisions, underperformance and adverse results.
Risk details
Key risk indicators
Opportunity
Risk profile change
Category:
Financial
Appetite:
Manage
Accountability:
Presidents and
Chief Operating Officers
–
Customer net promoter
score
–
In-market sales growth
versus segment
Grow portfolio and market share
through cost-efficient, innovative
products that strengthen the
relationship with our customer base.
2024: increased – global economic
challenges continue to pressure
healthcare systems’ financial
constraints with potential effects on
future pricing and reimbursement rates.
Key drivers
Risk mitigation
–
Local or national government healthcare budget provisions
impacting reimbursement
–
Operational, contracting and price review process
–
Competitive markets and behaviours and consolidation
of buying groups
–
Manufacturing costs in a low-margin driven pricing
environment and as a result of changes in consumer
and government behaviour/attitude to sustainability
–
Changes in customer buying patterns and service
level expectations
–
Product portfolio rationalisation. Strategic M&A
and divestures realisation
–
FISBE market and geographies focus supported by the Global Strategic
Pricing CoE established in key regions to adapt and provide insight to
changing market conditions, with regular pricing analysis and reviews
undertaken. Global Market Access & Reimbursement CoE focus on
reimbursement market rates
–
Executive operational reviews in place to drive manufacturing cost
efficiencies and focus through dedicated R&D and technology innovation
teams on new product development and launch. Digital strategy capability
for patient and customer interaction and voice of customer processes
in place. Clinical trial capability and programme in place
–
Key strategic market and geographies monitored and in-market activity
and environment assessed for further growth opportunities. Supply chain
team manages and mitigates market and region challenges and logistics
How the principal risk links to:
Strategy
Key stakeholders
see pages 36 and 37
ESG topics
Viability statement
Important to groups within:
–
Customers/patients
–
Direct enablers
–
Evaluators
Aligns with issues within:
–
Products & customer
Considered in scenarios:
–
Reimbursement reduction
–
Key global markets
Read more on pages 14 to 21
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Governance
Financial statements
Additional information
Overview
Strategic report
3. CYBER AND INFORMATION SECURITY
Risk
Effective operation of our global business relies on the resilience of our technology systems, network and information management processes.
Failure to ensure that our systems, data management and related controls are effective, available, integral and secure, and recoverable, including
those of our third-party partners, could adversely affect our ability to maintain continuity in our operations and the trust of our customers and
other stakeholders. Any real or perceived failure to comply with standards, laws and regulations, or to adjust to a change in conditions and
increase in scrutiny, could result in adverse consequences such as penalties, regulatory investigation, a decrease in corporate trust from
stakeholders or additional compliance measures.
Risk details
Key risk indicators
Opportunity
Risk profile change
Category:
Operational
Appetite:
Manage
Accountability:
Jonny Mason,
Chief Financial Officer
–
Security incidents
–
Vulnerability patching
Enhance the efficiency and resilience
of our IT and data management
systems and processes to support
effective delivery of our operations.
2024: no material change –
privacy moved to Legal,
Compliance and Privacy to
reflect CELT accountability.
Key drivers
Risk mitigation
–
Cybersecurity
–
IT and network resilience, business continuity and disaster
recovery arrangements
–
Digitisation
–
IT network alignment to business needs
–
Internal IT control
–
Data optimisation
–
Cybersecurity steering committee provides risk governance and
oversight. Global Information Security and Compliance function
supports the business with an IT general control framework and
technical benchmarks in place to protect systems and data.
Independent cyber assessment and data review programme
in place
–
Critical IT system recovery plans, overarching IT recovery plan
and backup solutions have been designed. Third-party partner
contracts with controls and assurance in place
–
Security operations team respond to threats and ensure the
security of IT. Policies, technical standards, guidance documents
and workforce training in place to manage the use and governance
of IT systems. Cyber threat monitoring in place across IT systems
How the principal risk links to:
Strategy
Key stakeholders
see pages 36 and 37
ESG topics
Viability statement
Important to groups within:
–
Evaluators
Aligns with issues within:
–
Governance
Considered in scenarios:
–
Cyber incident
Read more on pages 83 and 108
4. POLITICAL AND ECONOMIC ENVIRONMENT
Risk
Our global operations and markets are subject to political interventions and changes to corporate governance requirements, particularly in
relation to global inflationary and supply chain pressures, fluctuations in interest rate and foreign exchange movements, security of raw material
and energy supply, healthcare system reform, regulatory reform, governance of industry operations, amendment to tax and disclosure regimes
and fiscal terms, and protection of consumers and business customers. Continuing volatility in the international political climate increases the
possibility of tariff structure changes, sanctions or other trade limiting actions. Failing to identify and adapt to these factors could impact sourcing
commodities and services, financial performance and our ability to maintain a presence/develop in current and future markets and countries.
Risk details
Key risk indicators
Opportunity
Risk profile change
Category:
Strategic
Appetite:
Accept
Accountability:
Jonny Mason,
Chief Financial Officer
–
Sales growth
–
G&A
Effective minimisation of political and
macroeconomic disruption will enable
us to identify areas for operational
improvement, deliver further value
and maintain our competitive
market positions.
2024: no material change.
Key drivers
Risk mitigation
–
Financial markets, inflationary and supply chain pressures
and macroeconomics
–
National healthcare reforms, political movements and trends
–
Geopolitics and security of the supply chain. Uncertainties effected
by global pandemics, interstate conflict and social unrest affecting
FISBE markets
–
Adverse national trading relationships, customs duties and tariffs
–
Compliance with sanction frameworks
–
Responsible and sustainable group performance to retain
stakeholder confidence and maintain perception and expectations
–
Strategic Pricing CoE established in key regions provides control
on local and regional pricing. Compliance, IR, Legal, Regulatory and
Tax teams support the business, liaise with external stakeholders
and respond to changing requirements where appropriate
–
Global supply chain function manages our presence in markets
and across regions. Third-party contracts in place to maintain the
security of supply. Monitoring of supply chain through implemented
systems and third-party partners
–
Dialogue with governments in relation to specific matters.
Membership of appropriate industry bodies and participation on
industry issues including development and implementation of best
practice. External support via third-party logistic service providers
and consultants to identify and manage supply chain risks
How the principal risk links to:
Strategy
Key stakeholders
see pages 36 and 37
ESG topics
Viability statement
Important to groups within:
–
Direct enablers
–
Evaluators
Aligns with issues within:
–
Products & customer
–
Governance
Considered in scenarios:
–
Reimbursement
reduction
–
Key global markets
Read more on pages 2, 3 and 5
Principal risks
continued
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Strategic report
5. INNOVATION AND REGULATORY
Risk
Failure to invest in and develop safe, effective, profitable and sustainable long-life products to meet customer and market expectations, fill unmet
medical needs or respond to disruptive new technologies, could result in lost market share, underperformance and a lack of stakeholder
confidence to deliver in line with expectations. We are subject to oversight by a number of regulatory jurisdictions that continue to implement
significant obligations and scrutinise how we operate. Failure to fulfil emerging obligations, provide safe clinical processes, or produce products
and packaging that meet stringent and transparent customer, environmental and performance criteria, or operate inadequate or environmentally
inappropriate manufacturing and quality systems could impact our ability to supply or a requirement to recall product(s). This may lead to the
potential for regulatory action and/or liability claims, a failure to meet stakeholder expectations or patient harm from faulty products.
Risk details
Key risk indicators
Opportunity
Risk profile change
Category:
Strategic
Appetite:
Cautious
Accountability:
Dr Divakar
Ramakrishnan, EVP, Chief
Technology Officer and Head
of Research & Development
–
Vitality index
–
Customer complaints per
million units
Create a leading and responsive
position in the regulatory environment,
and through a sustainable development
pipeline, improve the long-term
customer experience, meet market
demands and capture growth
opportunities in our markets.
2024: no material change.
Key drivers
Risk mitigation
–
Product innovation transition from end-of-life technology
and ageing products
–
Compliance with regulatory frameworks and anticipation
of emerging regulatory environment
–
Disruptive and new technologies. Artificial intelligence.
Changing customer and market needs
–
Maintaining legal manufacture structure, authorised
representatives and assurance process for pre-market,
manufacture, and post-market compliance
–
Managing safe clinical services for sustainable growth
–
Sustainable approach to responsible products, packaging
and development
–
Central Technology & Innovation team provides strategic direction for
continued R&D investment, product development, medical education,
regulatory approval, M&A initiatives and new product reimbursement
and launches to cultivate the product pipeline
–
Product portfolio reviews, with Executive oversight, provide oversight on
near-, medium- and long-term innovations and the balance across product
categories and market regions. Product ‘sustainability’ metrics in place
–
Regulatory teams and regulatory intelligence framework supports the
business to meet the latest standards and expectations in all our
jurisdictions and manages our relationship with regulatory bodies
How the principal risk links to:
Strategy
Key stakeholders
see pages 36 and 37
ESG topics
Viability statement
Important to groups within:
–
Customers/patients
–
Direct enablers
–
Evaluators
Aligns with issues within:
–
Products & customer
Considered in scenarios:
–
Regulatory issue
Read more on pages 39 to 43
6. LEGAL, COMPLIANCE AND PRIVACY
Risk
Our business is subject to a complex environment of laws and regulations across multiple jurisdictions. Any real or perceived failure to comply with
required and/or new and emerging laws, regulations and sanctions or to adjust to a change in conditions and increase in scrutiny, or exposure to
litigation from contractual obligations or intellectual property could result in adverse consequences such as penalties, government investigation,
a decrease in corporate trust from stakeholders, competitive disadvantage or additional compliance measures. Loss of data management and
privacy integrity can lead to IP and data theft, fraud or accidental disclosure and result in non-compliance with global data protection laws.
Risk details
Key risk indicators
Opportunity
Risk profile change
Category:
Compliance
Appetite:
Cautious
Accountability:
James Kerton,
EVP, General Counsel & Company
Secretary
–
Whistleblower case
monitoring
–
Compliance training
(Workforce)
Create an industry-leading legal and
compliance approach to our
obligations and stakeholder
expectations.
2024: no material change – privacy
moved to Legal, Compliance and
Privacy to reflect CELT
accountability.
Key drivers
Risk mitigation
–
Privacy and data management
–
Market conduct compliance
–
Legal obligations in relation to customer conduct, including
sales practices and distributor activity
–
Product and patient liability
–
Commercial litigation. Complexity and transparency of IP and
patent environment, including in tax and operations
–
Financial crime
–
Our Code of Conduct and policies govern how we conduct our affairs
through our values and culture. Executive Compliance Steering Committee
and the ARC provide oversight on compliance assurance programme,
training and emerging exposures. Independent whistleblower process
in place. Sanction framework checks in place with shareholder register,
Compliance, Treasury, Banking Partners, Supply Chain and Finance
–
Executive Privacy Committee and privacy team provide governance and
oversight with policies, methodologies, training, accountability and control
frameworks in place to manage the protection and use of personal data
–
In-house legal counsel team with external counsel engaged when
appropriate. Contract database, contract approval process and Grant
of Authority scheme in place. Third-party risk control framework for
onboarding due diligence process and distributor training. Patent counsel
manages patent protection and ongoing market IP monitoring processes
How the principal risk links to:
Strategy
Key stakeholders
see pages 36 and 37
ESG topics
Viability statement
Important to groups within:
–
Customers/patients
–
Evaluators
Aligns with issues within:
–
Governance
Considered in scenarios:
–
Cyber incident
–
Regulatory issue
Read more on pages 43 and 49 to 51
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Convatec Group Plc Annual Report and Accounts 2024
Governance
Financial statements
Additional information
Overview
Strategic report
7. PEOPLE
Risk
Failure to effectively recruit, retain and develop a diverse and inclusive workforce with strong succession to align the right talent, particularly in
our senior management and through the development of the talent pipeline, to enable key business imperatives. Global cost of living and
inflationary pressures continue to challenge retaining and/or recruiting key talent and skills. Failing to successfully manage transformation and/or
the effects of high business disruption could impact employee effectiveness, engagement and wellbeing and adversely affect our ability to achieve
our strategic objectives and deliver growth.
Risk details
Key risk indicators
Opportunity
Risk profile change
Category:
Operational
Appetite:
Manage
Accountability:
Emma Rose,
EVP, Chief People Officer
–
Employee engagement
–
Voluntary turnover
Create a sustainable level of expertise
and key skills across the Group.
2024: no material change.
Key drivers
Risk mitigation
–
Attraction, recruitment and retention of key skills and capabilities,
including salary and remuneration inflation challenges in critical areas
–
Effective succession and knowledge management planning strategy
for senior leadership and key roles
–
Mental and occupational health and wellbeing of the workforce
–
Resource planning, people capability and capacity, including the speed
and volume of management change
–
Performance and development management, diversity, equal
opportunities and labour relations
–
Company culture, values and workforce engagement
–
Executive and senior leadership focus on maintaining a diverse
and effective leadership team with a pipeline of senior future
talent and retention and development of key skills across the
organisation. Employee Resource Groups (ERG) in place and
mentorship programme launched
–
Employee engagement surveys and initiatives in place. Appropriate
remuneration and reward arrangements attract and retain top,
senior talent, maintain strength in key skills and respond to key
regional market challenges
–
Global diversity, equality, inclusion and wellbeing strategic
framework with key initiatives in place. Established employee
assistance programme and occupational health activities to
support workforce
How the principal risk links to:
Strategy
Key stakeholders
see pages 36 and 37
ESG topics
Viability statement
Important to groups within:
–
Direct enablers
Aligns with issues within:
–
Social
No long-term viability risk
events were considered
severe but plausible for
the People principal risk.
Read more on pages 44 to 48
8. ENVIRONMENT AND COMMUNITIES
Risk
Long-term success relies on addressing the challenges to the sustainability of our operations (including environmental and social aspects), supply
chain resilience, products and the ability to manage the impact of climate change, developing trends in the political environment and increasing
pressure and scrutiny from external groups, society, customers and communities in which we operate. The level of requirements and expectation
from stakeholders continues to increase, which requires a robust, transparent and equitable level of sustainable corporate culture to underpin
the way in which the Group operates. Failure to implement appropriate plans across environmental, social and governance aspects, including
incorporating the recommendations of the TCFD and SBTi and deliver on a net zero commitment, could hinder efforts to mitigate long-term
risks and bring a range of reputational and commercial impacts to the business across a range of stakeholders.
Risk details
Key risk indicators
Opportunity
Risk profile change
Category:
Strategic
Appetite:
Manage
Accountability:
Emma Rose, EVP,
Chief People Officer.
–
Carbon footprint reduction
(Scope 1 and 2)
–
Carbon footprint reduction
(Scope 3)
Achieve an effective balance between
short-term needs and delivery versus
longer-term requirements and
commitments, in response to
anticipated exposures from changes
and events in the climate, the
environment and society.
2024: no material change.
Key drivers
Risk mitigation
–
Environmental and climate change strategy delivering our net zero
commitment and Science-Based Targets initiative
–
Recommendations of the TCFD and emerging ESG reporting
requirements and standards
–
Responsible and sustainable behaviours across the supply chain
–
Product impacts, sustainable product design and product stewardship
–
Sustainable corporate culture in DE&I and transparent ways of working
–
Community investment programme
–
Executive ESG Steering Committee, including functions from
across the business, provides oversight and direction on Group
strategy and execution, with regular Board engagement
–
ESG framework implemented, aligned to Group strategy and our
Group reporting and regulatory requirements. Published policies
and independent third-party expert assurance in place
–
Supply chain partners managed through contracts, supplier code
of conduct and performance monitoring with third-party
assurance process in place for key suppliers
How the principal risk links to:
Strategy
Key stakeholders
see pages 36 and 37
ESG topics
Viability statement
Important to groups within:
–
Customers/patients
–
Direct enablers
–
Evaluators
Aligns with issues within:
–
Products & customer
–
Environmental
–
Social
–
Governance
No long-term viability risk
events were considered
severe but plausible for
the Environment and
Communities principal risk.
Read more on pages 52 to 59
Principal risks
continued
80
Convatec Group Plc Annual Report and Accounts 2024
Strategic report
In accordance with the requirements of Section 414CB of the Companies Act 2006, the information below is provided
to help our stakeholders understand our position in relation to key non-financial and sustainability matters including,
where appropriate, the relevant policies and processes we operate.
Key matter
Position and policies and processes we implement
Page
Environmental matters
Climate change and environmental strategy
Pages 32 to 35
and 52 to 60
Climate-related financial disclosures
Pages 52 to 71
Employees
Our vision and values
Page 33
Code of Conduct
Pages 49 to 51
Diversity, Equity & Inclusion and Wellbeing
Pages 44 to 48
Our people strategy
Pages 44 to 48
Employee induction, training and development programmes
Pages 45 and 46
Employee engagement
Pages 36 to 45
Diversity targets and review of metrics
Pages 46 and 47
Human rights
Human Rights and Labour Standards
Page 50
Modern Slavery Act Statement
Page 50
Social and community matters
Community engagement
Pages 58 and 59
Anti-corruption and anti-bribery
Third-Party Compliance Manual
Page 50
Compliance helpline and website
Page 50
Principal risks and impact of
business activity
Pages 72 to 80
Non-financial key performance
indicators
Page 13
Our business model
Page 8
→ You can find more information, including copies of our policies, processes and statements at:
www.convatecgroup.com/investors/governance/our-policies-and-statements/
www.convatecgroup.com/sustainability/esg-reports-and-data/
Non-financial and sustainability
information statement
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Governance
Financial statements
Additional information
Overview
Strategic report
Convatec’s future
prospects and viability
Viability statement
An understanding of the Group’s
strategy, to deliver sustainable revenue
growth and expanding operating margin,
and its business model (pages 8 to 11),
are central to allowing the Board to
assess Convatec’s prospects, liquidity,
resilience and viability. The principal and
emerging risks being addressed by the
Company (see pages 72 to 80) are
reflected in the determination of the
Group’s strategy and its successful
implementation.
Assessment of future prospects
The Directors are of the view that the
appropriate period of assessment
remains a three-year period from January
2025 to December 2027 (the Viability
Period). Although the Directors have no
reason to believe that the Group will not
be viable over a longer period, the Board
has chosen to conduct the assessment
for this three-year period because:
–
Our R&D and production cycles tend
to be of a duration of less than three
years with key innovation pipeline
programmes targeting launch
within the Viability Period.
–
Significant capital investments are
being made to realise the Group’s
strategy over the medium to long
term. The Group’s business model
means that its capital investment
is discretionary, and it has the ability
to respond in a timely manner to
reasonably possible Group specific
and market events, and therefore
does not require a longer time
horizon assessment.
–
Implicitly, it is harder to accurately
forecast the latter years of a five-
year plan.
The Group’s performance management
process consists of monthly monitoring
of progress against the financial budget
and key objectives for the current year
by CELT and the Board, and reforecasting
throughout the year in respect of the
expected outcome for the current year.
It also includes the preparation of a
detailed budget for the following year
and updating a rolling five-year strategic
plan, which forms the main basis on
which to assess the longer-term
prospects of the Group.
In 2024, the Board approved a detailed
operational plan and execution model
to deliver sustainable and profitable
growth that underpins the Group’s
five-year strategic plan. The five-year
financial plan from 2025 to 2029
forecasts the Group’s profitability,
cash flows and funding requirements,
inclusive of the Viability Period.
Our strategy is consumer-centric,
agile, focuses on innovation and
ensures clear accountability. It has been
developed from strategic plans for each
of our business units and functional
areas, supplemented by items managed
at a Group level and assumptions such
as macroeconomic activity, market sector
growth forecasts, competitor activity
and exchange rates. This has then
been supplemented by CELT’s plans for
improving the operational effectiveness
and execution across the Group.
Key factors affecting the Board’s
view of the Group’s prospects over
the period of the viability assessment
and the longer term are:
–
The fundamentals of our markets,
products and brands remain sound,
as does our current and future strategy
of leveraging our product portfolio for
growth in attractive segments and
geographies, developing and
commercialising new technologies
and services and striving to reduce
complexity and increase efficiency.
–
Established positions in large,
structurally growing markets; strong
brands and a range of differentiated
products; a well-diversified business
platform across a range of market
segments and geographies.
–
Strong cash generation capabilities
and a sound financial base, with
the Group’s $250 million term loan
committed until November 2027,
which is towards the end of the
Viability Period, $950 million revolving
credit facilities committed until 2028,
and the Group’s $500 million senior
unsecured notes due in 2029.
–
The evolved five strategic pillars that
support the delivery of the strategy,
which are set out on pages 10 to 11.
The key assumptions considered in the
strategic plan, on which this viability
assessment is based, include:
–
Our markets remain structurally sound
and continue to grow at existing levels
with no significant change to
reimbursement environments.
–
Margin improvement is driven by
successful execution of our operational
excellence programmes in order to
deliver productivity gains in excess
of inflation and other headwinds.
–
Climate impact has been considered
but is not expected to have a bearing
during the viability assessment period
of three years.
–
Through the execution of our strategy,
we continue to simplify our business,
remove excess costs and re-invest in
capacity and future innovation.
–
The Group will be able to refinance
its $250 million term loan in
November 2027.
–
Dividends growing progressively
over the Viability period.
Viability assessment
Throughout the year, the Board has
undertaken a robust assessment of the
principal risks affecting the Group and
also emerging risks, particularly those
that could threaten the business
model and the Group’s viability over
an extended period, including an
assessment of the likelihood of them
materialising. These risks and the
actions being taken to manage or
mitigate these risks are explained in
detail on pages 72 to 80. This analysis has
then been applied to allow the Board to
assess the prospects, liquidity, resilience,
and viability of the Group.
The viability assessment has consisted
of stress testing the forecasts underlying
the strategic plan by modelling severe
but plausible scenarios in which a
number of the Group’s principal risks
and uncertainties materialise within
the Viability Period. We have modelled
scenarios which group together principal
risks where we believe interdependencies
exist between risks, in addition to
scenarios where unconnected risks occur
simultaneously. These scenarios focused
on both external factors and internal
factors, such as the impact of economic
recession leading to higher interest rates
and increased inflation headwinds, and
affecting reimbursement rates, or
consequences of regulatory compliance
issues resulting in a loss of revenues.
We continue to strengthen and develop
the link between the Group’s principal
risks and the viability assessment and
scenarios. The Group’s principal risks
are updated through the lens of our
risk appetite together with assessing
our evolving strategy, current business
environment and any emerging risks.
We reviewed the severe but plausible
risk events from each principal risk
and prioritised those by relative
impact to form revised long-term
viability scenarios.
As a result, six severe but plausible risk
scenarios have been chosen. We have
added a new scenario in addition to the
five scenarios we have modelled in 2023.
We included a significant business
82
Convatec Group Plc Annual Report and Accounts 2024
Strategic report
interruption, leading to loss in revenues,
caused by a major climate event in
Dominican Republic, which is one of our
strategic manufacturing plants. This risk
is linked to the operational resilience and
quality principal risk, and reflects our
consideration of longer-term climate
change impacts or an extreme weather
event to the business. We have maintained
our other five risk scenarios from 2023,
in relation to an EHS incident in Deeside,
UK, significant cyber incident, regulatory
issues within product lines, significant
adverse change to reimbursement
rates and financial market distress, and
macroeconomic forces and/or sanctions
restricting access to a key global market
due to geopolitical challenges. This reflects
the importance of all these areas to our
business as we grow new and emerging
markets as well as the changing and
emerging external environment that our
current and future operations work within.
The main severe but plausible scenarios
are included in the table below.
The scenarios and sensitivity testing
have been based upon the current
Board-approved strategic plan and
forecast revenues, operating profit
and balance sheet and were reviewed
against the current and projected liquidity
and funding position. In addition, as a
result of recent Medicare announcements,
we have also considered the
crystallisation of the reimbursement risk,
affecting the reimbursement of our
InnovaMatrix™ product within the
Viability Period financials.
The individual scenarios took no
account of any corporate mitigating
actions available to and within control
of the Directors. For combined scenarios,
where required, controllable corporate
mitigations have been applied through
adjustments to the Group’s strategy
and other means in the normal course
of business, for example, reducing
expansionary capital investment. In
the Board’s estimation, these events
would not plausibly occur to a level of
materiality that, in themselves, would
endanger the Group’s viability.
This assessment was informed by
Management’s and the Board’s combined
judgement as to the potential financial
(particularly liquidity and debt financing
financial covenants) impact of these risks
if they were to materialise, together with
their likelihood of occurrence. The Board
reviewed and discussed the process
undertaken by Management and also
reviewed the results of reverse stress
testing performed against the forecast
to determine the performance levels that
would result in a breach of covenants or
lack of liquidity. The outcome of this test
was considered implausible given the
Group’s strong global market position
and diversified portfolio of products
and mitigations available to the
Board and management.
In addition, the Board undertook
an independent review of market
information, including investors’ and
analysts’ views on the future viability
of the Group and market prospects.
This review was undertaken to ensure
that where there was an external view
or information that was contradictory
to the views of Management, the Board
understood the rationale for the
difference of opinion and agreed with
Management’s view. This independent
review and the scenario tests enabled the
Board to conclude on the Group’s viability
and resilience.
Viability statement
Having assessed the Group’s principal risks
and uncertainties, and the consolidated
financial impact of sensitivity analysis,
including any corporate mitigating actions
available to the Group (that can be
deployed in the unlikely event that two of
the scenarios occur at the same time), plus
the Group’s level of cash generation and
existing financing facilities, and the timing
of the forecast peak cash outflows, the
Board has determined that it has a
reasonable expectation that the Group
will be able to continue to operate within
its existing bank covenants and meet its
liabilities over the Viability Period to
December 2027.
The Group’s Going Concern statement
is detailed on page 161.
The Strategic Report comprising pages
4 to 83 was approved by the Board on
25 February 2025.
Karim Bitar
Chief Executive Officer
Jonny Mason
Chief Financial Officer
Scenarios
Linkage to risks on pages 76 to 80
Impacts from a significant manufacturing incident modelled on a plant fire
–
Impact on supplying customers before plant production is restored
–
Reduced production or extended period of shut down
–
Loss of sales could have a material adverse impact on the Group’s reputation
–
Impact of supply disruption
–
Operational Resilience and Quality
Impacts from a significant business interruption, linked to an extreme climate event
at an important supply chain location
–
Impact on supplying customers before island infrastructure and plant production is restored
–
Impact of supply disruption from reduced production or extended period of shut down
–
Loss of sales could have a material adverse impact on the Group’s reputation
–
Operational Resilience and Quality
Impacts from a significant cyber incident producing a significant interruption
–
A significant data privacy breach, leading to a regulatory penalty and fine, and subsequent costs
for investigation and remediation
–
Cyber and Information Security
–
Operational Resilience and Quality
–
Legal, Compliance and Privacy
Impacts from significant regulatory issues in a key product line
–
Significant breach of regulatory compliance in a product line
–
Reduced production and loss of sales due to adverse impact on the Group’s reputation
–
Impact of supply disruption
–
Legal, Compliance and Privacy
–
Innovation and Regulatory
–
Operational Resilience and Quality
Reimbursement reduction and financial market distress
–
Significant reimbursement reduction in a major market resulting in adverse change to pricing
–
Increased costs as a result of sustained inflationary pressure matched by sustained high interest rates
–
Impact of reduced market refinancing appetite and/or competitive terms
–
Customer and Markets
–
Political and Economic Environment
Macroeconomic forces and/or sanctions restrict access to key global markets
–
Failure to deliver stated growth targets in a key global focus market
–
Supply chain issues to our manufacturing and distribution from the affected key global focus market
–
Customer and Markets
–
Political and Economic Environment
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Convatec Group Plc Annual Report and Accounts 2024
Governance
Financial statements
Additional information
Overview
Strategic report
85
Governance at a glance
86
Chair’s governance letter
88 Board statements
89
How we have applied the Code’s
core principles
92
Board of Directors
94
Convatec Executive Leadership Team
96
Board activity and actions
99
Board performance evaluation
101 Nomination Committee report
104 Audit and Risk Committee report
114 Directors’ Remuneration report
145 Directors’ report
148 Directors’ responsibilities statement
What’s inside
Governance
Convatec Group Plc Annual Report and Accounts 2024
84
Governance
Governance at a glance
Key Board activities
Throughout 2024, the Board has overseen and regularly reviewed the Group’s financial performance, risk and controls,
strategic initiatives (including material capital expenditure, M&A and integration), relevant regulatory and market
developments, people matters and culture. The Board seeks to engage with stakeholders and considers their interests
when making decisions.
ADDITIONAL AREAS OF FOCUS AND ACTIVITIES BY MONTH INCLUDE:
Jan
Feb Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
2025
–
Approval:
New appointments
to CELT, strengthening the
leadership team
–
Announcement:
Convatec’s
partnership with AbbVie allowing
our Neria Guard™ infusion sets
to be used in AbbVie’s Parkinson’s
therapy and rolled out across
Japan and Europe. In October
2024, AbbVie received FDA
approval in the US
–
Announcement:
Publication of
2023 full-year
results and
dividend
declared to
shareholders
–
Event:
Board and CELT
participate in a two-day
strategy session to
reassess and review
FISBE strategy goals
and priorities, with
participation from
relevant business
leadership teams
and deep dives into
key business category
and functional
strategic areas
–
Approval
: Ernst &
Young (EY) appointment
as external auditor from
FY2026
–
Announcement:
Publication of 2024
half-year results and
dividend declared to
shareholders
–
Approval:
Acquisition
of Livramedom, a
homecare business
in France to build our
direct-to-consumer
capabilities in
Continence Care and
Ostomy Care through
a homecare channel for
our French business
–
Announcement:
Continued scale-up
of GentleCath Air™ for
Women with FeelClean
Technology™, in the
UK and Italy, following
its successful launch
in France
–
Discussion:
Group internal controls
environment, including cyber
security, data privacy and fraud
prevention opportunities and
considerations
–
Announcement:
Publication of the ten-
month trading update
–
Approval:
2025 budget
–
2024 Annual General Meeting
–
Event:
Audit and Risk Committee
(ARC) members and senior
managers visit our Lisbon office to
review progress of GBS transition
and to learn more about its
contribution to our simplification
and productivity agenda
–
Event:
The Board participated in a two-day
visit to our manufacturing site in Osted,
Denmark which included:
•
A tour of our site and deep-dives into our
Infusion Care (IC) products and pipeline
•
Meeting with a Professor of Neurology
from Lund University and an IC patient using
our product to help manage type-1 diabetes
•
Meetings with colleagues
–
Deep dive:
Presentations and discussions
on Global Quality & Operations, including
automation and robotics, plant network
optimisation and further capital expenditure
investment into quality and production
capacity expansion
–
Discussion:
ESG
topical update and
an update by
external advisers on
governance and
regulatory changes,
including relating to
audit and corporate
governance reform,
ESG and AI
–
Approval:
Vitality
metric calculation
and governance
–
Approval:
Capital expenditure to
support operations automation, plant
network optimisation and continuous
improvement projects, optimising
production lines improving quality
and increasing production capacity
for future demand
–
Announcement:
Oversaw the launch
of Esteem Body with Leak Defense™,
the latest ostomy system
advancement in soft convexity, in
Italy, followed by the US in April 2024
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Convatec Group Plc Annual Report and Accounts 2024
Governance
Financial statements
Additional information
Overview
Strategic report
Chair’s governance letter
A culture of doing
what’s right
Dear Shareholder
I am pleased to present this Governance
report for the year ended 31 December
2024. This report, together with the
Nomination, Remuneration and Audit
and Risk Committee (ARC) reports, show
how Convatec’s leadership and
governance framework support Convatec
as we continue to build on our long-term,
sustainable and profitable growth,
whilst engaging with our stakeholders,
maintaining our values and culture and
conducting our business in a responsible
and sustainable way.
Our culture
We maintain strong governance
principles across the Company through
our culture of doing what’s right, one of
Convatec’s five core values. This is
reflected in our vision: pioneering trusted
medical solutions to improve the lives we
touch, and is supported by our promise
to be forever caring. We continue to
invest in leadership and sustain strong
levels of overall employee engagement.
Sharon O’Keefe and I were particularly
pleased to join our CEO and his team at
Convatec’s Global Leaders Meeting
during the year – a three-day event that
brought together Convatec’s top 100
leaders in London. The strength of the
talent we have built in recent years is
clear, and we can have confidence in
our continued success.
Our people
The Board has a critical role in promoting
our culture and ensuring that our
strategic focus is to deliver on our forever
caring promise. Our people are key to this
and the Board follows a programme of
engagement with Convatec’s employees
and is regularly briefed on people matters
and employee information and surveys
throughout the year. In 2024, members of
the Board connected with employees
during on-site visits to our Osted
manufacturing site in Denmark and our
GBS site in Lisbon, Portugal. Sharon
O’Keefe leads for the Board on workforce
engagement and hosted focus groups
with employees in Osted and heard about
their experiences working for Convatec.
Colleagues across different functions and
levels of seniority described our engaging
and collaborative culture, which enables
colleagues to feel empowered and a sense
of ownership in our journey. We were
pleased to hear our employees talk with
pride about their work and the Company
as a whole. As a Board, we recognise the
importance of their feedback and
acknowledge that we must continue to
invest in our people through training,
development and workplace cultural
initiatives to maintain this sense of
community and pride in the business.
Further details of Board-level workforce
engagement and our culture can be
found on page 36 and 45, respectively.
Leadership
Leadership continues to be a particular
focus for the Board, and through the
Nomination Committee, we have
continued to oversee a diverse
succession pipeline for the Board and
wider leadership team. This year saw
a number of new appointments to our
executive leadership team supported
by the Board, and we are pleased to have
in place a team with the right skills and
experience to fulfil the Company’s vision
and support the continued successful
delivery of our FISBE strategy. As a
Board we review the Group’s senior
management and talent pipeline to
ensure we are growing tomorrow’s
leaders. Further details are provided
in the Nomination Committee Report
on pages 101 to 103.
Membership of the Board is set out on
pages 92 and 93 and the members of the
Board’s committees are set out in the
respective committee reports on pages
101, 104 and 114. Membership of CELT
is set out on pages 94 and 95.
ESG
The Board also continued to oversee our
responsible business programme, details
of which are included on pages 32 to 59.
We have overseen ongoing progress
in embedding Convatec Cares, our
approach to ESG, including on
emissions reduction and net zero
transition planning. Under the remit
Dr John McAdam CBE
Chair
“Core to bringing our vision to life is maintaining a culture that
is consistent with our core values and underpins our commitment
to effective corporate governance”
Directors’ attendance at Board meetings held during the year is outlined below:
Director
Member since
Attended
John McAdam (Chair)
September 2019
8/8
Karim Bitar
September 2019
8/8
Jonny Mason
March 2022
8/8
Brian May
March 2020
8/8
Margaret Ewing
August 2017
8/8
Constantin Coussios
September 2020
8/8
Heather Mason
July 2020
8/8
Kim Lody
February 2022
8/8
Sharon O’Keefe
March 2022
8/8
Board attendance
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Convatec Group Plc Annual Report and Accounts 2024
Governance
of our CELT-led ESG Steering Committee,
we developed an internal carbon
footprint database to enhance decision
making in this area. We also made good
progress across ESG targets, including
a vitality index of 30% in 2024. From a
people and culture perspective, we made
progress towards our 2027 target of 50%
of senior management roles held by
women (45% in 2024) and saw strong
levels of overall employee engagement.
We have also kept compliance with
regulatory requirements for
sustainability in focus.
Key stakeholders
Our key stakeholder groups are identified
and detailed on pages 36 to 37. Our
stakeholders are key to the long term
sustainable success of our business and
we have ensured that all Directors have
timely access to information about
stakeholder issues and concerns.
Information about how the Board
has taken account of Section 172
considerations in our Board discussions
and decision-making processes is set out
on pages 36 to 37 and 98.
Board performance evaluation
In accordance with the Code
requirements, a performance evaluation
of the Board and Board Committees
was carried out in the autumn of 2024.
Details of the evaluation process,
recommendations and actions can
be found on pages 99 to 100.
The Code
We explain how we have applied the
Code’s principles on pages 89 to 91.
These core principles also serve as
a framework for the following sections
of this Annual Report which explain our
governance structure and processes we
operate to support the Group’s long-term
success. More details can also be found
on our website: www.convatecgroup.
com/investors/governance/.
During the year, the Board, through the
ARC, has also monitored plans to address
the new requirements of the EU
Corporate Sustainability Reporting
Directive (CSRD) and the workstreams
reviewing and improving the Group’s
internal controls, in preparedness for
changes brought about by the UK
Corporate Governance Code 2024 which
will apply to financial years beginning
on or after 1 January 2025 generally and
specifically for internal controls from
1 January 2026. More details of the
progress made in respect of our internal
controls workstream can be found within
the ARC Report on page 109.
AGM
Our 2024 Annual General Meeting (AGM)
took place as a hybrid meeting, enabling
shareholders to attend either in person
or remotely. Our 2025 AGM will similarly
be held as a hybrid meeting, full details
can be found in the Notice of Meeting.
2025 priorities
The Board remains committed to
effective corporate governance practices.
Looking at the year ahead, Non-Executive
succession planning will remain a key
focus for the Board, through its
Nomination Committee.
As a Board, we will continue to oversee
delivery of our FISBE strategy. We will
monitor progress on our simplification
and productivity initiatives, including
the continuing transition of key central
functions and activities to our Global
Business Services teams in Lisbon,
Bogotá and Kuala Lumpur, which
has helped to reduce our general
and administrative costs and improve
the effectiveness of our end-to-end
processes, as well as the improvements
in our global operations and quality team
which will provide us with a best-in-class
manufacturing operations and optimise
quality, capacity and productivity.
It is clear that our innovation pipeline
is delivering with strong growth in
products and applications. The Board
will continue to monitor the successful
development and launch of a range
of new products in 2025 and oversee
the continuing build of our supply chain
resilience to support product delivery.
After much progress over the last few
years, we continue to monitor the
broader regulatory landscape, evolving
stakeholder expectations and Convatec’s
overall response and actions.
In 2025, following extensive shareholder
consultation in 2024 and early 2025, we
will be asking shareholders to approve a
new Directors Remuneration Policy at the
AGM, expected to be in place for the next
three years. The proposed new Policy can
be found on pages 128 to 134 and has
been designed to drive retention of our
senior leadership, and provide market
competitive reward contingent on
delivery of robust business performance.
I would like to take this opportunity to
thank my fellow Board members, the
management team and our colleagues in
the wider workforce, who served during
another successful year for Convatec and
look forward to building on this success
during 2025.
Dr John McAdam CBE
Chair
25 February 2025
1. As at 31 December 2024 and at 21 February 2025.
2. As at 31 December 2024.
BOARD STATISTICS
Gender
1
Male:
56%
Female:
44%
Length of tenure
2
2-3 years:
3
4-5 years:
3
5 years or more:
3
BOARD AND COMMITTEE MEETINGS
8
Board
scheduled meetings
5
Audit and Risk
Committee meetings
5
Remuneration
Committee meetings
3
Nomination
Committee meetings
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Convatec Group Plc Annual Report and Accounts 2024
Governance
Financial statements
Additional information
Overview
Strategic report
Board statements
REQUIREMENT
BOARD STATEMENT
MORE INFORMATION
UK Corporate Governance
Code 2018 compliance
Throughout the financial year ended 31 December 2024,
except as explained above, the Company has complied
with the Code.
Pages 89 to 91
Going concern
The Directors are satisfied that the Group has sufficient
financial resources to continue operating for at least
12 months from the date of signing of the 2024 Annual
Report and Accounts and, therefore, have adopted the
going concern basis in preparing the Group’s 2024
Financial Statements.
Page 161
Viability statement
The Directors have assessed the viability of the Group
over a three-year period ending 31 December 2027, taking
into account the principal risks identified by the Board as
set out on pages 72 to 80. This assessment led the Board
to the reasonable expectation that the Group will remain
viable and continue in operation and meet its liabilities as
they become due over the Viability Period.
Pages 82 and 83
Fair, balanced, and
understandable
The Directors consider that the 2024 Annual Report
and Accounts, taken as a whole, are fair, balanced and
understandable, and provide the necessary information
for all stakeholders to assess the Group’s position and
performance and its business model and strategy.
Page 105
Assessment of the
Group’s principal
and emerging risks
The Directors confirm that they have undertaken a
robust assessment of the principal and emerging risks
facing the Group.
Pages 72 to 80
Annual review of
risk management and
internal control systems
The Board undertook, throughout the year, a review of the
effectiveness of the Group’s risk management framework
and internal controls, including those over the financial
reporting period, and concluded that these provided
assurance that there were no control failures in the year
which could materially impact the financial statements
or the future financial performance of the Group.
Page 91
Stakeholder engagement
The Board has taken steps to understand stakeholders’
views and has considered them in its discussions and
decision-making process.
Pages 36, 37 and 98
Throughout 2024, Convatec was subject to the requirements of the UK Corporate Governance Code 2018. During the year, we have
complied with the Code other than provisions 40 and 41, employee engagement on executive remuneration. The Remuneration
Committee has not undertaken consultation with the workforce when considering executive remuneration, however the
Committee has considered wider pay practices at all levels across the Group and all employees have opportunity to provide
feedback on pay and other issues. The Committee is mindful of this when applying salary increases. Page 123 of the Remuneration
Committee report provides further details of our engagement activities.
During 2024, the Board reviewed the implications and Convatec’s preparedness for the changes brought about by the new version
of the UK Corporate Governance Code, which will apply to financial years beginning on or after 1 January 2025.
In accordance with the Code, the Board is required to make a number of statements. These are set out in the table below.
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Governance
BOARD LEADERSHIP AND COMPANY PURPOSE
Code principles
Application
Where further information is available
A
The Board’s role
The Board is collectively responsible for promoting the long term
success of the Company for its shareholders and stakeholders.
The Board discharges its responsibilities through a programme
of activities. This includes an annual event held over two days
where the Board and CELT review and approve the Group’s
strategic priorities, regular progress reviews of its execution and
implementation, discussion on arising key issues and monitoring
of performance, to enable the Group to deliver sustainable and
profitable growth.
Board focus and principal matters
considered in 2024
Pages 96 and 97
Matters reserved for the board can be
found on our website: www.
convatecgroup.com/
globalassets/2024-schedule-of-
matters-reserved-for-the-board---
final-and-approved-for-web-
B
Purpose and culture
The Board endorses the Group’s vision statement (which encapsulates
our purpose and ambition), our values and our forever caring
promise. During the year, the Board regularly considers the Group’s
strategy, both in the two-day strategy Board meetings in June and
as part of scheduled Board meetings.
People and culture are a key part of Convatec’s strategy. The Board
has reviewed several cultural indicators, including regular briefings
from the Chief People Officer, employee surveys, interactions
between the Board and employees and employee focus groups
chaired by Sharon O’Keefe, our designated Non-Executive Director
Workforce Liaison Champion. The Chair, Executive Directors and
Workforce Liaison Champion all attended a three-day Global Leaders
Meeting that brought together Convatec’s top 100 leaders (see page
45). The Executive Directors also participated in global town hall
events throughout the year to provide employees with key updates,
participate in live Q&As and to hear inspirational stories from
patients, HCP and caregivers about how our products are
transforming lives.
How we realise our vision
Page 7
Shaping our winning culture
Page 45
Chair’s statement
Pages 6 and 7
Chair’s governance letter
Pages 86 to 87
Culture
Page 44 to 45
Board site visit
Page 97
C
Resources and controls
The Board regularly reviews the Group’s financial and non-financial
resources to ensure that it has the resources available to deliver its
strategy. The Board has approved and regularly reviews a series
of KPIs that monitor performance and delivery of strategy. The Board
has established an effective governance and risk management
framework.
The ARC helps the Board to oversee the risks to which the Group may
be exposed and provides the Board with strategic advice in relation
to current and potential risk exposures.
The Group’s KPIs
Pages 12 and 13
The Group’s risk management
framework
Page 72 to 75
Audit and Risk Committee report
Pages 104 to 113
D
Stakeholder
engagement
To fulfil its duty to promote the Group’s long-term success and
generate value for shareholders, stakeholders and wider society
a number of mechanisms have been established to facilitate
shareholder, workforce and wider stakeholder engagement and
ensure that the Directors consider all relevant stakeholder issues
and concerns when making strategic decisions.
Engaging stakeholders and Section
172 statement
Pages 36, 37 and 98
Board key decisions
Page 98
E
Workforce engagement
The Board has ensured that workforce policies and practices are
consistent with the Group’s values and has established mechanisms,
including an independently provided whistleblowing/speaking-up
facility, to allow the workforce to raise concerns anonymously.
Throughout the year, the Board, through its ARC, received regular
reports on the global use of the whistleblowing facility.
The Executive Directors also host global town hall events and other
engagement events throughout the year to provide employees with
key updates and answer questions. We also rolled out additional
employee engagement measures in 2024 – see page 45.
During the year, Non-Executive Directors met with colleagues to
discuss their experience and share insights. The Board has also
designated a Non-Executive Director as Workforce Liaison Champion.
Enabling our people to thrive
Pages 44 to 48
Compliance Helpline and website
Page 50
Audit and Risk Committee report
Pages 104 to 113
How we have applied the Code’s core principles
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Convatec Group Plc Annual Report and Accounts 2024
Governance
Financial statements
Additional information
Overview
Strategic report
DIVISION OF RESPONSIBILITIES
Code principles
Application
Where further information is available
F
The Chair’s role
The Chair was independent on appointment in September 2019 and
is responsible for the leadership of the Board and continues to
demonstrate objective judgement. The Chair effectively facilitates
robust discussions at Board meetings and active participation from
all Board members.
The Board’s key roles and
responsibilities can be found on our
website: www.convatecgroup.com/
investors/governance/
G
Composition of the
Board
The Board comprises seven Non-Executive Directors, including
the Chair and two Executive Directors. Their responsibilities are
clearly defined.
Key Board roles and responsibilities
can be found on our website: www.
convatecgroup.com/investors/
governance/. The division of
responsibilities between the roles of
the Chair and Chief Executive Officer;
and, the responsibilities of the Senior
Independent Director can be found
on our website: www.convatecgroup.
com/investors/governance/
H
Time commitment,
constructive challenge
and strategic guidance
All Directors have demonstrated that they have sufficient time to fulfil
their duties and responsibilities, including taking into account any
new significant external appointments during the year. In their roles,
the Non-Executive Directors have provided constructive challenge,
strategic guidance and held management to account.
The Board and Nomination Committee regularly reviews the skills
and experience of its members to ensure that the Board continues
to be effective.
Nomination Committee report
Page 101 to 103
Board performance evaluation
Pages 99 and 100
I
Effective and efficient
Board
All Directors have access to an encrypted electronic portal system
which enables them to receive accurate and timely information.
The Board works with the Company Secretary to ensure effective
communication flows between the Board and its Committees, and
between senior management and the Non-Executive Directors.
The Company Secretary assists the Chair in establishing the policies
and processes the Board needs and periodically reviews governance
processes.
All Directors have access to the advice and services of the Company
Secretary and, through him, have access to independent professional
advice in respect of their duties, at the Group’s expense.
Board key activities during 2024
Page 85
Board activity and actions
Page 96 to 98
Board performance evaluation
Pages 99 and 100
COMPOSITION, SUCCESSION AND EVALUATION
Code principles
Application
Where further information is available
J
Board appointments
and succession
planning
The Nomination Committee is responsible for reviewing Board
composition and leads the process for Board appointments. These
are based on merit against an objective criteria and with due regard
for the benefits of diversity in all forms on the Board. The Nomination
Committee regularly considers Board and senior management
succession.
There is a formal, rigorous and transparent process for all
appointments. The Board engages international search and selection
firms to provide support, most recently using firms including Egon
Zendher, Korn Ferry and Russell Reynolds. None of them have any
connection with the Group, or any Director, other than they may be
engaged to assist with Board and senior management appointments
and ordinary course succession planning from time to time.
Nomination Committee report and
Board appointment procedure
Pages 101 to 103
Board appointments
Page 103
Talent and succession planning
Page 103
Board Diversity, Equity and Inclusion
Policy
www.convatecgroup.com/investors/
governance
K
Skills, experience and
knowledge of the Board
Our Board is balanced and diverse and its members have proven
leadership capabilities as well as relevant healthcare, operational
skills, financial expertise and experience. Board member tenure is such
that there is a balance of deep knowledge of the Company and fresh
perspective and challenge.
None of the Non-Executive Directors have currently served more than
nine years on the Board.
Directors’ biographical information
Page 93
Skills and experience matrix
Page 92
Board member tenure
Pages 86, 87 and 103
L
Annual evaluation
In compliance with the Code, during 2024, the Board undertook an
evaluation of its performance and that of its committees. The evaluation
was by way of an externally facilitated questionnaire and reporting
process, the conclusions of which are contained within this report.
The Non-Executive Directors meet with the Chair, without the
Executive Directors present, to discuss performance against agreed
objectives. Led by the Senior Independent Director, the Non-Executive
Directors also meet without the Chair to appraise his performance.
The Chair provides performance feedback to each Non-Executive
Director throughout the year as and when the need arises.
Board performance evaluation
Page 99 and 100
How we have applied the Code’s core principles
continued
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Governance
AUDIT RISK AND INTERNAL CONTROL
Code principles
Application
Where further information is available
M
Independent and
effective internal and
external audit
functions
The Board has delegated a number of responsibilities to the ARC,
including oversight of the Group’s financial reporting processes,
and ensuring the effectiveness and independence of the external
and internal auditors. The ARC Chair regularly briefs the Board on
how the Committee has discharged its responsibilities. The ARC
assesses throughout the year the effectiveness of the internal and
external audit functions, including a formal assessment, taking into
consideration management’s views, once per year.
Audit and Risk Committee report
Pages 104 to 113
N
Fair, balanced and
understandable
assessment
The Strategic Report sets out the performance of the Company, the
business model and the risks and uncertainties relating to the
Company’s prospects.
When taken as a whole, the Directors consider that the Annual Report
is fair, balanced and understandable and provides information
necessary for shareholders to assess the Company’s performance,
business model and strategy.
Audit and Risk Committee report
Pages 104 to 113
O
Risk management and
internal controls
The Board is ultimately responsible for overseeing how we manage
both internal and external risks (current and emerging) that could
impact our business model and strategic goals. The Board also
determines the Group’s risk appetite and monitors adherence to it
through reports received by the ARC and from the VP, Internal Audit,
Enterprise Risk & Insurance. The Board regularly reviews the Group’s
principal risks and, on an annual basis, reviews the effectiveness of
our risk management and internal control systems and undertakes
horizon scanning to identify new emerging risks. The ARC reviews the
effectiveness of the Group’s risk management and internal control
frameworks and systems regularly throughout the year.
Following this review, the Board is satisfied that the Group’s risk
management and internal control frameworks and systems provided
assurance that there were no control failures in the year that could
have a material impact on the Group’s financial statements or its
future financial situation.
Risk management
Pages 72 to 75
Principal and emerging risks
Pages 74 to 80
Audit and Risk Committee report
Pages 104 to 113
REMUNERATION
Code principles
Application
Where further information is available
P
Remuneration policy
and practices
Our Remuneration Policy is designed to support our strategy,
be aligned to our vision and shareholder interests, and promote
long-term sustainable success. Our current Policy was approved
by shareholders in 2023. We will be tabling proposed changes
to our Policy for approval by shareholders in 2025, following an
extensive consultation exercise with our key shareholders.
Remuneration Policy
Pages 128 to 134
Directors’ Remuneration report
Pages 114 to 144
Q
Development of
remuneration policy
and packages
The Remuneration Committee is responsible for setting the
remuneration for Executive Directors. The Remuneration Committee
reviews remuneration packages of CELT members to ensure that they
support our strategy and provide an appropriate balance between
motivating and challenging our senior leaders. No Director is involved
in making decisions on their own remuneration.
Remuneration Policy
Pages 128 to 134
Directors’ Remuneration report
Pages 114 to 144
R
Independent
judgement and
discretion
Following a formal procedure, the Remuneration Committee sets
the remuneration for the Executive Directors and oversees the
remuneration of senior management. In doing so it applies
judgement and, if required, discretion to ensure a considered
outcome on remuneration issues.
Directors’ Remuneration report
Pages 114 to 144
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Governance
Financial statements
Additional information
Overview
Strategic report
Board of Directors
Experienced
leadership
A diversely skilled Board with proven
leadership capabilities and relevant
healthcare, operational and financial
skills and experience
SKILLS AND EXPERIENCE
John
McAdam
Karim
Bitar
Jonny
Mason
Margaret
Ewing
Brian
May
Constantin
Coussios
Kim
Lody
Heather
Mason
Sharon
O’Keefe
Board experience
Corp. transactions & M&A
ESG
Finance
Global
Healthcare
Leadership
Operational
Strategy, transformation
& org design
T&I
Advanced.
Director
demonstrates
significant skill and
knowledge and/or
previous experience.
(5-8 years)
Expert.
Director
demonstrates extensive
experience, identifiable
by occupation,
profession and career.
(8+ years)
Key
1
7
8
2
4
9
6
3
5
1
Jonny Mason, Chief Financial Officer
4
Heather Mason, Non-Executive Director
7
Margaret Ewing, Senior Independent
Director
2
Sharon O’Keefe, Non-Executive Director
5
Karim Bitar, Chief Executive Officer
8
Kim Lody, Non-Executive Director
3
Dr John McAdam CBE, Chair
6
Brian May, Non-Executive Director
9
Prof Constantin Coussios OBE,
Non-Executive Director
The skills and experience matrix has been created on the basis that all members of our Board have previous operational experience or have
acquired a working knowledge through their tenure at Convatec in each of the areas. Any additional capabilities with a director being either
advanced or expert are indicated below.
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Convatec Group Plc Annual Report and Accounts 2024
Governance
Dr John McAdam CBE
N*
Chair
Karim Bitar
Chief Executive Officer
Jonny Mason
Chief Financial Officer
Date of appointment:
September 2019
Independent:
Yes (on appointment)
Relevant skills and experience
–
Extensive chair and board leadership
experience, including as former Chair of
Rentokil Initial plc and United Utilities Group
PLC and as a Non-Executive Director of a
number of FTSE 100 and US companies.
–
Extensive experience of leading companies
undergoing transformation including as
Chief Executive of ICI PLC between 2003
and 2008.
Current external appointments
Adviser to BlackRock’s Long-Term
Investment Group.
Date of appointment:
September 2019
Independent
: No
Relevant skills and experience
–
Significant board level and leadership
experience including as Non-Executive
Director of Spectris PLC between 2017 and
2021 and Chief Executive Officer of Genus
PLC between 2011 and 2019.
–
Successful business transformation track
record.
–
Extensive and broad management
experience.
–
Relevant sector knowledge and experience,
including 15 years with Eli Lilly, where from
2008, Karim was President of Europe,
Australia and Canada.
Current external appointments
Member of the Advisory Board of the
University of Michigan, Ross School of
Business.
Date of appointment:
March 2022
Independent:
No
Relevant skills and experience
–
Seasoned CFO with an extensive track
record in listed and international
businesses.
–
Was formerly CFO of Dixons Carphone PLC,
now known as Currys Plc, from 2018 to 2021,
CFO of Halfords PLC from 2015 to 2018, CFO
of Scandi Standard AB, CFO at Odeon and
UCI Cinemas and FD of Sainsbury’s
Supermarkets.
Current external appointments
None.
Margaret Ewing
AR*
N
Senior Independent Director
Brian May
AR
N
R*
Non-Executive Director
Heather Mason
AR
N
Non-Executive Director
Date of appointment:
August 2017
Independent:
Yes
Relevant skills and experience
–
Chartered Accountant with significant
financial and executive experience,
including as former Managing Partner
of Deloitte LLP and CFO of BAA PLC.
–
Extensive audit and risk management
experience.
–
Strong board experience, having served as a
Non-Executive Director of Whitbread plc and
Standard Chartered PLC and CFO of BAA PLC
and Trinity Mirror PLC (now Reach PLC).
Current external appointments
Non-Executive Director, Chair of the Audit
and Risk Committee and member of the
Nomination Committee of ITV PLC. Non-
Executive Director, member of the Audit and
Compliance Committee and the Nominations
Committee of International Consolidated
Airlines Group, S.A.
Date of appointment:
March 2020
Independent:
Yes
Relevant skills and experience
–
Significant financial and international
business experience, including as Chief
Financial Officer of Bunzl plc from 2006
to 2019. Prior to that, Brian held a number
of senior management finance roles with
Bunzl, including divisional Finance Director,
Group Treasurer and Head of Internal Audit.
–
Experience as a Non-Executive Director
including of United Utilities Group PLC
between 2012 and 2021, where he was also
Chair of the Audit Committee.
–
Extensive experience of significant strategic
initiatives that delivered growth and
sustained shareholder returns over the
long term.
–
Chartered accountant.
Current external appointments
Non-Executive Director of Ferguson
Enterprises Inc., where Brian is also a member
of its Nominations and Governance Committee
and Audit Committee. Non-Executive Director
of OFI Group Limited.
Date of appointment:
July 2020
Independent:
Yes
Relevant skills and experience
–
Significant international healthcare
experience leading fully integrated global
businesses, including 27 years with Abbott
Laboratories, where Heather held a number
of global senior operational and strategic
leadership roles, including Senior Vice
President of Abbott Diabetes Care and most
recently Executive Vice President of Abbott
Nutrition.
–
Extensive relevant international, commercial
and operational experience.
–
Proven track record of overseeing the
development of commercially viable new
product pipelines and brand building.
Current external appointments
Chair of Assertio Therapeutics, Inc.; Chair of
SCA Pharmaceuticals, LLC. Non-Executive
Director of Immatics, Inc., and Non-Executive
Director of Pendulum Therapeutics, Inc.
Prof Constantin Coussios OBE
N
R
Non-Executive Director
Kim Lody
N
R
Non-Executive Director
Sharon O’Keefe
N
R
Non-Executive Director
Date of appointment:
September 2020
Independent
: Yes
Relevant skills and experience
–
Internationally recognised key opinion
leader, awarded an OBE for Services
to Biomedical Engineering with a track
record of translating research into
commercial technologies.
–
Significant experience in drug delivery
devices and technologies, including
previously leading the Oxford Centre for
Drug Delivery Devices, a cross-disciplinary
centre working with pharmaceutical and
medical device companies and the NHS.
–
Significant experience in antimicrobial
technologies and advanced wound care,
including as co-investigator of a national
programme on antibacterial technologies
beyond antibiotics.
Current external appointments
Director, Institute of Biomedical Engineering,
University of Oxford. Professorial Fellow
Magdalen College, Oxford, Founder and
Director of OrganOx Limited, OxSonics Limited
and OrthoSon Limited. Trustee of the Oxford
Transplant Foundation and Trustee of
Magdalen College Oxford.
Date of appointment:
February 2022
Independent:
Yes
Relevant skills and experience
–
Extensive healthcare, reimbursement,
and MedTech experience specialising in
commercial strategy, product innovation,
branding, business development, and
growth.
–
Leadership experience as President and
CEO of NYSE listed Sonida Senior Living
Corporation (retired); President of GN
Hearing North America, President of
Resound US; President of Coloplast Chronic
Care US, Chief Operating Officer of Senior
Home Care, and Executive Vice President
and Chief Marketing Officer of Gentiva
Health Services.
Current external appointments
Non-Executive Director and Chair of the Talent
& Compensation Committee, Ball Ventures;
Non-Executive Director and member of the
Audit Committee of Mozarc Medical; and
Non-Executive Director and Treasurer,
Geauga Hunger Task Force.
Date of appointment:
March 2022
Independent:
Yes
Relevant skills and experience
–
Extensive healthcare and executive
experience, with focus on driving quality,
efficiency and innovation.
–
Previously President and Chief Operating
Officer of UChicago Medicine, Non-
Executive Director of Aviv REIT and of Vocera
Communications.
–
Holds an M.S. in Nursing Administration
from the Loyola University of Chicago,
and a B.S. in Nursing from Northern Illinois
University.
Current external appointments
Non-Executive Director of Adtalem Global
Education Inc.
N
Nomination Committee
AR
Audit and Risk Committee
R
Remuneration Committee
*
denotes Chair of the respective Committee
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Governance
Financial statements
Additional information
Overview
Strategic report
Convatec Executive Leadership Team (CELT)
CELT is responsible for the management and performance of Convatec
with frequent reporting to, and oversight by, the Board
1
James Kerton
EVP, General Counsel & Company
Secretary
5
Karim Bitar
Chief Executive Officer
9
John Haller
EVP, Chief Quality & Operations Officer
2
Mark Jassey
President & Chief Operating Officer,
Continence Care & Home Services Group
6
Jonny Mason
Chief Financial Officer
10
David Shepherd
President & Chief Operating Officer,
Advanced Wound Care
3
Kjersti Grimsrud
President & Chief Operating Officer,
Infusion Care
7
Emma Rose
EVP, Chief People Officer
11
Dr Divakar Ramakrishnan
EVP, Chief Technology Officer and Head
of Research & Development
4
Bruno Pinheiro
President & Chief Operating Officer,
Ostomy Care
8
Evelyn Douglas
EVP, Chief Strategy & Business
Development Officer
12
Anne Belcher
President & Chief Operating Officer,
Global Emerging Markets
Biographical details for Karim Bitar, CEO, and Jonny Mason, CFO, are provided on
page 93.
More detailed CELT member biographical information is available at
www.convatecgroup.com
BOARD MEMBERSHIP
1
2
3
4
5
6
7
8
9
10
11
12
94
Convatec Group Plc Annual Report and Accounts 2024
Governance
James Kerton¹
EVP, General Counsel & Company
Secretary
Emma Rose¹
EVP, Chief People Officer
Kjersti Grimsrud
President & Chief Operating Officer,
Infusion Care
Appointed to CELT:
2024
James rejoined Convatec in May 2024, having
previously held the role of Vice-President,
Deputy General Counsel in 2021 to 2022. James
was previously General Counsel and Company
Secretary at Redde Northgate plc and brings
significant listed company and legal practice
experience, having previously held senior
leadership roles at London Stock Exchange
Group plc and practiced as a lawyer at
Freshfields Bruckhaus Deringer LLP.
Appointed to CELT:
2024
Emma joined Convatec in April 2024. She was
previously Chief Human Resources Officer at
Travis Perkins Plc, the UK’s largest distributor
of building materials, with more than 20,000
colleagues in the UK and Europe.
Emma is a seasoned HR leader and has had a
distinguished career spanning more than two
decades across industries, from Kerry Foods
and InterContinental Hotels Group, to
Mondelez International, Cadbury, Coca-Cola
and M&S. She has a very strong track record
for delivering transformational people and
culture strategies.
Appointed to CELT:
2018
Kjersti joined Convatec and CELT in 2018.
She was a member of the founding team
at Axis-Shield and appointed President
Europe and the Middle East and President
International at Alere, Inc., following its
acquisition. Kjersti’s 25 years of experience
in the MedTech sector includes roles
within diabetes care, including General
Manager, Operations, Sales, Marketing
and R&D positions.
Mark Jassey
President & Chief Operating Officer,
Continence Care & Home Services
Group
Dr Divakar Ramakrishnan¹
EVP, Chief Technology Officer and
Head of Research & Development
Bruno Pinheiro
President & Chief Operating Officer,
Ostomy Care
Appointed to CELT:
2024
Mark was promoted and joined CELT in
October 2024. Mark joined 180 Medical in 2007,
which became part of Convatec in 2012, and
has held a variety of leadership roles, including
most recently, Chief Commercial Officer, HSG
and VP, Head of Global Marketing – Continence
Care. Prior to joining Convatec, Mark worked
for several years in retail and logistics.
Appointed to CELT:
2020
Prior to joining Convatec, Divakar served as
Chief Digital Officer and Vice President for
Eli Lilly’s Drug Delivery, Device and Digital
Health groups, where he led a global R&D
team focused on developing innovative and
digitally enabled devices to improve patient
care. Divakar’s career in healthcare spans
more than 20 years. He served as Eli Lilly’s
Vice President of Manufacturing Science and
Technology, a role in which he oversaw all the
company’s process development across its
entire product portfolio.
Appointed to CELT:
2021
Bruno worked for Bristol Myers Squibb prior to
its sale of Convatec in 2008. Bruno’s diverse
experience spans across Sales, Business
Development & Global Emerging Markets.
Prior to his appointment as interim President
& Chief Operating Officer, Global Emerging
Markets, Bruno led a diverse team across eight
countries in his role as Head of Convatec’s
Latin America business. Bruno was appointed
as President & Chief Operating Officer, Ostomy
Care, in May 2022.
Evelyn Douglas¹
EVP, Chief Strategy & Business
Development Officer
John Haller¹
EVP, Chief Quality & Operations
Officer
Anne Belcher
President & Chief Operating Officer,
Global Emerging Markets
Appointed to CELT:
2020
Evy has in-depth expertise in the MedTech
sector, having spent 20 years at Becton,
Dickinson and Company (BD) prior to joining
Convatec in 2020. At BD, she was Senior Vice
President of Corporate Development and
Strategy, where she supported the company to
build its capabilities, focusing on opportunities
for partnerships, acquisitions and divestitures.
Prior to her role in corporate development at
BD, Evy held senior positions in their legal
team.
Appointed to CELT:
2022
John joined Convatec in 2022 from Next Press,
where he was General Manager. Previously,
he spent 26 years with Stryker Corporation,
a leading global MedTech business, where he
played a pivotal role in helping Stryker grow
from a $1 billion revenue company to a
$13 billion revenue company. John has lived
and worked in countries around the world.
Appointed to CELT:
2022
Anne joined Convatec in 2022 after 30 years
at GlaxoSmithKline (GSK), where she most
recently served as Senior Vice President
& General Manager, Nordics. She originally
joined GSK as a sales representative in New
Zealand in 1991 and went on to hold senior
roles globally within GSK. Anne has experience
in diverse market environments, including
both mature and emerging markets across
Asia Pacific, EMEA and the Americas.
David Shepherd
President & Chief Operating Officer,
Advanced Wound Care
Appointed to CELT:
2018
David joined Convatec and CELT in 2018,
having previously worked for Johnson &
Johnson for 26 years, where he held a variety
of sales, marketing, strategic and operations
roles, most recently being Vice President,
Southern EMEA with responsibility for 15
businesses across the region. Prior to that,
he was the US President for Cardiovascular
and Speciality Services.
1. Members of the ESG Steering Committee.
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Convatec Group Plc Annual Report and Accounts 2024
Governance
Financial statements
Additional information
Overview
Strategic report
Board activity and actions
Areas of focus
Activities
Strategic priorities
Strategy and delivery
–
Considering and approving
the Group’s strategy and any
changes and monitoring
execution and delivery.
–
Considering and approving major
transactions, capital projects,
corporate actions or investments
by the Company.
–
Two-day strategy meeting to review progress and evolution
of the FISBE strategy
–
Review of corporate development opportunities and capital
investments to ensure alignment with our FISBE strategy
and business segment plans
–
Consideration and approval of capital expenditure to support
manufacturing capacity expansion across all segments
–
Consideration and approval of the acquisition of
Livramedom, a homecare services business to provide
improved support to our patients and Healthcare
Professionals (HCP) in France
–
Regular review of innovation and technology, including the
new product pipeline and out clinical evidence generation as
well as quality and operations enhancements to improve
resilience. In particular, the Board has considered the US
Medicare Administrative Contractors (MACs) Local Coverage
Determinations (LCDs) for Skin Substitute Grafts/Cellular and
Tissue-Based Products for the treatment of Diabetic Foot
Ulcers (DFUs) and Venous Leg Ulcers (VLUs)
–
Reviewed progress of the GBS transition and its contribution
to our simplification and productivity agenda
–
Consideration of the global economy and geopolitics, and
the potential impact on growth and performance
–
Consideration of our customers and those who use our
products and services, the competitive landscape we operate
in and opportunities for innovation
Focus
Innovate
Simplify
Build
Execute
Leadership
–
Recommendation of directors
for re-election, following
recommendations from the
Nomination Committee.
–
Reviewing the performance of
the Board and its committees,
individual Directors and the
Group’s overall corporate
governance framework.
–
Reviewing wider leadership
across the organisation.
–
Board evaluation completed and results reviewed in late
2024 (see pages 99 to 100 for details)
–
Consideration of the composition and skills, knowledge
and experience of the Board and Board Committees
–
Consideration of Non-Executive Director tenure and
appropriate succession planning
–
Consideration of the appointment of three new CELT leaders.
–
Review of CELT including their performance, retention and
career development
–
Further development of succession plans for CELT
including review of potential candidates from the wider
leadership team
Build
Execute
Our people
–
Receiving and considering the views
of the Company’s employees.
–
Sharon O’Keefe continued her role as Non-Executive Director
Workforce Liaison Champion and provided the Board with
regular post-engagement briefings. The Board also
considered the 2025 plan for workforce engagement.
–
The Chair and Sharon O’Keefe attended the Global
Leadership Meeting, held in London in April 2024
–
The Board met colleagues from across the organisation
during site visits
Innovate
Build
Execute
Business plan and performance
–
Approving annual budget and
business plan and regularly
reviewing actual performance and
latest forecasts against the budget
and business plan.
–
Approved 2025 budget and business plan
–
Regular CEO and CFO reports and briefings on
actual performance, horizon scanning and forecasts
–
Deep-dives into segment performance and plans
Focus
Innovate
Simplify
Build
Execute
Board focus and principal matters considered in 2024
The principal matters considered by the Board during 2024 and their linkage to the Company’s strategic priorities are set out in the
table below.
As part of the business of each Board meeting, the Board is briefed by Executive Management on business performance, people
and culture, including relevant updates on employee engagement, turnover, DE&I, wellbeing and talent. The Board also receives a
report from the CFO providing updates on the Group’s financial performance. Members of CELT and senior management regularly
brief the Board on business and strategic developments, opportunities, principal and emerging risks and their mitigation, and key
operating decisions. The Board also receives regular reporting on Convatec’s responsible business agenda, including enterprise risk
management, stakeholder engagement, legal and compliance and other topics relevant to the business and the environment
Convatec operates in.
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Convatec Group Plc Annual Report and Accounts 2024
Governance
Areas of focus
Activities
Strategic priorities
Financial reporting
–
Approving final and interim results,
trading updates, the Annual Report
and the release of price-sensitive
information.
–
Approving the dividend policy,
determination of any interim
dividend and the recommendation
(subject to the approval of
shareholders) of any final dividend
to be paid by the Company.
–
Approval of the Viability and Going Concern statements
–
Approval of half-year and full-year results
–
Consideration and approval of trading updates issued
in May and November 2024
–
Confirmation and approval of the interim dividend and
recommendation of the final dividend
–
Approval of the 2023 Annual Report and Notice of 2024 AGM,
held as a hybrid meeting
Focus
Execute
Risk and governance
–
Ensuring the Group has an effective
framework and systems of internal
control and risk management in
place, including approving the
Group’s risk appetite and principal
and emerging risks.
–
Review of the effectiveness of the Group’s risk management
and internal control framework and systems
–
Review and approval of the Group’s risk appetite, ensuring
that Group strategy and current performance are aligned
with risk appetite
–
Review and approval of the Group’s principal and
emerging risks
–
Regular Governance, Legal and Compliance briefings,
including updates provided by external advisers
–
Briefings to the Board from the Board Committee Chairs
on the activities of the Committees
–
Review of Board Committee terms of reference, with
particular reference to the changes brought about by the
2024 UK Corporate Governance Code
Focus
Innovate
Simplify
Build
Execute
Stakeholder engagement
–
Considering the balance of interests
between the Group’s stakeholders.
–
Receiving and considering the views
of the Company’s shareholders.
–
The Board met with patients, HCP and thought leaders to
gain deeper insights into our products and developments
–
Briefings provided by the Investor Relations team and the
Group’s corporate brokers on investor feedback following
results announcements and investor roadshows
–
The Chair and other members of the Board had meetings
with our largest institutional shareholders during the year
Innovate
Build
Execute
Responsible business
–
Overseeing the Group’s responsible
business programme.
–
Reviewing the Group’s responsible
business strategy and its
implementation.
–
Considering the Group’s people
and their welfare.
–
Regular briefings from the ESG Steering Committee
–
Oversight of the Group’s ESG framework
–
Reviewed progress against sustainability targets and agreed
priorities for 2025 and further embedding ESG into strategy
–
Review of plans to address the new requirements of the EU
Corporate Sustainability Reporting Directive (CSRD)
–
Review of talent management and progress on DE&I
initiatives including gender and ethnicity data
–
Review of employee gender pay gap data
–
Review and approval of the Modern Slavery Statement.
–
Review of results collected from and management’s
responses to two employee surveys
Innovate
Simplify
Build
Execute
BOARD FOCUS SESSION ON OUR INFUSION CARE PRODUCTS
CASE STUDY: BOARD EDUCATION
In September, the Board enjoyed an in-depth
visit to our Infusion Care manufacturing site
in Osted, Denmark, spending time with
colleagues to learn more about Global
Quality & Operations (GQO) and Infusion
Care and to see the progress we are making
in the execution of our FISBE strategy.
During the visit, Non-Executive Director,
Sharon O’Keefe – a former nurse and our
W
Orkforce Liaison Champion, held a series
of small focus groups to listen directly
to colleagues in manufacturing and
commercial roles on their perspectives
and suggestions, which Sharon shared
with the Board as a whole.
Board members also had the opportunity
to hear a number of insightful briefings
and practical demonstrations from Kjersti
Grimsrud, President & Chief Operating
Officer, Infusion Care, and members of the
Infusion Care team, as well as leading Health
Care Practitioner, Professor Per Odin, Head
of Neurology at Lund University, who shared
insights on Parkinson’s disease, and a
customer with Type 1 diabetes.
The Board spent time hearing from John
Haller, EVP, Chief Quality & Operations
Officer, and members of the GQO team on
our commitment to quality and continuous
improvements, and took a tour of the
manufacturing facilities for a first-hand
look at products coming off the line and
the highly automated lines that produce our
Inset Guard portfolio of products. Sessions
helped bring to life our solutions and
exciting portfolio, including Neria™ Guard
and the benefits it offers in the treatment
of Parkinson’s disease (see page 21).
As part of the site tour, colleagues spoke
about a range of continuous improvement
projects underway to increase capacity to
meet the needs of our customers, ensuring
the many people who use our Infusion Care
solutions can continue to count on trusted
solutions from Convatec.
Further opportunities to meet with HCP,
researchers and patients will be scheduled
during 2025.
Commenting on the visit, Non-Executive
Director Professor Constantin Coussios
OBE, said “Convatec is a global leader in
subcutaneous drug delivery and infusion
set design, development and manufacturing.
During our visit, we were able to see how the
Company is building on its three decades
of experience in this area to drive innovation,
quality, safety, as well as leveraging its
global scale to support Convatec partners.”
Convatec delivers more than 110 million
products every year to serve end users in
disease areas such as diabetes, Parkinson’s
disease, pain management, and primary
immunodeficiency.
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Governance
Financial statements
Additional information
Overview
Strategic report
Board activity and actions
continued
BOARD KEY DECISIONS IN 2024
Oversight of Convatec’s
product pipeline and new
product launches
The Board oversaw our technology
and innovation driven growth strategy
during the year, reviewing progress
and approving capital to support R&D,
improvements in quality and capacity
and drive the launch and scale-up of
new products. During the year, the Board
oversaw the delivery of four new product
launches: GentleCath Air™ for women
2.0, see pages 18 and 19; Esteem Body™
with Leak Defense™, see pages 16 and 17;
our me+ Companion™ app, see page 41;
partnered with Tandem on a new
innovative infusion set, see page 20;
and collaborated with AbbVie for new
therapies to treat Parkinson’s disease
through Neria™ Guard, pages 20 and 21.
S.172 – How the Board considered different
stakeholders in making the decision
New product launches are fully aligned
with our FISBE strategy as diversification
of products and customers is vital to the
long-term success of the Company.
Patients and HCPs:
Our innovative new
products have the potential to provide
improved care, greater choice and better
outcomes for patients living with chronic
conditions.
Our people:
Our colleagues benefit from the
increased strength of our business, creating
more opportunities for career development
within a larger-scale business.
Suppliers and distributors:
The launches
provide opportunities to build partnerships
with trusted suppliers and distribution
networks across the globe.
Investors:
Our innovation pipeline supports
our FISBE strategy and our sustainable and
profitable growth through diversifying our
product portfolio, improving the solutions
we provide to our customers and enabling
us to serve more customers across our
chronic care markets.
Oversight of Global Quality
Operations (GQO)
transformation programmes
The programmes aim to support the
business by providing Convatec with
a world class quality and operations
team that is able to deliver high-quality,
cost-effective products to our customers
on time and aligned with our ESG
strategy, by focusing on three pillars
of simplification and productivity:
–
Continuous Improvement
–
Automation and Robotics
–
Plant Network Optimisation
During the year, the Board oversaw
initiatives to optimise our network,
these included the approval of significant
capital expenditure projects to expand
manufacturing capacity and increase
resilience by scaling core sites; while
also reducing our footprint through the
finalisation of the closure of our Herlev
site in Denmark and our Eurotec site in
the Netherlands and the movement of
our supply hub work from Switzerland
to the UK.
The Board also approved capital and
operational investments and monitored
the roll-out of programmes to increase
the use of automation and robotics in
our production lines.
S.172 – How the Board considered different
stakeholders in making the decision
The programmes are fully aligned with our
FISBE strategy as their delivery will result
in a more efficient and effective commercial
organisation.
Investors:
The GQO transformation
programmes support revenue growth through
capacity expansion and cost reduction. The
improvements to quality and availability will
also strengthen customer loyalty, increasing
demand for our products. The programmes
also underpin confidence in the future growth
and overall success of the business.
Suppliers and distributors:
The ability of
suppliers to meet the increased requirements
in terms of quality, volume, price and
standards of raw materials was considered
before making decisions to invest in the
expansion of our core sites. The expansion
will provide opportunities to build
partnerships with new and existing trusted
suppliers and our distribution networks
across the globe.
Patients and HCPs:
The programme will
provide patients with better quality and
improved access to our products. The
efficiencies created in our supply chain
can also be passed onto our customers
and patients who will benefit from lower
cost products.
Our people:
The closure of our Herlev
and Eurotec manufacturing sites and supply
hub in Switzerland resulted in a number of
redundancies. While the impact of any
redundancy proposals on colleagues was
considered, the decision was taken to ensure
the success of the business in the medium
to long term.
The reforms within our GQO will provide
our colleagues with safe, challenging, and
engaging places of work where they can
grow their careers while enabling us to
grow our business. Convatec will also invest
in developing our people with additional
skills to support the new and innovative
ways of working.
Convatec Group Plc Section 172 statement
In accordance with Section 172 of the Companies Act 2006 (Section 172), the Group and its Directors act in the way that they
consider in good faith would most likely promote the success of the Company for the benefit of its shareholders as a whole,
having regard to other stakeholders.
Throughout the Annual Report and Accounts, we provide examples of how Convatec has taken into account the likely
consequences of decisions in the long term, fosters and builds relationships with stakeholders, understands the importance
of engaging with our employees and gives consideration to their interests, understands the impact of our operations on the
communities in the regions where we operate and the environment we depend upon and attributes important to behaving
as a responsible business. The Board appreciates the importance of effective stakeholder engagement and considers its
stakeholders’ views in its decision making and in setting its strategy. The Board also understands the need to act fairly
between Convatec’s stakeholders. Although the Board’s decisions do not always impact all of our stakeholders to the same
extent, by having a process in place for decision making, the Board ensures that it has due regard for the interests of its
stakeholders, including our customers and patients, HCP, our people, our suppliers and other supply chain partners, our
channel partners, our B2B customers and our investors and debt providers, when taking decisions.
Details of our stakeholder engagement can be found throughout the Annual Report and Accounts and in particular on pages
36 and 37. The above principal decisions and activities provide specific examples of how the Board and its Directors have
complied with Section 172 and have considered, individually and collectively, stakeholder interests and impacts in making
different decisions that support the implementation of Convatec’s strategy and the delivery of our objectives now and in the
longer term. Details of how our Board and Board committees operate, their responsibilities, and the matters they considered
during the year are contained in the Governance Report on pages 84 to 148.
98
Convatec Group Plc Annual Report and Accounts 2024
Governance
Board performance evaluation
recommendations resulting from
the review process, are set out below.
Lintstock has no other connection
with Convatec or any of the individual
Convatec Directors.
Individual Director performance
evaluation
As part of the annual evaluation process,
there is a review of the effectiveness and
commitment of individual Directors. In
respect of the Non-Executive Directors
this includes a review of an individual’s
commitment of time to the Company
in light of their other commitments
(as noted in their biographies on page 93).
Except in relation to his own, the Chair
leads the individual Director evaluations.
All Non-Executive Directors were
considered to be providing valuable
input and robust challenge to
management with a small degree of
healthy tension, effective dialogue and
thoughtful and authentic interactions.
Therefore, the Board is recommending
all Non-Executive Directors for re-
election at the 2025 AGM.
2023 Board performance
evaluation progress report
and 2024 Board performance
evaluation review
In 2023, the Board undertook an
evaluation of its effectiveness as required
by the Code (details of which are set out
in the 2023 Annual Report and Accounts).
Information about the key priorities
arising from this evaluation and progress
to date is set out on the following page.
In October 2024, the Board undertook
a questionnaire-based evaluation,
externally facilitated by Lintstock.
The questionnaire included both
quantitative and qualitative questions.
Lintstock analysed the results and
provided reports for the Board and
Board Committees, with unattributed
scoring and comments. The reports and
key findings were discussed at the Board
and Committee meetings, with each
considering the evaluation outcomes
and any appropriate actions.
The key findings from the 2024 Board
performance evaluation process,
including the actions agreed to address
Board Chair performance
evaluation
In line with prior years, the evaluation
of the performance of the Board Chair
was conducted by the Senior
Independent Director (SID) in discussion
with all other Board members, other
than the Board Chair. The overall
conclusion was that he continues to
perform very well in all aspects of the
role, providing considerable value and
support to management, the Board
and wider business.
The review highlighted that the Chair
leads effective meetings, with a focus
on clarity and pragmatism in decision
making. He has a strong and constructive
relationship with the Executive Directors,
providing appropriate challenge, support
and advice.
The SID provided feedback to the Board
Chair after the review of his performance.
PROGRESS IN RELATION TO ACTIONS ARISING FROM THE 2023 BOARD
PERFORMANCE EVALUATION
Actions
Progress
Board education and understanding around
external developments and competition
Reinforce focus on key areas for the business including broad
emerging trends, IT, talent and the competitive landscape.
During the year, the CEO and CFO Reports provided the Board with
information on the competitive landscape, including latest
developments and market share. The Board also received
presentations from external advisers concerning competition.
In June, the Board participated in a two-day off-site meeting which
focused on strategic review and priorities, each business segment
provided the Board with details on the Group’s positioning within
the market as well as the business’ relative strengths and
weaknesses and any opportunities within the market.
The Board also benefitted from an external presentation on AI
exploring opportunities for future use.
This programme will continue in 2025.
Engaging with stakeholders, particularly through
site visits
In order to gain better insight into stakeholder priorities and
concerns and to provide opportunities to improve relationships,
the Board considered that the momentum in respect of stakeholder
engagement be maintained and additional opportunities for the
Board and management to engage with colleagues and customers
be sought.
An engagement programme between Non-Executive Directors,
Executive Directors, colleagues from across the business,
researchers, HCP and patients was implemented during the year.
As part of this programme, the Board and Committee members
visited a number of Convatec sites, including our GBS centre in
Lisbon, Portugal; our manufacturing site in Osted, Denmark and
our Head Office in London, UK. A similar programme has been put
in place for 2025.
Board information, including R&D
The Board considered that they would benefit from more
opportunities to improve their knowledge in areas such as
research and development (R&D) to better inform decision making.
The Board was provided with a deep-dive session on Infusion Care
product landscape and innovative use developments supporting
increased capacity requirements. Technology & Innovation (T&I)
leadership also provided details of the T&I strategy as part of the two
day strategy focused off-site event in June.
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Financial statements
Additional information
Overview
Strategic report
Board performance evaluation
continued
2024 BOARD PERFORMANCE EVALUATION REVIEW
Overall, the Board was considered to be operating at a high standard, with positive Board member dynamics that continue to
add real value to the business. The Board felt confident in its oversight, with strong alignment as to the key priorities. The
priority recommendations arising from the Board performance evaluation and proposed actions are set out below.
Findings
Actions for 2025
Board focus on strategy
The Board should continue to focus on overseeing the execution
and delivery of the strategy and strong financial performance.
This should include innovation strategy, capacity and pipeline for
research and development and growth through investment in
organic growth opportunities or M&A, as well as longer-term
strategy, opportunities and risks.
The Chair and the Company Secretary to review the Board
meeting forward planner, to ensure appropriate weight is given
to strategic plans and opportunities in the short, medium and
long term.
Board membership and succession planning
The Board‘s composition of high calibre individuals with a diverse
range of experience is a strength, and has a focus on how the
skills and experience of the Board can be leveraged in oversight
of succession planning for the organisation more broadly.
The Chair to ensure that the Nomination Committee is focused on
addressing future succession needs broadly and considering any
additional skill sets or diversity that could complement the Board.
Assessment of past decisions
The Board has benefitted from the structured look-back at past
decisions, to assess outcomes and the key learnings and intends
to broaden the use of this important tool.
CEO to lead structured sessions reviewing past decisions,
including an assessment of outcomes versus expectations
and use of key learnings as part of decision making for future
strategic initiatives.
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Governance
Nomination Committee report
A word from
the Chair
“We recognise the multiple benefits for stakeholders that a diverse and
inclusive business, leadership team and culture will deliver. These factors
continue to make a positive contribution to Convatec’s success”
Dr John McAdam CBE
Chair of the Nomination
Committee
COMMITTEE INTRODUCTION AND OVERVIEW
Activity highlights
–
Reviewed skills, experience and
characteristics of Board members and
determined that the Board was balanced,
diverse and with an appropriate level of
skills, knowledge and experience
–
Reviewed talent and succession planning
for the Board, Board Committees and CELT
–
Recommended to the Board the
appointments to CELT to further
strengthen our leadership team
–
Reviewed progress and development
of the Group’s diversity, equity &
inclusion and wellbeing strategy and
assessed key metrics
–
Reviewed performance and development
for CELT and senior leaders within the
organisation, helping to build and
develop a sustainable, diverse and
inclusive organisation
–
Reviewed and approved the Board
Diversity, Equity and Inclusion Policy
2025 priorities
–
Maintain focus on development
and succession plans for CELT
and senior management
–
Continue the development of short-,
medium- and long-term Board
succession plans, considering the
tenure of each Director
–
Identify any gaps in skills, background or
experience which the Board may wish to
consider when making new appointments
Key numbers
Meetings held
3
(2023: 3)
Attendance
95%
(2023: 100%)
Key areas of responsibility
–
Reviews regularly the Board’s composition
–
Leads Board appointments process
as necessary
–
Oversees and recommends orderly
Board succession and oversees senior
management succession planning
–
Reviews whether each Non-Executive
Director is devoting enough time to his
or her duties
–
Oversees the balance of skills and
experience within the Group and on
the Board
–
Monitors diversity within the Board,
its Committees and across the Group
The role and responsibilities of the
Committee are set out in the terms
of reference and available at
www.
convatecgroup.com/investors/
governance/
. These are subject to
annual review and were last reviewed
in December 2024.
Committee membership, meetings and attendance
Director
Member since
Attended
John McAdam (Chair)
September 2019
1
3/3
Margaret Ewing
May 2019
3/3
Heather Mason
September 2020
3/3
Brian May
September 2020
3/3
Constantin Coussios
January 2022
2/3
2
Kim Lody
February 2022
3/3
Sharon O’Keefe
March 2022
3/3
1. Dr McAdam was appointed Chair of the Committee on 30 September 2019
2. Mr Coussios was unable to attend one meeting due to a scheduling conflict
The table above shows Committee members and the number of scheduled meetings attended out of the number of meetings
members were eligible to attend during 2024.
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Financial statements
Additional information
Overview
Strategic report
Diversity
The Board endorses the aims of The FTSE
Women Leaders Review and the Parker
Review. At Board level, we have members
of various nationalities, gender and
ethnicity who have an excellent range
of appropriate skills and expertise.
The renewed Board Diversity, Equity and
Inclusion Policy, which also applies to its
committees was reviewed and approved
by the Board in December 2024, and
reflects the objectives of the FCA Listing
Rules, The FTSE Women Leaders Review
and Parker Review. As at 31 December
2024 and at the date of this report, we
comply with the recommendations of
all requirements in relation to gender
and ethnicity at a Board and executive
management level. On this page, we
have provided data on Board and
executive management gender and
ethnicity. For the purposes of gathering
this information, individuals were
asked to self-declare their gender and
ethnicity against the Office for National
Statistics classification.
The Committee will continue to monitor
Board diversity in other respects,
including experience, skills, personal
attributes, age and ethnicity. In all
instances, individuals will continue to be
appointed on merit and the Committee
will remain focused on always ensuring
that the Board has the relevant skills
and expertise to perform effectively.
Dear Shareholder
I am pleased to present the Nomination
Committee Report, which summarises
how the Committee discharged its duties
during the year.
Year in review
The Committee’s main priorities this year
included supporting the evolution of the
senior leadership structure and reviewing
longer-term Board composition.
The Committee supported the
appointments of Emma Rose, EVP, Chief
People Officer and James Kerton, EVP,
General Counsel & Company Secretary
to CELT in April and May 2024, respectively,
as well as the promotion of Mark Jassey to
CELT as President & Chief Operating Officer
of Continence Care & Home Services Group
in October 2024. They are each strong
additions to CELT and, with their
leadership, we are in an even stronger
position to deliver our FISBE strategy.
Board and Committee
composition
This year there have been no Board
changes, but the Nomination Committee
has continued to keep Board composition
under review The composition of the
Nomination Committee is set out on
page 101.
As part of our ongoing diversity
and inclusion strategy, our target is
to achieve 50% of senior management
roles to be held by female leaders
and 20% by ethnically diverse leaders
by 2027, this currently stands at 45%
and 27%, respectively.
During the year, the Board has
considered diversity insights across a
range of metrics with a focus on gender
and ethnicity. In 2025, the Committee
and the Board will continue to monitor
the ongoing development of DE&I and
Wellbeing initiatives across the Group.
Relevant skills and expertise
The Board benefits from a wide
variety of relevant skills, experience
and knowledge, details of which are
set out in the biographies and skills
matrix on pages 92 and 93.
Nomination Committee report
continued
Board and senior leadership gender representation
Number of Board
members
Percentage of Board
Number of senior
positions on the Board
(CEO, CFO, SID and
Chair)
Number in executive
management
Percentage of executive
management
Men
5
56%
3
6
60%
Women
4
44%
1
4
40%
Note: Executive Management includes CELT members but excludes the CEO and CFO.
Board and senior leadership ethnicity representation
Number of Board
members
Percentage of Board
Number of senior
positions on the Board
(CEO, CFO, SID and
Chair)
Number in executive
management
Percentage of executive
management
White British or other white (including
minority-white groups)
7
78%
3
9
90%
Mixed/multiple ethnic groups
–
–
–
–
–
Asian/Asian British
–
–
–
1
10%
Black/African/Caribbean/ black British
–
–
–
–
–
Other ethnic group
2
22%
1
–
–
Note: Executive Management includes CELT members, but excludes the CEO and CFO.
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Talent and succession planning
An equally important role for the
Committee is ensuring that we have
an appropriate pipeline of future talent
within the business. The Committee
regularly reviews succession plans,
not only for the Board, but also for
CELT. In support of Convatec’s succession
planning, the Committee received reports
on talent management, DE&I and
Wellbeing initiatives as well as progress of
the Group’s efforts to increase the number
of Vice-President appointments from
internal candidates, through a leadership
development programme for mid-level
leaders with emphasis on personal
development goals. This programme
assesses potential successors ready now,
those ready in one to two years, and those
anticipated to be ready in three to five
years and aims to accelerate their
development and enable them to play a
crucial role in delivering on our strategic
aims into the future. Mark Jassey was
appointed to the role of President & Chief
Operating Officer of Continence Care and
Home Services Group, having been
previously identified by the Committee
as a suitable internal candidate.
Given its importance, succession
planning is scheduled for the
Committee’s consideration twice a year.
Board tenure
Director tenure and independence was
reviewed as part of the annual Board
Review. None of the directors’ tenure
exceeded the recommended nine
years, and it was concluded that
each Non-Executive Director
remained independent. The
Committee has commenced
appropriate succession planning for
the Board’s longest serving members.
Board induction, training and
development
On joining the Board, all Non-Executive
Directors participate in a formal
induction programme. The programme
is monitored by the Chair (other than
in relation to his own induction, which
is guided by the Senior Independent
Director) and is the responsibility of
the Company Secretary. Its purpose
is to ensure that each newly appointed
Non-Executive Director is able
to contribute to Board discussions
as quickly as possible.
Board appointments
Appointments to our Board are made
solely on merit with the overarching
objective of ensuring that the Board
maintains the correct balance of
diversity, experience, skills, length of
service and knowledge of the Group to
successfully establish and oversee the
delivery of the Group’s strategy, whilst
also providing constructive challenge
as necessary. Appointments are made
based on the recommendation of the
Nomination Committee with due
consideration given to the benefits of
diversity in its widest sense, including
gender, social and ethnic backgrounds,
as well as candidates expected ongoing
commitments. Directors are required
to seek Board approval prior to taking
on additional significant commitments
and to ensure that existing roles and
responsibilities continue to be met
and conflicts are avoided or managed.
When recruiting new Non-Executive
Directors, meetings are held between
potential candidates and the Chair,
CEO, CFO and Non-Executive Directors.
Members of the Nomination Committee
review feedback and recommend
candidates for appointment to the
Board. Decisions relating to such
appointments are made by the Board
based on a number of criteria, including
the candidate’s skills and experience,
the contribution they can make to our
business and their ability to devote
sufficient time to properly fulfil their
duties and responsibilities.
Reappointment of Directors
All Directors are subject to annual
re-election and will be proposed for
re-election by shareholders at the AGM
to be held on 22 May 2025. Following
evaluation, all Directors continue to be
effective and have the time available to
commit to their role, and the Board has
recommended that all directors are put
forward for re-election.
Non-Executive Directors are initially
appointed for a three-year term and
retiring Directors, if willing to act, will
be deemed to be reappointed unless
the resolution for their re-election
is not approved.
While each induction programme
is tailored to the individual Director’s
needs, based on their skills and
experience, typically, each programme
provides new Directors with insight
into the Group’s strategy, culture and
operations and informs them about the
governance and compliance processes
and procedures we operate.
During the year, the Board has also
received training and updates on
governance and regulatory matters,
including the new 2024 Corporate
Governance Code; the listing and
prospectus regime reform; sustainability,
including EU sustainability disclosure
requirements and UK transition plan
requirements; people matters, including
remuneration and diversity; the new
corporate failure to prevent fraud offence
and AI governance. The Board also
received updates and training from
the Group’s senior management and
external advisers covering a range
of topics.
We continued to advance Board
knowledge through training sessions
and updates provided to both the
Remuneration and Audit and Risk
Committees by external advisers.
Training focused on matters specific
to their respective committee activities,
including corporate governance updates,
executive remuneration, corporate
reporting and audit updates. In line with
the results of the Board and Committee
performance evaluation, we will focus
on appropriate training in 2025.
Committee performance
evaluation
The Committee conducted an
evaluation of its performance in
the form of a detailed questionnaire
facilitated by an external provider,
Lintstock, the results of which were
highly rated overall. Matters identified
for attention in 2025 are set out under
2025 Priorities on page 100.
Copies of all Non-Executive Directors’
appointment letters are available
for inspection at the Company’s
registered office.
On behalf of the Nomination Committee.
Dr John McAdam CBE
Chair of the Nomination Committee
25 February 2025
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Financial statements
Additional information
Overview
Strategic report
Audit and Risk Committee report
A word from
the Chair
“The Committee is delighted with the progress made by Global Business
Services in continuing to transform and improve core business processes
and controls, creating value for the Group”
Margaret Ewing
Chair of the Audit and Risk
Committee
COMMITTEE INTRODUCTION AND OVERVIEW
2024 highlights
–
Reviewed key judgements and estimates,
alternative performance measures (or
adjusted measures) and disclosures in
respect of the 2024 financial statements
–
Visited the Global Business Service centre
in Lisbon to review progress
–
Appointed a new external auditor for
2026 financial year, following a successful
tender process
–
Monitored the development of
ESG reporting and targets including
compliance with TCFD and the plans
to address the new requirements of the
EU Corporate Sustainability Reporting
Directive (CSRD)
2025 priorities
–
Continue to monitor the Audit and Risk
Committee’s (ARC) understanding of the
rapidly evolving regulatory requirements
related to ESG and CSRD and the
implications for the Group
–
Review the material control framework
developed to respond to the new
requirements of the UK Corporate
Governance Code (the Code) 2024
(‘the revised Code’)
–
Monitor the preparation to address the
new failure to prevent fraud offence,
applicable from September 2025
Composition
The current members of the Committee are
listed above.
The biographies of the Committee members
on page 93 outline the members’ collective
wide finance, audit, risk management and
relevant sector and business experience,
enabling the Committee to provide
constructive challenge and support to
management and the auditors.
In accordance with the Code, the Board has
determined that Margaret Ewing and Brian
May possess an appropriate breadth of
recent and relevant financial experience
and is satisfied that the Committee has
competence relevant to the sector and
its overall responsibilities.
Key numbers
Meetings held
5
(2023: 5)
Attendance
93%
(2023: 100%)
Key areas of responsibility
The Audit and Risk Committee (ARC) plays
a key role in supporting the Board to ensure
there is appropriate oversight of the Group’s
financial position, external reporting,
controls and risks. The Committee’s
principal responsibilities are to oversee
and provide assurance to the Board on:
–
The integrity and quality of financial and
non-financial (including ESG and TCFD)
reporting and to ensure it is fair, balanced
and understandable
–
The effectiveness of audit and assurance
arrangements
–
The robustness and effectiveness of
the financial, reporting, operational and
compliance controls and risk management
processes throughout the year
The full role and responsibilities of the
Committee are set out in the terms of
reference (available on our website: www.
convatecgroup.com/investors/governance/)
and were updated in July 2024 to comply
with the requirements of the revised Code.
The Chair, Chief Executive Officer, Chief
Financial Officer, EVP General Counsel
& Company Secretary, Deputy Company
Secretary, VP Group Financial Controller
& Transformation and the VP Internal
Audit, Enterprise Risk & Insurance and
representatives of the external auditor
attend the meetings on a regular basis.
Other Board members have an open
invitation to attend Committee meetings.
The Committee also has at least two private
sessions each year with each of the external
auditor and the VP Internal Audit, Enterprise
Risk & Insurance.
A summary of the Committee’s activities
during 2024, and until the date of this
report, is detailed on the following pages.
Committee membership, meetings and attendance
Director
Member since
Attended
2
Margaret Ewing
1
August 2017
5/5
Heather Mason
September 2020
4/5³
Brian May
March 2020
5/5
1. Ms Ewing was appointed Chair of the Committee on 28 June 2019.
2.
In 2024, there were five formal scheduled Committee meetings and, in addition, the members
met as part of the selection panel to the external audit tender process.
3. Ms Mason was unable to attend one meeting due to a scheduling conflict.
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Governance
General Counsel & Company Secretary
and the lead partners of our external
auditor, Deloitte, allowing me to
understand how existing and emerging
issues were being addressed and
adapting the Committee’s agendas
accordingly. The meetings with the VP
Internal Audit, Enterprise Risk &
Insurance and Deloitte lead partners
also informed the Committee’s ongoing
review of the effectiveness of audit
(internal and external, respectively)
and ensured the internal audit plan
prioritised controls and processes related
to the Group’s principal and emerging
key risks and the external audit plan
focused on the evolving key audit risks.
They also provided insight on the culture
across the Group.
Committee performance
evaluation
During the year, as part of the Board
performance evaluation, the Committee
members and regular attendees
(including the internal and external
auditors) undertook an evaluation of the
Committee’s performance. The findings
were discussed initially by the Committee
and then shared with the Board. Overall,
it was concluded that the Committee
continued to perform very effectively
and had addressed its key priorities
and action plan for 2024.
Fair, balanced and understandable
The Board is required to provide its
opinion on whether it considers that
the Company’s 2024 Annual report
and Accounts (ARA), taken as a whole,
are fair, balanced and understandable,
and provide the information necessary
for shareholders and other stakeholders
to assess the Company’s position and
performance, business model and
strategy and key risks that challenge
the Group.
To support the Board in providing
its opinion, the Committee considered
the overall cohesion and clarity of the
ARA an assessment of the quality of
reporting through the assurance
framework, process and controls that
were applied in its preparation and
discussion with management and the
external auditor. This included:
Dear Shareholder
and other stakeholders
As Chair of the Audit and Risk Committee,
I am pleased to present the Committee’s
2024 Report, the purpose of which is to
describe how the Committee conducted
its responsibilities during the year.
The Committee had five formal
scheduled meetings in 2024, including
the May meeting held in the Lisbon
Global Business Services (GBS) centre.
The Committee also led a robust external
audit tender process. This concluded
in June, when a Selection Panel held a
meeting, resulting in a recommendation
to the Board to appoint Ernst & Young
as external auditor for the 2026 financial
year. See page 113 for further details.
Whilst in Lisbon, the Committee held
knowledge sharing sessions with the
key leaders from the financial, IT and
HR control process teams based in the
GBS as part of the Committee’s oversight
responsibilities. The Committee was keen
to understand the progress in simplifying
processes, improving controls and risk
management and any ongoing
challenges faced by the GBS management
in its ongoing migration. The expansion
of the GBS from the Lisbon centre to now
include Bogotá and Kuala Lumpur enables
support to markets in all time zones. The
Committee was delighted to observe the
significant progress made by the teams
since its last visit in 2022, to transform,
standardise and simplify business
processes and controls. The Committee
will continue to review progress as the
Gloabl Emerging Markets (GEM) markets
and Home Services Group (HSG) are
transitioned into GBS scope (whereby
processes across all of the Group will be
included in the GBS), and as an increasing
number of previously outsourced IT
services are migrated to and provided
by GBS. The GBS platform provides
cost-effective services to a high standard
and is a critical facilitator of the Group’s
strong internal controls and risk
management framework.
In addition to the Committee’s scheduled
meetings, throughout the year I met
regularly with senior management,
particularly the CFO, VP Group Financial
Controller & Transformation, VP Internal
Audit, Enterprise Risk & Insurance, EVP
–
A detailed verification process dealing
with the factual content
–
Comprehensive reviews undertaken
independently by senior management
and Committee members to consider
messaging, adequacy of disclosures,
compliance with regulatory and legal
reporting requirements, and balance
–
Specific reviews by the Board and CELT
in relation to key sections of the ARA
and relevant sections of the ARA
audited by Deloitte
–
Confirmation from management that
the assurance framework had been
adhered to for the preparation of the
2024 ARA
Committee conclusions and
confirmations
Taking into consideration all areas of
focus of the Committee during the year
and in reviewing the 2024 ARA, including
reviewing the supporting detailed topic
papers, presentations and reports
from management and Deloitte, the
Committee was satisfied and able
to confirm to the Board that:
–
The Financial Statements for the year
ended 31 December 2024 have been
prepared applying appropriate
accounting policies and disclosures,
and provide a true and fair view
–
The Group’s internal controls and
risk management processes were
operating effectively throughout
the year, with no significant control
failures identified
–
The 2024 ARA, overall, are fair,
balanced and understandable. The
Board’s statement in relation to this
confirmation is included on page 148
–
It is reasonable for the Directors to
make the viability and the going
concern statements on pages 82
to 83 and page 161, respectively
–
The Group’s speaking up and fraud risk
processes have operated effectively
during the year
–
The external and internal auditors have
provided effective and independent
audits that have been challenging,
robust and of a high quality
I would like to thank my fellow
Committee members and all teams
involved with the Committee’s activities
for their contribution during 2024 and
their intense focus on quality, sound
judgements, controls and risk in
a challenging global environment,
politically and economically.
I hope that you find this report
informative and can take assurance from
the work undertaken by the Committee
during the year and planned for 2025.
Margaret Ewing
Chair of the Audit and Risk Committee
25 February 2025
ARC members, together with Jonny Mason and James Kerton, met with GBS colleagues in Lisbon.
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Financial statements
Additional information
Overview
Strategic report
Audit and Risk Committee report
continued
2024 KEY MATTERS
The Committee reviewed the interim
and full-year results statements and 2024
ARA, with supporting materials, focusing
on the:
–
Integrity of the Group’s financial
reporting process
–
Clarity of disclosure
–
Compliance with relevant legal and
financial reporting standards and
regulatory guidance
–
Application of accounting policies and
judgements
–
The consistency of the non-financial
disclosures, including climate risks and
opportunities, and related evolving
regulatory reporting requirements
–
Considering the above factors,
whether the Convatec Annual Report
and Accounts were fair, balanced and
understandable
Throughout the year, the Committee
received regular updates from the
CFO, VP Group Financial Controller
& Transformation, VP Internal Audit,
Enterprise Risk & Insurance and the
VP Investor Relations & Treasury, and
formal and informal reports and
feedback from the external auditor,
covering the following scope:
–
Alternative performance measures,
including the policy and the rationale
and non-recurring nature and
quantum of the proposed
adjusting items
–
Non-Financial information reported
externally, including the increasing
requirements and the compliance
readiness planning
–
Accounting judgements related to the
impact of recent decisions on the
reimbursement of specific advanced
tissue technology products in the US
–
Acquisitions and related accounting
treatments and judgements, including
the assessment of contingent
consideration
–
The results of the monitoring of the
effectiveness of internal controls,
particularly financial and IT general
controls related to financial reporting,
and the fraud risk assessment and
ongoing related enhancement
programme to support the Committee
conclusions on the integrity of the
Consolidated Financial Statements
and the review of the wider control
environment in anticipation of the
requirements of the revised Code
–
Appropriateness of going concern and
viability assessment, including basis of
preparation and management reports
on all key judgements, risk scenarios
and underlying assumptions,
supporting analysis and evidence
–
Treasury matters including policy,
activity, funding and ongoing
compliance with debt covenants
–
Tax matters including the Tax Strategy
Statement, tax transparency, key tax
risks, ongoing and new local tax audits
and investigations, estimated tax rates
applied in the Financial Statements and
provisions for uncertain tax positions
As a result of the reviews performed and
related discussions and challenges, the
Committee was able to recommend the
interim and full-year results statements
and 2024 ARA to the Board for approval.
1. EXTERNAL REPORTING
Significant reporting matters considered by the Committee
The principal area of judgement considered by the committee is set out below.
Issue
Committee’s conclusion and response
Revenue
recognition in
key markets
The calculation of revenue includes a number of areas of estimation at the point of recognition,
including rebates, discounts, allowances, product returns and consideration expected to be received. The
arrangements in different countries and with individual customers vary. As a result, the Group applies a limit
on variable revenue consideration, in order to ensure that revenue is recognised at an appropriate level (see
pages 163 and 164). The Committee scrutinised these judgements and estimates related to revenue, and
discussed them with the external auditor, ultimately concluding that the accounting for revenue was
appropriate.
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The Committee considered the key risks, facts and judgements for the following areas:
Matter
Committee’s conclusion and response
Going concern
and
Viability
statements
The Committee considered and robustly challenged management’s going concern review and viability
assessment, including the supporting analysis, in accordance with the requirements of the Code. The
Committee considered the Board approved Group 2025 budget, 2025 to 2029 strategic financial plan, and
updated forecasts and projections, taking into account reasonably possible changes in trading performance
and the potential impact of principal and emerging risks. The stress test scenarios, including the underlying
scenario assumptions and the reverse stress test, were reviewed and assessed against the Group’s financing
facilities and covenants. In addition, the Committee obtained a summary of external views from analysts and
other industry commentators, to understand the wider market’s perception of the Group’s future financial
performance and viability, including the impact of the coverage of Medicare for reimbursement of
InnovaMatrix
®
for specific applications in the US. The Committee considered the possible implications of the
rapidly evolving geopolitical and economic environment in which the Group operates. It also considered the
potential ‘corporate’ mitigations that would be available to management should the environment and
Group’s performance deteriorate beyond that reflected in the stress test scenarios, and discussed the
external auditor’s findings and conclusions.
Following this assessment, the Committee considered the scenarios applied were severe but plausible and
the extent of the analysis made by management to be appropriate and ultimately recommended the viability
and going concern statements and their respective related disclosures to the Board for approval and
inclusion in the 2024 ARA.
Taxation
The Committee was pleased to note the improvements in the efficiency and effectiveness of the Group’s
tax operations, contributing to minimal uncertain tax positions and a reduction in risk, regarding transfer
pricing. The Committee challenged management’s conclusions relating to these risk areas and related
disclosures and considered them to be appropriate.
Alternative
Performance
Measures (APM)
The Committee discussed the APM policy and the alignment with guidance, and concluded the APM policy
remains appropriate given the material level of adjusting items, certain of which would continue to be
incurred for several years. The largest adjustments continue to be the amortisation of acquired intangible
assets, of which a significant proportion relate to the Bristol Myers Squibb spin-out in 2008 and will be fully
amortised by 2026. The Committee concluded that management had correctly proposed the adjusting items
as they were relevant to understanding the ongoing underlying performance of the Group. The Committee
will continue to scrutinise all proposed adjusting items prior to approval.
Dividends
The Committee reviewed the dividends recommended by management with regard to the realised
distributable reserves, cash resources, availability of liquidity and the effect of sensitivities aligned to
the viability statement and concluded that it was able to advise the Board that there were sufficient realised
distributable reserves and cash resources to enable the Board to approve and recommend the 2024 interim
and final dividends, respectively.
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Financial statements
Additional information
Overview
Strategic report
2. RISK MANAGEMENT AND COMPLIANCE
Throughout the year, the Committee reviewed risk management and compliance matters to be able to provide assurance to the
Board that it could conclude on the effectiveness of the Group’s compliance, fraud prevention, risk management and internal
controls frameworks.
Our role
Decisions and actions taken by the Committee
Enterprise Risk Management (ERM)
and insurance
–
Ensure a robust assessment of the principal and
emerging risks has been undertaken with
effective mitigations and controls established
–
Assist the Board to establish and articulate overall
risk appetite, oversee specific risk exposures and
mitigations and ensure the Group is operating
within the Board’s risk appetite
–
Review effectiveness of the Company’s risk
management systems and processes and the
progress to comply with the revised Code
–
Review of the annual insurance renewal
strategy and programme to assess adequacy
and appropriateness of coverage of insurable
risks across the Group
The Committee reviewed and approved the updated ERM policy, with
the key updates being further clarification of roles and responsibilities
to further enhance the effective management of processes and assist the
Committee in monitoring the effectiveness of risk controls and mitigations.
The principal and emerging risks identified by management were regularly
reviewed and challenged by the Committee, with consideration of the
effectiveness of the respective risk mitigations and controls. Improvements
to the risk framework with the introduction of key risk indicators were
noted. The Committee will continue to monitor the development of the risk
management processes and the control activities on behalf of the Board,
in preparation for the Board’s material controls declaration for the 2026
financial year (in compliance with the revised Code).
The Committee reviewed the risk appetite statements, and the principal
and emerging risk management statements and disclosures, including the
priority order of risk as disclosed in the 2024 ARA, reflecting the discussions
held with CELT (collectively and with individual members). After careful
review and discussion, the Committee concluded that the risk appetite
statements and the principal and emerging risks (including prioritisation)
were appropriate and recommended them to the Board for approval.
At the request of the Committee, a risk simulation exercise was undertaken
in May, with risks expanded beyond the IT and cyber scope performed in
2023 to include a significant product recall. The lessons learned from this
simulation exercise were reviewed by the Committee. A further risk
simulation is planned in 2025 to include an incident at a manufacturing
facility, to align with the principal risks of the Group.
Following the maturity assessments performed by external advisers in
2023, the ongoing improvement of data protection controls and cyber
defence capabilities were monitored, with regular updates from the Chief
Digital Information Officer to the Committee. The Committee will continue
to closely monitor these key risks due to their nature and significance.
The Committee reviewed and approved the proposed insurance renewals
programme, which has been further tailored to reflect the significant
growth in the business and to better align to the risks faced by the Group.
Audit and Risk Committee report
continued
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Our role
Decisions and actions taken by the Committee
Internal controls
–
Promote and review sound risk management
and internal control systems and frameworks
over financial, reporting, operational and
compliance processes
–
Review the effectiveness of internal controls
–
Monitor progress on the preparations for
readiness towards compliance with the
revised Code
The Internal Controls team provided the Committee with quarterly updates
of the self-attestation of compliance with the Group’s formal internal
control frameworks, including details of control failures (all immaterial
during 2024), their remediation and independent reviews of control
evidence. A deep dive on IT controls was also conducted.
The reliance approach adopted by the external auditor on GBS controls
and the reviews undertaken by the internal auditors across all aspects of
the Group continued to provide additional assurance to the Committee on
the effectiveness of the financial, operational, IT and compliance controls.
Based on the quarterly updates, and the reports from the internal and
external auditors, the Committee is satisfied that the Group’s internal
controls operated effectively throughout the year, with no occurrence
of material weaknesses. Controls relating to compliance are covered
in the paragraph below.
The Committee received updates of progress on the implementation of the
framework for material controls in order to comply with the revised Code
with effect from 2026, and in reviewing the 2024 ARA, has had particular
regard to the controls framework related to external reporting of non-
financial information.
Compliance, including speaking up and
fraud
–
Review the Group’s codes, policies, systems
and controls in respect of fraud, bribery,
corporate conduct, privacy and regulatory
and legal compliance
–
Review speaking up reports
The Committee continued to monitor our compliance culture across the
Group with strong focus on markets that have an enhanced perceived
corruption index risk score. This included the review of regular reports
on the results of the global compliance programme and the speaking
up process.
The global business risk assessments, performed jointly by the Group’s
compliance team and internal audit (as part of the global compliance
programme), were extended to the remaining markets throughout 2024,
building on the successful launch in 2023 focused on high-risk markets.
The Committee monitored progress, together with the conclusions and
actions arising out of the reviews. Key themes arising from the reviews
included data privacy, the adoption of artificial intelligence, third-party
risk management, regulatory change and challenges associated with
rapidly evolving technologies, including emerging fraud risks tied to
new standards of conduct. The Committee monitored the progress and
outcomes of these assessments which have informed policy and process
updates, enhanced corporate education, and the reinforcement of roles
and responsibilities. Overall, the Committee was able to conclude that
an ethical and compliant business culture remains firmly rooted across
the organisation.
Whistleblowing/speaking up incidents are reported by employees and
certain third parties through a confidential Compliance helpline or
directly to the Office of Ethics and Compliance (OEC). Reports of a speaking
up nature or of breaches of the Code of Conduct that are made directly
to senior management or HR personnel are also reported to the OEC.
All reports, irrespective of the channel, are collated, managed, reviewed
and investigated by the OEC. A summary of the key themes, locations
and disposition of whistleblower/ speaking up matters together with
subsequent actions are reviewed by the Committee and reported
to the Board.
The Committee reviewed the status of the fraud risk assessment
initiative, the associated control framework and the improved reporting
on measures taken to prevent and detect fraud in accordance with the
enhanced requirements of the Code and the new UK ‘Failure to prevent
fraud’ offence, applicable from 2025.
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Financial statements
Additional information
Overview
Strategic report
Our role
Decisions and actions taken by the Committee
Regulatory compliance – ESG and TCFD
–
Approve appointment of ESG assurance partner
and review their report
–
Approve ESG related metrics to be subject to
external (limited) assurance (see page 59)
–
Approve TCFD disclosures
–
Review the Responsible Business section of
the 2024 ARA for compliance with all applicable
regulations (pages 32 to 59)
The Committee continued to focus on ESG, including TCFD and transition
plan reporting, during 2024, monitoring progress to meet increasing
stakeholder expectations and reporting requirements, and our progress
towards our net zero ambition.
An initial transition plan was established in 2023 and the Committee has
continued to monitor progress in delivering the actions required to iterate
this further, ensuring a roadmap is in place to meet the commitments and
targets, notwithstanding dynamic market considerations and externalities
that will make the delivery of our long-term net zero ambition a reality.
As the Group will be in scope for CSRD reporting on 2025 data, the
Committee received updates on the requirements and reviewed progress
in December to ensure that compliance was on track. An in-depth review,
including the approval of key decisions regarding reporting scope and
the double materiality assessment, will be performed by the Committee
in May 2025.
The Committee approved Deloitte to provide limited assurance over seven
key ESG metrics, consistent with 2023, and the targets disclosed in the
Group’s ARA and other sustainability reporting linked to senior executives’
remuneration. The scope of ESG assurance will be reviewed as part of CSRD
readiness in 2025.
Regulatory developments
–
Monitor the development of regulations
relating to ESG, TCFD, CSRD, climate change,
fraud, audit and corporate governance and
FRC and FCA reporting requirements and any
other relevant evolving regulations and
management’s preparedness to adopt
the changing requirements
The Committee continued to keep abreast of guidance relating to new
regulations, including the revised Code, issued in January 2024, and CSRD.
The Committee received detailed briefings on both the revised Code and
CSRD to ensure it can navigate the requirements of these new regulations,
calibrate Convatec’s approach and monitor progress of related initiatives to
ensure compliance in the required timeframes. The Committee also
received regular briefings from the external auditor and Convatec’s ESG
Steering Committee on regulatory and other developments relating to
sustainability, fraud and other disclosure and reporting requirements,
building the proposed timelines for implementation of related changes into
the Committee’s forward agenda.
Treasury, debt and insurance
–
Provide oversight of the treasury function
–
Annually review and approve the Group’s
treasury policy
–
Review activities of the treasury function,
including the status of the treasury instruments,
the indebtedness of the Group and compliance
with covenants within its debt instruments and
the treasury policy
The Committee received regular updates from the VP Investor Relations &
Treasury as regard to compliance with treasury policy, covenants and other
conditions of financing arrangements.
Tax
–
Provide oversight of the tax function
–
Review the key aspects of taxation, including
compliance, accounting judgements, reporting,
tax strategy and the external reporting
requirements of regulators and tax bodies
–
Annually review and recommend to the Board for
approval the Group’s updated Global Tax Strategy
statement for publication
The Committee continues to review the appropriateness of the Tax Strategy
to ensure the alignment with the Group’s tax risk profile and continues to
be satisfied that the Group manages its tax affairs carefully, ensuring that
we operate within our tax risk appetite.
The judgements underpinning the provision for uncertain tax positions
were scrutinised by the Committee and considered to be prudent,
appropriate and in line with the requirements of IFRIC 23,
Uncertainty over
Income Tax Treatments
.
The Committee reviewed the tax rates to be applied during the year
compared to the guidance previously disclosed.
Audit and Risk Committee report
continued
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Governance
3. INTERNAL AUDIT
The Internal Audit function provides independent, objective assurance to the Board, the Committee and senior management
on the adequacy and effectiveness of the Group’s risk management, governance, and internal control framework and processes.
The Committee oversees the work of the Internal Audit team as follows:
Focus areas
Decisions and actions taken by the Committee
Annual audit plan and
resources
Monitored progress in delivery of the approved 2024 audit plan and approved amendments
to the plan to reflect emerging risks and changes in priorities.
Reviewed and challenged the 2025 audit plan, which includes risk-based reviews of financial,
operational, strategic and governance risks, reviews of emerging risks and business change
activity, together with assurance over risk management activities. The Committee also
considered the adequacy and capabilities of the internal audit resource and budget to enable
effective delivery of the audit plan.
Audit conclusions
Reviewed the results of the audits conducted (including management’s response to the audit
findings and recommendations) and considered emerging themes of concern. Actions arising
from audits rated with more significant weaknesses were closely monitored, with responsible
management invited to present their response to the audit finding and action plans directly to
the Committee where appropriate, thereby emphasising the need for considered, timely and
deliverable responses. The Committee was pleased to note the increased focus by management
to ensure closure of audit actions in a timely manner.
Effectiveness of the internal
audit function
A formal assessment was undertaken by the Committee, including obtaining direct feedback
from CELT members and other relevant management.
Both management and the Committee concluded that the internal audit function continued
to be highly effective and provided robust, challenging and quality audits.
4. EXTERNAL AUDIT
The Committee is responsible for overseeing the relationship with the external auditor, the audit process and, most importantly,
the effectiveness and quality of the audit. The following table summarises the steps taken by the Committee in overseeing the
effectiveness of the 2024 audit and its quality.
Significant matters for review
Decisions and actions taken by the Committee
The annual audit plan and
strategy including the scope
of the audit, changes in
approach and methodology,
emerging industry and
Group specific risks.
Reviewed and challenged the strategy, particularly in respect of the risk in specific markets,
leading to an agreed plan (see below).
The Committee noted the increased reliance on the financial controls enabled by the further
transition of financial accounting processes to GBS for the US and GEM markets.
Audit materiality level,
including Group materiality
and component materiality.
Reviewed and agreed the methodology for calculating the materiality, which was consistent
with 2023.
Audit fee and terms
of engagement.
Approved the audit fee and terms of engagement, ensuring no impact on scope of audit
or quality of resource engaged due to the agreed fee level.
The Committee also approved the engagement of Deloitte to provide continued limited
assurance on ESG data in 2024.
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Financial statements
Additional information
Overview
Strategic report
Significant matters for review
Decisions and actions taken by the Committee
Audit scope and
risk assessment.
The Committee considered the impact of the revised auditing standard for the audit of Group
financial statements (ISA 600R), which impacted the audit scope in 2024 and focused on a
risk-based approach for each significant account, compared to the previous approach which
focused on individually significant entities, which aligned to the Group strategy. The Committee
noted that this approach, combined with the increased scope of GBS in 2024, enabled Deloitte
to apply its global shared service centre audit approach, resulting in an increase in the scope
of audit testing performed by the Deloitte team co-located with GBS in Lisbon, rather than
in-market. The Committee reviewed the risk assessment performed by Deloitte and the
proposed audit scope, and considered it to be appropriate and aligned to the key developments
in the Group’s business.
Audit findings, significant
issues and other accounting
judgements.
Discussed with Deloitte and management throughout the year, and particularly during the
year-end audit.
Deloitte’s independence,
objectivity and quality
control procedures.
Independence and objectivity confirmed and quality control procedures reviewed (see below).
judgements and estimates; reliably
interpreted evidence provided by
management; involved relevant
specialists; and used external sources
to support their conclusions where
appropriate. Based on the Committee’s
conclusion, the Committee recommended
to the Board that Deloitte be proposed for
reappointment by shareholders at the
AGM to be held on 22 May 2025 in respect
of the 2025 financial year.
Audit independence
The Committee has responsibility for
monitoring auditor independence and
objectivity. The Committee enforces the
Group policy on the provision of non-audit
services, aligned with the FRC’s Ethical
Standard, which requires non-audit
engagements performed by the external
auditor to be approved by the Committee.
Permissible services are subject to a fee
cap of 10% of average audit fees billed
to the Company by the auditor in the past
three financial years. The Group was
compliant with the policy in 2024, when
non-audit fees (which were not significant
in quantum) principally related to the
interim review of the Group’s half-year
unaudited financial statements and to
the limited assurance on the ESG metrics.
A summary of fees paid to the external
auditor is set out in Note 3.3 to the
Consolidated Financial Statements.
Audit quality and effectiveness
The Committee monitors the
effectiveness of the external audit
continuously throughout the year,
with a formal assessment undertaken
in February and a post audit completion
debrief taking place in May. A targeted
group of Convatec financial management,
with regular contact with the external
auditor, was asked to participate, which
assisted the Committee with its own
consideration of the quality of the audit
team and involvement by the lead audit
partner, the adequacy of audit planning,
the timely and robust execution of the
audit, the quality of communications with
the Committee, and auditor independence
and objectivity. The Committee also
reviewed the FRC’s most recent Audit
Quality Review conclusions relating to
Deloitte as a firm and any specific findings
that may relate to Convatec. The findings
from the evaluation and agreed actions
were reviewed and approved by the
Committee in February 2025.
The Committee’s review concluded that
the 2024 audit was highly effective, and
demonstrated that the external auditor
has: a good understanding of the
business; continued to provide the
Committee with strong opinions, views
and insights; provided clear evidence of
robust and objective challenge of
management; exercised appropriate
scepticism in relation to key audit
In addition, the Committee’s review
of the independence of the external
auditor included:
–
Confirmation to the Directors
from Deloitte that they remained
independent and objective within
the context of applicable
professional standards
–
Monitoring the tenure and rotation
of the lead and engagement partners.
Claire Faulkner rotated into the role
of lead partner in 2021 and she will
continue in this position for 2025.
David Holtam assumed the role
of engagement partner in 2023
and the limited assurance of ESG
–
Monitoring the tenure and rotation
of other key personnel
–
Observing the relationship and
tone of communication between
management and the auditor
–
Deloitte reconsidering and
reconfirming their audit
independence under 2019 Ethical
Standard for Auditors, given Margaret
Ewing’s situation as both a former
partner of Deloitte LLP and chair
of this Committee, with Deloitte and
the Committee (excluding Margaret)
concluding that this relationship
does not affect the external
auditor’s independence
The Committee concluded that Deloitte
remained appropriately independent
in the role of external auditor.
Audit and Risk Committee report
continued
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Governance
Committee members and key
management and visiting our
manufacturing site in Deeside, UK.
Proposals were submitted to the Selection
Panel (which consisted of all members of
the Committee and two key members of
finance management). These were judged
against a number of key selection criteria
identified in advance of the process
including strength and experience of
proposed team, audit quality, knowledge
and understanding of the business and
industry, audit approach and use of
technology for financial and non-financial
data and audit delivery and execution.
A final short list of two candidates was
put forward to the final stage, where
final presentations were made to the
Committee. After a robust process, and
considerable discussion, the Committee
recommended to the Board that EY be
appointed as the Group’s auditors,
effective for the 2026 financial year audit.
The Board approved the appointment at
its meeting in June. A detailed transition
plan will be developed by EY with Group
financial management and Deloitte and
will commence implementation during
the latter stages of 2025.
External auditor appointment
and engagement tender
At the AGM on 16 May 2024, shareholders
approved the reappointment of Deloitte
as the Group’s external auditor. Deloitte
has been the Group’s external auditor
since the Company’s Listing in
October 2016 and prior to this were
the Company’s external auditor for the
period 2008 to 2016 whilst the Company
was in private equity ownership. For
the purposes of complying with the
requirements of The Statutory Audit
Services for Large Companies Market
Investigation (Mandatory Use of
Competitive Tender Processes and
Audit Responsibilities) Order 2014 (2014
Order), Deloitte’s ‘qualifying’ tenure as
the Group’s external auditor commenced
in October 2016.
During 2024, the Committee undertook
a formal competitive tender (not
mandatory rotation), in line with the FRC’s
Minimum Standard for audit committees,
with the resulting appointment effective
for the 2026 financial year audit. Six firms
were approached during 2023, including
all members of the ‘Big Four’ and two
mid-tier firms, to gauge their willingness
to participate in the audit tender in
2024. Three firms declined to participate,
citing resourcing issues and limited
engagement and knowledge of the Group.
The tender commenced with the
Committee meeting and approving
the three participating firms’ proposed
lead audit partners. The detailed
process commenced in April 2024,
with the participating firms being given
access to information stored in a data
room created by management (the
content of which had been agreed
with the Committee), meeting with
The Group is monitoring non-audit
services currently provided by EY
to safeguard their independence
ahead of their appointment as
Group auditor in 2026.
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Financial statements
Additional information
Overview
Strategic report
Directors’ Remuneration report
A word from
the Chair
“As Convatec has successfully pivoted to sustainable growth and demonstrates
continued delivery, the retention of key talent is ever more critical to ensure we
continue to drive the business forward and deliver future growth.”
Brian May
Chair of the Remuneration
Committee
Committee membership, meetings and attendance³ in 2024
Director
Member since
Attended
2
Brian May
1
March 2020
5/5
Constantin Coussios
January 2022
3/5
Kim Lody
February 2022
5/5
Sharon O’Keefe
March 2022
5/5
1. Mr May was appointed Chair of the Committee on 1 September 2020.
2. Mr Coussios was unable to attend meetings in January and December 2024 due to competing
commitments. He provided feedback in advance to the Committee Chair on agenda items
and papers.
3.
The Deputy Company Secretary attends meetings as the Secretary to the Committee. The Chair,
CEO, CFO, General Counsel and Company Secretary, Chief People Officer and VP Head of Global Total
Rewards & Recognition attend meetings of the Committee by invitation, as does the Committee’s
appointed adviser. Executives are absent when their own remuneration is under consideration.
COMMITTEE INTRODUCTION AND OVERVIEW
Activity highlights
–
Ensured remuneration arrangements
for the Executive Directors and CELT
members in 2024 supported Convatec’s
successful pivot to sustainable and
profitable growth.
–
Reviewed competitiveness of reward for
Executive Directors, to understand our
ability to retain key talent and attract
successors when required.
–
Developed proposals for changes to
our Remuneration Policy and
undertook extensive shareholder
consultation activity to share our insight
and seek input from key investors.
–
Ensure that the way we operate as
a Committee reflects best practice
guidelines, including review of our terms
of reference and committee evaluation
to support continuous improvement.
2025 priorities
–
Work with shareholders to ensure
understanding of our proposed
policy changes and the wider context
to our proposals.
–
Ensure that targets for variable reward
remain stretching in nature, and that
we continue to embed a pay for
performance philosophy aligning
leaders with the wider shareholder
experience.
–
Continue to actively engage key
stakeholders on remuneration
matters, as appropriate.
Key areas of responsibility
–
Designs, recommends and implements
Convatec’s Remuneration Policy, packages
for the Executive Directors and other CELT
members, and sets the fee for the Non-
Executive Chair.
–
Ensures appropriate alignment of executive
remuneration with the remuneration
approach across the wider organisation.
In this section you will find
Letter from the Chair of the Remuneration
Committee
Update from the Committee Chair on the
activities and decisions made in 2024 on
pages 115 to 117.
Our remuneration at a glance:
2024 Reward Outcomes and summary of the
changes we are proposing to our Policy for
approval by Shareholders at the forthcoming
AGM on pages 118 and 119.
Our proposed new Policy:
Full details behind our Policy changes,
including market insight and the outcomes
from our extensive shareholder consultation
exercise on pages 120 to 134.
Our Annual Report on Remuneration
How we implemented our Remuneration
Policy during 2024 and how we intend to
apply it in 2025, pages 135 to 144. This includes
insight on the wider workforce including our
CEO pay ratio.
Meetings held
5
(2023: 4)
Attendance
90%
(2023: 94%)
Remuneration Principles
Our driving principles behind
Remuneration remain unchanged:
1
Incentivise sustained strong
financial performance
2
Align rewards with the delivery
of the Group’s strategy and
long-term interests of
shareholders
3
Help attract, motivate and retain
the best talent to deliver the
Group’s strategy and create
long-term shareholder value
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LETTER FROM THE CHAIR
OF THE REMUNERATION
COMMITTEE
Dear Shareholder
On behalf of the Board, I am pleased to
present the report of the Remuneration
Committee for the year ended
31 December 2024.
Introduction
This has been a strong year for the
business, illustrating that Convatec has
successfully been through a turnaround
phase, and how it is well placed for future
growth and delivery of long-term returns
for shareholders. We have accelerated
organic revenue growth and delivered
double-digit adjusted EPS and free cash
flow to equity growth. The evolution of
Convatec’s FISBE strategy has delivered
material operating margin progress,
particularly during H2 of 2024. We
can clearly see the FISBE 2.0 strategy
delivering simplification across the
business, driving productivity
improvements and flow through to
bottom-line financial performance.
Most excitingly, we are well placed to
draw on structural growth opportunities,
supported by a strong innovation pipeline
and investment in our future. We have
also shown the ability to overcome
challenges that we naturally face
from day-to-day within our markets
and operations.
This report contains full disclosures
around the way we have implemented
our Remuneration Policy during 2024,
including the determination of reward
outcomes against the backdrop of strong
business performance and strategic
delivery.
The Board is pleased with the continued
strategic progress of the Group and
financial delivery for the year. Against our
key financial metrics we have seen strong
results. Organic revenue growth was 7.7%,
adjusting operating profit growth was
16.4% on a constant currency basis, and
free cash flow to equity performance was
well in excess of the stretch target set for
the year.
We continue to demonstrate the progress
the business is making against the
medium-term goals we have stated, the
strength of our innovative new product
pipeline and the pivot to higher levels of
organic revenue growth and profitability.
The resultant performance means that
overall formulaic outcomes under the
Annual Bonus were 98.7% of maximum
for the CEO and 98.7% of maximum for
the CFO. Additionally, PSP awards granted
in March 2022 will vest at 70.3% of
maximum. The Committee was satisfied
that the formulaic outcomes under the
incentive plans were a fair reflection of
the overall strong performance, against
the context of the wider group
achievement and the shareholder
experience, and did not use any discretion
to alter these values. A full breakdown
of the stretching targets we set, and the
associated final outcomes is provided
within this disclosure.
As required under the UK Corporate
Governance Code, we have
comprehensive provisions covering
clawback and malus in connection with
the operation of our incentive plans.
We can confirm that these provisions
were not utilised during 2024, and we
will continue to disclose the application
of any clawback or malus in line with
the expectations of the Code.
As a Committee, a major focus is to ensure
that we can attract and retain key talent
to drive the business forward and build
on the momentum we now see in place.
We discussed the extent to which our
existing Remuneration Policy would
support this and concluded that
changes were required to ensure
ongoing competitiveness at a key
time for the organisation. Therefore,
we have made the decision to revert
to shareholders a year ahead of our
standard cycle with a revised Policy.
We have provided full details of our
proposed Remuneration Policy that
we will be asking shareholders to support
at the forthcoming AGM, and the way we
propose to implement reward for 2025.
This disclosure outlines the factors and
insight we considered as a Committee
which drove our conclusion that a policy
change was necessary, as well as sharing
granular detail of what we heard through
the extensive shareholder consultation
that we have undertaken during the
year. I would like to thank all those
shareholders and proxy voting agencies
who gave their time to support our
consultation and provided comprehensive
feedback and contribution to our thinking
as a Committee. This was invaluable, and
the evolution of our proposed Policy
through the consultation process shows
the benefits of active engagement with
and listening to our investors, as well
as shareholder proxy agencies to fully
understand their perspectives.
COMMITTEE FOCUS AND
ACTIVITIES DURING 2024
Policy development
–
Considered effectiveness of
existing Policy and read-across
to identified talent pools
–
Developed revised Policy and
undertook extensive
consultation exercise with
shareholders
Remuneration packages
–
Approved Executive Director and
CELT salaries for 2024
–
Approved the 2023 bonus
outcomes for Executive
Directors and CELT
–
Approved 2024 LTIP award levels
for Executive Directors and CELT
Setting performance
targets
–
Reviewed and set financial
targets for 2024 annual bonus
and 2024 LTIP awards, in the
context of multiple internal and
external reference points for
performance over the
relevant period
Equity incentives
–
Confirmed outcome of PSP
awards linked to three-year
performance period ending
31 December 2023
–
Reviewed developments in the
executive remuneration
landscape
Workforce remuneration
–
Received updates on workforce
remuneration policies
and practices
–
Received updates on our gender
pay gap position within the UK
–
Reviewed global trends in pay
transparency and how this may
impact Convatec
Effectiveness
–
Undertook an annual
performance review of the
Committee
–
Worked with Willis Towers
Watson to analyse AGM trends
and conduct comprehensive
market benchmarking to make
sure we are aligned
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Financial statements
Additional information
Overview
Strategic report
Directors’ Remuneration report
continued
Goals of proposed changes
We identified three goals we wanted
to achieve through our review:
a)
Driving retention of leadership
.
Our CEO, Karim Bitar, a US national
based in the UK with multiple ties
to the US, has been instrumental
in the creation and leadership of
Convatec’s FISBE strategy, designed
to achieve our strategic intent of
pivoting to sustainable and
profitable growth. Business
performance demonstrates the
extent of business transformation
and flow-through to financial
delivery. This strategy is delivering,
with robust organic growth and
commitment to further margin
improvement in line with our
medium-term stated commitments.
As we continue to accelerate our
growth and deliver the next stage
of our strategy (FISBE 2.0) it is vital
that we can retain the leadership
of Karim Bitar and Jonny Mason,
our CFO, to drive the delivery of the
business and progress towards our
medium term stated financial goals.
We are very well positioned to
benefit from future growth
opportunities, with an established
leadership team and the strongest
innovation pipeline in Convatec’s
history, all underpinned by our
forever caring promise.
We wish to incentivise and retain
each Executive Director to drive
the business forward.
b)
Enabling effective succession
(when needed).
Convatec is a global
organisation competing across the
world, but with a heavy focus within
North America. Many of our leaders
are based there or are US nationals,
it is the source of 57% of our revenue
and is the leading centre for the
MedTech industry. It is important
that we take steps to plan for future
succession whenever this may be
needed. Routine CEO succession
activity in 2023 (carried out
independently on behalf of the Board)
highlighted the extent of potential
candidates who are either US citizens
and/or currently working in the US,
with a match of skills to the needs
of Convatec. We therefore see it
as imperative that we have a
Remuneration Policy that is capable of
attracting candidates from across the
world, including those with significant
ties to the US, in the event that we
need to secure future successors.
c)
Alignment of reward and
performance.
We are committed to
driving a strong alignment between
reward and performance, ensuring
that leaders are incentivised for
delivery of successful business
outcomes, and that they are
aligned to the wider shareholder
experience through material
levels of shareholding.
We also wanted to consider previous
changes we had made in senior level
reward in the business below the
Executive Directors in response to
prevailing market conditions, and
ensure that we had an effective cascade
of reward through the business.
Approach to Policy Review
and Findings
We engaged with our top-20
shareholders, and held meetings with
the vast majority, covering in excess
of 50% of our issued share capital.
To support conversations, Willis
Towers Watson (WTW), our
remuneration consultant, helped us
develop an effective comparator group
of 20 organisations, operating within
our sector and of similar revenue or
market capitalisation levels with global
representation. The comparator group
was validated for applicability by WTW
through considering a talent mapping
exercise of companies where Convatec
had attracted senior talent from, or lost
talent to, over the past three years, and
also the findings of the CEO succession
activity from 2023. In total, half of these
companies were based in the US, and
the full breakdown of the composite
companies within the Group and our
associated methodology is provided
in more detail on page 121.
This insight showed a sizeable gap in
expected reward levels between our
current reward structure and the median
of this global comparator group for CEO
reward, placing Convatec towards the
lower quartile of the comparator
companies, and significantly below the
lower quartile of the US only companies
within the comparator group. This was
primarily reflected through the quantum
available through long-term incentives,
but also through incentive design, where
many companies were using multiple
forms of long-term incentive (typically
Restricted Stock and Performance
Shares) compared to the existing
Convatec design of Performance
Shares only.
Our conclusion was that we needed
to review our existing remuneration
policy in light of our stated goals and
analysis of the market insight from these
comparator organisations. We discussed
a straw-model for change with
shareholders, designed to reflect the
global insight we had reviewed and to
seek input from our key investors. We
used these conversations to discuss and
gain perspectives from our shareholder
base, and to use this to develop proposed
changes to our Policy that we are now
seeking approval for at our AGM. Later
in this report we have provided full
detail on the comparator group, changes
we discussed with shareholders, and
the range of feedback we heard in
response, including how we have used
this feedback to shape our revised
policy proposals.
Summary of Proposed
Policy Changes
Shareholders were appreciative and
generally understanding of the insight
we shared into the prevailing market
reward practices within our sector, and
the proposed use of Performance Shares
and Restricted Shares within the
long-term incentive design. We heard
some specific comments around the
structure of restricted stock awards
and overall quantum levels that we
have reflected into our final proposal.
In summary, our proposed changes are:
–
Quantum:
Increase in amount of
long-term incentives permissible
under our Policy, to address gaps
in competitiveness against a global
comparator group, and to ensure
future ability to attract potential
candidates into Convatec from a global
talent pool.
–
Structure:
Evolution of the structure
of our long-term incentive awards
through a combination of Performance
Shares (PSP) linked to stretching
Convatec performance targets, and
Restricted Stock Units (RSU) linked
to continued employment with the
business. This more closely aligns
with market norms we have seen
across the companies within our sector
and our comparator group. We noted
the retention impact that RSU awards
can have, at a time when maintaining
continuity of leadership is of key
importance for us as a business. Our
assessment is that a structure with
delivery of long-term incentives
through PSP alone would be a barrier
to effective talent retention or future
recruitment from outside if required.
–
Strengthening Alignment:
Increase
in level of shareholding requirement
under our Remuneration Policy for
our CEO to 500% of salary, reflecting
typical practice seen in the US and to
drive further alignment with value
creation for owners in the business.
The requirement for the CFO will
remain at 300% of salary, which has
been identified as an already
significant requirement against
market comparators.
We also considered the resulting
alignment that would be created with
the next layers of leadership in the
business, where long-term incentives
are already delivered through a
combination of PSP and RSU awards.
This was a change we implemented in
2022 to reflect typical market practice
within the MedTech sector and drive
competitiveness.
Our conclusion is that the introduction of
RSU awards within our long-term incentive
structure is a necessary change, reflective
of our own experience in competing for
global talent within our industry and to
support our desire to drive retention of
existing leaders, but also to equip us to
successfully attract talent from outside
the organisation when needed.
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Governance
We remain committed to ensuring
that the majority of executive reward
continues to be linked with the
achievement of stretching performance
outcomes that drive shareholder value,
and for our leaders to have a material
shareholding in the business and
alignment to the shareholder experience.
How we would look to implement
these changes in 2025 and beyond
We will operate the annual bonus in
a consistent way to 2024, both in terms
of quantum and structure. This will
continue to include an element linked
to free cash flow to equity, which many
shareholders have indicated they
support as a key measure of our success.
The balance between each metric will be
unchanged, and full disclosure of the
respective targets set and associated
outcomes for each measure will be
provided in the disclosure next year.
For our long-term awards we will
continue to use PSP as our primary long
term incentive vehicle. We will continue
to determine vesting using a combination
of absolute financial delivery of Convatec
(using annualised growth in adjusted EPS
and organic revenue growth) and relative
TSR performance of Convatec against a
comparator group.
Subject to approval from shareholders
at the AGM, we will grant total long-term
incentive awards for the CEO of 525%,
comprising a PSP award of 425% of salary
and a RSU award of 100% of salary.
This compares to our existing approach
of a PSP award only of 300% of salary.
The PSP award for the CFO will remain
unchanged (at 250% of salary) and we
will introduce a RSU award of 75% of
salary. These awards will vest after three
years and then be subject to a further
two-year holding period. Full details
of the way we have determined these
changes in quantum are provided
within this report and has been subject
to extensive shareholder consultation.
We have agreed to make a change in the
TSR comparator assessment so that all
TSR vesting is determined by reference
to a Global Healthcare Index, as opposed
to the previous split between a global
healthcare index and a subset of the
FTSE. This change was supported by the
Committee having heard a desire from
a number of shareholders to reflect
both the global nature of Convatec and
the specific sector when considering
TSR achievement.
We have continued to set stretching
targets for our PSP awards. The range
for organic revenue growth is consistent
with the award made in March 2024
(4% to 7%). For our earnings metric, we
will move from an adjusted PBT metric to
use adjusted EPS, consistent with the way
we publish forward looking guidance to
investors. We have maintained the same
growth range as used for earnings in
2024 (6% to 14% per annum).
To support implementation of these
changes we will also look for shareholder
approval for a revised share plan,
to enable effective delivery of our
revised Policy.
Finally, the Committee decided to
increase the salary of the CEO, CFO
and the fee of the Chair by 2.9% from
1 April 2025, in line with the increases
provided to the general employee
population in the UK. The Committee
considered these increases to be
appropriate in the context of the
continued strong performance of the
Group. The pension allowance for the
CEO and CFO remains at 8.5% of salary,
which is aligned with the wider UK
workforce.
Concluding remarks
I hope that this Remuneration Report
provides you with the insight into the
way we have implemented our Policy
during 2024, and why we feel it is
important to now evolve our Policy
for the future. This is a critical time
for Convatec: the business has now
demonstrated the actions taken to
position itself for future success, and it
is vital that we have stability and quality
of leadership to see through the next
stage of the journey and implementation
of our FISBE 2.0 strategy. The business
is set up to deliver sustainable and
profitable growth, has a very strong
innovation pipeline, continues to
drive productivity and simplification
improvements, and is set to deliver
on medium-term operating margin
commitments. We remain confident
that the proposed Policy changes are
necessary and align executives and
shareholder interests in the context
of the global growing business that
Convatec now is.
On behalf of the Committee, I would
like to thank you for your support and
constructive input to our engagement
activity, and I hope that you will support
our proposals at the forthcoming AGM.
Brian May
Chair of the Remuneration Committee
25 February 2025
Convatec Group Plc Annual Report and Accounts 2024
117
Governance
Financial statements
Additional information
Overview
Strategic report
Directors’ Remuneration report
continued
2024 annual bonus outcomes
The charts below show how actual performance contributed to the bonus payouts for the Executive Directors for 2024:
Annual bonus: 197.3% of salary (£1,936,657); 98.7% of maximum bonus
opportunity. LTIP: Vesting of 70.3% of maximum (£1,991,124).
Annual bonus: 197.3% of salary (£1,051,609); 98.7% of maximum
bonus opportunity. LTIP: Vesting of 70.3% of maximum (£1,109,632).
Free cash flow to equity (15% weighting)
Adjusted Operating Profit¹ (40% weighting)
Target
Threshold
Actual
Maximum
$457m
$471m
$500m
$499m
Target
Threshold
Actual
Maximum
$213m
$237m
$260m
$302m
Performance Outcome: 98.5% of maximum for this element.
1.
Adjusted operating profit is calculated on a constant currency
basis using a budget rate.
Target = Assumes Fixed remuneration plus target annual bonus (50% of
maximum) and 60% vesting of LTIP awards
Target = Assumes Fixed remuneration plus target annual bonus
(50% of maximum) and 60% vesting of LTIP awards
Performance Outcome: 100% of maximum for this element.
Personal Strategic Objectives (inc. ESG)
(20% weighting)
Jonny Mason
Karim Bitar
96.25% of max
96.25% of max
Organic Revenue Growth¹ (25% weighting)
Performance Outcome: 70.5% of maximum for this element.
Three-year Compound Annualised Growth in
Adjusted PBT (75% weighting)
Maximum
Threshold
Actual
8.0%
15.0%
12.2%
Target
Threshold
Actual
Maximum
4%
5.5% growth
7% growth
7.5% growth
Performance Outcome: 100% of maximum for this element.
1. Organic revenue growth is calculated on a constant currency
basis using a budget rate.
Relative TSR vs FTSE350 (25% weighting)
Stretch
(upper quartile)
Threshold
(median)
Actual vesting
(67th percentile)
Maximum
(upper decile)
25.0%
75.0%
90.0%
69.7%
Performance Outcome: 96.25% of maximum for this element.
Personal strategic objectives were set for each Executive Director
in relation to the following areas of strategic focus for 2024:
Customer People, Product/service improvement and Business
performance. Details of the objectives set for the Executive
Directors, and performance against these, are on page 136.
2022-2024 LTIP outcomes
The charts below show how actual performance contributed to the LTIP awards vesting for the Executive Director for the three-year
period ended 31 December 2024. Overall, the LTIP vesting outcome was 70.3% of maximum.
Chief Executive Officer Karim Bitar
(£’000)
Chief Financial Officer Jonny Mason
(£’000)
Maximum
Minimum
On-target
£5,926,240
£5,058,537
£1,130,755
£3,811,730
Single Figure 2024
Fixed Remuneration
Annual bonus
LTIP
Single Figure 2024
Maximum
Minimum
On-target
£3,233,559
£2,750,376
£589,135
£2,069,189
Fixed Remuneration
Annual bonus
LTIP
REMUNERATION AT A GLANCE – 2024
This section provides a summary of the way we have implemented the Policy in 2024.
2024 remuneration: outcomes vs performance scenarios
Performance Outcome: 69.7% of maximum for this element.
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This section provides a summary of proposed implementation relating to 2025. We will be reverting to shareholders one year
ahead of the typical three-year cycle with a proposed new Remuneration Policy, and the table below highlights changes we plan
to incorporate subject to endorsement from Shareholders. Full details on these Policy changes are outlined within this disclosure,
including the extensive shareholder consultation process that was undertaken.
Our approach to implementing our Remuneration Policy in 2025
Rationale
Link to strategy
Base salary
Reviewed
annually
Policy:
Benchmarked periodically against comparable roles at international
MedTech peers, as well as UK-listed companies of similar size and
complexity. In deciding base salary levels, the Committee considers personal
performance including the individual’s contribution to the achievement
of the Group’s strategic objectives. The Committee will also consider
employment conditions and salary levels across the Group, and prevailing
market conditions in the geographies in which the Group competes for
talent. Base salaries are reviewed annually with any increases normally
aligned with those of the wider workforce, and effective from 1 April.
Implementation from April 2025:
Karim Bitar: £1,010,000 (+2.9%);
Jonny Mason: £548,500 (+2.9%).
Base salaries are aligned
with the broader market
trends and UK workforce
increase of 2.9%.
Innovate
Build
Pension and
benefits
Policy:
Executives may receive a contribution to a personal pension plan,
a cash allowance in lieu or a combination thereof. Other benefits normally
include car allowance, medical insurance and life insurance, and are set
at a level considered appropriate taking into account market practice and
consistent with the wider workforce.
Implementation in 2025:
No change to the range of benefits provided.
Karim Bitar and Jonny Mason will continue to receive a pension benefit
of 8.5%, aligned to that of the wider UK workforce.
Pension levels for all
Executive Directors are
aligned to the wider
workforce rate, in line
with prior commitment
to investors and market
expectations.
Annual bonus
Policy:
Maximum opportunity: 200% of salary (target: 50% of maximum).
Performance measures, targets and weightings are set at the start of each
year. Financial performance will normally be weighted 80% of the overall
opportunity, with the remainder (up to 20%) linked to the achievement of
personal strategic objectives. A minimum of 5% of the bonus opportunity
will be based on quantifiable ESG metrics. One-third of any bonus earned
is deferred into shares normally for three years. Malus and clawback
provisions apply.
Implementation in 2025:
Maximum opportunity of 200% of salary for
Karim Bitar and Jonny Mason. The annual bonus will be based on: adjusted
operating profit (weighted 40%), organic revenue growth (excluding ATT)
(25%), free cash flow to equity (15%) and personal strategic objectives
(20%), of which 5% relate to quantifiable ESG metrics. Adjusted operating
profit and organic revenue are calculated on a constant currency basis
using a budget rate.
For 2025, we have set a target
for revenue growth excluding
ATT, and these revenues will
be removed from the base
year and 2025 outcomes
when assessing performance.
We have done this
recognising the current
uncertainty around LCDs
in the US. This is only being
applied to the revenue
metric, and full disclosure
of targets and resultant
performance will be made
in the next Remuneration
Report.
Focus
Innovate
Simplify
Build
Execute
Long-Term
Incentive Plan
Policy:
Subject to shareholder approval at the 2025 AGM, the maximum
opportunity permissible under the LTIP will be 525% for the CEO and 325%
for the CFO. This will be delivered through a combination of Performance
Shares and Restricted Shares.
Implementation in 2025:
Performance Shares:
Award opportunity of 425% of salary for Karim Bitar
and 250% for Jonny Mason. Awards will vest subject to adjusted Earnings
per share (EPS) growth (weighted 50%), organic revenue growth (weighted
at 25%), and TSR versus the S&P Global Healthcare Equipment & Services
Index (25%) over the three financial years to 31December 2027.
Restricted Shares:
Award opportunity of 100% of salary for Karim Bitar
and 75% of salary for Jonny Mason, vesting in March 2028.
Malus and clawback provisions will apply to all awards made under
the LTIP. A two-year post vesting holding period will also apply.
Full details of the performance targets set for these awards (where
applicable) and the timing and basis for when awards will be made
in 2025 is provided on page 127.
The Long-Term Incentive
plan continues to underscore
sustainable growth and
long-term value creation
and drive retention. The
performance conditions
(where applicable) and
reward structure are
designed to attract,
incentivise and retain
high-calibre talent from the
global healthcare sector.
Focus
Innovate
Simplify
Execute
Shareholding
requirement
Current Policy:
Executives are required to build up shareholdings of 400%
of salary for the CEO and 300% of salary for the CFO. These must be retained
whilst the Executive Directors remain on the Board. 50% of any net vested
share awards (after sales to meet tax liabilities) must be retained until the
minimum shareholding requirements are met.
Subject to shareholder approval of our amended Policy at the 2025 AGM,
the shareholding requirement for the CEO will increase to 500% of salary
and this will be used for future calculations, with no change for the CFO
(remaining at 300% of salary).
Implementation:
Our agreed approach includes ordinary shares held
outright, shares not subject to future company performance conditions
(on a net of tax basis) and vested shares under our PSP plan in a mandatory
holding period post vesting. At the end of 2024, Karim Bitar held shares
worth 774% of his year-end 2024 salary and Jonny Mason held shares worth
78%. See page 143 for more information.
Executive Directors are required to hold 100% of their in-situ shareholding
requirements for 12 months after cessation and50% for the next 12 months.
Our shareholding
requirement is designed to
demonstrate alignment with
shareholder interest and
fosters a culture of ownership
and long-term investment in
the Company’s success.
Focus
OUR REMUNERATION AT A GLANCE 2025
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Financial statements
Additional information
Overview
Strategic report
Directors’ Remuneration report
continued
OUR APPROACH TO POLICY REVIEW
Driving retention of
leadership at a critical
time for the business
Supporting retention of our
existing Executive Directors
to lead the next stage of our
strategy: FISBE 2.0
Ensuring ability
to attract future
leadership talent
Ensuring that a Remuneration
Policy would support a global
search for future leadership
talent, when needed
Ensuring alignment of
leaders with shareholder
experience
Driving alignment of Executives
through shareholding and
enabling effective cascade of
reward through the organisation
Karim Bitar joined Convatec in late 2019.
He is an American citizen with multiple ties
to the US and currently resides in the UK.
He was the architect of the FISBE strategy
as well as subsequently overseeing the
introduction and implementation, designed
to achieve our strategic intent of pivoting
to sustainable and profitable growth. This
FISBE strategy has under-pinned business
transformation and the financial
performance we have seen over the period.
This transformation is being recognised and
reflected in a significant improvement in
business performance and in the shareholder
experience. We have also seen progressive
dividend growth over this period. Our TSR
performance has significantly outperformed
market indices, including both FTSE and
Global Healthcare indices, since Karim Bitar’s
appointment as CEO, with growing
confidence within the investor community
in our Executive Directors, the sustainability
of our business model and opportunities to
drive continued growth.
Furthermore, Karim Bitar has been
instrumental in attracting and recruiting
quality leadership talent at CELT.
Our last full CEO succession planning review
took place in autumn 2023. This involved a
wide market mapping by an external leading
search agency, looking at identifying
potential CEO successors if one were
required, considering their commercial
background and acumen and assessed
cultural fit with our organisation.
Of a shortlist of potential successors for
the role identified we noted the following:
–
Around half were either working
for US listed organisations or
were currently based in the US
–
Two-thirds were operating as a CEO
within existing organisations,
most at a Group CEO level of
the respective organisation.
It is evident to us that this insight, coupled
with the clear importance of the US to
Convatec, but also the industry in which we
operate, mean that we should aspire to have
a Remuneration Policy capable of attracting
global talent into Convatec at all levels,
including Executive Director positions.
We firmly believe in the importance of
significant levels of alignment of senior
leaders to Company performance through
material levels of shareholding in the
business. We have high levels of share
ownership requirements in place now and
would consider increasing these further
such that any executive leader is required
to have significant financial alignment while
in role, and beyond through the application
of post-cessation shareholding guidelines.
In 2022, we made reward changes at the
levels below our Executive Directors in
response to conditions prevailing in the
MedTech sector to ensure that we were able
to successfully attract and retain leadership
talent. These changes included investment
in overall opportunity levels within variable
reward, coupled with the use of multiple
forms of long-term incentives, including
both Performance Shares (shares vesting
linked to achievement against Company
performance targets) and Restricted Stock
(shares vesting contingent on future
employment only). These changes have
enabled us to evolve our leadership team,
with high representation across CELT with
close ties to the US.
Convatec is a global organisation, actively
selling goods and services in almost 90
countries. We see growth opportunities in
all our markets, with North America a highly
significant region for the business, reflective
in our customer and employee base, and as
a key centre for our industry.
57%
of our 2024 revenue was from
the region, and it is at the centre
of our sector.
It is a key location for product innovation
and development, and our business
relationships and ability to successfully
operate across the region are key levers
to future success. A considerable number
of comparator companies are either listed
in the US or have key headquarters or
leadership centres based there.
Half of our CELT members have joined
from US organisations in the past three
years. Including the next level below, around
40% of our senior leadership are currently
based in the US and the US is a key market
for talent.
67%
of the current CELT members
(8 out of 12) are either US nationals,
US based, or have extensive
experience working in the US.
Below the Executive Director level we
have needed to make changes to the way
we deliver reward to attract this talent into
the organisation and drive competitiveness.
This has included both quantum of variable
reward and the way this is structured,
introducing RSU awards in addition to PSP,
which now more closely resembles market
practice seen in the US.
CEO succession planning activities have
highlighted potential external candidates
that we could consider if we needed to
source new leadership.
CONVATEC IS A GLOBAL ORGANISATION
These facts led us to the
conclusion that we need to be able
to consider a global talent market
when considering remuneration,
which includes a reward design
that can be viewed as competitive
to someone with significant ties
to the US, whether through
citizenship, residency or working
for a US listed organisation.
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Defining a suitable Comparator Group
Against this backdrop we wanted to understand the competitiveness of reward within Convatec for our Executive Directors
compared to other companies. We constructed a comparator group using the following principles:
–
Global MedTech businesses using size criteria (considering businesses of ¼ through to 3x scale of Convatec on either Revenue
or Market Capitalisation)
–
Removal of service-related organisations (e.g. solely laboratory testing, dialysis, surgery)
–
Validated against companies from a talent flow overlay (an identification of organisations where Convatec has either lost
or gained senior talent)
–
Includes overlay of potential CEO candidates identified through recent routine succession planning activity (Autumn 2023)
–
Excludes private organisations where market data is not readily available/disclosable
This resulted in a comparator group of 20 companies, of which half were based in the US and half in Europe. From a size
perspective, Convatec was around the middle of this group (depending on the respective financial metric used).
The resultant Comparator Group (sorted by descending revenue):
Company Name
Country
Fresenius SE & Co. KGaA
Germany
Baxter International Inc.
United States
Edwards Lifesciences Corporation
United States
Smith & Nephew plc
United Kingdom
STERIS plc
United States
Sonova Holding AG
Switzerland
Coloplast A/S
Denmark
Demant A/S
Denmark
Getinge AB (publ)
Sweden
Teleflex Incorporated
United States
GN Store Nord A/S
Denmark
ICU Medical, Inc.
United States
Integer Holdings Corporation
United States
Integra LifeSciences Holdings Corp
United States
Haemonetics Corporation
United States
Merit Medical Systems inc
United States
CONMED Corporation
United States
LivaNova PLC
United Kingdom
Ambu A/S
Denmark
Medacta Group SA
Switzerland
Convatec
United Kingdom
Convatec Placement (Percentile)
41st (Revenue) 54th (Market capitalisation)
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Additional information
Overview
Strategic report
Market insight – CEO target reward
Through analysis of reward data for each of these companies (provided to us by our external adviser – WTW) we were able
to establish the overall competitiveness of the reward structure within Convatec, highlighting potential differences in quantum
and underlying reward structure.
Quantum
Global MedTech Group
US global MedTech
Comparator details
MedTech organisations that range between
¼ and 3x Convatec’s scale based on market
capitalisation or revenue. Convatec is
around median of this group based on
financial metrics.
Subset of the Global Group based on US
only.
20
companies
10
companies
Benchmark target
Remuneration level*
(£k)
Lower quartile
£2,754k
Lower quartile
£5,878k
Median
£5,699k
Median
£6,680k
Upper quartile
£6,680k
Upper quartile
£8,564k
Current Convatec CEO
Existing Convatec Target
Remuneration
£3,730k
Convatec CEO vs
benchmark
Between Lower Quartile and Median (closer
to Lower Quartile)
Significantly below Lower Quartile
Gap to benchmark
median
£(1,969)k
£(2,950)k
Market insight –
Structure of
long-term awards
The use of multiple long-term incentives was common across the identified comparator group,
with 13 of the companies offering multiple forms of long-term incentives within their reward
structure, including all of the US constituents. Half of the comparator group were using restricted
shares within their long-term incentive design, all in combination with another form of incentive
(typically performance shares and occasionally market priced share options).
Market insight –
Annual Bonus
Our existing target award level of 100% of base was comparable with the wider comparator group.
(Median target bonus across the Global comparator group = 108% of salary).
Market insight –
Base Pay
Existing Convatec CEO base salary of £981k is competitive compared to the Global median
of £846k.
Market insight –
Shareholding
Requirements
Current Convatec requirement for CEO is 400% of base salary. Market practice varies globally from
nil to in excess of 6x salary. US requirements are typically higher than those seen across Europe.
*
Target Remuneration defined as value of base salary, target bonus and expected value of long-term incentives.
Notes to above table
–
Target remuneration is defined as base salary, target annual bonus and expected value of long-term incentives.
–
Values shown in GBP using average exchange rates for the last three months of 2024 where applicable.
–
Data has been derived using a consistent methodology provided by WTW, using publicly disclosed information. This was done
to enable effective comparison between organisations, while recognising that the underlying reward structures in place may
differ between individual companies.
–
Performance shares (where used) are valued at 60% of the face value of grant (unless otherwise stated by the organisation) to
reflect the associated performance conditions in place. Restricted share awards are based on the face value of awards, and stock
options calculated using a binomial lattice model, adjusted for any applicable performance vesting conditions where used.
–
Comparator data was not available for one organisation (due to an Interim CEO appointment that was in place).
Directors’ Remuneration report
continued
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Governance
Competitiveness of other reward elements
Our CEO base pay level was confirmed as competitive against the comparator group, ahead of market median but below upper
quartile levels. Additionally, annual target incentives in place at Convatec (100% of base) were positioned close to the median level
of 108% of base. Shareholding requirements varied considerably between the US and Europe: our current holding of 4x base for
the CEO was high against European peers (some of which had no formal requirement in place) compared to typical requirements
of 4x to 6x base in the US.
Conclusion:
Our conclusion was that while there were different approaches being utilised across the companies analysed,
our overall market position was less competitive than we would like, coupled with some structural differences that may be a
barrier to effective future succession. In particular, we noted the widespread use of multiple long-term incentives across the US
organisations, and concluded that our existing approach may make attraction of future candidates with strong linkages to the US
difficult. We therefore agreed to engage with shareholders to discuss changes to our Policy designed to address our stated goals
with a focus on:
Addressing quantum
Ensure that through changes in
the quantum we would be better
positioned within the comparator
group, ideally with target levels
of reward closer to the median
level of the comparator group
Reviewing structure of
long-term incentives
Recognise that multiple forms of
long-term incentive were typical
in our industry, and that the use
of restricted stock was widespread,
and would support our desire to
retain Karim Bitar and Jonny Mason
(or attract future talent if required)
Driving continued alignment
through shareholding
Further increase shareholding
requirements for our CEO to
levels above the 400% of base
level to ensure ongoing high
levels of alignment through
material share ownership
Effective shareholder engagement
We engaged with 13 shareholders (covering 52% of our issued share capital) and held discussions with shareholder proxy voting
agencies to discuss our proposals.
Feedback was largely consistent, but on some topics we heard a spectrum of views, in some cases diametrically opposite
perspectives on the same point. It was evident that we would not be able to evolve our initial thinking into a single solution that
would address our goals and align fully with the individual expectations of every shareholder. Instead, we have used consultation to
recognise the broad themes and expectations cited by our shareholders. This engagement process has helped shape our views and
evolve the Policy we are now proposing to shareholders. The table overleaf highlights key topics within the consultation, examples
of shareholder feedback and the way we have looked to incorporate feedback into our proposed policy.
Shareholders were highly supportive of the existing leadership team and a desire to retain this leadership through the next stages
of the deployment of our strategy.
They were generally understanding of the insight we shared into the prevailing market reward practices within our sector, and the
proposed use of Performance Shares and Restricted Shares.
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Financial statements
Additional information
Overview
Strategic report
Themes from our discussions with shareholders through effective consultation
The table below illustrates some of the themes that emerged through our consultation process and the way we used shareholder
feedback to inform our final Policy proposals shown later.
Area
Feedback
Our Response / What we have incorporated through feedback into our proposals
Use of combination
of PSP and RSU
awards
–
Shareholders were largely supportive of the
use of a combination of PSP and RSU
awards within long-term incentive design,
and wanted further insight on the proposed
structure of each element and associated
targets (where applicable).
Structure of
Restricted Share
awards
–
Conversations highlighted the mixed
practice of staged vesting of RSU’s annually
(the predominant US practice) compared to
a cliff vesting after three years elsewhere
(often accompanied by a further two-year
holding period). Feedback highlighted a
strong desire to align to UK market
expectations around cliff vesting, followed
by a holding period.
Our original proposal was for RSU awards to vest on a phased basis over
the first three anniversaries of grant. We will adjust the scheduled vesting
profile of RSU awards so that vesting happens at the end of year three,
followed by a two-year holding period. While practice is mixed on this point
in the US, we recognise the clear expectations from our shareholder base in
this area, drawn out through the recent publication of updated Investment
Association guidelines in the UK.
Why not PSP only?
–
Would it not be easier to further increase
the quantum under the PSP?
We did consider this route as an alternative, although a number of
shareholders were keen to highlight the positive retention-based impact
that Restricted Share awards can have.
We reflected that a PSP-only approach would result in a structure atypical
within the MedTech industry. Our view was that a balance of both a PSP,
with stretching performance criteria, and the RSU would show more
conformity with prevailing market practice and would support future
recruitment from a global talent pool (if needed).
Overall quantum
change
–
Some shareholders recognised the need
to bridge a gap in quantum and a desire to
narrow rather than close the gap to where
the market median of our comparator
group would suggest.
Our final proposal reflects some scaling back in quantum from the example
initially shared with shareholders. This reduces the overall expected value
of the resultant annual CEO package (by £0.5m) and continues to place
Convatec below the median of the comparator group.
Balance of PSP and
RSU
–
We heard some requests to amend the
weighting between PSP and RSU awards,
so that proportionately more was linked
to company performance.
Our final proposal has a higher weighting of the overall opportunity
towards PSP awards and a reduction in the level of RSU.
Setting of future
stretch targets for
implementation of
Performance Share
Awards
–
Will the change in quantum be accompanied
by more stretching targets?
We believe that our existing approach to target setting is rigorous.
The business has an increasingly strong track record of delivery and the
associated reward outcomes (particularly around long-term incentives)
demonstrate the inherent stretch in targets we have set. (See later section
on page 127 for more detail).
Use of relative
metrics within
performance targets
–
A desire for us to use a global healthcare
index (e.g. MSCI or S&P) to assess TSR
performance rather than considering
a combination of Global Healthcare and
a FTSE-linked index.
We will use a single global Healthcare global index for TSR assessment (S&P
Global Healthcare and Equipment Services) beginning from March 2025
awards, with no adjustment to the basis of assessment of in-flight awards.
Internal alignment
and cascade of
approach
–
How are the changes proposed for
Executive Directors being cascaded
through the business?
In 2022, we implemented some changes to reward across our senior
leaders (below Executive Directors) to reflect market practice and drive
competitiveness. This included investment in quantum under our
long-term plans and a change in structure to include a combination of
Performance Shares and Restricted Shares awards across the Convatec
Executive Leadership Team and the management layer below.
The changes we are proposing for the Executive Directors drive alignment
with what is already in place, and which has been successful in ensuring
we can attract and retain key leadership talent.
Approach for CFO
(or other Executive
Director as
applicable)
–
Would we look to follow the approach
proposed for the CEO and cascade this to
apply to any Executive Directors in place?
Our consultation was initially focused on our CEO, as this was the area
where we saw the greatest divergence between our current structure
and our identified comparator group.
Our proposal includes a structural change to bring Restricted Shares into
the package for the CFO and deliver an overall package that is similarly
placed against comparator group data.
Directors’ Remuneration report
continued
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Governance
Evolving our policy proposals through effective consultation
We consulted on a straw model for changes as a basis to engage with shareholders. This looked to drive market competitiveness
(through an increase in overall LTI quantum) and an amended structure using a combination of both Performance Shares and
Restricted Stock Units.
As expected, while we heard support for the way we proposed to evolve our structure and our stated aims, we did see some
variation in response from shareholders. We have therefore needed to consider feedback carefully and determine an approach
that meets our goals and is right for the business, while reflecting feedback from the majority of our shareholders.
The diagram below shows the structure we used as a basis to consult and the way this has evolved into the final policy proposal.
LONG-TERM INCENTIVE DESIGN – CEO
Current Policy
Target Total Reward
£3.7m pa
PSP
300%
of Salary
RSU
150%
RSU
100%
PSP
425%
PSP
425%
Target Total Reward
£5.9m pa
Target Total Reward
£5.4m pa
PSP – Assessment based on
achievement against key
metrics over three–year
period
Shareholding requirement
– 4x salary for CEO
PSP – Award level increased
to 425% of salary
RSU – Annual awards of 150%
of base, vesting on first three
anniversaries of award date
Shareholding requirement
– increased to 5x salary
for CEO
PSP – Award increased to
425% of salary
RSU – 100% of base, cliff vest
after three years followed by
two-year holding period
Shareholding requirement
– increased to 5x salary
for CEO
Original model for
consultation
Final Proposal
Comparator Insight (Target Reward):
Global MedTech – £5.7m Median, US Subset only – £5.9m Lower Quartile
Driving principles
–
Majority of awards
linked to key financial
performance metrics
–
Increased alignment
between executive and
shareholder experience
through material
shareholding
requirements
–
Effective cascade and
alignment of
performance metrics
through senior
leadership teams
–
Recognition of the
global talent market
and significance of the
US to our business and
industry sector
–
Ensure competitive
framework to attract
and retain world class
leadership talents
Our proposed policy
We are proposing changes to our long-term incentive structure and quantum, to align with market practice and ensure competitiveness. No
changes are proposed within our revised Policy to our approach to salary or annual bonus, both of which have been shown to be competitive
with the identified comparator group.
The key changes within our policy are:
Proposed Policy change
Proposed changes to the way we plan to implement the Policy in 2025
–
Introduction of ability to make Restricted Stock awards as
part of Long-Term incentive awards for Executive Directors.
–
These awards to vest after three years with a further two-year
holding period (replicating the approach to existing
Performance Share awards).
–
Vesting of RSU awards to occur subject to an underpin of
Committee determination of alignment of overall reward
outcomes with underlying Group performance and to ensure
fairness to shareholders and participants.
–
Subject to approval from Shareholders at the 2025 AGM, ability
to make restricted share awards under our Policy, with awards of
100% of salary to be made to the CEO and 75% of salary to the CFO,
respectively in 2025.
–
We will use the share price at the time we make our core
Performance Share award (in March 2025) as a basis for
determining these awards, which would be made following
successful approval of the Policy at the AGM.
–
These will vest in March 2028 and then be subject to a further
two-year holding period, after allowing some to be sold to cover
an estimate of any resulting tax liability.
–
Awards in future years would be expected to be made in
March with vesting on the third anniversary of award, followed
by a two-year holding period.
–
Increase in Performance Share Awards permissible under
the Policy from 300% to 425% for CEO. No change for the
CFO (250%).
–
A PSP award of 300% of salary will be made to the CEO in March
2025, and awards of 250% of salary to the CFO.
–
A further award of 125% of salary will be made in June 2025 to the
CEO, subject to Policy approval at the AGM. The share price used for
this additional award will reflect that used at the time of the main
grant in March 2025. Awards will vest in March 2028 and be subject
to the same performance targets as the award made in March 2025.
–
Shareholding Requirement. Increase of shareholding
requirement for CEO to 500% of salary.
–
This would be effective and apply following approval of the wider
Policy change at the AGM.
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Additional information
Overview
Strategic report
The graph below shows how the existing total target remuneration for the Convatec CEO compares to the comparator group.
Additionally, we have shown how the proposed changes to our policy reposition Convatec against this comparator group.
Our changes are focused on long-term incentives only, introducing RSU awards and investing in overall quantum.
Our changes continue to place Convatec below the median of the comparator group, and mean that the vast majority
of variable reward is fully performance linked, either through Annual Bonus or Performance Share awards.
We are not proposing any changes to annual bonus quantum, or to base salary (other than through annual salary reviews,
which will be a 2.9% increase from April 2025 in line with the wider workforce).
HOW OUR PROPOSED CHANGES RE-POSITION CONVATEC CEO REWARD
AGAINST THE IDENTIFIED COMPARATOR GROUP (£K)
Co 1
Co 2
Co 3
Co 4
Co 5
Co 6
Co 7
Co 8
10,000
8,000
6,000
4,000
12,000
Convatec
Proposed
Co 09
Co 11
Co 10
Co 12
Co 13
Co 14
Co 15
Co 16
Co 17
Co 18
Co 19
Co 20
Convatec
Current
Upper Quartile £6.7m
Median £5.7m
Lower Quartile £2.8m
£3.7m
£5.4m
2,000
0
Total Direct Compensation is the aggregate value of salary, target annual bonus and expected value of long-term incentives.
Comparator data was not available for one organisation (due to an Interim CEO appointment that was in place).
Directors’ Remuneration report
continued
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Governance
Demonstration of stretch within performance assessment
Several shareholders asked us about the level of stretch within future performance targets. We have highlighted three factors that
demonstrate the rigour behind target setting, and the way we will look to set stretching performance targets so high levels of
reward is dependent on robust business delivery.
1.
Our Performance Curve for TSR assessment.
–
Our current vesting profile is tougher than prevailing market practice with full vesting only at 90th percentile performance
or above, compared to market practice at 75th percentile or above.
–
This leads to lower vesting outcomes in all cases for TSR rankings between 50th and 90th percentile.
2.
Our recent history of target setting.
–
Our recent performance ranges for adjusted PBT growth have required either 14% or 15% per annum compound growth
over the respective three-year performance period for maximum vesting.
–
This is well in excess of typical market levels and reflects the commitment to deliver robust growth through our strategy
in a sustainable way.
–
Our financial performance over the past few years has improved significantly as the business has delivered a turnaround,
yet Performance Share vesting has averaged around 60% of maximum, illustrating the inherent stretch within the target
setting adopted by the Committee.
3.
Choice of future comparator group for TSR assessment.
We will use solely a Global Healthcare index for TSR assessment for the awards we make in March 2025, driving effective
comparative sectoral assessment of Convatec. This aligns Convatec fully to a wider global healthcare sector and is designed
to enable effective comparison of our performance with others within the same market sector that we operate within.
History of adjusted PBT ranges and
PSP vesting levels
Period
Growth
range (PBT)
Actual PBT
Growth
PSP Vesting
(% max)
2024–26
6%–14%
n/a
n/a
2023–25
7%–14%
n/a
n/a
2022–24
8%–15%
12.3%
70.3%
2021–23
8%–15%
10%
51.6%
2020–22
4.5%–10%
8.3%
80.5%
Typical Market Practice
TSR Outcome vs Peers (Percentile)
TSR Outcome vs Peers (Percentile)
Convatec – Stretch
100%
25%
100%
90%
25%
50th
75th
100th
50th
75th
100th
90th
Vesting
Vesting
Current Performance scale for TSR assessment
Conclusion
Through extensive shareholder consultation we heard clear support and endorsement for the existing leadership of Convatec
and a desire to drive retention to see through delivery of our FISBE 2.0 strategy. Our review process, underpinned by market
insight, indicates that changes are required at an important time for Convatec. We have used shareholder inputs to develop our
approach and shape our final proposed policy, making changes in direct response to what we heard from our shareholder base.
Convatec is well placed to deliver sustainable and profitable growth, has a very strong innovation pipeline and is set to deliver
on medium term operating margin commitments. We believe that the changes proposed are the right ones at this time, addressing
the goals of our review and taking actions now to position the business for future success.
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Additional information
Overview
Strategic report
OUR REMUNERATION POLICY
This section of the Directors’ Remuneration report has been prepared in accordance with the Remuneration Reporting Regulations,
and sets out details of the 2025 Policy to be tabled for approval by shareholders at the 2025 AGM and effective for a period of up to
three years from that date.
We also describe below how our Policy reflects the principles of Provision 40 of the 2018 UK Corporate Governance Code:
–
Clarity:
we are committed to transparent disclosure of our remuneration structures and decisions, including clear rationale
and context for these.
–
Simplicity:
our Policy and approach to its implementation is simple and well-understood internally and externally.
–
Risk:
remuneration arrangements are designed not to encourage or reward excessive risk taking, with targets set to
be stretching and achievable, and retaining Committee discretion to adjust formulaic bonus and LTIP outcomes to align
with underlying performance.
–
Predictability:
there are defined threshold and maximum pay scenarios, which we have disclosed on page 132.
–
Proportionality:
there is a clear and direct link between performance and reward.
–
Alignment to culture:
the Committee has designed the Policy to align with the Group’s culture, driving behaviours that promote
the long-term and sustainable success of the Group for the benefit of all stakeholders.
Details of how the Company plans to implement the Policy for the year ending 31 December 2025 are provided in the Annual Report
on Remuneration starting on page 135, including our intended approach to implementation of changes within our proposed Policy.
Remuneration principles
The Committee recognises and manages conflicts of interest when determining the policy and no director is responsible for setting
their own remuneration. When setting remuneration for the Executive Directors, the Committee considers the following principles:
–
Incentivise sustained strong financial performance.
–
Align rewards with the delivery of the Group’s strategy and long-term interests of shareholders.
–
Help attract, motivate and retain the best talent to deliver the Group’s strategy and create long-term shareholder value.
–
Reflect market best practice and consistently adhere to principles of good corporate governance and encourage good risk
management.
Proposed Remuneration Policy for the Executive Directors
Purpose and link
to strategy
Operation
Opportunity
Performance measures
Summary of changes
from existing Policy
Base salary
To attract and retain
talented Executive
Directors to deliver
the Group’s strategy,
by ensuring base
salaries and the implied
total package are
competitive in relevant
talent markets, while
not overpaying.
Base salaries will be reviewed
by the Committee annually
and benchmarked periodically
against comparable roles at
international MedTech peers,
as well as UK-listed companies
of similar size and complexity.
Any resulting changes are normally
effective from 1 April, in line with
the effective date for salary increases
for the broader workforce.
In deciding base salary levels, the
Committee considers personal
performance including the
individual’s contribution to the
achievement of the Group’s strategic
objectives. The Committee will also
consider employment conditions
and salary levels across the Group,
and prevailing market conditions in
the geographies in which the Group
competes for talent.
Base salary increases for the
Executive Directors will normally
be no higher than those of the wider
workforce, but may be made above
or below this level in exceptional
circumstances such as a material
change in responsibilities, size or
complexity of the role, or if a Director
was intentionally appointed on
a below-market salary.
Salaries will be set on a case-by-
case basis to reflect the role and
the experience and qualifications
of the individual.
Base salaries for the year
under review and the following
year, as well as the rationale for
any increases, will be disclosed in
the relevant year’s Annual Report
on Remuneration.
There is no maximum but
increases are typically in line
with the wider workforce.
n/a
None
Pension
To provide an
appropriate level of
post-retirement benefit
for Executive Directors
in a cost-efficient
manner, taking account
of the provisions for the
wider workforce.
Executive Directors may receive a
contribution to a personal pension
plan, a cash allowance in lieu, or
a combination thereof.
Salary is the only element of
remuneration that is pensionable.
Karim Bitar and Jonny Mason receive
a pension benefit from the Group
(currently 8.5% of salary), in line
with the wider UK workforce.
Details of the pension contributions
made to Executive Directors during
the year are disclosed in the Annual
Report on Remuneration.
n/a
None
Directors’ Remuneration report
continued
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Governance
Purpose and link
to strategy
Operation
Opportunity
Performance measures
Summary of changes
from existing Policy
Other benefits
To provide non-cash
benefits which are
competitive in the
market in which the
Executive Director
is employed.
The Group may provide benefits in
kind including, but not limited to,
a company car or car allowance,
private medical insurance (or
allowance in lieu), permanent
health insurance, and life insurance.
Executive Directors may also be
provided certain other benefits
to take account of individual
circumstances such as, but not
limited to, payment of financial, and/
or legal adviser fees, expatriate
allowance, relocation expenses,
housing allowance and tax
equalisation (including associated
interest, penalties or fees plus, in
certain circumstances or where the
Committee consider it appropriate,
any tax incurred on such benefits).
Executive Directors may also be
offered any other future benefits
made available either to all senior
employees globally or in the region
in which the Executive Director
is employed.
Benefits for Executive Directors are
set at a level which the Committee
considers appropriate compared
to wider employee benefits, as
well as competitive practices in
relevant markets.
The value of annual benefits
will normally not exceed 10% of
salary. The Committee retains
discretion to approve non-material
increases in cost. In addition, the
Committee retains discretion to
approve a higher cost in exceptional
circumstances (e.g. to facilitate
recruitment, relocation, expatriation,
etc.) or in circumstances where
factors outside the Group’s control
have changed (e.g. market increases
in insurance costs).
Benefits in respect of the year under
review are disclosed in the Annual
Report on Remuneration.
n/a
None
Annual bonus
To incentivise Executive
Directors to deliver
strong financial
performance on
an annual basis and
reward the delivery of
the Group’s strategic
aims that will underpin
the longer-term health
and growth of the
business.
Deferral into shares
enhances alignment
with shareholders.
Performance measures, targets
and weightings are set by the
Committee at the start of the year.
After the end of the financial year, the
Committee determines the level of
bonus to be paid, taking into account
the extent to which these targets have
been achieved.
To the extent that the performance
criteria have been met, one-third
of the annual bonus earned will
normally be compulsorily deferred
into shares for a period of three
years under the Deferred Bonus Plan.
The remainder of the bonus will be
paid in cash.
Dividends may accrue on deferred
bonus shares over the deferral period
and, if so, will be paid on deferred
shares at the time deferred shares are
released to the Executive Director.
Malus and clawback provisions
apply to the annual bonus in certain
circumstances (as set out in the Notes
to the Policy Table).
The maximum annual bonus
opportunity is 200% of base salary
for both Executive Directors.
The payout for on-target performance
is 50% of maximum; threshold
performance results in a payout
of no more than 25% of maximum.
Bonuses are based on a
combination of stretching
annual financial and
non-financial/strategic
performance measures,
selected to reflect the
Group’s short-term
KPIs, financial goals
and strategic drivers.
The financial element of the
annual bonus will normally
be weighted 80% of the
overall bonus opportunity,
with the balance based
on personal strategic
objectives, including
a minimum of 5% linked to
qualifiable ESG metrics.
The Committee may adjust
the formulaic annual bonus
outcomes (including to
zero) to avoid unintended
outcomes, align pay
outcomes with underlying
Group performance
and ensure fairness
to shareholders and
participants.
Further details will
be disclosed in the
relevant Annual Report
on Remuneration.
Performance targets set for
each year will be disclosed
retrospectively, usually
in the Annual Report
on Remuneration in respect
of the year to which such
performance targets relate.
None
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Governance
Financial statements
Additional information
Overview
Strategic report
Purpose and link
to strategy
Operation
Opportunity
Performance measures
Summary of changes
from existing Policy
Long-Term Incentive Plan (LTIP)
To align the interests
of Executive Directors
and shareholders in
growing the value of
the Group over the
long term.
A minority of the
award can be made
as Restricted Shares
designed to retain
executives and
recognise typical
market norms within
our wider sector, and
global talent pool
where we compete.
Executive Directors are eligible to
receive annual awards of Convatec
Group Plc shares under the LTIP
either in the form of conditional
share awards or nil cost options.
The majority of any award will be
made as ‘Performance Shares’.
These are awards that vest after
a performance period (normally
three years) subject to achievement
against targets determined prior to
grant. Targets are set to ensure that
they remain appropriately stretching
and aligned to the Group’s strategy.
A proportion of any award (up to a
maximum of 100% of salary) may be
awarded as ‘Restricted Shares’.
Awards granted under the LTIP to
Executive Directors will normally
have a performance period of three
years and a minimum vesting period
of three years. If no entitlement
has been earned at the end of
the relevant performance period,
awards will not vest.
Shares received as a result of
an award vesting will normally
be subject to an additional two-year
holding period.
Dividends may accrue on LTIP
awards over the vesting period and,
if so, will be delivered in shares that
vest at the end of the vesting period.
LTIP awards granted to Executive
Directors will be subject to malus and
clawback provisions, as set out in the
Notes to the Policy Table.
The maximum total annual LTIP
opportunity is 525% of base salary for
the CEO and 325% of base salary for
the CFO (or other Executive Directors
as applicable).
For awards made as Performance
Shares, 25% of an award will
vest if performance against each
performance condition is at threshold
and 100% if it is at maximum,
normally with straight-line vesting
in between these points, unless the
Committee determines otherwise.
Vesting of LTIP awards
is subject to continued
employment during the
performance period
and the achievement of
performance conditions
(where applicable)
aligned with the
Group’s strategic plan
and shareholder value
creation. Measures
and their weightings
will be determined by
the Committee prior to
making an award.
The Committee may
adjust the formulaic
Performance Share
vesting outcomes to
ensure it takes account
of any major changes to
the Group (e.g. as a result
of M&A activity).
As an underpin, for both
Performance Share and
Restricted Share awards
the Committee may make
adjustments to vesting
levels (including to nil) to
ensure that the awards
are a fair reflection
of the underlying
financial performance
of the Group over the
performance period.
Further details, including
the performance targets
attached to the LTIP in
respect of each year,
will be disclosed in the
relevant Annual Report
on Remuneration.
Introduction of
flexibility under
the Plan to
make awards of
Restricted Shares.
Increase in total
opportunity
available for CEO
to 525% of salary,
and to 325% for
CFO.
Shareholding requirements
To align executives
and shareholders
through shareholding
requirements,
including periods
beyond cessation
of employment.
See notes to Policy table covering
calculation of share ownership
guidelines and post-cessation
shareholding requirements.
500% of salary for CEO and 300%
of salary for any other Executive
Director.
Requirement to hold 100% of
guideline in first year following
cessation, and 50% of guideline
in year two.
n/a
Increase in
shareholding
requirement for
CEO from 400%
of salary to 500%.
Save-As-You-Earn (SAYE) or equivalent scheme
To align the interests
of employees
and shareholders
by encouraging
employees to buy and
own Convatec Group
Plc shares.
Executive Directors are entitled
to participate in the Group’s all-
employee share plan if available in
the jurisdiction in which they are
based on identical terms as other
eligible employees. A UK or Europe-
based Executive Director may make
monthly savings over a period of
three or five years or other period set
by any relevant tax authority linked
to the grant of an option over Group
shares. The option price will be set at
a discount of up to 15% of the market
value of the shares at grant (which
align with similar all-employee
arrangements in the US).
Employees are limited to saving
a maximum in line with the
monthly savings limit imposed
by the Committee (which will
not exceed any limits imposed
by legislation) at the time they
are invited to participate.
n/a
None
Full details behind proposed changes within the Policy and associated rationale are set out on pages 120 to 127.
Notes to the policy table
Malus and clawback
The Committee regularly reviews the Company’s approach to malus and clawback and our Malus and Clawback Principles
determines the trigger events and time periods that these provisions relate to. Both our annual bonus and LTIP awards are covered
by these provisions and they apply in circumstances including:
–
cases of fraud, negligence or gross misconduct by the Executive Director;
–
material financial misstatement in the audited financial results of the Group;
–
error in calculation; or
–
other exceptional circumstances at the Committee’s discretion.
Directors’ Remuneration report
continued
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Governance
The timeline over which Malus and Clawback provisions could be used is shown in the table below. These have been determined
to appropriately balance the timing of determination of awards/vesting with the underlying performance metrics that are used
to determine award levels and align with mandated deferral period under the Annual Bonus or holding period post vesting
of long-term incentive awards.
Cash bonuses will be subject to clawback, with deferred bonus shares being subject to malus, over the deferral period. LTIP awards
will be subject to malus over the vesting period and clawback from the vesting date to the second anniversary of the relevant
vesting date.
We believe this timeframe is effective and proportionate to the operational nature of the business, allowing for malus on deferred
bonus shares for up to three years following the determination of company performance upon which the award was made. For LTIP
awards this aligns with the mandatory holding period in place for shares post vesting, and again extends for a significant timeframe
(five years) from when the original grant of awards was made.
Summary of Malus/Clawback
Malus
Clawback
Annual Bonus – Cash Payments
Up to point of cash payment
Yes – aligned to share deferral period
Annual Bonus – Deferred Shares
Up to point of vest (three years after
completion of performance period that
determined the award)
None post vesting
Share Awards under Long-Term Incentive Plans
During vesting period
Up to 2nd anniversary of respective vesting date
Share ownership guidelines
The Committee recognises the importance of aligning Executive Directors’ and shareholders’ interests through significant
shareholdings in the Group. The Group’s policy is to require Executive Directors to build up shareholdings worth 500% (previously
400%) of base salary for the CEO, and 300% of base salary for other Executive Directors, and to retain these shares whilst an
Executive remains on the Board of Directors. 50% of any net vested share awards (after sales to meet tax liabilities) must be
retained until the minimum shareholding requirements are met. Shareholdings will be valued at the higher of the acquisition
price of the shares and the average share price over the last three months of the financial year. The Committee have determined
that unvested shares not subject to future Company performance conditions can be included in assessing compliance with the
Guideline, calculated on a net of tax basis. This includes shares that may be in a compulsory holding period after vesting. Details
of the Executive Directors’ current personal shareholdings, and progress towards meeting the share ownership guidelines,
are provided in the Annual Report on Remuneration.
Post-exit shareholding requirement
The Committee further recognises the expectation of shareholders that a requirement is placed on Executive Directors to maintain
a meaningful shareholding for a period of time after they leave the Company. In keeping with prior commitments, the 2023 Policy
introduced a requirement for Executive Directors to hold 100% of their in-situ guideline in the first-year post-exit and 50% in year two.
Use of discretion
The Committee may apply its discretion (as set out below) when agreeing remuneration outcomes, to help ensure that the
implementation of our Remuneration Policy is consistent with the guiding principles set out in this report.
Payments from outstanding awards
The Committee reserves the right, in certain circumstances, to make any remuneration payments and payments for loss of office
(including exercising any discretions available to it in connection with such payments) where the terms of the payment were agreed:
before the Policy in force at that time came into effect; or at a time when the relevant individual was not a Director of the Group
provided that, in the opinion of the Committee, the payment was not agreed in consideration of the individual becoming a Director
of the Group. For these purposes, payments include the satisfaction of variable remuneration awards previously granted, but not
vested, to an individual.
Minor changes to Policy
The Committee retains discretion to make minor, non-significant changes to the Policy set out above (for reasons including, but
not limited to, regulatory, exchange control, tax or administrative purposes or to take account of a change in legislation) without
reverting to shareholders for approval for that amendment, where seeking such shareholder approval would be disproportionate
to the discretion being exercised.
LTIP awards
The Committee may exercise its discretion as provided for in LTIP rules approved by shareholders. The Committee may also adjust
the number of shares comprising an LTIP award (or the exercise price if the award comprises options) in the event of a variation of
share capital, demerger, special dividend, distribution or any other corporate event which may affect the current or future value of
an award. It is intended that any adjustment will be made on a neutral basis, i.e. to not be to the benefit or detriment of participants.
Any use of discretion by the Committee during a financial year will be detailed in the relevant Annual Report on Remuneration and
may be the subject of consultation with the Group’s major shareholders, as appropriate.
Remuneration Policy for the wider workforce
The Remuneration Policy for other employees is based on principles that are broadly consistent with those applied to Executive
Director remuneration, with a common objective of driving financial performance and the achievement of strategic objectives,
and contributing to the long-term success of the Group. Remuneration supports our ability to attract, motivate and retain skilled
and dedicated individuals, whose contribution will be a critical factor in the Group’s success. Annual salary reviews take into
account Group performance, local pay and market conditions, and salary levels for similar roles in comparable companies.
Pension entitlements and other benefits vary according to jurisdiction, to ensure these remain appropriately competitive
for the local market.
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Governance
Financial statements
Additional information
Overview
Strategic report
Many employees below executive level are eligible to participate in annual bonus schemes or similar variable incentive
arrangements. Opportunities and performance measures vary by organisational level, geographical location and an individual’s
role. Employee ownership of Convatec Group Plc shares is promoted across the Group. Senior executives are eligible for LTIP
awards on similar terms as the Executive Directors, although award opportunities are lower and vary by organisational level. At
senior levels a combination of Performance Shares and Restricted Share awards are used, as is common within our sector. Other
executives are eligible for restricted share awards on a discretionary basis. Convatec also offers an opportunity for broader-based
participation in share purchase plans, such as Save As You Earn (SAYE) or Employee Share Purchase Plan (ESPP) arrangements. The
Committee does not directly consult with employees as part of determining our Remuneration Policy for Executives, but receives
regular oversight and updates on workforce policies and practices on reward.
Approach to target setting and performance measure selection
The Committee considers carefully the selection of performance measures at the start of each performance cycle, taking into
consideration the Group’s strategic objectives and the macroeconomic environment.
Annual bonus measures are selected to align with the Group’s KPIs (see pages 12 and 13). Measures may change from year-to-year
(subject to the Remuneration Policy), and the rationale for any changes to the bonus measures selected will therefore be disclosed
in the relevant Annual Report on Remuneration.
LTIP performance measures (used for awards of Performance Shares) are selected to ensure they align with the Group’s
strategy and long-term shareholder value creation. They are designed to align executive and shareholder interests through an
effective balance between external and internal measures of performance, and between growth and returns in the context of
the Group’s strategy.
Targets are set to be stretching but achievable over the performance period, taking account of multiple relevant reference points,
for example, internal forecasts, external expectations for future performance at both the Group and its closest sector peers, and
typical performance ranges of companies of comparable size and complexity. The Committee also retains discretion, in exceptional
circumstances, to vary, substitute or waive the performance conditions attaching to incentive awards (within the relevant limits set
out in the Policy table) if there is a significant and material event which causes the Committee to believe the original conditions are
no longer appropriate, and the new performance conditions are deemed reasonable and not materially less difficult to satisfy than
the original conditions.
Pay-for-performance: scenario analysis
The charts below provide an estimate of the potential future reward opportunities for Karim Bitar and Jonny Mason, and the
potential split between the different elements of remuneration under four different performance scenarios: “Maximum + 50%
share price growth”, “Maximum”, “On target” and “Minimum”.
Potential reward opportunities are based on the forward-looking policy, applied to 2024 base salaries and incentive opportunities.
LTIP awards granted in a year will not normally vest until the third anniversary of the date of grant, and the projected value of the
“Maximum”, “On target” and “Minimum” scenarios excludes the impact of share price movement.
The above charts are based on the following assumptions:
“
Maximum + 50% SPA”:
fixed remuneration (salary, pension, other benefits), plus maximum bonus (200% of salary) and full vesting of the 2024 LTIP awards
(Performance Share Awards of 425% of salary for the CEO/250% of salary for the CFO, and Restricted Share awards of 100% for CEO and 75% for CF0), and
reflecting 50% share price growth over the vesting period).
“Maximum”:
fixed remuneration (as above), plus maximum bonus (200% of salary) and full vesting of the 2024 LTIP awards assuming no share price growth.
“On-target”:
fixed remuneration (as above), plus target bonus (50% of maximum or 100% of salary) and 60% of maximum vesting of Performance Share Awards
under the LTIP and full vesting of Restricted Share awards, assuming no share price growth.
“Minimum”:
fixed remuneration only, being the only element of Executive Directors’ remuneration not linked to performance.
Executive Director service contracts
In accordance with general market practice, each of the Executive Directors has a rolling service contract. Karim Bitar and Jonny
Mason have service contracts with the Company (copies of which are available to view at the Company’s registered office) that are
terminable on 12 months’ notice from the Group and six months’ notice from the Executive Director. This practice will also apply for
any new Executive Directors. The following table shows the date of the service contract for each Executive Director that served
during the year:
Executive Director
Position
Date of appointment
Date of service agreement
Karim Bitar
CEO
30 September 2019
24 March 2019
Jonny Mason
CFO
12 March 2022
8 December 2021
Directors’ Remuneration report
continued
Pay scenarios
CEO – Karim Bitar
Maximum + 50% SPA
Minimum
Target
£11,145,280
11%
18%
71%
14%
24%
62%
20%
100%
18%
62%
£ 8,494,030
£ 1,171,530
£ 5,767,030
Maximum
Fixed Remuneration
Annual bonus
LTIP (PSP + RSU)
CFO – Jonny Mason
Maximum + 50% SPA
Minimum
Target
£4,382,519
£3,491,207
£611,582
£2,394,207
Maximum
Fixed Remuneration
Annual bonus
LTIP (PSP + RSU)
14%
25%
61%
18%
31%
51%
25%
100%
23%
52%
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Governance
Exit payments policy
The Group’s policy on termination payments is to consider the circumstances on a case-by-case basis, taking into account the
relevant contractual terms in the executive’s service contract and the circumstances of termination. Executive Directors’ contracts
provide for the payment of a pre-determined sum in the event of termination of employment in certain circumstances (but
excluding circumstances where the Group is entitled to dismiss without compensation), comprising base salary, pension benefit
and benefits in respect of the unexpired portion of the notice period. Termination payments may take the form of payments in lieu
of notice. Payments would normally be made on a phased basis and subject to mitigation. If the employment is terminated by the
Group, the Committee retains the discretion to settle any other amount the Committee considers reasonable to the Executive
Director including in settlement of claims, in respect of legal fees incurred in connection with the termination and fees for
outplacement services and relocation costs.
In addition to contractual provisions, the following table summarises how awards under each discretionary incentive plan
are typically treated in specific circumstances, with the final treatment remaining subject to the Committee’s discretion as provided
under the rules of the plan. In the event of termination, any outstanding options granted under the SAYE, or equivalent, scheme
will be treated in accordance with the rules of the scheme, which do not include discretion. Disclosure in relation to any departing
Executive Director, including details of any remuneration payment made to them after they cease to be a Director, will be made
on the Company’s website in accordance with Section 430(2B) of the Companies Act 2006.
Treatment of awards on cessation of employment
Reason for cessation
Calculation of vesting/payment
Timing of vesting/payment
Annual bonus
Injury, disability, death, redundancy,
retirement, or other such event as the
Committee determines
The Committee may determine that a bonus is
payable on cessation of employment (normally
pro-rated for the proportion of the performance
year worked) and the Committee retains
discretion to determine that the bonus should
be paid wholly in cash. The bonus payable will
be determined based on the performance of the
Group and of the individual over the relevant
period, and the circumstances of the Director’s
loss of office.
At the normal payment date, taking into
account actual Company performance for
the performance period.
All other reasons (including voluntary
resignation)
No bonus will be paid for the financial year.
Not applicable.
Deferred bonus shares
Resignation or dismissal for cause
Awards normally lapse.
Not applicable.
All other reasons (e.g. injury, disability, death,
redundancy, retirement, or other such event
as the Committee determines)
Awards will normally vest in full (i.e. not pro-
rated for time) unless the Committee determines
that time pro-rating should apply.
At the normal vesting date, unless the
Committee decides that awards should vest
earlier (e.g. in the event of death).
Change of control
Awards will normally vest in full (i.e. not pro-
rated for time). Awards may alternatively be
exchanged for equivalent replacement awards,
where appropriate.
On change of control.
LTIP awards
Resignation or dismissal for cause
Awards normally lapse.
Not applicable.
All other reasons (e.g. injury, disability, death,
redundancy, retirement, or other such event
as the Committee determines)
Awards will normally be pro-rated for time
(unless the Committee chooses to disapply time
pro-rating) and will vest based on performance
over the original performance period (where
awards are subject to performance conditions)
unless the Committee decides to measure
performance to the date of cessation.
At the normal vesting date, unless the
Committee decides that awards should
vest earlier (e.g. in the event of death).
Change of control
LTIP awards will normally be pro-rated for time
(unless the Committee chooses to disapply time
pro-rating) and will vest subject to performance
(where applicable) over the performance period
to the change of control.
LTIP awards may alternatively be exchanged
for equivalent replacement awards, where
appropriate.
On change of control.
Approach to remuneration on recruitment
External appointments
In cases of hiring or appointing a new Executive Director from outside the Group, the Committee may make use of all existing
components of remuneration set out in the Policy table, up to the disclosed maximum opportunities (where applicable).
When determining the remuneration package for a new Executive Director, the Committee will take into account all relevant factors
based on the circumstances at that time to ensure that arrangements are in the best interests of the Group and its shareholders.
This may include factors such as the experience and skills of the individual, internal comparisons and relevant market data.
The Committee may also make an award in respect of a new appointment to “buy-out” incentive arrangements forfeited on leaving
a previous employer, i.e. over and above the maximum limits on incentive opportunities set out in the Policy table. In doing so, the
Committee will consider relevant factors, including any performance conditions attached to these awards, the likelihood of those
conditions being met, and the time over which they would have vested. The intention is that the expected value of any “buy-out”
award would be no higher than the expected value of the forfeited arrangements, and that the structure will replicate (as far as
reasonably possible) that of the awards being forfeited. The Committee may consider it appropriate to structure “buy-out” awards
133
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Governance
Financial statements
Additional information
Overview
Strategic report
differently from the structure described in the Policy table, exercising its discretion under the LTIP rules to structure awards in
other forms (including market value options, restricted shares, forfeitable shares or phantom awards) and may use the exemption
permitted within the Listing Rules where necessary to make a one-off award to an Executive Director in this context.
Internal promotion
Where a new Executive Director is appointed by way of internal promotion, the Policy will be consistent with that for external
appointees, as detailed above (other than in relation to ‘buy-out’ awards). Any commitments made prior to an individual’s
promotion will continue to be honoured even if they would not otherwise be consistent with the Policy prevailing when the
commitment is fulfilled, although the Group may, where appropriate, seek to revise an individual’s existing service contract on
promotion to ensure it aligns with other Executive Directors and good practice.
Disclosure on the remuneration structure of any new Executive Director, including details of any ‘buy-out’ awards, will be disclosed
in the RNS notification made at the time of appointment and in the Annual Report on Remuneration for the year in which
recruitment occurred.
External appointments held by Executive Directors
Executive Directors may accept one external appointment subject to approval by the Board, there being no conflicts of interest and
the appointment not leading to deterioration in the individual’s performance. Executive Directors may retain the fees paid for such
roles. Details of external appointments and the associated fees received will be included in the Annual Report on Remuneration.
Consideration of conditions elsewhere in the Group
The Committee seeks to promote and maintain good relations with employees as part of its broader employee engagement
strategy, considers pay practices across the Group and is mindful of the salary increases applying across the rest of the business
in relevant markets when considering any increases to salaries for Executive Directors.
Consideration of shareholder views
The Committee will take into consideration all shareholder views received during the year and at the Annual General Meeting each
year, as well as guidance from shareholder representative bodies more broadly, in shaping the Group’s implementation of its
Remuneration Policy. The Committee has undertaken extensive engagement with Shareholders in determining the Policy
proposals, which reflect investor feedback received.
Remuneration Policy for the Non-Executive Directors
Details of the Policy on fees paid to our Non-Executive Directors are set out in the table below:
Purpose and link
to strategy
Operation
Opportunity
Performance
measures
Summary of changes
from existing Policy
Non-Executive Director fees
To attract and retain Non-
Executive Directors of the
highest calibre with broad
commercial and other
experience relevant to
the Group
The fees of the Chair are determined by the
Committee. The fees paid to Non-Executive
Directors are determined by the Chair and
Executive Directors. Additional fees are
payable for acting as Senior Independent
Director and for chairing the Audit and Risk
Committee or the Remuneration Committee.
An additional fee is also payable for acting
as a Board Level Representative for the
workforce. Flexibility to introduce Committee
membership fees is also retained if deemed
to be necessary.
The maximum aggregate
annual fee for all Non-
Executive Directors
(including the Chair) as
provided in the Group’s
Articles of Association
is £1,500,000.
n/a
None
Fee levels are reviewed annually (with any
increases normally effective 1 April), taking
into account external advice on best practice
and competitive levels, in particular at
other FTSE companies of comparable size
and complexity. Time commitment and
responsibility are also taken into account
when reviewing fees.
Chair and Non-Executive Director fees are
paid in cash.
The Committee reimburses the Chair and
Non-Executive Directors for reasonable
expenses and may settle any tax incurred
in relation to these expenses.
The fees paid to the Chair and Non-Executive
Directors are disclosed in the Annual Report
on Remuneration.
Fee increases will be applied
taking into account the
outcome of the annual
review.
None
Non-Executive Directors are not eligible to join the Group’s pension, incentives or share schemes or to participate in any of the
Group’s other benefit arrangements.
In recruiting a new Non-Executive Director, the Committee will use the Policy set out above. To see details of current appointments
of the Chair and Non-Executive Directors for the year ending 31 December 2024, please see page 143.
Directors’ Remuneration report
continued
134
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Governance
OUR ANNUAL REPORT ON REMUNERATION
Introduction
This section of the Remuneration report provides details of how our Remuneration Policy was implemented during the financial
year ended 31 December 2024, and how it will be implemented during the year ending 31 December 2025. It has been prepared
in accordance with the provisions of the Companies Act 2006 and Schedule 8 of the Large and Medium-sized Companies and Groups
(Accounts and Reports) Regulations 2008 (as amended). It also meets the requirements of the FCA’s Listing Rules.
In accordance with the Regulations, the following sections of the Remuneration report are subject to audit: the single total figure
of remuneration for Executive Directors and Non-Executive Directors, and accompanying notes (pages 135 and 138), scheme
interests awarded during the financial year (page 137), payments to past Directors (page 139) and the statement of Directors’
shareholdings (page 143). The remaining sections of the report are not subject to audit.
Committee membership in 2024
Details of the membership of the Committee, the number of times it met during 2024 and attendance at its meetings are set out
on page 114.
Committee responsibilities
The Committee’s key areas of responsibility are also set out on page 114.
Committee performance evaluation
A performance evaluation of the Remuneration Committee was carried out in 2024, facilitated by an external consultant, Lintstock,
by way of a detailed questionnaire. The evaluation confirmed that the Committee was functioning effectively and addressing all
areas of its remit in a systematic manner. Recommendations included ensuring that Committee members continue to have full
access to appropriate training and support, to include UK Governance trends, recognising that a number of Committee members
were based in the US.
Advisers
During the year, Willis Towers Watson (WTW) reported to the Chair of the Committee and provided reward survey benchmark
data to the Company. WTW is considered to be independent by the Committee. Fees paid to WTW are determined on a time and
materials basis, and totalled £133,350 (excluding expenses and VAT) for the 2024 financial year in its capacity as adviser to the
Committee. WTW is a member of the Remuneration Consultants Group and, as such, voluntarily operates under the Code of
Conduct in relation to executive remuneration consulting in the UK (www.remunerationconsultantsgroup.com).
Summary of shareholder voting
The following table shows the results at the 2024 AGM of the advisory vote on the 2023 Annual Report on Remuneration and the
binding vote on the 2023 Remuneration Policy (at the 2023 AGM).
Resolution
Votes
‘for’
Votes
‘against’
Votes
‘withheld‘
1
2023 AGM: To approve the Directors’ Remuneration Policy (Binding)
95.95%
4.05%
8,682,610
2024 AGM: To approve the Directors’ Remuneration report (Advisory)
98.24%
1.76%
8,051,515
1. Votes ‘withheld’ are not votes in law and, therefore, have not been included in the calculation oftheproportion of votes ‘for’ or ‘against’ each resolution.
Single total figure of remuneration for Executive Directors (audited)
The following table sets out a single figure for the total remuneration received by each Executive Director for the 2024 financial year
and compares this with the equivalent figure for the 2023 financial year. The Committee believes that the Remuneration Policy has
operated as intended in 2024 with no deviations from the approved Policy.
Director
Base
salary
’000
Taxable
benefits
1
’000
Annual
bonus
2
’000
LTIP
3
’000
Pension
benefit
4
’000
Total
Fixed
5
’000
Total
Variable
6
’000
Total
’000
Karim Bitar
2024
£972
£76
£1,937
£1,991
£83
£1,131
£3,928
£5,059
2023
£938
£76
£1,873
£1,661
£80
£1,094
£3,534
£4,628
Jonny Mason
2024
£528
£16
£1,052
£1,109
£45
£589
£2,161
£2,750
2023
£509
£17
£1,017
n/a
£43
£569
£1,017
£1,586
1. For Karim Bitar and Jonny Mason, benefits consist primarily of car allowance, private medical insurance, life assurance and permanent health insurance.
For Karim Bitar, private medical is provided in the form of a healthcare allowance of £50,000 payable per annum.
2. Reflects the total bonus awarded for performance in the relevant financial year. One-third of the bonus earned by Karim Bitar and Jonny Mason is deferred
into shares for three years (the vesting of which is not subject to any further performance conditions).
3. 2024 figures represent the estimated value of LTIP awards made to Karim Bitar and Jonny Mason in March 2022. These awards shall vest on the third
anniversary of grant at 70.3% of maximum based on performance over the three-year performance period ending 31 December 2024 (further details of which
are set out on page 137). The estimated values shown in the table above use the three-month average share price for the period ended 31December 2024
(228.72p) and will be trued up in next year’s report to reflect their value (including any accrued distribution which were reinvested into shares) on the vesting
date. The value of vested shares has increased by £415k for Karim Bitar since the respective award dates as a result of share price appreciation (awards were
granted at 181p per share). The 2023 figure has been updated from that disclosed in our last Annual Report to reflect the actual value of the 2021 LTIP when
it vested in March 2024, with an associated share price of 280p.
4. Karim Bitar’s and Jonny Mason’s pension benefits in the year are equivalent to 8.5% of base salary, in line with the wider UK workforce.
5. Total of base salary, taxable benefits and pension benefit.
6. Total of annual bonus and LTIP.
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Convatec Group Plc Annual Report and Accounts 2024
Governance
Financial statements
Additional information
Overview
Strategic report
Directors’ Remuneration report
continued
Incentive outcomes for the year ended 31 December 2024 (audited)
Annual bonus in respect of performance in the 2024 financial year
For 2024, Karim Bitar and Jonny Mason had a maximum bonus opportunity of 200% of their 2024 base salary. Any payments
under the annual bonus are normally payable two-thirds in cash and one-third in shares, deferred for three years. The on-target
opportunity was 50% of maximum. The annual bonus for 2024 was based on a combination of adjusted operating profit
1
(weighted
40%), organic revenue growth
1
(25%), free cash flow to equity (15%) and personal strategic objectives (20%), of which 5% relate to
quantifiable ESG metrics.
The tables below summarise the structure of the 2024 annual bonus, the targets set, our performance over the financial year and
the resulting annual bonus payout.
Performance targets
Financial measure
Link to corporate strategy
Threshold
0% payout
Target
50% payout
Maximum
100% payout
Actual
performance
Adjusted operating profit
1
Focus
Innovate
Simplify
$457m
$471m
$500m
$499m
Organic revenue growth
1
Focus
Innovate
Simplify
4%
5.5%
7%
7.5%
Free cash flow to equity
Simplify
Execute
$213m
$237m
$260m
$302m
Objectives and actual performance
Karim Bitar
–
Grew FISBE market sales ahead of other markets.
–
Customer net promoter score (cNPS) introduced across all business units: actioning insights leading to increased customer
loyalty.
–
Roll out of eNPS globally, with Convatec in the top decile for employee engagement.
–
Continued the successful execution of FISBE strategy, delivering sustainable and profitable growth, a strong cash flow
position and strengthening Convatec’s competitive position.
–
Effective pipeline progression with strong pipeline of new products.
–
Continued delivery of improvements in overall quality of products, greenhouse gas emissions (61% reduction in Scope 1
and Scope 2 over 2021), increased diversity through women in senior leadership positions (45%).
Jonny Mason
–
Guided the business to deliver on all financial targets for the year, including: revenue growth; margin expansion; earnings
increase; and cash generation.
–
Expanded Finance, IT and Global Business Services (GBS) scope, with reduction in cost ratio achieved ahead of target.
–
Delivered process improvements in core processes (such as purchase to pay), evidenced by increases in tNPS.
–
Continued increase in employee engagement and reduction in voluntary turnover levels.
–
Successful delivery of first year of IT transformation activity.
ESG targets in scope: Complaints per million (CPM), Scope 1 and 2 greenhouse gas emissions; Vitality Index and a DE&I metric
linked to proportion of females in senior management roles. We successfully achieved a reduction in CPM by at least 8% and
attained a Vitality Index in excess of the target set of 28%. We also reduced Scope 1 and 2 emissions by 61% relative to our
2021 baseline, and had female representation within senior management of 45% at year end, ahead of the stated target.
For a comprehensive account of our performance against these targets see pages 39, 44 and 52 of the Annual Report.
Annual bonus in respect of performance breakdown
Weighting
Maximum
opportunity
(% of salary)
Bonus Calculation
Director
Measure
(% of maximum)
(‘000)
Karim Bitar
Adjusted operating profit
1
40%
80%
98.5%
Organic revenue growth
1
25%
50%
100%
Free cash flow to equity
15%
30%
100%
Personal strategic objectives
(inc. 5% in relation to ESG metrics)
20%
40%
96.25%
Total
100%
200%
98.7%
£1,937k
Jonny Mason
Adjusted operating profit
1
40%
80%
98.5%
Organic revenue growth
1
25%
50%
100%
Free cash flow to equity
15%
30%
100%
Personal strategic objectives
(inc. 5% in relation to ESG metrics)
20%
40%
96.25%
Total
100%
200%
98.7%
£1,052k
1.
Adjusted operating profit and organic revenue growth are both calculated on a constant currency basis using a budget rate.
One-third of the bonus earned by the Executive Directors will be deferred into shares to be held for three years. This will
be awarded in March 2025 and full details of this element of the award will be disclosed in next year’s Annual Report.
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Convatec Group Plc Annual Report and Accounts 2024
Governance
Scheme interests vesting in respect of the year ended December 2024 (audited)
In March 2022, Karim Bitar and Jonny Mason were granted conditional share awards under the LTIP. These LTIP awards were
subject to performance over the three-year period ended 31 December 2024, and performance conditions based on a combination
of: Relative TSR and adjusted PBT growth, both over a three-year period, weighted 25% and 75%, respectively.
The table below sets out details of the targets, and performance against these:
Measure
Weighting
Performance
range
Payout Range
Actual
performance
Weighted
vesting
outcome
Three-year Relative TSR against the
constituents of the FTSE 350 excluding
investment trusts
25%
Median to 90th
percentile
Median = 25% award
Stretch (75th percentile) = 90% award
Max (90th percentile or above) = 100% award
67th percentile
69.7%
Three-year compound annualised
growth in adjusted PBT
1
75%
8% to 15% p.a.
Threshold (8%) = 25% award through to
Stretch (15% or above) = Full award
12.2%
70.5%
Total %
vesting
70.3%
1.
Final vesting outturns on the PBT measure have been adjusted to reflect the impact of M&A over the period in line with the Remuneration Policy.
Accordingly, Executive Directors’ 2022 LTIP awards will vest on the third anniversary of grant as set out below:
Director
Date of grant
Number awarded
% vesting
Number vesting
Karim Bitar
14 March 2022
1,238,337
70.3%
870,551
Jonny Mason
14 March 2022
690,112
70.3%
485,149
Scheme interests awarded in 2024 (audited)
2024 LTIP awards
During the year ended 31 December 2024, the Executive Directors were awarded conditional share awards under the LTIP, details
of which are summarised in the table below. They are based on Convatec performance from 1 January 2024 to 31 December 2026.
Face value
Director
Date of grant
Number awarded
Award price
1
Value
% of
annualised salary
Vesting date
Karim Bitar
11 March 2024
1,025,891
276p
£2,831,459
300%
11 March 2027
Jonny Mason
11 March 2024
464,221
276p
£1,281,250
250%
11 March 2027
1. The LTIP face values are determined as a percentage of each Executive Director’s annualised salary on the date of grant and converted into numbers
of conditional shares using the average of the three-day closing price preceding the date of grant.
The performance conditions attached to these 2024 LTIP awards are set out in the table below.
Measure
Weighting
Threshold
(25% vesting)
Stretch
(90% vesting)
Maximum
(100% vesting)
Organic revenue growth
25%
4%
7%
Three-year compound annualised growth in adjusted PBT
50%
6% p.a.
14% p.a.
Three-year Relative TSR rank vs constituents of FTSE 50 to 150 excluding
investment trusts and using three-month average opening and closing values
12.5%
Median
75th
percentile
≥
90th
percentile
Three-year Relative TSR rank vs constituents of S&P Global Healthcare
Equipment & Services index (calculated in GBP)
12.5%
Median
75th
percentile
≥
90th
percentile
To the extent the 2024 LTIP awards vest, vested shares will be required to be held for a further two-year post-vesting holding
period. Vesting will be determined on a straight-line basis between the points in the table above.
Deferred Bonus Award (audited)
One-third of the 2023 bonus earned by Karim Bitar and Jonny Mason was deferred into shares to be held for three years under the
Deferred Bonus Plan DBP), details of which are summarised in the table below.
Value
Director
Date of grant
Number awarded
Award price
1
£
% of 2023 bonus
Vesting date
Karim Bitar
11 March 2024
226,266
276p
£624,494
One-third
11 March 2027
Jonny Mason
11 March 2024
122,863
276p
£339,102
One-third
11 March 2027
1.
The award values are determined as one-third of each Executive Director’s 2023 bonus and converted into numbers of conditional shares using the average
of the three-day share price preceding the date of grant.
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Convatec Group Plc Annual Report and Accounts 2024
Governance
Financial statements
Additional information
Overview
Strategic report
Directors’ Remuneration report
continued
Fees retained for external non-executive directorships
Executive Directors may hold one external appointment and retain the fees paid for such a role. Neither of the Executive Directors
held an external non-executive director appointment during the year.
Single total figure of remuneration for Non-Executive Directors (audited)
The table below sets out a single figure for the total remuneration received by each Non-Executive Director for the 2024 and 2023
financial years.
Fee
1
Benefits
2
Total
Non-Executive Director
2024
’000
2023
’000
2024
’000
2023
’000
2024
’000
2023
’000
John McAdam
£346
£334
£30³
£1
£376
£335
Margaret Ewing
£123
£120
£0
£1
£123
£121
Brian May
£100
£97
£0
£1
£100
£98
Heather Mason
£81
£79
£2
£2
£83
£81
Constantin Coussios
£79
£77
£2
£1
£81
£78
Kim Lody
£81
£80
£3
£2
£84
£82
Sharon O’Keefe
£92
£90
£3
£2
£95
£92
1.
Effective 1 April 2023, US dollar and Euro fee levels were introduced alongside the Sterling fee rates. Where a Non-Executive Director receives fees in US
dollar or Euro, the fees have been converted to Sterling using the average exchange rate at the time of payment.
2.
In addition to the fees payable to each of the Directors, the Group reimburses reasonable expenses.
3.
Includes travel related benefits provided to the Chair during the year.
Percentage change in Director remuneration
The table below shows the percentage change in Director remuneration (from 2019 to 2024) compared to the average percentage
change in remuneration for other employees over the same period.
Convatec Group Plc does not have any other employees other than Executive Directors. For the comparator group, we have used
the population of UK-based employees whose remuneration is based on overall Group business performance rather than that of a
particular Business Unit. In determining the annual change in average employee remuneration, we have looked at average annual
pay increase (excluding promotions) and actual bonus payments. We have only included employees who were in the Group in both
years of the comparison to ensure consistency.
Annualised percentage
change from 2023 to 2024
Annualised percentage
change from 2022 to 2023
Annualised percentage
change from 2021 to 2022
Annualised percentage
change from 2020 to 2021
Annualised change
from 2019 to 2020
Salary or
fees¹
Benefits²
Bonus
Salary or
fees¹
Benefits²
Bonus
Salary or
fees¹
Benefits²
Bonus
Salary or
fees¹
Benefits²
Bonus
Salary or
fees¹
Benefits²
Bonus
Executive
Directors
Karim Bitar
3%
0%
3%
2.5%
35.9%
39.9%
2.6%
0.0%
(6.5)%
1.9%
0.0%
(16.9)%
0.0%
0.0%
40.0%
Jonny Mason
3%
0%
3%
2.5%
1.3%
41.9%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Non-
Executive
Directors
John
McAdam
4%
2226%
n/a
1.9%
197.1%
n/a
2.5%
213.0%
n/a
0.0%
n/a
n/a
0.0%
(100)%
n/a
Margaret
Ewing
3%
(88)%
n/a
2.6%
6.3%
n/a
0.0%
310.1%
n/a
(5.4)%
n/a
n/a
0.9%
(100)%
n/a
Brian May
3%
(81)%
n/a
2.4%
2.3%
n/a
0.0%
443.5%
n/a
8.4%
n/a
n/a
n/a
n/a
n/a
Heather
Mason
2%
0%
n/a
5.7%
(14)%
n/a
0.0%
134.2%
n/a
15.4%
n/a
n/a
n/a
n/a
n/a
Constantin
Coussios
4%
29%
n/a
2.0%
(1.7)%
n/a
0.0%
247.4%
n/a
15.4%
n/a
n/a
n/a
n/a
n/a
Kim Lody
2%
26%
n/a
5.7%
(19.5)%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Sharon
O’Keefe
2%
27%
n/a
6.1%
(9.7)%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Average per
employee
6.4%
5.7%
18.8%
7.2%
3.1%
21.2%
5.3%
10.0%
13.5%
2.7%
(16.5)%
39.2%
2.7%
2.7%
16.0%
Former Directors (who did not serve on the Board during the financial year under review) have been removed from the table. Relevant prior data and
commentary can be found in last year’s annual report.
1.
Salary / fee figures have been annualised for this analysis to permit a meaningful comparison over time. Effective 1 September 2020, the Non-Executive
Director fee structure was changed: the base fee was increased and committee membership fees were discontinued.
2.
The year-on-year increase in benefits reflects the Group’s best estimate for the change in the average value of benefits for other employees. Non-Executive
Directors’ benefits relate to taxable expenses (largely travel to attend meetings). Karim Bitar receives a healthcare allowance instead of private medical
insurance which was set at £30,000 per annum in 2019. Due to the rising cost of healthcare and inflation, Karim’s medical benefit was reviewed during the
year and the Committee approved an increase to £50,000 per annum. Changes exclude the value of pension contributions.
138
Convatec Group Plc Annual Report and Accounts 2024
Governance
Relative importance of spend on pay
The table below shows shareholder distributions (i.e. dividends) and total employee pay expenditure for the financial years ended
31 December 2024 and 31 December 2023, and the percentage change year-on-year.
2024
$m
2023
$m
Year-on-year
change
Total employee pay expenditure
767
701
9%
Shareholder distributions
130
127
2%
Payments to past Directors and payments for loss of office (audited)
There were no payments to past Directors or payments for loss of office during the year.
Review of past performance
The first graph shows the Group’s TSR compared to the FTSE 100 index, an index of which the Group is a constituent. Performance,
as required by legislation, is measured by TSR over the period from commencement of conditional dealing (26 October 2016) to
31 December 2024.
The second graph shows TSR performance of the Group compared with the FTSE 100 index since the announcement of Karim Bitar
as CEO (25 March 2019) to 31 December 2024.
TSR Chart – Convatec vs the FTSE 100
Value of £100 invested on
25 October 2016 – IPO
Convatec Group Plc
FTSE 100
40
60
80
100
120
140
160
180
25/10/16 31/12/16 31/12/17 31/12/18 31/12/19 31/12/20 31/12/21 31/12/22 31/12/23 31/12/24
Value of £100 invested on 25 March 2019 – announcement
of Karim Bitar as CEO
Convatec Group Plc
FTSE 100
40
60
80
100
120
140
160
180
200
220
March 19
Dec 19
Dec 20
Dec 21
Dec 22
Dec 23
Dec 24
The table below details the CEO’s single total figure of remuneration and incentive outcomes over the same period:
2016
2017
2018
2019
2020
2021
2022
2023
2024
Karim Bitar
(from 30 September 2019)
CEO single figure (‘000)
£6,878¹
£2,786
£3,699²
£4,419
£4,628³
£5,059
Annual bonus (% max.)
70.2%
98.5%
79.8%
72.7%
99.3%
98.7%
LTIP vesting (% max.)
n/a
n/a
44.2%
80.5%
51.6%
70.3%⁴
Rick Anderson⁵
(15 October 2018 to
29 September 2019)
CEO single figure (‘000)
£264
£1,118
Annual bonus (% max.)
n/a
n/a
LTIP vesting (% max.)
n/a
n/a
Paul Moraviec
(to 14 October 2018)
CEO single figure (‘000)
£1,413
£917
£631
Annual bonus (% max.)
40%
9%
n/a
LTIP vesting (% max.)
n/a
n/a
n/a
1.
2019 remuneration includes the face value of the restricted share awards made to Karim Bitar as part of his buy-out.
2.
Includes the actual vesting value of Karim Bitar’s Conditional Share award that formed part of his buy-out arrangement on appointment of £888k.
3.
Updated single figure to reflect actual vesting of 2021 LTIP award in March 2024.
4.
Represents the performance outcome of the 2022 LTIP (as a % of maximum) with a final vesting date in March 2025.
5.
Rick Anderson was a Non-Executive Director who acted as interim Executive Chair ahead of Karim Bitar joining the business. He received a fixed fee for his
services in comparison to the reward package design in place for Paul Moraviec and Karim Bitar.
139
Convatec Group Plc Annual Report and Accounts 2024
Governance
Financial statements
Additional information
Overview
Strategic report
Directors’ Remuneration report
continued
CEO pay ratio
The table below discloses the ratio of CEO pay for 2023, comparing the single total figure of remuneration for Karim Bitar to the full-time
equivalent total reward of those colleagues whose pay is ranked at the 25th, 50th and 75th percentiles in our total UK workforce.
Methodology Option A (as defined by the Regulations) has been chosen to calculate the ratio, as it provides a fair comparison
of colleague pay with that of our CEO by using a consistent methodology to value remuneration and identify our colleagues ranked
at the 25th, 50th and 75th percentiles. We believe that the median ratio for 2024 is consistent with the pay and reward policies for
the company’s UK employees. Colleague pay was calculated based on actual pay and benefits for the 12 monthly payrolls in respect
of the full financial year to 31 December 2024. We can confirm that no adjustments were made to the calculation of the total
remuneration for these employees from the methodology set out for the CEO’s single total figure remuneration. Our pay ratios
are set out below:
Year
Method
25th percentile
50th percentile
75th percentile
2024
Option A
117:1
87:1
58:1
2023
Option A
106:1
80:1
51:1
2022
Option A
125:1
98:1
59:1
2021
Option A
115:1
89:1
52:1
2020
Option A
83:1
65:1
40:1
2019
Option A
163:1
123:1
76:1
The table below provides information on the salary and total pay and benefits paid to our colleagues ranked at the 25th, 50th and
75th percentiles.
Year
Method
25th percentile
50th percentile
75th percentile
2024
Salary
£33,345
£43,735
£64,191
Total pay and benefits
£43,296
£58,123
£87,627
2023
Salary
£31,639
£41,076
£60,000
Total pay and benefits
£40,145
£53,121
£82,799
2022
Salary
£29,892
£38,000
£55,017
Total pay and benefits
£34,757
£44,418
£73,336
2021
Salary
£27,638
£34,521
£58,739
Total pay and benefits
£32,663
£41,964
£71,619
2020
Salary
£26,660
£34,487
£52,415
Total pay and benefits
£33,425
£42,641
£69,668
2019
Salary
£23,500
£32,798
£39,542
Total pay and benefits
£30,652
£40,601
£65,922
Our CEO Pay Ratio has increased since 2023 to 87:1 from 80:1. Pay and benefits for the median employee increased by 9.4%
between the two years. This compared to an increase in the CEO single figure of 9.3%. The breakdown of the variance for the CEO
is provided below with commentary behind the change.
History of CEO pay ratio: CEO pay to median employee
2020
CEO Pay Ratio (Median)
2022
2021
2023
2024
65:1
150
100
50
0
89:1
98:1
80:1
87:1
Change in CEO Single Figure 2023 to 2024 (£K)
Single
Figure
2023
Single
Figure
2024
Change
in
Salary
Change
in
Benefits
Increase
in
Annual
Increase
in
PSP
4,628
34
3
64
330
5,
059
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Convatec Group Plc Annual Report and Accounts 2024
Governance
Change in CEO Reward (Single Figure 2023 to 2024)
Reward Change
Commentary
Salary (+£34k)
This is the impact of the change in annual base pay to £981,580 effective April 2024 (previously £943,820)
Benefits (including pension)
(+£3k)
There was no change in structure of benefits provided to the CEO between 2023 and 2024. The value relates to the
pension allowance paid by the Company, driven off a higher base salary figure. The allowance level has remained
consistent year-on-year, at 8.5% of base pay, consistent with the wider UK workforce.
Annual Bonus (+£64k)
Awards under our annual plan were at similar levels to 2023, with awards of 197.3% out of a maximum of 200%
(2023: 198.5%). This represents a further year of strong business delivery for the organisation.
Long-Term Incentives –
Performance Shares (+£330k)
The PSP award vested at 70.3% of maximum compared to a vesting level of 51.6% for the previous three-year
performance period. The estimated value on vesting (based on the average share price for the last three months of
2024) is £1,991k. This compares to the value of the PSP award that vested in March 2024 of £1,661k.
Overall (+£431k)
The variance in the CEO pay ratio reflects the overall proportion of pay linked to variable reward for the CEO, and the
associated strength of achievement against this over time.
Implementation of Executive Director Remuneration Policy for 2025
Base salary
Following a review of the Executive Directors’ salaries, the Committee decided to award a base salary increase of 2.9% in line with
the increases for the general employee population in the UK. The increase will be effective from 1 April 2025.
Director
Role
From 1 April 2025
From 1 April 2024
Karim Bitar
CEO
£1,010,000
£981,580
Jonny Mason
CFO
£548,500
£533,000
Pension
Karim Bitar and Jonny Mason receive a pension benefit of 8.5% of base salary in line with that available to the wider UK workforce.
Karim Bitar receives his pension benefit as a combination of a contribution to pension and the balance as a cash allowance.
Jonny Mason receives his pension benefit as a cash allowance.
Annual bonus
For 2025, Karim Bitar and Jonny Mason will continue to have a maximum bonus opportunity of 200% of salary. The on-target bonus
opportunity remains 50% of maximum. Two-thirds of any bonus earned will be paid in cash, with the remainder deferred into
Convatec Group Plc shares for a further three-year period.
The annual bonus for 2025 will be based on the following measures and weightings:
Measure
Link to corporate strategy
Weighting
Adjusted operating profit
1
Focus
Innovate
Simplify
40%
Organic revenue growth
1
Focus
Innovate
Simplify
25%
Free cash flow to equity
Simplify
Execute
15%
Personal strategic objectives (including ESG)
Focus
Build
20%
(of which 5%
relates to ESG)
1.
Adjusted operating profit and organic revenue growth are both calculated on a constant currency basis using a budget rate. We have set revenue targets
excluding ATT for 2025, removing this from the base year and 2025 performance to determine growth achieved.
The Committee reaffirms its confidence in the established balance of financial measures for 2025, which continues to support
our focus on sustainable and profitable growth. The use of organic revenue growth as a key metric reinforces our commitment to
long-term value creation, and complements operating profit in driving our strategic objectives forward. ESG is within the personal
strategic objective metric of the bonus to place importance on this and responsible business practices within our operations.
The Board currently considers these targets to be commercially sensitive and intends to disclose retrospectively in next year’s
Annual Report on Remuneration. In the event the Board considers these targets to remain commercially sensitive, they will be
disclosed as soon as possible once they are no longer considered to be sensitive.
In line with our Policy, bonuses for the 2025 financial year will be subject to the Group’s policy on deferral, and its malus and
clawback provisions (see pages 130 to 131 for further details).
Long-Term Incentive Plan (LTIP)
The 2025 LTIP will, subject to approval of our revised Remuneration Policy at the 2025 AGM, comprise two elements: an award
of Performance Shares and a separate award of Restricted Shares.
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Convatec Group Plc Annual Report and Accounts 2024
Governance
Financial statements
Additional information
Overview
Strategic report
Directors’ Remuneration report
continued
Performance Shares
We will make PSP awards to Karim Bitar of 425% salary, and of 250% of salary to Jonny Mason, as described on page 125. These awards
will vest in March 2028, subject to the following performance targets assessed over the three years ending 31 December 2027:
Measure
Weighting
Threshold
(25% vesting)
Stretch
(90% vesting)
Maximum
(100% vesting)
Organic revenue growth
25%
4% p.a.
7% p.a.
Three-year compound annualised growth in adjusted Earnings per Share (EPS)
50%
6% p.a.
14% p.a.
Three-year Relative TSR rank vs constituents of S&P Global Healthcare Equipment
& Services index (calculated in GBP)
25%
Median
75th
percentile
≥
90th
percentile
Vesting will be determined on a straight-line basis between the data points in the table above. To the extent an award vests, it will be
subject to a further two-year holding period after allowing some of the shares to be sold to cover estimated social security/tax liabilities.
Restricted Shares
We will make awards of 100% of salary to Karim Bitar and 75% of salary to Jonny Mason. These will be awards of shares that vest
in the future subject to continued employment with the business. They are not subject to further company performance conditions,
but remain subject to our clawback and malus policies. The Committee may adjust the vesting level (including to zero) to avoid
unintended outcomes, align pay outcomes with underlying Group performance and ensure fairness to shareholders and
participants.
To support transition to the new Policy, awards will be made in June 2025, using the share price used for the main Performance
Share grant described above, and will be scheduled to vest in March 2028. In future years we expect awards to be made each
March, with vesting on the third anniversary of award.
As with the award of Performance Shares, to the extent an award vests, it will be subject to a further two-year holding period after
allowing some of the shares to be sold to cover estimated social security/tax liabilities.
Summary of Scheme Interests
As at 31 December 2024, the Executive Directors had the following beneficial interests in share awards and share options:
PSP
– Performance Share Plan – awards of shares that vest after three years subject to the achievement of performance against
business targets.
DBP
–Deferred Bonus Plan – awards of shares that represent the compulsory deferral of part of the annual bonus into shares that
vest after three years subject to continued employment with the business.
SAYE
– Awards of shares under our Save as You Earn plan, our HMRC approved all-employee share plan that operates in the UK.
Karim Bitar
Vesting Period
Share Price
at Grant
At
31 December 2023
Granted
in year
Lapsed
In year
Exercised
in Year
As at
31 December 2024
10 March 2021 to 10 March 2024 – DBP
£1.90
301,460
0
0
(301,460)
0
10 March 2021 to 10 March 2024 – PSP
£1.90
1,147,691
0
(555,483)
(592,208)
0
14 March 2022 to 14 March 2025 – DBP
£1.81
263,650
0
0
0
263,650
14 March 2022 to 14 March 2025* – PSP
£1.81
1,238,337
0
0
0
1,238,337
15 March 2023 to 15 March 2026 – DBP
£2.21
201,937
0
0
0
201,937
15 March 2023 to 15 March 2026* – PSP
£2.21
1,041,628
0
0
0
1,041,628
05 June 2023 to 05 June 2026* – PSP
£2.07
222,630
0
0
0
222,630
20 July 2023 to 01 September 2026 – SAYE
£1.76
10,253
0
0
0
10,253
11 March 2024 to 11 March 2027 – DBP
£2.76
0
226,266
0
0
226,266
11 March 2024 to 11 March 2027* – PSP
£2.76
0
1,025,891
0
0
1,025,891
TOTAL
4,427,586
1,252,157
(555,483)
(893,668)
4,230,592
*
A further two-year holding period applies to these awards post vesting.
Jonny Mason
Vesting Period
Share Price
at Grant
At
31 December 2023
Granted
in year
Lapsed
In year
Exercised
in Year
As at
31 December 2024
14 March 2022 to 14 March 2025* – PSP
£1.81
690,112
0
0
0
690,112
14 July 2022 to 01 September 2025 – SAYE
£1.74
10,346
0
0
0
10,346
15 March 2023 to 15 March 2026 – DBP
£2.21
99,826
0
0
0
99,826
15 March 2023 to 15 March 2026* – PSP
£2.21
565,610
0
0
0
565,610
11 March 2024 to 11 March 2027 – DBP
£2.76
0
122,863
0
0
122,863
11 March 2024 to 11 March 2027* – PSP
£2.76
0
464,221
0
0
464,221
TOTAL
1,365,894
587,084
–
–
1,952,978
*
A further two-year holding period applies to these awards post vesting.
142
Convatec Group Plc Annual Report and Accounts 2024
Governance
Implementation of Non-Executive Director Remuneration Policy for 2025
The Remuneration Committee sets the fee for the Chair and approved an increase aligned with that of the Executive Directors
at 2.9%.
The fees for the Non-Executive Directors, other than the Chair, are reviewed and set by the Non-Executive Director Fee Committee,
comprised of the Chair, CEO and CFO. The Non-Executive Fee Committee reviewed and approved an increase to the basic fees
aligned with the that of the wider UK employee workforce.
The fee increases will take effect on 1 April 2025. The fees payable to the Non-Executive Directors are set out below.
Role
Fee structure
in 2025¹
Fee structure
in 2024
Chair
£359,800
£349,700
Non-Executive Director basic fee
£82,300 or $107,800
£80,000 or $104,750
Additional fees:
Senior Independent Director
No change
£21,000 or $28,000
Chair of the Audit and Risk Committee
No change
£23,000 or $30,000
Chair of the Remuneration Committee
No change
£21,000 or $28,000
Fee for acting as a Board Level Employee
Representative
No change
£10,500 or $14,000
1. Effective 1 April 2025.
Non-Executive Director letters of appointment
None of the Non-Executive Directors has a service contract with the Group. They do have letters of appointment, and will be
submitted for re-election annually. Copies of letters of appointment are available to view at the Company’s registered office. The
dates relating to the appointments of the Chair and Non-Executive Directors who served during the reporting period are as follows:
Director
Role
Date of appointment
Date of letter of
appointment
Date of election/
re-election
John McAdam
Non-Executive Chair
30 September 2019
18 August 2019
16 May 2024
Margaret Ewing
Senior Independent Director
11 August 2017
17 August 2017
16 May 2024
Brian May
Independent Non-Executive Director
2 March 2020
26 February 2020
16 May 2024
Heather Mason
Independent Non-Executive Director
1 July 2020
8 May 2020
16 May 2024
Constantin Coussios
Independent Non-Executive Director
1 September 2020
29 June 2020
16 May 2024
Kim Lody
Independent Non-Executive Director
1 February 2022
13 December 2021
16 May 2024
Sharon O’Keefe
Independent Non-Executive Director
1 March 2022
24 February 2022
16 May 2024
Directors’ shareholdings (audited)
The table below sets out details of the current shareholdings of each Director (and any relevant connected persons) as at
31 December 2024. For Executive Directors, the current shareholding is compared to their shareholding guideline.
Shares
Options
Owned outright or vested
Director
31 December
2023
31 December
2024
Unvested and
not subject to
performance
conditions
Unvested and
subject to
performance
conditions
Vested but not
exercised
Unvested and
not subject to
performance
conditions
Current
shareholding¹
(% salary)
Shareholding
guideline
(% salary)
Current directors
Karim Bitar
2,456,534
2,929,020
691,853
3,528,486
–
10,253
774%
400%
Jonny Mason
50,000
50,000
222,689
1,719,943
–
10,346
78%
300%
John McAdam
23,181
23,181
Margaret Ewing
10,000
10,000
Brian May
25,000
25,000
Heather Mason
10,000
10,000
Constantin Coussios
23,278
23,278
Kim Lody
10,000
10,000
Sharon O’Keefe
3,200
3,200
1. Executive Director shareholdings calculated based on the number of shares that are owned outright or vested plus an estimated number of unvested shares
that are not subject to performance conditions, on a net of tax basis. These shares are valued using a share price of 228.72p, being the average share price
during the last three months of the 2024 financial year, or the market value of the shares at the point of award (if higher) in line with our Shareholding
Guidelines policy.
There were no changes to the number of shares held by Directors between 31 December 2024 and 21 February 2025, being the
latest practicable date prior to publication of this Annual Report.
143
Convatec Group Plc Annual Report and Accounts 2024
Governance
Financial statements
Additional information
Overview
Strategic report
Directors’ Remuneration report
continued
Share scheme dilution limits
The Company complies with the guidelines laid down by the Investment Association. These restrict the issue of new shares under
all the Company’s share schemes in any ten-year period to 10% of the issued ordinary share capital. Our year-end position shows
dilution levels at December 2024 of 3.1% across all schemes, with 2.6% over discretionary schemes. These fall well below current
shareholder guidelines.
The Directors’ Remuneration report has been approved by the Board and signed on its behalf by:
Brian May
Chair of the Remuneration Committee
25 February 2025
SPOTLIGHT ON EXECUTIVE DIRECTOR SHAREHOLDING
Our existing Policy requires Executive Directors to develop and maintain a significant shareholding in the Company,
currently 400% for the CEO and 300% for the CFO. We intend to further increase the requirement for the CEO as part of our
updated Policy, from 400% to 500% of base. This is expected to be developed through holdings of shares that vest under
company share plans.
0
100
200
300
400
500
600
700
800
900
2020
2021
2022
2023
2024
774
664
547
405
365
0
200
150
100
50
250
2022
2023
2024
March 2025
(projection)
199
*
78
44
22
CEO Shareholding
Our disclosures show the way that Karim Bitar’s stated
shareholding has developed over time, comfortably
exceeding the required shareholding expectations
under our Policy.
CFO Shareholding Progression
The level of holding for Jonny Mason has increased steadily
each year since joining in 2022. This is now accelerating
more quickly as the first sets of long-term awards begin
to vest since joining the business. We operate a mandatory
two-year holding period for awards vesting under the PSP
(post tax) and our Policy requires that at least half of other
shares that vest are retained by the individual until the
point the shareholding guideline is achieved. The graph
shows the stated position at year end, but also a projection
of how this will change in March 2025, when the PSP award
from 2022 vests, and the one-third of the annual bonus
award for 2024 is awarded as deferred shares.
Disclosed CEO Shareholding at year end (% Salary)
CFO Shareholding at year end (% Salary)
*
Projection as at March 2025 following PSP vesting
144
Convatec Group Plc Annual Report and Accounts 2024
Governance
Directors’ report
The Directors present their Annual Report on the affairs of the Group,
together with the financial statements and auditor’s report, for the year
ended 31 December 2024.
The Directors’ Report comprises the Governance Report (on pages 84 to 144), the Directors’ Report (on pages 145 to 148) and the
Shareholder information section (on page 210). The following information is provided in other appropriate sections of the Annual
Report and is incorporated by reference in this table.
To comply with the Disclosure and Transparency Rules (DTR) 4.1.5R(2) and DTR 4.1.8R, the required content of the Management
Report can be found in the Strategic Report or this Directors’ Report, including the material incorporated by reference.
Information
Section where provided
Page
Likely future developments and research and development activities
Strategic report
39 to 43
Stakeholder engagement
36 to 38
Employee engagement
36, 45 and 96
Employment of disabled persons
147
Greenhouse gas emissions
55 to 56
Task Force on Climate-related Financial Disclosures (TCFD) report
60 to 71
Viability statement
82 to 83
Compliance with the 2018 UK Corporate Governance Code (the Code)
88 to 91
Directors
Governance Report – Our Board
92 to 93
Directors’ Remuneration report
114
to 144
Directors’ Remuneration report – directors’ beneficial
interests and shareholding requirements
142 to 144
Details of Long-Term Incentive Plan
130 to 131
Dividend
25 and 145
Statement of Directors’ responsibilities
148
Going concern
161
Accounting policies, financial instruments and financial risk management
161 to 200
Disclosure of information
to the auditor
Each of the Directors, as at the date
of this Annual Report, confirms that:
–
the Director has taken all steps that he/
she ought to have taken as a Director
in order to make him/herself aware
of any relevant audit information and
to establish that the Company’s auditor
is aware of that information; and
–
so far as the Director is aware, there is
no relevant audit information of which
the Company’s auditor is unaware.
This confirmation is given and should
be interpreted in accordance with the
provision of Section 418 of the
Companies Act 2006 (the Act). Deloitte
LLP has expressed its willingness to
continue in office as auditor and a
resolution to reappoint them will be
proposed at the 2025 AGM.
Branches of the Company
The Group, through various subsidiary
and related undertakings, has branches
in a number of different jurisdictions
in which the business operates. Further
details are included in subsidiary
undertakings on pages 207 to 209.
Dividends
Our stated policy is to target a payout
ratio of between 35% and 45% of adjusted
net profit. This is interpreted flexibly over
time to reflect the development of the
business. The Board is recommending
a 3% increase in the full-year dividend
to reflect the underlying improvement
in business performance.
We annually assess the application of
the policy when proposing the dividend,
taking into account, among other things,
our growth prospects, capital efficiency,
investment plans and the profitability
of the Group, whilst also maintaining
appropriate levels of dividend cover. Any
decision to declare and pay dividends will
be made at the discretion of the Directors
and will depend on, among other things,
applicable law, regulation, restrictions,
strategic objectives, capital
management, the Group’s various
stakeholders (for further information see
the Section 172 statement on page 98),
review of our comparator peer group,
available and forecast realised
distributable reserves of the Company
and the forecast cashflows and liquidity
of the Group, and other factors the
Directors deem significant.
The Directors recommend a final dividend
for the year of 4.594 cents per share
(2023: 4.460 cents) which, together with
the interim dividend of 1.822 cents per
share (2023: 1.769 cents), makes a total
for the year of 6.416 cents per share (2023:
6.229 cents), a 3% increase over the prior
year. The final dividend, if approved by the
shareholders, will be paid on 29 May 2025
to shareholders on the register at the
close of business on 22 April 2025.
Capital structure
Share capital
As at 31 December 2024, the Company’s
issued share capital consisted of
2,049,789,559 ordinary shares of 10p
each. Further details of the authorised
and issued share capital, together with
details of the movements in the
Company’s issued share capital during
the year, are shown in Note 17 to the
Consolidated Financial Statements.
As at 31 December 2024, the Company
had only one class of share consisting
of ordinary shares of 10p each.
145
Convatec Group Plc Annual Report and Accounts 2024
Governance
Financial statements
Additional information
Overview
Strategic report
Directors’ report
continued
Acquisition of Company’s
own shares
At the Company’s AGM on 16 May 2024,
the Directors’ authority was renewed
under shareholders’ resolution to
purchase through the market up to
10% of the Company’s ordinary shares at
a maximum price per share of the higher
of: (i) an amount equal to 105% of middle
market quotations of the price of shares
for the five business days prior to the date
of purchase; and (ii) an amount equal to
the higher of the last independent trade
and the highest current independent bid
at the time of purchase. This authority will
expire at the end of Company’s 2025 AGM
and the Company will seek its renewal
at the AGM. It is confirmed that no
acquisition of the Company’s own shares
has been made under such authority.
Shareholders’ rights
The rights attaching to the ordinary
shares are governed by the Company’s
Articles of Association (the Articles) and
prevailing legislation. There are no specific
restrictions on the size of a holding.
Subject to applicable law and the Articles,
holders of ordinary shares are entitled
to receive all shareholder documents,
including notice of any general meeting,
attend, speak and exercise voting rights
at general meetings, either in person
or by proxy, and participate in any
distribution of income or capital.
Restrictions on voting
There are no specific restrictions on
voting rights, save in situations where
the Company is legally entitled to impose
such restrictions (usually where amounts
remain unpaid on shares after request, or
the shareholder is otherwise in default of
an obligation to the Company). Currently,
all issued ordinary shares are fully paid.
There are no agreements between
holders of securities in the Company
that are known to the Company and may
result in restrictions on transfer or on
voting rights.
Restrictions on the transfer
of ordinary shares
The transfer of ordinary shares is
governed by the general provisions of
the Company’s Articles and applicable
legislation. There are no restrictions on
the transfer of ordinary shares other than:
(i) as set out in the Articles; and (ii) certain
restrictions which may from time to time
be imposed by laws and regulations and
pursuant to the Listing Rules whereby
Directors and certain officers and
employees of the Company require
approval to deal in the ordinary shares
in accordance with the Company’s share
dealing policies and the Market Abuse
Regulation.
Directors’ appointment,
replacement and powers
The appointment and replacement of
Directors of the Company is governed by
its Articles, the Code, the Act and related
legislation. The Articles themselves may
be amended by special resolution.
Details of the powers of the Board and
its Committees are described in the
Governance Framework on our website.
The powers of the Board are set out in the
Articles and the Terms of Reference of each
of the Board’s committees set out their
respective duties and responsibilities. The
aforementioned documents can be found
at www.convatecgroup.com/investors/
governance.
Significant agreements
There are a number of agreements that
take effect, alter or terminate upon a
change of control of the Company, such
as commercial contracts, bank loan
agreements, property lease arrangements
and employees’ share plans. Other than
the Group’s main funding agreements
referenced in the following paragraph,
none of these are considered to be
significant in terms of their likely impact
on the business of the Group as a whole.
Furthermore, the Directors are not aware
of any agreements between the Group
and its Directors or employees that
provide for compensation for loss of
office or employment that occurs because
of a change of control resulting from
a takeover bid.
In the event of a change of control of
the Company, the Group’s main funding
agreements allow the lenders to give
notice of repayment for all outstanding
amounts under the relevant facilities.
Directors’ indemnities
The Group has made qualifying third-
party indemnity provisions for the
benefit of its Directors, which remain
in force at the date of this report.
Company Secretary
The Company Secretary provides
ongoing support to the Board in relation
to corporate governance issues and
compliance with the Listing Rules.
He is responsible for establishing,
implementing and monitoring the
corporate governance framework,
attending (directly or through a designate)
all Board and Committee meetings,
advising on effective Board processes,
advising on Directors’ statutory duties,
disclosure obligations and requirements
under the Listing Rules, and working in
conjunction with the investor relations
team regarding dialogue with investors.
Political donations
No political donations, including to
non-UK political parties, were made
during the period.
Substantial shareholdings
At 31 December 2024, the Company had been notified in accordance with Chapter 5 of the Disclosure Guidance and Transparency
Rules, of the following voting rights as a shareholder of the Company. At 21 February 2025, being the latest practicable date prior
to the publication of this Annual Report, the Company had not received any further notifications pursuant to Chapter 5 of the
Disclosure Guidance and Transparency Rules.
Shareholder
No. of ordinary shares
Percentage of voting
rights
Nature of holding
Novo Holdings A/S
395,318,793
20.25%¹
Direct holding
Fil Limited
104,437,607
5.10%²
Direct holding/Indirect holding
Black Creek Investment Management, Inc.
98,997,466
4.83%³
Direct holding/Indirect holding
BlackRock, Inc.
Below 5%
Below 5%⁴
Indirect holding/Financial
instruments
Pelham Capital Ltd.
93,526,729
4.71%⁵
Direct holding
Artisan Partners Limited Partnership
97,980,658
4.98%⁶
Indirect holding
The Capital Group Companies Inc.
97,418,767
4.99%⁷
Indirect holding
It should be noted that the percentages are shown as notified and that these holdings may have changed since the Company was notified, however, notification
of any change is not required until the next notifiable threshold is crossed.
1. Disclosure made in 2018.
2. Disclosure made in 2024.
3. Disclosure made in 2023.
4.
Disclosure made in 2023.
5. Since the disclosure made in 2019, Pelham Capital Ltd has sold its shares and is no longer a shareholder of the Company.
6. Disclosure made in 2018.
7. Since the disclosure made in 2017, The Capital Group Companies Inc. has sold its shares and is no longer a shareholder of the Company.
146
Convatec Group Plc Annual Report and Accounts 2024
Governance
Diversity and inclusion
We are committed to creating a values-
led, performance-driven culture which
starts with our employees, and we aim
to bring together a rich diversity of
backgrounds, experiences, preferences
and capabilities which unite together
to improve people’s lives through their
work at Convatec. The Board considers
a diverse workforce as critical to the
Company’s success. Information about
the Group’s initiatives to achieve diversity
across the business, including specific
objectives, are contained on pages 46
and 47.
Employment of disabled people
Applications for employment by disabled
people are always fully considered,
bearing in mind the aptitudes of the
applicant concerned. In the event of
members of staff becoming disabled
every effort is made to ensure that their
employment with the Group continues
and that appropriate training is arranged.
It is the policy of the Group that the
training, career development and
promotion of anyone with a disability
should, as far as possible, be equitable
with that of other employees.
Employee share schemes
In addition to the discretionary share
schemes operated as part of the Group’s
long-term incentives, detailed in the
Remuneration Policy on page 130, the
Group operates an all-employee share
scheme in selected jurisdictions. The
Directors believe that these schemes
align the interests of employees and
shareholders by encouraging employees
to buy and own shares in the Company,
thus enabling them to benefit directly
from the anticipated growth and success
of the Group in the future.
Executive Directors may also participate
in the UK all-employee share scheme,
which is an HMRC-approved savings-
related share option plan, on the same
basis as other eligible employees. All
participants may invest up to the limits
set in line with HMRC guidance and as
operated by the Group.
Shares acquired through the Group’s
share plans rank pari passu with existing
ordinary shares in issue and have no
special rights with regards to voting,
rights to dividend, control of the
Company or otherwise.
All of the Group’s employee share plans
contain provisions relating to a change
of control. On a change of control,
options and awards granted to
employees under the Group’s share
plans may vest and become exercisable,
subject to the satisfaction of any
applicable performance conditions
at that time.
Listing Rules – compliance with UKLR 6.6.1
The information in the table below is required to be disclosed by
UK Listing Rules (UKLR) 6.6.1 and can be found in the following
locations. There are no other disclosures required under this UKLR.
Section
Applicable sub-paragraph within UKLR 6.6.1
Location
1
Interest capitalised
Group Financial Statements, Note 25, page 197
4
Details of long-term incentive schemes
Directors’ Remuneration report, page 119
Annual General Meeting
The Annual General Meeting will be held on Thursday 22 May 2025 at 2pm and will take place at the offices of FGS Global, The
Adelphi, 1-11 John Adam Street, London, WC2N 6HT, United Kingdom, in the form of a hybrid meeting. Notice of the meeting,
containing details of the resolutions to be put to the meeting, will be available at www.convatecgroup.com/investors/shareholder-
centre/agm-information/.
By order of the Board:
James Kerton
Company Secretary
25 February 2025
Convatec Group Plc is registered in England No. 10361298
147
Convatec Group Plc Annual Report and Accounts 2024
Governance
Financial statements
Additional information
Overview
Strategic report
Directors’ responsibilities statement
The Directors are responsible for
preparing the Annual Report and the
Financial Statements in accordance
with applicable law and regulations.
Company law requires the Directors
to prepare financial statements for
each financial year. Under that law
the Directors are required to prepare
the Group Financial Statements in
accordance with United Kingdom
adopted International Accounting
Standards and have elected to prepare
the parent company financial statements
in accordance with United Kingdom
Generally Accepted Accounting Practice
(United Kingdom Accounting Standards
and applicable law), including FRS 101
“Reduced Disclosure Framework”. Under
company law the Directors must not
approve the accounts unless they are
satisfied that they give a true and fair
view of the state of affairs of the Group
and Company and of the profit or loss of
the Group and Company for that period.
In preparing the parent company’s
financial statements, the Directors are
required to:
–
select suitable accounting policies
and then apply them consistently;
–
make judgements and accounting
estimates that are reasonable and
prudent;
–
state whether applicable UK
Accounting Standards have been
followed, subject to any material
departures disclosed and explained
in the Financial Statements; and
–
prepare the Financial Statements on
the going concern basis unless it is
inappropriate to presume that the
Company will continue in business.
In preparing the Group Financial
Statements, International Accounting
Standard 1 requires that Directors:
–
properly select and apply accounting
policies; present information, including
accounting policies, in a manner that
provides relevant, reliable, comparable
and understandable information;
–
provide additional disclosures when
compliance with the specific
requirements in IFRSs are insufficient
to enable users to understand the
impact of particular transactions, other
events and conditions on the Group’s
financial position and financial
performance; and
–
make an assessment of the Group’s
ability to continue as a going concern.
The Directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the Group
and Company’s transactions and disclose
with reasonable accuracy at any time the
financial position of the Group and
Company and enable them to ensure
that the Financial Statements comply
with the Companies Act 2006. They are
also responsible for safeguarding the
assets of the Group and Company and
hence for taking reasonable steps for
the prevention and detection of fraud
and other irregularities.
The Directors are responsible for
the maintenance and integrity of the
corporate and financial information
included on the Group’s website.
Legislation in the United Kingdom
governing the preparation and
dissemination of financial statements
may differ from legislation in other
jurisdictions.
Responsibility statement
We confirm that to the best of our
knowledge:
–
the Financial Statements, prepared in
accordance with the relevant financial
reporting framework, give a true and
fair view of the assets, liabilities,
financial position and profit or loss
of the Company and the undertakings
included in the consolidation taken
as a whole;
–
the Strategic report includes a
fair review of the development
and performance of the business
and the position of the Company
and the undertakings included in
the consolidation taken as a whole,
together with a description of the
principal risks and uncertainties
that they face; and
–
the Annual Report and Financial
Statements, taken as a whole, are
fair, balanced and understandable and
provide the information necessary for
shareholders to assess the Group and
Company’s performance and position,
business model and strategy.
This responsibility statement was
approved by the Board of Directors
on 25 February 2025 and is signed
on its behalf by:
Karim Bitar
Chief Executive Officer
Jonny Mason
Chief Financial Officer
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150 Independent auditor’s report
157 Consolidated financial statements
201 Company financial statements
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Overview
Independent auditor’s report
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF CONVATEC GROUP PLC
Report on the audit of the Financial Statements
1. Opinion
In our opinion:
–
the Financial Statements of Convatec Group Plc (the Company) and its subsidiaries (the Group) give a true and fair view of the
state of the Group’s and of the Company’s affairs as at 31 December 2024 and of the Group’s profit for the year then ended;
–
the Group Financial Statements have been properly prepared in accordance with United Kingdom adopted international
accounting standards and IFRS Accounting Standards as issued by the International Accounting Standards Board (IASB);
–
the Company Financial Statements have been properly prepared in accordance with United Kingdom Generally Accepted
Accounting Practice, including Financial Reporting Standard 101 “Reduced Disclosure Framework”; and
–
the Financial Statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the Financial Statements which comprise:
–
the Consolidated Income Statement;
–
the Consolidated Statement of Comprehensive Income;
–
the Consolidated and Company Statements of Financial Position;
–
the Consolidated and Company Statements of Changes in Equity;
–
the Consolidated Statement of Cash Flows; and
–
the related Notes 1 to 29 of the Consolidated Financial Statements and Notes 1 to 10 of the Company Financial Statements.
The financial reporting framework that has been applied in the preparation of the Group Financial Statements is applicable
law and United Kingdom adopted international accounting standards and IFRS Accounting Standards as issued by the IASB. The
financial reporting framework that has been applied in the preparation of the Company Financial Statements is applicable law and
United Kingdom Accounting Standards, including FRS 101 “Reduced Disclosure Framework” (United Kingdom Generally Accepted
Accounting Practice).
2. Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the auditor’s responsibilities for the audit of the Financial Statements section of our report.
We are independent of the Group and the Company in accordance with the ethical requirements that are relevant to our audit of
the Financial Statements in the UK, including the Financial Reporting Council’s (the ‘FRC’s’) Ethical Standard as applied to listed public
interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. The non-audit services
provided to the Group and the Company for the year are disclosed in Note 3.3 to the Financial Statements. We confirm that we have
not provided any non-audit services prohibited by the FRC’s Ethical Standard to the Group or the Company.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
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3. Summary of our audit approach
Key audit matters
The key audit matter that we identified in the current year was:
–
Revenue recognition in key markets
Within this report, key audit matters are identified as follows:
Similar level of risk
Materiality
The materiality that we used for the Group Financial Statements was $11.8m which was determined
on the basis of profit before tax adjusted for certain items.
Scoping
Combined, we performed audit procedures across 23 components in 13 countries accounting for 78%
of revenue, 81% of profit before tax and 90% of net assets.
Significant changes in our
approach
We have concluded that the valuation of contingent consideration is no longer a key audit matter
following payments agreed and made in the year and revisions to contractual terms. We have also
determined that the acquisition of Starlight Science is no longer a key audit matter given that the
acquisition took place in the prior financial year. Finally, our audit approach for 2024 changed to
execute a significantly higher proportion of audit work through the Group’s Global Business Services
(GBS) centre.
4. Conclusions relating to going concern
In auditing the Financial Statements, we have concluded that the Directors’ use of the going concern basis of accounting in the
preparation of the Financial Statements is appropriate.
Our evaluation of the Directors’ assessment of the Group’s and Company’s ability to continue to adopt the going concern basis
of accounting included:
–
Obtaining an understanding of the Directors’ process for determining the appropriateness of the use of the going concern basis;
–
Assessing the availability of financing facilities, including nature of facilities, repayment terms and covenants;
–
Testing the accuracy of management’s models, including agreement to the most recent Board-approved budgets and forecasts;
–
Challenging the key assumptions used in these forecasts by determining whether there was adequate support for the assumptions,
including consideration of ongoing global macroeconomic uncertainty;
–
Assessing the historical accuracy of forecasts prepared by management;
–
Evaluating sensitivity analysis and its impact on available financial headroom; and
–
Assessing the appropriateness of the disclosures within the Financial Statements.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the Group’s and Company’s ability to continue as a going concern for
a period of at least 12 months from when the Financial Statements are authorised for issue.
In relation to the reporting on how the Group has applied the UK Corporate Governance Code, we have nothing material to add
or draw attention to in relation to the Directors’ Statement in the Financial Statements about whether the Directors considered
it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections
of this report.
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5. Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial
Statements of the current period and include the most significant assessed risks of material misstatement (whether or not due
to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy; the allocation
of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the Financial Statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.
5.1. Revenue recognition in key markets
Key audit matter description
The Group recorded revenue of $2,289.2m for the year ended 31 December 2024 (31 December
2023: $2,142.4m) under IFRS 15:
Revenue from Contracts with Customers
(IFRS 15).
As disclosed in Note 2.1 to the Group Financial Statements, the Group’s policy is to recognise revenue
when control over a product has transferred, generally on delivery, to a customer, distributor or
wholesaler. The Group measures revenue for goods sold based on the consideration specified in a
contract with a customer, net of discounts, rebates, chargeback allowances and sales related taxes.
Further information is included in the geographic segment information in Note 2.2.
For certain sales of new and recently launched products to individual doctors, medical centres and
hospitals, there is judgement in estimating the transaction price due to:
–
Uncertainties over the payment and timing of the customers’ insurance reimbursements; and
–
The limited established market practice and customer payment history.
As the audit of revenue is one of the key determinants of our overall audit strategy requiring
significant allocation of audit resources, and there is judgement in estimating the total transaction
price in certain elements of revenue in key markets as described above, revenue recognition has
been included as a key audit matter. The Audit and Risk Committee includes its assessment of this
matter on page 106.
How the scope of our audit
responded to the key audit
matter
We performed the following procedures:
–
We completed walkthroughs of the revenue cycle to gain an understanding of the end-to-end
revenue processes and tested relevant controls across the Group;
–
We tested the general IT controls and relevant automated business controls in the main financial
reporting system used by the Group;
–
We evaluated the accounting policy for revenue relating to sales of new and recently launched
products against the requirements of IFRS 15;
–
We obtained Management’s latest sales forecasts, as well as scenario analyses, and details of sales
and collections made subsequent to the balance sheet date to evaluate sales patterns and cycles;
–
We assessed the relevance and reliability of the underlying data used in determining the
transaction price for certain contracts with customers for new and recently launched products;
–
We performed analytical procedures to assess the relationship between revenue, receivables
and cash collections for new and recently launched products;
–
We performed analytical reviews to identify potentially unusual sales trends and obtained
an explanation for any such movements;
–
We held direct enquiries with category and geographic market leaders, assessing changes
in customer demand and new product introductions that might impact sales patterns;
–
We performed detailed transaction testing on a sample basis, agreeing sales through to invoice,
final sales contracts and delivery notes;
–
We reviewed any relevant updates to distributor contracts to assess the terms of sale and to
support recalculation of rebates and chargebacks associated with the revenue;
–
We assessed whether the disclosures within the annual report and accounts are in compliance
with the requirements of IFRS 15; and
–
We assessed Management’s analysis as to whether any elements of revenue recognition would
constitute a key source of estimation uncertainty in the Financial Statements.
Key observations
We are satisfied that revenue recognised across key markets and the disclosures made are
appropriate.
Independent auditor’s report
continued
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6. Our application of materiality
6.1. Materiality
We define materiality as the magnitude of misstatement in the Financial Statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope
of our audit work and in evaluating the results of our work.
Based on our professional judgement, we determined materiality for the Financial Statements as a whole as follows:
Group Financial Statements
Company Financial Statements
Materiality
$11.8m (2023: $10.8m)
$5.9m (2023: $5.5m)
Basis for determining materiality
4.3% (2023: 4.8%) of profit before tax adjusted
for certain items totalling $28.7m, which include
acquisition and divestiture-related costs.
The Company materiality equates to 0.1%
(2023: 0.1%) of net assets.
Rationale for the benchmark
applied
In determining our materiality benchmark, we
considered the focus of the users of the Financial
Statements. Profit before tax is the base from
which key performance measures are calculated
as well as key metrics used in providing trading
updates. We have adjusted profit before tax for
certain items as summarised above.
In determining our materiality, we considered
net assets as the appropriate benchmark given
the Company is primarily a holding company
for the Group.
Group materiality $11.8m
Component performance
materiality range
$4.1m to $5.8m
Audit and Risk Committee
reporting threshold $0.6m
PBT adjusted for certain items
Group materiality
PBT adjusted
for certain
items $275m
6.2. Performance materiality
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and
undetected misstatements exceed the materiality for the Financial Statements as a whole.
Group Financial Statements
Company Financial Statements
Performance materiality
70% (2023: 70%) of Group materiality
70% (2023: 70%) of Company materiality
Basis and rationale for
determining performance
materiality
We set performance materiality at a level that we consider normal for the audit of public companies.
In determining performance materiality, we considered the following factors:
a.
our risk assessment, including our understanding of the entity and its overall control
environment;
b.
the quality of the control environment and control reliance adopted over certain business
processes and IT systems;
c.
the disaggregated nature of the Group and the likelihood of an individually material error; and
d.
our cumulative experience from prior year audits and low level of corrected and uncorrected
misstatements identified.
Component performance
materiality
For components other than the Company, where our work on a component included an audit of the
entire financial information or an audit on one of more classes of transactions, account balances and
disclosures, this work was completed to component performance materiality levels between $4.1m
and $5.8m (2023: $4.0m and $5.5m).
6.3. Error reporting threshold
We agreed with the Audit and Risk Committee that we would report to the Committee all audit differences in excess of $0.6m (2023:
$0.5m), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the
Audit and Risk Committee on disclosure matters that we identified when assessing the overall presentation of the Financial Statements.
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7. An overview of the scope of our audit
7.1. Identification and scoping of components
Our Group audit was scoped by developing an appropriate audit plan for each significant account, in line with the requirements of
ISA 600 Revised:
Special Considerations – Audits of Group Financial Statements (Including the Work of Competent Auditors)
. We assessed
the qualitative and quantitative characteristics of each Financial Statement line item and considered the relative contribution of each
component to these line items in determining which components would be subject to audit procedures. In performing our assessment,
we have considered the geographical spread of the Group and any risks presented within each region. We also considered the
presence of individual financial transactions of a significant nature.
Based on this assessment, we focused our work on 23 (2023: 23) components covering 13 (2023: 13) countries, 78% (2023: 80%) of
revenue, 81% (2023: 84%) of profit before tax and 90% (2023: (83%) of net assets. The 23 (2023: 23) components are in the US, UK,
Australia, Brazil, Canada, Denmark, Dominican Republic, France, Germany, Italy, Slovakia, Spain and Switzerland, which include the
principal operating units of the Group.
In carrying out our work, we responded to management’s continued progress in centralising finance processes in GBS. We centrally
determined the scope of the audit procedures executed by component and GBS audit teams, with a significantly higher proportion of
work performed by the GBS team in the year ended 31 December 2024.
Subject to audit procedures 78%
Review at group level 22%
Revenue
Subject to audit procedures 81%
Review at group level 19%
Profit before tax
Subject to audit procedures 90%
Review at group level 10%
Net assets
7.2. Our consideration of the control environment
We obtained an understanding of the relevant internal controls over the financial reporting process for our audit risk assessment.
We have continued to place greater reliance on financial controls, as a higher proportion of the Group’s financial controls have been
transferred to the Group’s GBS, which has a standardised controls and processing environment. We have tested and placed reliance on
relevant financial controls within the revenue and expenditure business cycles processed within the Group’s GBS, including automated
controls. Within other components, we have obtained an understanding of relevant controls.
We identified IT systems relevant to the audit of the Group and obtained an understanding of relevant IT controls. For some operating
companies, including the main financial reporting IT environment in the GBS centre, we tested the general IT controls with the
involvement of our IT specialists and placed reliance on general IT controls.
7.3. Our consideration of climate-related risks
In planning our audit, we have considered the potential impact of climate change on the Group’s business and its Financial Statements.
The Group has reassessed the risk and opportunities relevant to climate change and maintained the Environment & Communities risk
as a principal risk across the Group. This risk grading has been maintained at the same level as the prior year and has been considered
and embedded into the business as explained in the Strategic Report.
As a part of our audit procedures, we have reviewed the Group’s environment related risk assessment and held discussions with the
Audit and Risk Committee to understand the process of identifying climate-related risks, the determination of mitigating actions
and the impact on the Group’s Financial Statements. While management has acknowledged that the transition and physical risks
posed by climate change have the potential to impact the medium- to long-term success of the business, they have assessed that
there is no material impact arising from climate change on the judgements and estimates made in the Group Financial Statements
as at 31 December 2024 as explained in Note 1.3 on page 162.
We performed our own qualitative risk assessment of the potential impact of climate change on the Group’s account balances and
classes of transactions and did not identify any additional risks of material misstatement. Our procedures include reviewing disclosures
included in the Strategic Report to consider whether they are materially consistent with the Financial Statements and our knowledge
obtained in the audit.
7.4. Working with other auditors
As part of our oversight of the component teams, planning meetings were held with all component auditors. The purpose of these
planning meetings was to determine whether the component teams had sufficient understanding of the Group’s businesses, its core
strategy and significant risks.
We issued our component teams detailed instructions, included them in our team briefings and discussed their risk assessment.
We also provided direction in response to enquiries made by the component auditors. All the findings observed were discussed
with the component auditors in detail and instructions to perform further procedures were issued where relevant.
We visited local operations in the UK, US and GBS Portugal. Considering the importance of GBS to the Group Financial Statements, and
the evolution of the audit strategy to greater testing of and reliance on financial controls in certain global processes, we maintained
frequent interactions with management and component teams during the planning and audit execution stages.
Independent auditor’s report
continued
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8. Other information
The other information comprises the
information included in the annual report,
other than the Financial Statements and
our auditor’s report thereon. The Directors
are responsible for the other information
contained within the annual report.
Our opinion on the Financial Statements
does not cover the other information and,
except to the extent otherwise explicitly
stated in our report, we do not express
any form of assurance conclusion thereon.
Our responsibility is to read the other
information and, in doing so, consider
whether the other information is
materially inconsistent with the Financial
Statements or our knowledge obtained
in the course of the audit, or otherwise
appears to be materially misstated.
If we identify such material inconsistencies
or apparent material misstatements, we
are required to determine whether this
gives rise to a material misstatement in
the Financial Statements themselves. If,
based on the work we have performed,
we conclude that there is a material
misstatement of this other information,
we are required to report that fact.
We have nothing to report in
this regard.
9. Responsibilities of directors
As explained more fully in the Directors’
responsibilities statement, the Directors
are responsible for the preparation of
the Financial Statements and for being
satisfied that they give a true and fair
view, and for such internal control as the
Directors determine is necessary to enable
the preparation of Financial Statements
that are free from material misstatement,
whether due to fraud or error.
In preparing the Financial Statements, the
Directors are responsible for assessing
the Group’s and the Company’s ability to
continue as a going concern, disclosing
as applicable, matters related to going
concern and using the going concern
basis of accounting unless the Directors
either intend to liquidate the Group or the
Company or to cease operations, or have
no realistic alternative but to do so.
10. Auditor’s responsibilities for the
audit of the Financial Statements
Our objectives are to obtain reasonable
assurance about whether the Financial
Statements as a whole are free from
material misstatement, whether due to
fraud or error, and to issue an auditor’s
report that includes our opinion.
Reasonable assurance is a high level
of assurance, but is not a guarantee
that an audit conducted in accordance
with ISAs (UK) will always detect a
material misstatement when it exists.
Misstatements can arise from fraud or
error and are considered material if,
individually or in the aggregate, they could
reasonably be expected to influence the
economic decisions of users taken on the
basis of these Financial Statements.
A further description of our responsibilities
for the audit of the Financial Statements is
located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities.
This description forms part of our
auditor’s report.
11. Extent to which the audit was
considered capable of detecting
irregularities, including fraud
Irregularities, including fraud, are
instances of non-compliance with laws
and regulations. We design procedures
in line with our responsibilities, outlined
above, to detect material misstatements
in respect of irregularities, including
fraud. The extent to which our procedures
are capable of detecting irregularities,
including fraud is detailed below.
11.1. Identifying and assessing potential risks
related to irregularities
In identifying and assessing risks of
material misstatement in respect of
irregularities, including fraud and non-
compliance with laws and regulations,
we considered the following:
–
the nature of the industry and sector,
control environment and business
performance including the design
of the Group’s remuneration policies,
key drivers for Directors’ remuneration,
bonus levels and performance targets;
–
the Group’s own assessment of the
risks that irregularities may occur
either as a result of fraud or error
that was approved by the Board;
–
results of our enquiries of
management, internal audit,
the Directors and the Audit and
Risk Committee about their own
identification and assessment of the
risks of irregularities, including those
that are specific to the Group’s sector;
–
any matters we identified having
obtained and reviewed the Group’s
documentation of their policies and
procedures relating to:
•
identifying, evaluating and complying
with laws and regulations and
whether they were aware of any
instances of non-compliance;
•
detecting and responding to the
risks of fraud and whether they have
knowledge of any actual, suspected
or alleged fraud;
•
the internal controls established
to mitigate risks of fraud or non-
compliance with laws and regulations;
•
the matters discussed among the
audit engagement team, including
significant component audit teams
and relevant internal specialists,
including tax, valuations, IT and
forensics specialists regarding how
and where fraud might occur in
the Financial Statements and any
potential indicators of fraud.
As a result of these procedures, we
considered the opportunities and
incentives that may exist within the
organisation for fraud and identified the
greatest potential for fraud in certain
elements of revenue recognition. In
common with all audits under ISAs
(UK), we are also required to perform
specific procedures to respond to the
risk of management override. We also
obtained an understanding of the legal
and regulatory frameworks that the
Group operates in, focusing on provisions
of those laws and regulations that had
a direct effect on the determination of
material amounts and disclosures in
the Financial Statements. The key laws
and regulations we considered in this
context included the UK Companies Act,
Listing Rules, pensions legislation and
tax legislation. In addition, we considered
provisions of other laws and regulations
that do not have a direct effect on the
Financial Statements but compliance with
which may be fundamental to the Group’s
ability to operate or to avoid a material
penalty. These included the Food and
Drug Administration (FDA) regulations and
the Medical Devices Regulations (MDR).
11.2. Audit response to risks identified
As a result of performing the above, we
identified revenue recognition in key
markets as a key audit matter related to
the potential risk of fraud. The key audit
matters section of our report explains the
matter in more detail and also describes
the specific procedures we performed
in response to those key audit matters.
In addition to the above, our procedures
to respond to risks identified included
the following:
–
reviewing the Financial Statement
disclosures and testing to supporting
documentation to assess compliance
with provisions of relevant laws and
regulations described as having a direct
effect on the Financial Statements;
–
enquiring of management, the
Audit and Risk Committee and both
in-house and external legal counsel
concerning actual and potential
litigation and claims;
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–
performing analytical procedures to
identify any unusual or unexpected
relationships that may indicate risks
of material misstatement due to fraud;
–
reading minutes of meetings of those
charged with governance, reviewing
internal audit reports and reviewing
correspondence with tax authorities
in jurisdictions in which the Group
operates; and
–
in addressing the risk of fraud through
management override of controls,
testing the appropriateness of journal
entries and other adjustments;
assessing whether the judgements
made in making accounting estimates
are indicative of a potential bias; and
evaluating the business rationale of
any significant transactions that are
unusual or outside the normal course
of business.
We also communicated relevant identified
laws and regulations and potential fraud
risks to all engagement team members
including internal specialists and
component audit teams, and remained
alert to any indications of fraud or non-
compliance with laws and regulations
throughout the audit.
Report on other legal and
regulatory requirements
12. Opinions on other matters
prescribed by the Companies
Act 2006
In our opinion the part of the Directors’
Remuneration report to be audited has
been properly prepared in accordance
with the Companies Act 2006.
In our opinion, based on the work
undertaken in the course of the audit:
–
the information given in the strategic
report and the Directors’ report for the
financial year for which the Financial
Statements are prepared is consistent
with the Financial Statements; and
–
the strategic report and the
Directors’ report have been
prepared in accordance with
applicable legal requirements.
In the light of the knowledge and
understanding of the Group and the
Company and their environment obtained
in the course of the audit, we have not
identified any material misstatements in
the strategic report or the Directors’ report.
13. Corporate Governance
Statement
The UK Listing Rules require us to
review the Directors’ Statement in
relation to going concern, longer-term
viability and that part of the Corporate
Governance Statement relating to the
Group’s compliance with the provisions
of the UK Corporate Governance Code
specified for our review.
Based on the work undertaken as part
of our audit, we have concluded that each
of the following elements of the Corporate
Governance Statement is materially
consistent with the Financial Statements
and our knowledge obtained during
the audit:
–
the Directors’ statement with regards
to the appropriateness of adopting the
going concern basis of accounting and
any material uncertainties identified set
out on page 161;
–
the Directors’ explanation as to its
assessment of the Group’s prospects,
the period this assessment covers and
why the period is appropriate set out
on page 82;
–
the Directors’ statement on fair,
balanced and understandable set
out on page 105;
–
the Board’s confirmation that it has
carried out a robust assessment of the
emerging and principal risks set out
on page 72;
–
the section of the annual report that
describes the review of effectiveness
of risk management and internal
control systems set out on page 91; and
–
the section describing the work of
the Audit and Risk Committee set out
on pages 104 to 113.
14. Matters on which we are
required to report by exception
14.1. Adequacy of explanations received and
accounting records
Under the Companies Act 2006 we are
required to report to you if, in our opinion:
–
we have not received all the information
and explanations we require for our
audit; or
–
adequate accounting records have not
been kept by the Company, or returns
adequate for our audit have not been
received from branches not visited by
us; or
–
the Company Financial Statements are
not in agreement with the accounting
records and returns.
We have nothing to report in respect
of these matters.
14.2. Directors’ remuneration
Under the Companies Act 2006 we
are also required to report if in our
opinion certain disclosures of Directors’
remuneration have not been made or the
part of the Directors’ Remuneration report
to be audited is not in agreement with the
accounting records and returns.
We have nothing to report in respect
of these matters.
15. Auditor tenures
15.1. Auditor tenure
Following the recommendation of
the Audit and Risk Committee, we
were appointed by the Directors
on 12 December 2016 to audit the
Financial Statements for the year ending
31 December 2016 and subsequent
financial periods. The period of total
uninterrupted engagement including
previous renewals and reappointments
of the firm is nine years, covering the
years ending 31 December 2016 to
31 December 2024.
15.2. Consistency of the audit report with
the additional report to the Audit and Risk
Committee
Our audit opinion is consistent with the
additional report to the Audit and Risk
Committee we are required to provide in
accordance with ISAs (UK).
16. Use of our report
This report is made solely to the
Company’s members, as a body, in
accordance with Chapter 3 of Part 16
of the Companies Act 2006. Our audit
work has been undertaken so that we
might state to the Company’s members
those matters we are required to state
to them in an auditor’s report and for
no other purpose. To the fullest extent
permitted by law, we do not accept or
assume responsibility to anyone other
than the Company and the Company’s
members as a body, for our audit work,
for this report, or for the opinions we
have formed.
As required by the Financial Conduct
Authority (FCA) Disclosure Guidance
and Transparency Rule (DTR) 4.1.15R-DTR
4.1.18R, these Financial Statements
form part of the Electronic Format
Annual Financial Report filed on
the National Storage Mechanism
of the FCA in accordance with DTR
4.1.15R-DTR 4.1.18R. This auditor’s report
provides no assurance over whether the
Electronic Format Annual Financial Report
has been prepared in compliance with
DTR 4.1.15R-DTR 4.1.18R.
Claire Faulkner, FCA
(Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London, United Kingdom
25 February 2025
Independent auditor’s report
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Financial statements
Consolidated financial statements
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2024
2024
2023
Notes
$m
$m
Revenue
2
Cost of sales
(1,005.6 )
(941.8 )
Gross profit
Selling and distribution expenses
(645.2 )
(612.5 )
General and administrative expenses
(195.0 )
(212.9 )
Research and development expenses
(111.7 )
(110.0 )
Other operating expenses
4
(6.8 )
(2.5 )
Operating profit
3
Finance income
25
Finance expense
25
(82.9 )
(80.7 )
Fair value movement of contingent consideration
26
(4.6 )
(24.6 )
Non-operating income, net
5
Profit before income taxes
Income tax expense
6
(55.4 )
(37.1 )
Net profit
Earnings per share
Basic earnings per share (cents per share)
7
Diluted earnings per share (cents per share)
7
The accounting policies and notes on pages 161 to 200 form an integral part of the Consolidated Financial Statements. All amounts are
attributable to shareholders of the Group and wholly derived from continuing operations.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2024
2024
2023
Notes
$m
$m
Net profit
Items that will not be reclassified subsequently to the Consolidated Income Statement
Remeasurement of defined benefit pension plans, net of tax
15
(0.3 )
(0.2 )
Changes in fair value of equity investments
10
(6.0 )
(7.8 )
Items that may be reclassified subsequently to the Consolidated Income Statement
Foreign currency translation
(47.3 )
Effective portion of changes in fair value of cash flow hedges
23
(11.1 )
Changes in fair value of cash flow hedges reclassified to the Consolidated Income Statement
23
(0.8 )
Costs of hedging
23
(0.5 )
Income tax in respect of items that may be reclassified
Other comprehensive (expense)/income
(61.9 )
Total comprehensive income
All amounts are attributable to shareholders of the Group and wholly derived from continuing operations.
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Governance
Financial statements
Additional information
Overview
Strategic report
Consolidated financial statements
continued
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2024
2024
2023
Notes
$m
$m
Assets
Non-current assets
Property, plant and equipment
8
Right-o
f
-use assets
24
Intangible assets
9
Goodwill
9
Investment in financial assets
10
Deferred tax assets
6
Restricted cash
22
Other non-current receivables
12
Current assets
Inventories
11
Trade and other receivables
12
Current tax receivable
Derivative financial assets
23
Restricted cash
22
Cash and cash equivalents
22
Total assets
Equity and liabilities
Current liabilities
Trade and other payables
13
Lease liabilities
24
Current tax payable
Derivative financial liabilities
23
Contingent consideration
1
26
Provisions
1
14
Non-current liabilities
Borrowings
21
Lease liabilities
24
Deferred tax liabilities
6
Contingent consideration
1
26
Provisions
1
14
Derivative financial liabilities
23
Other non-current liabilities
13
Total liabilities
Net assets
Equity
Share capital
17
Share premium
17
Own shares
17
(16.4 )
(0.6 )
Retained deficit
(828.4 )
(888.7 )
Merger reserve
Cumulative translation reserve
(169.5 )
(122.2 )
Other reserves
17
Total equity
Total equity and liabilities
1.
The comparatives have been re-presented as outlined in Note 1.6 to the Consolidated Financial Statements.
The Consolidated Financial Statements of Convatec Group Plc, company number 10361298, were approved by the Board of
Directors and authorised for issue on 25 February 2025 and signed on its behalf by:
Jonny Mason
Karim Bitar
Chief Financial Officer
Chief Executive Officer
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Financial statements
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2024
Share
capital
Share
premium Own shares
Retained
deficit
Merger
reserve
Cumulative
translation
reserve
Other
reserves
Total
Notes
$m
$m
$m
$m
$m
$m
$m
$m
At 1 January 2023
(1.5 )
(892.2 )
(177.1 )
Net profit
Other comprehensive
income/(expense):
Foreign currency translation
adjustment
Remeasurement of defined benefit
pension plans, net of tax
15
(0.2 )
(0.2 )
Changes in fair value of cash flow
hedges, net of tax
(0.5 )
(0.5 )
Changes in fair value of
equity investments
(7.8 )
(7.8 )
Other comprehensive
income/(expense)
(8.5 )
Total comprehensive
income/(expense)
(8.5 )
Dividends paid
18
(110.7 )
(110.7 )
Scrip dividend
17, 18
(16.1 )
Share-based payments
19
Share awards vested
Excess deferred tax benefit from
share-based payments
At 31 December 2023
(0.6 )
(888.7 )
(122.2 )
Net profit
Other comprehensive
income/(expense):
Foreign currency translation
adjustment
(47.3 )
(47.3 )
Remeasurement of defined benefit
pension plans, net of tax
15
(0.3 )
(0.3 )
Changes in fair value of cash flow
hedges, net of tax
23
(8.3 )
(8.3 )
Changes in fair value of equity
investments
10
(6.0 )
(6.0 )
Other comprehensive
income/(expense)
(47.3 )
(14.6 )
(61.9 )
Total comprehensive
income/(expense)
(47.3 )
(14.6 )
Dividends paid
18
(130.2 )
(130.2 )
Purchase of shares by
Employee Benefit Trust
(22.8 )
(22.8 )
Share-based payments
19
Share awards vested
(5.3 )
Excess deferred tax benefit
from share-based payments
(1.5 )
(1.5 )
Changes in fair value of cash flow
hedges transferred to inventory
23
At 31 December 2024
(16.4 )
(828.4 )
(169.5 )
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Governance
Financial statements
Additional information
Overview
Strategic report
Consolidated financial statements
continued
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2024
2024
2023
Notes
$m
$m
Cash flows from operating activities
Net profit
Adjustments for:
Depreciation of property, plant and equipment
8
Depreciation of right-o
f
-use assets
24
Amortisation of intangible assets
9
Income tax
6
Non-operating income/(expense), net
1
5
(11.5 )
Fair value movement of contingent consideration
26
Finance costs, net
25
Share-based payments
19
Impairment of intangible assets
9
Impairment of property, plant and equipment
8
Impairment of right-o
f
-use assets
24
Change in assets and liabilities:
Inventories
(49.4 )
Trade and other receivables
(26.9 )
Other non-current receivables
(1.1 )
Restricted cash
Trade and other payables
Provisions
(9.8 )
Other non-current payables
(1.3 )
Net cash generated from operations
Interest received
Interest paid
(84.5 )
(70.8 )
Payment of contingent consideration arising from acquisitions
26
(48.1 )
(21.7 )
Income taxes paid
(52.1 )
(35.9 )
Net cash generated from operating activities
Cash flows from investing activities
Acquisition of property, plant and equipment and intangible assets
8, 9
(122.1 )
(129.2 )
Proceeds from sale of property, plant and equipment
8
Acquisitions, net of cash acquired
26
(13.6 )
(84.4 )
Payment of contingent consideration arising from acquisitions
26
(22.8 )
(73.0 )
Net cash inflow arising from divestitures
Investment in other financial assets
(5.0 )
Net cash used in investing activities
(160.8 )
(285.7 )
Cash flows from financing activities
Repayment of borrowings
21
(98.0 )
Proceeds from borrowings
21
Payment of lease liabilities
24
(24.7 )
(22.7 )
Dividends paid
18
(130.2 )
(110.7 )
Purchase of own shares
(10.9 )
Net cash used in financing activities
(263.8 )
(124.0 )
Net change in cash and cash equivalents
(28.4 )
(42.3 )
Cash and cash equivalents at beginning of the year
22
Effect of exchange rate changes on cash and cash equivalents
(4.5 )
(3.9 )
Cash and cash equivalents at end of the year
22
1.
The comparatives have been re-presented as outlined in Note 1.6 to the Consolidated Financial Statements.
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Financial statements
Overview
Strategic report
Governance
Financial statements
Additional information
Convatec Group Plc Annual Report and Accounts 2024
161
Convatec Group Plc Annual Report and Accounts 2024
161
Notes to the consolidated financial statements
This section describes the Group’s material accounting policies that relate to the Consolidated Financial Statements and explains
critical accounting judgements and estimates that management has identified as having a potentially material impact to the
Group. Specific accounting policies relating to the Notes to the Consolidated Financial Statements are described within that note.
of 2006. The Company's registered office is 7th Floor, 20 Eastbourne Terrace, London, W2 6LG, United Kingdom.
The Consolidated Financial Statements have been prepared in accordance with United Kingdom adopted international accounting
standards and IFRS Accounting Standards as issued by the International Accounting Standards Board (IASB).
The Consolidated Financial Statements are presented in US dollars (USD), which is also the functional currency as the revenue and
operating profits of the Company and its subsidiaries (collectively, the Group) are primarily generated in US dollars and US dollar-
linked currencies. All values are rounded to $0.1 million except where otherwise indicated.
The following material accounting policies apply to the Consolidated Financial Statements as a whole:
The consolidated financial information has been prepared on a historical cost basis, except for certain financial instruments
The Consolidated Financial Statements include the results of the Company and all of its subsidiary undertakings. Subsidiaries are
entities controlled ultimately by the Company. Control exists when the Company ultimately: (i) has power over the investee; (ii) is
exposed, or has rights, to variable returns from its involvement in the investee; and (iii) has the ability to use its power to affect its
returns. The Company reassesses whether or not it ultimately controls an entity if facts and circumstances indicate that there are
changes to one or more of the three elements of control listed above.
The consolidated financial information of the Company's subsidiaries is included within the Group's Consolidated Financial
Statements from the date that control commences until the date that control ceases and is prepared for the same year-end date
As discussed in the Financial review on pages 22 to 27, the overall financial performance of the business remains very strong with
a robust liquidity position.
In preparing their assessment of going concern, the Directors have considered available cash resources, financial actual and
forecast performance, including strategy delivery, together with the Group’s financial covenant compliance requirements and
principal risks and uncertainties. The Group’s liquidity remains strong as management continues to monitor its liquidity
requirements to ensure there is sufficient cash to meet operational needs and maintain adequate headroom.
The Directors have used actual performance in 2024, the Board approved 2025 budget (and related cash flow forecasts) and longer-
term strategic plan as foundations. The forecasts reflected the full potential funding requirements in relation to the remaining
estimated contingent consideration payable in relation to the Group’s acquisitions. The Directors have considered a going concern
period to 30 June 2026, which is more than 12 months from the date of approval of the Consolidated Financial Statements.
In accordance with FRC guidance, management applied severe but plausible downside scenarios linked to the Group’s principal
and emerging risks, including supply chain disruption, cyber security disruption, significant regulatory breaches, financial market
distress and geopolitical events. Scenarios combining certain risks were also considered. Further details of the specific scenarios
are provided in the Viability statement on pages 82 to 83. The Board has reviewed these scenarios as part of the going concern
assessment and has concluded that these scenarios are in line with the Group’s principal and emerging risks and continue to reflect
the potential financial risk of severe but plausible downside events and circumstances during the going concern period. Under each
scenario, the Group is forecast to retain significant liquidity and covenant headroom throughout the going concern period.
A reverse stress test, before corporate level mitigations, was also considered to demonstrate what reduction in revenue would be
required in the next 12 months to create conditions which may lead to a potential covenant breach. The outcome of this was
considered implausible given the Group’s strong global market position, diversified portfolio of products and the corporate
mitigations available to the Board and management.
Accordingly, at the time of approving these Consolidated Financial Statements, the Directors have a reasonable expectation that
the Group and the Company will have adequate liquid resources to meet their respective liabilities as they become due and will
be able to sustain the Group’s business model, strategy and operations and remain solvent for a period of at least 12 months from
Financial statements
Notes to the consolidated financial statements
continued
1. BASIS OF PREPARATION (CONTINUED)
Convatec Group Plc Annual Report and Accounts 2024
162
Assets and liabilities of subsidiaries whose functional currency is not US dollars are translated into US dollars at the rate of exchange
at the period end. Equity is translated into US dollars at historic rate. Income and expenses are translated into US dollars at
the average rates of exchange prevailing during the year. Foreign currency gains and losses resulting from the translation of
subsidiaries into US dollars are recognised in the Consolidated Statement of Comprehensive Income. Exchange differences arising
from the translation of the net investment in foreign operations are taken to the cumulative translation reserve within equity. They
are recycled and recognised in the Consolidated Income Statement upon disposal of the operation.
In preparing the financial statements of the individual companies, transactions in currencies other than the entity’s functional
currency (foreign currencies) are recognised at the rates of exchange prevailing on the dates of the transactions. At each reporting
date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing at that date.
Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the
date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency
are not retranslated. Any gain or loss arising from subsequent exchange rate movements is included as an exchange gain or loss in
1.3 Climate change
In preparing the consolidated financial statements, the Directors recognised the risk of climate change on the business and
acknowledge that the Group must take appropriate action to mitigate and, where feasible, prevent further climate change impact.
Further details are provided within the ‘Responsible Business Review’ and the ‘Task Force on Climate-related Financial Disclosure’
sections of the Annual Report and Accounts on pages 52 to 71. In addition, climate related risks have been considered within the
‘Environment and Communities’ principal risk and discussed in greater detail in the ‘Principal Risks’ section within the Annual Report
and Accounts.
The Group does not believe that there is currently a material impact to judgements and estimates in relation to climate-related risks
and, as a result, the valuation of assets and liabilities have not been significantly impacted as at 31 December 2024 . Consideration
was given to the financial reporting judgements and estimates in respect of the following areas:
–
Estimates of future cash flows used in the impairment assessment of goodwill
–
Valuation of the Group’s assets and liabilities (including the useful economic life of property, plant and equipment and other
intangible assets)
–
Going concern and viability of the Group over the next three years (see Viability assessment on pages 82 to 83 of the Annual
Report and Accounts)
Whilst there are currently no material changes or impact, management is aware of the variable risks that arise from climate change
and will regularly assess these risks against judgement and estimates made in the preparation of the Group’s consolidated financial
statements, including their impacts on cash flows and the valuation of assets and liabilities.
The preparation of financial statements, in conformity with United Kingdom adopted international accounting standards and
International Financial Reporting Standards (IFRS), requires management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported value of assets and liabilities, income and expense. Actual results
may differ from these estimates or judgements of likely outcome. Management regularly reviews, and revises as necessary, the
accounting judgements that significantly impact the amounts recognised in the Consolidated Financial Statements and the sources
of estimation uncertainty that are considered to be key estimates due to their potential to give rise to material adjustments in the
Group’s Consolidated Financial Statements within the next financial year.
In preparing the Consolidated Financial Statements, management has determined that there are no areas of estimation uncertainty
that have a significant risk of resulting in a material adjustment to the carrying amount of assets and liabilities within the next
financial year or critical judgements in applying accounting policies that have a significant effect on the amounts recognised in the
1.5 Accounting standards
New standards, interpretations and amendments applied for the first time
On 1 January 2024, the Group adopted the following amendments which are mandatorily effective for the period beginning
1 January 2024:
–
Liability in a Sale and Leaseback – Amendments to IFRS 16
–
Classification of Liabilities as Current or Non-Current – Amendments to IAS 1
–
Non-Current liabilities with Covenants – Amendments to IAS 1
–
Supplier Finance Arrangements – Amendments to IAS 7 and IFRS 7
The adoption during the year of the amendments and interpretations has not had a material impact on the
Consolidated Financial Statements.
Apart from these changes, the accounting policies set out in the Notes have been applied consistently to both years presented
in these Consolidated Financial Statements.
Overview
Strategic report
Governance
Financial statements
Additional information
Convatec Group Plc Annual Report and Accounts 2024
163
New standards, interpretations and amendments not yet effective
At the date of authorisation of these financial statements, the Group has not applied the following new and revised IFRS Accounting
Standards that have been issued but are not yet effective:
–
Lack of exchangeability – Amendment to IAS 21 (effective for the period beginning 1 January 2025)
–
IFRS 18 –
Presentation and Disclosures in Financial Statements (effective for the period beginning 1 January 2027)
–
IFRS 19 –
Subsidiaries without Public Accountability: Disclosures (effective for the period beginning 1 January 2027)
The amendments to IAS 21 are not expected to have a material impact on the Group’s financial statements.
The Group is currently working to identify all impacts that IFRS 18 will have on the primary financial statements and notes to the
Group’s consolidated financial statements.
As the Group’s equity instruments are publicly traded, it is not eligible to elect to apply IFRS 19 for the purposes of the consolidated
financial statements of the Group.
Other interpretations and amendments
In addition to these issued standards, there are a number of other interpretations, amendments and annual improvement project
recommendations that have been issued but not yet effective that have not been adopted by the Group because application is not
yet mandatory, or they are not relevant for the Group.
1.6 Prior year re-presentations
Certain lines in the primary statements have been disaggregated to provide greater clarity, and accordingly, the corresponding
2023 comparative amounts have been re-presented for consistency and comparability between periods.
Within the Consolidated Statement of Financial Position, contingent consideration of $138.0 million (of which $69.7 million was
current and $68.3 million was non-current) at 31 December 2023 is disclosed separately from provisions.
Within the Consolidated Statement of Cash Flows, the non-operating income for the year ended 31 December 2023 has been
re-presented to be disclosed net of unrealised losses on derivatives of $1.9 million. This was previously recognised separately
as derivative financial assets ($11.5 million) and derivative financial liabilities ($13.4 million).
RESULTS OF OPERATIONS
This section includes disclosures explaining the Group’s performance for the year, including segmental information, operating
costs, other expenses, taxation and earnings per share.
2.1 Revenue recognition
The Group sells a broad range of products to a wide range of customers, including healthcare providers, patients and manufacturers.
This note provides further information about how the Group generates revenue and when it is recognised in the Consolidated
Income Statement.
The Group measures revenue for goods sold based on the consideration specified in a contract with a customer, net of discounts,
chargeback allowances and sales-related taxes. Revenue is recognised when control over a product is transferred to a customer,
distributor or wholesaler, which is generally when goods have been delivered. Due to the short-term nature of the receivables
from sale of goods, the Group measures them at the original transaction price without discounting.
Nature of goods
Advanced Wound Care, Ostomy Care, and Continence Care products are sold to pharmacies, hospitals and other acute and post-
acute healthcare service providers directly or through distributors and wholesalers. Products are also sold directly to end
customers (patients) through the Group's home services entities and a small number of clinical and retail outlets.
Infusion Care primarily serves business-to-business customers, consisting principally of the leading manufacturers for pumps for
insulin and other medications.
In 2024 and 2023, no single customer generated more than 10% of the Group's revenue.
Convatec Group Plc Annual Report and Accounts 2024
164
2. REVENUE AND SEGMENTAL INFORMATION (CONTINUED)
Accounting policy (continued)
Financial statements
Notes to the consolidated financial statements
continued
Nature, timing of satisfaction of performance obligations
Principally the Group's contracts with customers contain a single performance obligation, that is the delivery of products to
customers. Revenue is typically recognised when the customer receives the product but is subject to the shipping terms in each
individual contract. Where non-standard shipping arrangements exist, revenue is recognised when control of the goods has
transferred. Allowances for returns, where the contract specifies these terms, are made at the point of sale.
For sales to distributors, revenue is recognised when title is transferred to the distributor and the distributor has assumed
control, the timing of which depends on the contractual terms with each distributor. Chargeback allowances or contractual
deductions relating to end-customer agreements, which may differ from distributor contracts, are made at the point of title
transfer to the distributor. In certain European countries, rebates are provided to governments and are often mandated by laws
or government regulations. These rebates are estimated based on government regulations and unbudgeted spending, laws and
terms of individual rebate agreements, and are recorded as a deduction from revenue at the time the related revenue is
recorded. The estimates are adjusted periodically to reflect actual experience.
When distributors buy products from the Group at a contract price and sell these products to end-customers at a price agreed
with the Group that is lower than the distributors’ list price, a chargeback may arise and a claim may be submitted to the Group
by the distributor. The provision for chargebacks is based on expected sell-through levels by the Group’s distributors to
contracted customers, as well as estimated distributor inventory levels. Retrospective claims are reviewed against estimations
to ensure provisions are regularly updated.
Volume discounts
The Group offers certain prospective volume discounts to customers who achieve a specified volume amount or value of
purchases in any given year. Volume discounts that meet the definition of a material right are recognised as a separate
performance obligation. Material rights are the option to purchase additional products at a discount which would not have been
given had the contract not been entered into and are incremental to the range of discounts typically given for those goods to
that class of customer.
The stand-alone selling price of these volume discounts is based on the discount that the customer would obtain when exercising
the option, adjusted for any discount the customer could receive without exercising the option and the likelihood that the option
will be exercised. The revenue allocated to volume discounts is short-term in nature and recognised proportionally to the pattern
of options exercised by the customer or when the option expires.
Variable consideration
The transaction price for revenue recognised is the amount the Group expects to receive at the date of revenue recognition.
In certain Group businesses, the transaction price is estimated based on the levels of rebates, discounts, allowances, product
returns and consideration expected to be received. In estimating the amounts to be recognised, the Group assesses historical
performance and collection patterns. The arrangements in different countries and with individual customers vary, but broadly they
are all dependent upon interactions with the customer, including the submission of claims that can extend to up to 24 months after
the initial point of revenue recognition. This can include factors outside the direct trading relationship with the customer such as
reimbursement, retrospective rebate or other claims by an insurer, healthcare provider or governmental agency which are not
the Group’s direct customers and may also be impacted by the timing of when a product is used by a customer. Where there is
variability in relation to the consideration that will ultimately be received from a customer, the Group estimates the amount of
consideration to be recognised as revenue during the period using the expected value method, taking into account the nature
of the customer, the contractual arrangements, and other circumstances where known and relevant. Revenue is not recognised
in full until it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur.
Accruals and allocations against gross accounts receivables balances are recorded at the time of sales for the estimated rebates,
chargebacks, retrospective discounts, other allowances and returns based on contractual obligations, historical experience and
other information available at that point in time. Given the large number of variables involved in calculating these accruals it is
not practicable to provide meaningful sensitivity analysis for the resultant accruals.
The nature of the estimations means that there is considerable variability in the ultimate outcomes when considered on an
individual customer basis. As a result, the Group applies a limit on variable revenue consideration, in order to ensure that
revenue is recognised at an appropriate level. The objective of the limit is to ensure that there is a low probability of a significant
reversal of revenue when the uncertainties behind the estimations are resolved for the transactions of individual customers.
The limit is applied by making prudent estimates of the inputs and assumptions used in estimating the variable consideration.
These estimates are driven by historical information, but also take into account the nature of customer and the specific
contractual arrangements we have with them. The limit means that the risk of a material downward adjustment to revenue in
2. REVENUE AND SEGMENTAL INFORMATION (CONTINUED)
Overview
Strategic report
Governance
Financial statements
Additional information
Convatec Group Plc Annual Report and Accounts 2024
165
The Board considers the Group’s business to be a single segment entity engaged in the development, manufacture and sale
of medical products and technologies. R&D, manufacturing and central support functions are managed globally for the Group,
supporting all categories of sales. Revenues are managed both on a category and regional basis. This note presents the
performance and activities of the Group as a single segment.
Pages 14 to 21 of the Strategic report provide further detail of category revenue.
Convatec’s Executive Leadership Team (CELT) is the Group's Chief Operating Decision Maker (CODM). The CODM is the function
that allocates resources and evaluates the Group's global product portfolios on a revenue basis and evaluates profitability and
associated investment on an enterprise-wide basis due to shared infrastructures and support functions between the categories.
Group financial information is provided to CELT for decision-making purposes with revenue included by category as disclosed below.
Resources are allocated on a Group-wide basis, with a focus on both category and the key markets but primarily based on the merits
of individual proposals.
Revenue by category
The Group generates revenue across four major product categories. The following table sets out the Group's revenue for the year
ended 31 December by category:
2024 | 2023 | |
$m | $m | |
Advanced Wound Care | 742.7 | 695.3 |
Ostomy Care | 634.0 | 608.3 |
Continence Care | 501.4 | 457.2 |
Infusion Care | 410.9 | 370.9 |
Revenue excluding hospital care exit | 2,289.0 | 2,131.7 |
Revenue from hospital care exit | 0.2 | 10.7 |
Total | 2,289.2 | 2,142.4 |
Geographic information
Geographic markets
The following chart sets out the Group's revenue by geographic market in which third-party customers are located:
2024 | 2023 | |
$m | $m | |
Europe | 661.1 | 647.8 |
North America | 1,295.6 | 1,186.0 |
Rest of World (RoW) 1 | 332.5 | 308.6 |
Total | 2,289.2 | 2,142.4 |
1.
Rest of World (RoW) comprises all countries in Asia Pacific, Latin America (including Mexico and the Caribbean), the Middle East (including Turkey) and Africa.
Geographic regions
The following table sets out the Group's revenue on the basis of where the legal entity generating the revenue resides, including
countries representing over 10% of Group revenue and the UK, where the Group is domiciled:
2024 | 2023 | |
$m | $m | |
Geographic regions | ||
US | 896.0 | 821.5 |
Denmark | 400.2 | 375.5 |
UK | 128.7 | 116.7 |
Other 2 | 864.3 | 828.7 |
Total | 2,289.2 | 2,142.4 |
2.
Other consists primarily of other countries in Europe, Asia-Pacific, Latin America and Canada.
The following table sets out the Group's long-lived assets by country in which the legal entity resides:
2024 | 2023 | |
$m | $m | |
Long-lived assets 3 | ||
US | 1,189.8 | 1,285.9 |
UK | 838.4 | 866.6 |
Denmark | 280.5 | 274.4 |
Other | 357.5 | 355.7 |
Total long-lived assets | 2,666.2 | 2,782.6 |
3.
Financial statements
Notes to the consolidated financial statements
continued
166
Convatec Group Plc Annual Report and Accounts 2024
The Group incurs operating costs associated with the day-to-day operation of the business. These operating costs are deducted
from revenue to calculate operating profit.
Operating profit is stated after deducting from revenue:
2024 | 2023 | ||
Notes | $m | $m | |
Depreciation: | |||
Property, plant and equipment | 8 | 40.6 | 37.5 |
Right-o f -use assets | 24 | 23.2 | 22.7 |
Amortisation of intangible assets | 9 | 157.0 | 154.6 |
Impairment of intangible assets | 9 | 0.9 | – |
Impairment of property, plant and equipment | 8 | 6.5 | 2.7 |
Impairment of right-o f -use assets | 24 | 0.3 | 1.9 |
Amounts in respect of inventories included in cost of sales | 856.1 | 794.4 | |
Write-down of inventories | 15.6 | 21.8 | |
Lease expenses 1 | 24 | 1.5 | 2.4 |
Staff costs: | |||
Wages and salaries | 618.0 | 578.4 | |
Share-based payment expense | 19 | 19.8 | 14.6 |
Social security costs | 94.9 | 77.3 | |
Defined contribution plans post-employment costs | 27.7 | 23.7 | |
Defined benefit plans pension costs | 15 | 1.2 | 1.4 |
Recruitment and other employment-related fees | 5.6 | 5.9 | |
Total staff costs | 767.2 | 701.3 |
1.
The remuneration of the Executive Directors, which is set out on pages 114 to 144, has been audited and is included within staff
costs and forms part of these Consolidated Financial Statements.
The average number of the Group's employees by function:
The average number of the Group's employees by location
2
:
2023
3,311
5,704
Operations
Sales and
marketing
General and
administrative
R&D
Operations
Sales and
marketing
General and
administrative
R&D
857
538
2024
10,410
3,241
5,559
791
517
10,108
3,655
Europe
North
America
RoW
1,479
5,276
2024
10,410
2023
1,468
3,600
5,040
10,108
Europe
North
America
RoW
2.
North America comprises the United States and Canada, and Rest of World (RoW) comprises all countries in Asia Pacific, Latin America (including Mexico and the
Caribbean), the Middle East (including Turkey) and Africa.
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Convatec Group Plc Annual Report and Accounts 2024
Overview
Strategic report
Governance
Financial statements
Additional information
The total remuneration of the Group's auditor, Deloitte LLP, for services provided to the Group during the year ended 31 December
is analysed below:
2024 | 2023 | |
$m | $m | |
Fees for audit services | ||
The audit of the Company and Group financial statements | 1.8 | 1.6 |
The audit of the accounts of the Company’s subsidiaries 1 | 3.1 | 3.3 |
Total fees for audit services | 4.9 | 4.9 |
Fees for non-audit services | ||
Audit-related assurance services | 0.2 | 0.2 |
Other non-audit services | 0.1 | 0.1 |
Total fees for non-audit services | 0.3 | 0.3 |
Total auditor remuneration | 5.2 | 5.2 |
1.
Included in the $3.1 million for the audit of the Company’s subsidiaries in 2024 is $0.3 million in respect of additional fees charged for the 2023 statutory audits.
A description of the work performed by the Audit and Risk Committee to safeguard auditor independence when non-audit services
Other operating expenses were as follows:
2024 | 2023 | |
$m | $m | |
Impairment of intangible assets | 0.7 | – |
Impairment of property, plant and equipment and right-o f -use assets | 6.1 | 2.5 |
Other operating expenses | 6.8 | 2.5 |
Other operating expenses in the year of $6.8 million consisted of $6.1 million of impairments in respect of property, plant and
equipment and right-of-use assets and a $0.7 million impairment of intangible assets as a result of the Group’s transformation
Non-operating income, net was as follows:
2024 | 2023 | ||
Notes | $m | $m | |
Net foreign exchange (loss)/gain 2 | (18.1) | 3.7 | |
Gain/(loss) on foreign exchange forward contracts | 23 | 25.8 | (4.3) |
(Loss)/gain on foreign exchange cash flow hedges | 23 | (4.3) | 0.8 |
Gain on divestiture | – | 3.9 | |
Other non-operating income | 0.3 | 0.7 | |
Non-operating income, net 3 | 3.7 | 4.8 |
2.
The foreign exchange loss in 2024 primarily relates to the foreign exchange impact on intercompany transactions, including loans transacted in non-functional currencies.
The Group uses foreign exchange forward contracts to manage these exposures in accordance with the Group’s foreign exchange risk management policy.
3.
Of the total non-operating income of $3.7 million (2023: $4.8 million), $8.8 million relates to the realised gain arising from the settlement of FX derivatives (2023: $6.7 million
Financial statements
Notes to the consolidated financial statements
continued
Convatec Group Plc Annual Report and Accounts 2024
168
The note below sets out the current and deferred tax charges, which together comprise the total tax expense in the Consolidated
Income Statement. The deferred tax section of the note also provides information on expected future tax charges or benefits and
sets out the deferred tax assets and liabilities held across the Group.
Current tax
Current tax is the expected tax payable or receivable on the taxable profit or loss for the year, using tax rates enacted or
substantively enacted at the reporting date, and any adjustment to tax payable in respect of prior years. Taxable profit differs
from profit before income taxes because taxable profit excludes items that are either never taxable or tax deductible or items
that are taxable or tax deductible in a different period.
Deferred tax is recognised using the balance sheet liability method for temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised
for temporary differences:
–
On the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither
accounting nor taxable profit or loss;
–
Arising on the initial recognition of goodwill; and
–
On investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the
foreseeable future.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to temporary differences when
the asset is realised or the liability is settled, based on the laws that have been enacted or substantively enacted by the
reporting date.
Deferred tax assets are recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it
is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reviewed
at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and
they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they
intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.
Current tax and deferred tax for the year
Current tax and deferred tax are recognised in the Consolidated Income Statement, except when they relate to items that
are recognised in other comprehensive income or directly in equity, in which case, the current tax and deferred tax are also
recognised in other comprehensive income or directly in equity, respectively. Where current tax or deferred tax arises from
Tax provisions
The Group is subject to income taxes in numerous tax jurisdictions. Judgement is sometimes required in determining the
worldwide provision for income taxes. There may be transactions for which the ultimate tax determination is uncertain and may
be challenged by the tax authorities. The Group recognises liabilities for anticipated or actual tax audit issues based on estimates
of whether additional taxes will be due. Where an outflow of funds to a tax authority is considered probable and the Group can
make a reliable estimate of the outcome of the issue, management calculates the provision for the best estimate of the liability.
In assessing its uncertain tax provisions, management takes into account the specific facts of each issue, the likelihood of
settlement and the input of professional advice where required. The Group assumes that where a tax authority has a right to
examine amounts reported to it, they will do so and will have full knowledge of all relevant information. Where the ultimate
liability as a result of an issue varies from the amounts provided, such differences could impact the current and deferred tax
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Convatec Group Plc Annual Report and Accounts 2024
169
6.1 Taxation
The Group's income tax expense is the sum of the total current and deferred tax expense.
2024 | 2023 | |
$m | $m | |
Current tax | ||
UK corporation tax | 2.1 | – |
Overseas taxation | 66.0 | 46.1 |
Adjustment to prior years | (4.2) | (5.5) |
Total current tax expense | 63.9 | 40.6 |
Deferred tax | ||
Origination and reversal of temporary differences | (4.6) | 2.0 |
Change in tax rates | 3.6 | 1.6 |
Adjustment to prior years | (7.2) | (4.5) |
Benefit from previously unrecognised tax losses | (0.3) | (2.6) |
Total deferred tax benefit | (8.5) | (3.5) |
Income tax expense | 55.4 | 37.1 |
In 2023, the deferred tax movement included a net tax benefit of $15.1 million following the successful resolution of an uncertain
tax position.
6.2 Reconciliation of effective tax rate
The effective tax rate for the year ended 31 December 2024 was 22.5% (2023: 22.2%).
Tax reconciliation to UK statutory rate
The table below reconciles the Group’s profit before income taxes at the UK statutory rate to the Group's total income tax expense:
2024 | 2023 | |||
$m | $m | |||
Profit before income taxes | 245.9 | 167.4 | ||
Profit before income taxes multiplied by rate of corporation tax in the UK of 25.0% | ||||
(2023: 23.52%) | 61.5 | 39.4 | ||
Difference between UK and overseas tax rates 1 | (0.3) | 1.6 | ||
Non-deductible/non-taxable items | 5.2 | 7.2 | ||
Change in recognition of deferred tax assets | – | 2.6 | ||
Recognition of previously unrecognised US deferred tax assets | – | (2.6) | ||
Movement in provision for uncertain tax positions | 3.7 | (17.5) | ||
Other 2 | (14.7) | 6.4 | ||
Income tax expense and effective tax rate | 55.4 | 22.5% | 37.1 | 22.2% |
1.
This includes changes in tax rates based on substantively enacted legislation across various tax jurisdictions as of 31 December.
2.
Includes the release of a $2.9 million tax liability relating to restructuring activities in Switzerland and the $11.4 million impact of prior year corporate income tax filings.
The Group has worldwide operations and therefore is subject to several factors that may affect future tax charges, principally the
levels and mix of profitability in different tax jurisdictions, transfer pricing regulations, tax rates imposed and tax regime reforms.
The calculation of the Group’s tax expense involves a degree of estimation and judgements in respect of certain items for which the
tax treatment cannot be finally determined until resolution has been reached with the relevant tax authority, specifically in relation
to open tax and transfer pricing matters. Due to the high volume of intercompany transactions, the Group’s evolving business
model and the increasing complexity in interaction between multiple tax laws and regulations, transfer pricing requires judgement
in determining the appropriate allocation of profits between jurisdictions. The Group assessed the impact of ongoing changes to the
Group’s operating model, the supporting documentation for the tax and transfer pricing positions, existing tax authority challenges,
and the likelihood of new challenges by tax authorities.
The Group continues to believe it has made adequate provision for uncertain tax positions on open issues in accordance with
IFRIC 23 Uncertainty over Income Tax Treatments. The ultimate liability for such matters may vary from the amounts provided and is
dependent upon the outcome of discussions with relevant tax authorities or, where applicable, appeal proceedings. The movement
includes resolutions of uncertain tax positions in the year.
The Group has applied the temporary exception as detailed in the IASB announcement “International Tax Reform – Pillar Two Model
Rules”, which amended IAS 12
Income Taxes
, and therefore has not recognised nor disclosed information about deferred tax assets
and liabilities related to Pillar Two income taxes.
Financial statements
Notes to the consolidated financial statements
continued
6. INCOME TAXES (CONTINUED)
170
Convatec Group Plc Annual Report and Accounts 2024
The components of deferred tax assets and liabilities at 31 December were as follows:
2024 | 2023 | |
$m | $m | |
Deferred tax assets | 22.7 | 21.2 |
Deferred tax liabilities | (82.7) | (88.2) |
(60.0) | (67.0) |
6.4 Movement in deferred tax assets and liabilities
Deferred tax is measured on the basis of the tax rates enacted or substantively enacted at the reporting date. The movements in the
deferred tax assets and liabilities were as follows:
Inventor y | Tax losses | PP&E | Intangibles | Interest | Other | Total | |
$m | $m | $m | $m | $m | $m | $m | |
At 1 January 2023 | 3.3 | 90.1 | (3.5) | (217.6) | 28.4 | 42.7 | (56.6) |
Recognised in income statement | 6.4 | (13.0) | (1.7) | 11.0 | 7.6 | (6.8) | 3.5 |
Recognised in other | |||||||
comprehensive income | – | – | – | – | – | 0.7 | 0.7 |
Acquisitions | – | – | – | (13.1) | – | – | (13.1) |
Foreign exchange | (0.1) | 0.4 | (0.2) | (3.1) | 0.5 | 1.0 | (1.5) |
At 31 December 2023 | 9.6 | 77.5 | (5.4) | (222.8) | 36.5 | 37.6 | (67.0) |
Recognised in income statement | 3.6 | (34.4) | 0.6 | 31.1 | 1.4 | 6.2 | 8.5 |
Recognised in other | |||||||
comprehensive income | – | – | – | – | – | (1.6) | (1.6) |
Acquisitions | – | – | – | (0.3) | – | – | (0.3) |
Foreign exchange | – | (0.6) | 0.8 | 1.2 | (0.8) | (0.2) | 0.4 |
At 31 December 2024 | 13.2 | 42.5 | (4.0) | (190.8) | 37.1 | 42.0 | (60.0) |
Net deferred tax liabilities provided in relation to intangible assets are predominantly in respect of temporary differences arising
on assets and liabilities acquired as part of business combinations. An amount relating to deductible tax amortisation of intangible
assets of $135.3 million that is not expected to reverse due to anticipated restructuring of the Group’s activities (2023: $145.9 million) is
not recognised.
Net deferred tax assets recognised in relation to tax losses are predominantly in respect of the US. Deferred tax assets on foreign
tax credits of $0.4 million remain unrecognised in the US based on forecasts of suitable future taxable profit and they are due to
expire within five years (2023: $2.4 million).
Deferred tax on inventory predominantly relates to a deferred tax asset recognised on intra-Group profits arising on intercompany
inventory that are eliminated in the Consolidated Financial Statements. As intra-Group profits are not eliminated from the individual
entities’ tax returns, a temporary difference arises and will reverse when the inventory is sold externally.
Other net temporary differences include accrued expenses, employee costs and pensions, for which a tax deduction is only available
on a paid basis, research and development expenses, unremitted earnings and share-based payments.
To the extent that dividends remitted from overseas subsidiaries and branches are expected to result in additional taxes,
appropriate amounts have been provided for. Deferred tax is not provided on temporary differences of $417.1 million in the year
to 31 December 2024 (2023: $381.2 million) arising on unremitted earnings as management has the ability to control any future
6.5 Unrecognised tax losses carried forward
Deferred tax assets are only recognised where it is probable that future taxable profits will be available to utilise the tax losses.
The following table shows the unrecognised tax losses carried forward, including anticipated period of expiration:
2024 | 2023 | |
Losses | Losses | |
Trading and capital losses expiring: | $m | $m |
Within five years | 1.3 | 2.2 |
Between five to ten years | – | 0.5 |
Unlimited | 925.4 | 961.6 |
Total | 926.7 | 964.3 |
The Group has Luxembourg tax losses of $911.3 million (2023: $944.5 million) which are not recognised and will not expire.
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171
Basic earnings per share is calculated based on the Group’s net profit for the year attributable to shareholders divided by the
weighted average number of ordinary shares in issue during the year. The weighted average number of shares is net of shares
purchased by the Group and held as own shares.
Diluted earnings per share take into account the dilutive effect of all outstanding share options priced below the market price in
arriving at the number of shares used in its calculation.
2024 | 2023 | |
Net profit attributable to the shareholders of the Group ($m) | 190.5 | 130.3 |
Basic weighted average ordinary shares in issue (number) | 2,047,643,498 | 2,038,653,228 |
Dilutive impact of share awards (number) | 9,153,919 | 13,936,032 |
Diluted weighted average ordinary shares in issue (number) | 2,056,797,417 | 2,052,589,260 |
Basic earnings per share (cents per share) | 9.3¢ per share | 6.4¢ per share |
Diluted earnings per share (cents per share) | 9.3¢ per share | 6.3¢ per share |
The calculation of diluted earnings per share does not contain any share options that were non-dilutive for the year, because the
average market price of the Group’s ordinary shares exceeded the exercise price (2023: average market price of the Group’s
OPERATING ASSETS AND LIABILITIES
This section set outs the assets and liabilities that the Group holds in order to operate the business on a day-to-day basis,
including long-term assets which generate future revenues and profits for the Group.
Liabilities relating to the Group’s financing activities are addressed in "Capital structure and financial costs".
The Group invests in buildings, equipment and manufacturing machinery to operate the business and to generate revenue
and profits. Assets are depreciated over their estimated useful economic life reflecting the reduction in value of the asset due,
in particular, to wear and tear.
expenditures that are directly attributable to the acquisition of an asset including subsequent additions and improvements when
it is probable that future economic benefit associated with the item will flow to the Group and the cost can be reliably measured.
Depreciation is provided using a straight-line method from the point an asset becomes available for use. Depreciation is
calculated to reduce the asset’s cost to its residual value over the asset’s estimated useful economic life. Assets are depreciated
as follows:
Asset category | Useful life |
Land | not depreciated |
Land improvements | 15 to 40 years |
Leasehold improvements | shorter of useful life or lease tenure |
Buildings | 15 to 50 years |
Machinery, equipment and fixtures | 3 to 20 years |
The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sale proceeds, less
any selling expenses, and the carrying amount of the asset. This difference is recognised in the Consolidated Income Statement.
Assets under construction reflects the cost of construction or improvement of items of PP&E that are not yet available for use.
Assets under construction are not depreciated whilst under construction and depreciation commences once the asset is
completed and ready for use. Finance costs incurred in the construction of assets that take more than one year to complete are
capitalised using the Group’s weighted average borrowing cost during the period in which the asset is under construction.
Capitalisation of finance costs ceases when the asset becomes available for use.
Consideration of useful economic lives
The assets’ residual values, depreciation methods and useful economic lives are reviewed annually and adjusted if appropriate.
Impairment of assets
The carrying values of PP&E are reviewed for indicators of impairment annually or when events or changes in circumstances indicate
the carrying value may be impaired. If any such indication exists, the recoverable amount of the asset is estimated, being the higher
of an asset’s fair value less costs to sell and the net present value of its expected pre-tax future cash flows (value in use).
Financial statements
Notes to the consolidated financial statements
continued
8. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
172
Convatec Group Plc Annual Report and Accounts 2024
Building, building | |||||
equipment and | Machinery, | ||||
Land & land | leasehold | equipment and | Assets under | ||
improvements | improvements | fixtures | construction | Total | |
$m | $m | $m | $m | $m | |
Cost | |||||
1 January 2023 | 14.2 | 135.2 | 481.2 | 143.7 | 774.3 |
Additions | – | 2.1 | 34.5 | 60.7 | 97.3 |
Arising from acquisitions | – | – | 1.1 | – | 1.1 |
Disposals 1 | – | (3.3) | (24.4) | – | (27.7) |
Transfers | 1.7 | 31.9 | 31.4 | (65.0) | – |
Foreign exchange | 0.5 | 7.9 | 13.7 | 5.6 | 27.7 |
31 December 2023 | 16.4 | 173.8 | 537.5 | 145.0 | 872.7 |
Additions | – | 2.3 | 2.7 | 97.3 | 102.3 |
Disposals 1 | (1.1) | (5.4) | (9.6) | (0.2) | (16.3) |
Transfers | – | 17.5 | 48.5 | (66.0) | – |
Foreign exchange | (0.4) | (10.7) | (21.5) | (7.2) | (39.8) |
31 December 2024 | 14.9 | 177.5 | 557.6 | 168.9 | 918.9 |
Accumulated depreciation | |||||
1 January 2023 | 1.0 | 55.3 | 317.6 | – | 373.9 |
Depreciation | 0.1 | 7.6 | 29.8 | – | 37.5 |
Arising from acquisitions | – | – | 0.7 | – | 0.7 |
Disposals 1 | – | (3.1) | (24.0) | – | (27.1) |
Impairment | – | 1.2 | 1.5 | – | 2.7 |
Foreign exchange | – | 2.5 | 8.7 | – | 11.2 |
31 December 2023 | 1.1 | 63.5 | 334.3 | – | 398.9 |
Depreciation | 0.1 | 8.9 | 31.6 | – | 40.6 |
Disposals 1 | – | (4.0) | (9.6) | – | (13.6) |
Impairment | – | 1.6 | 4.9 | – | 6.5 |
Foreign exchange | – | (3.1) | (13.0) | – | (16.1) |
31 December 2024 | 1.2 | 66.9 | 348.2 | – | 416.3 |
Net carrying amount | |||||
31 December 2023 | 15.3 | 110.3 | 203.2 | 145.0 | 473.8 |
31 December 2024 | 13.7 | 110.6 | 209.4 | 168.9 | 502.6 |
1.
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Convatec Group Plc Annual Report and Accounts 2024
173
The Group’s intangible assets are those that have been recognised at fair value as part of business combinations, investment in
product development and software purchased to support business operations. These are assets that are not physical in nature
but can be sold separately or arise from legal rights.
Measurement on initial recognition of intangible assets is determined at cost for assets acquired by the Group and at fair value
at the date of acquisition if acquired in business combinations. Following initial recognition of the intangible asset, the asset is
carried at cost less any subsequent accumulated amortisation and accumulated impairment losses.
Purchased computer software and certain costs of information technology are capitalised as intangible assets. Software that is
integral to purchased computer hardware is capitalised as PP&E.
The Group accounts for its software-as-a-service (SaaS) arrangements by applying the guidance in the 2021 IFRIC agenda
decision to determine whether the configuration and customisation expenditure gives rise to an asset, including whether the
Group has control of the software that is being configured or customised or whether the configuration or customisation activities
create a resource controlled by the Group that is separate from the software and can be transferred to another provider.
Where the recognition criteria of IAS 38
Intangible Assets
are satisfied, including configuration and customisation costs which
are distinct and within the control of the Group, these are capitalised and carried at cost less any accumulated amortisation and
impairment, and amortised on a straight-line basis over the period which the developed software is expected to be used. Where
these recognition criteria are not met, the Group recognises configuration and customisation costs, along with the ongoing fees
to obtain access to the SaaS provider’s application software, as operating expenses as the services are received.
R&D expenses are comprised of all activities involving investigative, technical and regulatory processes related to obtaining
appropriate approvals to market our products. It also includes new product development aimed at developing more sustainable
product portfolios for the longer term, as mentioned within the Responsible Business review section (refer to page 41). Costs
include payroll, clinical manufacturing and pre-launch clinical trial costs, manufacturing development and scale-up costs, product
development, regulatory costs including costs incurred to comply with legislative changes, contract services and other external
contractors costs, research licence fees, depreciation and amortisation of laboratory facilities, and laboratory supplies.
Research costs are expensed as incurred. Development costs are capitalised only if the expenditure can be measured reliably, the
product or process is technically and commercially feasible, future economic benefits are probable and the Group intends to and
has sufficient resources to complete development and use or sell the asset. Subsequent to initial recognition, development costs
are measured at cost less accumulated amortisation and any accumulated impairment losses. Upgrades and enhancements are
Intangible assets with an indefinite life are not amortised. Amortisation of intangible assets with a finite life is calculated using
the straight-line method based on the following estimated useful lives:
Asset category | Useful life |
Product-related | 3 to 20 years |
Capitalised software | 3 to 10 years |
Customer relationships and non-compete agreements | 2 to 20 years |
Trade names – finite | 2 to 10 years |
Trade names – indefinite | Indefinite |
Development costs | 5 years |
Impairment of assets
Intangible assets with finite life are reviewed for indicators of impairment at each reporting period or when events or changes in
circumstances indicate the carrying value may be impaired. If any such indication exists, the recoverable amount of the asset is
estimated, being the higher of an asset’s fair value less costs to sell and the net present value of its expected pre-tax future cash
flows (value in use).
When an asset’s recoverable amount falls below its carrying value, an impairment is charged to the Consolidated Income Statement.
174
Convatec Group Plc Annual Report and Accounts 2024
Financial statements
Notes to the consolidated financial statements
continued
9. INTANGIBLE ASSETS AND GOODWILL (CONTINUED)
Customer | |||||||
relationships | |||||||
and non- | |||||||
Capitalised | compete | Development | Assets under | ||||
Product-related | software 1 | agreements | Trade names | cost | construction | Total | |
$m | $m | $m | $m | $m | $m | $m | |
Cost | |||||||
1 January 2023 | 2,120.5 | 130.4 | 324.4 | 262.8 | 11.0 | 35.5 | 2,884.6 |
Additions | – | 2.0 | – | – | – | 35.6 | 37.6 |
Arising from acquisitions | 112.5 | – | 4.3 | – | – | – | 116.8 |
Write-offs | – | (1.1) | – | – | – | – | (1.1) |
Transfers | 1.5 | 39.8 | – | – | – | (41.3) | – |
Foreign exchange | 35.6 | 2.5 | 3.0 | 0.4 | 0.3 | 1.0 | 42.8 |
31 December 2023 | 2,270.1 | 173.6 | 331.7 | 263.2 | 11.3 | 30.8 | 3,080.7 |
Additions | 1.0 | 3.6 | – | – | – | 26.8 | 31.4 |
Arising from acquisitions 2 | – | – | 1.0 | 0.3 | – | – | 1.3 |
Write-offs | (12.8) | – | – | – | – | – | (12.8) |
Transfers | 11.3 | 24.7 | – | – | – | (36.0) | – |
Foreign exchange | (13.3) | (1.2) | (5.8) | (1.0) | (0.7) | (0.6) | (22.6) |
31 December 2024 | 2,256.3 | 200.7 | 326.9 | 262.5 | 10.6 | 21.0 | 3,078.0 |
Accumulated amortisation | |||||||
1 January 2023 | 1,622.0 | 92.8 | 223.5 | 11.1 | 10.3 | – | 1,959.7 |
Amortisation | 114.5 | 16.3 | 22.3 | 1.1 | 0.4 | – | 154.6 |
Write-offs | – | (1.1) | – | – | – | – | (1.1) |
Foreign exchange | 28.2 | 0.7 | 3.0 | – | 0.3 | – | 32.2 |
31 December 2023 | 1,764.7 | 108.7 | 248.8 | 12.2 | 11.0 | – | 2,145.4 |
Amortisation | 117.3 | 20.1 | 18.9 | 0.4 | 0.3 | – | 157.0 |
Write-offs | (12.8) | – | – | – | – | – | (12.8) |
Impairment | – | 0.2 | 0.7 | – | – | – | 0.9 |
Foreign exchange | (11.4) | (0.4) | (5.9) | – | (0.7) | – | (18.4) |
31 December 2024 | 1,857.8 | 128.6 | 262.5 | 12.6 | 10.6 | – | 2,272.1 |
Net carrying amount | |||||||
31 December 2023 | 505.4 | 64.9 | 82.9 | 251.0 | 0.3 | 30.8 | 935.3 |
31 December 2024 | 398.5 | 72.1 | 64.4 | 249.9 | – | 21.0 | 805.9 |
1.
Capitalised software is in respect of purchased and internally generated software.
2.
Acquisitions comprise assets in relation to the acquisition of Livramedom. See Note 26 – Acquisitions.
Amortisation expenses in respect of finite-lived intangible assets for the year ended 31 December were as follows:
2024 | 2023 | |
$m | $m | |
Cost of sales | 111.4 | 112.4 |
Selling and distribution expenses | 5.0 | 3.6 |
General and administrative expenses | 32.4 | 31.0 |
Research and development expenses | 8.2 | 7.6 |
Total amortisation expense | 157.0 | 154.6 |
The carrying amount of trade names with indefinite life at 31 December 2024 was $248.4 million (2023: $249.4 million). Each of these
trade names is considered to have an indefinite life, given the strength and durability of the current trade name and the level of
marketing support. The trade names are in relatively similar stable and profitable market sectors, with similar risk profiles, and their
size, diversification and market shares of the products to which the trade names relate mean that the risk of market-related factors
causing a reduction in the lives of the trade names is considered to be relatively low. The Group is not aware of any material legal,
regulatory, contractual, competitive, economic or other factor which could limit their useful lives.
Individual intangible assets with a carrying amount in excess of 10% of the total intangible asset carrying amount were as follows:
2024 | 2023 | ||
$m | $m | Remaining life | |
Trade names | |||
Convatec trade name | 234.6 | 234.6 | Indefinite |
Product-related | |||
InnovaMatrix TM | 123.5 | 134.5 | 11.3 years |
NextGen Antimicrobial platform | 98.7 | 107.0 | 13.3 years |
9. INTANGIBLE ASSETS AND GOODWILL (CONTINUED)
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The Group recognises goodwill resulting from business combinations where there are future economic benefits from assets
which cannot be individually separated and recognised. Goodwill represents the amount paid in excess of the fair value of the
net assets of the acquired business.
goodwill arising from acquisitions.
Goodwill is not subject to amortisation but is tested for impairment annually or when events or changes in circumstances
indicate the carrying value may be impaired. Impairment losses recognised in respect of goodwill cannot be reversed.
Refer to Note 9.3 – Cash Generating Unit (CGU) impairment review for consideration of impairment of goodwill.
Goodwill is denominated in the functional currency of the acquired entity and revalued to the closing exchange rate at each
The changes in the carrying value of goodwill as at 31 December were as follows:
Total | |
$m | |
1 January 2023 | 1,224.6 |
Arising from acquisitions | 45.9 |
Foreign exchange | 28.3 |
31 December 2023 | 1,298.8 |
Arising from acquisitions (Note 26) | 11.5 |
Foreign exchange | (20.1) |
31 December 2024 | 1,290.2 |
An impairment assessment is required to be performed annually for goodwill and indefinite-lived intangibles or when events or
changes in circumstances indicate the carrying value may be impaired. An impairment is a reduction in the recoverable amount
of an asset compared to the carrying value of the asset. Recoverable amount is the higher of value in use and fair value less costs
to sell.
This note provides details of the annual impairment assessment that has been performed.
continuing use that are largely independent of the cash inflows of other assets or CGUs. Additionally, goodwill arising
from a business combination is allocated to a CGU or groups of CGUs that are expected to benefit from the synergies of the
combination. An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount.
The recoverable amounts of the CGUs are determined based on value in use calculations, which reflect the estimated future
cash flows of each CGU discounted by an estimated weighted average cost of capital that represents the rate of return an
outside investor would expect to earn. This discount rate is based on the weighted average cost of capital for comparable public
companies and is adjusted for risks specific to the CGU including differences in risk due to its size, geographic concentration and
trading history.
Future cash flows are determined using the latest available Board-approved forecasts and strategic plans. These forecasts and
strategic plans are based on specific assumptions for each CGU during the five-year planning period with respect to revenue,
results of operations, working capital, capital investments and other general assumptions for the projected period. The forecast
assumptions that derive the future cash flows are based on the historical results of each CGU combined with external market
information and defined strategic initiatives.
If identified, impairment losses are recognised in the Consolidated Income Statement. They are allocated first to reduce the
carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the remaining assets in the
CGU, on a pro-rated basis.
An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that
the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or
amortisation, if no impairment loss had been recognised. The Group has not recognised any reversal of previous impairments
The CGUs identified by management are consistent with the four categories within the Group that generate cash inflows which are
largely independent of each other. These are Advanced Wound Care, Ostomy Care, Continence Care and Infusion Care. The Group
continues to operate under the same operating model as prior year and determined that there has not been any triggers for a
change in CGU groups. Profitability continues to be assessed on a consolidated basis, and management’s focus is predominantly
category revenue and key market focus. Goodwill is allocated to these CGUs, which represent the lowest level within the Group at
which the goodwill is monitored for internal management purposes.
Financial statements
Notes to the consolidated financial statements
continued
9. INTANGIBLE ASSETS AND GOODWILL (CONTINUED)
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Goodwill and intangible assets with an indefinite life (trade names) are allocated to the Group's CGU groups as at 31 December
as follows:
Goodwill | Indefinite-lived intangible assets | |||
2024 | 2023 | 2024 | 2023 | |
$m | $m | $m | $m | |
CGU groups | ||||
Advanced Wound Care | 518.3 | 523.7 | 104.8 | 104.8 |
Ostomy Care | 152.7 | 154.3 | 91.2 | 91.2 |
Continence Care | 540.8 | 535.0 | 41.2 | 41.2 |
Infusion Care | 78.4 | 85.8 | 11.2 | 12.2 |
Total | 1,290.2 | 1,298.8 | 248.4 | 249.4 |
Determining the estimated recoverable amount of a CGU group is judgemental in nature. The key input used in the estimation of
value in use as at 31 December 2024 is the Group’s five-year Board approved strategic plan, with key assumptions including forecast
sales growth rates, terminal value growth rate and discount rates. Forecast sales growth rates are based on past experience
adjusted for macroeconomic activity, sector market growth forecasts, competitor activity and strategic decisions made in respect of
each CGU group.
The terminal value growth rate and discount rates used were as follows:
2024 | 2023 | |
Discount rate (pre-tax) 1 | % | % |
CGU groups | ||
Advanced Wound Care | 10.6 | 14.5 |
Ostomy Care | 10.6 | 13.5 |
Continence Care | 10.0 | 12.0 |
Infusion Care | 10.2 | 13.5 |
Terminal value growth rate 2 | 2.0 | 2.0 |
1.
The discount rate is based on the weighted average cost of capital for comparable public companies and is adjusted for risks specific to the CGU group including
differences in risk due to its size, geographic concentration and trading history.
2.
The estimated terminal value growth rate for the CGU groups is a prudent estimate based on expectations concerning the growth trends of the CGU groups and taking
into account global gross domestic product growth, general long-term inflation and population expectations.
Discount rates have seen a decrease year-on-year, primarily attributable to a reduction in risk-free rates.
No impairments have been recognised in respect of the Group’s current CGU groups for the years ended 31 December 2024 and 2023.
Taking into consideration the Board-approved 2025 budget and longer-term strategic plan as foundations, sensitivity analysis was
performed considering changes in key assumptions including discount rates and terminal value growth rate and consideration of
risk-based severe but plausible downside scenarios consistent with those identified as part of the Viability assessment (refer to
page 83 for full details of scenarios). As part of the assessment, an external benchmarking assessment was also carried out on
the forecast sales growth rates.
Under all severe but plausible scenarios, headroom remained on all CGU groups, demonstrating that the impairment of goodwill
and indefinite-lived intangible assets is not a key source of estimation uncertainty and any possible impairment would not result
Accounting policy
directly attributable transaction costs and subsequently recognised at fair value at each balance sheet date.
Unrealised gains and losses are recognised in other comprehensive income.
On disposal of the equity investment any gains and losses that have been deferred in other comprehensive income are
transferred directly to retained earnings.
Dividends on equity investments are recognised in the income statement when the Group’s right to receive payment is
The investment is in relation to the Group’s investment in BlueWind Medical Limited in 2022 and the Group considers this
investment to be strategic in nature and it is not held for trading.
The Group made an irrevocable election on initial recognition that changes in the fair value of the investment would be recognised
in other comprehensive income. It was initially recorded at fair value plus transaction costs and will be remeasured to fair value at
subsequent reporting dates. The fair value of the investment at 31 December 2024 was $16.9 million (31 December 2023: $22.9 million),
with the movement of $6.0 million taken to the Consolidated Statement of Other Comprehensive Income. No dividends were
recognised during the period.
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10. INVESTMENT IN FINANCIAL ASSETS (CONTINUED)
In line with IFRS 13
Fair Value Measurement
, this investment has been classified as Level 3 in the fair value hierarchy as its
measurement is derived from significant unobservable inputs by reference to available information, including the current market
value of similar instruments, recent financing rounds and discounted cash flows of the underlying net assets.
The fair value of the investment has been determined by a third party, and confirmed by management, by using an average of
three valuation methodologies, those being the precedent transaction method, the income approach method and the probability-
weighted expected return model. The table below summarises the various methodologies used by the Group to fair value the
investment, the inputs and the sensitivities applied.
Sensitivity applied to input | |||
Methodology | Inputs | Low range | High range |
Precedent transaction method/Price of | Change in market multiples | Decrease of 5% | Increase of 5% |
recent investment | (decrease of 45% to 55%) | to 60% | to 40% |
The initial transaction involving BlueWind | |||
Medical itself was the most relevant starting | |||
point and then this was calibrated by considering | |||
exogenous and idiosyncratic factors to apply a | |||
discount or uplift as applicable. | |||
Income approach method | Internal cash flow projections | +2.5% on | -2.5% on |
(discounted cash flow analysis) | the alpha | the alpha | |
Discounted at weighted average cost of | |||
Provides an estimation of the value of an asset | capital (WACC) appropriate for the risk of | ||
based on expectations about the cash flows | achieving the projected cash flows of 28.6% | ||
that an asset would generate over time, | |||
discounted at the appropriate rate of return. | The final year of projections has been | ||
extrapolated using a reasonable long term | |||
growth rate (LTGR) of 2%. | |||
Probability-weighted expected return model | Discounted at cost of equity of 31.5% | +2% to | -2% to |
(“PWERM”) | discount rate | discount rate | |
Assesses multiple scenarios for the future | |||
proceeds to be received by the holders of the | |||
shares and weighting them according to their | |||
relative probability of occurring. The PWERM is | |||
a market approach based on comparable | |||
companies’ market multiples. | |||
Fair value measurement | $13.4m | $20.1m |
The impact of applying these sensitivities across the three methodologies would result in a fair value measurement range of
Inventories are the materials used in manufacturing, products manufactured or purchased to be sold by the Group in the ordinary
course of business. Inventories include finished goods, goods which are in the process of being manufactured (work in progress)
and raw and packaging materials awaiting use in production.
calculate a standard cost. The cost of finished goods and work in progress comprises raw materials, direct labour, other direct
costs and indirect production overheads. Production overheads comprises indirect material and labour costs, maintenance and
depreciation of the machinery and production buildings used in the manufacturing process, as well as costs of production
administration and management. Any manufacturing or purchasing variances between actual costs and standard costs are
deferred over the appropriate inventory holding period, which may vary based on the specific nature of the inventory.
Net realisable value is defined as anticipated selling price or anticipated revenue less cost to completion. Estimates of net
realisable value are based on the average selling prices at the end of the reporting period, net of applicable direct selling
expenses. Subsequent events related to the fluctuation of prices and costs are also considered, if relevant. If net realisable
values are below inventory costs, a provision corresponding to this difference is recognised.
Provisions are also made for obsolescence of inventories that (i) do not meet the Group's specifications, (ii) have exceeded their
expiration date, or (iii) are considered slow-moving. The Group evaluates the carrying value of inventories on a regular basis, taking
into account such factors as historical and anticipated future sales compared with quantities on hand, the price the Group expects to
Financial statements
Notes to the consolidated financial statements
continued
11. INVENTORIES (CONTINUED)
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The components of inventories at 31 December were as follows:
2024 | 2023 | |
$m | $m | |
Raw and packaging materials | 93.6 | 102.3 |
Work in progress | 32.2 | 42.5 |
Finished goods | 223.8 | 251.3 |
Inventories | 349.6 | 396.1 |
Inventories are stated net of provision for obsolescence of $10.6 million (2023: $17.0 million). Adjustments to write down inventory
Trade receivables consist of amounts billed and currently due from customers. Gross trade receivables are presented before
allowances for expected credit losses, sales discounts and chargeback allowances. Credit risk with respect to trade receivables
is generally diversified due to the large dispersion and type of customers across many different geographies.
Other receivables include amounts due from third parties not related to revenue and prepaid expenses.
is evaluated on a regular basis. Exposure to credit risk is managed through credit approvals, credit limits and monitoring
procedures. The Group considers a default event to be one where the customer does not have sufficient funds to make their
required payments and/or is in the process of being liquidated.
An allowance is maintained for expected lifetime credit losses that result from the failure or inability of customers to make
required payments. It is not necessary for a credit event to have occurred before credit losses are recognised. Instead, the Group
accounts for expected lifetime credit losses and changes in those expected lifetime credit losses. In determining the allowance,
consideration includes the probability of recoverability based on past experience and general economic factors, incorporating
forward-looking information and adjustments for customers who represent a lower risk of default, which includes public or
private medical insurance customers and customers guaranteed by local government. The amount of expected credit losses,
if any, is required to be updated at each reporting date.
Certain trade and other receivables may be fully reserved when specific collection issues are known to exist, such as pending
bankruptcy. The Group writes off uncollectable receivables at the time it is determined the receivable is no longer collectable.
Trade and other receivables are not collateralised. Where the Group has entered into a receivables financing arrangement,
these receivables are derecognised at the point of sale in accordance with IFRS 9 if we have substantially transferred all risks
and rewards of ownership and there is no option to return the receivables to the Group.
2024 | 2023 | |
$m | $m | |
Included within current assets: | ||
Trade receivables | 310.9 | 337.8 |
Less: allowances for expected credit losses | (15.6) | (27.1) |
Less: sales discounts and chargebacks | (28.3) | (40.9) |
Other receivables 1 | 34.0 | 39.0 |
Prepayments | 34.0 | 24.9 |
Trade and other receivables | 335.0 | 333.7 |
1.
The aged analysis of trade receivables at 31 December was as follows:
2024 | 2023 | |
$m | $m | |
Current | 247.5 | 244.2 |
Past due 1 to 30 days | 18.5 | 27.7 |
Past due 31 to 90 days | 21.5 | 19.2 |
Past due 91 to 180 days | 7.4 | 15.1 |
Past due by more than 180 days | 16.0 | 31.6 |
310.9 | 337.8 |
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Additional information
The unimpaired amounts at 31 December that are past due were aged as follows:
2024 | 2023 | |
$m | $m | |
Past due 1 to 30 days | 18.2 | 27.2 |
Past due 31 to 90 days | 21.1 | 18.5 |
Past due 91 to 180 days | 6.3 | 12.7 |
Past due by more than 180 days | 2.2 | 8.1 |
47.8 | 66.5 |
The Group believes that the unimpaired amounts that are past due are still collectible in full, based on historic payment behaviour
and extensive analysis of customer credit risk.
2024 | 2023 | |
$m | $m | |
At 1 January | (27.1) | (22.0) |
Charged to the income statement | (9.7) | (14.3) |
Released to the income statement | 8.8 | – |
Utilisation of provision | 11.6 | 9.4 |
Foreign exchange | 0.8 | (0.2) |
At 31 December | (15.6) | (27.1) |
Other non-current receivables
Other non-current receivables of $12.5 million (2023: $11.7 million) are principally in respect of deposits held with lessors, prepaid
expenses and other receivables.
Receivables financing
The Group has a Limited Recourse Financing Arrangement at a beneficial financing cost with a financial institution for certain
customers who have a stronger credit profile than the Group and longer than normal payment terms. It has been assessed that
the Group has substantially transferred all the risks and rewards of ownership to the financial institution and accordingly, these
receivables have been derecognised at the point of sale in accordance with IFRS 9.
Trade payables consist of amounts owed to third-party suppliers and represent a contractual obligation to deliver cash in the future.
Other payables include taxes and social security, accruals and liabilities for other employee-related benefits.
The components of trade and other payables at 31 December were as follows:
2024 | 2023 | |
$m | $m | |
Included within current liabilities: | ||
Trade payables | 124.9 | 136.9 |
Taxes and social security | 31.8 | 32.2 |
Other employee-related liabilities | 114.3 | 108.2 |
Accruals and other payables 1 | 111.7 | 111.4 |
Trade and other payables | 382.7 | 388.7 |
1.
Included within accruals and other payables are customer rebates of $17.7 million (2023: $19.8 million) and amounts held in escrow of $8.8 million (2023: $12.3 million).
2024 | 2023 | |
$m | $m | |
Included within non-current liabilities: | ||
Defined benefit obligations (Note 15) | 11.5 | 12.1 |
Other employee-related liabilities | 4.2 | 5.1 |
Accruals and other payables | 15.0 | 15.3 |
Other non-current liabilities | 30.7 | 32.5 |
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Financial statements
Notes to the consolidated financial statements
continued
A provision is an obligation recognised when there is uncertainty over the timing or amount that will be paid. Provisions
recognised by the Group are primarily in respect of restructuring, dilapidations and legal liabilities.
Provisions, Contingent Liabilities and Contingent Assets
, a provision is recognised when there is a present legal
or constructive obligation as a result of a past event, it is probable that the Group will be required to settle the obligation and
that obligation can be measured reliably. Restructuring provisions are only recognised when a constructive obligation exists,
which requires both a detailed formal plan and a valid expectation being raised in those affected by starting to implement that
plan or announcing the main features. Provisions are measured at the best estimate of the expenditure required to settle the
obligation and are discounted to present value if the effect is material. Provisions are reviewed on a regular basis and adjusted
to reflect management’s best current estimates. Due to the judgemental nature of these items, future settlements may differ
from amounts recognised.
When the timing of a settlement is uncertain or expected to be more than 12 months from the reporting date, amounts are
The movements in provisions are as follows:
Dilapidations | Restructuring | Legal | Total | |
$m | $m | $m | $m | |
1 January 2024 | 2.4 | 14.0 | 0.6 | 17.0 |
Charged to income statement | 0.7 | 6.7 | 0.3 | 7.7 |
Released to income statement | – | (2.9) | (0.1) | (3.0) |
Utilised | – | (13.1) | (0.3) | (13.4) |
Foreign exchange | – | (0.4) | (0.1) | (0.5) |
31 December 2024 | 3.1 | 4.3 | 0.4 | 7.8 |
Current | – | 4.3 | – | 4.3 |
Non-current | 3.1 | – | 0.4 | 3.5 |
The expected payment profile of the discounted provisions at 31 December was as follows:
2024 | 2023 | |
$m | $m | |
Within 1 year | 4.3 | 14.0 |
2 to 5 years | 3.5 | 3.0 |
Total | 7.8 | 17.0 |
Dilapidation provisions are in respect of contractual obligations, on the expiry of a lease, to return leased properties in the condition
Restructuring provisions
Restructuring provisions are in respect of the Group’s strategic transformation activities. All restructuring provisions are supported
by detailed plans and a valid expectation has been raised in those affected as required by the Group’s accounting policy.
Legal provision
The legal provisions are in respect of ongoing cases. Legal issues are often subject to uncertainties over the timing and the final
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Additional information
The Group has over 10,000 employees globally and operates a number of defined benefit and defined contribution pension plans
for its employees. Each individual plan is subject to the applicable laws and regulations of the country in which the plan operates.
Defined contribution arrangements are where the Group pays fixed payments as they fall due into a separate fund on behalf of
employees participating in the plan and has no further legal or constructive obligations. The cost of Group contributions to
defined contribution arrangements during the year is provided in Note 3 – Operating costs.
A defined benefit plan is a pension or other post-employment benefit plan under which the Group has an obligation to provide
agreed benefits to current and former employees. The Group bears the risk that its obligation may increase or that the value of
the assets in the pension fund may decline. The benefit payable in the future by the Group is discounted to the present value and
the fair value of plan assets is deducted to measure the defined benefit pension position.
The Group has defined benefit plans in a number of European countries. The most significant plans are: Switzerland, a state
mandated plan that remains open to all Swiss employees; and Germany, with one unfunded plan, that remains open to German
employees but closed to new entrants, and a funded plan put in place from April 2019. The Group's other defined benefit plans
are located in Austria, France and Italy (referred to as "Other" in the tables below).
For plans in Switzerland, Germany and Austria, asset funds for each country are being accumulated to meet the accruing
liabilities. The assets of each of these funds are either held under trusts or managed by insurance companies and are entirely
separate from the Group’s assets.
Payments to defined contribution pension plans are recognised as an expense when employees have rendered service entitling
them to the contributions. Payments made to state-managed retirement benefit plans are treated as payments to defined
contribution pension plans where the Group’s obligations under the plans are equivalent to those arising in a defined
contribution pension plan.
Defined benefit pension plans
The Group records an asset or liability related to its defined benefit pension plans as the difference between the fair value of the
plan assets and the present value of the plan liabilities. The obligations of the plans are calculated using the Projected Unit Credit
Method, with actuarial valuations being performed by an independent actuary at the end of each reporting period. The valuation
requires estimates and judgements to be made to calculate the Group’s liabilities, and results in actuarial gains and losses being
recorded.
Actuarial gains and losses, movements in the return on plan assets (excluding interest) and the impact of the asset ceiling
(if applicable) are recognised immediately in the Consolidated Statement of Financial Position with a charge or credit to the
Consolidated Statement of Comprehensive Income. Remeasurements recorded in the Consolidated Statement of Comprehensive
Income are not subsequently reclassified to the Consolidated Income Statement.
Past service cost is recognised in the Consolidated Income Statement in the period of plan amendment, where relevant. Net
interest is calculated by applying a discount rate to the net defined benefit liability or asset.
The assets of the plans are held at fair value, which is equal to market value, and are held in separate trustee-administered funds
or similar structures in the countries concerned. Surplus assets within the plan are only recognised to the extent that they are
recoverable in accordance with IFRIC Interpretation 14, IAS 19 –
The Limit on a Defined Benefit Asset, Minimum Funding
Requirements and their Interaction
Risks
The defined benefit plans typically expose the Group to risks. The most significant risks impacting the Group as a result of these
plans are as follows:
Investment risk | The present value of the defined benefit plan liability is calculated using a discount rate determined by |
reference to high-quality corporate bond yields; if the return on plan assets is below this rate, it will create | |
a plan deficit. | |
Interest risk | A decrease in the interest rate will increase the plan liability, but this will be partially offset by an increase in |
the return on the plan’s fixed rate debt instruments. | |
Longevity risk | The present value of the defined benefit plan liability is calculated by reference to the best estimate of the |
mortality of plan participants both during and after their employment. An increase in the life expectancy of | |
the plan participants will increase the plan’s liability. | |
Salary risk | The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan |
participants. As such, an increase in the salary of the plan participants will increase the plan’s liability. |
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Financial statements
Notes to the consolidated financial statements
continued
15. POST-EMPLOYMENT BENEFITS (CONTINUED)
Amounts recorded in the Consolidated Financial Statements
Consolidated Income Statement
The aggregate expense for all post-employment defined benefit plans recognised in the Consolidated Income Statement for the
year ended 31 December was as follows:
2024 | 2023 | |
$m | $m | |
Defined benefit plans: | ||
Current service cost | 1.0 | 1.1 |
Past service (income) | (0.1) | (0.1) |
Interest (income) on plan assets | – | (0.2) |
Interest expense on defined benefit obligations | 0.3 | 0.6 |
Total expense (Note 3) | 1.2 | 1.4 |
Consolidated Statement of Comprehensive Income
Aggregate actuarial gains and losses for all defined benefit plans recognised in the Consolidated Statement of Comprehensive Income
for the year ended 31 December were as follows:
2024 | 2023 | |
$m | $m | |
Remeasurement effect recognised in other comprehensive income: | ||
Actuarial gain on liabilities due to experience | 0.1 | 0.1 |
Actuarial (loss)/gain arising from changes in financial assumptions | (0.5) | 0.1 |
Actuarial gain/(loss) on plan assets | 0.1 | (0.2) |
Remeasurement (loss)/gain recognised in other comprehensive income | (0.3) | – |
Deferred tax on remeasurement loss recognised in other comprehensive income | – | (0.2) |
Total amount recognised in other comprehensive income | (0.3) | (0.2) |
Consolidated Statement of Financial Position
The amount recognised for each defined benefit arrangement in the Consolidated Statement of Financial Position at 31 December
was as follows:
German y 1 | Switzerland | Other | Total | |||||
2024 | 2023 | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | |
$m | $m | $m | $m | $m | $m | $m | $m | |
Fair value of schemes’ assets | 0.7 | – | 12.9 | 11.8 | 0.7 | 0.8 | 14.3 | 12.6 |
Present value of funded | ||||||||
schemes’ liabilities | (8.6) | – | (14.7) | (13.8) | (0.8) | (0.7) | (24.1) | (14.5) |
Deficit in the funded schemes | (7.9) | – | (1.8) | (2.0) | (0.1) | 0.1 | (9.8) | (1.9) |
Present value of unfunded | ||||||||
schemes’ liabilities | – | (8.4) | – | – | (1.7) | (1.8) | (1.7) | (10.2) |
Net pension liability | (7.9) | (8.4) | (1.8) | (2.0) | (1.8) | (1.7) | (11.5) | (12.1) |
Recognised within Consolidated Statement of Financial Position: | ||||||||
Defined benefit obligations (Note 13) | (11.5) | (12.1) | ||||||
1.
In 2024, the Group began funding the pension scheme in Germany.
The weighted average duration of the Group's defined benefit obligations at the end of the year is 17.3 years (2023: 16.5 years).
15. POST-EMPLOYMENT BENEFITS (CONTINUED)
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Additional information
Fair value of assets and present value of the liabilities of the plan
The amount included in the Consolidated Statement of Financial Position arising from its obligations in respect of its defined benefit
plans was as follows:
Assets | Liabilities | Total | |
$m | $m | $m | |
At 1 January 2023 | 11.1 | (22.1) | (11.0) |
Current service cost | – | (1.2) | (1.2) |
Past service income | – | 0.1 | 0.1 |
Interest income/(expense) | 0.2 | (0.6) | (0.4) |
Remeasurement (loss)/gain | (0.2) | 0.1 | (0.1) |
Contributions by employer | 0.7 | – | 0.7 |
Contributions by members | 0.6 | (0.6) | – |
Benefits paid | (0.9) | 1.0 | 0.1 |
Experience gain | – | 0.1 | 0.1 |
Foreign exchange | 1.1 | (1.5) | (0.4) |
At 31 December 2023 | 12.6 | (24.7) | (12.1) |
Current service cost | – | (1.0) | (1.0) |
Past service income | – | 0.1 | 0.1 |
Interest income/(expense) | – | (0.3) | (0.3) |
Remeasurement gain/(loss) | 0.7 | (0.5) | 0.2 |
Contributions by employer | 1.3 | – | 1.3 |
Contributions by members | 0.4 | (0.4) | – |
Benefits paid | (3.3) | 3.3 | – |
Experience gain | – | 0.1 | 0.1 |
Transfer from multi-employer scheme | 3.5 | (4.1) | (0.6) |
Foreign exchange | (0.9) | 1.7 | 0.8 |
At 31 December 2024 | 14.3 | (25.8) | (11.5) |
Plan assets
The fair value of defined benefit plan assets at 31 December, which has been determined in accordance with IFRS 13,
Fair Value
Measurements
, is analysed below. All assets have a quoted market price and are categorised as a Level 1 measurement in the fair
value hierarchy.
German y | Switzerland | Other | Total | |||||
2024 | 2023 | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | |
$m | $m | $m | $m | $m | $m | $m | $m | |
Equity instruments | 0.7 | – | 4.3 | 3.9 | – | – | 5.0 | 3.9 |
Debt instruments | – | – | 4.5 | 4.6 | – | – | 4.5 | 4.6 |
Property | – | – | 2.6 | 1.8 | – | – | 2.6 | 1.8 |
Qualifying insurance policies | – | – | – | – | 0.7 | 0.8 | 0.7 | 0.8 |
Other | – | – | 1.5 | 1.5 | – | – | 1.5 | 1.5 |
Plan assets | 0.7 | – | 12.9 | 11.8 | 0.7 | 0.8 | 14.3 | 12.6 |
Actuarial assumptions
The Group makes certain key assumptions in order to value the plan obligations, and the approach to how these were set was
as follows:
Approach taken | |
Discount rate | Calculated by reference to the yields on high-quality corporate bonds which match expected cash |
flows in each territory in which a defined benefit plan is present. | |
Inflation | Calculated using the difference on yields between fixed and index-linked government bonds. |
Future salary increases | Based on historical expectations and known future increases, including expected inflation rates. |
Mortality | Based on mortality tables derived from assessments performed by national governments and based |
upon recommendations by plan actuaries. |
Convatec Group Plc Annual Report and Accounts 2024
184
Financial statements
Notes to the consolidated financial statements
continued
15. POST-EMPLOYMENT BENEFITS (CONTINUED)
The principal actuarial assumptions for each defined benefit arrangement used at 31 December were as follows:
German y | Switzerland | Other | ||||
2024 | 2023 | 2024 | 2023 | 2024 | 2023 | |
Discount rate | 3.32% | 3.57% | 1.10% | 2.00% | 3.18% to 3.61% | 3.15% to 4.61% |
Rate of price inflation | N/A | N/A | 1.00% | 1.00% | 2.00% to 2.20% | 2.00% to 2.20% |
Future salary increases | 2.50% | 3.00% | 1.75% | 1.75% | 0% to 2.50% | 0.00% to 3.00% |
Discount rates have remained consistent year on year.
The current mortality assumptions underlying the values of the obligations in the defined benefit plans were as follows:
German y | Switzerland | Other | ||||
2024 | 2023 | 2024 | 2023 | 2024 | 2023 | |
Life expectancy at age 65 | ||||||
Male | 18.9 years | 18.8 years | 22.8 years | 23.0 years | 18.8 years | 24.0 years |
Female | 22.3 years | 22.2 years | 24.5 years | 23.7 years | 24.0 years | 28.0 years |
Life expectancy at age 65 in 20 years’ time | ||||||
Male | 21.6 years | 21.5 years | 24.8 years | 25.2 years | 18.8 years | 24.9 years |
Female | 24.5 years | 24.4 years | 26.4 years | 25.7 years | 24.0 years | 28.9 years |
Sensitivity analysis
The effect of movements in the key actuarial assumptions in respect of the Germany and Switzerland plans at 31 December 2024
would be an (increase)/decrease to the defined benefit asset/liabilities as follows:
German y | Switzerland | |||
Increase 0.5% | Decrease 0.5% | Increase 0.5% | Decrease 0.5% | |
Discount rate | 0.7 | (0.8) | 1.4 | (1.5) |
Inflation | N/A | N/A | (0.5) | 0.5 |
Future salary increases | N/A | N/A | (0.2) | 0.2 |
1 year increase | 1 year decrease | 1 year increase | 1 year decrease | |
Life expectancy | (0.2) | 0.2 | (0.3) | 0.3 |
Future funding
Payments expected to be made by the Group to its defined benefit pension plans in the year ending 31 December 2025 are as follows:
German y | Switzerland | Other | Total | |
$m | $m | $m | $m | |
Expected payments | 0.2 | 0.5 | – | 0.7 |
CAPITAL STRUCTURE AND FINANCIAL COSTS
The Group ensures that all entities within the Group have sufficient funding to deliver the Group’s strategy while maximising
the return to shareholders through the debt and equity balance. The capital structure of the Group consists of net debt (which
includes borrowings less cash and cash equivalents and excluding lease liabilities) and equity of the Group, comprising issued
capital, reserves and earnings as disclosed in the Consolidated Statement of Changes in Equity.
The capital structure of the Group at 31 December was as follows:
2024 | 2023 | |
$m | $m | |
Borrowings (Note 21) | 1,122.8 | 1,226.9 |
Less: Cash and cash equivalents (Note 22) | (64.7) | (97.6) |
Net debt (excluding lease liabilities) | 1,058.1 | 1,129.3 |
Equity | 1,688.9 | 1,692.7 |
Total capital | 2,747.0 | 2,822.0 |
The Group's capital structure is managed to provide ongoing returns to shareholders and service debt obligations whilst
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Called up share capital is the total number of shares in issue at their par value. The rights attaching to the ordinary shares are
uniform in all respects. They form a single class for all purposes, including with respect to voting and for all dividends and other
distributions thereafter declared, made or paid on the ordinary share capital of the Group. Incremental costs directly attributable
to the issue of new ordinary shares are shown in equity as a deduction from the proceeds, net of tax.
Share premium
The share premium represents amounts received in excess of the nominal value of the ordinary shares.
Own shares are ordinary shares in the Group purchased and held by an Employee Benefit Trust to satisfy obligations under the
Group's employee share ownership programmes.
When any Group company purchases the Company’s equity share capital (own shares), the consideration paid, including any directly
attributable incremental costs (net of tax), is deducted from equity until the shares are cancelled, reissued or disposed of. Where
such shares are subsequently sold or reissued, any consideration received, net of any directly attributable costs and the related tax
In 2016, the Consolidated Financial Statements were prepared under merger accounting principles. Under these principles, no
acquirer was required to be identified and all entities were included at their pre-combination carrying amounts. This accounting
treatment led to differences on consolidation between issued share capital and the book value of the underlying net assets. This
difference is included within equity as a merger reserve.
Cumulative translation reserve
The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial
statements of foreign subsidiaries.
Other reserves
Other reserves comprises of the cumulative changes in the effective portion of cash flow hedges, remeasurement of defined
In 2023, the Board took the decision to terminate the scrip dividend option, effective from 2024. The movements in ordinary shares
of 10 pence each were as follows:
Ordinary shares | Share capital Share premium | ||
Issued and fully paid or credited as fully paid | number | $m | $m |
1 January 2023 | 2,043,872,048 | 250.7 | 165.7 |
Issue of new shares for Scrip Scheme – 2022 final dividend | 1,717,549 | 0.2 | 4.5 |
Issue of new shares for Scrip Scheme – 2023 interim dividend | 4,199,962 | 0.6 | 10.8 |
5,917,511 | 0.8 | 15.3 | |
31 December 2023 | 2,049,789,559 | 251.5 | 181.0 |
31 December 2024 | 2,049,789,559 | 251.5 | 181.0 |
At 31 December 2024, 5,444,666 shares (2023: 3,986,597 shares) were held in the Employee Benefit Trust. The market value of own
obligations of $4.3 million (2023: $4.6 million) offset by the remeasurement of equity investments of $13.8 million (2023: $7.8 million)
and the effective portion of cash flow hedges of $3.2 million (2023: $4.4 million). A reconciliation of movements in all reserves
is provided in the Consolidated Statement of Changes in Equity.
Distributable reserves
At 31 December 2024, the retained surplus of the Company was $3,088.5 million (2023: $1,539.4 million) of which $1,474.7 million
(2023: $1,539.4 million) was realised and distributable – refer to Note 8 – Distributable Reserves in the Company’s financial
statements for further details. The capacity of the Company to make dividend payments is primarily determined by the availability
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Financial statements
Notes to the consolidated financial statements
continued
The Group ensures that adequate realised distributable reserves are available in the Company in order to meet proposed
shareholder dividends and the purchase of shares for employee share scheme incentives. The Company principally derives
distributable reserves from dividends received from subsidiary companies.
In determining the level of dividend for the year, the Board considers the following factors and risks that may influence the
proposed dividend:
–
Availability of realised distributable reserves;
–
Available cash resources and commitments;
–
Strategic opportunities and investments, in line with the Group’s strategic plan; and
–
Principal risks of the Group (as disclosed on pages 76 to 80).
The Board paid the 2023 final dividend in May 2024 and the 2024 interim dividend in October 2024. The Board has taken into
consideration balancing the return to shareholders and the additional investment in transformation in the period. The decision
to increase the dividend for 2024 reflects the Board’s confidence in the future performance of the Group, this includes its
underlying financial strength and cash generation when assessing cash flow forecasts for the next two years from the date of the
dividend payment. Further details of the Group’s considerations and rationale for its policy in respect of the dividend distribution
are given in the Directors’ report on page 145.
Dividends paid and proposed were as follows:
Settled in | Settled via | |||||
Pence | Cents | Total | cash | scrip | No of scrip | |
per share | per share | $m | $m | $m | shares issued | |
Final dividend 2022 | 3.657 | 4.330 | 92.4 | 87.7 | 4.7 | 1,717,549 |
Interim dividend 2023 | 1.380 | 1.769 | 34.4 | 23.0 | 11.4 | 4,199,962 |
Paid in 2023 | 5.037 | 6.099 | 126.8 | 110.7 | 16.1 | 5,917,511 |
Final dividend 2023 | 3.517 | 4.460 | 91.5 | 91.5 | – | – |
Interim dividend 2024 | 1.422 | 1.822 | 38.7 | 38.7 | – | – |
Paid in 2024 | 4.939 | 6.282 | 130.2 | 130.2 | – | – |
Final dividend 2024 proposed | 3.639 | 4.594 | 94.2 |
The final dividend proposed for 2024 is to be distributed on 29 May 2025 to shareholders on the register at the close of business on
22 April 2025 and is subject to shareholder approval at the Annual General Meeting on 22 May 2025. The dividend will be declared in
US dollars and will be paid in Sterling at the chosen exchange rate of $1.262/£1.00 determined on 25 February 2025.
The Group operates a number of plans used to award shares to Executive Directors and other senior employees as part of their
remuneration package. A charge is recognised over the vesting period in the Consolidated Income Statement to record the cost
of these, based on the fair value of the award at the grant date.
The Group’s share-based payment schemes in place are as follows:
Long Term Incentive Plan (LTIP)
Provides Performance Share Plan (PSP) awards subject to Group performance and market conditions and Restricted Stock Units
(RSU) subject only to remaining employed up to the vesting date. Details on share-based payments in relation to Executive
Directors is set out on page 137.
Deferred Bonus Plan (DBP)
Provides for the grant of share awards to defer a portion of the participant’s bonus as determined by the Remuneration
Committee. The awards vest subject only to remaining employed up to the vesting date.
Share Plan / Matching Share Plan (SP/MSP)
Provides for the grant of discretionary share awards. Awards granted in 2024 will vest to employees still employed on the vesting date.
Employee Plans
The Group also operates Employee Plans which provide eligible employees the opportunity to save up to £500 per month
(or local currency equivalent) with an option to acquire shares using these savings at a 15% discount to the market price at date
of grant. The Employee Plans are available to employees under the following schemes:
–
Save-As-You-Earn (SAYE)
– Available to all employees in the UK employed by participating Group companies.
–
Employee Stock Purchase Plan (ESPP)
– Available to all employees in the US.
–
International Share Save Plan
– Available to all employees in the rest of the world.
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Additional information
of non-market-based vesting conditions. The fair value of the awards at the date of the grant is expensed to general and
administrative expenses in the Consolidated Income Statement over the vesting period on a straight-line basis.
Appropriate adjustments are made to reflect expected and actual forfeitures during the vesting period due to uncertainties
in satisfying service conditions or non-market performance conditions. The corresponding credit is to other reserves in the
Share-based payment expenses recognised in the Consolidated Income Statement as follows:
2024 | 2023 | |
$m | $m | |
LTIP | 11.9 | 7.3 |
SP/MSP | 6.0 | 5.5 |
DBP | 1.2 | 1.0 |
Employee Plans | 0.7 | 0.8 |
19.8 | 14.6 |
During the year to 31 December 2024, $19.7 million (2023: $14.5 million) of share-based payments were equity-settled, with $0.1 million
(2023: $0.1 million) cash-settled. All amounts that were equity-settled were recognised in other reserves, with the amounts that were
cash-settled recognised through other non-current liabilities.
Awards outstanding
The movements in the number of share and share option awards and the weighted average exercise price of share options are
detailed below:
2024 | 2023 | |||
Weighted | Weighted | |||
Number of | average | Number of | average | |
shares/ | exercise price | shares/ | exercise price | |
options | of options | options | of options | |
000’s | £ per share | 000’s | £ per share | |
Outstanding at 1 January | 31,439 | 0.29 | 30,800 | 0.33 |
Granted | 10,667 | 0.27 | 10,987 | 0.22 |
Forfeited | (5,207) | 0.25 | (4,081) | 0.47 |
Exercised | (6,009) | 0.24 | (6,267) | 0.25 |
Outstanding at 31 December | 30,890 | 0.28 | 31,439 | 0.29 |
Exercisable at 31 December | 670 | 1.74 | 840 | 1.51 |
Weighted average fair value of awards granted (£ per share) | – | 1.97 | – | 1.53 |
The average share price during 2024 was £2.45 (2023: £2.21). The share price of the Company at 31 December 2024 was £2.21
(2023: £2.44).
The range of exercise prices and the weighted average remaining contractual life of options outstanding at 31 December were as follows:
2024 | 2023 | |
Number of | Number of | |
shares/options | shares/options | |
Range of prices | 000’s | 000’s |
Nil | 26,240 | 26,414 |
1.21 | – | 73 |
1.74 | 1,546 | 2,002 |
1.76 | 1,101 | 1,821 |
1.84 | – | 18 |
1.96 | 1,444 | – |
2.08 | 559 | 1,111 |
30,890 | 31,439 | |
Weighted average remaining contractual life of options outstanding | 1.9 years | 1.9 years |
Convatec Group Plc Annual Report and Accounts 2024
188
Financial statements
Notes to the consolidated financial statements
continued
19. SHARE-BASED PAYMENTS (CONTINUED)
Valuation assumptions
All share awards granted are valued directly by reference to the share price at date of grant except:
–
PSP shares awarded under the LTIP and MSP plans are subject to both market-based measures and non-market based measures.
Values under the market-based element are based on relative Total Shareholder Return (TSR) performance conditions and are
valued using a Monte Carlo simulation.
–
Options granted under the Employee Plans are valued using the Black-Scholes model.
The principal assumptions used in these valuations were:
| 2024 | 2023 | |||||
SAYE & | SAYE & | |||||
International | International | |||||
LTIP | Share Save Plan | ESPP | LTIP | Share Save Plan | ESPP | |
Share price at date of grant | £2.81 | £2.31 | £2.31 | £2.21 | £2.07 | £2.07 |
Exercise price | nil | £1.96 | £1.96 | nil | £1.76 | £1.76 |
Expected life | 3 years | 3.6 years | 2.0 years | 3 years | 3.6 years | 2.0 years |
Expected volatility 1 | 28.1% | 28.1% | 28.1% | 25.1% | 25.1% | 25.1% |
Risk free rate | 4.3% | 4.3% | 4.5% | 3.3% | 3.3% | 3.3% |
Dividend yield | n/a | 1.9% | 1.9% | 2.3% | 2.3% | 2.3% |
Fair value | £2.02 & £2.19 | £0.48 | £0.43 | £1.09 & £1.41 | £0.38 | £0.34 |
1.
The expected volatility was determined by calculating the observed historical volatility of share prices of peer group companies (including the Company) over the
The Group’s treasury policy seeks to minimise the Group's principal financial risks. No trading or speculative transactions in
financial instruments are undertaken. This note presents information about the Group’s exposure to financial risks and the
Group’s objectives, policies and processes for measuring and managing risks.
Financial risk management objectives
Based on the global operations of the Group, management consider the key financial risks to be liquidity, foreign exchange, interest
rate and counterparty credit. The management of counterparty credit risk is discussed in Note 12 – Trade and other receivables.
Liquidity risk is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due. The Group
manages and minimises liquidity risk by using global cash management solutions and actively monitoring both actual and projected
cash outflows to ensure that it will have sufficient liquidity to meet its liabilities when due and have headroom to provide against
unforeseen obligations. As at 31 December 2024, the Group held cash and cash equivalents of $64.7 million (2023: $97.6 million),
of which 32.3% (2023: 57.5%) was held centrally.
Medium and long-term borrowing requirements are met through committed bank facilities and capital market funding as detailed in
Note 21 – Borrowings. Short-term borrowing requirements, if necessary, may be met from drawings under the multicurrency facility.
Longer term, the Group has assessed its liquidity forecast as part of the viability assessment and its ability to continue trading as
As a result of the global nature of operations, the Group is exposed to market risk arising from changes in foreign currency
exchange rates.
Where possible, the Group manages foreign exchange risk by matching same currency revenues and expenses. It will also
denominate debt in certain currencies and use foreign exchange forward contracts and swap contracts to further minimise
transactional foreign exchange risk, with certain currency contracts designated as cash flow hedges; refer to Note 23 – Financial
Instruments for details. As a result, the impacts of the fluctuations in the market values of assets and liabilities and the settlement
of foreign currency transactions are reduced.
Convatec Group Plc Annual Report and Accounts 2024
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20. FINANCIAL RISK MANAGEMENT (CONTINUED)
Overview
Strategic report
Governance
Financial statements
Additional information
The following table summarises the exchange rates used for the translation of currencies into US dollars that have the most
significant impact on the Group results:
Average rate/ | |||
Currenc y | Closing rate | 2024 | 2023 |
USD/EUR | Average | 1.08 | 1.08 |
Closing | 1.04 | 1.10 | |
USD/GBP | Average | 1.28 | 1.24 |
Closing | 1.25 | 1.27 | |
USD/DKK | Average | 0.15 | 0.15 |
Closing | 0.14 | 0.15 |
During 2024, revenue was mostly USD denominated (56%) (2023: 55%). Other significant currencies were EUR (19%) (2023: 19%)
and GBP (5%) (2023: 5%). The balance comprises a basket of other currencies which, on an individual basis, were each no more than
2% of revenue.
Sensitivity analysis on foreign exchange risk
The sensitivity analysis below assumes a 10% strengthening of the US dollar against the principal currencies to highlight the
sensitivity of profit before income taxes and total equity to translation foreign exchange risk as at 31 December, with all other
variables held constant.
2024 | 2023 | ||
Currenc y | Sensitivity | $m | $m |
I ncrease/(decrease) in profit before income taxes | |||
USD/GBP | +10% | 3.8 | 4.4 |
USD/EUR | +10% | (7.9) | (10.3) |
USD/DKK | +10% | (11.6) | (11.2) |
Decrease/(increase) in total equity | |||
USD/GBP | +10% | (84.7) | (88.0) |
USD/EUR | +10% | 3.3 | (2.5) |
USD/DKK | +10% | (31.4) | (27.0) |
Interest rate risk
The Group’s principal exposure to interest rate risk is in relation to interest expense on borrowings made under the Group's credit
facilities which attract interest at floating rates plus a fixed margin as well as any cash or investments that result in interest income
at floating rates. Floating rate instruments expose the Group to interest rate cash flow and expense risk. The Group manages this
exposure on a net basis within Board approved policy parameters, including the use of interest rate swaps designated as cash flow
hedges to maintain an appropriate mix between fixed and floating rate borrowings.
As at 31 December 2024, the Group’s borrowings were principally denominated in USD and Euros. The Group’s credit facilities
expose the Group to SOFR and EURIBOR. The Group’s interest rate swaps of $265.0 million, are referenced to the SOFR benchmark
(see Note 23 – Financial Instruments).
IBOR Reform
Non-derivative financial liabilities
The Group’s facilities are based on a floating rate and reflect IBOR reform. Whilst one of the Group’s facilities is multicurrency,
most borrowings are expected to be denominated in USD and EUR with the reference rates of SOFR and EURIBOR respectively.
Derivatives
As of 31 December 2024, the Group held interest rate swaps for the purpose of risk management that are designated in cash flow
hedge relationships. The floating legs of these swaps are linked to SOFR. The Group’s derivatives are governed by contracts based
on the master agreement of the International Swaps and Derivatives Association (ISDA).
All interest rate swaps at 31 December 2024 had a floating rate linked to SOFR, aligned with the Group’s facilities. See Note 23 –
Financial Instruments.
Hedge accounting
Swaps with floating legs linked to SOFR had also been designated as cash flow hedges and will provide interest rate risk
management beyond January 2025.
Sensitivity analysis on interest rate risk
Based on the composition and the terms of the Group's borrowings as at 31 December 2024, and including the 0% interest rate
floor and after the effect of the interest rate swaps and cash, if interest rates were to increase or decrease by 100 basis points, the
interest expense on borrowings would increase by $3.6 million (2023: $3.1 million) or decrease by $3.6 million (2023: $3.1 million)
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Financial statements
Notes to the consolidated financial statements
continued
The Group’s sources of borrowing for funding and liquidity purposes derive from senior notes and credit facilities including
a committed revolving credit facility.
Accounting policy
measured at amortised cost using the effective interest rate method. Borrowing costs directly attributable to the facility are
capitalised and amortised over the period of the loan.
The effective interest rate method is a method of calculating the amortised cost of a financial liability and allocating the interest
expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments
through the expected life of the financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial
recognition.
Borrowings are classified as non-current when the repayment date is more than 12 months from the period-end date or where
they are drawn on a facility with more than 12 months to expiry.
The Group derecognises borrowings when its contractual obligations are discharged, terminated or expired.
Fair value measurement
Borrowings are classified as Level 1 or Level 2 in the fair value hierarchy in accordance with IFRS 13,
Fair Value Measurements
,
The Group's borrowings as at 31 December were as follows:
2024 | 2023 | |||
Year of | Face value | Face value | ||
Currenc y | maturit y | $m | $m | |
Revolving Credit Facility 1 | USD/Euro | 2028 | 383.5 | 490.6 |
Term Loan | USD | 2027 | 250.0 | 250.0 |
Senior Notes | USD | 2029 | 500.0 | 500.0 |
Interest-bearing borrowings | 1,133.5 | 1,240.6 | ||
Financing fees 2 | (10.7) | (13.7) | ||
Total carrying value of borrowings | 1,122.8 | 1,226.9 | ||
Current portion of borrowings | – | – | ||
Non-current portion of borrowings | 1,122.8 | 1,226.9 |
1.
Included within the Revolving Credit Facility was €106.0 million ($109.8 million) and £7.0 million ($8.8 million) at 31 December 2024 (2023: €100.0 million ($110.4 million)
and £8.0 million ($8.2 million)), representing 28.6% of RCF debt denominated in Euros, 2.3% of RCF debt denominated in GBP and 69.1% denominated in US dollars.
2.
Financing fees of $10.7 million (2023: $13.7 million) related to the remaining unamortised fees incurred on the credit facilities of $5.8 million (2023: $7.8 million) and on
the senior notes of $4.9 million (2023: $5.9 million).
Credit facilities
The credit facilities held by the Group are committed and available for the refinancing of certain existing financial indebtedness
and general corporate purposes. The Group’s bank credit facility of $1.2 billion comprises of a $250.0 million term loan and a
$950.0 million multicurrency revolving credit facility. As at 31 December 2024, the term loan was fully drawn and $383.5 million
(2023: $490.6 million) of the revolving credit facility was drawn, with $566.5 million undrawn (2023: $459.4 million).
Financial covenants
The principal financial covenants are based on a permitted net debt to covenant-adjusted EBITDA
3
ratio and interest cover test
as defined in the credit facilities agreement. Testing is required on a semi-annual basis, at June and December, based on the last
12 months’ financial performance. At 31 December 2024, the permitted net debt to covenant-adjusted EBITDA
3
ratio was a maximum
of 3.50 times and the interest cover a minimum of 3.50 times, terms as defined by the credit facilities agreement. In accordance with
the credit facilities agreement, the net debt to covenant-adjusted EBITDA
3
ratio can increase to a maximum 4.00 times for permitted
acquisitions or investments.
The Group was in compliance with all financial and non-financial covenants at 31 December 2024, with significant available
headroom on the financial covenants (in excess of $887.5 million debt headroom on net debt to covenant-adjusted EBITDA
3
).
Excluding the impact of interest rate swaps, the weighted average interest rate on borrowings for the year ended 31 December 2024
was 6.0% (2023: 5.7%).
3.
Covenant-adjusted EBITDA is calculated based on terms as defined in the credit facilities agreement. This is different to adjusted EBITDA, which is an alternative
performance measure (“APM”) as disclosed on pages 28 to 31.
21. BORROWINGS (CONTINUED)
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Senior notes
Unsecured senior notes of $500.0 million are subject to an interest cover financial covenant as defined in the indentures which
is a minimum of 2.0 times, with testing required annually at 31 December on the last 12 calendar months’ financial performance.
Borrowings measured at fair value
The senior notes are listed and their fair value at 31 December 2024 of $456.9 million (2023: $450.1 million) has been obtained
from quoted market data and therefore categorised as a Level 1 measurement in the fair value hierarchy under IFRS 13,
Fair Value
Measurements
. For the Group’s other borrowings, the fair value is based on discounted cash flows using a current borrowing rate
and is categorised as a Level 2 measurement. At 31 December 2024, the estimated fair value of the Group's other borrowings was
$678.9 million (2023: $774.9 million).
Maturity of financial liabilities
The contractual undiscounted future cash flows, including contractual interest payments, related to the Group's financial liabilities
were as follows:
| Contractual cash flows | ||||||||
Within 1 year or | 1 to 2 | 2 to 3 | 3 to 4 | 4 to 5 | More than | Carrying | ||
on demand | years | years | years | years | 5 years | Total | amount | |
$m | $m | $m | $m | $m | $m | $m | $m | |
At 31 December 2023 | ||||||||
Borrowings | 58.6 | 49.8 | 47.7 | 298.0 | 532.8 | 519.4 | 1,506.3 | 1,226.9 |
Lease liabilities (Note 24) | 25.6 | 19.5 | 14.6 | 10.1 | 8.2 | 18.5 | 96.5 | 85.5 |
Trade and other payables (Note 13) | 388.7 | – | – | – | – | – | 388.7 | 388.7 |
Derivative financial instruments (Note 23) | ||||||||
Derivative financial instruments payable | 1,486.9 | 6.8 | – | – | – | – | 1,493.7 | 17.6 |
Derivative financial instruments receivable | 1,483.1 | 5.4 | – | – | – | – | 1,488.5 | 13.6 |
At 31 December 2024 | ||||||||
Borrowings | 54.1 | 53.3 | 303.6 | 417.4 | 519.4 | – | 1,347.8 | 1,122.8 |
Lease liabilities (Note 24) | 25.9 | 20.2 | 15.0 | 11.3 | 8.3 | 16.0 | 96.7 | 78.8 |
Trade and other payables1 (Note 13) | 350.9 | – | – | – | – | – | 350.9 | 350.9 |
Derivative financial instruments (Note 23) | ||||||||
Derivative financial instruments payable | 1,539.3 | 1.7 | – | – | – | – | 1,541.0 | 18.4 |
Derivative financial instruments receivable | 1,538.2 | 1.5 | – | – | – | – | 1,539.7 | 18.4 |
1.
Trade and other payables excludes taxes and social security of $31.8 million as per Note 13 – Trade and other payables, as these are statutory rather than contractual
requirements and therefore are not classified as financial liabilities in the above table.
Reconciliation of movement in borrowings
2024 | 2023 | |
$m | $m | |
Borrowings at 1 January | 1,226.9 | 1,211.9 |
Repayment of borrowings | (98.0) | – |
Proceeds of new borrowings, net of financing fees | – | 9.4 |
Foreign exchange | (9.1) | 2.8 |
Non-cash movements 2 | 3.0 | 2.8 |
Borrowings at 31 December | 1,122.8 | 1,226.9 |
2.
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Convatec Group Plc Annual Report and Accounts 2024
Financial statements
Notes to the consolidated financial statements
continued
Cash held at bank is used for the Group's day-to-day operations. The Group utilises bank deposits or money market funds which
have a maturity of three months or less as liquid investments that enable short-term liquidity requirements to be met.
including term deposits and money market funds, have original maturities of three months or less, are subject to insignificant
risk of changes in value and are repayable within one business day with no significant loss of interest, resulting in classification
as cash equivalents.
Cash at bank earns interest at rates based on daily bank deposit rates. Term deposits and money market funds earn interest at
the respective short-term deposit rate.
Cash and cash equivalents at 31 December 2024 included $19.0 million (2023: $21.1 million) of cash held in territories where
there are restrictions related to timely repatriation. The amounts meet the definition of cash and cash equivalents but are not
deemed to be readily available for general use by the wider Group.
Under certain circumstances, the Group utilises bank overdrafts to manage temporary fluctuations in cash positions. The bank
overdrafts are repayable on demand, used as part of the Group’s overall cash management strategy and form part of cash
and cash equivalents for the purpose of the Consolidated Statement of Cash Flows. The Group had no bank overdrafts as at
31 December 2024 or 31 December 2023.
The Group reports cash flows from operating activities using the indirect method in accordance with IAS 7,
Statement of Cash Flows
.
The Group has elected to classify net interest paid (including interest on lease liabilities) as cash flows from operating activities.
Short-term lease payments and payments for leases of low-value assets are included in cash flows from operating activities.
Changes in working capital assets and liabilities as reported in cash flows from operating activities reflect the changes in the
Consolidated Statement of Financial Position between the current and previous financial year end, including adjustments for
amounts relating to acquisitions and disposals (when necessary), as well as currency translation adjustments.
Cash payments for the principal portion of lease liabilities is included within cash flows from financing activities.
Acquisition of property, plant and equipment, and intangible assets reflects additions to the related assets, including adjustments
for changes in capital accruals. Acquisition of intangible assets relates to capitalised software, development and product-related
licences. Refer to Note 9 – Intangible assets and goodwill for further details.
The adjustment for non-operating expense, net in the Consolidated Statement of Cash Flows excludes the gains and losses
In certain instances, there are requirements to set aside cash to support payment guarantees and obligations, including the
payment of value-added taxes, custom duties on imports, tender programmes and lease arrangements. Such amounts are
classified by the Group as restricted cash, which do not form part of cash and cash equivalents. Cash paid into escrow, arising
2024 | 2023 | |
$m | $m | |
Cash at bank and in hand | 56.8 | 57.7 |
Money market funds | 7.9 | 39.9 |
Cash and cash equivalents | 64.7 | 97.6 |
2024 | 2023 | |
$m | $m | |
Restricted cash – current | 8.8 | 12.5 |
Restricted cash – non-current | 3.4 | 5.3 |
Total restricted cash | 12.2 | 17.8 |
Current restricted cash of $8.8 million (2023: $12.5 million) relates to cash held in escrow in respect of the Group’s acquisitions.
Non-current restricted cash of $3.4 million (2023: $5.3 million) relates primarily to amounts held in respect of guarantees and the
Group’s Share Save scheme for employees. Included in the 2023 balance was $1.6 million relating to cash held in escrow in respect
193
Convatec Group Plc Annual Report and Accounts 2024
Overview
Strategic report
Governance
Financial statements
Additional information
A derivative financial instrument is a contract that derives its value from the performance of an underlying variable, such as
foreign exchange rates or interest rates. The Group uses derivative financial instruments to manage foreign exchange and
interest rate risk arising from its operations and financing. Derivative financial instruments used by the Group are foreign
exchange forwards and interest rate swaps.
The Group utilises interest rate swap agreements, designated as cash flow hedges, to manage its exposure to variability in
expected future cash outflows attributable to the changes in interest rates on the Group’s committed borrowing facilities.
fair value at subsequent reporting dates. Derivative financial instruments are classified at fair value through profit or loss (FVTPL)
unless they are designated and qualify as an effective cash flow hedge. The fair value of forward foreign exchange contracts is
determined by using the difference between the contract exchange rate and the quoted forward exchange rate from third
The Group has elected to apply the IFRS 9,
Financial Instruments
hedge accounting requirements. Changes in the fair values of
derivatives designated as cash flow hedges are recognised in other comprehensive income to the extent the hedges are
effective. The fair value is the estimated amount that the Group would receive or pay to terminate the forward or swap at the
reporting date, taking into account current market rates, the Group’s current creditworthiness, as well as that of the financial
instrument counterparties.
The cumulative gain or loss is then reclassified to the Consolidated Income Statement in the same period when the relevant
hedged transaction is realised. Any ineffectiveness on hedging instruments is recognised in the Consolidated Income Statement
as they arise. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or no
longer qualifies for hedge accounting. The discontinuation is accounted for prospectively. Any gain or loss recognised in other
comprehensive income and accumulated in the cash flow hedge reserve at that time remains in equity and is reclassified to profit
or loss when the forecast transaction occurs. When a forecast transaction is no longer expected to occur, the gain or loss
accumulated in the cash flow hedge reserve is immediately reclassified to profit or loss.
The Group held interest rate swaps of $265.0 million at 31 December 2024 (2023: $425.2 million), with exposure to SOFR as a
reference rate and maturing at various points in the next two years. These have been designated as cash flow hedges through
Financial assets and liabilities are offset and the net amount presented in the Consolidated Statement of Financial Position when,
and only when, the Group has a legal right to offset the amounts and intends either to settle them on a net basis or to realise the
Financial instruments are classified as Level 1, Level 2 or Level 3 in the fair value hierarchy in accordance with IFRS 13,
Fair Value
Measurements
, based upon the degree to which the fair value movements are observable. Level 1 fair value measures are defined
as those with quoted (unadjusted) market prices in active markets for identical assets or liabilities. Level 2 fair value
measurements are defined as those derived from inputs other than quoted prices that are observable for the asset or liability,
either directly (prices from third parties) or indirectly (derived from third-party prices). Level 3 fair value measurements are
defined as those derived from significant unobservable inputs.
The only instrument classified as Level 1 are the senior notes, given the availability of quoted market price (Note 21 – Borrowings).
The Group’s derivative financial instruments, discussed below, are classified as Level 2. The Group’s equity investment in
preference shares (Note 10 – Investment in financial assets) and contingent consideration arising on business combinations
The Group holds interest rate swap agreements to fix a proportion of variable interest on the Group’s US dollar debt, in accordance with
the Group's risk management policy. The interest rate swaps are designated as hedging instruments in a cash flow hedging relationship.
In accordance with Group policy, the Group uses forward foreign exchange contracts, designated as cash flow hedges, to hedge
certain forecast third-party foreign currency transactions. When a commitment is entered into a layered approach is taken when
hedging the currency exposure, ensuring that no more than 100% of the transaction exposure is covered. The currencies hedged
by forward foreign exchange contracts are US dollars, Swiss francs, Pound sterling, Danish krone and Japanese yen.
The Group further utilises foreign exchange contracts and swaps classified as FVTPL to manage short-term foreign exchange exposure.
Convatec Group Plc Annual Report and Accounts 2024
194
Financial statements
Notes to the consolidated financial statements
continued
23. FINANCIAL INSTRUMENTS (CONTINUED)
Cash flow hedges
The fair values are based on market values of equivalent instruments at 31 December. The following table presents the Group's
outstanding interest rate swaps, which were designated as cash flow hedges at 31 December:
2024 | 2023 | ||||||
Fair value 1 | Fair value 1 | ||||||
Notional | assets/ | Notional | assets/ | ||||
amount | (liabilities) | amount | (liabilities) | ||||
Currenc y | Effective date | Maturity date | $m | $m | $m | $m | |
6 Month term SOFR Float to Fixed | |||||||
Interest Rate Swap | USD | 23 Jan 2023 | 23 Jan 2024 | – | – | 90.0 | 0.4 |
6 Month term SOFR Float to Fixed | |||||||
Interest Rate Swap | USD | 23 Jan 2023 | 23 Jul 2024 | – | – | 40.0 | 0.1 |
6 Month term SOFR Float to Fixed | |||||||
Interest Rate Swap | USD | 23 Jan 2023 | 23 Jan 2025 | 50.0 | 0.1 | 50.0 | 0.2 |
6 Month term SOFR Float to Fixed | |||||||
Interest Rate Swap | USD | 3 Aug 2023 | 3 Aug 2024 | – | – | 50.0 | – |
6 Month term SOFR Float to Fixed | |||||||
Interest Rate Swap | USD | 3 Aug 2023 | 3 Feb 2025 | 50.0 | 0.1 | 50.0 | – |
6 Month term SOFR Float to Fixed | |||||||
Interest Rate Swap | USD | 3 Aug 2023 | 4 Aug 2025 | 50.0 | – | 50.0 | – |
6 Month term EURIBOR Float to Fixed | |||||||
Interest Rate Swap | EUR | 29 Sep 2023 | 29 Sep 2024 | – | – | 55.2 | (0.2) |
6 Month term SOFR Float to Fixed | |||||||
Interest Rate Swap | USD | 29 Sep 2023 | 29 Sep 2025 | 40.0 | (0.3) | 40.0 | (0.5) |
6 Month term SOFR Float to Fixed | |||||||
Interest Rate Swap | USD | 23 Jan 2024 | 23 Jan 2026 | 25.0 | 0.1 | – | – |
6 Month term SOFR Float to Fixed | |||||||
Interest Rate Swap | USD | 23 Jan 2024 | 23 Jan 2026 | 25.0 | 0.1 | – | – |
6 Month term SOFR Float to Fixed | |||||||
Interest Rate Swap | USD | 28 May 2024 | 28 May 2026 | 25.0 | (0.3) | – | – |
1.
The fair values of the interest rate swaps were disclosed in non-current derivative financial liabilities, current derivative financial liabilities and current derivative assets in
the Consolidated Statement of Financial Position. There was no ineffectiveness recognised in the Consolidated Income Statement.
Foreign exchange forward contracts
The following table presents the Group's outstanding foreign exchange forward contracts valued at FVTPL and foreign currency
forward contracts designated as cash flow hedges, disclosed in current derivative financial assets and liabilities, at 31 December:
2024 | 2023 | ||||
Fair value | Fair value | ||||
Notional | assets/ | Notional | assets/ | ||
amount | (liabilities) | amount | (liabilities) | ||
Term | $m | $m | $m | $m | |
Foreign exchange contracts | ≤ 3 months | 783.5 | 16.8 | 453.0 | 8.0 |
Foreign currency forward exchange contracts designated as | |||||
cash flow hedges | ≤ 12 months | 36.2 | 1.2 | 195.9 | 4.4 |
Derivative financial assets | 819.7 | 18.0 | 648.9 | 12.4 | |
Foreign exchange contracts | ≤ 3 months | 514.5 | (8.4) | 760.7 | (15.2) |
Foreign currency forward exchange contracts designated as | |||||
cash flow hedges | ≤ 12 months | 193.5 | (9.4) | 53.3 | (1.3) |
Derivative financial liabilities | 708.0 | (17.8) | 814.0 | (16.5) | |
During the year ended 31 December 2024, the Group realised a net gain of $25.8 million (2023: $4.3 million loss) on foreign
exchange forward contracts designated as FVTPL in Note 5 – Non-operating income, net in the Consolidated Income Statement.
Impact of hedging on other comprehensive income
The following table presents the impact of hedging on other comprehensive income:
2024 | 2023 | |
$m | $m | |
Recognised in other comprehensive income: | ||
Effective portion of changes in fair value of cash flow hedges: | ||
Interest rate swaps | 0.5 | (1.3) |
Foreign currency forward exchange contracts designated as cash flow hedges | (11.6) | 2.0 |
Changes in fair value of cash flow hedges reclassified to the Consolidated Income Statement | 2.1 | (0.8) |
Cost of hedging | 0.6 | (0.5) |
Total | (8.4) | (0.6) |
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Overview
Strategic report
Governance
Financial statements
Additional information
Offsetting financial assets and liabilities
Financial assets and liabilities are offset and the net amount reported in the balance sheet where there is a legally enforceable
right to offset the recognised amounts, and there is an intention to settle on a net basis or realise the asset and settle the liability
simultaneously.
Amounts which do not meet all of the criteria for offsetting on the balance sheet but could be settled net in certain circumstances
primarily relate to derivative transactions entered under International Swaps and Derivatives Association (ISDA) master netting
arrangements or other similar agreements. In general, under such agreements, each party has the option to settle on a net basis
in the event of default of the other party. As there is presently not a legally enforceable right of offset, these amounts have not been
offset in the balance sheet and have been presented separately in the table below.
The financial assets and financial liabilities presented below are subject to offsetting, enforceable master netting or similar
agreements. The column 'Net amount' shows the impact on the Group's balance sheet if all set-off rights were exercised.
Financial liabilities offset against trade and other receivables mainly relate to accrued customer rebates/discounts and chargebacks,
as the offsetting criteria for these are met under IAS 32.
Gross financial | Net financial assets/ | Related amounts | |||
Gross financial assets/ | (liabilities)/ | (liabilities) per balance | not set off in the | Net | |
(liabilities) | assets set off | sheet | balance sheet | amount | |
$m | $m | $m | $m | $m | |
As at 31 December 2024 | |||||
Financial assets | |||||
Trade and other receivables | 363.3 | (28.3) | 335.0 | – | 335.0 |
Derivative financial assets | 18.4 | – | 18.4 | (10.1) | 8.3 |
Financial liabilities | |||||
Trade and other payables 1 | (379.2) | 28.3 | (350.9) | – | (350.9) |
Derivative financial liabilities | (18.4) | – | (18.4) | 10.1 | (8.3) |
Gross financial | Net financial assets/ | Related amounts not | |||
Gross financial assets/ | (liabilities)/ | (liabilities) per balance | set off in the balance | ||
(liabilities) | assets set off | sheet | sheet | Net amount | |
$m | $m | $m | $m | $m | |
As at 31 December 2023 | |||||
Financial assets | |||||
Trade and other receivables | 374.6 | (40.9) | 333.7 | – | 333.7 |
Derivative financial ass ets | 13.6 | – | 13.6 | (11.3) | 2.3 |
Financial liabilities | |||||
Trade and other payables | (429.6) | 40.9 | (388.7) | – | (388.7) |
Derivative financial liabilities | (17.6) | – | (17.6) | 11.3 | (6.3) |
1.
Trade and other payables excludes taxes and social security of $31.8 million as per Note 13 – Trade and other payables, as these are statutory rather than contractual
The Group principally leases real estate and vehicles. Leases are recognised as a right-of-use asset with a corresponding liability
recorded at the date at which the leased asset is available for use by the Group.
If this rate is not readily determinable, the Group uses its incremental borrowing rate. Generally, the Group uses its incremental
borrowing rate as the discount rate.
Options such as lease extensions or terminations on lease contracts are considered on a case-by-case basis by regular
management assessment.
Each lease payment is allocated between amounts paid for principal and interest. The interest cost is charged to the Consolidated
Income Statement over the lease term to produce a constant periodic rate of interest on the remaining balance of the liability for
each period. The right-of-use asset is depreciated on a straight-line basis over the lease term.
Payments associated with short-term leases and low-value leases are recognised on a straight-line basis as an expense in the
Consolidated Income Statement. Short-term leases are leases with a lease term of 12 months or less and low-value leases
comprise of leases with an underlying asset value of less than $5,000. Expenses recognised for these short-term and low-value
196
Convatec Group Plc Annual Report and Accounts 2024
Financial statements
Notes to the consolidated financial statements
continued
24. LEASES (CONTINUED)
The movements in right-of-use assets were as follows:
Real estate and | |||
other | Vehicles | Total | |
$m | $m | $m | |
As at 1 January 2023 | 65.6 | 13.8 | 79.4 |
Lease additions | 14.2 | 10.9 | 25.1 |
Arising from acquisitions | 1.6 | – | 1.6 |
Leases terminated | (7.4) | (0.9) | (8.3) |
Depreciation of right-o f -use assets | (14.7) | (8.0) | (22.7) |
Impairment of right-o f -use assets | (1.9) | – | (1.9) |
Foreign exchange | 0.9 | 0.6 | 1.5 |
As at 31 December 2023 | 58.3 | 16.4 | 74.7 |
Lease additions | 9.8 | 12.4 | 22.2 |
Arising from acquisitions (Note 26) | 0.4 | 0.5 | 0.9 |
Leases terminated | (0.7) | (1.0) | (1.7) |
Depreciation of right-o f -use assets | (14.8) | (8.4) | (23.2) |
Impairment of right-o f -use assets | (0.3) | – | (0.3) |
Sublease of right-o f -use assets | (2.1) | – | (2.1) |
Foreign exchange | (1.9) | (1.1) | (3.0) |
As at 31 December 2024 | 48.7 | 18.8 | 67.5 |
Movements in lease liabilities were as follows:
2024 | 2023 | |
$m | $m | |
Lease liabilities as at 1 January | 85.5 | 88.3 |
Lease additions | 22.2 | 25.1 |
Arising from acquisitions (Note 26) | 0.9 | 1.6 |
Payment of lease liabilities | (24.7) | (22.7) |
Leases terminated | (1.7) | (8.3) |
Interest expense on lease liabilities (Note 25) | 3.6 | 3.5 |
Interest paid on lease liabilities | (3.6) | (3.5) |
Foreign exchange | (3.4) | 1.5 |
Lease liabilities as at 31 December | 78.8 | 85.5 |
The total cash outflow of lease liabilities including interest for the year ended 31 December 2024 was $28.3 million (2023: $26.2 million).
Interest paid during the year was $3.6 million (2023: $3.5 million).
Lease liabilities by category at 31 December were as follows:
| 2024 | 2023 | |||||
Real estate | Real estate | |||||
and other | Vehicles | Total | and other | Vehicles | Total | |
$m | $m | $m | $m | $m | $m | |
Current | 14.6 | 7.4 | 22.0 | 13.9 | 6.8 | 20.7 |
Non-current | 45.4 | 11.4 | 56.8 | 55.3 | 9.5 | 64.8 |
Total | 60.0 | 18.8 | 78.8 | 69.2 | 16.3 | 85.5 |
The maturity of lease liabilities at 31 December was as follows:
| 2024 | 2023 | |||||
Real estate | Real estate | |||||
and other | Vehicles | Total | and other | Vehicles | Total | |
$m | $m | $m | $m | $m | $m | |
Within 1 year | 14.6 | 7.4 | 22.0 | 13.9 | 6.8 | 20.7 |
1 to 2 years | 11.0 | 6.1 | 17.1 | 14.0 | 5.0 | 19.0 |
2 to 3 years | 8.9 | 3.7 | 12.6 | 9.7 | 3.2 | 12.9 |
3 to 4 years | 8.0 | 1.5 | 9.5 | 7.6 | 1.1 | 8.7 |
4 to 5 years | 6.7 | 0.1 | 6.8 | 7.0 | 0.1 | 7.1 |
More than 5 years | 10.8 | – | 10.8 | 17.0 | 0.1 | 17.1 |
Total | 60.0 | 18.8 | 78.8 | 69.2 | 16.3 | 85.5 |
Convatec Group Plc Annual Report and Accounts 2024
197
Overview
Strategic report
Governance
Financial statements
Additional information
Finance expenses arise from interest on the Group’s borrowings and lease liabilities. Finance income arises from interest earned
on investment of surplus cash.
Consolidated Income Statement using the effective interest rate method.
When existing debt is derecognised in the financial statements any transaction costs not amortised are recognised immediately
in the Consolidated Income Statement.
Upon derecognition of financial liabilities, any unamortised financing fees are recognised immediately in the Consolidated
Income Statement.
Interest related to qualifying assets under construction included within PP&E is capitalised (refer to Note 8 – Property, plant
and equipment).
Refer to Note 24 – Leases for accounting policy on interest expense on lease liabilities.
Interest arising from interest rate swaps is recorded as either interest income or expense over the term of the agreement.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or no longer qualifies
for hedge accounting. The discontinuation is accounted for prospectively. Any gain or loss recognised in other comprehensive
income and accumulated in the cash flow hedge reserve at that time remains in equity and is reclassified to profit or loss when
the forecast transaction occurs. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in the
Finance costs, net for the year ended 31 December were as follows:
2024 | 2023 | |
$m | $m | |
Finance income | ||
Interest income on cash and cash equivalents | 4.8 | 5.2 |
Total finance income | 4.8 | 5.2 |
Finance expense | ||
Interest expense on borrowings | (76.1) | (75.2) |
Other financing-related fees 1 | (8.9) | (7.2) |
Interest expense on interest rate derivatives | (0.2) | – |
Interest expense on lease liabilities | (3.6) | (3.5) |
Capitalised interest 2 | 6.4 | 5.4 |
Other finance costs | (0.5) | (0.2) |
Total finance expense | (82.9) | (80.7) |
Finance costs, net | (78.1) | (75.5) |
1.
Other financing-related fees include the amortisation of deferred financing fees associated with the multicurrency revolving credit facilities, term loan facilities and senior notes.
2.
During the year to 31 December 2024, the Group completed the acquisition of Livramedom. The Group used acquisition
accounting to reflect the fair value of the assets acquired and liabilities assumed as well as the intangible assets and goodwill
recognised upon acquisitions. These valuations are considered provisional as at 31 December 2024.
The contingent consideration liabilities recognised by the Group is in respect of acquisitions and includes amounts contingent
on future events such as development milestones and sales performance.
Accounting policy
transferred in respect of an acquisition is measured at the fair value of the assets acquired, equity instruments issued and
liabilities incurred or assumed on the date of the acquisition. Identified assets acquired and liabilities assumed are measured
at their respective acquisition-date fair values.
The excess of the fair value of the consideration given over the fair value of the identifiable net assets acquired is recorded as
goodwill. If the fair value of the identifiable net assets acquired is greater than the fair value of the consideration given, the
excess is recognised immediately in the Consolidated Income Statement as a bargain purchase gain. Acquisition-related costs
are expensed as incurred.
The operating results of the acquired business are reflected in the Group’s Consolidated Financial Statements from the date
of acquisition.
198
Convatec Group Plc Annual Report and Accounts 2024
Financial statements
Notes to the consolidated financial statements
continued
26. ACQUISITIONS (CONTINUED)
Accounting policy (continued)
Contingent consideration arising from a business combination is recognised at fair value on acquisition. Contingent
consideration classified as a liability is a financial instrument and within the scope of IFRS 9 – Financial Instruments and is
subsequently measured at fair value, with the changes in fair value recognised in the Consolidated Income Statement, in
accordance with IFRS 9. This is classified within Level 3 of the fair value hierarchy (Note 23 – Financial Instruments).
The classification of cash payments associated with contingent consideration within the Consolidated Statement of Cash Flows is
dependent on the nature of the arrangement. The settlement of the amount initially recognised upon acquisition is reflected in
cash flows from investing activities, with the element of the payment relating to any subsequent remeasurement included within
Livramedom
On 17 September 2024, the Group completed its acquisition of 100% of the share capital of Livramedom, a France-based retailer
of equipment for the treatment of continence, wound healing, and stoma therapy disorders, which will strengthen our direct-to-
consumer capabilities in Continence Care and Ostomy Care. The company was founded in 2006, and is based in Marseille, France.
The total consideration for the acquisition was $12.8 million (€11.5 million). There is no contingent consideration associated with
this acquisition.
Assets acquired and liabilities assumed
The transaction meets the definition of a business combination and has been accounted for under the acquisition method of
accounting. The following table summarises the provisional fair values of the assets acquired and liabilities assumed as at the
acquisition date:
Livramedom | |
Provisiona l | |
$m | |
Non-current assets | |
Right-o f -use assets | 1.0 |
Intangible assets | 1.3 |
Other non-current receivables | 0.1 |
Current assets | |
Inventories | 0.9 |
Trade and other receivables | 1.5 |
Cash and cash equivalents | 0.9 |
Total assets acquired | 5.7 |
Current liabilities | |
Trade and other payables | (3.0) |
Lease liabilities | (0.3) |
Deferred tax liabilities | (0.2) |
Non-current liabilities | |
Lease liabilities | (0.7) |
Deferred tax liabilities | (0.2) |
Total liabilities assumed | (4.4) |
Net assets acquired | 1.3 |
Goodwill (Note 9.2) | 11.5 |
Total | 12.8 |
Initial cash consideration | 14.5 |
Working capital adjustment 1 | (1.5) |
Gross indebtedness adjustment 1 | (0.2) |
Total consideration | 12.8 |
1.
These are the Group’s calculations of the working capital and gross indebtedness adjustments in accordance with the terms of the Merger Agreement. These were not
finalised or paid by the reporting date.
Analysis of cash outflow in the Consolidated Statement of Cash Flows
Livramedom | |
Provisiona l | |
$m | |
Initial cash consideration | 14.5 |
Cash and cash equivalents acquired | (0.9) |
Net cash outflow from acquisitions, net of cash acquired | 13.6 |
199
Convatec Group Plc Annual Report and Accounts 2024
26. ACQUISITIONS (CONTINUED)
Overview
Strategic report
Governance
Financial statements
Additional information
The fair values of the assets acquired and liabilities assumed are provisional at 31 December 2024. The Group will finalise these
amounts as it obtains the information necessary to complete the measurement process. Any changes resulting from facts and
circumstances that existed as of the acquisition dates may result in retrospective adjustments to the provisional amounts
recognised at the acquisition date. The Group will finalise these amounts no later than one year from the acquisition date.
The provisional fair value of trade and other receivables amounted to $1.5 million, with a gross contractual amount of $1.6 million.
At the acquisition date, the Group's best estimate of the contractual cash flows expected not be collected amounted to $0.1 million.
Goodwill amounting to $11.5 million was recognised on acquisition and is underpinned by a number of elements, which individually
could not be quantified. Most significant amongst these is the premium attributable to a pre-existing, well-positioned business in
the important Direct to Consumer market in France that will now allow Convatec to be more competitive. Additionally, Livramedom
has a highly skilled workforce and established reputation. The Group expects cost savings, operational synergies and future growth
opportunities to arise from combining the operations of the business to those of the Group. The Livramedom acquisition is included
in the Continence Care CGU.
Acquisition-related costs
The Group incurred $3.5 million of acquisition-related costs in the year, primarily relating to legal and professional fees in respect of
completed or aborted acquisitions in both the current year and previous years. The acquisition-related costs have been recognised
in general and administrative expenses in the Consolidated Income Statement.
Revenue and profit
The revenue of Livramedom for the period from the acquisition date to 31 December 2024 was $4.8 million and net loss for the
period was $0.6 million. If the acquisition had been completed on 1 January 2024, reported Group revenue would have been
$11.4 million higher and Group profit for the year would have been $0.1 million higher.
Contingent consideration
As at 31 December 2024, the discounted fair value of the contingent consideration payable in respect of the Group’s acquisitions
was $70.3 million. During the year, final earn out payments totalling $70.9 million were made in respect of the Cure Medical and
Triad Life Sciences acquisitions ($22.8 million recognised within cash flows from investing activities and $48.1 million recognised
within cash flows from operating activities in the Consolidated Statement of Cash Flows). The net charge to the income statement
in respect of changes in the fair value of contingent consideration (based on the best estimates of the amounts payable as at
31 December 2024) was $4.6 million. In addition, there was a foreign exchange movement of $1.4 million from the re-translation
of non-USD denominated balances.
The movement in contingent consideration to 31 December was as follows:
2024 | 2023 | |
$m | $m | |
1 January | 138.0 | 140.0 |
Contingent consideration from acquisitions | – | 66.7 |
Fair value movement of contingent consideration | 4.6 | 24.6 |
Utilised | (70.9) | (94.7) |
Foreign exchange | (1.4) | 1.4 |
31 December | 70.3 | 138.0 |
Current | 53.3 | 69.7 |
Non-current | 17.0 | 68.3 |
The expected payment profile of the contingent consideration at 31 December was as follows:
2024 | 2023 | |
$m | $m | |
Within 1 year | 53.3 | 69.7 |
2 to 5 years | 0.4 | 55.8 |
More than 5 years | 16.6 | 12.5 |
Total | 70.3 | 138.0 |
Convatec Group Plc Annual Report and Accounts 2024
200
Financial statements
Notes to the consolidated financial statements
continued
26. ACQUISITIONS (CONTINUED)
Fair value of contingent consideration at reporting date
Contingent consideration arising on business combinations is classified as a recurring fair value measurement within Level 3 of the
fair value hierarchy, in line with IFRS 13 Fair Value Measurements. Key unobservable inputs in respect of the Group’s acquisitions
include actual results, management forecasts and an appropriate discount rate.
As at 31 December 2024, the discounted fair value of the contingent consideration payable in respect of the Group’s acquisitions
was $70.3 million (2023: $138.0 million).
Management has determined that the potential range of undiscounted outcomes at 31 December 2024 is between $58.8 million and
$163.9 million, from a maximum undiscounted amount of $163.9 million.
The table below shows an indicative basis of the sensitivity to the income statement and balance sheet at 31 December 2024.
Sales forecast | Discount rate | |||||||
5% | 10% | -5% | -10% | 1% | 2% | -1% | -2% | |
Increase/(decrease) in financial liability and loss/(gain) | ||||||||
in income statement | 0.5 | 1.0 | (0.5) | (1.1) | (1.8) | (3.3) | 2.0 | 4.0 |
Commitments represent the Group’s future capital expenditure which is not recognised as a liability in the Consolidated Financial
Statements but represents a non-cancellable commitment.
A contingent liability is a possible liability that is not sufficiently certain to qualify for recognition as a provision because the
amount cannot be measured reliably or because settlement is not considered probable.
At 31 December 2024, the Group had non-cancellable commitments for the purchase of property, plant and equipment, capitalised
The Company and its subsidiaries are party to various legal claims and disputes which arise in the normal course of business. Provisions
are recognised for outcomes that are deemed probable and can be reliably estimated. Management believe that any material liability in
The Directors have not identified any related parties to the Group, other than the key management personnel. The Group considers
key management personnel as defined in IAS 24,
Related Party Disclosures
to be the members of the CELT as set out on pages 94 to
95 and the Non-Executive Directors as set out on pages 92 to 93.
Key management personnel compensation for the year ended 31 December was as follows:
2024 | 2023 | |
$m | $m | |
Short-term employee benefits | 18.6 | 15.5 |
Share-based payment expense | 9.2 | 7.1 |
Post-employment benefits | 0.6 | 0.5 |
Termination benefits | 0.3 | – |
Total | 28.7 | 23.1 |
Further details of short-term employee benefits, share-based payment expense and post-employment benefits for the two Executive
Directors are shown on page 135. Details of the Non-Executive Directors' fees, included in the table above, are provided on page 143.
The Group has not been a party to any other material transaction, or proposed transactions, in which any member of the key
The Group has evaluated subsequent events through to 25 February 2025, the date the Consolidated Financial Statements were
approved by the Board of Directors.
On 25 February 2025, the Board proposed the final dividend in respect of 2024 subject to shareholder approval at the Annual
General Meeting on 22 May 2025, to be distributed on 29 May 2025. See Note 18 – Dividends to the Consolidated Financial
Company financial statements
COMPANY STATEMENT OF FINANCIAL POSITION
As at 31 December 2024
2024
2023
Notes
$m
$m
Assets
Non-current assets
Investment in subsidiaries
3
5,529.6
4,019.4
Deferred tax assets
4
2.2
3.0
5,531.8
4,022.4
Current assets
Other receivables
5
31.4
33.4
Total assets
5,563.2
4,055.8
Equity and liabilities
Current liabilities
Trade and other payables
6
59.3
4.6
59.3
4.6
Non-current liabilities
Other payables
0.1
0.1
Total liabilities
59.4
4.7
Net assets
5,503.8
4,051.1
Equity
Share capital
7
251.5
251.5
Share premium
7
181.0
181.0
Own shares
7
(16.4)
(0.6)
Retained surplus
3,088.5
1,539.4
Merger reserve
1,765.6
1,765.6
Cumulative translation reserve
112.4
206.6
Other reserves
121.2
107.6
Total equity
5,503.8
4,051.1
Total equity and liabilities
5,563.2
4,055.8
The Company reported a net profit for the year ended 31 December 2024 of $1,679.3 million (2023: $103.3 million).
The Financial Statements of Convatec Group Plc (registered number 10361298) were approved by the Board of Directors and
authorised for issue on 25 February 2025. They were signed on its behalf by:
Jonny Mason
Karim Bitar
Chief Financial Officer
Chief Executive Officer
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Governance
Financial statements
Additional information
Overview
Strategic report
Company financial statements
continued
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2024
Share capital
Share
premium
Own shares
Retained
surplus
Merger
reserve
Cumulative
translation
reserve
Other
reserves
Total equity
$m
$m
$m
$m
$m
$m
$m
$m
At 1 January 2023
250.7
165.7
(1.5)
1,562.9
1,765.6
3.7
91.3
3,838.4
Net profit
–
–
–
103.3
–
–
–
103.3
Foreign currency translation
adjustment
–
–
–
–
–
202.9
–
202.9
Total comprehensive
income
–
–
–
103.3
–
202.9
–
306.2
Dividends paid
–
–
–
(110.7)
–
–
–
(110.7)
Scrip dividend
0.8
15.3
–
(16.1)
–
–
–
–
Share-based payments
–
–
–
–
–
–
14.5
14.5
Share awards vested
–
–
0.9
–
–
–
1.5
2.4
Excess deferred tax benefit
from share-based payments
–
–
–
–
–
–
0.3
0.3
At 31 December 2023
251.5
181.0
(0.6)
1,539.4
1,765.6
206.6
107.6
4,051.1
Net profit
–
–
–
1,679.3
–
–
–
1,679.3
Foreign currency translation
adjustment
–
–
–
–
–
(94.2)
–
(94.2)
Total comprehensive
income
–
–
–
1,679.3
–
(94.2)
–
1,585.1
Dividends paid
–
–
–
(130.2)
–
–
–
(130.2)
Share-based payments
–
–
–
–
–
–
19.7
19.7
Share awards vested
–
–
7.0
–
–
–
(5.3)
1.7
Excess deferred tax benefit
from share-based payments
–
–
–
–
–
–
(0.8)
(0.8)
Purchase of shares by
Employee Benefit Trust
–
–
(22.8)
–
–
–
–
(22.8)
At 31 December 2024
251.5
181.0
(16.4)
3,088.5
1,765.6
112.4
121.2
5,503.8
For further information on share-based payments, refer to Note 19 – Share-based payments, and for dividends refer to Note 18 –
Dividends to the Consolidated Financial Statements.
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Financial statements
1. BASIS OF PREPARATION
This section describes the Company’s material accounting policies in respect of the Company Financial Statements and explains
critical accounting judgements and estimates that management has identified as having a potentially material impact to the
Company. Specific accounting policies relating to the Notes to the Company Financial Statements are described within that note.
1.1 General information
The separate Financial Statements of the Company are presented as required by the Companies Act 2006. The Company meets the
definition of a qualifying entity under Financial Reporting Standard 100 (FRS 100) issued by the Financial Reporting Council (FRC).
Accordingly, the Financial Statements have been prepared in accordance with Financial Reporting Standard 101 (FRS 101) Reduced
Disclosure Framework as issued by the FRC.
As permitted by FRS 101, the Company has taken advantage of the disclosure exemptions available under that standard in respect
of share-based payments, financial instruments, capital management, comparative information, presentation of a cash flow
statement, new but not yet effective IFRSs and certain related party transactions.
As permitted by s408 of the Companies Act 2006 the Company has elected not to present its own Income Statement for the current
or prior year. The profit attributable to the Company is disclosed in the footnote to the Company’s Statement of Financial Position.
Where required, equivalent disclosures are given in the Consolidated Financial Statements.
The auditor’s remuneration for audit and other services is disclosed in Note 3.3 – Auditor’s remuneration to the Consolidated
Financial Statements.
1.2 Material accounting policies
Basis of accounting
The Financial Statements have been prepared on the historical cost basis. The principal accounting policies adopted are the same as
those set out in the Consolidated Financial Statements except as noted below.
Foreign currencies
The functional currency of the Company is Sterling, being the currency of the primary economic environment in which it operates.
The Company has adopted US dollars as the presentation currency for its Financial Statements, in line with the presentation
currency for the Consolidated Financial Statements. For the purpose of presenting individual company financial statements,
assets and liabilities of the Company are translated into US dollars at exchange rates prevailing on the balance sheet date.
Equity is translated into US dollars at the historic rate. Income and expense items are translated at the average exchange rates
for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the date of
transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in
a separate component of equity, the cumulative translation reserve, in accordance with IAS 21,
The Effects of Changes in Foreign
Exchange Rates
.
Share-based payments
The Company has implemented the generally accepted accounting principle for accounting for share-based payments with
subsidiary undertakings under FRS 101, whereby the Company has granted rights to issue its shares to employees of its subsidiary
undertakings under an equity-settled arrangement and the subsidiaries have not reimbursed the Company for these rights. Under
this arrangement, the Company treats the share-based payment recognised in the subsidiary's financial statements as an increase
in the cost of investment in the subsidiary and credits equity with an equal amount.
Investments
Investments in Group undertakings are stated at cost less any provision for impairment. The Company assesses investments for
impairment whenever events or changes in circumstances indicate that the carrying value of an investment may not be recoverable.
If any such indication of impairment exists, the Company makes an estimate of the recoverable amount. If the recoverable amount
of the investment is less than the carrying amount of the investment, the investment is considered to be impaired and is written
down to its recoverable amount.
Any impairment charge is initially taken to retained earnings and subsequently offset against any merger reserve by way of a
reserves transfer.
At the end of each reporting period, the Company assesses whether there is any indication that previously recognised impairment
losses may no longer exist or may have decreased. If such an indication exists, the Company should estimate the recoverable
amount to determine if all or part of the previously recognised impairment loss should be reversed.
1.3 Critical accounting judgements and key sources of estimation uncertainty
The preparation of the Company's Financial Statements in accordance with FRS 101 requires management to make judgements,
estimates and assumptions that affect the application of accounting policies and the reported value of assets and liabilities, income
and expense. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an
ongoing basis.
There were no critical accounting judgements that would have a significant effect on the amounts recognised in the parent
company financial statements or key sources of estimation uncertainty at the balance sheet date that would have a significant risk
of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year
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Governance
Financial statements
Additional information
Overview
Strategic report
Company financial statements
continued
2. STAFF COSTS
The Executive Directors of Convatec Group Plc are the only employees of the Company. The remuneration of the Executive
Directors is set out on pages 114 to 144 within the Remuneration Committee report.
Their aggregate remuneration comprised:
2024
2023
$m
$m
Wages and salaries
4.2
3.8
Share-based payment expense
5.2
3.7
Social security costs
1.1
1.1
Pension-related costs
0.1
0.2
Total
10.6
8.8
Average monthly number of employees (including Executive Directors) was 2 (2023: 2).
3. INVESTMENTS IN SUBSIDIARIES
Investments in subsidiaries represent the cost of the Company’s investment in its subsidiary undertakings, net of any impairment
charges. Refer to pages 207 to 209 for details of all the Company’s direct and indirect holdings.
Cost
Impairment
Net book value
$m
$m
$m
At 1 January 2023
5,350.1
(1,531.2)
3,818.9
Capital contributions in respect of share-based payments to employees of subsidiaries
12.1
–
12.1
Reduction due to reimbursement upon exercised awards
(16.4)
–
(16.4)
Foreign exchange
286.9
(82.1)
204.8
At 31 December 2023
5,632.7
(1,613.3)
4,019.4
Capital contributions in respect of share-based payments to employees of subsidiaries
14.5
–
14.5
Reduction due to reimbursement upon exercised awards
(22.6)
–
(22.6)
Reversal of impairment loss
–
1,613.8
1,613.8
Foreign exchange
(95.0)
(0.5)
(95.5)
At 31 December 2024
5,529.6
–
5,529.6
The Company performed an assessment of the recoverable amount of the investments in subsidiaries at 31 December 2024.
The recoverable amount was determined with reference to IAS 36 by assessing the value in use of the investments based on the
discounted cash flows. This resulted in a complete reversal of the previous impairment from 2018 of $1,613.8 million, which has
been taken to the retained surplus account. Refer to Note 8 for further details.
In undertaking this assessment, the company has considered both external and internal sources of information, as well as any
observable indications that may suggest that the impairment had reversed.
The future cash flows are determined using the latest available Board-approved forecasts and strategic plans. These forecasts
and strategic plans are based on specific assumptions during the five-year planning period with respect to revenue, results of
operations, working capital, capital investments and other general assumptions for the projected period. The forecast assumptions,
that derive the future cash flows, are based on the historical results of the Group combined with external market information and
defined strategic initiatives. The recoverable amount has been estimated by the application of an appropriate discount rate to these
future cash flows.
The share price of Convatec Group Plc at 31 December 2024 was £2.21 (2023: £2.44), resulting in a market valuation of £4,534.1 million
($5,674.9 million) (2023: £5,006 million ($6,373 million)).
The following UK subsidiaries are exempt from the requirement to file audited accounts by virtue of Section 479A of the Companies
Act 2006:
Company
registration
number
Convatec Group Holdings Limited
12698069
Starlight Science Limited
14419310
Convatec International U.K. Limited
06622355
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Convatec Group Plc Annual Report and Accounts 2024
Financial statements
4. DEFERRED TAX ASSETS
Deferred tax assets mainly arise in relation to timing differences on the exercise of share-based awards.
$m
At 1 January 2023
2.6
Movement in income statement
0.1
Movement in other comprehensive income
0.3
Foreign exchange
–
At 31 December 2023
3.0
Movement in income statement
0.1
Movement in other comprehensive income
(0.8)
Foreign exchange
(0.1)
At 31 December 2024
2.2
The deferred tax asset consists of deferred tax on the following items:
2024
2023
$m
$m
Share-based payments
2.2
3.0
At 31 December
2.2
3.0
Deferred tax assets are only recognised where it is probably that future profit will be available to utilise the tax losses.
5. OTHER RECEIVABLES
Other receivables consist of amounts due from Group undertakings, other receivables and prepaid insurance.
2024
2023
$m
$m
Amounts falling due within one year:
Amounts owed by Group undertakings
31.0
23.0
Other receivables
0.2
10.3
Prepayments
0.2
0.1
31.4
33.4
Included in the amounts owed by Group undertakings at 31 December 2023 were intercompany loans of $6.3 million with a variable
interest rate set at a margin 35bps below SONIA. In 2024, this was in a payable position and is discussed in Note 6 – Trade and other
payables below. All amounts owed by Group undertakings are unsecured and are expected to be realised within 12 months of the
reporting date.
6. TRADE AND OTHER PAYABLES
Trade payables consist of amounts payable to third parties related predominantly to the Company’s corporate responsibilities.
Other payables represent amounts owed to Group undertakings, accruals and other taxation and social security.
2024
2023
$m
$m
Amounts falling due within one year:
Trade payables
0.3
1.1
Amounts owed to Group undertakings
54.6
–
Other taxation and social security
1.3
0.8
Accruals
3.1
2.7
59.3
4.6
Included in the amounts owed to Group undertakings at 31 December 2024 are intercompany loans of $53.9 million (2023: nil) with
a variable interest rate set at a margin 200bps above SONIA. All amounts owed to Group undertakings are unsecured and are
repayable on demand.
7. RESERVES
All reserve balances included in this note are components of equity and are non-distributable.
Share capital, share premium and own shares
Details of the Company's share capital, share premium and own shares are detailed in Note 17 – Share capital and reserves to the
Consolidated Financial Statements.
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Governance
Financial statements
Additional information
Overview
Strategic report
Company financial statements
continued
7. RESERVES (CONTINUED)
Merger reserve
The merger reserve represents the fair value in excess of the par value of shares issued as part of a share exchange upon
incorporation of the Company.
Currency translation reserve
The currency translation reserve comprise the exchange differences arising on the translation of the assets and liabilities of the
Company into US dollars at the prevailing balance sheet rate and income and expense items being translated at the average
exchange rates for the period.
Other reserves
Other reserves are in respect of movements on equity-settled share-based payments.
8. DISTRIBUTABLE RESERVES
As the Company is a holding company with no direct operations the capacity of the Company to make dividend payments is
primarily derived from dividends received from subsidiary companies.
As disclosed in Note 3, a previous impairment of $1,613.8 million in respect of investments in subsidiaries was reversed during
the year and taken to the retained surplus account. This amount is treated as non-distributable. At 31 December 2024, the retained
surplus of the Company was $3,088.5 million (2023: $1,539.4 million) of which $1,474.7 million (2023: $1,539.4 million) was realised
and distributable. Details of the considerations and rationale for the distribution of dividends are given in the Directors’ report on
page 145.
9. FINANCIAL GUARANTEES
The Company has guaranteed certain external borrowings of subsidiaries which at 31 December 2024 amounted to $1,133.5 million
(2023: $1,240.6 million). The likelihood of these guarantees being called upon is considered to be remote and therefore the
estimated fair value of these guarantees is considered to be nil at 31 December 2024 (2023: nil).
10. SUBSEQUENT EVENTS
On 25 February 2025, the Board proposed the final dividend in respect of 2024 subject to shareholder approval at the Annual
General Meeting on 22 May 2025, to be distributed on 29 May 2025. See Note 18 – Dividends to the Consolidated Financial
Statements for further details.
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Financial statements
Details of the Company’s subsidiaries and associated undertakings at 31 December 2024 are as follows:
Name
Place of business and
registered office
Portion of ownership
interest
%
Portion of
voting power held
%
Akers & Dickinson Limited
1
United Kingdom
100%
100%
Allied Medical (UK) Services Limited
1
United Kingdom
100%
100%
Alpha-Med (Medical & Surgical) Limited
1
United Kingdom
100%
100%
Amcare Limited
1
United Kingdom
100%
100%
Arthur Wood Limited
1
United Kingdom
100%
100%
B.C.A. Direct Limited
1
United Kingdom
100%
100%
Bradgate-Unitech Limited
1
United Kingdom
100%
100%
Convatec Accessories Limited
1
United Kingdom
100%
100%
Convatec Holdings U.K. Limited
2
United Kingdom
100%
100%
Convatec NAP Limited
1
United Kingdom
100%
100%
Convatec Speciality Fibres Limited
1
United Kingdom
100%
100%
Convatec International U.K. Limited
2
United Kingdom
100%
100%
Convatec Limited
1
United Kingdom
100%
100%
Farnhurst Medical Limited
1
United Kingdom
100%
100%
Lance Blades Limited
1
United Kingdom
100%
100%
M.S.B. Limited
1
United Kingdom
100%
100%
Needle Industries (Sheffield) Limited
1
United Kingdom
100%
100%
Nottingham Medical Equipment Limited
1
United Kingdom
100%
100%
Novacare UK Limited
1
United Kingdom
100%
100%
Pharma-Plast Limited
1
United Kingdom
100%
100%
Project Dragon SPV Limited
2
United Kingdom
100%
100%
Resus Positive Limited
1
United Kingdom
100%
100%
Rotax Razor Company Limited
1
United Kingdom
100%
100%
Shrimpton & Fletcher Limited
1
United Kingdom
100%
100%
Starlight Science Limited
1
United Kingdom
100%
100%
Steriseal Limited
1
United Kingdom
100%
100%
SureCalm Healthcare Holdings Limited
1
United Kingdom
100%
100%
SureCalm Healthcare Ltd
1
United Kingdom
100%
100%
SureCalm Pharmacy Limited
1
United Kingdom
100%
100%
Unomedical Developments Limited
1
United Kingdom
100%
100%
Unomedical Holdings Limited
1
United Kingdom
100%
100%
Unomedical Limited
1
United Kingdom
100%
100%
Unoplast (U.K.) Limited
1
United Kingdom
100%
100%
Convatec Finance Holdings Limited
2
United Kingdom
100%
100%
Convatec Management Holdings Limited*
1
United Kingdom
100%
100%
Convatec Group Holdings Limited*
2
United Kingdom
100%
100%
Cidron Healthcare Limited*
3
Jersey
100%
100%
Convatec Healthcare Ireland Limited
4
Ireland
100%
100%
Convatec France Holdings SAS
5
France
100%
100%
Laboratoires ConvaTec SAS
5
France
100%
100%
Livramedom SAS
11
France
100%
100%
Convatec Healthcare D S.à.r.l.
6
Luxembourg
100%
100%
Convatec Spain Holdings, S.L.
7
Spain
100%
100%
Convatec Spain S.L.
7
Spain
100%
100%
CVT Business Services, Unipessoal Lda.
8
Portugal
100%
100%
KVTech Portugal – Produtos Medicos Unipessoal Ltda
8
Portugal
100%
100%
Convatec OY
9
Finland
100%
100%
Convatec (Switzerland) GmbH
10
Switzerland
100%
100%
Convatec International Services GmbH
10
Switzerland
100%
100%
Convatec (Austria) GmbH
12
Austria
100%
100%
Convatec Italia S.r.l.
13
Italy
100%
100%
Convatec Hellas Medical Products S.A.
14
Greece
100%
100%
Convatec Polska Sp. Z.o.o
15
Poland
100%
100%
Convatec Ceska Republika s.r.o.
16
Czech Republic
100%
100%
Convatec (Australia) PTY Limited
17
Australia
100%
100%
Subsidiary and related undertakings
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Convatec Group Plc Annual Report and Accounts 2024
Governance
Financial statements
Additional information
Overview
Strategic report
Name
Place of business and
registered office
Portion of ownership
interest
%
Portion of
voting power held
%
Convatec (New Zealand) Limited
18
New Zealand
100%
100%
Convatec Sağlik Ürünleri Limited Şirketi
19
Turkey
100%
100%
Convatec (Sweden) AB
20
Sweden
100%
100%
Convatec Norway AS
21
Norway
100%
100%
Convatec (Germany) GmbH
22
Germany
100%
100%
EuroTec GmbH
23
Germany
100%
100%
Unomedical s.r.o.
24
Slovakia
100%
100%
EuroTec B.V.
25
Netherlands
100%
100%
EuroTec Beheer B.V.
25
Netherlands
100%
100%
Convatec Nederland B.V.
26
Netherlands
100%
100%
Convatec Belgium BVBA
27
Belgium
100%
100%
EuroTec BV (Belguim Branch)
28
Belgium
100%
100%
Papyro-Tex A/S
29
Denmark
100%
100%
Convatec Denmark A/S
30
Denmark
100%
100%
Unomedical A/S
31
Denmark
100%
100%
Convatec Denmark Holdings ApS
32
Denmark
100%
100%
Convatec South Africa (PTY) Limited
33
South Africa
100%
100%
ConvaCare Medical South Africa (PTY) Ltd
33
South Africa
100%
100%
Convatec Middle East & Africa LLC
34
Egypt
100%
100%
Convatec Middle East FZ-LLC
35
United Arab Emirates
100%
100%
Convatec (Singapore) PTE Limited
36
Singapore
100%
100%
Convatec Malaysia Sdn Bhd
37
Malaysia
100%
100%
Convatec China Limited (Beijing Branch)
38
China
100%
100%
Convatec China Limited (Guang Zhou Branch)
39
China
100%
100%
Convatec China Limited
40
China
100%
100%
Boston Medical Device Dominicana S.R.L.
41
Dominican Republic
100%
100%
Convatec Hong Kong Limited
42
Hong Kong
100%
100%
Convatec Japan KK
43
Japan
100%
100%
Convatec (Singapore) PTE Limited (Taiwan Branch)
44
Taiwan
100%
100%
Convatec (Thailand) Co. Limited
45
Thailand
100%
100%
ZAO ConvaTec
46**
Russia
100%
100%
Convatec Korea, Ltd
47
Korea
100%
100%
Convatec Argentina SRL
48
Argentina
100%
100%
Convatec Canada Limited
49
Canada
100%
100%
Unomedical S.A de C.V.
50
Mexico
100%
100%
Convatec Medical Care Mexico S. de R.L. de C.V.
51
Mexico
100%
100%
Boston Medical Device de México, S. de R.L. de C.V.
51
Mexico
100%
100%
Unomedical Devices S.A. de C.V.
52
Mexico
100%
100%
Convatec Peru S.A.C.
53
Peru
100%
100%
Convatec Brasil Ltda.
74
Brazil
100%
100%
Convatec Medical Care Assistência a Paciente Ltda
54
Brazil
100%
100%
Convatec Colombia Ltda.
55
Colombia
100%
100%
Boston Medical Care S.A.S IPS
56
Colombia
100%
100%
Convatec Medical Care S.P.A
57
Chile
100%
100%
Convatec Chile S.A.
57
Chile
100%
100%
Convatec Ecuador S.A.
58
Ecuador
100%
100%
Boston Medical Device de Venezuela, C.A.
59
Venezuela
100%
100%
Convatec India Private Limited
60
India
100%
100%
180 Medical Acquisition Inc.
61
US
100%
100%
180 Medical Holdings Inc.
61
US
100%
100%
180 Medical Inc.
61
US
100%
100%
180 Medical Distribution Inc.
62
US
100%
100%
AbViser Medical, LLC
63
US
100%
100%
Boston Medical Device, Inc.
64
US
100%
100%
Boston Med Device International, LLC
64
US
100%
100%
Convatec Dominican Republic Inc.
62
US
100%
100%
Subsidiary and related undertakings
continued
208
Convatec Group Plc Annual Report and Accounts 2024
Financial statements
Name
Place of business and
registered office
Portion of ownership
interest
%
Portion of
voting power held
%
Convatec Inc.
64
US
100%
100%
Convatec Technologies Inc.
65
US
100%
100%
Woodbury Holdings, Inc.
66
US
100%
100%
WPI Acquisition Corporation
66
US
100%
100%
WPI Holdings Corporation
66
US
100%
100%
Wilmington Medical Supply, Inc.
67
US
100%
100%
PRN Medical Services, LLC
68
US
100%
100%
PRNMS Investments LLC
68
US
100%
100%
Symbius Medical Inc.
68
US
100%
100%
South Shore Medical Supply, Inc.
69
US
100%
100%
Unomedical America, Inc.
64
US
100%
100%
Unomedical, Inc.
64
US
100%
100%
J&R Medical, LLC
70
US
100%
100%
Cure Medical LLC
71
US
100%
100%
Convatec Triad Life Sciences, LLC
62
US
100%
100%
Convatec NAP Holdings, Inc.
64
US
100%
100%
A Better Choice Medical Supply, L.L.C
72
US
100%
100%
All American Medical Supply Corp.
73
US
100%
100%
1.
GDC First Avenue, Deeside Industrial Park,
Deeside, Flintshire CH5 2NU, UK
2.
20 Eastbourne Terrace, Paddington, London
W2 6LG, UK
3.
44 Esplanade, St. Helier, Jersey, JE4 9WG,
Channel Islands
4.
10 Earlsfort Terrace, Dublin 2, D02 T380,
Ireland
5.
89, Boulevard National, 92250 La Garenne-
Colombes, France
6.
12C, rue Guillaume Kroll, L-1882, Luxembourg
7.
C/Constitucion, Num 1, Planta 4, Puerta 4,
08960 Sant Just Desvern, Barcelona, Spain
8.
Av. Duque de Loulé, 106, 4th Floor, 1050-093,
Lisboa Portugal
9.
Karhumäentie 3, 01530 Vantaa, Finland
10. Herrenacker15, 8200 Schaffhausen,
Switzerland
11. 111 Avenue de la Roque Forcade, 13420
Gemenos, France
12. Schubertring 6, 1010 Wien, Austria
13. Via della Sierra Nevada, 60-00144 Rome,
Italy 14. 392A Mesogeion Avenue, Ag.
Paraskevi, Athens, 15341, Greece
15. Rondo Daszyńskiego 1, 00-843Warszawa,
Poland
16. Olivova 2096/4, Prague 1, 11000, Czech
Republic
17. C/o Intertrust Australia Pty Ltd, Suite 2, Level
25, 100 Miller Street, North Sydney, NSW 2060,
Australia
18. C/o Intertrust New Zealand, Level 1, 33 Federal
Street, Auckland, 1010, New Zealand
19. Ayazağa Mah.Mimar Sinan SK. A Blok No:21A İC
Kapi No:9 Sariyer, Istanbul, Turkey
20. Box 3096, 169 03 Solna, Stockholm, Sweden
21. Wergelandsveien 7, 0167 Oslo, Norway
22. Mühldorfstrasse 8, 81671 Munich, Germany
23. Solingerstrasse 93 40764 Langenfeld,
Germany
24. Priemyselný Park 3, 071 01 Michalovce,
Slovakia
25. Schotsbossenstraat 8, 4705AG Roosendaal,
Netherlands
26. Papendorpseweg 95, 3528 BJ, Utrecht,
Netherlands
27. Parc d’Alliance, Boulevard de France 9,
B-1420 Braine l’Alleud, Belgium
28. Stationsstraat 35, 2950 Kapellen, Belgium
29. ConvaTec Harlev Skinderskovvej 32-36, 2730,
Herlev, Denmark
30. Transformervej 14, 2860 Søborg, Denmark
31. Åholmvej 1-3, 4320 Lejre, Denmark
32. Åholmvej 1 Osted, 4320 Lejre, Denmark
33. Workshop 17, 16 Baker Street, Rosebank,
Johannesburg, Gauteng 2196, South Africa
34. Office No. M017, Raya Building, 70 Street,
New Cairo Banks, Cairo, Egypt
35. 604N, 6th Floor, Dubai Science Park Park (DSP)
Towers North, Dubai Science Park, Dubai,
United Arab Emirates
36. 456 Alexandra Road, #18-02 Fragrance Empire
Building, Singapore 119962, Singapore
37. 18-12 Menara Q Sentral, 2A Jalan Stesen
Sentral 2, Kuala Lumpur Wilayah Persekutuan
50470 Malaysia
38. Unit 805, 8F Jinbao Tower, No.89 Jinbao Street
Dongcheng District, Beijing 100005, China.
39. Unit 808, Level 8, Fortune plaza, No.116 Ti Yu
Dong Road, Tianhe District, Guangzhou City,
Guangdong, 510620, China.
40. Unit 1105-1106, Crystal Plaza Office Tower 1,
No.1359 Yaolong Road, China (Shanghai) Pilot
Free Trade Zone, Shanghai 200124, China
41. Arzobispo Portes No. 659, Ciudad Nueva,
Santo Domingo, Dominican Republic
42. Unit 1901 Yue Xiu Bldg 160–174, Lockhart
Road, Wan Chai, Hong Kong
43. 1-1-7 Kouraku, Bunkyo-ku, Tokyo 112-0004,
Japan
44. 5F.-4, No. 57, Fuxing N. Rd, Songshan Dist.,
Taipei City, 10595, Taiwan
45. 9th Floor, M. Thai Tower, All Seasons Place,
87 Wireless Road, Lumphini, Phatum Wan,
Bangkok, 10330, Thailand
46. Kosmodamianskaya nab. 52, building 1,
9th floor, 115054, Moscow, Russia
47. 4F, American Standard B/D, Yeongdongdaero
112gil 66, Gangnam-Gu, Seoul, 06083, Republic
of Korea
48. Calle Cerrito No.1070 Tercer Piso, Oficina 71,
Buenos Aires, Argentina
49. 600-1741 Lower Water Street, Halifax,
Nova Scotia B3J 0J2, Canada
50. Avenida Industrial Falcón, L7, Parque Industrial
del Norte, Reynosa Tamps, C.P. 88736, Mexico
51. Avenida Insurgentes Sur 619, 3° Piso, Nápoles,
Ciudad de Mexico 03810, Mexico
52. Av. Fomento Industrial L9 M3, Parque
Industrial del Norte, Reynosa Tamps, C.P.
88736, Mexico
53. Cal. Monte Rosa Nro 255 Int. 301 Urb.
Chacarilla, Lima, Santiago DE Surco, Perú
54. Rua Alexandre Dumas, 2100,15º. Andar, Ed
Corporate Plaza, Conj 151 e 152, Chácará
Stº Antonio, São Paulo, 04717-913, Brazil
55. Av. Carrera 45 #108 – 27 Centro Empresarial
Paralelo 108, Bogotá, DC Codigo Postal 111111,
Colombia
56. Calle 82 # 18-31, Bogotá, Colombia
57. Av. Andres Bello #2325, Oficina 8, Santiago,
Chile
58. Francisco Robles E4-136 y Av. Amazonas,
Edificio Proinco Calisto, Piso 12, Quito,
EC170526, Ecuador
59. Av. Eugenio Mendoza Urb. La Castellana,
Torre La Castellana Piso 7, Caracas Venezuela
60. Unit No 206, 2nd Floor Tower B, Digital Greens,
Sector 61, Golf Course Road, Gurgaon 122102,
Haryana, India
61. 8516 Northwest Expressway, Oklahoma City,
OK 73162-601, US
62. 251 Little Falls Drive, Wilmington, DE 19808,
US 63.
79 W 4500 S, Suite 18, Salt Lake City
UT 84107-2647, US
64. 200 Connell Drive, Suite 1000, Berkeley
Heights, NJ 07922, US
65. C/o CSC, 112 North Curry Street, Carson City,
NV 89703, US
66. 725 Primera Blvd, Suite 230, Lake Mary,
FL 32746-2127, US
67. 5815 Oleander Drive, Unit 310, Wilmington,
NC 28403-4853, US
68. 16610 N. Black Canyon Highway, Suite 109,
Phoenix, AZ 85053-7551, US
69. 58 Norfolk Avenue, Unit 2, South Easton,
MA 02375-1907, US
70. 4625 Southwest Freeway, Suite 800, Houston,
TX 77027-7105, US
71. 3471 Via Lido, Suite 211, Newport Beach,
CA 92663, US
72. 3100 Dixie Hwy, Waterford Twp, MI 48328,
US 73.
5493 Merrick Road, Massapequa,
NY 11758, US
74. Floor 2, Room 21/22, Av Pres. Juscelino
Kubitschek 50, New Conception Village,
Sao Paulo, Brazil
*
Directly held investment by Convatec Group Plc
**
The Group discontinued operations (including
all sales and marketing activities) in Russia in
2022. We are in the process of managing our
exit from the Group’s dormant entity, and
from 1 March 2025, will have no remaining
employees in the country. We have no plans
to recommence operations.
209
Convatec Group Plc Annual Report and Accounts 2024
Governance
Financial statements
Additional information
Overview
Strategic report
Internet share dealing
Please note that, if you wish to
purchase shares in the Company,
you may do so through a bank or
stockbroker. Alternatively, please go
to www.computershare.com/dealing/uk
for a range of dealing services made
available by Computershare; this service
is only available to shareholders in the
UK. This service provides shareholders
with a convenient way to buy or sell the
Company’s ordinary shares on the
London Stock Exchange. The commission
is 1.4%, subject to a minimum charge
of £40. In addition, stamp duty, currently
0.5%, is payable on purchases. Real-time
dealing is available during market
hours. In addition, there is a convenient
facility to place your order outside
of market hours.
Up to 90-day limit orders are available for
sales. Before you can trade you will need
to register for the service. To access go
to www.computershare.com/dealing/uk.
Shareholders should have their SRN
available. The SRN appears on share
certificates as it will be required as part
of the registration process. A bank debit
card will be required for purchases.
Postal share dealing
Please note this service is, at present,
only available to shareholders resident
in the UK. The commission is 1.4% plus
a charge of £40. In addition, stamp duty,
currently 0.5%, is payable on purchases.
The service is available from 8.00am to
4.30pm Monday to Friday, excluding
bank holidays, on telephone number
+44 (0) 370 703 0084. Before you trade
you will need to register for this service.
This can be done by going online at
www.computershare.com/dealing/uk.
Shareholders should have their SRN
ready when making the call. The SRN
appears on share certificates. A bank
debit card will be required for purchases.
Detailed terms and conditions are
available on request by telephoning
+44 (0) 370 703 0084.
Please note that due to the regulations
in the UK, Computershare are required
to check that you have read and accepted
their Terms and Conditions before being
able to trade, which could delay your first
telephone trade. If you wish to trade
quickly, we suggest visiting their website
and registering online first.
Our corporate website:
www.convatecgroup.com
Information about our Stock Exchange
announcements, key dates in our
financial calendar, our share price
information and background information
is available on our corporate website at
www.convatecgroup.com/investors.
–
We will release our interim results
for the six months ended 30 June
2025 on 29 July 2025.
Shareholders may also receive
information by email by signing up
to the news alert service available at
www.convatecgroup.com/investors/
sign-up-for-more-information.
Share price information
Our closing share price as at
31 December 2024 was 221.2p.
Managing your shareholding
You can manage your shareholding
online by registering to use Investor
Centre, a free and secure website.
Investor Centre is available 24 hours
a day, 365 days a year. To find out
more about Investor Centre visit
www.investorcentre.co.uk. Registration
is a straightforward process and all
you will need is your shareholder
reference number (SRN) and
registered address details.
Shareholders who prefer not to manage
their shareholding online can contact
our Registrars, Computershare Investor
Services PLC, who manage our share
register. The shareholder helpline
number is +44 (0) 370 703 6219
and further information about
Computershare Investor
Services PLC is set out below.
Share fraud
We would like to warn all of our
shareholders to be very wary of any
unsolicited telephone calls or letters
which offer investment advice, offer
to buy your shares at a discounted price,
or sell them at an inflated price or offers
free company reports. This type of call
should be treated as an investment scam.
Further information about investment
scams and how they should be reported
is available at www.convatecgroup.com/
investors/shareholder-services/.
Company Secretary and registered
office
James Kerton
7th Floor, 20 Eastbourne Terrace
Paddington
London
W2 6LG
United Kingdom
Registrar
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS13 8AE
United Kingdom
Telephone: +44 (0) 370 703 6219
Contact: www.investorcentre.co.uk/
contactus
Auditor
Deloitte LLP
Brokers
UBS Limited
Solicitors
Freshfields Bruckhaus Deringer LLP
Shareholder information
210
Convatec Group Plc Annual Report and Accounts 2024
Additional information
Glossary
AAALAC
Assessment and
Accreditation of Laboratory
Animal Care.
Alternative
performance
measures
(APMs)
Certain financial measures
in this Annual Report and
Accounts not prepared in
accordance with IFRS and
used as a meaningful
supplement to reported
measures. Also referred
to as adjusting items.
Advanced
Wound Care
(AWC)
Advanced dressings for the
management of acute and
chronic wounds resulting
from ongoing conditions,
such as diabetes, and acute
conditions resulting from
traumatic injury and burns.
AGM
Annual General Meeting
of the Company.
AI
Artificial intelligence.
ARA
Annual Report and
Accounts.
ARC
Audit and Risk Committee.
Articles
The Articles of Association
of the Company for the time
being in force.
ATT
Advanced Tissue
Technologies.
Base erosion
and profit
shifting (BEPS)
initiative
OECD initiative which
seeks to close gaps in
international taxation for
companies that allegedly
avoid tax or reduce tax
burden in their home
country by engaging in
tax inversions.
Basic earnings
per share
Net profit available for
Convatec shareholders
divided by the weighted
average number of
ordinary shares in
issue during the year.
Basis points
(bps)
A unit of measurement that
represents one-hundredth
of one percent, or 0.01%.
BMS
Bristol Myers Squibb.
Board
The Board of Directors
of Convatec Group Plc.
Book tax rate
The tax charge in the
income statement as
a percentage of profit
before tax.
Compound
annual growth
rate (CAGR)
CAGR shows the rate of
growth over a certain
period of time, expressed in
annual percentage terms.
Capital
expenditure
(capex)
Purchases of property,
plant and equipment
and intangible assets.
Cash-
generating
units (CGUs)
The smallest identifiable
groups of assets that
generate cash inflows that
are largely independent of
the cash inflows from other
assets or groups of assets.
CE mark
Certification mark that
indicates conformity
with health, safety, and
environmental protection
standards for products
sold within the European
Economic Area.
CELT
Convatec Executive
Leadership Team.
CHW
Community Health Worker
Code
UK Corporate Governance
Code 2018 in effect from
1 January 2019, issued by
the FRC.
Code of conduct
Our code of conduct which
covers business conduct
and compliance issues,
including bribery and
corruption.
CODM
Chief Operating Decision
Maker.
CoE
Centre of Excellence.
COGS
Cost of Goods Sold.
Companies Act
Companies Act 2006,
as amended, of England
and Wales.
Company or
parent
company
Convatec Group Plc.
Constant
currency
growth
Constant currency growth
is calculated by applying
the applicable prior period
average exchange rates
to the Group’s actual
performance in the
respective period.
Continence
Care (CC)
Products and services
for people with urinary
continence issues related
to spinal cord injuries,
neurological disease,
prostate enlargement
and other causes.
COSO
The Committee of
Sponsoring Organizations,
a global organisation
providing a framework for
risk management, internal
control, governance and
fraud deterrence.
CPM
Complaints per million.
CR
Corporate responsibility.
CSRD
The EU Corporate
Sustainability Reporting
Directive.
DE&I
Diversity, equity and
inclusion.
Derivatives
Financial instruments used
to reduce risk, the price of
which is derived from an
underlying asset, index
or rate.
Diluted
earnings per
share
The calculation of diluted
earnings per share, includes
the dilutive impact of share
awards where the average
market price of the Group’s
ordinary shares exceeds the
exercise price.
Director
A member of the Board
of Directors of Convatec
Group Plc.
Disclosure
guidance and
transparency
rules (DTRs)
FCA disclosure guidance
and transparency rules
with which the Group
must comply.
EBITDA
Earnings before interest,
tax, depreciation and
amortisation.
EcoVadis
Third-party platform used
for supplier risk assessment
and ESG engagement.
Effective tax
rate (ETR)
The tax charge in the
income statement as
a percentage of profit
before tax.
EPS
Earnings per share.
Equity cash
conversion
Free cash flow to equity
divided by adjusted net
profit.
EHS
Environment, Health
and Safety.
eNPS
Employee Net Promoter
Score.
ERG
Employee Resource Group.
ESG
Environmental, Social and
Governance.
ESMA
European Securities and
Markets Authority.
ESOS
Energy Savings Opportunity
Scheme.
EU
European Union.
EURIBOR
Euro Interbank Offered
Rate.
FBU
Fair, Balanced and
Understandable. Statement
made by the Board that
considers the Annual Report
and Accounts, taken as a
whole, are fair, balanced
and understandable. The
Board is supported by the
Audit and Risk Committee.
FCA
Financial Conduct Authority.
FDA
US Food and Drug
Administration.
FISBE
Convatec’s corporate
strategy: Focus, Innovate,
Simplify, Build, Execute.
FRC
Financial Reporting Council.
FX
Foreign exchange.
G&A
General & Administrative.
211
Convatec Group Plc Annual Report and Accounts 2024
Governance
Financial statements
Additional information
Overview
Strategic report
GBS
Global Business Services
(located in Lisbon, Bogotá
and Kuala Lumpur).
GDGs
Green Design Guidelines.
GDP
Gross Domestic Product.
GDPR
General Data Protection
Regulation.
GEM
Global emerging markets.
GHG emissions
Greenhouse gas emissions.
Group
The Company and its
subsidiaries.
GPO
Group purchasing
organisations.
GQO
Global Quality &
Operations.
H&S
Health and safety.
HCP
Healthcare professional.
Home Services
Group (HSG)
The Group’s US home
services business unit
for distribution catheter
and ostomy products.
IASB
International Accounting
Standards Board – the
independent standard
setting body of the IFRS
Foundation.
IBOR
Interbank Offered Rate.
IDA
Industrial Denatured
Alcohol.
IEA
International Energy
Agency, an autonomous
intergovernmental
organisation providing
policy recommendations
and analysis and data on
the global energy sector.
IFRS
International Financial
Reporting Standards as
issued by the IASB.
IFRIC
International Financial
Reporting Interpretations
as issued by the IASB.
Infusion Care
(IC)
Disposable infusion sets
used with insulin pumps for
diabetes or with continuous
infusion treatments for
conditions such as
Parkinson’s diesease.
IP
Intellectual property.
IR
Investor Relations.
KPI – Key
Performance
Indicator
Financial and non-financial
measures that the Group
uses to assess performance
and strategic progress.
LCDs
Local Coverage
Determinations (eligibility
for local Medicare coverage
in the US).
Leverage
Net debt (excluding leases)
divided by adjusted EBITDA.
LTIP
Long-term incentive plan.
LTIR
Lost time injury rate.
M&A
Mergers and acquisitions.
MAR
Market abuse regulation.
MDR
Medical Device Regulations
introduced in the EU with
required transition by
May 2021. MDR imposes
rigorous requirements
in relation to a number
of areas including clinical
data and post
market surveillance.
MedTech
Medical technology.
Net debt
Borrowings less cash
and cash equivalents and
excluding lease liabilities.
NGO
Non-governmental
organisation.
NHS
UK National Health Service.
OEC
Office of Ethics and
Compliance.
OECD
Organisation for Economic
Cooperation and
Development.
Operating cash
conversion
Operating cash flow
divided by adjusted
operating profit.
Opex
Operating expenses,
being the total of selling
and distribution expenses,
general administrative
expenses and research
and development, and
other operating expenses.
Organic growth
Period-over-period growth
at constant currency,
adjusted for: Livramedom
(September 2024), Starlight
Science Limited (April 2023),
A Better Choice Medical
Supply (July 2023) and
All American Medical
Supply (October 2023)
acquisitions; and the
discontinuation of hospital
care, related industrial
sales and associated
Russia operations.
Organisational
Health Index
(OHI)
McKinsey index tracking
organisational health that
drives performance.
Ostomy Care
(OC)
Devices, accessories and
services for people with
a stoma (a surgically created
opening where bodily waste
is discharged), commonly
resulting from causes
such as colorectal cancer,
bladder cancer,
inflammatory bowel
disease and trauma.
PBT
Profit before income taxes.
Peakon
Workday employee voice
platform.
PIH
Partners in Health, an
international public health
organisation providing
healthcare in the poorest
areas of developing
countries.
PP&E
Property, plant and
equipment.
Product
categories
The Group has four product
groups, being Advanced
Wound Care, Ostomy Care,
Continence Care and
Infusion Care.
R&D
Research and Development.
RCT
Randomised controlled trial.
ROIC
Return on invested capital.
SBTi
Science Based Target
initiative.
SBTs
Science Based Targets.
Sedex
Third-party platform used
for supplier risk assessment
and ESG engagement.
SID
Senior Independent
Director.
SKU
Stock keeping unit.
SLR
SLR Consulting
Limited, our specialist
sustainability advisers.
SOFR
Secured Overnight
Financing Rate.
SONIA
Sterling Overnight Index
Rate.
Sterling, £,
pence or p
The currency of the United
Kingdom.
Subsidiary
A company over which the
Group exercises control.
T&I
Technology & Innovation.
TCFD
Task Force on Climate-
related Financial
Disclosures.
Transformation
Initiative
Initiatives and associated
investment focused on
transforming the business
to deliver sustainable and
profitable growth.
TSL
Total Safety Leadership.
TSR
Total shareholder return.
UKLA
The UK’s Listing Authority.
US dollar, $,
cent or ¢
The currency of the United
States of America.
UTI
Urinary tract infection.
YoY
Year-on-year.
Viability period
The three-year period
from January 2025 to
December 2027 (based
on the Annual Report).
WACC
Weighted average cost
of capital.
Glossary
continued
212
Convatec Group Plc Annual Report and Accounts 2024
Additional information
Important information for readers of this Annual Report
Forward-looking statements are not
guarantees of future performance and
such uncertainties and contingencies,
including the factors set out in the
Principal Risks section of the Strategic
report which begins on page 76, could
cause the actual results of operations,
financial condition and liquidity, and the
development of the industry in which the
Group operates, to differ materially from
the position expressed or implied in the
forward-looking statements set out in
this Annual Report. Past performance of
the Group cannot be relied on as a guide
to future performance. Nothing in this
Annual Report should be construed
as a profit forecast.
Forward-looking statements are based
only on knowledge and information
available to the Group at the date of
preparation of this document and speak
only as at the date of this Annual Report.
The Group and its Directors, officers,
employees, agents, affiliates and
advisers expressly disclaim any
obligations to update any forward-
looking statements (except to the extent
required by applicable law or regulation).
Third-party data
The industry and market data contained
in this Annual Report has come from
third-party sources and from the Group’s
own internal research and estimates
based on the knowledge and experience
of the Group’s management in the
market in which the Group operates.
Whilst the Group believes that such
sources, research and estimates are
reasonable and reliable, they have not
been independently verified and are
subject to change without notice.
Accordingly, undue reliance should
not be placed on any of the industry
or market data in this Annual Report.
Cautionary statement regarding
forward-looking statements
The purpose of this Annual Report is to
provide information to the members of
the Company. The Group and its Directors,
employees, agents and advisers do not
accept or assume responsibility to any
other person to whom this Annual Report
is shown or into whose hands it may come
and any such responsibility or liability is
expressly disclaimed. In order, among
other things, to utilise the ‘safe harbour’
provisions of the US Private Securities
Litigation Reform Act 1995 and the UK
Companies Act 2006, we are providing
the following cautionary statement: This
Annual Report contains certain forward-
looking statements with respect to the
operations, performance and financial
condition of the Group, including among
other things, statements about expected
revenues, margins, earnings per share
or other financial or other measures.
Forward-looking statements are generally
identified by the use of terms such as
‘believes’, ‘estimates’, ‘aims’, ‘anticipates’,
‘expects’, ‘intends’, ‘plans’, ‘predicts’, ‘may’,
‘will’, ‘could’, ‘targets’, ‘continues’ or, in
each case, their negatives or other similar
expressions. These forward-looking
statements include all matters that
are not historical facts.
Forward-looking statements are
necessarily based upon a number of
estimates and assumptions that, while
considered reasonable by the Company,
are inherently subject to significant
business, economic and competitive
risks, uncertainties and contingencies
that are difficult to predict and many
of which are outside the Group’s control.
As such, no assurance can be given that
such future results, including guidance
provided by the Group, will be achieved.
Convatec website
Information on or accessible through
our website www.convatecgroup.com
and other websites mentioned in this
Annual Report, does not form part of
and is not incorporated into this
Annual Report.
Figures
Figures in parentheses in tables and
in the Financial Statements are used
to represent negative numbers.
Credits
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Convatec Group Plc
7th Floor, 20 Eastbourne Terrace
Paddington
London
W2 6LG
United Kingdom
www.convatecgroup.com
Company No: 10361298
www.convatecgroup.com