Convatec Group PLC

Convatec Group Plc

Annual Report and Accounts 2023

Pioneering

trusted medical solutions

to improve the lives we touch

Overview

Our 2023 highlights

About us

Strategic report

How we realise our vision

Our business model

Chair’s statement

Investment case

Chief Executive Officer’s review

Key performance indicators

Operational review

Financial review

Non-IFRS financial information

Responsible business review

The Task Force on Climate-related

Financial Disclosures

Risk management

Principal risks

Non-financial and sustainability

information statement

Viability statement

Governance

Governance at a glance

Board statements

Chair’s governance letter

How we have applied the Code’s

core principles

Board of Directors

Convatec Executive

Leadership Team

100

How we are governed

102

Board activity and actions

106 Board evaluation

107

Nomination Committee report

110

Audit and Risk Committee report

120

Directors’ Remuneration report

143

Directors’ report

146

Directors’ responsibilities statement

Financial statements

148

Consolidated financial statements

197

Company financial statements

206

Independent auditor’s report

Additional information

214

Transition Plan Taskforce

supplementary information

215

Shareholder information

216

Glossary

218

Important information for readers

of this Annual Report

Welcome

Pioneering

trusted medical solutions

to improve the lives we touch

Convatec is a global medical products and technologies company, focused

on solutions for the management of chronic conditions, with leading positions

in advanced wound care, ostomy care, continence care and infusion care.

With around 10,000 colleagues, we provide our products and services in

almost 100 countries, united by a promise to be forever caring. Our solutions

provide a range of benefits, from infection prevention and protection of at-risk

skin, to improved patient outcomes and reduced care costs.

We are forever caring

We are Convatec

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results-and-presentations

OUR 2023 HIGHLIGHTS

FINANCIAL

STRATEGIC

Group revenue

$2,142m

(2022: $2,073m)

FOCUS

–

7.2% organic

revenue growth

–

>90% revenue from

chronic care

Adjusted

operating

profit

$432m

(2022: $404m)

INNOVATE

–

Acquired novel nitric

oxide technology

platform

–

Launched ConvaFoam™,

GentleCath Air™

for Women, various

infusion sets

Diluted earnings

per share

6.3¢

(2022: 3.1¢)

SIMPLIFY

–

c.6% reduction

in general and

administrative spend

–

Closed plant in the

Netherlands to optimise

the network

Operating profit

$263m

(2022: $207m)

BUILD

–

Pricing Centre of

Excellence (CoE)

delivered +100 bps

benefit to gross margin

–

Continued to embed

Pricing, Sales and

Marketing CoEs

Adjusted

operating

profit margin

20.2%

(2022: 19.5%)

EXECUTE

–

c.12% reduction in

complaints per million

–

Winning share in Global

Emerging Markets

Adjusted

diluted

earnings per share

13.4¢

(2022: 12.6¢)

Read more about our

vision, promise, strategy

and values on page 5

Our vision

Our ESG

framework

Our values

Our strategy

Our promise

Identify unmet customer

needs or pain points

Process and solution

development

Clinical development

Regulatory submission

Manufacture with

quality and at scale

Commercialise globally

Customer support across

the continuum of care

Measure loyalty and learn

Generate profit

Reinvest and distribute

Usability and human

factor design

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

THE VALUE WE CREATE

1. Identify unmet customer

needs or pain points

Consistently and

systematically map

customer journeys, to

better understand the

needs of patients and

healthcare professionals

2. Usability and human

factor design

Design products and

services to improve the

customer experience or

to meet an unmet need

3. Process and solution

development

Leverage common R&D

technologies and design

for manufacturing expertise

to deliver optimum solutions

at scale and with attractive

cost profiles

4. Clinical development

Focus on medical strategy

and clinical development

to generate evidence of

improved patient outcomes,

health economic efficiency

and better patient access

5. Regulatory submission

Understand the regulatory

backdrop and work with

regulatory bodies to enable

access for patients

6. Manufacture with quality

and at scale

Leverage common

technologies and capabilities

to manufacture high-volume,

high-quality consumables at

the right price

7. Commercialise globally

Leverage global commercial

infrastructure to enhance

access for patients and

customers. Where feasible,

adopt a global approach

to brand launches

8. Customer support across

the continuum of care

Offer high-quality services

and tools which support

the patient across their

continuum of care

9. Measure loyalty and learn

Focus on measuring

Net Promoter Score and

reviewing complaints to

ensure we are delivering for

patients – taking any feedback

into account as we consider

future innovations

10. Generate profit

Constantly explore ways

to improve productivity and

efficiency of how we operate

to deliver sustainable and

profitable growth

11. Reinvest and distribute

Utilise strong free cash flow

to reinvest in the business

(either organically or

inorganically) or return

capital to shareholders

Patients

Solutions to improve

the lives we touch

~875m

finished products

manufactured

Healthcare professionals

(HCPs)

Providing value-added

solutions, support

and advice

~240k

HCPs engaged in

medical education

Health plan contracts

Enabling healthcare

systems to reduce costs

and increase efficiency

>1,750

health plan contracts

Employees

Providing employment

and development

opportunities

~10,000

employees

Shareholders

Generating returns

for investors

$110.7m

cash dividends paid to

shareholders

Society

Making a positive

contribution through

community engagement

and paying tax

$35.9m

corporate tax paid

Overview

Governance

Financial statements

Additional information

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Chair’s statement

Dear Shareholder

Despite continuing global macroeconomic

challenges in 2023, Convatec has once

again delivered strong financial results

and has also continued to strengthen its

competitive position with a rich stream

of innovation and successful product

launches. The continued execution of

our FISBE 2.0 strategy has been key to

Convatec’s progress and our ability to

consistently deliver sustainable and

profitable growth.

Execution of our strategy

During 2023, we have continued to

strengthen our competitive position

and our innovation and technology

agenda has continued to gather

momentum. We made several

acquisitions, including the acquisition

of 30 Technology Limited’s anti-infective

nitric oxide technology platform, which

will strengthen our ability to provide best-

in-class solutions for patients. In addition

to applications in advanced wound care,

we will explore application of this highly

innovative technology platform across

our businesses. We also launched six

new products including ConvaFoam™

in the US and GentleCath Air™ for

Women in France.

We have continued to drive operational

and commercial improvements as part

of our simplification and productivity

agenda. During the year, we migrated

manufacturing operations from our

EuroTec facility in the Netherlands

to Slovakia and opened a new Global

Business Services centre in Kuala

Lumpur to provide around-the-clock

support to the Group. Our various

Centres of Excellence continue to have a

positive impact on the business, helping

to achieve better pricing and salesforce

productivity, particularly following

the roll-out of a new single Customer

Relationship Management platform

in our top 12 markets.

We have also continued to develop the

resilience of our operations with strategic

infrastructure investments in automation

and capacity across our manufacturing

network, ensuring that we are ready

to respond to opportunities for growth.

2023 trading and dividend

Our reported revenue for the Group

was $2,142 million, up 3.4% against

2022 (3.2% higher on a constant

currency basis). Operating profit was

$263 million on a reported basis (2022:

$207 million) and $432 million on an

adjusted basis (2022: $404 million).

Despite the ongoing inflationary

headwinds during the year, we improved

our adjusted operating profit margin

to 20.2% (2022: 19.5%). Net debt

rose slightly as a result of strategic

investments in M&A and R&D to drive

growth but leverage

1 at 3

1 December

2023 remained steady at 2.1x, in line

with our guidance and prior year.

Given these results, Convatec’s underlying

financial strength and the Board’s

continuing confidence in the Group’s future

growth prospects and cash generation,

the Board is pleased to recommend a final

dividend of 4.460 cents per share to be

paid on 23 May 2024 to shareholders on

the register at the close of business on 26

April 2024. The final dividend will be subject

Annual General Meeting on 16 May 2024

and, if approved, will bring the full year

dividend to 6.229 cents per share (2022:

6.047 cents). The payout ratio of 46% of

adjusted EPS remains modestly ahead of

the target range of 35-45%, this progressive

dividend recommendation is consistent

with the approach over the last 3 years.

Taking into consideration the recent trends

in take up and the cost of operating, the

Board has taken the decision to terminate

the scrip dividend option.

Board changes

In September 2023, Convatec agreed

with Novo Holdings A/S to end the

relationship agreement entered into

when Novo Holdings acquired their

stake in the Company. As a result, Sten

Scheibye stepped down from the Board

after five years of valuable service.

During the year, we have made

further progress on Board and senior

management diversity, exceeding both

the gender targets set by the FTSE

Women Leaders Review and the ethnic

and cultural targets set by the Parker

Review, including the diversity targets

in the Listing Rules. While we continue

to remain focused on recruiting on

merit and ensuring that we appoint

the best candidate for the role, it is

the Board’s intention to maintain both

gender and ethnic diversity levels on the

Board at least in line with these targets.

We remain equally committed to drive

overall diversity, equity and inclusion

in Convatec’s senior management and

throughout the Company. Further

information on this, including our targets

for gender and ethnic diversity within

senior management, can be found

in the Responsible business review.

Following careful review, the Board

continues to consider that it has an

appropriate mix of skills, knowledge,

experience and diversity on the Board

to fulfil its vision and support the

delivery of the Company’s strategy.

Culture, values and behaviours

Our values guide our colleagues’

everyday behaviours. As a Board we are

determined to reinforce a culture that is

shaped by these values; this is essential

as we strive to deliver our vision of

pioneering trusted medical solutions to

improve the lives we touch. Throughout

this Annual Report, we set out the

progress we have made over the last year

in reinforcing a responsible, engaging,

inclusive and high-performing culture –

one which delivers against our forever

caring promise.

1. Net debt (excluding lease liabilities)/adjusted EBITDA.

We are united

by a promise

to be forever

caring

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Convatec Cares

Convatec Cares, our approach to

Environmental, Social and Governance

(ESG), sets out the commitments and

activities that enable us to fulfil our

forever caring promise and integrate ESG

practices throughout the organisation.

Convatec Cares is integrated within

our FISBE strategy and supports our

ability to consistently 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

–

Behaving ethically and transparently

–

Protecting the planet and

supporting communities

There is detailed commentary against

each of these pillars in the Responsible

business review (pages 38 to 65), as well

as further insight into the ESG framework,

governance, metrics and targets and our

refreshed ESG materiality analysis, 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 89 to 146

provides further detail on Convatec’s

wider governance framework as well as

further detail on the Board’s stakeholder

engagement activities.

Looking ahead

The considerable progress that Convatec

has made since 2019 would not have been

possible without the hard work, drive and

unwavering commitment of our employees

and leadership team, for which I would like

to thank them on behalf of the Board.

I would also like to thank our shareholders

for their support, many of whom met with

me or other members of the Board over

the last year.

Finally, the Board remains focused on

execution of the Group’s FISBE 2.0 strategy,

maintaining a sharp focus on driving the

simplification and productivity agenda.

This includes oversight of the innovation

pipeline and the global product launch

programme. While the macroeconomic

environment remains uncertain, with

challenges to shipping lanes in the Middle

East and the ongoing conflicts in the Middle

East and Ukraine, I believe the Group is

well placed to continue to strengthen

its competitive position and successfully

deliver sustainable and profitable growth

into the medium term.

Dr John McAdam CBE

Chair

5 March 2024

Chronic care

is a large and

growing market

We have leading

positions

The business is

now growing

sustainably in

5-7% range

We expect to

expand our

operating profit

margin over time

The business

generates strong

cash flow

This supports

future revenue

growth and

serves

stakeholders

OUR INVESTMENT CASE

overleaf

Jonny Mason

Chief Financial Officer

Karim Bitar

Chief Executive Officer

Heather Mason

Independent Non-Executive Director

Professor Constantin Coussios OBE

Independent Non-Executive Director

Sharon O’Keefe

Independent Non-Executive Director

Margaret Ewing

Senior Independent Non-Executive Director

Dr. John McAdam CBE

Chairman

Kim Lody

Independent Non-Executive Director

Brian May

Independent Non-Executive Director

INTRODUCING CONVATEC‘S BOARD OF DIRECTORS

Read more about Board member skills and experience on pages 96 and 97.

Convatec Group Plc Annual Report and Accounts 2023

Governance

Financial statements

Additional information

Overview

Strategic report

Investment case

Reasons

to invest

We believe that Convatec represents an attractive

defensive-growth opportunity for investors

By pioneering trusted medical solutions to meet the

needs of patients suffering from chronic conditions

we generate attractive returns and strong free cash

flow which can be reinvested to benefit more patients,

our wider stakeholders and society as a whole

We are focused on the

chronic care market:

>90%

of our revenues are from serving chronic

care patients. These revenues are often

recurring in nature as patients rely on

our solutions

The chronic care market

is large:

$14bn

global market size

It is fast growing:

4-8% p.a.

2. Chronic conditions are rising

Approximately one in three adults

globally suffer from chronic conditions

(e.g. diabetes, cancer).

There are three global trends driving

structural growth and increasing

demand for our solutions.

1. An ageing global population

Global population aged 65+

3. People are now living longer

Average life expectancy

in the world (years)

Chronic care

is a large and

growing market

Revenue is now

growing

sustainably in the

5-7% range

Organic revenue growth

Adjusted operating profit growth

We have leading

positions

Infusion Care

#1 globally

Ostomy Care

#3 globally

Continence Care

#1 in the US

Advanced Wound Care

#3 globally

Source: United Nations, World

Population Prospects.

Source: The global burden of multiple chronic

conditions, Cother Hajat and Emma Stein.

Source: United Nations Population

Divisions estimates.

1. Market size and growth based on

aggregate of category estimates,

internal analysis and publicly

available sources, including

SmartTRAK and Global Industry

Analysts Inc. reports. See pages

18 to 25 for detail.

Refer to operational reviews on

pages 18 to 25 for further detail.

2. APMs see pages 34 to 37.

2019

-14.3

2020

0.9

2021

5.4

2023

2022

7.0

11.6

2023

2022

7.2

5.6

5.3

2020

4.2

2019

2.3

2021

2022

1950

2060

2020

1.6bn

0.8bn

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

This results in attractive financial outcomes

Target leverage

~2x over time

This supports future

growth and serves

stakeholders

We expect to

expand our operating

proﬁt margin over

time by:

The business

generates strong

cash ﬂow

i. Simplification and

productivity

–

Reduce adjusted G&A spend

to 7% of sales

–

Improve commercial productivity

–

Increase automation

ii. Improving mix

–

Acquiring higher-growth,

higher-margin businesses

–

Natural benefit given our

faster-growth categories

are higher margin

–

Improving the margin within

our categories

iii. Increasing operating

leverage as revenue grows

Adjusted EBITDA

$527m

Free Cash Flow to Equity

1,2

$228m

1. APMs see pages 34 to 37.

2. Free cash flow to equity is a new non-IFRS financial measure introduced in the year. Refer to the Non-IFRS financial information section for how this is calculated.

The Directors consider that this new measure provides improved definition, clarity and insight.

3. Net debt (excluding lease liabilities) / adjusted EBITDA

4. Adjusted.

Sustainable

top-line

growth

5-7%

organic revenue

growth p.a.

Expanding

operating

profit

margin

1,4

Mid-20%

operating

profit margin

by 2026 or 2027

Potential

M&A to

enhance

growth

Strengthen

positions in

technology,

geography and

capability

Sustainable

and profitable

growth

Double digit

EPS

and Free

Cash Flow to

Equity

1,4

CAGR

MEDIUM-TERM

OUTCOME

MEDIUM-TERM

TARGETS

OPPORTUNITY

Any surplus capital

returned to shareholders

Bolt-on M&A

Progressive dividend targeting

payout ratio of 35-45% of net profit

Invest organically in opex and capex

Overview

Governance

Financial statements

Additional information

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Convatec continued to successfully

execute its FISBE 2.0 strategy,

strengthening its competitive position

and delivering on our forever caring

promise for patients and customers.

The various strategic initiatives actioned

during the period enhanced the quality

of the business and improved our

financial performance and prospects.

Attractive growth prospects

Convatec operates in four categories

of the structurally-growing, attractive

chronic care markets. These have a

combined market size

of $14 billion

p.a. and market growth rates

between 4-8% p.a. We are among the

leaders in the categories in which we

operate and expect to grow revenue

in line with or faster than each market.

We serve a diverse set of chronic care

markets, producing high-volume,

high-quality consumables which our

customers rely on, resulting in attractive

recurring revenue. This diversity provides

resilience and synergies, notably in areas

such as biomaterial sciences, product

and clinical development, automated

manufacturing and shared supply chain

capabilities. Consistent with our FISBE 2.0

strategy we have been investing in our

innovation pipeline, building mission-

critical capabilities, expanding capacity

and increasing our resilience.

A chronic care focused business

delivering sustainable and

profitable growth

We continued to execute our FISBE

strategy, strengthening our competitive

position and our ability to consistently

deliver sustainable and profitable

growth. After a period of catch-up

investment, equity cash conversion

has now normalised and this strong

cash generation will support continued

organic and inorganic investment for

growth, consistent with our capital

allocation priorities.

Over the course of 2023, we remained

focused on delivering for our customers.

Our continued focus on innovation

resulted in six new products launching

and the R&D function was strengthened

by an increased emphasis on clinical

and regulatory. We enhanced both

our innovation pipeline and service

proposition using cash generated

to acquire three businesses.

We further simplified our organisation,

closed a small factory in the Netherlands

and opened a new Global Business

Services centre in Kuala Lumpur, which

in combination with Lisbon and Bogota,

will provide 24/7 support. Our Centres

of Excellence continued to positively

impact the business, with better pricing

and greater salesforce productivity as

the Customer Relationship Management

platform roll-out was completed for our

top 12 markets.

Further details on the progress made

under each pillar can be found on

pages 13 to 15.

Chief Executive Officer’s review

Strong strategic

progress and

positive outlook

Convatec’s revenue

growth accelerated

and was broad-

based across all

our categories. We

further expanded our

operating margin and

increased earnings per

share and free cash

flow to equity.

Given our innovative

new product pipeline

and strengthened

competitive position,

Convatec has pivoted

to a higher level of

organic sales growth

and we remain on

track to deliver our

medium-term

margin guidance.

Karim Bitar

Chief Executive Officer

Footnotes within the CEO review are defined as follows

Market size and growth based on aggregate of category estimates, internal analysis and publicly available sources, including SmartTRAK and Global Industry Analysts

Inc. reports. See pages 18 to 25 for detail.

2. Equity cash conversion is a new non-IFRS financial measure introduced in the year and is calculated as Free cash to equity/Adjusted net profit. The Directors consider

that this new measure provides improved definition, clarity and insight.

3. APM see pages 34 to 37.

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

We achieved a strong

financial performance

Group reported revenue of $2,142

million rose 3.4% (2022: $2,073 million),

and 3.2% on a constant currency basis,

lower than organic growth because of

the strategic exit of the non-core hospital

care activities and related industrial sales

in 2022. Organic revenue growth was

7.2%, in line with our latest guidance.

Adjusted operating profit rose 7.0%

(10.2% on a constant currency basis).

Adjusted operating profit margin was

20.2% (2022: 19.5%) with mix/price,

operational productivity and G&A spend

reduction more than offsetting significant

inflation, continued investment in R&D

and commercial capabilities, as well as a

60 bps foreign exchange headwind. Over

a two-year period Convatec has delivered

250bps of improvement in its adjusted

operating profit margin.

In 2022, the Group incurred costs relating

to the exit of the hospital care business.

As a result, and also benefitting from

a higher gross margin, the reported

operating profit increased 26.7% over

the previous year.

Adjusted diluted EPS increased by

6.1% primarily due to improvements in

adjusted operating profit and a reduction

in non-operating expenses more than

offsetting an increase in finance costs

from higher market interest rates.

Reported diluted EPS increased by 105.9%

as the prior year was impacted by higher

adjusting items mostly relating to the exit

of hospital care and the Triad Life Sciences.

Capital expenditure during 2023 was

$129 million (2022: $144 million) as we

continued to invest for future growth,

expanding our manufacturing lines and

developing new digital technologies to

deliver enhanced customer experiences.

Free cash flow to equity increased

to $228 million (2022: $105 million).

Equity cash conversion (free cash flow

to equity as a proportion of adjusted net

profit) was 83% (2022: 41.0%) primarily

driven by a significantly lower working

capital outflow, the increase in EBITDA

and lower capital expenditure.

Net debt increased by $61m to

$1,129m, following three acquisitions

and the payment of the first year

earnout for Triad Life Sciences

acquisition, together totaling $179m.

Our net debt to EBITDA ratio remained

unchanged at 2.1x. We continue to

target leverage of 2x over time but are

comfortable temporarily going higher

for appropriate M&A opportunities.

Executing on our FISBE strategy

The execution of our FISBE (Focus,

Innovate, Simplify, Build, Execute)

strategy is progressing well.

Focus

We continued to

focus on our top

12 markets

, achieving organic revenue

growth of 8.4%, compared with 7.2%

globally. The US was our largest market

and grew strongly, supported by the

contribution from InnovaMatrix

. China,

whilst still a small part of the overall

group, remained a key strategic market

where we continued to strengthen our

position, growing double-digit and

winning market share in both Ostomy

Care and Advanced Wound Care.

Having

laid the foundations for

customer net promoter score

(NPS)

insight gathering, through a series of

pilots in 2023, during 2024 we will focus

on embedding actionable NPS insight

more broadly across the business.

Innovate

We continued to invest to strengthen

our Technology & Innovation capabilities

and advance our pipeline; we

increased

adjusted R&D expenditure

by 12.9%

to $104 million (2022: $92 million),

equivalent to 4.8% of sales.

We started

launching ConvaFoam™ in the

, which is strengthening our competitive

position in the very large and growing

foam segment. Feedback from evaluations

has been encouraging, with healthcare

professionals particularly positive about

its exudate and adhesion properties.

In April, we

acquired a highly innovative

anti-infective nitric oxide technology

platform with a unique natural

antimicrobial mode of action, backed by

compelling scientific and clinical data. We

will be looking to secure the first regulatory

approvals for the first wound care product

in 2025.

We began launching our new compact

catheter,

GentleCath Air™ for Women

with FeelClean™ Technology in France in

Q4. This technology is designed for urethral

protection and to reduce the risk of UTIs.

In Infusion Care we

continued to

collaborate with a number of partners

within and outside diabetes

and

launched a number of products during

the period:

–

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, cleared by the FDA in July

–

Infusion set for AbbVie Parkinson’s

therapy launch in Japan

Focus

on strengthening

customer loyalty in key

markets and categories

Innovate

to increase vitality

and velocity of trusted

medical solutions

Simplify

to improve productivity

across our organisation

Build

and embed

mission-critical

capabilities and

winning culture

Execute

with excellence

while integrating

environmental, social

and governance (ESG)

OUR FISBE STRATEGY

4. Net debt excludes lease liabilities

5. Net debt / adjusted EBITDA

Convatec Group Plc Annual Report and Accounts 2023

Governance

Financial statements

Additional information

Overview

Strategic report

Looking into 2024 we expect continued

momentum with product launches.

In Q1 we have begun to launch our

new one-piece convex pouching system,

Esteem Body™ with Leak Defense™ in

Europe and the US. It is very early days

but we are encouraged by the reaction

from healthcare professionals so far.

We will also be leveraging our recent

product launches by rolling them out

in key geographies:

– InnovaMatrix

in certain GEM markets

and, in the US, with new iterations

–

Begin the roll-out of ConvaFoam™

in Europe

–

GentleCath Air™ for Women in

Europe and the US

–

supporting AbbVie’s Parkinson’s

drug launch in Europe and, later

in the year, in the US

For 2025 and beyond we are also

developing a richer pipeline with exciting

new innovations, including:

–

AWC: an enhanced hydrofibre,

Nitric oxide wound dressing and

ConvaVac™ (a single use negative

pressure treatment)

–

OC: Natura Body™

–

CC: GentleCath Air™ for Men v2.0

–

IC: Further customer pump technology

innovations including a potential new

Parkinson’s therapy

Simplify

We continued to make progress simplifying

the organisation.

Adjusted G&A reduced to 8.1% of sales

(2022: 8.9%), declining 6.4% to $173 million

(2022: $185 million) as we continued to

transition activities to our Global Business

Services centres; allowing us to improve,

standardise and automate processes, build

internal expertise and consolidate our

corporate office facilities footprint.

We opened a new GBS facility in Kuala

Lumpur to provide 24/7 business service

support to the Group in conjunction with

Lisbon and Bogota, started the migration

of HR services and created a new IT Centre

of Excellence.

As part of our

Plant Network

Optimisation initiative

, we closed

a small factory in Roosendaal, the

Netherlands, and migrated machines

to our larger and more efficient site

in Michalovce, Slovakia, which already

manufactures similar Ostomy products.

In 2024, we intend to continue to

embed our Global Business Services

network, driving further efficiencies

in finance, IT and HR. Our Global

Quality and Operations function will

continue to introduce smart factory tools

and automation to the manufacturing

footprint to drive enhanced productivity.

Build

Our Pricing Centre of Excellence (CoE),

in collaboration with our business units,

supported the

delivery of 100 bps of

pricing improvement

on gross margin.

During the year we further

developed

our clinical and regulatory

functions

with a step up in clinical

evidence generation and in scientific

publications, and another year

with more than 80 patent filings.

In 2024, we will continue to embed

our CoEs within the business and

drive commercial excellence. For

example our Marketing CoE will

drive our NPS customer loyalty

measurement programme.

Execution

Our

Salesforce CoE has continued to

roll out

the single CRM platform to all

of our Top 12 markets. This is driving

enhanced salesforce productivity by

increasing call rates and improving

targeting to priority (A,B,X) accounts.

Through improved commercial execution

we are

winning share in the Global

Emerging Markets

in both AWC and

OC. Our sales in GEM continued to

grow double digit, with revenue in

China growing 30% notwithstanding

the broader industry slow-down since

the summer.

We have continued to focus on

execution

excellence within our Global Quality

and Operations function

, expanding

capacity in IC, increasing automation

on certain AWC product lines and

further reducing complaints per

million by c.12% during 2023.

Chief Executive Officer’s review

continued

OUR CEO AND BOARD MEMBERS ENGAGE WITH TEAMS

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

We also made further

progress

embedding our Convatec Cares

responsible business strategy

which underpins our commitment

to embedding environmental, social

and governance (ESG) practices.

In line with our goal to achieve net

zero by 2045, we reduced Scope 1 and

Scope 2 greenhouse gas emissions by

35% in 2023. We are pleased that our

manufacturing sites now use 100%

renewable electricity. In addition,

our Scope 1, 2 and 3 (near term)

targets were validated by Science-

Based Targets Initiative (SBTi). We

also received a ‘B’ from the Carbon

Disclosure Project (CDP) in their 2023

ratings, recognising our progress.

Consistent with our commitment to

diversity, equity and inclusion (DE&I)

and wellbeing, we finished 2023 with

44% of the senior management team

being women, exceeding our 40% target.

2024 guidance and upgraded

medium term outlook

In 2024, we expect organic revenue

growth of 5-7%. We are also raising our

medium-term organic revenue growth

to 5-7% p.a. (previously 4-6% p.a.),

given growing confidence in both the

new product pipeline and improved

commercial execution. This reflects our

expectations of high single-digit growth

in AWC and IC and mid single-digit

growth in OC and CC.

We remain focused on expanding our

operating margin by growing revenue,

improving our mix/price and delivering

on our simplification and productivity

agenda. In 2024 we expect further

improvement in the adjusted operating

margin to at least 21%, on a constant

currency, based on the current geo-

political backdrop and an inflation

expectation of 3-5%.

We expect adjusted net finance expense

for 2024 to be $75-85 million. The

adjusted book tax rate is expected to

be approximately 24% with the cash tax

rate at approximately 18%. We expect

capex of $120-140 million reflecting the

continued investments we are making

across the Group.

In the medium term, we are on track to

deliver a mid-20s% adjusted operating

margin in 2026 or 2027. This requires on

average 100bps or more of expansion

per annum, compared to the delivery of

125bps expansion per year over the last

2 years in a high inflation environment.

We have now pivoted to sustainable

revenue growth, have started to deliver

margin expansion and expect to achieve

double digit compound growth in EPS

and free cash flow to equity over the

medium term.

Karim Bitar

Chief Executive Officer

5 March 2024

Bruno Pinheiro

President & Chief Operating Officer,

Ostomy Care

Evelyn Douglas

EVP, Chief of Corporate Strategy

& Business Development and General Counsel

Kjersti Grimsrud

President & Chief Operating Officer,

Infusion Care

David Shepherd

President & Chief Operating Officer, Advanced

Wound Care

Seth Segel

President & Chief Operating Officer,

Continence Care & Home Services Group

John Haller

EVP, Chief Quality & Operations Officer

Karim Bitar

Chief Executive Officer

Anne Belcher

President & Chief Operating Officer,

Global Emerging Markets

Jonny Mason

Chief Financial Officer

Divakar Ramakrishnan

EVP, Chief Technology Officer

and Head of Research & Development

Moyra Withycombe

Interim Chief People Officer

Read more about CELT members’ skills and experience on pages 98 and 99.

INTRODUCING CONVATEC‘S EXECUTIVE LEADERSHIP TEAM

6. Convatec Executive Leadership Team and their direct reports, excluding administrative support.

Overview

Governance

Financial statements

Additional information

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

We are continuously

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

Period-over-period growth of

Free Cash Flow to Equity. (The

definitions of adjusted measures

are as calculated within the

reconciliation tables on page 37.)

Relevance

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). This cash is

then available to reinvest in the

business (i.e. through M&A),

distribute to shareholders or

be used to pay down debt. It is

a key metric by which investors

judge our strategic progress.

We have indicated that we

expect to grow our Free cash

flow to equity by a double digit

compounded annual growth

rate over the medium term.

Remuneration linkage

Previously adjusted free cash

flow post tax related to 10% of

annual bonus. Going forward

free cash flow to equity will be

the bonus metric.

2023 performance

Free cash flow to equity

increased significantly year

on year. The principal driver

was a significant improvement

in working capital. EBITDA grew

and capital expenditure remained

high as we continue to invest

to strengthen the business,

although this was lower than in

2022. An increase in interest paid

was broadly offset by a reduction

in cash tax paid.

Metric

Period-over-period growth

of adjusted diluted EPS. (The

definitions of adjusted measures

are as calculated within the

reconciliation tables on page 36.)

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.

We have indicated, after 2023,

we expect to grow our adjusted

diluted EPS by a double digit

compounded annual growth

rate over the medium term.

Remuneration linkage

Adjusted PBT growth is 50%

of 2023 LTIP.

2023 performance

Adjusted diluted EPS rose 6.1%

during 2023.

Strong growth in the adjusted

operating profit, of 7.0%, was

partially offset by increased

interest, owing to the rise in

market interest rates, and

an increase in tax expense.

Metric

Adjusted operating profit as

a % of Group revenue. (The

definitions of adjusted measures

are as calculated within the

reconciliation tables on page 35.)

Relevance

Adjusted operating profit margin

reflects how effective we are

at running our business. It is

the second key tenet of our

strategic ambition and a key

metric by which investors judge

our strategic progress.

We have indicated that we believe

a mid-20% adjusted operating

margin is achievable in 2026

or 2027.

Remuneration linkage

Adjusted operating profit ($m)

metric is 45% of annual bonus.

2023 performance

Despite continued inflationary

pressures, further R&D and

commercial investments and a

foreign exchange headwind of

60 bps, we expanded the adjusted

operating profit margin by 70bps

to 20.2%.

Metric

Period-over-period growth

at constant currency, adjusted

for acquisitions, divestments

and discontinuations.

Relevance

Sustainable top-line growth

is a key tenet of our strategic

ambition and a key metric

by which investors judge our

strategic progress.

We have indicated in the medium-

term we expect revenues to grow

between 5-7% every year.

Remuneration linkage

Organic growth metric is 25%

of the annual bonus.

Organic growth metric is 25%

of the 2023 LTIP plan.

2023 performance

During 2023 we delivered

significant improvement in our

organic growth to 7.2%. This was

driven by strong high single-digit

organic growth in our Advanced

Wound Care and Infusion Care

businesses, strong organic growth

in Continence Care and good mid

single-digit organic growth in

Ostomy Care.

2019

7.2%

2020

5.6%

2021

5.3%

2022

4.2%

2023

2.3%

2019

20.2%

2020

19.5%

2021

17.7%

2022

18.5%

2023

19.4%

2019

6.1%

2020

(3.1)%

2021

8.3%

2022

2.6%

2023

(26.9)%

2019

116.8%

2020

(49.4)%

2021

(14.2)%

2022

(18.4)%

2023

1.7%

These KPIs are new for 2023.

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

At our Capital Markets Day in November 2022, we shared how

our FISBE strategy is evolving and clarified the metrics by which

stakeholders can measure progress. Having introduced a new

remuneration policy in May 2023, which is more aligned with

these metrics, we have updated our Annual KPI disclosures.

Consistent with our regular disclosures to investors,

the financial KPIs are adjusted figures. See pages 35 to 37

for reconciliation to the reported numbers.

NON-FINANCIAL METRICS

Quality – Complaints

per million

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*

, 3

Metric

The percentage of revenues

that are generated from new or

significantly upgraded products

and services launched by Convatec

in the preceding five-year period.

Relevance

Our vision is pioneering trusted

medical solutions to improve the

lives we touch. The vitality index

is a measure of how effective our

innovation efforts are at meeting

patients’ needs and delivering

for customers.

Vitality features as a key ESG

metric within the customer

pillar of our Convatec Cares ESG

framework (see page 39). We are

targeting a vitality index of 30%

by Q4 2025.

Remuneration linkage

Executive members of the

Board plus certain members

of CELT and the R&D leadership

team are incentivised to deliver

improvement as part of their

personal objectives.

2023 performance

We brought six new products

to market, and continue to see

good performance from products

launched in the recent past.

Metric

Period-over-period reduction

in our combined Scope 1 and 2

GHG emissions.

Relevance

We understand the importance

of the need for change in order

to achieve our ambition of net

zero carbon emissions by 2045.

Reduction in our Scope 1 and 2

features as an ESG metric within

the communities pillar of our

Convatec Cares ESG framework

(see page 39). Our target is

to reduce our Scope 1 and 2

emissions by 70% by 2030.

Remuneration linkage

Executive members of the Board

plus certain members of CELT and

the Global Operations leadership

team are incentivised to deliver

improvement as part of their

personal objectives.

2023 performance

During 2023, we further reduced

our emissions through the purchase

of renewable electricity, installation

of on-site renewables and

implementation of energy efficiency

projects. In the year the Science-

Based Target initiative (SBTi) also

validated our near-term Scope 1,

2 and 3 carbon reduction targets.

We updated our reporting

methodology in 2022 to align to

GHG protocol and SBTi guidelines.

See our basis of reporting and ESG

definitions on page 65.

See pages 60 and 61 for more

detail about carbon emissions

across all categories.

Metric

Proportion of females in combined

CELT and senior management.

Relevance

We recognise that if we harness

the power of our differences

and encourage diverse

thinking we can deliver more

for our customers. Therefore

building a diverse workforce

with greater gender diversity

across leadership is important.

It features as a key ESG metric

within the colleagues pillar

of our Convatec Cares ESG

framework (see page 39). In

2022, we set a target achieve

at least 40% females in senior

management by Q4 2024, which

we are committed to maintaining

and advancing further.

Remuneration linkage

Executive members of the Board

plus certain members of CELT

and members of the HR leadership

team are incentivised to deliver

improvement as part of their

personal objectives.

2023 performance

During 2023 we achieved

attainment of our 40% target,

a year ahead of plan. As such

we have set a further target to

achieve 50% by Q4 2027. Baseline

population numbers are subject

to year-on-year variation

1. As our ESG journey continues and our metrics and measurement mature it is possible we may modify our non-financial KPIs.

2. Percentage movements are calculated on actual unrounded numbers.

3. The percentage of women in CELT and senior management combined in 2023 is 44% (2022: 38%). Total population in 2023 is 79 (2022: 92).

Metric

Period-over-period reduction in

the number of complaints received

per million (CPM) products sold.

Relevance

CPM is a strong indication of our

manufacturing quality. It is key to

ensuring that we develop trusted

medical solutions, consistent with

our vision. It is a reflection of our

core capabilities and our ability to

execute effectively.

CPM features as a key ESG metric

within the customer pillar of our

Convatec Cares ESG framework

(see page 39). We targeted to

reduce CPM by 8% during 2023.

Remuneration linkage

Executive members of the Board

plus certain members of the

CELT and the Quality leadership

team are incentivised to deliver

improvement as part of their

personal objectives.

2023 performance

Year-on-year reduction

of 12.2% as the Quality

CoE continues to have a

positive impact, delivering

for our customers, driven

by implementation of

continuous improvement

across our manufacturing

and quality operations.

The CPM numbers have been

restated following the exit

from hospital care and related

industrial sales in 2022. See

page 49 for further details

on our approach to quality.

2020

(12.2)%

2021

56.2 (24.4)%

2022

(10.0)%

2023

(16.4)%

74.4

50.6

44.5

2021

27%

2022

26%

2023

25%

2019

(15)%

2020

2021

20%

2022

(32)%

2023

(35)%

2019

44%

2020

38%

2021

32%

2022

30%

2023

23%

Overview

Governance

Financial statements

Additional information

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Operational review

Advanced Wound Care

Market dynamics

Wound biologics

Foam

Antimicrobials

Single-use NPWT

Other

Advanced Wound Care is a growing market globally

Convatec has strong positions and attractive brands in fast-growing segments

Segment

size

Segment

growth

Our segment

position

Convatec

brands

$2.4bn

~6%

~13%

~5%

$1.9bn

$1.0bn

$0.4bn

$0.7bn

SOURCES:

4. Segment size based on SmartTrak projections for FY2023; including all sub-segments, total Advanced Wound Care market size is c.$7.5bn

5. Wound Biologics includes: skin substitutes, collagen dressings and topical delivery drugs; Other segment includes: Alignates and fibre, superabsorbers, hydrocolloids;

6. Segment market growth as projected by SmartTrak five-year CAGR ’22-’27

7. Segment positions based on SmartTrak YTD Q3 2023 reported revenues across companies

Extra

Aquacel

Ag+

100m patients

p.a. globally

~50% unhealed

despite therapy

Now 2-4% of

healthcare budgets

Prevalence of hard-to-heal

wounds is increasing

Wound healing rates need

to improve

Wound-care related costs

are increasing

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

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

David Shepherd

President & Chief Operating

Officer, Advanced Wound Care

2023 performance

Revenue of $695 million increased

12.0% on a reported basis or 11.6%

on a constant currency basis. On an

organic basis revenue rose by 9.5%.

This performance was enhanced by

InnovaMatrix

, which contributed to

organic growth from April.

The business achieved strong sales

growth in North America supported

by the growing position in the

wound biologics segment

, broad-

based double-digit growth in GEM

despite some market softness in

China in H2 and good growth in

Europe. Continued leadership in the

antimicrobial segment enhanced the

overall performance of the division.

We continued to make strategic

progress in AWC during 2023,

strengthening our position

in the US with the launch of

ConvaFoam™. Reaction from

healthcare professionals has

been encouraging with a number

of ongoing evaluations as well

as conversions from competitor

product to ConvaFoam.

InnovaMatrix

continued to achieve

strong momentum in the large and

rapidly growing wound biologics

segment

. Feedback from clinicians

has been positive.

In 2024 we will focus on:

–

Rolling-out recent launches

to new markets:

•

Launching ConvaFoam™

in Europe

•

Launching new iterations

of InnovaMatrix

in the US

–

Continuing to develop the future

2025+ AWC pipeline with:

•

a new nitric oxide dressing,

a new enhanced hydrofibre

dressing and ConvaVac™

–

Improving commercial

performance:

•

Further leverage Salesforce

Effectiveness Centre of

Excellence (CoE) in our

focus markets

•

Further expand ATT salesforce

and build synergies with

existing AWC sales team

STRENGTHENING OUR FOAM PRESENCE WITH CONVAFOAM

Convatec has been committed

to pioneering Advanced Wound

Care solutions for more than

40 years.

By actively listening to the needs

of patients and HCPs, we have

created ConvaFoam™. ConvaFoam™

has been designed to make

choosing of dressings simpler by

providing best in class performance

with easy to access information

for healthcare professionals,

caregivers and patients.

The ConvaFoam™ family of dressings

includes our new enhanced silicone

technology for improved adhesion

and we have also improved the

absorbency and fluid handling

resulting in up to 7-days wear time.

ConvaFoam™ can be used for skin

protection and on a spectrum of

wound types making it the simple

dressing choice. ConvaFoam™

dressings includes AQUACEL

Hydrofiber

Technology, so HCPs

can trust that every ConvaFoam™

dressing helps to create an optimal

wound healing environment.

Following the 2023 rollout in the US

and Chile, we have received positive

feedback on the performance and

benefits that ConvaFoam™ brings

to patients. As we move into 2024,

we will launch in other key global

markets so more patients will soon

have access to ConvaFoam™.

2023

2022

2021

2020

2019

2018

Total sales

Organic growth

695

621

592

547

570

587

9.5%

6.8%

9.2%

-2.7%

0.5%

0.2%

Performance

Overview

Governance

Financial statements

Additional information

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Supporting patients across the continuum of care is critical to achieving growth

$1,500m

~5%

~2%

$700m

~$3bn segment, growing at ~4-5%

$700m

Growth rate

Total segment size

Europe

Global Emerging Markets

North America

~7-8%

Operational review

Source: Market dynamics, segment size, growth rates and positions based on internal analysis and publicly available sources

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

Home

services

group

Global ostomy

Ostomy Care

Market dynamics

Global trends driving growth

Large and growing segment with attractive recurring revenues

~2.8m patients¹

~50% lifelong conditions

Growing 2x faster than

developed markets

Aging population and

increase in life expectancy

Rise in underlying conditions

(obesity, cancer, etc)

Improved access in

emerging markets

Category position

Products

Services

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Bruno Pinheiro

President & Chief Operating

Officer, Ostomy Care

2023 performance

Revenue of $608 million was up 4.3%

on a reported basis and increased

4.2% on constant currency and

organic bases. The Ostomy Care

category comprises Convatec ostomy

products, our Flexi-Seal™ sales (fecal

management system product) and

non-Convatec ostomy products.

We are making positive progress

with the turnaround in Ostomy Care,

particularly with Convatec ostomy

products, where revenue grew 6.3%.

The business achieved double-digit

growth in the Global Emerging Markets

as it continued to win share. In North

America 180 Medical grew ostomy

sales well from a small base and New

Patient Starts remained stable. There

was a good performance in Europe

although, as expected, further planned

declines in non-Convatec product

sales via Amcare™ UK partially offset

this positive performance. The launch

of the ESENTA™ brand of accessories

continued to progress well. As

anticipated, Flexi-Seal™ finished close

to flat for the full year, having declined

in the first half when it was lapping

tough comparatives.

Strategic progress continued in the

ostomy business, as the team prepared

for the launch of our new one-piece

convex pouching system, Esteem

Body™ with Leak Defense™ in the US

and Europe. Leak Defense™ refers to

the exclusive combination of Convatec’s

gold-standard adhesives (Durahesive

and Modified Stomahesive

) coupled

with the comprehensive, soft convexity

range, which together are designed to

adapt to the body for a secure seal that

can help prevent leaks and achieve the

desired wear time.

In 2024 we will focus on:

–

Continuing to progress our

innovation pipeline:

•

Launching our new Esteem

Body™ in the US and certain

European markets

•

Developing a new Flexi-Seal™

Air product

•

Developing a 2-piece Body

portfolio for the future

–

Further improving commercial

execution across the continuum

of care:

•

Bringing all the products we sell

in the fast-growth accessories

market under the ESENTA™ brand

•

Improving new patient starts

in the US, with continued

collaboration with Home

Service Group (HSG)

•

Enhancing engagement

with patients, through Me+,

and the interactions with

healthcare professionals

‘ESSENTIAL’ SKINCARE FOR STOMA CARE

As part of our vision to improve

the lives of the people we touch,

we identified the opportunity to

deliver more consumer-friendly

looking accessories, with one

consistent brand, in a discreet and

premium looking packaging. The

result was the continued success

of our brand ESENTA™, with the

release of our improved Sting-Free

skincare products.

ESENTA™ was developed in

collaboration with customers and

HCPs, repositioning accessories

as an essential part of the lives

of our customers. Sting-Free

products provide the performance

our patients need and expect,

with packaging designed to live

in the home not the hospital,

allowing users to focus on

themselves not their stoma.

A simplified set of SKUs under a

single brand launched globally using

our Healthy Bonds campaign enables

us to participate in the attractive,

fast-growing ostomy accessories

market as awareness increases

about skin protection as part of

ostomy care.

2023

2022

2021

2020

2019

2018

Total sales

Organic growth

608

583

615

590

569

582

4.2%

1.7%

2.0%

4.5%

1.0%

-0.9%

Performance

Overview

Governance

Financial statements

Additional information

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

$1,000m

~6%

~3%

$900m

~$2.2bn segment, growing at ~4%

$300m

Growth rate

Total segment size

Europe

~2%

Global Emerging Markets

Market dynamics

Core urinary intermittent catheter usage is largely in the home

Large and growing segment with attractive recurring revenues

3-6x per day

>95% at home

average 3-5 year

relationship with end-user

Customers require manual

intervention to void their

bladders daily

In-home usage, typically

without any assistance

Enduring relationships via

chronic conditions

and

distinctive services

Continence Care

Operational review

Source: Market dynamics, segment size, growth rates and positions based on internal analysis and publicly available sources including Medicare/CMS

and Millennium Research Group

1. BPH (benign prostatic hyperplasia (prostate enlargement)), SCI (spinal cord injury), MS (multiple sclerosis), Spina Bifida,urinary retention

Delivering solutions for users – both service and product

How one lives with their device is equally important to the device itself

US service share

#1:

~40%

US manufacturing share

#2:

~23%

Category position

Service

Products

Expansive and

growing portfolio

Forward integrated

solutions for high retention

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Seth Segel

President & Chief Operating

Officer, Continence Care and

Home Services Group

2023 performance

Revenue of $457 million rose 7.5%

on a reported basis and 7.4% on

a constant currency, with modest

incremental contribution from the

two acquisitions. On an organic

basis revenue rose 6.5%.

A strong operating performance was

supported by higher reimbursement

pricing in the US during the year

and increasing patient adoption of

Convatec products (Cure Medical

and GentleCath™). The quality and

breadth of the Convatec product

portfolio have resulted in it growing

as a proportion of overall sales,

which is beneficial to the gross

margin. In the US home service

market (direct to consumer) we

continued to gain share by providing

world-class customer service.

We further strengthened the

Home Service Group by acquiring

A Better Choice Medical Supply LLC

(Michigan) and All American Medical

Supply Corp (New York), two North

American continence care service

businesses.

We made further progress building

international sales and management

teams, which has resulted in

incremental sales in GEM and

Europe which, although modest,

were supportive to overall growth.

We launched our new and improved

GentleCath Air™ for Women 2.0

in Q4 2023 in France which has

been well received by healthcare

professionals and customers.

In 2024 we will focus on:

–

Rolling-out launches

to new markets:

•

Launching GC Air for

Women in additional

European markets and the US

•

Introducing Cure products into

European and GEM markets

–

Further improving commercial

execution globally:

•

Integrating recent HSG

acquisitions in the US

•

Continuing to build out

and strengthen commercial

teams in Europe

•

Leveraging improved

customer service performance

at Amcare UK

GENTLECATH AIR™ FOR WOMEN: GENTLE PROTECTION AND CONFIDENT LIVING

The Continence Care forever caring

promise to HCPs and intermittent

catheter users is to champion higher

standards of continence care for all.

Our aim is to provide intermittent

catheter users with products and

services that allow them to live their

lives confidently.

In Q4, we started launching

GentleCath Air™ for Women, our

new compact catheter that blends

gentle, protective cathing with

everyday discretion and ease of use.

GentleCath Air™ for Women uses

our next-generation FeelClean

Technology™. It uniquely integrates

hydrophilic properties into the

material of the catheter, avoiding

the sticking and tugging associated

with some coated hydrophilic

catheters

– while minimising

mess and residue

It is designed to minimise damage

to the urethral mucosa, reduce

discomfort, bleeding and protect

the first line of defence against

UTIs

1,2

. GentleCath Air™ for Women

delivers Gentle Protection and

Confident Living.

2023

2022

2021

2020

2019

2018

Total sales

Organic growth

457

426

405

363

342

325

6.5%

5.1%

3.4%

5.4%

12.0%

Performance

1. Pollard D, Allen D, Irwin NJ, Moore JV,

McClelland N, McCoy CP. Evaluation

of an integrated amphiphilic surfactant

as an alternative to traditional

polyvinylpyrrolidone coatings for hydrophilic

intermittent urinary catheters. Biotribology.

Published online August 31, 2022:100223.

2. Data on file

Overview

Governance

Financial statements

Additional information

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Infusion Care

Operational review

Market dynamics

Subcutaneous drug delivery is relevant to multiple therapeutic areas

~33 million

intensive insulin users

Pain management

Immunoglobulin

deficiency

Parkinson’s disease

Diabetes

Other therapies

–

7.5m patients² and 8%

market growth³

–

Morphine and

combinations-pallative care

–

6m patients⁴ and 10%

market growth⁵

–

IgG antibodies for e.g.

autoimmune and cancer

–

10m patients and 6%

market growth⁶

–

Abbvie or Mitsubishi Tanabe

targeting advanced patients

of which

~1.7 million (5%)

use pumps to manage daily insulin needs

Significant penetration opportunity as

pumps displace users currently on multiple

daily injections (~31m)

2023-2038 CAGR of patients

Durable pumps

Patch & hybrid

Multi Daily

Injection (MDI)

~8%

~3%

~16%

Within insulin intensive diabetes, durable, patch and hybrid pumps will grow rapidly

Convatec’s modular technology platform can be used across an expanding spectrum

of pump solutions, in diabetes and other therapies

Existing partners in diabetes

New partners outside of diabetes

2. WHO 2020 – Palliative Care fact sheet

3. Center to Advance Palliative Care facts and stats

4. Bousfiha et al. Primary Immunodeficiency Diseases Worldwide: More Common than Generally Thought. JClin Immunol. 2013; 33:1-7

5. MEGAN A. COOPER et al. Primary Immunodeficiencies Am Fam Physician. 2003;68(10):2001-2009

6. WHO 2022 fact sheet, estimate based on yearly new diagnoses in the US from US Parkinson’s disease foundation

1. Seagrove SIMM April 2023

Roche

Abbvie

Mitsubishi Tanabe Pharma

Medtronic

BetaBionics

Ypsomed

Sooil

Tandem

Diabetes Care

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Kjersti Grimsrud

President & Chief Operating

Officer, Infusion Care

2023 performance

Revenue of $371 million increased

8.7% on reported, constant currency

and organic bases. This growth was

primarily driven by sustained strong

demand for our innovative infusion

sets for people with diabetes. We

supported our customers with

multiple product launches during

2023: Medtronic’s 780G insulin

pump approval in the US, Beta

Bionics iLet bionic pancreas system

launch in the US and soft launch

of Tandem’s Mobi pump.

Our neria™ brand infusion sets,

for non-insulin therapies, achieved

strong double-digit growth, and

included the launch of AbbVie’s new

Parkinson’s drug therapy in Japan.

In 2024 we will focus on:

–

Delivering for our diabetes

customers given the

continued strong demand

for our infusion sets:

•

Scaling up MioAdvance

Extended Wear Infusion

Set following US launch

of Medtronic’s 780G

•

Supporting Tandem with the

full launch of Mobi in the US

•

Supporting Beta Bionics

following its iLet launch in

the US

•

Supporting Ypsomed as they

grow their durable pumps

business

–

Continuing to diversify

patient base

•

Providing Neria sets for AbbVie

Parkinson’s launch in Europe

and preparing for US launch,

expected in 2024

•

Increasing penetration with

European distributors of

infusion sets for European

palliative care and pain

management

–

Enhancing operations:

•

Increasing production capacity

for future demand

•

Optimising existing

production lines and further

improving quality

EXPANDING OUR LEADERSHIP IN DIABETES

During 2023, Convatec expanded

its leadership in the design and

manufacturing of infusion sets for

insulin pump treatment, supporting

more partners with exciting new

pump launches.

Convatec has been committed to

pioneering diabetes solutions for

more than 30 years. We remain

focused on expanding our offer by

partnering with companies, who share

our ethos of providing innovative and

simplified medical device solutions

which improve the lives we touch.

We partnered with Medtronic to

launch, in the US, the Extended

Wear Infusion Set with their

new 780G pump.

We are also sole supplier to

BetaBionics, who in Q2 launched

their iLet Bionic Pancreas – an

innovative, first of its kind device

which simplifies the user experience

by only requiring the input of the

user’s weight, the continuous

glucose monitoring (CGM) sleep

target and overall CGM target.

In Q3, Tandem received FDA approval

for Mobi, the world’s smallest

durable automated insulin delivery

system. The pump’s discrete size

provides users with new options

in wearability, the flexibility to

disconnect, and full smartphone

control. Specifically for Tandem Mobi,

Convatec developed the AutoSoft

XC™ with a new short 5” (12 cm)

tubing – enabling users to wear the

Mobi pump as an on-body system.

MioAdvance

Extended Wear Infusion Set

Infusion Set for

Betabionics iLet

2023

2022

2021

2020

2019

2018

Total sales

Organic growth

371

341

316

283

238

227

8.7%

9.2%

11.5%

18.5%

2.2%

-5.0%

Performance

Overview

Governance

Financial statements

Additional information

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Financial review

Revenue grew by 3.4% on a reported basis, 3.2% on a constant

currency basis and 7.2% on an organic basis. Constant currency

growth was lower than organic growth due to the exit from the

low-margin, low-growth hospital care activities during 2022.

The adjusted operating profit margin was 20.2%, representing

an increase of 70bps over the previous year. Adjusting for

foreign exchange headwinds, the expansion was 130bps,

with pricing and mix benefits more than offsetting inflation

and continued investment in commercial and R&D capabilities.

The adjusted operating profit margin has increased by

250bps over the past two years.

Adjusted diluted earnings per share increased by 6.1%

year-on-year to 13.4 cents per share, primarily due to

improvements in adjusted operating profit and a reduction

in adjusted non-operating expenses more than offsetting an

increase in finance expenses. Reported diluted EPS more than

doubled to 6.3 cents per share (2022: 3.1 cents per share).

Net cash generated from operations improved by 27.6% to

$490.6 million (2022: $384.5 million), with free cash flow to

equity increasing by 116.8% to $228.3 million (2022: $105.3

million), driven by higher EBITDA and significantly better

changes in working capital compared to the previous year.

Equity cash conversion improved to 83.3% (2022: 41.0%).

We further enhanced the competitive position of the Group

during the year, with the acquisition of an innovative anti-

infective nitric oxide technology platform to strengthen our

Advanced Wound Care portfolio, and two bolt-on acquisitions

to strengthen our Home Services Group in the US.

In November 2023, the Group extended the term of its

multicurrency revolving credit facility by one year and this

is now committed to 2028. The Group’s term loan and

$500.0 million senior unsecured notes remain committed

until 2027 and 2029 respectively.

We remain confident of delivering sustainable future revenue

growth and an adjusted operating margin in the mid-20s by

2026 or 2027, with double-digit compound annual growth

in adjusted diluted EPS and free cash flow to equity.

1. These non-IFRS financial measures are explained and reconciled to the most directly comparable financial measures prepared in accordance with IFRS on pages 34 to 37.

2. Equity cash conversion is calculated as free cash flow to equity divided by adjusted net profit.

Reported revenue

growth

+3.4%

$2,142.4m

$2,072.5m

2022

2023

Reported operating

profit margin growth

+230bps

12.3%

10.0%

2022

2023

Organic revenue

growth

+7.2%

+5.6%

2022

2023

Adjusted operating

profit margin growth

+70bps

20.2%

19.5%

2022

2023

Reported diluted

earnings per share

+105.9%

6.3¢

3.1¢

2022

2023

Net cash generated

from operations

+27.6%

$490.6m

$384.5m

2022

2023

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 148

to 196 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 34 to 37.

Revenue and the revenue growth on constant currency and organic bases

are non-IFRS financial measures and should not be viewed as replacements

of IFRS reported revenue. 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.

Adjusted diluted

earnings per share

+6.1%

13.4¢

12.6¢

2022

2023

Equity cash

conversion

1,2

83.3%

$228.3m

$105.3m

2022

2023

Free cash flow to equity

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Financial review

“Convatec continued to build momentum in 2023. Organic

revenue growth accelerated, adjusted operating profit margin

expanded despite continued high cost inflation and cash flow

performance improved. We have now pivoted to sustainable

revenue growth and remain focused on delivering our FISBE

2.0 strategy, which will lead to double-digit compound annual

growth in adjusted diluted earnings per share and free

cash flow to equity.”

Jonny Mason

Chief Financial Officer

Group financial performance

Reported

2023

Reported

2022

Adjusted

2023

Adjusted

2022

Revenue

2,142.4

2,072.5

2,142.4

2,072.5

Gross proﬁt

1,200.6

1,103.9

1,320.7

1,245.6

Operating proﬁt

262.7

207.3

431.8

403.7

Proﬁt before income taxes

167.4

81.9

357.2

337.6

Net proﬁt

130.3

62.9

274.1

256.8

Basic earnings per share (cents per share)

6.4¢

3.1¢

13.4¢

12.7¢

Diluted earnings per share (cents per share)

6.3¢

3.1¢

13.4¢

12.6¢

Dividend per share (cents)

6.229¢

6.047¢

1. These non-IFRS financial measures are explained and reconciled to the most directly comparable financial measures prepared in accordance with IFRS

on pages 34 to 37.

Revenue

Group reported revenue for the year ended 31 December 2023 of $2,142.4 million (2022: $2,072.5 million) increased 3.4% year-on-

year on a reported basis and 3.2% on a constant currency basis.

Adjusting for foreign exchange and acquisition and divestiture-related activities

, Group revenue grew by 7.2% on an organic basis.

This was driven by strong growth in Advanced Wound Care, Infusion Care and Continence Care and good growth in Ostomy Care.

For more details about category revenue performance, refer to the Operational reviews on pages 18 to 25.

Revenue by category

2023

2022

Reported

growth

Foreign

exchange

impact

Constant

currency

growth

Organic

growth

Advanced Wound Care (AWC)

695.3

620.7

12.0%

0.4%

11.6%

9.5%

Ostomy Care (OC)

608.3

583.0

4.3%

0.1%

4.2%

Continence Care (CC)

457.2

425.4

7.5%

0.1%

7.4%

6.5%

Infusion Care (IC)

370.9

341.1

8.7%

0.0%

8.7%

Revenue excluding hospital care exit

2,131.7

1,970.2

8.2%

0.2%

8.0%

7.2%

Exit of hospital care and related industrial sales

10.7

102.3

(89.5)%

n/a

Total

2,142.4

2,072.5

3.4%

0.2%

3.2%

7.2%

AWC revenue of $695.3 million increased 12.0% on a reported basis, 11.6% on a constant currency basis and 9.5% on an organic

basis, with good growth in Europe and strong growth across the Global Emerging Markets and in North America, with the latter

supported by the contribution from InnovaMatrix

, which continued to grow rapidly in the large, fast-growth wound biologics

segment

. InnovaMatrix

was part of the Triad Life Sciences acquisition in 2022 and contributed to organic growth from April 2023.

OC revenue of $608.3 million increased 4.3% on a reported basis and 4.2% on constant currency and organic bases. This was

driven by a 6.3% growth of sales of Convatec Ostomy products on a constant currency basis, principally across the Global Emerging

Markets and key European markets and supported by its world-class Direct to Consumer service proposition through the Home

Services Group in the US. As expected, growth was partially offset by the ongoing planned transition away from the lower-margin

non-Convatec Ostomy products.

CC revenue of $457.2 million increased 7.5% on a reported basis, 7.4% on a constant currency basis and 6.5% on an organic basis,

driven by both higher reimbursement pricing and higher volumes of Convatec products (Cure Medical and GentleCath™) in the US.

We continued to see strong performance on customer satisfaction, retention and pricing in the US.

IC revenue of $370.9 million increased 8.7% on reported, constant currency and organic bases. This growth was primarily from

sustained strong demand for our innovative infusion sets for people with diabetes. It was also supported by double-digit growth

of our Neria™ brand infusion sets and for non-insulin therapies such as subcutaneous infusion of immunoglobulins (linked to cancer

and autoimmune diseases), pain management and Parkinson’s medications.

See pages 18 to 25 for detail on the performance of each category.

2. Acquisitions were Starlight Science, A Better Choice Medical Supply and All American Medical Supply in 2023 and Triad Life Sciences in 2022. Divestitures related to the

2022 discontinuation of hospital care, related industrial sales and associated Russia operations (with the final discontinuances in early 2023).

3. Wound biologics segment as defined by SmartTRAK. Includes skin substitutes, active collagen dressings and topical drug delivery.

Overview

Governance

Financial statements

Additional information

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Financial review

continued

Reported net profit

Reported gross margin increased from 53.3% to 56.0%. This was largely driven by pricing and mix benefits being partly offset

by inflationary pressures and foreign exchange headwinds. Prior year comparatives also included higher one-time divestiture

and termination costs primarily as a result of the hospital care and related industrial sales exit in 2022.

Reported operating profit increased by 26.7% to $262.7 million, driven by improvements in the reported gross margin being partially

offset by an increase in reported operating expenses of $41.3 million to $937.9 million. Increases in selling and distribution expenses

of $36.6 million to $612.5 million and R&D of $18.0 million to $110.0 million were partly offset by a reduction in other operating

expenses of $11.3 million (down from $13.8 million).

Reported net finance costs increased by $23.4 million to $75.5 million, primarily due to an additional $28.8 million of interest

expense on borrowings due to higher market interest rates.

During the year, the fair value movement of the contingent consideration arising on acquisitions was $24.6 million (2022: $45.1 million).

Reported non-operating income/(expense) decreased by $33.0 million to $4.8 million income (2022: $28.2 million expense) and principally

consisted of foreign exchange gains of $0.2 million (2022: $14.2 million loss) and a gain of $3.9 million on divestiture-related activities

relating to the sale of the Unometer™ trademarks during the year. The prior year also included the recycling of $12.2 million of cumulative

translation losses following the closure activities associated with the hospital care exit and a $2.0 million loss on divestitures.

The reported income tax expense for the year ended 31 December 2023 was $37.1 million (2022: $19.0 million) and this is explained

further in the Taxation section below. The reported net profit was $130.3 million (2022: $62.9 million).

The basic reported earnings per share rose 105.6% to 6.4 cents (2022: 3.1 cents), reflecting the reported net profit divided by the

basic weighted average number of ordinary shares of 2,038,653,228 (2022: 2,023,839,657).

Adjusted net profit

Adjusted gross profit increased by 6.0% to $1,320.7 million (2022: $1,245.6 million). The adjusted gross margin increased year-on-

year from 60.1% to 61.6% due to a combination of price, mix and productivity benefits of 460bps being partially offset by inflation

and foreign exchange headwinds of 250bps and 60bps respectively. The Group benefited from the impact of reduced volumes of

low-margin and low-growth products following the hospital care exit in 2022 and the growing contribution from Advanced Tissue

Technology (ATT).

Adjusted operating expenses saw a net increase of $47.0 million to $888.9 million, with increases in adjusted selling and distribution

expenses and adjusted R&D partly offset by a reduction in adjusted general and administrative expenses.

Increases in adjusted selling and distribution expenses of $47.0 million to $611.9 million, primarily driven by higher headcount

associated with growing the business, expansion in the acquired ATT business and higher labour inflation, were only partially offset

by the exit of hospital care.

Increases in adjusted R&D of $11.9 million to $103.9 million reflected the continued investment in our future pipeline of new

products and new R&D talent joining the business through the recent acquisitions over the past few years.

Adjusted G&A decreased by $11.9 million to $173.1 million, reflecting the Group’s focus on simplification and productivity, notably as we

continued to build internal expertise and reduce external third party spend whilst also seeing the benefits of transitioning more activities

to our Global Business Services (GBS) centre in Lisbon. Adjusted G&A as a percentage of revenue fell to 8.1% (2022: 8.9%)

A reconciliation between reported and adjusted operating expenses is provided in the Non-IFRS financial information section on

pages 34 to 37. The Group achieved an adjusted operating profit of $431.8 million (2022: $403.7 million), delivering an adjusted

operating margin of 20.2% (2022: 19.5%) despite ongoing inflationary headwinds and continued investments for growth.

Adjusted net profit increased 6.7% to $274.1 million (2022: $256.8 million). The increases in adjusted operating expenses (as

explained above), finance expenses (driven by higher market interest rates) and adjusted income tax expense (which is explained

below) were more than offset by strong adjusted gross margin improvement and a reduction in adjusted non-operating expenses

of $14.9 million (driven by favourable foreign exchange impacts on intercompany transactions).

Adjusted basic and diluted EPS at 31 December 2023 were 13.4 cents and 13.4 cents respectively (2022: 12.7 cents and 12.6 cents).

Taxation

Year ended 31 December

2023

Effective

tax rate

2022

Effective

tax rate

Reported income tax expense

(37.1)

22.2%

(19.0)

23.2%

Tax eﬀect of adjustments

(38.5)

(41.7)

Other discrete tax items

(7.5)

(20.1)

Adjusted income tax expense

(83.1)

23.3%

(80.8)

23.9%

The Group’s reported income tax expense was $37.1 million (2022: $19.0 million). The decrease in the reported effective tax rate was

mainly driven by a one-off net tax benefit following the successful resolution of an uncertain tax position, which for the purpose of

calculating the adjusted income tax expense, was treated as an adjusting item.

The adjusted effective tax rate of 23.3% for the year ended 31 December 2023 (2022: 23.9%) 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

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

in the Non-IFRS financial information section on page 35). The decrease in the adjusted effective tax rate was principally driven

by the impact of profit mix between jurisdictions in which the Group had a taxable presence.

Adjusting items

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 34 and in line with this, the following adjustments were

made to derive adjusted operating profit and adjusted net profit.

Operating

proﬁt

Fair value movement

of contingent

consideration

Non-operating

income/(expense)

Income

tax

2023

2022

2023

2022

2023

2022

2023

2022

Reported

262.7

207.3

(24.6)

(45.1)

4.8

(28.2)

(37.1)

(19.0)

Amortisation of acquired intangibles

136.2

131.3

–

(32.6)

(29.2)

Acquisitions and divestitures

10.1

56.6

24.6

45.1

(3.9)

14.2

(0.7)

(11.3)

Termination beneﬁts and related costs

9.5

7.1

–

(2.0)

(1.2)

Impairment of assets

–

1.4

–

Other adjusting items

13.3

–

(3.2)

–

Other discrete tax items

–

(7.5)

(20.1)

Adjusted

431.8

403.7

–

0.9

(14.0)

(83.1)

(80.8)

Adjustments made to derive adjusted operating profit in 2023 included the amortisation of acquired intangibles of $136.2 million

(2022: $131.3 million), of which $93.2 million (2022: $93.0 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 $10.1 million (2022: $56.6 million) consisted of acquisition-related costs of $8.3 million

(2022: $16.9 million) and divestiture-related costs of $1.8 million (2022: $39.7 million). Acquisition-related costs, which primarily

consisted of deal-related fees, also included the inventory fair value release of $1.5 million (2022: $8.7 million) in respect of the Triad

acquisition in 2022. Divestiture-related costs of $1.8 million were incurred as a result of the exit from the hospital care and related

industrial sales activities.

Termination costs of $9.5 million were in respect of one-off, fundamental transformation projects and primarily due to the migration

of HR services to our Global Business Services, the closure of the EuroTec factory in the Netherlands and a restructuring of activities

in Switzerland. The latter two projects, in addition to the office footprint optimisation programme previously announced, contributed

to other adjusting items of $13.3 million. These costs largely consisted of legal and professional fees, the impairment of right-of-use

assets and property, plant and equipment and charges related to certain office closures.

During the year, the fair value movement of the contingent consideration arising on acquisitions was $24.6 million (2022: $45.1 million).

Net adjustments of $3.9 million made to non-operating income in 2023 wholly related to a gain made from the sale of the

UnoMeter™ trademarks, previously part of hospital care. This is disclosed within Note 5 – Non-operating income/(expense),

net to the Consolidated Financial Statements.

Of the total $169.1 million of adjusting items recognised within operating profit in the Consolidated Income Statement in the year

(excluding tax impact), $16.1 million was cash-impacting in 2023 (2022: $11.1million). There was also a cash outflow of $7.5 million

during the year in respect of adjusting items recorded as accruals in the prior year. For further information on Non-IFRS financial

information, see pages 34 to 37.

In the year to 31 December 2023, other discrete tax items related to the 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 Switzerland. In the year to 31 December 2022, other discrete tax items related to the tax benefit

of $20.1 million resulting from the recognition of deferred tax assets following the acquisition of Triad Life Sciences. For further

details on deferred taxation see Note 6 – Income taxes to the Consolidated Financial Statements.

The Board, through the Audit and Risk Committee, continuously reviews the Group’s APM policy to ensure that it remains

appropriate, aligns with regulatory guidance and represents the way in which the performance of the Group is managed.

Acquisitions

During the year, the Group completed three acquisitions. The acquisition of Starlight Science Limited in April 2023 included the highly

innovative anti-infective nitric oxide technology platform, which complements the Group’s Advanced Wound Care portfolio and has

potential applications across the Group’s other categories. In addition to the initial consideration of $56.7 million (£45.3 million), the

sellers may earn contingent consideration up to a maximum of $163.9 million (£131.0 million), in the form of (i) a milestone payment

of $58.8 million (£47.0 million) due upon regulatory clearances in the US and Europe; and (ii) earnout payments based on sales of

products over the lifetime of the acquired patents, with the maximum earnout payable capped at $105.1 million (£84.0 million).

The provisional discounted fair value of the contingent consideration recognised at the date of acquisition was $66.7 million.

We also completed two small bolt-on acquisitions in 2023 (A Better Choice Medical Supply LLC and All American Medical Supply

Corp) for a combined net cash outflow of $27.7 million to further strengthen our US Home Services Group. There was no contingent

consideration associated with these two acquisitions.

Overview

Governance

Financial statements

Additional information

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Financial review

continued

During the year, $94.7 million was paid in respect of contingent consideration associated with the Triad Life Sciences acquisition,

in addition to the $50.0 million paid in 2022 following achievement of two short-term milestones. As at 31 December 2023, the

discounted fair value of the contingent consideration payable in respect of the Group’s acquisitions was $138.0 million (2022:

$140.0 million). Refer to Note 26 – Acquisitions to the Consolidated Financial Statements for further details.

Reasonably possible changes in certain key assumptions and forecasts may cause the calculated fair value of the contingent

consideration to vary materially within the next financial year and accordingly, this has been identified as a key source of estimation

uncertainty. Refer to Note 1.4 – Critical accounting judgements and key sources of estimation uncertainty to the Consolidated

Financial Statements for further details.

Dividends

Dividends are distributed based on the 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 distributable

reserves of the Company at 31 December 2023 were $1,539.4 million (2022: $1,562.9 million).

The Board declared an interim dividend of 1.769 cents per share in August 2023 and has recommended a final 2023 dividend of

4.460 cents per share, which would bring the full year dividend to 6.229 cents per share (2022: 6.047 cents per share), an increase

of 3% and a pay-out ratio when compared to adjusted net profit of 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. The Board has also taken the decision to terminate the scrip dividend option.

Further information about the Group’s dividend policy and dividends paid can be found on page 143 and information on capital

maintenance and the available distributable reserves position can be found on page 181.

Cash Flow and Net Debt

Net debt bridge $m

Net debt

1 January

2023

Net debt

31 December

2023

Acquisitions &

divestitures

Dividends

Other

Lease

payments

Net interest

paid

Tax paid

Capital

expenditure

Adjusting

items

(Loss)

on FX

derivatives

Working

capital

movement

EBITDA

Reported

527.1

(8.1)

(4.8)

(23.6)

(129.2)

(35.9)

(65.6)

(22.7)

(8.9)

(110.7)

(178.8)

(1,129.3)

(1,068.1)

496.7

(1.3)

(4.8)

–

(129.2)

(35.9)

(65.6)

(22.7)

(8.9)

(110.7)

(178.8)

1,200

1,000

800

600

400

Operating cash ﬂow

1,3

$361.4m

Free cash ﬂow to capital

1,3

$325.5m

Free cash ﬂow to equity

1,3

$228.3m

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 pages 34 to 37.

2. Details of adjusting items are provided in the adjusting items cash movement table in the Non-IFRS financial information section. Of the total cash outflow of

$23.6million during the year, $7.5 million related to accruals recorded in the prior year.

3. Compared to 2022, certain cash flow measures have been simplified in respect of their title. ’Net cash for cash conversion’ has been renamed ’Operating cash flow’

and ‘Free cash flow (post-tax)’ has been renamed ‘Free cash flow to capital’. In addition, a new measure has been introduced, ‘Free cash flow to equity’ (as defined

in the ‘Reconciliation of operating free cash flow, free cash to capital and free cash to equity’ table on page 37). The Directors consider that these changes result

in consistency of cash flow measures and provide improved definition, clarity and insight.

4. Other consisted of financing fees amortisation $2.8 million (2022: $6.6 million) and net FX loss on cash and borrowings of $6.7 million (2022: $4.9 million) offset

by proceeds from PPE sales of $0.6 million (2022: nil).

5. Dividend cash payments of $110.7 million were made to shareholders during the year. This represented 87.3% of total dividends declared in the period, with the

remaining 12.7% electing to settle via scrip dividends. The Board took the decision to terminate the scrip dividend option during the year.

6. Net acquisition and divestiture payments of $178.8 million consisted of the initial consideration payment of $56.7 million in respect of the Starlight acquisition,

$27.7 million in respect of the acquisitions of A Better Choice Medical Supply LLC and All American Medical Supply Corp and $94.7 million in respect of the Year

1 earn out associated with the Triad Life Sciences acquisition. These were offset by $0.3 million of income arising from divestiture-related activities.

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

EBITDA

Adjusted EBITDA increased by $27.1 million to $527.1 million (2022: $500.0 million), with the increase in adjusted gross profit of

$75.1 million more than offsetting the increase in adjusted operating expenses of $47.0 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 34 to 37.

Free cash flow to capital

Free cash flow to capital increased by $138.1 million to $325.5 million (2022: $187.4 million), largely driven by a significantly lower

working capital outflow (resulting in a movement year-on-year of $90.5 million), the increase in adjusted EBITDA of $27.1 million

as explained above, a reduction in capital expenditure spend of $15.0 million and a reduction in cash tax paid of $17.0 million.

These were partly offset by an increase in adjusting cash outflow items of $8.4 million, of which details are provided in the Non-IFRS

financial information section on page 37.

The Group invested $129.2 million in capital expenditure (2022: $144.2 million) to increase manufacturing capacity and automation

and improve information technology and digital tools.

The adjusted working capital outflow of $8.1 million (2022: $98.6 million outflow) improved significantly year-on-year, with

increased inventory levels of $53.9 million on an adjusted basis largely offset by a $30.2 million decrease in trade and other

receivables, a $10.5 million increase in trade and other payables and a $7.8 million reduction in restricted cash.

Increased inventory levels reflected strategic decisions to continue to build supply chain resilience across the Group, which was

achieved in the first half of the year. There was a modest decline in inventory in the second half of the year.

The decrease in trade and other receivables reflected improving cash collections, coupled with a receivables financing arrangement

entered by the Group during the year to normalise receivable terms for certain major customers, equating to $27.4 million, and

favourable movements in the mark-to-market valuation of derivative financial assets. Further details on the receivables financing

arrangement can be found in Note 12 – Trade and Other receivables to the Consolidated Financial Statements.

The increase in trade and other payables of $10.5 million reflected standardisation of supplier payment terms implemented in the

year as part of our simplification and productivity initiatives, coupled with some favourable timing impacts which will partly reverse

in 2024. The increase was partially offset by a decrease in derivative financial liabilities as a result of the mark-to-market valuation

at the year end.

Operating cash conversion

was 83.7% (2022: 59.5%). The increase in the ratio primarily reflected the significantly lower working

capital outflow as commented on above. Further details are provided in the Non-IFRS financial information section.

Free cash flow to equity

Free cash flow to equity increased by $123.0 million to $228.3 million (2022: $105.3 million). This was driven by an increase in free

cash flow to capital of $138.1 million as explained above and a decrease in the amortisation of financing fees of $3.8 million. These

favourable movements were partly offset by higher finance expense payments of $15.7 million due to higher market interest rates.

Equity cash conversion

was 83.3% (2022: 41.0%).

Borrowings and net debt

2022

2023

2022

2023

2022

2023

2022

2023

Net debt excluding leases $1,129.3m

(2022: $1,068.1m)

500

250

-1,000

-750

-250

-500

Net debt/

adjusted EBITDA

At 31 December 2022

2.1x

Net debt/

adjusted EBITDA

At 31 December 2023

2.1x

($732.8m)

$143.8m

($718.8m)

($88.3m )

($493.1m)

$97.6m

($85.5m)

($494.1m)

Cash and cash equivalents

Lease liabilities

Senior notes

Credit facilities drawn

1. The previous ratio called ‘Adjusted cash conversion’, calculated as Operating cash flow/Adjusted EBITDA, has been replaced by ‘Operating cash conversion’

and is now calculated as Operating cash flow/Adjusted operating profit. The Directors consider that this change results in consistency of cash flow measures

and provides improved definition, clarity and insight.

2. A new measure has been introduced. ‘Equity cash conversion’ is calculated as Free cash flow to equity/Adjusted net profit. The Directors consider that this

change results in consistency of cash flow measures and provides improved definition, clarity and insight.

Overview

Governance

Financial statements

Additional information

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Financial review

continued

As at 31 December 2023, the Group’s cash and cash equivalents were $97.6 million (31 December 2022 $143.8 million) and the debt

outstanding on borrowings (net of deferred financing fees) was $1,226.9 million (31 December 2022: $1,211.9 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.

In November 2023, the Group extended the term of its multicurrency revolving credit facility by an additional year and this is now

committed to November 2028. The term loan remains committed to November 2027.

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 2023, $459.4 million of the multicurrency revolving credit facility remained undrawn. This, combined with cash

of $97.6 million, provided the Group with total liquidity of $557.0 million at 31 December 2023 (31 December 2022: $616.6 million).

Of this, $21.1 million was held in territories where there are restrictions related to repatriation (31 December 2022: $19.2 million).

The Group ended the period with total borrowings, including IFRS 16 lease liabilities, of $1,312.4 million (2022: $1,300.2 million).

Offsetting cash of $97.6 million (2022: $143.8 million) and excluding lease liabilities, net debt was $1,129.3 million (2022:

$1,068.1 million), equivalent to 2.1x adjusted EBITDA (2022: 2.1x adjusted EBITDA).

For further information on borrowings see Note 21 – Borrowings to the Consolidated Financial Statements.

Covenants

At 31 December 2023, 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 2023 and 2022.

Maximum

covenant

net

leverage

Actual

covenant

net

leverage

Minimum

covenant

interest

cover

Actual

covenant

interest

cover

31 December 2023

3.50x

2.30x

3.5x

7.0x

31 December 2022

3.50x

2.28x

3.5x

9.9x

1. 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 34 to 37

and applied in the commentary in this Financial review.

Group financial position

At 31 December

2023

2022

Change

Intangible assets and goodwill

2,234.1

2,149.5

84.6

Other non-current assets

609.6

553.2

56.4

Cash and cash equivalents

97.6

143.8

(46.2)

Other current assets

772.4

745.5

26.9

Total assets

3,713.7

3,592.0

121.7

Current liabilities

(536.4)

(533.1)

(3.3)

Non-current liabilities

(1,484.6)

(1,449.2)

(35.4)

Equity

(1,692.7)

(1,609.7)

(83.0)

Total equity and liabilities

(3,713.7)

(3,592.0)

(121.7)

Intangible assets and goodwill

Intangible assets and goodwill increased by $84.6 million to $2,234.1 million (2022: $2,149.5 million). This increase was primarily

driven by intangible assets and goodwill arising from the acquisitions during the year of $162.7 million, combined with intangible

asset additions of $37.6 million and the net effect of foreign exchange of $38.9 million, being partially offset by the in-year

amortisation of intangible assets of $154.6 million.

No triggers of impairments were identified during 2023. Further detail is provided in Note 9 – Intangible assets and goodwill

to the Consolidated Financial Statements.

Other non-current assets

Other non-current assets, including property, plant and equipment (PP&E), right-of-use assets (ROU assets), investment in financial

assets, deferred tax assets, restricted cash and other assets increased by $56.4 million to $609.6 million (2022: $553.2 million).

The increase reflected the continued investment in our manufacturing facilities, with additions in PP&E of $97.3 million and the

net effect of foreign exchange of $16.5 million being partly offset by depreciation of $37.5 million and impairments of $2.7 million.

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Included within other non-current assets was the investment made in the preference shares of BlueWind Medical in 2022. The

fair value at 31 December 2023 decreased to $22.9 million (2022: $30.7 million) due to a downgrade in revised forecasts as a result

of delays in obtaining regulatory approvals, with the movement taken to Other Comprehensive Income. Restricted cash reduced

by $2.0 million primarily due to movements in amounts held in escrow arising from the Group’s acquisitions, whilst ROU assets

reduced by $4.7 million.

Current assets excluding cash and cash equivalents

Current assets, excluding cash and cash equivalents, increased by $26.9 million to $772.4 million (2022: $745.5 million), primarily

driven by an increase in inventories of $59.2 million. Excluding a foreign exchange effect of $9.8 million, inventory increased on

a reported basis by $49.4 million and was largely to build resilience across the Group. This was partly offset by reductions in trade

and other receivables of $5.6 million (net of foreign exchange effect of $9.8 million), current tax receivable of $8.2 million, derivative

financial assets of $12.8 million and restricted cash of $5.7 million.

Derivative financial assets decreased by $12.8 million due to movements in the mark-to-market valuations at the year end, whilst

restricted cash fell by $5.7 million, driven by movements in cash held in escrow that arose from the Group’s acquisitions.

Current liabilities

Current liabilities increased modestly by $3.3 million to $536.4 million (2022: $533.1 million), with an increase in trade and other

payables of $42.1 million largely offset by decreases in derivative financial liabilities of $15.8 million, provisions of $16.5 million

and current tax payable of $6.9 million.

Trade and other payables increased due to an extension to supplier payment terms following standardisation as part of our

simplification and productivity initiatives, coupled with some favourable timing impacts which will partly reverse in 2024.

Derivative financial liabilities decreased due to movements in the mark-to-market valuations at the year end.

Overall, provisions increased by $1.7 million, with amounts less than one year decreasing by $16.5 million and amounts greater than

one year increasing by $18.2 million. The overall increase was primarily due to an increase in restructuring provisions of $3.7 million

offset by a reduction in contingent consideration payable of $2.0 million. Refer to Note 14 – Provisions to the Consolidated Financial

Statements for further commentary.

Non-current liabilities

Non-current liabilities increased by $35.4 million to $1,484.6 million (2022: $1,449.2 million). This included an increase in non-current

borrowings of $15.0 million, an increase in provisions of $18.2 million (see comments in current liabilities above) and an increase in

deferred tax liabilities of $5.0 million primarily due to deferred tax recognised on the acquisition of Starlight Science Limited in the

year.

These were partially offset by a reduction in lease liabilities of $3.2 million, as a result of the office footprint optimisation programme

that commenced in 2023 as part of our simplification and productivity initiatives.

Going concern

In preparing their assessment of going concern, the Directors considered available cash resources, access to committed undrawn

funding, financial performance and forecast performance, including continued implementation of the FISBE strategy, together with

the Group’s financial covenant compliance requirements and principal risks and uncertainties.

Management also applied the same severe but plausible downside scenarios utilised in the preparation of the Viability Statement.

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. 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. For a breach of covenants to occur in the next 12 months, before corporate mitigation, the Group would need to experience

a sustained revenue reduction of more than 10% across all categories and markets. 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. For further information on the Viability statement see pages 86 and 87 and for Going Concern, see Note 1.2 to the

Consolidated Financial Statements.

Accordingly, the Directors continue to adopt the going concern basis in preparing the Consolidated Financial Statements.

Financial control environment

The Group closely monitors the financial and IT general control environment (in respect of those IT controls that have an implication

on the financial processes) using a formal control programme to confirm the effectiveness of key reporting and IT controls across

our global operations, including self-certifications from control owners. Compliance was high throughout the year.

The Internal Controls team acts as the second of line of defence monitoring the controls framework, including monitoring responses,

undertaking random sample testing of responses to supporting evidence and reviewing all notified financial and IT control failures

to safeguard against risk of material financial misstatement.

Independent assurance on the control framework is given by the Internal Audit team, including key controls in their reviews of

specific markets and GBS. In addition, key controls in the framework were tested by the external audit team as part of their controls

reliance approach in 2023.

In response to the developments in corporate governance in the UK, the scope of the formal control programme was extended

to include key non-financial metrics reported in the ARA, notably the ESG metrics currently in scope for limited assurance.

Jonny Mason

Chief Financial Officer

5 March 2024

Overview

Governance

Financial statements

Additional information

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

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.

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 intangibles 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

Non-IFRS financial

information

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.

Organic revenue growth

Organic revenue growth represents

the change in organic revenue year

on year. Organic revenue represents

reported revenue, as determined

under IFRS, and excludes the impact

of acquisitions, divestitures and

currency exchange movements.

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 37 for details on how these

measures are calculated.

KPI

Please see page 16

KEY

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Reconciliation of reported earnings to adjusted earnings for the years ended 31 December 2023 and 2022

Year ended 31 December

2023

Revenue

Gross

proﬁt

Operating

costs

Operating

proﬁt

Finance

expense,

net

Fair value

movement of

contingent

consideration

Non-

operating

income,

net

PBT

Income

tax

Net proﬁt

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

Total adjustments

including tax eﬀect

–

120.1

49.0

169.1

–

24.6

(3.9)

189.8

(38.5)

151.3

Other discrete tax items

–

(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/write-oﬀ of

assets

2.1

Share-based payments

14.6

Adjusted EBITDA

527.1

Year ended 31 December

2022

Revenue

Gross

proﬁt

Operating

costs

Operating

proﬁt

Finance

expense,

net

Fair value

movement of

contingent

consideration

Non-

operating

expense,

net

PBT

Income tax

Net proﬁt

As reported

2,072.5

1,103.9

(896.6)

207.3

(52.1)

(45.1)

(28.2)

81.9

(19.0)

62.9

Amortisation of acquired

intangibles

–

111.6

19.7

131.3

–

131.3

(29.2)

102.1

Acquisition-related costs

–

8.7

8.2

16.9

–

45.1

–

62.0

(3.5)

58.5

Divestiture-related costs

–

16.6

23.1

39.7

–

14.2

53.9

(7.8)

46.1

Termination beneﬁts and

related costs

–

4.8

2.3

7.1

–

7.1

(1.2)

5.9

Impairment of assets

–

1.4

–

1.4

–

1.4

Total adjustments

including tax eﬀect

–

141.7

54.7

196.4

–

45.1

14.2

255.7

(41.7)

214.0

Other discrete tax items

–

(20.1)

Adjusted

2,072.5

1,245.6

(841.9)

403.7

(52.1)

–

(14.0)

337.6

(80.8)

256.8

Amortisation

16.1

Depreciation

61.8

Impairment/write-oﬀ of

assets

1.7

Share-based payments

16.7

Adjusted EBITDA

500.0

1. The comparatives have been re-presented as outlined in Note 1.6 to the Consolidated Financial Statements.

Adjusted operating profit margin of 20.2% (2022: 19.5%) is calculated as adjusted operating profit of $431.8 million (2022: $403.7 million)

divided by revenue of $2,142.4 million (2022: $2,072.5 million). A reconciliation of adjusted operating profit to its closest IFRS measure

is shown in the tables above.

KPI

Overview

Governance

Financial statements

Additional information

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Reconciliation of reported operating costs to adjusted operating costs for the years ended 31 December 2023

and 31 December 2022

2023

2022

S&D

G&A

R&D

Other

Operating

costs

S&D

G&A

R&D

Other

Operating

costs

As reported

(612.5)

(212.9)

(110.0)

(2.5)

(937.9)

(575.9)

(214.9)

(92.0)

(13.8)

(896.6)

Amortisation of

acquired intangibles

–

19.8

6.0

–

25.8

–

19.7

–

19.7

Acquisition-related

costs

–

6.8

–

6.8

–

8.2

–

8.2

Divestiture-related

costs/(income)

(1.0)

(0.4)

–

(0.4)

(1.8)

9.0

1.7

–

12.4

23.1

Impairment of

assets

–

1.4

Termination beneﬁts

and related costs

1.6

5.7

0.1

–

7.4

2.0

0.3

–

2.3

Other adjusting

items

–

7.9

–

2.9

10.8

–

Adjusted

(611.9)

(173.1)

(103.9)

–

(888.9)

(564.9)

(185.0)

(92.0)

–

(841.9)

Reconciliation of reported basic and diluted earnings per share to adjusted basic and diluted earnings

pershare for the years ended 31 December 2023 and 31 December 2022

2023

Adjusted

2023

2022

Adjusted

2022

Net proﬁt attributable to the shareholders of the Group

130.3

274.1

62.9

256.8

Number

Basic weighted average ordinary shares in issue

2,038,653,228

2,023,839,657

Diluted weighted average ordinary shares in issue

2,052,589,260

2,040,247,468

Cents per

Basic earnings per share

6.4

13.4

3.1

12.7

Diluted earnings per share

6.3

13.4

3.1

12.6

1. See Note 7 – Earnings per share to the Consolidated Financial Statements.

Adjusted diluted EPS has increased by 6.1% 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

Cash flow conversion

Year ended 31 December

2023

2022

Operating cash conversion

83.7%

59.5%

Equity cash conversion

83.3%

41.0%

1. ‘Adjusted cash conversion’, previously calculated as Operating cash flow/Adjusted EBITDA, has been replaced by ‘Operating cash conversion’ and is calculated as

Operating cash flow/Adjusted operating profit. In addition, a new measure has been introduced. ‘Equity cash conversion’ is calculated as Free cash flow to equity/

Adjusted net profit. The Directors consider that these changes result in consistency of cash flow measures and provide improved definition, clarity and insight.

Refer to the next page for the calculations of Operating cash flow and Free cash flow to equity.

Non-IFRS financial information

continued

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Reconciliation of Operating cash flow, Free cash flow to capital and Free cash flow to equity

Year ended 31 December

2023

2022

Net cash generated from operations

490.6

384.5

Less: acquisition of property, plant and equipment and intangible assets

(129.2)

(144.2)

Operating cash ﬂow

361.4

240.3

Tax paid

(35.9)

(52.9)

Free cash ﬂow to capital

325.5

187.4

Net interest paid

(65.6)

(49.9)

Payment of lease liabilities

(22.7)

(20.7)

Financing fee amortisation

(2.8)

(6.6)

Foreign exchange (loss) on cash and borrowings

(6.7)

(4.9)

Proceeds from sale of property, plant and equipment

0.6

–

Free cash ﬂow to equity

228.3

105.3

1. The cash flow measures have also been simplified. ‘Net cash for cash conversion’ has been renamed ‘Operating cash flow’ and ‘Free cash flow (post-tax)’ has been

renamed ‘Free cash flow to capital’. In addition, a new measure has been introduced, ‘Free cash flow to equity’ (as defined in the table above). The Directors consider

that these changes result in consistency of cash flow measures and provide improved definition, clarity and insight.

Free cash flow to equity has increased by 116.8% to $228.3 million (2022: $105.3 million). The increase 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

2023

2022

Reported working capital movement

(1.3)

(62.5)

Increase/(decrease) in respect of acquisitions and divestitures

3.1

(39.2)

(Decrease)/increase in termination beneﬁts

(6.1)

3.1

(Decrease) in respect of other adjusting items

(3.8)

–

Adjusted working capital movement

(8.1)

(98.6)

Cash outflows from adjusting items

Year ended 31 December

2023

2022

Acquisition and divestitures adjustments

(13.6)

(5.0)

Termination beneﬁts and related costs adjustments

(3.4)

(10.2)

Other adjusting items

(6.6)

–

Cash outﬂows from adjusting items

(23.6)

(15.2)

Overview

Governance

Financial statements

Additional information

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Karim Bitar

CEO

Chair, ESG Steering Committee

“Our approach to ESG

aims to drive the actions

necessary to help us

realise our vision in a way

that engenders trust with

all our stakeholders.”

Doing business responsibly and generating value sustainably underpins

our forever caring promise to patients and customers. Convatec Cares is

our approach to integrating environmental, social and governance (ESG)

practices across the Company.

Responsible business review

We are here

for good

→ For a short summary of

our ESG journey click here

www.convatecgroup.com/

sustainability/our-frameworks-and-targets/

In recent years, we’ve transformed

our Company, refreshed our strategy

and introduced our forever caring

promise. At the same time, we have

advanced operational, people-led and

environmental topics that are most

important to us and our stakeholders,

including customers, colleagues,

communities and shareholders.

Forever caring is the promise we make to

customers and those we serve every day

and underpins our commitment to being

a responsible business. We’re proud of

the progress achieved so far – thanks

to the care and determination of our

people. We also recognise there’s more

to do and are committed to building trust

and confidence by acting on issues that

are important to our stakeholders, and

meeting standards that demonstrate

these commitments.

We are making an increasingly positive

difference to our stakeholders and the

world around us – not only through our

products and services, but by the way

in which we operate.

Convatec Cares – our approach to ESG –

sets out the commitments and activities

across the Company that enable us to

fulfil our forever caring promise and

integrate ESG practices throughout

our organisation.

Our commitment is to ensure that words

are backed up with actions – recognising

the benefits to all stakeholders in

doing so; whether that’s more engaged

employees, better access to capital,

strengthened investor confidence, or a

stronger, healthier brand and reputation.

Because it’s all this that drives Convatec’s

value for the long term – and that’s

what makes ESG central to our vision:

Pioneering trusted medical solutions

to improve the lives we touch.

Karim Bitar, CEO

Chair, ESG Steering Committee

Convatec Cares

→ To find out more

about Convatec Cares,

watch our short video

www.convatecgroup.com/

sustainability/our-frameworks-and-targets/

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

CONVATEC CARES: OUR ESG FRAMEWORK

ESG PILLARS

Delivering for

our customers

Innovative patient-centric

products, services and

solutions that improve lives

(see page 48)

Enabling our people

to thrive

Ensuring the health,

safety and wellbeing of our

people and using their talent

for good (see page 52)

Behaving ethically and

transparently

Protecting and enhancing

our reputation with all

our stakeholders (see page 56)

Protecting the planet and

supporting communities

How we operate and

our contribution to the

world around us

(see page 58)

Integrated within our FISBE strategy and informed

by our refreshed materiality matrix (page 44),

Convatec Cares sets out our commitments and

activities that are supporting our pivot to 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 52), 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.

Our ESG framework is built around four pillars.

Pioneering

trusted medical

solutions

to improve the

lives we touch

Overview

Governance

Financial statements

Additional information

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Responsible business review

continued

ESG GOVERNANCE: BOARD AND MANAGEMENT

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 isour CEO, Karim Bitar. As a Board

member, he brings together continuity and responsibility for our ESG strategy. The Board reviews

progress in respect of theexecution of our ESG strategy, including two formal touchpoints for

ESG updates.

See pages 92 to 103 for information about the Board’s activities in this area during 2023.

Role of the Audit and Risk Committee

The Board’s Audit and Risk Committee (ARC) met seven times during the year and is responsible

for reviewing and approving our ESG and Task Force on Climate-related Financial Disclosures

(TCFD) reporting, in terms of data integrity and compliance with regulatory requirements, as

well as for oversight of the annual assurance of the Responsible business review (pages 38 to 65).

See page 115 for more information on the ARC’s activities in this area.

Our ESG Steering Committee is chaired by the CEO and includes six members of our Convatec

Executive Leadership Team (CELT). Committee members provide ESG stewardship across a range

of areas for Convatec.

The Committee oversees the formulation and delivery of the ESG strategy and meets three times

a year. It drives the strategy, progress and required actions to manage our ESG-related risks and

capitalise on opportunities. This is then reported to CELT for discussion, review and challenge.

TheCommittee updates the Board twice a year. Together, these measures ensure that all members

of CELT understand our business response to ESG topics and are committed to delivering against

our commitments to become a more sustainable business.

The Committee oversees four sub-groups, which are composed of leaders across the business.

The TCFD working group, which includes leaders from Risk, Finance and Operations teams, met

quarterly in 2023 to advance the essential work needed to meet TCFD requirements. The Human

Rights Committee, which comprises leaders from HR, Legal, Compliance, Procurement and Supply

Chain teams, monitors progress on protecting labour and human rights in our operations and

supply chain and met twice in 2023. The Diversity, Equity & Inclusion (DE&I) and Wellbeing Council

meets annually, alongside regular engagement with CELT and the Nomination Committee on

relevant DE&I topics. In 2023, we launched a Product Sustainability and Scope 3 emissions working

group, which met three times in 2023 to develop an action plan for addressing Scope 3 emissions

as part of Convatec’s net zero transition plan.

Our central ESG team works across Convatec and brings together stakeholder activities, initiatives

and priorities, 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.

In 2023, ESG was elevated in our Company-wide strategic planning process, with a focus on its role

in supporting execution in our FISBE strategy. Leaders from each business unit and functional area

revisited ESG priorities set in 2022 to ensure their alignment with business plans and to update

internal targets, initiatives and allocated resources. The process was designed to prioritise the

risks and opportunities presented by our ESG commitments, as well as to clarify the necessary

processes and activities needed to deliver on our targets and transition to a low-carbon economy.

Given the importance, complexity and dynamic nature of ESG considerations, the strategic

planning process also clarified various roles and responsibilities for positioning the Company

to meet our targets, particularly related to our net zero transition plan, see pages 58 to 60.

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

ESG STEERING COMMITTEE

Responsibilities

–

Custodian of ESG strategy and objectives,

including our approach to key sustainability

topics such as:

–

Our impact on the environment and

communities, including transition planning

–

Engagement with the workforce and DE&I

and Wellbeing

–

Human rights in the supply chain

–

Relevant key stakeholder engagement

across Convatec

–

Establishes and oversees sub-groups to drive

execution and focus in particular areas

Details on the relevant skills and experience of our

CELTmembers can be found on pages 98 and 99. The VP,

Internal Audit, Enterprise Risk & Insurance regularly attends

the ESG Steering Committee, with particular focus on climate-

related risks and opportunities. ESG assurance activity is also

supported through the Group Financial Controller.

In 2024, the ESG Steering Committee will continue to

facilitate our ESG agenda through a sustained focus

on net zero transition planning, ensuring readiness for

forthcoming regulatory compliance considerations and

further integrating ESG practices across direct operations

and our value chain, as well as other measures.

1. Not members of CELT.

CEO (Chair)

CFO

Chief Quality &

Operations Officer

Chief of Corporate Strategy

& Business Development

and General Counsel

Chief Technology Officer

and Head of R&D

Chief People Officer

Head of Investor

Relations, Corporate

Communications

& Treasury

Head of Global

Communications,

Engagement & ESG

Company Secretary

Strategic planning and

investment cycle

ESG stakeholders

drive progress,

performance,

compliance and

metrics

Board

Audit and

Risk

Committee

ESG Steering

Committee

ESG Steering

Committee

Human Rights Committee

DE&I and Wellbeing Council

TCFD working group

Product Sustainability

working group

Overview

Governance

Financial statements

Additional information

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Responsible business review

continued

We proactively engage with our stakeholders to understand their

perspectives, and build positive relationships which inform our practices

and decision-making.

1. Including distributors, large buying organisations, integrated delivery networks, hospitals and national and regional payors.

Engaging stakeholders

Stakeholder

Importance of stakeholders

and their key needs

How we 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, who have

chronic conditions. They need:

–

Safe, effective, accessible

and innovative products

–

Support and information

–

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

–

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

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

–

Ongoing clinical and commercial

dialogue

–

Targeted research

–

Specialist training programmes

–

Advisory boards

–

Key opinion leader meetings

–

Product and service insights inform

our development processes and our

day-to-day operations

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

–

Focus on DE&I and wellbeing

–

Ability to make a difference to the

people who rely on our products

and services

–

Career growth opportunities

–

Attractive reward and recognition

–

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)

–

Board-level engagement

programme

–

Performance reviews

–

Compliance helpline and website

(Speak up)

–

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 on behaving ethically

and transparently on pages 56

and 57

Channel

partners

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

–

Commercial dialogue

–

Marketing activities

–

Tender processes

–

Distributor due diligence

and compliance training

–

Quarterly reviews with partners

–

Continued inclusion in tender

processes

–

Development of valuable

relationships to address

consumer needs

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Convatec Group Plc Section 172 statement

Section 172 of the Companies Act 2006 (the Act) requires each of our Directors to act in a way that he or she considers,

in good faith, would most likely promote Convatec’s success for the benefit of its shareholders as a whole, having regard

to other stakeholders. Section 172 requires our Directors to have specific regard, amongst others, to the matters set out

in section 172(1)(a-f) of the Act. On pages 42 and 43 we explain how our Board engages with stakeholders to gain an

understanding of stakeholder issues and, during the year, discharged its duty pursuant to Section 172 of the Act.

On these pages, we identify our stakeholders and how Convatec engages with them, further detailing within our

ESG materiality matrix on page 44 what we believe to be the key issues to our stakeholders. As we continue our journey

topivot to sustainable and profitable growth, we are mindful of the importance of staying aware and responsive to

stakeholder needs.

The Directors acknowledge that every decision made will not necessarily result in a positive outcome for all stakeholders;

however, the Board aims to make well-considered decisions consistent with our vision, promise, strategy and values.

Stakeholder

Importance of stakeholders

and their key needs

How we engage

Outcomes

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

–

Commercial dialogue

and partnerships

–

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

–

Annual General Meeting

–

Active investor relations

programme: in 2023 we hosted

more than 260 investor meetings

including seven roadshows and

participation in 13 conferences

–

Post-roadshow investor surveys plus

feedback from corporate brokers

–

Relationship-led engagement with

debt providers

–

Access to the Chair of the

Board of Directors, and other

Board members

–

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 take into

account feedback from investors

–

Read more about our capital

allocation policy on page 11

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

–

Regular and ad hoc dialogue in

relation to product approvals

and other matters

–

Implementation of responsible

and diligent business practices

–

Compliance with legislation

and regulation

–

Input into relevant industry

consultations

Governments

Governments set out legislative and

other frameworks which underpin our

work. They need:

–

Responsible business practices

–

Employment

–

Income generation via taxes

–

Ad hoc dialogue in relation to

specific matters, including fiscal

(e.g. taxation), employment

(e.g. apprenticeships) and

corporate governance

–

Making a socio-economic

contribution to a range of

stakeholders, including through

paying taxes as described on

page 63

Communities

Communities are core to our people

and planet commitments. They need:

–

Employment opportunities

–

Medical education

–

Active management of

environmental impact

from operations

–

Ad hoc dialogue in relation

to specific matters

–

Support for a range of medical

education initiatives

–

Charitable partnerships and

donations, including NGO partners

–

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

–

Membership of several industry

bodies, including Association of

British HealthTech Industries,

MedTech Europe, APACMed and

AdvaMed

–

Participation in discussions in

relation to industry issues, including

best practice

–

Contributing to improved

understanding of key industry

issues

–

Helping to shape relevant agendas

and standards

Overview

Governance

Financial statements

Additional information

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Responsible business review

continued

Our ESG focus is on the operational, people-led

and environmental issues that are most material

to us and our stakeholders.

We regularly engage stakeholders (see page 42)

and, in 2023, reassessed ESG materiality. This helped

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. The process

was guided by third-party expert support and aligned

to a range of good practice and standards.

The process 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 ESG Steering Committee

and Board. Insights are aligned with our approach

to enterprise risk management and established

corporate governance.

We will use the findings to strengthen stakeholder

engagement in the coming years and ensure alignment

with emerging disclosure requirements.

We anticipate conducting our next materiality

exercise in 2026, aligned to regulatory expectations

at that time, and to support the continued evolution

of our approach to ESG.

IDENTIFYING KEY ISSUES FOR STAKEHOLDERS

Product quality and patient

safety

Climate change

Responsible business

Corporate governance

Sustainable product and

packaging design (circular

economy)

Workers elsewhere in the

value chain (inc. health

and safety)

Developing user-centric

solutions

Waste (operational)

Customer access and

affordability

Water (operational)

Talent attraction and

development

Geopolitical risks and value

chain resilience

Human rights and labour

rights in own workforce

Local community

engagement

Diversity, equity & inclusion

and wellbeing

Natural capital and

biodiversity/ecosystems

Data privacy and

cybersecurity

ESG MATERIALITY MATRIX

Impact on the business

Impact on people and planet

Products & customer

Environmental

Governance

Cross-cutting

Social

KEY

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

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. Our UNGC Annual Communication on Progress

SDG target

Contributing activity and policies

SDG 3.4:

By 2030, reduce by one third premature

mortality from non-communicable diseases

through prevention and treatment and promote

mental health and well-being

SDG 3.8:

Achieve universal health coverage,

including financial risk protection, access to

quality essential health-care services and access

to safe, effective, quality and affordable essential

medicines and vaccines for all

–

Patients and HCPs served

–

Improving efficacy and safety of our products through innovation

–

Supporting wellbeing of colleagues (page 54)

–

Improving access to products and services by focusing on

affordability (page 50), supply chain (page 51) and education

(page 63)

–

Vitality Index (page 48)

–

Quality target (reducing complaints per million) (page 49)

–

Target to reduce voluntary turnover (page 52)

SDG 4.4:

By 2030, substantially increase the

number of youth and adults who have relevant

skills, including technical and vocational skills, for

employment, decent jobs and entrepreneurship

–

Apprenticeship programmes (page 53)

–

Building capabilities of our people (page 53)

–

Medical education (page 63)

–

NGO partnerships (page 64)

SDG 8.5:

By 2030, achieve full and productive

employment and decent work for all women and

men, including for young people and persons with

disabilities, and equal pay for work of equal value

SDG 8.7:

Take immediate and effective measures

to eradicate forced labour, end modern slavery

and human trafficking and secure the prohibition

and elimination of the worst forms of child labour,

including recruitment and use of child soldiers,

and by 2025 end child labour in all its forms

SDG 8.8:

Protect labour rights and promote safe

and secure working environments for all workers,

including migrant workers, in particular women

migrants, and those in precarious employment

–

Strengthened engagement, audit and risk assessment

of suppliers (page 57)

–

Expanding apprenticeship programmes (page 53)

–

Ensured 100% of our locations at or above the living wage

(page 54)

–

Health and safety programming (page 55)

–

Updated Code of Conduct; Human Rights & Labour Standards

Policy; and Global Third Party Manual

–

Human Resources policies

SDG 10.2:

By 2030, empower and promote the

social, economic and political inclusion of all,

irrespective of age, sex, disability, race, ethnicity,

origin, religion or economic or other status

SDG 10.4:

Adopt policies, especially fiscal, wage

and social protection policies, and progressively

achieve greater equality

–

Diversity, equity & inclusion and wellbeing commitments

(page 54)

–

Strengthened and expanded our employee resource groups

(page 54)

–

Our products and services help people with chronic

conditions regain increased mobility and ability to partake

in societal activities

–

Updated hiring practices to reduce barriers and increase

diversity (page 54)

–

Maintain a target for women in senior leadership

–

Gender pay gap reporting

SDG 12.5:

By 2030, substantially reduce waste

generation through prevention, reduction,

recycling and reuse

SDG 12.6:

Encourage companies, especially large

and transnational companies, to adopt sustainable

practices and to integrate sustainability information

into their reporting cycle

–

Waste, water and packaging waste reduction plans developed

(page 62)

–

Transition plan to meet our net zero target (page 58)

–

Enhanced the data completeness of our digital product

sustainability tool (page 50)

–

Product sustainability working group drives the Scope 3

emissions reduction levers to meet our net zero target (page 59)

SDG 13.3:

Improve education, awareness-raising

and human and institutional capacity on climate

change mitigation, adaptation, impact reduction

and early warning

–

Increased depth of internal communications on climate change

topics such as COP28, driving tips, and the SBT process to engage

employees in our commitments

–

Included educational resources as part of ESG Steering

Committee meetings and Board updates

–

Working with our suppliers on emissions reductions

–

Science-based targets and aligning with the UK Transition

Plan Taskforce guidance (page 58)

can be found at www.convatecgroup.com/sustainability/esg-

reports-and-data and on the UNGC website.

Though all 17 goals are interlinked and important to

stakeholders, we have prioritised six goals where we

can contribute to a more sustainable future:

Overview

Governance

Financial statements

Additional information

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Responsible business review

continued

Our ESG targets

We are committed to sharing progress towards our ESG

targets and milestones. We track our progress throughout

the year and report to management and the Board.

Delivering for our customers

Target

Progress in 2023

Status

Quality:

Reduce complaints per million (CPM) by 8% for 2023 against

a 2022 baseline

12.2% (2022: 10.0%)

Page 49

Reduce complaints per million (CPM) by 8% for 2024 against a 2023 baseline

Replaces 1 above

Page 49

Product vitality:

Vitality Index of 30% by Q4 2025

27% (2022: 26%)

Page 48

Product development:

Expand use of Green Design Guidelines (GDGs) digital tools, with at least five

new product launches assessed by Q4 2023

6 new products assessed by the GDGs

Page 50

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, as we continue to expand

the impact of the platform

Replaces 3 above

Page 50

Enabling our people to thrive

Target

Progress in 2023

Status

Health and safety:

4.1 Maintain an annual Operations Hazard Observation Rate above 200

per 200,000 hours worked

265 per 200,000 hours worked

(2022: 234)

Page 55

4.2 Sustain Operations Lost Time Injury Rate below 0.22 by Q4 2025

0.22 per 200,000 hours worked

(2022: 0.20)

Page 55

Diversity, equity & inclusion and wellbeing:

5.1 At least 40% females in senior management by Q4 2024

44% (2022: 38%)

Page 54

50% of senior management are female by Q4 2027

Replaces 5.1 above

Page 54

At least 25% of senior management are from ethnic minority/under-

represented groups by Q4 2027

Self-ID campaign

Page 54

5.2 Reduce voluntary turnover to less than 10% by Q4 2023

10.0% (2022: 12.9%)

Page 52

Sustain voluntary turnover at 10% or less by Q4 2027

Replaces 5.2 above

Page 52

The 2023 progress against aselect set of target metrics have been reviewed as part of the external

assurance process. For further details see the assurance statement on page 65 and basis of reporting

at www.convatecgroup.com/sustainability/esg-reports-and-data

1. Excluding exit from hospital care and associated industrial sales.

PROGRESS KEY

Achieved

New

In progress

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Behaving ethically and transparently

Target

Progress in 2023

Status

Human rights:

6.1 Launch annual compulsory training programme on Human Rights

for all employees by Q4 2023

Launched Human Rights training

to all employees

Page 56

6.2 Strengthen our risk management practices focused on labour standards

and modern slavery through our procurement and supply chain, including

through the introduction of a new responsible supplier assessment

platform by Q2 2023

Integrated use of risk assessment

platform in our supplier engagement

programme. Engaged with key

suppliers to join the platform.

Page 57

6.3 Ensure that supplier’s sites covering 80% of spend across direct,

external manufacturing and logistics are registered with our risk

assessment platform by end Q4 2025

2023 is our baseline year

Page 57

Code of conduct:

7.1 Ensure at least 95% of employees trained on an annual basis

by Q4 2023 and in subsequent years

90% trained in 2023 (2022: 96%)

Change attributed to the transition to

a new learning management system.

Page 56

Procurement and supply chain:

8.1 Ensure that 80% of Convatec’s in-scope spend is with suppliers with

whom we have engaged to request their participation in our EcoVadis

platform by Q4 2023

89% of in-scope spend supported

by suppliers engaged to participate

with EcoVadis

Page 61

8.2 Ensure that suppliers covering 60% of our Scope 3 category 1

emissions have committed to set science-based targets by end Q4 2026

Commenced new engagement

programme with suppliers.

Suppliers covering 19% of our category

1 emissions have committed to set

near-term science-based targets at

end Q3 2023

Page 57

Protecting the planet and supporting communities

Target

Progress in 2023

Status

Emission reduction:

9.1 Achieve net zero carbon (in line with our SBTi target) by 2045

See below

Page 58

9.2 Reduce our combined Scope 1 and 2 emissions by 70% against

a 2021 baseline, in line with our SBTs, by 2030

55%

(2022: 32%)

Page 60

9.3 Reduce our Scope 3 emissions by 52% per sold product against a 2021

baseline, in line with our SBTs, by 2030

Validated target with SBTi

Page 61

Science-based target commitment:

10.1 Set quantitative targets for Scope 3 GHG emissions, against

a 2021 baseline, aligned with the SBT criteria by Q4 2023

See 9.3 above

Page 58

10.2 Achieve validated SBT for Scope 1, 2 and 3 emissions by Q4 2023

Achieved validated Scope 1, 2

and 3 targets in December 2023

Page 58

Community contributions:

11.1 Establish new NGO partnership(s) and funding commitments

by Q4 2022

Launched three-year, $2million

partnership with international NGO,

Partners In Health

Page 63

11.2 Contribute $2 million to our community partners to improve lives

by Q4 2025

See above

Page 63

11.3 Contribute responsibly to a range of HCP and patient education

programmes. Set specific targets for 2023-25 on reach and impact

Approximately 240,000 HCPs and

patients participated in educational

programming led by Convatec.

Page 63

Medical education:

12.1 Reach more than 500,000 healthcare professionals with medical

education programmes per year by 2027

See 11.3 above

Page 63

12.2 Expand healthcare professional education programmes through the

development of a global medical education digital platform and review of

activity to enhance impact by end 2024

Ongoing development of Medical

& Clinical Affairs capabilities

Page 63

Community impact:

By 2027, touch one million lives in our communities through medical

education programming and support of strategic community partners

Strengthened programmes

and partnerships

Page 63

2. 35% in 2023 vs 2022.

Overview

Governance

Financial statements

Additional information

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Responsible business review – customers

DELIVERING

FOR OUR

CUSTOMERS

2023 highlights

–

Launched six new products

–

Added antimicrobial nitric oxide

technology to our R&D portfolio

–

Rolled out new customer

loyalty programme

–

Enhanced quality system

–

Enhanced data completeness in

our digital product sustainability tool

and assessed six projects

2024 priorities

–

Support roll out of new products and

continue to develop our product pipeline

–

Continue focus on product quality,

efficacy and safety

–

Advance our focus on customer loyalty

–

Strengthen clinical and new product

research capabilities

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. We have invested $104 million

(2022: $92 million) in 2023 in (adjusted)

R&D and continued to make progress

towards our goal of reaching and

sustaining a 30% Vitality Index by 2025.

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. 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 four 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 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 and Slovakia.

–

Portfolio management:

Our

investment must be properly managed

in order to maximise value for all

our stakeholders. It starts with

detailed regular reviews as described

above. We look through all projects

to prioritise where resources are

best deployed. In between reviews,

we have our budget and strategic

planning process and regular

engagement with the Board.

–

Continuous improvement:

While

we are building momentum and

in a position where we are now

developing and launching multiple

medical technology platforms each

year, we are also identifying learnings

to continuously improve our overall

new product scale-up process. We have

begun incorporating these learnings

into our IDEAL stage gate review

process, as well as our overall new

product operating system spanning

capabilities, metrics, governance, tools

and infrastructure. This will help ensure

we are rapidly and effectively driving

continuous improvement in terms of

quality, speed and value across our

innovation portfolio.

New products and solutions

In 2023, we launched six new products.

We also provided new infusion sets

to support four new pump launches.

Our new products offer significant

benefits for the user. ConvaFoam™

offers customers a broad portfolio of

dressings that provide longer wear times

due to better absorption and improved

adhesive technology and GentleCath Air™

for Women 2.0, is our improved female

compact catheter offering.

During 2023, a total of 82 patent filings

were made (2022: 83) and ideation has

been supported by new capabilities

in preclinical research that looks at

underlying physiological processes,

enabling our engineers to create highly

targeted solutions to address the most

challenging problems.

Convatec continued to strengthen

strategic partnerships in 2023. Partnering

with Tandem Diabetes Care, Convatec

supported the production of Tandem

Mobi, the world’s smallest durable insulin

delivery system. Specifically for Tandem

Mobi, Convatec developed new, kink-free

tubing, with discretion and flexibility. The

new insulin pump system aims to provide

people living with diabetes with new

options in wearability, the flexibility to

disconnect, and full smartphone control.

Dr. Divakar Ramakrishnan

EVP, Chief Technology Officer and

Head of Research & Development

“Forever caring means we will

never stop listening, learning

and improving our solutions for

customers and patients. Today,

we are working closer than ever

before with our customers.

We put their needs at the heart

of our innovation so that more

people can live their lives to the

fullest. We’re embedding an

innovation mindset and continue

to prioritise safety, quality and

efficacy in our solutions.”

Innovative and patient-centric

products, services and solutions

that improve lives

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Convatec partnered with Beta Bionics in

2023 on the iLet Bionic Pancreas system,

the first and only automated insulin-

delivery system that determines 100%

of all insulin doses. Convatec is the sole

supplier for the infusion set used in

the system, which, by simplifying user

experience, aims to significantly improve

diabetes management and the quality

of life and convenience for people living

with diabetes. Our partnership with

AbbVie focused on the launch of drug

Produodopa for advanced Parkinson’s

disease in Japan, a continuous under-

the-skin drug infusion delivered via

a pump through Convatec’s neria™

guard infusion set.

Strategic investments

In 2023, Convatec acquired the anti-

infective nitric oxide technology platform

of 30 Technology Limited which includes

new product assets and research and

development in the anti-infective space.

The innovative technology platform

and new product pipeline complement

Convatec’s Advanced Wound Care

portfolio and strengthen our ability

to provide best-in-class solutions for

patients. Other potential applications for

this technology include the prevention

of urinary tract infections as well as other

transformative applications. For more

information on Advanced Wound Care,

see page 18.

Strengthened customer loyalty

In 2023, we strengthened our focus on

customer loyalty with a new programme

to embed customer Net Promoter Score

(cNPS), building on work in our Home

Services Group which has established

excellent practice in using cNPS to

continuously improve its customer

support. We have built on this with a

series of pulse surveys in the US and

Europe, reaching over 30,000 healthcare

professionals (HCP) and patients.

By actively listening to what our

customers are saying, and ensuring

we act on that feedback, our customer

loyalty programme will help us become

a more customer-centric organisation.

Product quality

Product quality is key for our customers

and vital in earning Convatec a

reputation as a trusted provider. We

have established quality certifications in

place across the business. In 2023, we

set an ESG target to reduce complaints

per million (CPM) by 8% against a 2022

baseline. We met this target with a 12.2%

reduction

. Please see page 65 for the

scope of our ESG assurance, basis of

reporting and ESG definitions.

Furthermore, in 2023, we continued to

build on our commitment to improve

quality by:

–

Delivering on improvements of core

quality system processes to increase

efficiency and effectiveness of

problem solving

–

Simplifying and standardising core

quality processes and tools across

the business

–

Leveraging data analytics and

technology solutions to improve alert

timing, decision-making and increase

our pace of execution

–

Enhancing internal problem-solving

capabilities and increasing robustness

in the areas of quality systems, quality

compliance and supplier quality

In 2024, we aim to further reduce CPM

and we will also further expand our

data segmentation capability to support

prioritisation and focus on targeted

improvements to maxmise impact on

the experience of our customers.

Product safety is also a key priority for

our customers and for our reputation

as a trusted provider. In 2023, we

successfully achieved recertification

of our quality system. Regulators

consider most of the products and

solutions we develop to be of low risk to

users. Nevertheless, we have a rigorous

and robust supplier audit mechanism

and quality management system. Notified

bodies, such as the British Standards

Institute (BSI) and GMED also review

our quality processes and procedures

on an annual basis. Moreover, our

quality compliance programme focuses

on continuously improving through

a rigorous corporate internal audit

programme. By strengthening our core

capabilities, this continually enhances

our overall quality culture.

We conducted a total of 98 audits

on suppliers during 2023 (2022: 153).

Our ability to perform onsite audits

improved in 2023, so we prioritised

onsite follow-ups with our critical

suppliers. We performed fewer audits

compared to 2022, due to the exit of

our hospital care business, which saw

a reduction in our supply base.

From time to time, it may be considered

necessary to conduct a product recall,

following a detailed internal quality

investigation led by our Quality,

Regulatory and Medical and Clinical

Affairs teams. Recalls are controlled

by standard operating procedures,

all of which underwent continuous

improvements in 2023 as part of our

focus to elevate standards across the

quality system. In 2023, we executed

three product recalls (2022: 11), including

a FDA Class 1 recall in the US for an

infusion set. Each of the three recalls

in 2023 occurred where the distributed

products did not meet the requirements

of our quality system and we took all

necessary steps to ensure customers and

patients were informed and supported.

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:

Availability:

We continue to evolve

our sales channels to best meet our

customers’ needs. As an example

of how we are progressing patient

and HCP support, our mobile apps

continue to enhance patient access for

Ostomy patients. Me+ nurses are able

to enhance the support they provide

through triaging challenging cases

for telehealth intervention to provide

support and guidance for patients

needing enhanced teaching and

troubleshooting. 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

Acadamy. These programmes are

rapidly developing where access

has historically been limited.

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. For example,

in Ostomy Care, we launched a medical

education series on sexual health with

a successful presentation at Wound

and Ostomy Care Nursing (WOCN)

2023 and regional engagement

programmes to enhance the ability of

HCP’s to provide appropriate care and

guidance to ostomates on intimacy.

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

literature, videos and online support

and deliver millions of products a year.

In Ostomy Care, we developed the first

abdominal stoma model with finite

element analysis of our convex range,

in order to guide HCPs to understand

emerging evidence on when to use

and how to select convex products.

This translational approach is the first

stage in educating the HCP and then

the patient on appropriate product

selection by visualising recent research

from an international panel of experts.

1. Excluding exit from hospital care and associated industrial sales

Overview

Governance

Financial statements

Additional information

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Responsible business review – customers

continued

Affordability:

Affordability is

a key issue which we strive to address

through competitive pricing and

innovation to increase product

effectiveness and, as a result, reduce

healthcare costs and improve

patients’ lives. Our global Pricing

Centre of Excellence considers the

role of economic affordability in

product availability. We are launching

a new Reimbursement and Market

Access Centre of Excellence in 2024.

In Ostomy Care, we completed a

health economics outcomes research

project in Norway, demonstrating

the cost savings of moldable

technology compared to cut-to-fit

products currently on the market. In

China, we set up two Patient Access

Programmes (PAPs); firstly, an Ostomy

PAP for patients from poorer economic

backgrounds, providing access to

high-quality solutions and appropriate

medical knowledge. Secondly, an

Advanced Wound Care PAP which

focuses on children suffering from

burns injuries, by helping their physical

and psychological recovery. We invite

HCPs from burns wards to collect

treatment plans and jointly explore

alternative treatment methods.

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 58).

Where possible, we aim to lower the

carbon intensity of our products, guided

by data obtained through our digital

product sustainability tool, Green

Design Guidelines (GDGs) and life

cycle assessments.

Our GDGs were rolled out in 2022

and are an important part of our

IDEAL process, helping us systematically

examine the environmental impact

of our solutions and consider ways

to reduce their impact. In addition

to calculating carbon footprint,

the tool assesses the impact of our

products and packaging on water use,

circularity, substances of concern and

nonquantitative ’red flags’ (e.g. potential

use of substances which are fully legal,

but could be seen as less favourable to

the wider environment). The tool can

also assess sustainability factors of new

products compared to existing products.

We will continue to identify projects

that have the potential to reduce the

environmental footprint of our portfolio.

In 2023, we assessed six launches

alongside using the tool to evaluate

design changes.

Given our focus on patient safety

and the regulatory framework in

place 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. 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

the value chain with regards to the

development of materials and solutions

that support a net zero ambition.

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.

Sustainable packaging

Primary packaging

is strongly

connected to the product, forming

a sterile barrier and is therefore an

essential component of our products and

packaging. We are reviewing our primary

packaging roadmap to increase its focus

on sustainability.

For example, in 2022 we commenced a

flow wrap project to eliminate PVC and

reduce packaging weight by almost 80%

on all baseplates in our Ostomy Care

portfolio. We have continued to roll-out

flow wrap this year and through the year

ahead. We have also strengthened our

packaging team further and elevated

our focus on packaging in our strategic

planning process and ESG governance.

Secondary and tertiary packaging:

100% of our cartons and shipping boxes

are paper-based and therefore recyclable.

Moving forward we’re focusing efforts to

reduce carton size and emissions, while

maximising space efficiently.

In addition, we are working with

suppliers that support our ambition

to achieve FSC/PEFC certification.

Our focus will be to achieve certification

as part of new product development

in the coming years.

We have strengthened the quality of our

Extended Producer Responsibility (EPR)

reporting by establishing an internal

digital product sustainability tool based

on product and packaging composition

at a component level. From 2024, this

will enable more precise calculation of

packaging weights and their relative

carbon footprint.

Simplify

Minimise pack size

Recycle ready

Transition existing products

As we transition away from existing packaging, we intend to simplify

operations and reduce costs.

Always ensure the package size is optimal.

Move to smaller, recycle-ready packaging for existing products.

Increased focus on recyclability of materials.

OUR SUSTAINABLE PACKAGING DESIGN PRINCIPLES

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Clinical studies

We made significant progress in 2023

to ramp up clinical evidence generation;

starting nine clinical studies, including

a global randomised clinical trial, and

also delivered three healthy volunteer

studies (HVS). This work has resulted in

16 peer-reviewed publications and 28

scientific posters and presentations to

share evidence generation work. This

represents a significant increase to

previous years.

Our HVS work took place at our user

insights and evidence facilities, based

at our technology centre in Deeside,

Wales. The face-to-face interactions

with healthy volunteers allows us to

explore our current products and inform

new knowledge and insights for future

design to our portfolio. The clinical data

generated supplements existing pre-

clinical data on our products. To ensure

diversity in our clinical data, patients from

our ConvaClinics across Latin America are

also included in our clinical studies.

Use of animals in research

At Convatec, we are always looking for

ways to improve welfare and 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 2023 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

the sole purpose of meat production. Our

ex-vivo tissue suppliers are either AAALAC

accredited or are registered to supply

animal by-products (EU Article 23, No.

1069/2009).

In 2023, as part of our biological risk

assessment to determine compatibility of

our devices within a biological system, we

conducted biocompatibility tests using

nine rabbits and 100 rodents (2022: 41

rabbits and 275 rodents). Additionally,

we conducted a performance and

efficiency study of infusion catheters

using two swine at Aalborg University

Hospital, Denmark (2022: two). 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

Satisfying and exceeding our customer

expectations continues to be a top

priority. Throughout 2023, we’ve

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.

2023 saw the 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

inventory. Our manufacturing network

has seen additional capacity come online

to support service and sales growth. We

are continuing our efforts to establish

dual source raw material on our strategic

raw materials.

We have a range of partnerships with

logistics providers to support our agility

to move products without delay, respond

to our customer expectations for delivery

lead-times and balance cost.

Data privacy

We operate a privacy governance

framework to ensure that we protect

and properly process personal data

and comply with all privacy regulations

including the European Union General

Data Protection Regulation (GDPR), the

California Consumer Privacy Act (CCPA)

and the Personal Information Protection

Law PIPL (China).

This framework includes policies,

procedures, controls and records

that are implemented on a global

basis. This is supported by mandatory

employee training, which forms part

of our induction process for new

employees and annual updates for

existing employees, underpinned

by our compliance programme.

Its implementation is overseen by

several internal governance groups,

including our Cybersecurity Steering

Committee. In 2023, we undertook

external, independent assessment

and shared findings with the Board,

including opportunities for continuous

improvement. We have undertaken a

range of activities to stengthen our data

privacy programme and maturity. Our

various data policies, procedures and

controls are regularly assessed by our

internal audit team. In certain markets,

trained privacy champions, supported

by third-party experts, provide first-line

local support on privacy matters. This

framework is continually reviewed to

ensure any changes in legislation are

incorporated and is regularly reviewed

for effectiveness by the ARC.

Our new data privacy governance

structure ensures global leadership

of privacy and compliance across

Convatec. This is achieved by

implementing executive leadership,

accountability and sponsorship for critical

personal data classes, by assigning four

CELT members accountable for ensuring

that the use of four critical personal

data classes across the organisation

is properly governed.

From time to time, we may experience

theft or inadvertent disclosure of data.

In 2023, there were three reportable

issues to data protection authorities (one

report was made jointly to the Dutch

and Belgian DPA, another to the Polish

DPA and one to the US authorities). No

significant volume of data subject access

requests were received. For further

information on our information systems,

security and privacy risk, see page 81.

Overview

Governance

Financial statements

Additional information

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Responsible business review – colleagues

ENABLING

OUR PEOPLE

TO THRIVE

2023 highlights

–

Refreshed people strategy and commenced

roll-out of new HR operating model

–

Advanced our journey to become

a listening organisation and drive

employee engagement

–

Strengthened learning and development

to embed high-performing teams

–

Sustained momentum across health and

safety, DE&I and Wellbeing initiatives

–

Enhanced talent management practices

2024 priorities

–

Integrate and scale up our

new HR operating model

–

Roll-out new employee listening

platform to support ongoing

dialogue and feedback

–

Focus on supporting colleagues,

leadership development and

career progression

–

Continue to elevate DE&I

and Wellbeing practices

–

Advance talent development

practices and initiatives

1. Includes eight Non-Executive Directors. For full breakdown, see page 54.

2. This includes voluntary and involuntary turnover.

At the end of 2023 we employed

10,136

people (2022: 10,036).

Employee turnover in 2023 was 18.8%

(2022: 28.1%). Voluntary turnover in 2023

was 10.0% (2022: 12.9%). 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 54.

While our employees are based in 45

countries, approximately 55% of our

workforce is employed at our nine

manufacturing locations (2022: 58%). In

addition to our facilities in the Dominican

Republic, Mexico and Slovakia, we have

manufacturing operations in the UK (two

locations), Denmark (two locations) and

Memphis, United States. Consistent with

our corporate theme of simplification

and productivity, in 2023, we closed

our manufacturing site in Roosendaal,

the Netherlands, moving operations to

our larger site in Michalovce, Slovakia.

Of countries with no manufacturing

operations, China has the largest

concentration of employees.

Our people strategy

Our people strategy has evolved to

reflect where we are as a company and

the prioritisation required to win in

the coming years. Our people mission

is:

Creating a winning culture where our

people can learn, grow, thrive and make

a real difference.

To do this we focus on

three core areas:

–

Build key capabilities:

Anticipate and

embed core capabilities to support

our pivot to 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:

Build a best-in-class HR team, digital

capabilities and foundation that drives

simplification and productivity and

improves employee experience.

Build key capabilities

We are on a journey to strengthen

capabilities and build stronger integrated

talent practices through key focus

areas including: democratising learning

for all employees, building strong

leaders to deliver our winning culture,

and enhancing manager capability to

attract and retain employees.

We launched new learning tools to

support colleague development including

access to best-in-class content, facilitated

by industry experts. We have designed

and developed instructor-led sessions as

part of virtual onboarding that welcomes

our new joiners to Convatec. These

enable new recruits to meet one another,

build their Convatec knowledge and

connect with the right people to grow

their internal network.

We enhanced our talent review process

by identifying development opportunities

for potential successors for critical roles

in order to build a stronger senior leader

pipeline. Additionally, we invested in mid-

level leader development and launched

an online coaching platform.

To ensure more global and standardised

hiring practices, we designed and

launched a learning journey to support

hiring managers and teams with an

end-to-end hiring process including

structured interview guides. This effort

is a meaningful step forward to strengthen

manager capability and candidate

experience to attract the best talent.

This year we continued to embed our

high performing team principles, with

a broader population of leaders across

the business, focusing on leadership

capability to build an inclusive culture.

Our goal in 2024 is to cascade our team

principles throughout the organisation.

Our values

Our values ensure we all work and act in

ways that deliver our forever caring promise,

every day.

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

Moyra Withycombe

Interim Chief People Officer

“2023 has been a significant

year as we commenced roll-out

of our new HR operating model,

putting employee experience

at its heart. It’s an exciting time

for our people at Convatec as

we bring forever caring to life

and create a winning culture

where our people can learn,

grow, thrive and make

a real difference.”

Ensuring the health, safety and

wellbeing of our people and using

their talent for good

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Shape our winning culture

Our people strategy was designed to

help shape an engaging, inclusive and

high-performing culture that enables all

our people to give their best and fulfil

their potential wherever they work. Our

values guide our behaviours and how

we run our business every day. They are

embedded in our policies and processes,

including our performance reviews, which

assess both the ‘what’ and ‘how’ of each

employee’s contribution.

2023 saw us redouble efforts to strengthen

employee engagement. We continued our

live global town hall series which engages

offices and manufacturing sites around

the globe with updates, patient stories

and conversation with CELT. We also

introduced CELT Live, giving colleagues

the opportunity to ask questions directly

to leadership on any topic in an open

forum, virtual ‘coffee and conversation’

series, initially focused on our CEO and

CFO. We also hosted our third iteration of

the Big Conversation, an initiative designed

to bring teams together in leader-led

discussions around core topics including

our vision, promise, strategy, values and

team principles.

In July 2023, we launched a new employee

voice platform to embed employee Net

Promoter Score (eNPS), following our last

Organisational Health Index survey in

October 2022. The platform will support

our ambition to become a listening

organisation, using regular surveys aligned

to comprehensive external benchmarks.

A representative sample of around 3,800

colleagues were invited to participate in

our pilot during 2023. We conducted two

surveys in the year, with above benchmark

results and strong participation rates (more

than 90% on an aggregated basis). We will

establish our global baseline during 2024

and set an eNPS target for the business.

Recognising colleagues and their

contribution is important. In 2023,

Convatec Champions, our way of

celebrating colleagues who go the extra

mile, surpassed more than 10,000 awards

since its launch in September 2022.

Built on a best-in-class digital platform,

any colleague can make a nomination for

an award for good work and behaviours

aligned to our promise and values.

Reports are regularly provided to the Board

to help assess and monitor workplace

practices and culture, including progress

on our people strategy, employee

engagement, DE&I and Wellbeing, and on

talent and succession planning.

Unlock potential to enable change

Some of our systems and processes

have been difficult to navigate,

including manual ways of working

and legacy tools. This has prompted

us to optimise our employee service

experience through simplification and

digitisation as part of HR transformation,

including leveraging AI and machine

learning capabilities.

This year we have shifted to more global

processes and ways of working through

a refreshed HR operating model, so that

we can bring greater consistency to

how HR and other functions support

the business and improve colleague

and people manager experience, with

a focus on:

–

Processes:

Standardised ways of

working and leveraging digital tools,

underpinned by data driven insights

–

Improving career pathways:

Bringing to life a new, consistent

career framework, helping colleagues

around the world understand more

clearly where their role currently fits,

and their future career planning and

development

–

Simplifying global payroll offering:

Strengthened payroll compliance,

efficiency and consistency, governance

and insight through improved

automation

–

Refreshing our HR operating model:

Brings together our HR people

partners, Centres of Excellence, HR

Service Delivery as well as our Global

Business Services capability to support

day-to-day HR solutions that benefit

everyone.

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.

Building high-performing teams

We continued our high-performing teams

programme, including our partnership

with the University of Michigan Ross

Business School. Following the roll-out

of our high-performing team principles

in 2022, we continued to engage leaders

and their teams through 2023 in order

to embed the team principles across

Convatec, in support of our values

and behaviours (see page 52).

Next generation talent

Part of building core capabilities is

engaging with and training the next

generation. In Lisbon, Portugal we

welcomed the first cohort of six finance

graduate trainees who started their initial

placements at our GBS centre. The pilot

programme offers an opportunity for

talented graduates, with high potential

and strong critical thinking skills, to

develop and learn across a range of

finance teams.

Partnering with Coleg Cambria, we

have built an apprenticeship programme

for our manufacturing site in Wales,

UK. The three-year apprenticeship

programme, aimed at students and

young adults aged 16+, adds value

through approaching multiskilling

in a structured way. In 2023, the

Deeside site successfully recruited

one engineering apprentice, who will

be working within the maintenance

team at the site, bringing the total to

nine apprentices in engineering and

manufacturing, and more are in the

pipeline for 2024.

In 2023, the Michalovce site in Slovakia

continued its partnership with Technical

University Košice by supporting students

with their diploma theses. Biomedical

engineering and mechanical engineering

students participated in career days in

which the site hired two graduates from

the university in 2023 for critical positions

within Operations and Technology &

Innovation (T&I).

Our Haina site also supports engineering

careers, as part of the Educational

Committee for the free zone sector

with the major universities in Dominican

Republic, and hosts over 200 students

from five universities. After every

graduation, the site receives resumes

of new professionals to ensure an

eligible pool of early talent candidates

is available.

To encourage innovation among

students, Convatec hosted a hackathon

in Denmark, where university students

could participate in competitions and

workshops to develop infusion care

solutions related to product design,

digital support and sustainability. As a

result, our innovation team has further

developed an idea with the winning

team: an accessory for the product Neria

Guard™ to help people with weak fine

motor skills, for example Parkinson’s

patients, apply the infusion set to the

body without any help.

For the second year, we were pleased

to send a delegation to the One Young

World Summit in Belfast, UK. The annual

summit brings together young leaders

from around the world to work on social

action programmes.

Overview

Governance

Financial statements

Additional information

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Responsible business review – colleagues

continued

Gender diversity demographic data

Male

Female

Total

Number

Board

1,2

CELT

Senior management

Other employees

10,050

3,765

6,285

Total

1, 4

10,136

3,812

6,324

1. Includes seven Non-Executive Directors.

2. The CEO and the CFO are included as members of the Board and CELT. Stated total numbers 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 2023 is 44% (2022: 38%). Total population in 2023 is 79 (2022: 92).

4. Excludes freelancers, independent contractors or other outsourced and non-permanent workers who are

hired on a project or temporary basis

Diversity, Equity & Inclusion (DE&I)

and Wellbeing

We are proud of the progress we’re

making to advance DE&I and Wellbeing

at Convatec and deliver on our ambitious

commitments. We recognise the multiple

benefits of ensuring our business reflects

the diversity of customers and patients

we serve, while ensuring colleagues can

be themselves.

Building on momentum since launching

a refreshed approach to DE&I and

Wellbeing in 2022, we have continued

to embed DE&I and Wellbeing as part of

our overall ESG governance – including

our DE&I and Wellbeing Council led by

our Chief People Officer.

In 2023, alongside our existing Employee

Resource Groups (ERGs) – Women’s

Network, Pride Network (LGBTQIA+)

and Black Employee Network (BEN) – we

launched our fourth ERG, Latinx, for the

Latin America community, which makes

up a large part (~40%) of the workforce.

Each ERG has CELT-level sponsorship and

celebrates key moments in the calendar

such as Pride Month, Black History

Month, International Women’s Day

and Hispanic Heritage month.

We launched a 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/ethnicity.

The information collected will help us

measure progress so that we can respond

to a range of stakeholder requirements.

We track employee diversity through our

HR systems, and the Board reviews our

diversity profile on an annual basis. In

2023, we strengthened our HR systems

and enabled colleagues with greater control

to update their personal information,

including adding pronouns, ethnicity,

gender identity and disability if they wish.

We have four pillars to our DE&I and

Wellbeing approach, with the following

key activities in 2023:

Cultivate an inclusive culture

forour 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

300 colleagues.

–

Rolled out diversity-focused training,

aligned to our high performing team

principles, to our global leadership team.

Build a diverse workforce with

greater gender and ethnic

diversity across our leadership

–

Exceeded our ESG target of at least

40% female representation in senior

management by 2025.

–

Launched a campaign to enable colleagues

to self-identify on our HR systems.

–

Advanced talent acquisition practices to

better recruit and retain diverse talent

Support wellbeing as a priority

for colleagues

–

Continued to embed flexible and hybrid

working as part of Our Work Life.

–

Celebrated our fourth annual Convatec

Day, aligned to wellbeing and global

mental health awareness day.

–

Strengthened our culture of

recognition with more than 10,000

awards through Convatec Champions.

Enhance our reputation

through leveraging our scale,

partnerships and programmes

–

Consistent pay structure, benefits

and flexibility for employees aligned

to their role.

–

Reviewed parental leave policies

in order to transition to equalised

maternity and paternity leave in the

coming years.

For more on our DE&I and Wellbeing

journey, go to www.convatecgroup. com/

sustainability/enabling-our-people/dei-

spotlight-page/

Increasing diversity

At 31 December 2023, women

represented 44% of our Board

membership (2022: 40%) and 44% of

our CELT and senior management team

(2022: 38%). Our gender diversity profile

at 31 December 2023 is found below.

Our gender pay gap

In 2023, the Remuneration Committee

reviewed our UK gender pay ratio.

The median hourly pay difference

between our UK-based male and female

employees at 5 April 2023 was 3.8%

(2022: 12.2%), which is below the UK

median pay gap of 14.3% (Source: Office

for National Statistics). The fall in the

pay gap seen was due to a job levelling

exercise undertaken, to ensure that

employees are classified consistently

based on their role scope, remit and

authority. Company headcount growth

has also influenced the reduction, with

an increase in the male population with

salaries distributed in the lower quartiles

and an overall increase in the median

hourly rates for women compared to

2022. 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.

Our disclosure is enhanced to include

all UK-based entities, including those not

in scope of the statutory requirement.

Overall, we are pleased with the progress

we have made and will continue to

ensure this is an area of focus. We also

report gender pay gap in other markets

where there is a regulatory requirement,

such as France, Italy, Portugal and Spain.

Paying a living wage

For employees globally we continue

with our annual salary review increases

and are committed to providing fair pay

for our employees. Every two years we

conduct a global living wage assessment

to ensure that 100% of our locations

continue to pay at or above the national

or local living wage. Our next review will

be conducted in 2024. We have also been

confirmed as a ’real living wage’ employer

in the UK for the seventh consecutive

year and continue to work with our

contractors to ensure they pay their

employees at the same rates. We require

all our contractors to comply with local

laws on employment rights.

Cost of living

We understand concerns from our

employees about the cost of living.

As a company, we actively look at ways

to support our colleagues in line with

our core values and our forever caring

promise. In 2023, as well as maintaining

annual pay awards, we continued to

prioritise supporting employees in lower

grades through the compensation

cycle, conducted a mid-year review to

raise salaries that had fallen below our

stated ranges and raised awareness of

financial wellbeing support available as

part of our global employee assistance

programme (EAP), which included a

range of educational sessions and other

resources to support financial planning.

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Health and safety

Our global Environment, Health

and Safety (EHS) team support the

development of strategy, policies and

standards, audit performance and

support site teams to 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 2023, we continued to deliver

improvements focused on key initiatives:

electrical safety, machinery and

equipment safety, developing safety-

specific standard work instructions

(SWI), and enhancing our safety

culture programme, tailoring delivery

to site specific requirements. Reviews

and development activities have

supported improved communication

and engagement, enhanced working

practices and improved performance.

Our manufacturing sites in Rhymney,

Deeside and Michalovce maintained

their ISO 14001 (Environmental

Management) certification.

Plans are in place to expand certification

across other manufacturing sites, starting

in 2024. In addition, our Deeside and

Michalovce sites maintained their ISO

45001 (Occupational Health & Safety

Management) certification, with plans

to expand this further from 2024. We

recognise the value of aligning our

practices to international standards.

There were no fatalities on our estate

in 2023, maintaining our record of zero

events. The target of sustaining our

Operations Lost Time Injury Rate (LTIR)

per 200,000 hours worked below 0.22

by 2025 remains on track.

The continuation of 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 2023, enabling the identification and

elimination of a significant number of

hazards across our sites, reflecting the

safety focus of our operations teams.

In addition, the continued focus on

engagement, safety leadership and

proactive behaviours has also contributed to

a reduction in the total number of accidents

incurred, resulting in a 40% reduction from

2022, improving the working environment

and safety for all employees.

OUR PEOPLE: AT A GLANCE

Employees

Agency staff and independent

contractors

< 30

30-50

> 50

Geographical

areas 2019-2021

Americas

APAC

EMEA

Geographical

areas 2022-2023

Europe

North America

Rest of World

Employees and contractors

Employees by geography

Employees by age

2023

2022

2021

2020

2019

10,136

301

10,036

350

10,142

319

9,914

341

9,197

314

2023

2022

2021

2020

2019

49%

15%

36%

48%

42%

41%

14%

38%

50%

52%

53%

2023

2022

2021

2020

2019

20%

59%

21%

20%

17%

58%

60%

61%

21%

20%

22%

Leavers and hires by age

Leavers

and hires by gender

< 30

30-50

> 50

Hires

2023

2022

2021

2020

2019

252

1,059

864

283

153

164

1,219

1,147

1,169

920

1,219

796

808

865

< 30

30-50

> 50

Leavers

360

973

653

569

319

221

215

1,514

989

750

961

862

683

436

856

2023

2022

2021

2020

2019

Male

Female

Hires

1,287

888

1,545

1,216

1,293

1,145

1,176

1,010

837

804

2023

2022

2021

2020

2019

Male

Female

Leavers

1,163

823

1,688

1,129

828

1,147

1,257

862

579

885

2023

2022

2021

2020

2019

Our Health and Safety performance¹

2023

2022

2021

2020

2019

Fatalities

Convatec Lost Time Injury Rate

0.17

0.18

0.26

0.21

0.27

Convatec Hazard Observation Rate

227

196

148

138

Operations Lost Time Injury Rate

0.22

0.20

0.30

0.23

0.30

Operations Hazard Observation Rate

265

234

190

173

Lost Time Injuries

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 65).

Lower rates are desirable for Lost Time Injury Rates; higher rates are desirable for Hazard Observation Rates.

1. Includes voluntary and non-voluntary turnover.

Overview

Governance

Financial statements

Additional information

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Responsible business review – commerce

BEHAVING

ETHICALLY AND

TRANSPARENTLY

2023 highlights

–

Strengthened third party and supply

chain risk management practices

–

Launched human rights training

for employees

–

Enhanced conflict of interest reporting

and risk assurance processes

2024 priorities

–

Expand supplier ESG engagement

–

Enhance third party risk

management programme

–

Increase scope of human rights

training for colleagues

Ethics and compliance governance

CELT meets with our Head of Ethics and

Compliance on a quarterly basis to review

the compliance programme, including

its risk assessment and mitigation efforts;

investigative and monitoring oversight;

and policy development and educational

delivery. Audit and Risk Committee (ARC)

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

Company. Regular corporate-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 all employees either

online, with electronic acknowledgement

of completion, or through participation

in town hall meetings.

–

Making available an independently

provided Compliance Helpline

(Speak up) and web link for

employees and third parties (https://

convatec.ethicspoint.com), to seek

guidance and to 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 41).

–

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.

In 2021, we set a target to ensure at

least 95% of employees are trained

on our Code of Conduct annually. We

achieved that target in 2022, and due to a

transition to a new learning management

system in 2023, training rates dropped

to 90%. Plans are in place to drive

participation on our new system in 2024.

In 2023, we further enhanced our conflict

of interest measures by piloting 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 roles by 2025.

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. In recent years

we have refreshed 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, with

partners, and with suppliers and so in

2023, we launched an annual training

around the policy’s principal areas of

focus. These include:

–

Compulsory labour

–

Human trafficking

–

Supply chain concerns

In 2023, 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 colleagues from legal,

compliance, supply chain, and HR,

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. This interactive module guides

all Convatec colleagues through

important subjects such as human

trafficking prevention, speaking up

and environmental issues.

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/.

We also engage with stakeholders on

ethical topics within our sector. During

2023, we continued to participate

in a number of MedTech Europe and

AdvaMed meetings and discussions

regarding key legal, ethical, compliance

topics, including HCP interactions,

as well as other ESG areas.

Evelyn Douglas

EVP, Chief of Corporate Strategy

& Business Development and

General Counsel

“At Convatec, one of our core

values is Do what’s right, as we

know that how we do business

matters. Our commitment to

responsible business practices

on important topics such as

human rights, environmental

stewardship and ethical and

transparent behaviours extends

to all those who we work with

– colleagues and through our

global supply chain. Across

Convatec, we are committed to

building stakeholder trust and

confidence by meeting standards

that demonstrate our ESG

commitments in action.”

Protecting and enhancing our

reputation with all our stakeholders

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Transparency, ratings,

disclosures and memberships

Being transparent with our stakeholders

about how we run our business is

a vital part of building strong, long-

term relationships based on trust. Our

disclosures and reporting are assessed and

scored by a range of external ESG analysts

and other organisations, and we use this

information to benchmark our progress.

See below for more on our approach

to disclosures and memberships.

Supplier due diligence

and contracting

To help protect against the risk of

a third party acting unethically, our

teams conduct a range of due diligence

and related activities. 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/.

We monitor and assess suppliers using

third-party risk platforms, which provide

in-depth, real-time coverage of a range

of factors that could impact on supplier

performance (including geopolitical,

climatic and civil unrest), as well as

events that may have been caused

by our suppliers (for example major

pollution and strike incidents). We also

operate processes that are designed 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.

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 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.

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.

Our spend is concentrated towards

a relatively small number of suppliers.

For example:

–

nine suppliers represent approximately

80% of our contract manufacturing

spend

–

five suppliers represent approximately

60% of our logistics spend

–

Our raw materials supply chain is more

diverse, with 42 suppliers representing

approximately 80% of our total raw

material spend

Like many medical device companies,

our products are often sold by third

parties, such as distributors. We

endeavour to work with partners who

share our sustainability ambitions,

aligned to our core values and can support

our journey. 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 2024 across

the Company, including our commitment

to monitor and ensure a risk-based audit

programme 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 2023 we requested emissions

information from suppliers that we

calculate make up over 60% of our

Scope 3, category 1 emissions. We are

committed to working with our suppliers

to support them through briefings,

training, and other initiatives. See

page 61 for our Scope 3 emissions.

Our ESG journey in action

Convatec has been included in

Sustainalytics’ 2023 Top-Rated ESG Risk

Rating Companies List for our progress

in 2023. In 2023, Convatec received a

rating of AAA (on a scale of AAA-CCC) in

the Morgan Stanley Capital Investment

(MSCI) ESG Ratings assessment. During

the year, we achieved a B scorewith ISS.

Disclosures

The landscape of ESG ratings and

disclosures is complex and constantly

evolving. We continue to disclose against

various reporting schemes that we

believe offer value to our stakeholders

and align with our material ESG topics.

We keep our approach under review.

In 2023, 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, and maintained UK Living

Wage Foundation accreditation. In 2023,

we were shortlisted as most improved

company in the Workforce Disclosure

Initiative (WDI). Our TCFD disclosure

is found on page 64.

Partnerships

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

2023

2022

2021

2020

2019

ISS

B-

Sustainalytics Risk Rating

16.6

14.5

14.6

15.2

15.3

MSCI²

AAA

CDP

WDI

73%

43%

54%

60%

19%

1. As at June 2023, 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.

Overview

Governance

Financial statements

Additional information

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Responsible business review – planet and communities

PROTECTING THE

PLANET AND

SUPPORTING

COMMUNITIES

2023 highlights

–

Near-term science-based targets

–

100% renewable electricity across

al manufacturing sites

–

Shaped carbon transition plan

and identified priorities

–

240,000 HCPs engaged in medical

education programme

–

Launched pilot community health worker

programmes with Partners In Health

2024 priorities

–

Continue to advance our transition plan

–

Progress ISO 14001 (Environmental

Standard) Certification across all

manufacturing sites

–

Prepare for waste diversion from

landfill certification

–

Enhance our water stewardship effort

–

Expand medical education programmes

Our climate ambition and

transition plan

Convatec’s strategic climate ambition

is to achieve net zero by 2045. We are

committed to delivering our vision

whilst enabling ESG-related activities

and transitioning to a 1.5°C-aligned

net zero economy. As part of our

annual report, we are sharing an

update on our progress, in line with the

UK Transition Plan Taskforce Disclosure

framework. This section of our report

covers the commitments and actions

we are taking to support the transition.

Our plans provide the foundation of

our climate risk management response

and transition to net zero.

Convatec Cares, our ESG framework,

sets out our priorities (see page 39).

Each of the four pillars in our framework

contributes to our role in the transition

to a net zero economy.

–

Customers:

We are committed to

delivering products and solutions that

meet the needs of our patients and

customers, ensuring efficacy, quality

and safety, as well as seeking ways

to continually reduce their climate

impact (see page 48).

–

Colleagues:

We have developed

climate-related digital tools to support

teams to drive our ambition. We are

also raising awareness internally

of environmental sustainability and

our impact (see page 52).

–

Communities:

Our validated near-

term science-based targets include

our commitment to reduce Scope 3

emissions by 52% per sold product

by 2030, from our 2021 baseline.

This target specifically includes the

emissions from purchased goods

and services (category 1), upstream

transportation and distribution

(category 4) and waste (category 5).

–

Commerce:

We are working closely

with suppliers to support value chain

decarbonisation and communicated

requirements for suppliers to set SBTs

(see page 57).

For more information on our alignment

with the Transition Plan Taskforce

Disclosure framework, see page 214.

Our climate-related targets

2030 near-term carbon

targets

70%

Scope 1 and 2 absolute reduction

52%

Scope 3 reduction per sold product

(including Category 1: Purchased goods

and services, Category 4: Upstream

transport and distribution and Category 5:

Waste generated in operations)

2045 long-term carbon target

90%

absolute reduction Scope 1, 2 and 3

including 100%

neutralisation of limited

residual emissions by 2045.

Energy:

80%

renewable electricity by 2025 and

100%

by 2030.

Resource use

Water:

Deliver sustainable water withdrawal

at high water-stressed locations and

develop our water management

practices at all locations.

Waste:

Reduce the amount of production waste

leaving our plants and to certify our waste

diversion from landfill practices by 2030.

Supplier engagement:

Suppliers covering

60%

of our Scope 3

category 1 emissions to have committed

to set science based targets by 2026.

2. Target baseline year is 2021.

Our ESG Steering Committee brings

together CELT members who are driving

our net zero ambitions, supported

by working groups to identify and

implement decarbonisation plans

See also: Environmental policy at

www.convatecgroup.com/sustainability/

esg-reports-and-data and our TCFD

disclosure on page 66.

John Haller

EVP, Chief Quality & Operations

Officer

“We’ve advanced our transition

planning, have set clear emissions

reduction targets, and continued

to expand our renewable

energy infrastructure across

our manufacturing sites. We’ve

validated our Science Based

Targets and are committed to

reach net zero by 2045. While

we can more easily manage

things we control directly, we

cannot meet our targets without

working with partners in our

global supply chain.

We continued to focus on

communities, and launched an

exciting new partnership with

Partners In Health, alongside a

range of initiatives to encourage

colleagues to make a difference.”

How we operate and our contribution

to the world around us

Renewable electricity generation installed

at our UK manufacturing site in Deeside

during 2023.

1. Validated science based target baseline in 2021.

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

We recognise that our plans to achieve a net zero transition will require Company-wide collaboration on a range of risks, challenges

and solutions. These are outlined in the table below and in our TCFD narrative (page 66).

RISKS, CHALLENGES AND SOLUTIONS

Risks

Challenges

Solutions

Use of data

More accurate data is needed to baseline our impact and identify

potential emission reduction options. (Including T4

and T5

)

There are ongoing initiatives across the business to collate

primary data and minimise assumptions. We need to ensure

the source data is used eﬀectively. This will allow Convatec to

evidence the impact of decarbonisation initiatives.

Strategic

and ﬁnancial

planning

Dedicated resource is needed to progress and enhance

innovation as it relates to decarbonisation at Convatec.

Otherwise Convatec risks not being able to achieve its target.

(Including T1

and R1

)

The incorporation of climate considerations into the annual

strategic planning process is a step forward in identifying the

required ﬁnancial resource required. Our intention is to further

integrate climate across other decision-making frameworks to

ensure ﬁnancial resource is budgeted.

Regulation

Limitations in material and design options associated with

medical safeguards and material regulation. In addition, there

is a long lag time to realise emission reductions due to lengthy

regulatory processes as well as the long lifetime of our products.

(Including P3

and P4

)

Convatec’s strategic planning is core to developing near-term

plans, and through our Product Sustainability and Scope 3

emissions working group, we are considering longer-term

actions required to achieve net zero.

Eﬃcacy priorities

Product safety is our top priority. It is essential that in achieving

our climate ambitions we do not compromise on the eﬃcacy and

safety of products. Nonetheless, this should not stop us from

innovating design for new and legacy products. (Including T2

)

Through engagement with value chain partners as well as more

broadly across the industry, we aim to overcome some of the

barriers preventing accelerated decarbonisation, such as low-

carbon materials.

Technology

limitations

There are limited material and design alternatives that are

readily and easily implementable given a range of regulatory

considerations in the MedTech sector. (Including T3

)

Investing in resources like our Green Design Guidelines helps

to drive sustainable behaviours through the identiﬁcation and

review of potential alternatives.

Physical risk

In addition to our decarbonisation levers, we are also cognisant

of the need to implement climate adaptation measures to ensure

the resiliency of operations at our manufacturing facilities under

physical climate hazards. (Including Ph1

, Ph2

, Ph3

)

To supplement our contingency plans, capital investment

programmes mitigate the risks of physical climate-related risks

on our business. Measures across our broader operations and

supply chain also help to mitigate future risks, levels of safety

stockholding to minimise any impact of production downtime,

alternative production locations for key product lines and

diﬀerent sources of raw material suppliers.

1. Refer to pages 68 and 69 for TCFD identified risks and opportunities.

CONVATEC’S AMBITION TO NET ZERO

KEY

Developing plans across our

key levers

Product:

We are building up a database

of emission factors for materials and products

across our portfolio. The development of

our strategy is contingent on this exercise to

highlight where our impact hotspots are, what

material change options there are as well as any

other design changes which will deliver emission

reductions. We expect this to complete in 2024.

Net zero target validation and Scope 3

milestones

Logistics:

The logistics software we

use gives us a granular view on transport

movements across the network. We have

identified some key reduction levers related

to productivity efficiencies, reduction of air

freight, shifting to lower-carbon suppliers etc.

Supplier engagement:

Our strategy is

in action, and we have set up a programme

for continual data collection and analysis to

increase supplier alignment to net zero.

Direct operations:

We have reduction

plans for our Scope 1 and 2 and are using

emissions and energy consumption metrics

to monitor performance against targets.

Packaging:

Our strategy is based on a

prioritisation of new product development

and alignment to the waste hierarchy. For

primary packaging, our focus is on recycling

and prevention, as many materials are

non-recyclable and paper/plastic blends.

For secondary and tertiary packaging our

focus is prevention as 100% of our cartons

and shipping boxes are paper-based and

therefore recyclable.

NEAR-TERM REDUCTION-RELATED ACTIVITIES

Near-term Scope 1, 2 and selected Scope 3

science-based target validated by SBTi in 2023

Commitment to achieve net zero by 2045 to be

submitted and validated by SBTi in 2024

Scope 3 working groups established to lead

the identification and implementation of

decarbonisation initiatives in 2023

SHORT TO MEDIUM-TERM ACTIONS FOR 2030 SBTi TARGET

100% procurement of renewable electricity across property portfolio

Supplier engagement to encourage alignment to SBTi framework

Reduce air freight throughout logistics network

Continue implementation of projects to reduce packaging and increase recyclability

LONG-TERM ACTIONS FOR NET ZERO BY 2045

Reduce weight and/or carbon-intensity of materials

Continue decarbonisation of logistics through

supplier engagement as well as consolidation

and efficiency programmes

Continued adoption of waste hierarchy with

a focus on prevention and recycling

100% neutralisation of limited residual emissions

by 2045

492,913 tCO

2021

2030

2045

Neutralisation through

carbon removals

Overview

Governance

Financial statements

Additional information

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Responsible business review – planet and communities

continued

Scope 1 and 2 GHG emissions

During 2023 we validated our near-term

science-based targets to reduce our

combined scope 1 and 2 emissions by

70% by 2030, from our 2021 baseline.

Our 2023 Greenhouse Gas (GHG)

emissions under the market-based

method totalled 16,142 tonnes CO

(2022: 24,653), equating to an in-year

reduction of 34.5% (2022: 31.9%).

This reduction was achieved through

improved energy efficiency and sourcing

of renewable electricity at all nine of our

global manufacturing locations. Our fleet

of 1,312 vehicles (2022: 1,157) generated

emissions of 6,790 tonnes CO

e (2022:

6,075), and our refrigerant gas emissions

amounted to 776 tonnes CO

e (2022: 746).

Energy consumption

In 2023, total global energy consumption

was 133,713 MWh (2022: 137,615 MWh).

Energy efficiency

In 2023, our overall energy intensity

ratio reduced by 6% (2022: 4.7%) 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.

Energy efficiency projects to reduce our

Scope 1 and 2 emissions in 2023 included;

energy efficient chiller installation, steam

system efficiency improvements, smart

metering, air handling unit retrofits,

compressed air heat recovery system

and LED lighting.

Renewable energy

As part of our Scope 1 and 2 science-

based targets, we have committed to

procuring 80% of our electricity from

renewable sources by 2025, reaching

100% by 2030. As of 2023, renewable

electricity accounts for 95% of total

electricity consumed (2022: 69%) with

100% renewable electricity procured

at all of our manufacturing sites.

During 2023 we expanded the amount

of renewable energy we generated from

owned sources 1,448 MWh (2022: 109

MWh), through the installation of roof-

mounted solar PV at our manufacturing

sites in Deeside, UK, and Osted, Denmark

and further generating capacity added at

our facility in Haina, Dominican Republic.

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 65).

GHG (market-based method) (tonnes CO

1,2

2023

2022

2021

2020

Scope 1 (Global)

14,632

14,395

14,931

5,608

Scope 1 (UK)

2,867

3,202

3,107

2,012

Scope 2 (Global)

1,510

10,258

21,255

24,650

Scope 2 (UK)

Total GHG emissions

16,142

24,653

36,186

30,258

Total UK

2,939

3,272

3,136

2,012

GHG (location-based method) (tonnes CO

1,2

2023

2022

2021

2020

Scope 1 (Global)

14,632

14,395

14,931

5,608

Scope 1 (UK)

2,867

3,202

3,107

2,012

Scope 2 (Global)

23,430

23,210

25,872

27,169

Scope 2 (UK)

2,403

2,200

2,348

2,433

Total (Global) GHG emissions

38,062

37,605

40,803

32,777

Total UK

5,270

5,402

5,455

4,445

Scope 1 and 2 GHG emission intensity (tonnes/$m revenue)

1,2

2023

2022

2021

2020

GHG emission intensity (location basis)

17.8

18.1

20.0

17.3

GHG emission intensity (location basis, UK)

2.5

2.6

2.7

2.3

GHG emission intensity (market basis)

7.5

11.9

17.8

16.0

GHG emission intensity (market basis, UK)

1.4

1.6

1.5

1.1

1. Please refer to our Basis of reporting for accounting methodologies (page 65).

2. In 2023, 3% of total Scope 1 and 2 emissions is estimated; 2022: 2.6%.

Total energy consumption (by function) (MWh)

1,2

2023

2022

2021

2020

Manufacturing locations

95,374

103,131

103,207

95,523

Non-manufacturing locations

9,969

9,770

10,736

6,205

Company vehicles

28,370

24,713

28,017

–

Total energy consumption

133,713

137,615

141,961

101,728

Total UK energy consumption

25,922

25,856

25,339

10,381

Total energy consumption (by fuel source) (MWh)

1,2

2023

2022

2021

2020

Non-renewable electricity

3,451

22,748

43,252

66,047

Renewable electricity

64,464

50,999

31,869

10,607

Natural gas

35,218

38,609

38,130

24,766

Propane

–

District heating

1,538

464

642

254

Diesel

671

Company vehicles

28,370

24,713

28,017

–

Total energy consumption

133,713

137,615

141,961

101,728

Energy intensity (GWh/$m revenue)

1,2

2023

2022

2021

2020

Energy intensity

0.062

0.066

0.070

0.054

1. 2.5% is estimated for 2023 data; 2022: 2.4%.

2. See our basis of reporting (page 65) for reporting methodology.

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Scope 3 emissions

The accuracy of Scope 3 emissions

measurement is dependent on strong

engagement with our suppliers and

partners to collect primary data to

replace spend-based emissions factors.

During 2023 we collected 8% of Scope

3 data from primary sources (2022: 2%).

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. In 2023, we

achieved our target of ensuring that a

minimum of 80% of Convatec’s spend

is with suppliers with whom we have

engaged to request their participation

in EcoVadis.

In 2023, our Scope 3 GHG emissions

totalled 459,590 tonnes CO

e (2022:

491,162). The reduction in total Scope

3 emissions is due to the increased use

of primary data from suppliers and

efficiencies in transportation costs.

See our basis of reporting on page

65 for full accounting methodologies,

including exclusions.

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.

Biodiversity

Guided by the results of our materiality

assessment, page 44, our focus in 2023

has been on the climate change impact

of our business and achieving validation

of our science-based carbon reduction

targets. However, we recognise the

importance of biodiversity and nature-

based topics and the associated impact

of our products and operations. In recent

years we have completed life cycle

analysis studies in each of our business

units and a water risk assessment to

analyse water quality risks at our global

manufacturing sites. The results of

these studies have provided initial data

on biodiversity and we will continue to

deepen our understanding of our impacts

on natural capital throughout the value

chain and take actions to address the

highest risk areas.

Water

During 2023, working with expert

partners, we have updated our water

risk assessment (using WRI Aqueduct

4.0 Water Risk Atlas and Ecolab Smart

Water Navigator), based on 2022

operational data. We confirmed that the

relative sustainability of our water uses

and the inherent risks to our operations

in each global location remains similar

to last year. Our manufacturing site

in Reynosa, Mexico, remains the only

site with high baseline water stress

and consequently a medium water

withdrawal risk. As such, this site

was prioritised for target setting and

facility level engineering. A facility level

assessment was completed to identify

opportunities to reduce our clean water

demands and improve water efficiency.

Our short-term sustainability target has

been confirmed using a combination

of sub-metering, water recycling and

reuse, and low flush rest room facilities.

In addition, a desk-top 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. These actions are aligned

with our progress to become water

stewards, working with others in the

catchment to reach sustainable water

management. The Alliance for Water

Stewardship (AWS) Audit Ready Tool

has been used to indicate progress

against the AWS Standard at Reynosa,

and key staff members at both the

Reynosa and Haina (Dominican Republic)

facilities have undergone initial water

stewardship training.

As part of our preparation for water

stewardship certification, we have also

developed a suite of water reduction

projects at our high-risk locations, to

reduce our water withdrawal. Projects

implemented during 2023 include retro-

fit of efficient restroom appliances and

recovery of water during fire pump tests

for maintenance purposes.

In 2023, we withdrew approximately

153 megalitres of water (2022: 169

megalitres), all of which was provided by

municipal water suppliers or other public

or private water utilities. The majority

of water (95%) is withdrawn at our

manufacturing sites in the Dominican

Republic, Mexico, Slovakia and the UK.

No water is abstracted directly from

lakes, rivers or other bodies of water.

Data is compiled from invoiced amounts

and meter readings. A small percentage

of water is treated on site (2023: 0.2%,

2022: 0.01%). 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 prepare

for water stewardship certification

at our priority sites.

6,015 tonnes of water (2022: 5,641

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.

As set out in our Environmental Policy,

we are committed to understanding,

quantifying and minimising our waste

(hazardous and non-hazardous),

and water consumption. We are also

intensifying our focus on initiatives which

will drive a reduction in waste generated

by our product, packaging and non-

manufacturing activities.

Water use

(megalitres purchased)

2020

153

2021

2022

170

2023

176

169

Scope 3 emissions (tCO

2023

2022

2021

Category 1: Purchased goods and services

283,780

295,482

299,007

Category 2: Capital goods

54,416

51,301

31,562

Category 3: Fuel and energy related activities

7,670

8,214

8,732

Category 4: Upstream transport and distribution

53,131

83,078

63,843

Category 5: Waste generated in operations

3,524

3,055

5,200

Category 6: Business travel

8,576

2,698

1,428

Category 7: Employee commuting

6,635

7,315

7,284

Category 12: End of life treatment of sold products

41,858

40,020

39,670

Total Scope 3 emissions

459,590

491,162

456,727

Total emissions (Scope 1, 2 and 3)

475,732

515,815

492,913

1. Please refer to our Basis of Reporting for accounting methodologies including exclusions (page 65).

2. Data restated in 2021 and 2022 to include well-to-wheel emissions.

Overview

Governance

Financial statements

Additional information

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Responsible business review – planet and communities

continued

Waste

During 2023, we have built on the work

undertaken in recent years to analyse our

waste processes and disposal practices

globally. We have implemented waste

segregation trials at key sites to improve

data quality and identify opportunities

for increased recycling and reuse of

materials, with the aim of raising waste

streams up the waste hierarchy. This

will allow us to reduce the amount of

production waste generated and increase

our production recycling rates. Our

ambition is to achieve waste diversion

from landfill certification at all global

manufacturing sites by 2030. We intend

to stage the journey, beginning with key

sites and bring all global sites up to the

same level of maturity by 2030. During

2024 we will complete gap analysis

assessments at the first sites, for which

we aim to achieve waste diversion

from landfill certification in 2025.

The table (left) shows our waste recycling

and disposal performance over the last

four years for both hazardous and non-

hazardous waste. Non-hazardous waste

represents 65% (2022: 69%) of the total

waste generated and the chart indicates

the proportion of this waste recycled

is 25% (2022: 26%) and the proportion

disposed of to landfill is 56% (2022: 47%).

The increase in waste sent to landfill

and incinerated without energy recovery

is due to a change in waste provider

at our manufacturing site in Haina,

Dominican Republic. Work is currently

being undertaken to complete a baseline

analysis of the waste generated in

Haina, and on completion we will be

investigating opportunities to improve

disposal rates of the waste streams as

part of a drive to achieve waste diversion

from landfill certification.

Hazardous waste represents 35% of total

waste generated (2022: 31%) and 98% of

this is recycled (2022: 99%). The increase

in hazardous waste generated in 2023

is due to increased production rates

at our manufacturing site in Rhymney,

UK, where 98% of our hazardous waste

is generated (2022: 97%). The recovery

process is described on page 61. Of the

residual hazardous waste, 1% is disposed

of to landfill (2022: 1%).

Waste generated (tonnes)

2023

2022

2021

2020

Non-hazardous waste

Disposed of

8,499

9,655

13,599

11,806

Recycled

2,779

3,425

2,990

2,120

Generated

11,278

13,080

16,589

13,926

Hazardous waste

Disposed of

Recycled

6,073

5,789

5,606

5,337

Generated

6,171

5,858

5,688

5,409

Total generated

17,449

18,938

22,277

19,335

Fate of non-hazardous waste generated (%)

2023

2022

2021

2020

Recycled

25%

26%

18%

15%

Incineration (with energy recovery)

18%

27%

16%

10%

Incineration (without energy recovery)

Landﬁll

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.

2023

2022

2021

2020

Direct economic value generated

2,142.4

2,072.5

2,038.3

1,910.8

Economic value distributed

Operating costs

937.1

990.4

962.3

891.7

Employee wages and beneﬁts

701.3

648.5

650.1

579.7

Payments to providers of capital

223.2

312.8

262.7

254.0

Payments to governments

61.2

45.7

47.6

56.3

Community investment

1.3

0.7

1.5

0.7

Economic value retained

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. Excludes product donations. See page

63 for calculation of value to communities.

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

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 Policy is available at

www.convatecgroup.com/investors/

governance/our-policies-and-

statements/.

Supporting communities

Forever caring is a promise we make

to the communities in which we operate.

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

and 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

We continued our support to the

Disasters Emergency Committee in

2023 by contributing to their Turkey-Syria

Earthquake appeal after the devastating

earthquake in February 2023. In order

to support our colleagues in the region,

we also donated products to the Wound,

Ostomy and Incontinence Nurses’ Society

(WOINS) – a registered NGO in Turkey

which provided aid to those injured. We

continued our support for the Red Cross

providing humanitarian relief in Ukraine

through donating more than $630,000

worth of Convatec products from across

our portfolio in 2023.

In line with our ESG commitment to

establish new NGO partnerships and

funding commitments, in 2023 we

launched a multi-year partnership with

the international NGO Partners In Health

(see page 64).

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 second 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

further local market activities as well.

→ For a short summary of Forever Caring

month, watch this short video

https://vimeo.com/899871065/3467918b4a

Medical education

In line with our forever caring promise,

we support HCPs through our medical

educational programming. We provide

grants to support HCPs and third parties

(such as regional bodies, associations,

educational and hospital institutions)

engaging with educational and scientific

meetings, programmes, workshops,

events, activities and public education,

non-contingent on the use of Convatec

products. In 2022, we set a target to

contribute responsibly to a range of HCP

and patient education programmes,

and we delivered on this in several ways

throughout 2023 – supporting almost

3,000 HCPs with medical education

grants alone.

Our commitment continues with

expansion and global reach of Wound

Hygiene Academy training, along

with the introduction of a National

Wound Hygiene day on 4 October

2023, where we partnered with

healthcare professionals to host

education events worldwide. We also

continue to collaborate with the Welsh

Wound Innovation Centre (WWIC)

through a series of scientific & clinical

e-learning programmes for healthcare

professionals worldwide. To date, from

five programmes, WWIC have educated

over 631 delegates from 12 countries,

exceeding our original goals for the

programme.

2023 VALUE TO COMMUNITIES

In line with our forever caring promise and our values, we

supported our communities through:

$1.3 million

to community partners through

programming and disaster relief

$2 million+

Product value donated to charity partners

(2022 – 2023)

240,000+

HCPs and patients participated in educational programmes

$475,000+

in medical education grants supporting over 3,000 HCPs

1. Product value calculated using regional average sale price. Includes

contribution from products with shortened shelf lives.

Overview

Governance

Financial statements

Additional information

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Responsible business review – planet and communities

continued

In 2023, Convatec began a three-year collaboration

with Partners In Health (PIH) to explore innovative

methods for recruiting, training and deploying

over 1,000 Community Health Workers (CHWs)

and enhance treatment of chronic conditions.

OUR PARTNERSHIP GOALS:

Enhance care for

underserved

communities in

Mexico, Peru

and the

United States

, with

potential to scale

elsewhere

Improve over

250,000

lives by

activating CHWs to

provide high-quality

services and home

visits

Share our expertise

in managing chronic

conditions to

support vulnerable

populations

IMPACT AREAS:

Financial support:

$2 million

will

support training and

recruitment of CHWs,

with a 10:1 social

return on investment

Product: Convatec

will

donate products

to support other PIH

sites, including

programmes in

Sierra Leone, Liberia

and Haiti

Education: Our

Medical and Clinical

Affairs teams

lead adaptation

and

sharing of materials

to upskill a range

of PIH health

workers globally

CELT visited PIH colleagues in Boston in October 2023 to learn more about

the Community Health Worker model and discuss areas of collaboration.

“PIH is proud to work with Convatec in this

new, multifaceted partnership to improve

care for patients living with chronic conditions.

We’re especially pleased that Convatec deeply

understands the transformative role of

community health workers in managing

chronic health conditions and in promoting

the health and wellness of the communities

in which they live.”

Dr. Sheila Davis

CEO, Partners In Health

→

For more information on PIH, visit their website at

www.pih.org

Partners In Health

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

STATEMENTS

Independent assurance

In line with our commitment to transparency, we commissioned Deloitte LLP to perform limited assurance procedures

on selected key performance indicators as detailed in our Responsible business review 2023. 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 2023 disclosures (performance data) from the review:

–

Greenhouse gas emissions: Scope 1 (14,632 tonnes CO

e); Scope 2 (market based) (1,510 tonnes CO

e ); Scope 2

(location based) (23,430 tonnes CO

e ) (page 60)

–

Emission intensity (location based: 17.8 tonnes CO

e/$million revenue and market based: 7.5 tonnes CO

e/$million

revenue) (page 60)

–

Energy consumption (133,713 MWh) (page 60)

–

Energy intensity (0.062 MWh/$million revenue) (page 60)

–

Health and safety: operations lost time injuries and rate (0.22) and hazard observation rate (265) (page 55)

–

DE&I and Wellbeing: percentage of females in senior management and CELT (44%) (page 54)

–

Quality: Complaints per million, added to the assurance scope in 2023 (44.5) (page 17)

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 2023 Annual Report and Accounts covers all

operations over which we had financial control for the 2023 financial and calendar year. It also covers all of theissues identified

in our ESG framework and places emphasis on the most material issues.

Where a reported KPI does not relate to the entire organisation forthe whole year, the scope of its boundaries is indicated.

Businesses acquired or disposed ofduring 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/.

Overview

Governance

Financial statements

Additional information

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

TCFD disclosure

The Task Force on Climate-related

Financial Disclosures

Statement of Compliance

Convatec is committed to continued adoption and alignment with the recommendations of the Task Force on Climate-related

Financial Disclosures (TCFD). Our disclosure follows the recommendations and is compliant with the UK Government’s introduction

of reporting requirements through the Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations 2022.

We are compliant with the requirements of the FCA Listing Rule LR 9.8.6R(8) on climate-related disclosure, the table below

summarises where we are reporting consistently against the TCFD recommendations and recommended disclosures. 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 58 to 65.

Recommendations

Relevant information

Status

Page ref

GOVERNANCE

a) Board oversight

–

Responsibility for the identification and management

of climate-related matters

Comply

Page 67

–

Frequency of engagements on climate-related matters

b) Management’s role

–

How climate is integrated across business processes

and frameworks

Comply

Page 67

STRATEGY

a) Climate-related risks

and opportunities

–

Description of time horizons used in the analysis

–

Climate risks and opportunities identified

Comply

Page 68

b) The impact of climate-related

risks and opportunities

–

Climate scenario analysis, including qualitative and

quantitative impact assessment results and the management

response measures

Comply

Page 68

–

Climate integration in financial planning processes and climate

transition plan on alignment to net zero

c) The resilience of the

organisation’s strategy

–

Description of climate scenarios used

Comply

Page 72

–

Conclusion on climate resilience under different scenarios

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 73

b) Managing climate-related risks

–

Process to identify and select risk controls

Comply

Page 73

c) Integration into overall

risk management

–

Overview of climate integration in Convatec enterprise risk

management framework

Comply

Page 73

METRICS AND TARGETS

a) Climate metrics

–

Overview of climate metrics and targets used to

monitor performance

Comply

Page 75

–

Climate metrics used to monitor risk and opportunity exposure

included in R+O table

b) GHG emissions

–

Scope 1, 2 and 3 GHG emissions reported in responsible

business section

Comply

Page 75

c) Climate targets

–

Climate commitments to align with the low-carbon transition

and to reduce our exposure

Comply

Page 75

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Governance

Our ESG framework, described on pages

39-41, outlines the responsibility of the

Board and management specifically

around climate-related issues and the

frequency of meetings where these

topics are discussed. Whilst the Board

has oversight and the CEO overall

responsibility for climate matters, the

following describes the governance roles

involved in identifying and managing

climate risks and opportunities (R+Os)

and reporting these to the business.

–

Identifying R+Os:

Climate-related

risks and opportunities are identified

by the TCFD working group. The risks

and opportunities are discussed and

reviewed by the working group team

members and Subject Matter Experts

(SMEs) from each business unit. This

information is cascaded to the ESG

Steering Committee who then refers up

to the Audit and Risk Committee (ARC)

and the Board.

–

Managing R+Os:

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 are given

responsibility to identify appropriate

controls, monitor risk exposure and

provide updates each quarter. In

addition, some controls are defined in

a top-down manner as climate change

is managed under the Principal Risk:

Environment and Communities. The

ARC is responsible for reviewing and

approving Convatec’s management

of all risks.

–

Frequency of engagements on

climate-related matters:

Climate is

a standing agenda item across most

Board and management committees.

There were over nine discussions on

climate-related matters in 2023. For

further details on the frequency of

meetings please see page 40.

Climate change is considered across

different business units and functions

to ensure accountability and action

against our commitments. For example,

the ESG Steering Committee, chaired

by the CEO, met three times during

the year to discuss climate change

matters and approve key climate-related

activities, i.e. SBTi validation of Convatec’s

near-term science-based target, the

establishment of a Scope 3 working

group to drive decarbonisation, and the

elevation of ESG activities in strategy

and financial planning.

Strategy

Our approach to climate resilience

Climate-related risks and opportunities

have been assessed and managed as

a Principal Risk since 2021. However, in

recent years, in response to regulatory

requirements and as we advance our

understanding of climate issues through

our approach to ESG strategy, we have

undertaken climate scenario analysis to

assess and enhance the resilience of our

business.

We have adopted a two-layered approach

for climate scenario analysis, assessing

climate-related financial impacts both

qualitatively and quantitatively, to

ensure a solid foundation is in place as

we advance our ways of working in line

with our net zero strategic ambitions.

Using a qualitative approach in the

first instance has provided a baseline

score for all identified material risks and

opportunities across climate scenarios

and timeframes, which supports the

prioritisation of further mitigating action.

As a result of our in-depth climate

scenario analysis, we have been able

to incorporate climate factors into our

strategy planning process and financial

statements disclosures (refer to Note 1.3

on page 153). This is an important step as

we invest in environmental sustainability

initiatives and ensure suitable action is

taken to drive resilience and value under

uncertain climate scenarios.

2022

Risk and opportunities

Identification and

qualitative assessment

2023

Quantification of financial

impact and development

of transition planning

2024

Continued monitoring

and strengthening of

integration

Engage with the

business including

senior leadership to

build awareness of how

climate change may

impact operations. Identify

whether climate risks and

opportunities are already

being managed.

Conduct a climate

scenario analysis to

systematically assess all

risks and opportunities.

Quantify the potential

financial impact of the

physical risk of selected

critical sites within our

value chain.

Conduct further

research, and where

possible quantification of

potential financial impact

for selected transition risks

and opportunities.

Continue to address

climate change in

Convatec’s business

strategic planning cycle

to ensure appropriate

resources are dedicated.

Continue efforts to

identify longer-term

actions required to meet

net zero commitments

and iterate Transition

Plan accordingly.

Contextualise identified

risks and opportunities

based on our business

operations and market

landscape to better

understand the cause

and consequence.

Develop the first

Transition Plan (page 58)

using the outcomes of

the identification and

assessment, to inform

decision-making on

strategic priorities. Actions

required to align with the

net zero transition.

Ensure a robust and

integrated approach is

taken to identify and

assess climate risks and

opportunities, under

the Environment and

Communities Principal

Risk. Refreshing climate

scenario analysis.

Integrate results of

physical risk analysis into

impairment testing, as well

as in business continuity

and risk management

plans. Incorporate priority

transition risks and

opportunities into the

strategic planning process.

Our climate scenario analysis approach

Overview

Governance

Financial statements

Additional information

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

TCFD disclosure

continued

Introduction to climate scenarios

The future is increasingly uncertain over the long time horizons used in climate scenario analysis. As such, we draw upon scenarios

from the Intergovernmental Panel on Climate Change (IPCC), the International Energy Agency (IEA), the Regional Model of

Investment and Development and the Model of Agricultural Production and its Impact on the Environment (REMIND-MAgPie) and

the Network for Greening the Financial System (NGFS) to inform the assessment of climate impacts, ensuring our assessment is

robust and evidence-based. The temperature outcome scenarios used are diverse, to identify the transition and physical risks. The

table below summarises the scenario sources Convatec has used in analysis to date, which are commonly referenced by our sector.

Ambitious policy

Middle of the road

High warming

Scenario storyline

Paris agreement aligned scenario,

where global CO

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.

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

Temperature outcome (2100)

1.4°C – 1.8°C

1.6°C – 2.7°C

2.6°C – 4.4°C

The time horizons used for this assessment are short-term (0 to one year) to reflect baseline risk and align with our business plan,

medium-term (one to five years) to align with the strategic planning cycle in which climate matters are integrated, and long-term

(five years to 2045) to align with Convatec’s goal of achieving net zero and the longer-term nature in which climate issues may manifest.

Magnitude

Likelihood

Risk matrix: consolidated risk scores across time horizons and climate scenarios

Ph1

Ph2

Ph3

Risk and opportunity qualitative

assessment

In the qualitative assessment, we score

each risk identified against impact and

likelihood; and opportunity against size

and ability to execute. This assessment is

granular, and the outcomes provide us with

detail on the significance of each risk and

opportunity at different intersects of time

and future climate scenario.

In the risk and opportunity matrices,

we present all risks and opportunities

identified and show the relative significance

of the potential impact over time,

across all climate scenarios. The relative

significance is determined by averaging

the qualitative assessment scores for

each scenario and time horizon intersect.

Refer to Convatec’s Annual Report 2022,

page 80 for our assessment results by

climate scenario and time horizon. While

it is important to understand the possible

shift of risk impact over time and climate

scenario, this aggregate view helps to

simplify the results and supports the

overall prioritisation of the risks. We believe

that Convatec has a high ability to execute

across all identified opportunities, as

these align with our business strategy. As

such, whilst we may face some barriers

related to the cost and development of

technology, plans are being developed

or are being executed.

The identified risks and opportunities

to Convatec’s business can be

grouped into four broad areas of

impact which help to understand the

relationship between different risks

and associated opportunities:

1. Supply chain and sustainable design

2. Direct operations and processes

3. Stakeholder expectations

4. Physical damage and disruption

Supply chain and

sustainable design

Direct operations

and processes

Stakeholder

expectations

Physical damage

and disruption

RISK CATEGORY KEY

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Supply chain and sustainable design

Stakeholder expectations

Risk

–

M1. Increase in price for purchased goods and services

–

M3. Increased competition to buy oil and gas by-products

(e.g. chemicals, plastics)

–

M4. Higher costs to procure sustainable materials

–

P4. Increase in regulation on raw materials used in our products

–

T2. Restricted access to alternative materials due to efficacy priorities

–

T3. Increased competition for IP ownership on new low-emission

products and materials

–

R3. Customers opt for suppliers providing more sustainable products

–

R4. Sudden and rapid change in consumer perception of

materials used

–

P1. Additional costs to comply with evolving regulations and exposure

to climate-related litigation

–

T4. Unsuitable or ineffective use of data to inform decision-making

on climate issues

–

T5. Gap in the use of AI which is fast developing as a critical tool

to manage climate risk

–

R1. Increased investor concern and scrutiny over climate credentials

–

R2. Customers request greater climate ambition and transparency

Opportunity

–

PM1. Development of lower emission and sustainable materials in

products

–

OR1. Increase resilience in the supply chain to be able to better

absorb climate-related shocks

–

OR2. Use of data to manage climate risk and seize opportunities

–

OR3. Collaboration in industry and lobbying of governments to

address climate impacts

Direct operations and processes

Physical damage and disruption

Risk

–

M2. Change and volatility in energy prices, increase the operating

costs of direct operations

–

M5. Limited availability of renewable energy

–

P2. Increased pricing of GHG emissions applied to direct operations

–

P3. Increase in regulations that affect our manufacturing processes

–

T1. Cost to invest in climate mitigation and adaptation of operations

–

Ph1. Increase in repair costs, and loss of productivity at

manufacturing sites due to extreme and gradual changes to weather

and climate (acute and chronic hazards respectively)

–

Ph2. Delays in receiving goods or unfilled orders from suppliers

disrupted by climatic events

–

Ph3. Disruption in transportation both upstream and downstream

due to extreme weather conditions

Opportunity

–

RE1. Implementing energy efficiency projects in manufacturing

and non-manufacturing locations

–

RE2. Investment in onsite renewable generations or PPA

–

RE3. Decarbonisation of heat to reduce reliance on fossil fuels

in manufacturing operations

–

RE4. Reduce water intensity of operations

In the risk and opportunity detail in the following pages, we describe the risk and opportunity drivers. The potential strategic and

financial impact is supported by examples of current and future management response options. For additional detail on how we

are managing the identified climate risks and opportunities, please refer to our Transition Plan on pages 58-62.

Size of opportunity

Ability to execute

RE4

RE3

RE2

RE1

PM1

OR1

OR3

OR2

Opportunity matrix: consolidated opportunity scores across time horizons and climate scenarios

Supply chain and

sustainable design

Direct operations

and processes

Stakeholder

expectations

Physical damage

and disruption

OPPORTUNITY CATEGORY KEY

Overview

Governance

Financial statements

Additional information

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

TCFD disclosure

continued

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, as well as packaging, with a focus on new

product development is an essential activity required to reduce the embodied GHG emissions and to manage transition risks associated with

a change in material availability and price.

Risk drivers

–

Suppliers face increased costs during transition to a low-carbon economy, which may be passed on to Convatec.

–

Lack of opportunity for sustainable material alternatives, and possible bottlenecks in advanced materials due to expected high demand.

–

Period of increased competition for petrochemical-based materials as road transport demand for oil declines.

–

Regulation (e.g. taxes on single-use plastics), as well as sudden shifts in consumer perception of materials, could inhibit the use of

certain materials.

–

Limited options to use sustainable materials without compromising product efficacy, or restricted access to solutions if competitors

patent designs.

Opportunity drivers

–

Implementation of Convatec’s Green Design Guidelines (GDG) digital tool to identify potential alternative lower-emission options in the design/

redesign phase to promote alignment of our product portfolio with the low-carbon transition.

–

Lower emission materials may also increase diversity and resilience of supply, e.g. by reducing reliance on petrochemicals.

–

Increase data accuracy through supplier data collection, and increase alignment across the value chain to the SBTi framework.

Possible strategic and financial impact

–

Material shortages due to increased competition

could result in disruption to production.

–

Increased costs for procurement from increased

carbon cost which could impact profit margins,

or result in loss of sales if products are not

priced competitively.

–

Investment in R&D to identify and use

sustainable material alternatives and

to also achieve regulatory compliance.

2023 management response

–

In 2023, we created a supplier engagement

strategy to increase the number of suppliers

with green credentials.

–

Continued 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 as well as our

packaging solutions.

Future management response

–

Further roll-out of the GDGs and digital

product sustainability tool across the product

development team.

–

Invest in suitable resources to monitor trends

in material alternatives and availability.

Key KPIs and targets

–

Emissions from raw material

purchases, with the goal to reduce

embodied emissions of products.

–

Convatec has committed to

reducing Scope 3 GHG emissions,

from Purchased Goods and

Service, Upstream Transport and

Distribution, and Waste by 52%

per sold product by 2030 from

a 2021 base year.

Direct operations and processes:

In a transition to a low-carbon economy, Convatec will be affected by global and national policy interventions aimed at increasing the cost of

emitting carbon. While Convatec is not currently subject to global carbon pricing mechanisms, Convatec 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 the reduced availability of renewable energy

or price volatility.

Risk drivers

–

Incentives to shift to low-carbon energy driven by changes in energy prices and the introduction or expansion of carbon pricing mechanisms

in regions Convatec operates in.

–

In the energy transition there may be limited availability of renewable energy due to a lack of procurement opportunities, extreme costs and

in constraints in the availability of renewable sources.

–

Resource and financial investment into the implementation of low-emission and renewable technologies are required to achieve decarbonisation

through the value chain.

Opportunity drivers

–

Continued implementation of energy efficiency and GHG reduction measures (e.g. LED lighting, low GWP refrigerant-charged cooling and

heating systems).

–

Increasing the number of sites with self-generation renewables will decrease Convatec’s exposure to potential future increases and volatility

of electricity prices.

–

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.

Possible strategic and financial impact

–

Increased operational costs associated with

renewable energy procurement.

–

Large upfront costs to direct capital towards

decarbonisation.

–

Operational cost savings through the

implementation of efficiency measures

and avoided transition costs.

2023 management response

–

We have decarbonised a selection of our sites

through improved efficiency and renewable

electricity procurement.

–

We have installed on-site renewable energy

at three manufacturing sites, and are currently

procuring 95% renewable energy.

Future management response

–

Introduction of a bespoke carbon price to

use within capital allocation to support the

investment direction towards projects that

avoid GHG emissions or deliver GHG reductions.

–

Switch our company cars to all be electric

vehicles by 2030.

Key KPIs and targets

Non-renewable energy with the aim

to reach 100% renewable electricity

throughout the estate by 2030.

Scope 1 and 2 SBT.

–

SBTi target of reducing absolute

Scope 1 and 2 GHG emissions

by 70% by 2030 from a 2021

base year.

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

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.

Risk drivers

–

Increased volume of legislation and reporting requirements will require us to direct appropriate resources to respond and manage increasing

stakeholder scrutiny.

–

Ineffective or limited use of data and AI could result in us having a limited understanding of baseline impacts and the direction of travel of

climate performance. As a result, if Convatec does not have suitable data, Convatec will not be able to make informed decisions in regard to

climate action.

–

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.

Opportunity drivers

Convatec is best placed to respond to stakeholder expectations if Convatec is able to manage our climate risks appropriately, for example:

–

Diversifying our supply chain with supplier duality to better absorb climate-related shocks, including product scarcity, price volatility

and extreme weather.

–

Continued investment, use and roll-out of data management tools and software, e.g. increasing supplier engagement through EcoVadis

and use of TransVoyant to reduce and monitor distribution costs and increase the efficiency of logistics.

–

Implementation of GDG digital product sustainability tool to improve reporting of emissions across the current and future product portfolio.

–

Collaboration in 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.

Possible strategic and financial impact

–

Impact on tenders if Convatec does not meet

the ‘rules of engagement’ or does not progress

to its SBTi target.

–

Customers switch to alternative suppliers

demonstrating accelerated climate action,

and Convatec loses sales and market share.

–

Reduced access or increased cost of

capital if investors switch to better climate-

performing stocks.

2023 management response

–

Frequent review of investor priorities through

consistent engagement to ensure Convatec

meets expectations.

–

Reviewing performance and reporting on

progress against environmental targets.

–

Use of ESG rating indices to indicate evolving

investor expectations in climate performance.

Future management response

–

Continued review of investor priorities as

they evolve and assessment of any additional

environmental reporting requirements.

Key KPIs and targets

Benchmarking of our ESG metrics

and targets against government

regulations, peers and key

stakeholders to ensure Convatec

meets our commitments and

reduction targets.

Physical damage and disruption:

In the future, gradual climate changes and increased frequency of extreme weather events will have an impact across 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 are managing climate risk.

Risk drivers

–

Damage and disruption at manufacturing sites due to extreme and gradual changes to weather and climate (acute and chronic hazards

respectively).

–

Delays in receiving goods from suppliers due to disruption from climatic events at supplier sites.

–

Disruption in transportation both upstream and downstream due to extreme weather conditions, which, for example, may prevent travel

on roads (snowstorms) or unloading/loading at ports (storms).

–

Rising temperatures and increased frequency of heatwave events.

–

Water security issues due to increasing demand and a shrinking supply of water, especially considering the decline in water quality.

–

Floods and storms (e.g. hurricanes) increase in severity and frequency, driven predominantly by the increased likelihood of extreme precipitation

events.

Opportunity drivers

–

Implementation of water efficiency measures including replenishment initiatives and 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.

Possible strategic and financial impact

–

Increased costs to manage damage and disruption

at manufacturing sites.

–

Unable to meet customer orders on time due

to unforeseen disruption in the value chain both

at supplier sites and in logistics.

–

Forced to move operations to an

alternative location.

–

Loss of revenue and missed growth targets.

–

Increased cost of insurance and reduced cover

for climate events.

2023 management response

–

Convatec has site-specific dependency flows

and business contingency plans for each

manufacturing and distribution location.

–

Infrastructure investment 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.

Future management response

–

Monitor need for further adaptation measures

to reduce risk, i.e. flood defences, temperature

control at heat-stressed sites.

Key KPIs and targets

Capital expenditure on climate

adaptation. 100% of high-risk

sites to have implemented business

continuity plans.

Identify efficiency metrics and

develop monitoring to track

impact on performance.

Overview

Governance

Financial statements

Additional information

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

TCFD disclosure

continued

Risk and opportunity deep dive

and financial impact assessment

Over the past year, to strengthen our

understanding of climate impacts on the

business, we have expanded the depth

of our risk and opportunity assessment.

Further information on this process can

be found on page 74. Our further analysis

has included:

–

Financial impact assessment of physical

risks on key manufacturing assets

–

Financial impact assessment of

costs associated with the low carbon

transition (energy price change, and

carbon pricing mechanisms)

–

Further research into the potential

future disruption in our plastics supply

chain associated with regulation and

change in supply.

Avoided costs from achievement

of target:

The implementation of

decarbonisation measures and

achievement of target will reduce

our emissions intensity of operations

and inherently reduce our exposure

to transition risks. This presents an

opportunity for Convatec to minimise

the potential financial impact and

demonstrate resilience to uncertain

climate changes.

The financial analysis results below

show the potential range of impact under

different climate scenarios. We present

the results as climate-adjusted net present

value for the period 2024-2050 in line with

a long-term time horizon, indicating the

extent and probability of potential losses

in the future. Our calculation methodology

and key assumptions are described on

page 75.

–

Physical risk:

We have considered

the potential increase in losses over

time, and as such have calculated

the delta of future years against this

year as a baseline. We have presented

this as the net present value of the

cumulative cash flow impact for the

period 2024-2050, 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.

Active contingency plans are in place

which are described on page 71.

–

Transition risk and opportunity:

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. The results presented

account for our decarbonisation plan

as we are committed to transition to

a net zero economy.

Based on the risks and opportunities

quantified only, the results show that

transition impacts are more significant

to the business than physical climate

change. The greatest risk stems

from our value chain, reflecting

the exposure of high transition costs

from procurement of raw materials

used in products and packaging. Our

commitment to decarbonisation and

associated actions (detailed in our

Transition Plan on page 58) greatly

reduces our exposure to these potential

net zero transition financial impacts and

contributes to the achievement of our

climate strategy.

We believe Convatec is resilient to the

potential impacts under different climate

scenarios including those that could limit

global warming to 1.5

C as well as on the

opposite end of the spectrum with more

than 4

C warming. Whilst our qualitative

and quantitative climate scenario analysis

illustrate the potential unmitigated level

of financial impact, in reality we already

have mitigations in place which reduce our

exposure and minimise potential impacts

to climate-related events. This is because

climate change is a key component of our

strategy through our ESG framework.

Damage to assets (Ph1)

Ambitious policy

Productivity loss (Ph1)

Climate physical risk-

adjusted net present value

Physical climate ﬁnancial impact: NPV (2024-2050)

$2m

$3m

$16m

$18m

$24m

$30m

$21m

$27m

Middle of the road

High warming

Change in

energy price (M2)

Cost of Renewable

Energy Certiﬁcates (M2)

Carbon taxes

on energy

consumption (P2)

Increased

transition cost of

raw materials (M1)

Climate transition-

adjustment net

present value

$4m

$3m

$4m

$23m

$64m

$51m

$56m

$98m

$110m

Climate transition gross ﬁnancial impact: NPV (2024-2050)

$(89)m

$(95)m

$(103)m

Ambitious policy

Middle of the road

High warming

1. These represent gross financial impacts. The results of our climate scenario analysis are indicative, in recognition of the uncertainty of future climate impacts.

The intention is that the results are used to inform risk management and financial planning discussions. Please refer to the scenario sources used on page 68,

and our calculation methodology on page 75.

2. This includes planned capital investment in decarbonisation (T1).

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

*not an exhaustive overview

EVOLVING REGULATORY AND ENVIRONMENTAL IMPACTS*

Our manufacturing operations in Dominican

Republic and Mexico are expected to be

increasingly affected by heat stress impacting

productivity levels, according to climate analytics

used in our financial impact assessment. For

more detail refer to Convatec Annual Report

2022, pages 83-84.

– A new bill in California

will require all plastic

packaging to be recyclable

or compostable by 2032.

With a large share of

our market output, the

value chain operations

throughout the US

contributes the most to

the overall financial impact.

Flood is the primary risk

driver at our manufacturing

plant in Deeside, UK,

driving an increase in

repair and maintenance

costs. The risk is mitigated

at our site, but we have

limited influence on the

adaptive capacity of

local infrastructure.

– The UK has introduced

a plastic packaging tax of

approximately £200 per

tonne. Increasing use of

renewable energy sources

and efficiency measures

at our UK sites.

– The EU’s Packaging and

Packaging Waste Directive aims to

increase recycling to 70% by 2030.

Risk and opportunity –

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 as a result of a severe tropical

storm and power disruption to our plant

in Reynosa as a result of extreme cold

weather in the US. In both examples,

our business continuity plans were

implemented to carefully manage any

impact on our business and the financial

impact was negligible.

To date, we have not recognised additional

costs in our procurement of energy or raw

materials associated with climate-related

policy specifically. Our manufacturing

operations and those of our supply chain

are not knowingly subject to any current

carbon pricing mechanisms. However,

in some cases, it may be that we are

experiencing higher costs passed on

in procurement which is partly driven

by climate transition costs which are

not delineated on invoices or pricing

agreement structures. Beyond financial

impacts, in recent years we have noticed

a step change in stakeholder interest in our

ESG and climate-related actions. As such,

we are dedicating more internal resources

towards responding to stakeholder

questions and customer requests.

Risk governance

Climate-related issues are considered

within the ‘Environment and Communities’

Principal Risk. This reflects the strategic

importance the business places on the

need to align with a net zero transition,

through the adoption, transition, and

integration of a low-carbon economy.

The Board undertakes a bi-annual

assessment of Convatec’s principal risks.

The Convatec Executive Leadership

Team (CELT) is supported by the risk

team and a network of champions

across the business, who are tasked with

maintaining identification, assessment,

management and awareness of key risks

and control measures on an ongoing

basis throughout the year.

Ownership and management of all risks

are assigned to relevant members of

CELT, who are responsible for ensuring

the operating effectiveness of the internal

control processes and for implementing

effective key risk-mitigation plans.

Environment and Communities is owned

by the Chief Quality & Operations Officer.

Integration of climate

in risk management

The ongoing review of climate issues

is integrated into Convatec’s risk

management approach, described

on pages 76 to 84. In addition to the

company-wide assessment, Convatec

uses climate scenario analysis to ensure a

complete and thorough review of climate

issues across long-term time horizons.

Risks and opportunities are identified

for Convatec but are considered

in the context of the geographies,

business units, functions and assets

that are affected.

Many of the management response

options used to mitigate identified

risks and impacts can be considered

opportunities for the business to

strengthen resilience and capitalise on

cost savings and revenue growth and

are already part of our strategy to align

with the net zero transition. Annually,

our strategic planning process helps to

identify the commitments and actions

of each business unit to respond to key

risks and opportunities, as well as to

contribute to the net zero alignment.

Decisions to control, mitigate or

accept climate-related risk impacts

are informed by top-down and bottom-

up risk management processes. The

risk appetite for the Environment and

Communities Principal Risk is used to

determine the level of resources and

investment that should be dedicated.

This overarching principal risk is further

informed by bottom-up climate scenario

analysis which indicates the scale of

potential impact across time frames

and climate scenarios. More information

on the measures in place, or that are

planned, to respond to our climate

risks and opportunities are described

on pages 58-62, and 70-71.

Overview

Governance

Financial statements

Additional information

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

TCFD disclosure

continued

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 68-71. 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.

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

CLIMATE SCENARIO

ANALYSIS

CLIMATE RISK

RESPONSE

CLIMATE RISK

Climate key risk

indicators

RISK MANAGEMENT GOVERNANCE

Board, CELT, ARC, Function leadership, Risk champions, Risk owners, ERM team, IA

ENVIRONMENT AND COMMUNITIES: PRINCIPAL RISK – CLIMATE RELATED RISK

Each business unit has an individual risk register, where it is also responsible for the application of additional

management and mitigation per risk as required.

The financial risk assessment of climate issues assesses the potential losses attributable to sites to

help inform decision-making.

BOTTOM UP

In each area of business, the risks to the delivery of Convatec’s strategy are identified, assessed and prioritised

using the Convatec risk assessment criteria, which includes establishing the risk drivers and mitigation.

Risk ratings are used to prioritise risks and are a product of the expected impact

and the likelihood of that impact to occur due to an event.

TOP DOWN

–

Identification:

Risk identification was

based on a range of sources including

a review of regulatory requirements

related to climate change, climate

policy and climate scenario research,

review of peer disclosures and

interviews with internal experts. Once

risks were identified and scored, they

were then validated in a workshop with

senior stakeholders representing all

relevant functions. These risks were

then presented to the ARC for review

and, where appropriate, incorporated

into the principal risk assessment.

–

Qualitative assessment:

To assess

the potential impact to its business

and cashflows, identified climate-

related risks have been assessed

against 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 level of risk

posed by a hazard and thereby alleviate

vulnerability. Climate opportunities

have been scored based on the

potential size of opportunity through

avoided costs or increased revenue,

as well as the ability to realise the

opportunity. 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.

The potentially subjective nature of

qualitative scoring is countered by

reference to sector and policy research,

interviews with internal experts, as well

as climate scenario databases including

the IPCC WGI Interactive Atlas and

NGFS IIASA Scenario Explorer.

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

–

Selecting risks and opportunities

for quantification:

The qualitative

scoring allows for the prioritisation

of possible impacts on which the

business agrees to focus control

measures and investment. Where

methodologies allow, Convatec has

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.

Financial assessment

methodology

Physical risk:

Convatec has undertaken a financial

assessment of potential losses associated

with physical climate risk across seven

key manufacturing sites, selected based

on their contribution to Group revenues

or criticality on product delivery. The

forward-looking assessment modelled

the potential impact of productivity loss

and asset damage driven by 12 climate

indicators which are categorised into

the following hazards: flood, 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 68. The climate data

provided is correlated to our business

data, including revenue generation

and building value, 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

would implement.

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 price 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.

SLR Consulting supported Convatec in

quantifying the potential future financial

impact of the low-carbon transition

referencing climate scenario data from

the International Energy Agency. This

data included regional carbon price and

energy price projections which were

overlayed onto our emissions and energy

profile. The climate-related information

is sourced from the International Energy

Agency’s World Energy Outline which

outlines current trajectories as well as

required level of policy action to limit

global warming to 1.5

C by 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.

The outcome provides a climate-adjusted

view of cashflows. 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.

Metrics and targets

Convatec use a range of metrics to

understand our baseline impact on the

environment. There are four key areas

that Convatec monitors: emissions,

energy use, waste and water. As disclosed

on pages 58-62, some of these metrics

are used to measure our exposure to

certain risks and to track performance

over time. For example, if a performance

trend was upward this would indicate

the potential impact may be greater

and therefore highlight that additional

action and mitigation are needed. Further

information on our performance against

climate metrics are included on pages

58-62, while the detail below shows our

alignment against the TCFD cross-industry

climate-related metric categories.

–

Scopes 1-3 emissions:

Convatec’s

operational emissions are calculated

and reported annually (Scope 3

emissions data is on page 61).

–

Climate-related risks:

In 2023,

Convatec undertook qualitative and

quantitative climate scenario analysis

for transition and physical risks

respectively. Internally Convatec is

using the results of this assessment

to inform the appropriate response

for priority risks.

–

Climate-related opportunities:

A qualitative climate scenario

analysis was conducted for

opportunities. Internally Convatec

is using the assessment results to

prioritise the areas which could have

the greatest impact, and to inform

management response options

for identified opportunities.

–

Capital deployment:

Convatec

has an estimated capex spend of

circa $30 million of mitigation and

adaptation projects across eight

manufacturing sites that have or will

be starting from 2024 to 2028. These

initiatives include projects to increase

green electricity generation (for

example, through solar panel schemes

and decarbonisation of heat through

electrification with air source heat

pumps), upgrades to more efficient

HVAC systems (Heating, Ventilation

and Air Conditioning), improved

water treatment solutions and energy

efficiency improvement projects.

–

Remuneration:

There are ESG

objectives in the personal objectives

of CELT members aligned to their

remuneration. In respect of the two

executive directors, the new Executive

Remuneration Policy includes ESG

objectives, contributing 5% of their

overall bonus.

While measuring and monitoring our

environmental performance is valuable,

having associated targets keeps us

responsible for the active management

of climate impacts. Our commitments to

minimise environmental impact and align

with the low-carbon transition are listed

on page 58, alongside the actions we are

taking to achieve these targets. Across

the board, we are leveraging different

tools and software to understand where

the largest impact areas are and what

the drivers are. This information will

support the identification of suitable

measures that address the root cause

to have the greatest impact. For further

information on measures implemented

in the last year to manage our impacts,

see pages 58-62.

Overview

Governance

Financial statements

Additional information

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Risk management

Understanding and appropriately managing our risk

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 the Convatec Executive

Leadership Team (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

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 2023,

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 will

continue to enhance our approach to risk

appetite through continuing to embed

identified metrics and obtain assurance

over the key controls for each of our

principal risks to support the Group to

operate within our risk appetite, and as a

management tool for business decisions.

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.

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.

Strategic enterprise level

Operational exposure management

Board risk

appetite

statements

Business risks and tolerance

Articulation into principal risks

RISK MANAGEMENT FRAMEWORK

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

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 the 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 114.

Board

–

Sets the Group’s risk appetite.

–

Ensures appropriate risk management and internal

control 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 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.

–

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.

–

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.

Strategy and objectives

Risk analysis

Risk reporting

Monitoring and challenge

Risk response

Tolerate

Treat

Terminate

Transfer

Risk information top down

Risk information bottom up

Risk identification

Risk description

Risk assessment

Risk categorisation

Overview

Governance

Financial statements

Additional information

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Risk management

continued

2023 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. Following year-end review,

we took the decision to remove our

principal risk for Strategy and Execution

Delivery. Strategically, we are pivoting

into FISBE 2.0 and, with work carried

out to date, this principal risk is now

considered normal business activity.

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 2023, we demonstrated good

momentum in the business with strong

sales growth and margin expansion by

further strengthening our competitive

position, accelerating our simplification

and productivity agenda and acquiring

businesses to strengthen our positions.

In our product development pipeline,

we successfully delivered six key

products to our targeted markets and

continue to focus on improving pipeline

delivery through our defined innovation

framework. Our ESG agenda continues

to develop our transition plan that will

deliver our net zero commitment and

science-based target initiative, as well

as the recommendations of the TCFD.

Operational risks

The current climate, driven by global

inflationary pressures, continues to

bring challenge to the business. We have

experienced persistent external supply

chain pressures with cost inflation for

raw materials, freight, utilities and on all

other aspects of the business cost base.

The business continues to effectively

manage and respond to the issues faced

and to work closely with third parties on

potential areas of exposure to minimise

any possible impact, including through

building the right level of strategic

resilience in our inventory holding. The

cost of living challenges and competition

for talent continues to place pressure on

our people risk and we remain focused

on delivering programmes of initiatives

to support having the right level of key

talent, roles and skills in place to deliver

our strategic objectives. Over the course

of 2023, we have continued to improve

the robustness of our IT infrastructure

and cybersecurity, data management

and privacy framework in line with the

changing business environment.

Financial risks

We have continued to positively manage

the adverse effects of the macroeconomic

environment on our business and,

overall, drove continued strong organic

revenue growth in 2023. Over the year,

we continued to improve margin through

our improved portfolio mix across and

within categories, and by simplifying our

business and driving productivity through

improving business cost efficiencies

(including extending our global business

services with another location in Asia

to provide round the clock support to

our organisation), driving automation

and efficiencies in our manufacturing

operations and improving commercial,

sales and marketing productivity. Driven

by our pricing centre of excellence,

improving pricing practices across

the Group has continued to positively

impact our strong financial performance.

We have implemented additional tax

solutions to enhance our level of tax

governance, and further refinancing of

bank facilities and credit facility extension

initiatives have continued to strengthen

our balance sheet and reflect our robust

credit standing.

Compliance risks

We have strengthened and adapted

our compliance framework as we

grow in mature markets and target

investment in emerging markets. We

took steps to ensure the maintenance

of ongoing compliance in our markets,

including the continued provision of

ethics training and focused global

compliance resources and initiatives.

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 continued

to be monitored and managed through

due diligence by our Compliance team

and an independent, expert third party.

2024 anticipated risks

We expect certain risks to impact in

2024 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 below.

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

improved since 2023, but we continue

to focus on delivering 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, fluctuations and

adverse movement in shipping costs,

congestion and capacity constraints,

which are all expected to have

continued uncertainty into 2024.

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 parties. The continued

worsening international political climate

increases the possibility of commodity

and energy price volatility, 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,

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.

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

New market growth and

product delivery

We expect to launch a new product for

Ostomy and leverage recent product

launches by rolling them out in key

geographies in 2024. We expect to

continue launching new products across

all of our categories into 2025 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 continue

to focus on our 12 key markets around

the world, with a particular emphasis on

the US and China. In China, during 2023,

there was a small impact (principally for

AWC) from the nationwide anti-bribery

and corruption campaign because

of the reduced access to healthcare

professionals. We anticipate the slower

AWC growth rate and industry-wide

regulatory restriction will be temporary,

and that market activity will normalise

in 2024 with no material impact on the

overall Group. In 2024, from a markets

perspective, we will continue to invest in

China as a key market going forward and

continue to grow our market share in the

US. We will 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 2023,

we continued to enhance our emerging

risk model with each area of the business

against the principal risks to further

develop our measurement of the key

exposures and the resilience in place.

In 2024, 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 key

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 key 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 and 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.

Other factors

For further information relevant to our

risk profile see:

–

Our business model – pages 6 and 7

–

Key performance indicators – pages

16 and 17

–

Operational review – pages 18 to 25

–

Responsible business review – pages

38 to 65

–

The Task Force on Climate-related

Financial Disclosures – pages 66 to 75

–

Viability statement – pages 86 and 87

–

Governance – pages 89 to 146

Overview

Governance

Financial statements

Additional information

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

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 2022.

Principal risks

Below is an overview of the Group’s principal risks that

could impact the delivery of our strategy and the

realisation of our vision, 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 together

with our evolving strategy, current business environment

and any emerging risks. 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

opposite). They are also reflected in the key adverse scenarios

underlying the Viability statement (see pages 86 to 87).

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.

Key drivers

Risk mitigation

–

Business continuity management.

–

Supply chain resilience capabilities.

–

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.

–

Single source or sole suppliers for raw materials and services.

–

Business continuity plans for manufacturing facilities, inventory

movement and our key supply chain processes to maintain capability

to respond rapidly and appropriately to any incident.

–

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 engineering, health, safety and environment, and

quality project teams and processes to prioritise and address risk

to manufacturing processes, facilities and people.

Risk details and link to strategy

Opportunity

Risk profile change

Category:

Operational

Appetite:

Manage

Accountability:

John Haller, EVP, ChiefQuality

& Operations Officer

Link to strategy:

Increase the efficiency and effectiveness of

operations to support future market and

customer demands.

2023: no material change

Read more on pages 38 to 75

Impact

Likelihood

KEY

Operational Resilience and Quality

Information Systems, Security and Privacy

Customer and Markets

Political and Economic Environment

Innovation and Regulatory

People

Legal and Compliance

Environment and Communities

Tax and Treasury

Risk category:

Strategic

Operational

Financial

Compliance

Increased

Unchanged

Decreased

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

2. INFORMATION SYSTEMS, SECURITY AND PRIVACY

Risk

Failure to ensure that our systems, data management and related controls supporting our global business 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. Information security breaches can lead to data theft, fraud or accidental disclosure and result

in non-compliance with global data protection laws. Any real or perceived failure to comply with 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.

Key drivers

Risk mitigation

–

Data management and privacy.

–

Cybersecurity.

–

IT and network resilience, business continuity and disaster recovery

arrangements.

–

Digitisation.

–

IT network alignment to business needs.

–

Data optimisation.

–

Cybersecurity leadership council, ethics committee and privacy

leadership team provide governance and oversight with policies,

methodologies, training and accountability framework in place to

manage the protection and use of personal data.

–

Global Information Security and Compliance function supports

the business with an IT general control framework in place to

protect systems and data. Independent cyber assessment and

data review programme in place. Third party partner contracts in

place. Programmes of enhancements in data and cyber security

effectiveness being implemented during 2024.

–

Security operations team respond to threats and ensure the security

of IT. Policies, technical standards and guidance documents in place

to manage the use and governance of IT systems.

Risk details and link to strategy

Opportunity

Risk profile change

Category:

Operational

Appetite:

Manage

Accountability:

Jonny Mason,

Chief Financial Officer

Link to strategy:

Enhance the efficiency and resilience of our IT

and data management systems and processes

to support effective delivery of our operations.

2023: no material change

Read more on pages 51 & 87

3. 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, along with a competitive pricing strategy. 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 could result in

suboptimal decisions, underperformance and adverse results.

Key drivers

Risk mitigation

–

Local or national government healthcare budget provisions.

–

Operational, contracting and price review process.

–

Product portfolio rationalisation.

–

Competitive markets and behaviours and consolidation of

buying groups.

–

Changes in customer buying patterns and service level expectations.

–

Manufacturing costs in a low-margin driven pricing environment

and as a result of changes in consumer and government behaviour/

attitude to sustainability.

–

Key market and geographies focus supported by the Global Pricing

CoE established in key regions to adapt to changing market

conditions and provide insight and information in a timely manner to

respond to increases in risk, with regular pricing analysis and reviews

undertaken. Ongoing investment into the Reimbursement and

Market Access CoE to 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.

–

Investment and continual focus on digital strategy capability

for patient and customer interaction.

–

Market environment monitored and key strategic markets, such as

China, assessed for further growth opportunities. Supply chain team

manages and mitigates market and region challenges and logistics.

Risk details and link to strategy

Opportunity

Risk profile change

Category:

Financial

Appetite:

Manage

Accountability:

Presidents and

Chief Operating Officers

Link to strategy:

Grow portfolio and market share through

cost-efficient, innovative products that

strengthen the relationship with our

customer base.

2023: increased – global inflationary

challenges continue to pressure

healthcare systems’ financial constraints

with potential effects on future pricing

and reimbursement rates.

Read more on pages 18 to 25

Overview

Governance

Financial statements

Additional information

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Principal risks

continued

4. POLITICAL AND ECONOMIC ENVIRONMENT

Risk

Our global operations and markets are subject to various political interventions and changes to corporate governance requirements, particularly in

relation to global inflationary and supply chain pressures, security of raw material and energy supply, healthcare system reform, regulatory reform,

governance of industry operations, amendment to existing 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. A failure to identify and adapt to these factors could impact sourcing commodities and services, as well as our ability to maintain

a presence/develop in current and future markets and countries.

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 key markets.

–

Compliance with sanction frameworks.

–

Adverse national trading relationships, customs duties and tariffs.

–

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 consultants

to identify and manage supply chain risks present to our operations.

Risk details and link to strategy

Opportunity

Risk profile change

Category:

Strategic

Appetite:

Accountability:

Jonny Mason,

Chief Financial Officer

Link to strategy:

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.

2023: increased – global inflationary

pressure and geopolitical tension & conflict

continues to challenge all aspects of the

business cost base.

Read more on pages 10 to 11

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), with the potential for

regulatory action and/or liability claims, due to non-compliance with regulatory bodies, a failure to meet stakeholder expectations or patient harm

from faulty products.

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 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 provide oversight on short-, medium-

and long-term innovations and the balance across product

categories and market regions.

–

Regulatory teams and regulatory intelligence process supports the

business to meet the latest standards and expectations in all our

jurisdictions and manages our relationship with regulatory bodies.

Risk details and link to strategy

Opportunity

Risk profile change

Category:

Strategic

Appetite:

Cautious

Accountability:

Dr Divakar Ramakrishnan,

EVP, Chief Technology Officer and Head of

Research & Development

Link to strategy:

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.

2023: decreased – delivery of six key

new products and the continued delivery

of the EU-MDR Compliance programme.

Read more on pages 48 to 51

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

6. 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.

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.

Continuing focus on Employee Resource Groups (ERG).

–

Talent to value approach embedded in the strategic planning

process. Talent management reviews create pipeline of talent

for critical and leadership roles.

–

OHI and employee pulse surveys in place. Implementation of

appropriate reward arrangements to attract and retain top, senior

talent, maintain strength in key skills and respond to regional

market inflation challenges.

Risk details and link to strategy

Opportunity

Risk profile change

Category:

Operational

Appetite:

Manage

Accountability:

Moyra Withycombe,

Interim Chief People Officer

Link to strategy:

Create a sustainable level of expertise and key

skills across the Group.

2023: no material change

Read more on pages 52 to 55

7. LEGAL AND COMPLIANCE

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.

Key drivers

Risk mitigation

–

Market conduct compliance.

–

Legal obligations in relation to customer conduct, including sales

practices and distributor activity.

–

Product and patient liability.

–

Commercial litigation.

–

Financial crime.

–

Complexity and transparency of IP and patent environment,

including in tax and operations.

–

Our Code of Conduct, Group policies and standards govern how we

conduct our affairs through our values and culture. Executive-level

Compliance Steering Committee and the ARC provide oversight

to the Group on annual compliance assurance programme,

mandatory training, compliance initiatives and emerging exposures.

Independent whistleblower process in place.

–

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.

–

Sanction framework checks in place with shareholder register,

Compliance, Treasury, banking partners, supply chain and

finance teams.

Risk details and link to strategy

Opportunity

Risk profile change

Category:

Compliance

Appetite:

Cautious

Accountability:

Evelyn Douglas, EVP, Chief of

Corporate Strategy & Business Development

and General Counsel

Link to strategy:

Create an industry-leading legal and

compliance approach to our obligations and

stakeholder expectations.

2023: no material change

Read more on pages 56 to 57

Overview

Governance

Financial statements

Additional information

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Principal risks

continued

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 ofsustainable 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.

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 and sustainable product design.

–

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.

Risk details and link to strategy

Opportunity

Risk profile change

Category:

Strategic

Appetite:

Manage

Accountability:

Moyra Withycombe,

Interim Chief People Officer

Link to strategy:

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.

2023: no material change

Read more on pages 58 to 65

9. TAX AND TREASURY

Risk

Our business operates across multiple jurisdictions with complex tax laws and regulations and it manufactures and/or operates across markets

with multiple currencies. Changes in tax law and regulations as well as any organisational change that affects the Group’s tax operations

framework, may impact tax liabilities and increase filing and disclosure requirements and obligations. Failure to manage tax compliance,

inflationary pressures, fluctuations in interest and foreign exchange movements, counterparty exposure, the cost of and access to financing

or a deterioration in cash-flow and liquidity as a result of impacts to our revenue, costs and/or global financial systems could drive reductions

in stakeholder trust, financial performance and future investment.

Key drivers

Risk mitigation

–

Multiple tax jurisdictions and emerging changes to tax law

and regulations.

–

Complex and increasingly hardening global tax regulatory

environment and complex Group trading structure and intra-Group

trading. Unprovided tax liabilities.

–

Global economic environment, including exposure from interest

and foreign exchange rates.

–

Financial obligations, cashflow management, access to funding

and credit rating.

–

Counterparty exposure.

–

Financial reporting and controls in key processes.

–

Central global tax function monitor changes in tax laws and

regulations, as well as support during major internal projects,

to advise the business regularly on obligations, requirements

and future improvements to the tax governance framework.

–

Central global tax function works with the business and Finance

team in major jurisdictions to understand tax changes and

provide support.

–

Central corporate treasury function manages the capital structure

that supports strategy, liquidity access to meet financial obligations

and liquidity reserve. Interest rate hedging strategy in place.

Risk details and link to strategy

Opportunity

Risk profile change

Category:

Financial

Appetite:

Manage

Accountability:

Jonny Mason,

Chief Financial Officer

Link to strategy:

Robust tax arrangements, financial

performance and balance sheet to increase

stakeholder and shareholder confidence.

2023: decreased – delivery of extended

credit facilities. Additional tax solutions

implemented to maintain stability and

control over tax positions.

Read more on pages 26 to 33

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Non-financial and sustainability

information statement

Key matter

Position and policies and processes we implement

Page

Environmental matters

Climate change and environmental strategy

Pages 38 to 64

Climate-related financial disclosures

Pages 66 to 75

Employees

Our vision and values

Pages 5

Code of Conduct

Page 56

Diversity, Equity & Inclusion and Wellbeing

Page 54

Our people strategy

Pages 52 and 53

Employee induction, training and development programmes

Page 53

Employee engagement

Page 53

Diversity targets and review of metrics

Pages 54 and 55

Human rights

Human Rights and Labour Standards

Page 56

Modern Slavery Act Statement

Page 56

Social and community matters

Community engagement

Pages 63 and 64

Anti-corruption and anti-bribery

Third Party Compliance Manual

Page 57

Compliance helpline and website

Page 57

Principal risks and impact of

business activity

Pages 58 and 59

and 76 to 84

Non-financial key

performance indicators

Pages 16 and 17,

60 to 62, and 75

Our business model

Page 6

→ 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/

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.

Overview

Governance

Financial statements

Additional information

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

The Group’s future

prospects and viability

An understanding of the Group’s strategy,

to deliver sustainable revenue growth

and expanding operating margin,

and its business model (pages 12 to

15 and pages 6 and 7), are central to

allowing the Board to assess the Group’s

prospects, liquidity, resilience and

viability. The principal and emerging

risks being addressed by the Company

(see pages 80 to 84) 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

2024 to December 2026 (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 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 2023, the Board approved a detailed

operational plan and execution model

to deliver sustainable and profitable

growth including the financial plan

that underpins the Group’s five-year

strategic plan. The five-year financial

plan from 2023 to 2028 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

with no refinancing requirement within

the Viability Period with the Group’s

$250 million term loan committed

until 2027, $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 12 to 15.

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 re-

imbursement 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 risk has been considered

but is not expected to have an impact

during the viability assessment period

of three years.

–

Through the execution of our strategy,

we simplify our business, remove

excess costs and re-invest in capacity

and future innovation.

–

Dividend 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 80 to 84. 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, such as the

impact of economic recession leading

to higher interest rates and increased

inflation headwinds, and affecting

reimbursement rates, and internal factors,

such as a major EHS incident 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.

Viability statement

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

As a result of ongoing investment in our

operational resilience over the course of

2023, we have decided to shift focus in

our EHS incident scenario from our plant

in Slovakia as modelled in 2022, to our

manufacturing facilities in Deeside, UK.

We have also incorporated a significant

adverse change to reimbursement rates

to our market distress scenario, which

is in addition to sustained inflationary

pressures and high interest rates. We

have maintained our risk scenarios in

relation to significant cyber incident,

regulatory issues within product lines,

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 scenarios and sensitivity testing

have been based upon the current

Board-approved strategic plan and

forecast revenues, operating profit

and balance sheets and were reviewed

against the current and projected

liquidity and funding position. The

main severe but plausible scenarios

are included in the table below.

Consideration was also given to a

number of other scenarios as well

as the combination of the main

severe but plausible scenarios,

reflecting individual risks and events.

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.

The scenarios took no account of

the likely corporate mitigating actions

available to and within control of the

Directors, through adjustments to the

Group’s strategy and other means in the

normal course of business, for example

reducing expansionary capital investment.

This assessment was informed by

Management’s and the Board’s combined

judgement as to the potential financial

(particularly liquidity) 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 base case to determine the

performance levels that would result

in a breach of covenants. For a breach

of covenants to occur in the next 12

months, before corporate mitigation,

the Group would need to experience a

sustained revenue reduction of at least

10% across all categories and markets.

This was considered to be 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 a severe but plausible

set of scenarios, which did not take into

consideration 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 2026.

The Group’s Going Concern statement

is detailed on pages 152 to 153.

The Strategic Report comprising pages

5 to 87 was approved by the Board on

5 March 2024.

Karim Bitar

Chief Executive Officer

Jonny Mason

Chief Financial Officer

Scenarios

Linkage to risks on pages 80 to 84

Impacts from a signiﬁcant manufacturing incident modelled on a plant ﬁre,

for example Deeside, UK

–

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 cyber incident producing a signiﬁcant interruption

–

A significant data privacy breach, leading to a regulatory penalty and subsequent costs

for investigation and remediation

–

We have modelled a one-off significant fine resulting from a privacy issue in 2024

–

Information Systems, Security

and Privacy

–

Operational Resilience and Quality

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 and Compliance

–

Innovation and Regulatory

–

Operational Resilience and Quality

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 sustained geopolitical unrest on financial markets and confidence

–

Customer and Markets

–

Political and Economic Environment

–

Tax and Treasury

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

–

Legal and Compliance

Overview

Governance

Financial statements

Additional information

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Governance at a glance

Board statements

Chair’s governance letter

How we have applied the Code’s core principles

Board of Directors

Convatec Executive Leadership Team

100

How we are governed

102

Board activity and actions

106 Board evaluation

107

Nomination Committee report

110

Audit and Risk Committee report

120

Directors’ Remuneration report

143

Directors’ report

146

Directors’ responsibilities statement

What’s inside

Governance

Convatec Group Plc Annual Report and Accounts 2023

1. As at 31 December 2023 and at 5 March 2024.

2. As at 31 December 2023.

3. In addition, there were further routine Board meetings to approve the release

of annual results, interim results and trading updates. There were also several

strategic or project-specific meetings of the Board and sub-committees thereof

held at short notice throughout the year.

Governance at a glance

GOVERNANCE HIGHLIGHTS

Board

–

Consideration of, and agreement for, the acquisition

of an innovative anti-infective nitric oxide technology

platform from 30 Technology Limited for initial

consideration of £45 million, plus potential milestone

and future payments of up to £131 million.

–

Consideration of, and agreement for, two bolt-on

acquisitions: A Better Choice Medical Supply and All

American Medical Supply Corp. for a total of $28 million,

which will further strengthen our HSG business in the US.

–

Ongoing review of other M&A opportunities.

–

Oversight of execution against the FISBE 2.0 strategy.

–

Capital expenditure discussions and approvals

for omnichannel commercial transformation

and manufacturing expansion.

–

Review and approval of the Group’s Strategic Plans

and Budget.

–

Review of quality and operations.

–

Oversight of the Group’s ESG framework and progress

against sustainability targets and priorities.

Nomination Committee

–

Review of Board and Committee composition,

considering Directors’ skills, knowledge and experience.

–

Consideration of progress against diversity, equity

and inclusion, and wellbeing strategic targets.

–

Review of succession planning and talent at Board,

CELT and wider global leadership team.

Audit and Risk Committee

–

Consideration of the Group’s internal controls

environment, including cyber security and data privacy.

–

Review of interim and full-year results statements prior

to recommending to the Board for approval.

–

Oversight of Convatec’s enterprise risk management

framework and risk reporting.

–

Review and approval of the external audit plan for the

2023 external audit.

–

Review of 2023 internal audit reports and 2024 internal

audit plan.

–

Evaluation of the effectiveness of the external auditor

and internal audit function.

–

Planning the audit tender process.

–

Review of management’s response to proposed

Department for Business and Trade corporate

governance reforms and revised UK Corporate

Governance Code.

–

Review of TCFD and other non-financial reporting

and disclosures.

Remuneration Committee

–

Implementation of the Remuneration Policy approved

by shareholders at the 2023 AGM.

–

Review and approval of 2023 Executive Director and

CELT salaries and LTIP awards.

–

Review and approval of the 2022 Executive Directors

and CELT bonus outcomes.

–

Received regular updates on workforce remuneration

policies and practices.

–

Conducted peer-group benchmarking on executive

remuneration with support from Willis Towers Watson.

BOARD STATISTICS

BOARD AND COMMITTEE MEETING

Male:

56%

Female:

44%

1–2 years:

3–4 years:

4 years or more:

Board

scheduled meetings

Audit and Risk

Committee meetings

Nomination

Committee meetings

Remuneration

Committee meetings

Gender

Length of tenure

Overview

Strategic report

Financial statements

Additional information

Convatec Group Plc Annual Report and Accounts 2023

Governance

Board statements

REQUIREMENT

BOARD STATEMENT

MORE INFORMATION

UK Corporate Governance

Code 2018 compliance

Throughout the financial year ended 31 December 2023,

except as explained above, the Company has complied

with the Code.

Pages 93 to 95

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 2023 Annual

Report and Accounts and, therefore, have adopted

the going concern basis in preparing the Group’s 2023

Financial Statements.

Page 152

Viability statement

The Directors have assessed the viability of the Group

over a three-year period ending 31 December 2026, taking

into account the principal risks identified by the Board as

set out on pages 80 to 84. 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 86 and 87

Fair, balanced, and

understandable

The Directors consider that the 2023 Annual Report

and Accounts, taken as awhole, 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 111

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 76 to 84

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 105

Stakeholder engagement

The Board has taken steps to understand stakeholders’

views and has considered them in its discussions and

decision-making process.

Pages 104 to 105

Throughout 2023, Convatec was subject to the requirements of the UK Corporate Governance Code 2018 (Code). 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 across the Group and is mindful when applying salary increases.

During 2024, the Board will consider the implications of the UK Corporate Governance Code 2024, 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.

Convatec Group Plc Annual Report and Accounts 2023

Governance

Chair’s governance letter

Firm foundations

for the future

Dear Shareholder

I am pleased to present this

Governance report for the year

ended 31 December 2023. The report

that follows, in conjunction with the

Nomination, Remuneration and Audit

and Risk Committee reports, seeks to

demonstrate our robust governance

framework and key governance

developments throughout the year,

progress against our diversity strategy

at Board and senior management levels,

open engagement with stakeholders, and

prudent risk management.

Our culture

We have a clear vision statement which

encapsulates our purpose and ambition,

a promise to be forever caring and a set of

values that reflect our culture, all of which

have become embedded throughout

the Group and influence our everyday

behaviours, and how we do business.

During the year, we have continued to

embed Convatec Cares, our ESG framework,

which supports what we do and reflects

our promise, vision and values, and how

they are integral to our wider strategic

framework, set out on pages 5 to 7.

The Board remains committed to

promoting a culture with our values

and forever caring promise at the heart.

We were pleased to be able to connect

with employees during our visit to

our manufacturing site and research

and development facility at Deeside in

Wales. The Board used the visit as an

opportunity to engage with staff at all

levels of the organisation on both a

formal and informal basis, and assess

the culture of the Company. We have also

continued to monitor culture through

reports provided regularly to the Board

and Nomination Committee, as well as

receiving reports on progress against

our people strategy and talent and

succession planning.

Convatec’s Our Work Life initiative

continued to gather momentum and

reinforces our approach to working in

more agile and flexible ways, as well

as supporting employees’ physical and

mental health. This initiative includes

our annual Convatec Day, a global mental

health awareness campaign, as well as

workshops, activities and focus groups.

Our Board

Through the Nomination Committee,

we focus on Board succession and

composition to ensure we have

the appropriate balance of skills,

independence, experience and diversity

to fulfil the Company’s vision and support

the delivery of the FISBE strategy.

In September, Convatec ended its

relationship agreement with Novo

Holdings A/S and consequently Sten

Scheibye stood down from the Board

after five years of excellent service.

Membership of each of the Board’s

committees is set out in the respective

committee reports on pages 107, 110

and 120.

Workforce engagement

This year we have continued with our

chosen workforce engagement approach,

with Sharon O’Keefe serving as our

designated Workforce Liaison Champion.

Sharon met with a number of employees

from across the business throughout

2023. Key discussion topics from the

meetings this year included:

–

Ways of working, including increasing

agility in our decision making

–

Focus on manufacturing simplification

and productivity, increasing the

standardisation of processes

–

Clarity of purpose and customer

orientation, with an emphasis on the

value of engagement with customers

and patients

–

Employee experience, noting the

importance of continuing employee

recognition and investment in

development opportunities.

The Board is committed to understanding

the views of Convatec’s stakeholders

to inform the decisions that we make.

Further details of Board-level workforce

engagement can be found on pages

103 and 104. We are planning yet more

direct and indirect employee engagement

activities for Sharon and the Board in

2024, including additional site-based

focus groups, holding Board and

Committee meetings at various Convatec

locations and Board member attendance

at our 2024 Global Leaders’ Meeting.

Other key stakeholders

Our key stakeholder groups are

identified and detailed on pages

42 and 43. Recognising that the

sustainable success of our business

is dependent on our stakeholders, 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 104 and 105. Our section

172 statement is on page 42.

Our governance practices

are enabling Convatec to

pivot to sustainable and

profitable growth.

Dr. John McAdam CBE

Chair

Overview

Strategic report

Financial statements

Additional information

Convatec Group Plc Annual Report and Accounts 2023

Governance

Environmental, social

and governance (ESG)

The Board oversees our responsible

business programme and details of work

in this area during the year are included

on page 103.

In recent years, we have laid strong

foundations to ensure we operate in

a responsible and sustainable way

(see pages 38 to 65) and in 2023, we

made further progress with our ESG

agenda particularly with respect to

building a business where our people

can thrive. We rolled out an executive

education series to engage our senior

leaders in diversity, equity and inclusion

practices and have had our ESG-targets

approved by the SBTi. In addition,

we have met our target to introduce

100% renewable energy across all our

manufacturing sites.

Our CELT-led ESG Steering Committee,

chaired by the CEO, met three times

during the year. The remit of the ESG

Steering Committee includes reviewing

progress on our sustainability targets,

setting new targets where required and

enhancing our TCFD disclosures. The

Committee provided regular updates

to the Board on progress against ESG

strategic aims; and, to the Audit and Risk

Committee in relation to TCFD disclosures

and compliance with ESG-related

regulatory requirements including

relevant assurance.

Our governance practices

During the year the Board held four

in-person Board meetings, in March,

July, September and December, and four

Board meetings by video conference, in

April, May, July and October, a pattern

which we expect to continue through

2024 and beyond.

Our 2023 AGM took place as a hybrid

meeting, enabling shareholders to attend

either in person or remotely. Our 2024

AGM will similarly be held as a hybrid

meeting, full details can be found in

the Notice of Meeting.

Board evaluation

In accordance with the Code

requirements, a performance evaluation

of the Board and Board Committees was

carried out in the autumn of 2023. This

was conducted by way of an externally

facilitated questionnaire to Board

members and select senior managers,

with findings then collated externally and

reports provided to the Board and Board

Committees. Details of the evaluation

process and key points arising from

the 2023 Board review can be found

on page 106.

Diversity

The Board is committed to achieving

diversity and inclusion across the Group

and, in doing so, ensuring transparency

against our targets. As at 31 December

2023 and the date of this report, we

have met the diversity targets under

the Listing Rules. Further details

can be found within the Nomination

Committee Report on page 108.

We are compliant with the

recommendations of the Parker

Review on ethnic diversity and the FTSE

Women Leaders Review on gender

diversity, and will continue to monitor

Board composition to ensure that we

maintain an appropriately diverse

Board in all respects. As at 31 December

2023 and the date of this report, the

proportion of women on our Board

was 44% (2022: 40%) and two members

of our Board self-identify as being from

a minority ethnic background.

Our objective was to achieve over 40% of

senior management roles (members of

CELT and their direct reports, excluding

administrative staff) held by women

by the end of 2025. As at 31 December

2023, we are pleased to announce that

we have exceeded our target with 44%

of our senior management roles held

by women (2022: 38%).

Despite this great progress, we recognise

that there is no room for complacency

and in order to continue to achieve

greater diversity at senior management

level, greater representation needs

to be achieved across all levels of the

organisation. Nurturing a diverse

pipeline of talent has been an area

of focus throughout the business.

During the year, the Board and

Nomination Committee has considered

diversity, equity and inclusion and

wellbeing insights globally across a range

of metrics, as well as insights from our

Employee Resource Groups. Initiatives

to increase DE&I and wellbeing are being

consistently implemented across the

Group and the Board and Nomination

Committee will continue to review the

Group’s efforts and the implementation

of our people strategy.

Our diversity policy for the Board, senior

management and the wider workforce

is a key pillar of our ESG strategy and is

fully aligned to our FISBE strategy and

our people strategy. The objectives of our

diversity policy are set out on page 54.

The Code

We explain how we have applied the

Code’s principles on pages 93 to 95.

These core principles also serve as a

framework for the following sections

of this Annual Report which explain our

governance structure and the processes

we operate to support the Group’s long-

term success.

During 2024, the Board will consider

the implications of the UK Corporate

Governance Code 2024, which will apply

to financial years beginning on or after

1 January 2025.

2024 priorities

The Board remains committed to the

highest levels of corporate governance.

As a Board, we will continue to oversee

delivery of our FISBE strategy.

We will also continue to track progress

on our simplification and productivity

initiatives, including the continuing

transition of key central functions to

our Global Business Services teams

in Lisbon, Bogota and Kuala Lumpur

and our Plant Network Optimisation

to simplify and create efficiencies in

our manufacturing operations.

In 2023, we saw the launch of several

key new products including ConvaFoam™

in the US. The Board will continue to

monitor the successful development and

launch of a range of new products, at the

same time overseeing the continuing

build of our wider supply chain resilience.

After much progress over the last few

years, we will also continue to track the

ESG and climate agenda, evolving societal

expectations and Convatec’s response

and actions.

Dr. John McAdam CBE

Chair

5 March 2024

Chair’s governance letter

continued

Convatec Group Plc Annual Report and Accounts 2023

Governance

BOARD LEADERSHIP AND COMPANY PURPOSE

Code principles

Application

Where further information is available

An effective and

entrepreneurial

Board that promotes

long-term sustainable

success of the Company

and which generates

value for shareholders

and contributes to

wider society

The Board discharges its responsibilities through a

programme of activities that include review and approval

of the Group’s strategy, 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 2023

Pages 102 and 103

Establishment of

purpose, values and

strategy and promotion

of desired culture

The Board endorses the Group’s vision statement (which

encapsulates our promise, purpose and ambition), its

values and our forever caring promise. During the year,

it has reviewed the Group’s strategy and continued to

assess and monitor culture to ensure their alignment.

How we realise our vision

Page 5

Shaping our winning culture

Page 53

Chair’s statement

Pages 8 and 9

Chair’s governance letter

Pages 91 and 92

Culture

Page 101

Ensuring resources are in

place to meet objectives,

measuring performance

and establishing controls

which assess and

manage risk

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 Group’s KPIs

Pages 16 and 17

The Group’s risk management

framework

Page 76

Audit and Risk Committee report

Pages 110 to 119

Effective stakeholder

engagement and

participation

To fulfil its duty to promote the Group’s long-term

success and generate value for shareholders,

stakeholders and wider society, the Board has

designated a Non-Executive Director for workforce

engagement. A number of mechanisms have also been

established to facilitate shareholder, workforce and wider

stakeholder engagement and ensure that the Directors

consider all relevant stakeholder issues and concerns.

Engaging stakeholders and

section 172 statement

Pages 42 and 43

Board stakeholder engagement

Pages 104 and 105

Board key decisions

Page 105

Ensuring workforce

policies and practices

are consistent with

the Company’s values

and support long-term

sustainable success,

and that mechanisms

are in place to allow the

workforce to raise concerns

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.

Enabling our people to thrive

Pages 52 to 55

Compliance Helpline and website

Page 56

Audit and Risk Committee report

Pages 110 to 119

How we have applied the Code’s core principles

Overview

Strategic report

Financial statements

Additional information

Convatec Group Plc Annual Report and Accounts 2023

Governance

How we have applied the Code’s core principles

continued

DIVISION OF RESPONSIBILITIES

Code principles

Application

Where further information is available

The Chair’s role

The Chair was independent on appointment and is

responsible for the leadership of the Board. The Chair

effectively facilitates robust discussions at Board meetings

and active participation from all Board members.

Key Board roles and

responsibilities

Page 101

Clear division of

responsibilities and

appropriate combination

of executive and non-

executive roles

The Board includes seven Non-Executive Directors and two

Executive Directors. Their responsibilities are clearly defined.

Key Board roles and

responsibilities

Page 101

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

Pages 107 to 109

Board evaluation

Page 106

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 it has processes in place to function effectively

and efficiently.

Board and Committee meetings

Page 101

Board evaluation

Page 106

COMPOSITION, SUCCESSION AND EVALUATION

Code principles

Application

Where further information is available

Board appointments

and succession

A Nomination Committee is established and Board

appointments are made in accordance with a formal,

rigorous and transparent procedure, with diversity a key

consideration as well as relevant knowledge, skills and

experience. The Nomination Committee regularly considers

Board and senior management succession.

Nomination Committee report

and Board appointment

procedure

Pages 107 to 109

Board appointments

Page 109

Talent and succession planning

Page 109

Combination of skills,

experience and knowledge,

with regard also to tenure

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.

Directors’ biographical

information

Pages 96 and 97

Skills and experience matrix

Page 96

Board member tenure

Page 89

Annual evaluation

In compliance with the Code, during 2023, 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 evaluation

Page 106

Convatec Group Plc Annual Report and Accounts 2023

Governance

AUDIT RISK AND INTERNAL CONTROL

Code principles

Application

Where further information is available

Independent and

effective internal and

external audit functions

The Board has delegated a number of responsibilities to

the Audit and Risk Committee (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 110 to 119

Fair, balanced and

understandable

assessment

The Board has established procedures and processes

to ensure that reports and other information published

by the Group are fair, balanced andunderstandable.

Audit and Risk Committee report

Page 111

Risk management and

internal control systems

The Board sets the Group’s risk appetite and assesses the

nature and extent of its principal risks. Annually, the Board

reviews the Company’s principal and emerging risks, and

the effectiveness of the Group’s risk management and

internal control systems and processes. The ARC regularly

reviews the effectiveness of these systems and processes

throughout the year.

Risk management

Pages 76 to 84

Audit and Risk Committee report

Pages 110 to 119

REMUNERATION

Code principles

Application

Where further information is available

Remuneration policy

and practices

The Group’s Remuneration Policy, which was approved

by shareholders at the 2023 AGM, is designed to support

our strategy, be aligned to our vision and our employee

and, shareholder interests, and promote long-term

sustainable success.

Remuneration Policy

Pages 134 to 142

Directors’ Remuneration report

Pages 120 to 142

Development of

remuneration policy

and packages

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. Executive

Directors are not involved in making decisions on their

own remuneration.

Remuneration Policy

Pages 134 to 142

Directors’ Remuneration report

Pages 120 to 142

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 120 to 142

Overview

Strategic report

Financial statements

Additional information

Convatec Group Plc Annual Report and Accounts 2023

Governance

Board of Directors

Experienced

leadership

A diversely skilled Board with proven leadership capabilities and relevant

healthcare, operational and financial skills and experience.

Margaret Ewing

Senior Independent

Director

AR*

Date of appointment:

August 2017

Independent:

Yes

Relevant skills and experience

–

Chartered Accountant with

significant financial 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, Chair of the

Audit and Compliance Committee

and a member of the Nominations

Committee of International

Consolidated Airlines Group, S.A.

Dr John McAdam CBE

Chair

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.

Karim Bitar

Chief Executive Officer

Date of appointment:

September 2019

Independent:

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.

Jonny Mason

Chief Financial Officer

Date of appointment:

March 2022

Independent:

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 2018-2021,

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.

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)

Nil value for more

limited understanding

or skill

Key

Convatec Group Plc Annual Report and Accounts 2023

Governance

Kim Lody

Non-Executive Director

Date of appointment:

February 2022

Independent:

Yes

Relevant skills and experience

–

Extensive healthcare, reimbursement, and

MedTech experience specialising in branding,

business development, innovation 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 Chair of the Nominating,

Governance, and Compensation Committee

of Invacare Corporation; and, Non-Executive

Director and member of the Audit Committee

of Mozarc Medical.

Heather Mason

Non-Executive Director

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

Interim CEO of Assertio Therapeutics, Inc.;

Chair of SCA Pharmaceuticals, LLC. Non-

Executive Director of Immatics, Inc., and

Non-Executive Director of Pendulum

Therapeutics, Inc.

Brian May

Non-Executive Director

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 PLC, where

Brian is also a member of its Nominations and

Governance Committee and Audit Committee.

Non-Executive Director of OFI Group Limited.

Sharon O’Keefe

Non-Executive Director

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.

Prof Constantin Coussios OBE

Non-Executive Director

Date of appointment:

September 2020

Independent:

Yes

Relevant skills and experience

–

Internationally recognised key opinion

leader, recognised with an OBE for Services

to Biomedical Engineering.

–

Proven track record of translating research

into commercial technologies through

academic entrepreneurship including as

Founder, Chief Technology Officer and Chief

Scientific Officer of three successful spinouts.

–

Significant experience of drug delivery devices

and technologies, including directing and leading

the Oxford Centre for Drug Delivery Devices,

a cross-disciplinary centre working across

pharmaceutical and medical device companies

and the NHS, between 2014 and 2020.

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.

Transplant Foundation.

Overview

Strategic report

Financial statements

Additional information

Convatec Group Plc Annual Report and Accounts 2023

Governance

Board membership

Convatec Executive Leadership Team (CELT)

CELT is responsible for the management and performance of the individual

business units with frequent reporting to, and oversight by, the Board.

Karim Bitar

Chief Executive Officer

Moyra Withycombe

Interim Chief People Officer

Appointed to CELT: 2023

Moyra joined Convatec in January 2021.

She was previously VP, HR Business

Partner for our Advanced Wound

Care business. Prior to Convatec, she

held several HR leadership roles at

GE Healthcare, GE Aviation and NXP

(formerly Motorola Semiconductors).

For over a decade at GE, she held

a variety of regional and global

roles including leading HR for their

European Healthcare business.

Jonny Mason

Chief Financial Officer

Kjersti Grimsrud

President & Chief Operating Officer,

Infusion Care

Appointed to CELT: 2018

Kjersti joined Convatec and the 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.

Seth Segel

President & Chief Operating Officer,

Continence Care and Home Services Group

Appointed to CELT: 2020

Seth served as CEO of Woodbury

Health Products for five years until

it was acquired by Convatec in 2017. Prior

to this, Seth was Executive Vice President

at Cantel Medical Corp, a speciality

healthcare company dedicated to

Infection Prevention and Control. Seth

has lived and worked in North America,

Asia and Europe, holding positions

in investment banking, management

consulting, and as head of operations.

Karim Bitar, CEO and Jonny Mason, CFO, are also members of CELT.

Their biographical details are provided on page 96.

More detailed CELT member biographical information is available at

www.convatecgroup.com

Convatec Group Plc Annual Report and Accounts 2023

Governance

1. Members of the ESG Steering Committee.

2. Evy also acted as Company Secretary until August

2023. From 1 September 2023, the Board was

supported by Robyn Butler-Mason following her

appointment as Company Secretary.

John Haller

Executive Vice President,

Chief Quality & Operations Officer

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.

Dr Divakar Ramakrishnan

Executive Vice President,

Chief Technology Officer & Head

of Research & Development

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.

Anne Belcher

President & Chief Operating Officer,

Global Emerging Markets

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.

Bruno Pinheiro

President & Chief Operating Officer,

Ostomy Care

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

& COO, 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.

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.

Evelyn Douglas

1,2

Executive Vice President,Chief Corporate

Strategy and Business Development Officer

and General Counsel

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.

Overview

Strategic report

Financial statements

Additional information

Convatec Group Plc Annual Report and Accounts 2023

Governance

How we are governed

GOVERNANCE FRAMEWORK

Our governance framework, which includes the Board and its committees, is set out below.

INTRODUCTION TO OUR GOVERNANCE FRAMEWORK

The Board is collectively accountable to

the Company’s shareholders for the proper

conduct of the Group’s business and its

long-term success. The Board is responsible

for effective oversight, delegating some

of its responsibilities to Board Committees

through agreed terms of reference which are

subject to regular review. Terms of reference

for each Board Committee and matters

reserved for the Board can be found at www.

convatecgroup.com/investors/governance.

The Board also delegates responsibility

for the day-to-day operational management

of the Company to the Chief Executive

Officer, who is supported by the Convatec

Executive Leadership Team, which is chaired

by the CEO.

The independent Non-Executive Directors

exercise independent, objective judgement

in respect of decisions of the Board, and

scrutinise and challenge management.

Through the various committees of the

Board, they have responsibility for ensuring

the robustness and integrity of financial

information; internal controls and the

risk management framework; that the

Board has an appropriate mix of skills,

knowledge, experience and diversity

to fulfil the Board’s vision and support the

delivery of the Company’s FISBE strategy;

and, that remuneration arrangements

appropriately support the Group’s culture

and strategic ambition.

Responsibilities:

–

Oversees and is responsible for the

long-term success of the Group and for

ensuring that there is a framework of

appropriate and effective governance and

controls which enables risk to be assessed

and managed.

–

Sets the Group’s strategic aims,

determines resource allocation to

ensure that the necessary financial and

human resources are in place for the

Group to meet its objectives and reviews

management performance

–

Determines the Group’s purpose and

values. Monitors and assesses the Group’s

culture and ensures that its obligations

to shareholders and other stakeholders

are understood and met.

Board

ESG Steering Committee

An executive committee chaired by the

CEO that drives the ESG agenda within

the Group, monitoring performance

of the ESG programme and regularly

reporting to the Board.

Market Disclosure Committee

A Board committee chaired by the Chair that

oversees the disclosure of information by the

Company to meet its obligations under the

Market Abuse Regulation, Listing Rules and

Disclosure Guidance and Transparency Rules.

Treasury, Tax & Finance Committee

An executive committee chaired by the

CFO that oversees day-to-day tax and

treasury matters and treasury related

financial liabilities.

Other key committees

Responsibilities:

–

Reviews Board composition and

proposes appointments to the Board.

–

Considers succession planning for

the Board and senior management.

–

Oversees diversity and inclusion

targets and objectives for Board

and senior management.

Responsibilities:

–

Oversees the integrity of the Group’s

financial reporting, internal controls

and risk management framework.

–

Ensures the Group complies with

legal and regulatory governance

requirements, including those

related to financial reporting,

environmental and climate change-

related matters.

–

Assesses the independence and

effectiveness of the external and

internal auditors.

Responsibilities:

–

Ensures the Remuneration Policy

and wider remuneration practices

are designed to support the Group’s

strategy and promote long-term

sustainable success.

–

Oversees Remuneration Policy

implementation for Executive

Directors and senior management.

–

Reviews workforce remuneration

and related policies.

Nomination Committee

Audit and Risk Committee

Remuneration Committee

Responsibilities:

–

Implements Group strategy for the long-

term success of the Group, monitoring

performance and significant business

projects and initiatives against budget

and the agreed strategy.

–

Assists the CEO in executing the authority

delegated by the Board, making and

implementing day-to-day operational

decisions and exercising oversight of

the Group’s commercial issues.

–

Monitors and assesses the Group’s

cultural activities, execution against

the ESG strategy and day-to-day

behaviours to ensure that they are

aligned with the Group’s vision,

promise, strategy and values.

Convatec Executive Leadership Team

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Governance

Culture

The Board has the responsibility

of ensuring that Convatec’s culture

remains fully aligned with the

Company’s purpose, values, promise

and strategy. Our values frame the

Group’s culture and our employees’

behaviours, in turn determining how

we do business. To this end, the Board

continues to assess and monitor culture

in different ways, including:

Strategy setting

The CEO, CFO and other members of

CELT take the lead in developing the

Group’s strategy. A dedicated two-

day strategy meeting is held annually

between the Board and CELT, at which

the strategy is reviewed, constructively

challenged and approved by the Board.

Key Board roles and responsibilities

Matters reserved for the Board

Board and Committee meetings

The Board has a schedule of matters reserved

for its approval and a formal structure of

delegated authority.

This schedule of matters clearly defines

the decisions which can only be made by

the Board and largely relates to matters

of strategic importance, particularly high-value

or governance related, where independence

from executive management is important. It is

available at www.convatecgroup.com/investors/

governance.

The Board has delegated certain responsibilities

and authority to the Board Committees, which

all operate in accordance with Board-approved

terms of reference. The Board has also

delegated specified management control to the

Executive Directors and CELT. The written terms

of reference that each of the Board Committees

operates under can also be found within the

web link referenced above.

The principal activities undertaken during

the year by the Nomination, Audit and Risk and

Remuneration Committees are set out in their

respective reports in this Annual Report.

Board attendance

Director

Member

since

Attended

John McAdam (Chair)

Sept 2019

8/8

Karim Bitar

Sept 2019

8/8

Jonny Mason

March 2022

8/8

Brian May

March 2020

8/8

Margaret Ewing

Aug 2017

8/8

Constantin Coussios

Sept 2020

8/8

Heather Mason

July 2020

8/8

Kim Lody

Feb 2022

8/8

Sharon O’Keefe

March 2022

8/8

Sten Scheibye

(Board member until

8 September 2023)

July 2018

4/5

Details of the number of Board and Committee

meetings which took place during the year can

be found at page 89. Four of the scheduled

Board meetings were held in person in the

UK, and four meetings were conducted using

video and audio conference facilities, a format

which the Board intends to continue to follow

during 2024. In addition to the scheduled

meetings, several meetings were held at short

notice to consider specific matters, projects or

transactions, for example the acquisitions of

the nitric-oxide technology platform from 30

Technology Limited and All American Medical

Supply Corp.

The Non-Executive Directors met on one

occasion during the year without the Chair

and Executive Directors present.

The Company Secretary and the Group Deputy

Company Secretary attend all Board meetings.

External advisers also attend meetings

where independent guidance and expertise

is required to facilitate the Board in carrying

out its duties. Members of CELT (who are not

Board members) and other senior executives

regularly attend relevant parts of meetings

to make presentations and provide their

input on a range of topics.

The Board and its Committees are provided

with appropriate and timely information.

For scheduled meetings, agendas are drafted

based on a previously agreed annual forward

agenda schedule and are then reviewed with

the relevant Board or Committee Chair. Agendas

may then be amended, if deemed appropriate,

to reflect current business priorities.

The Directors have access to an encrypted

electronic portal system, which enables them

to receive and review Board and Committee

papers quickly and securely.

Scheduled Board and Committee

meetings held

–

Regular briefings from the CEO,

the Chief People Officer and other

members of the senior management

team on progress against our FISBE

and people strategies.

–

Review of Convatec’s Organisational

Health Index survey results and output

from our Big Conversation initiatives.

–

Post-engagement briefings from

Sharon O’Keefe, the Board’s workforce

liaison champion.

–

Review of compliance and Speaking

Up hotlines investigation reports and

internal and external audit reports.

Chair

–

Independent on appointment.

–

Leads the Board and facilitates constructive

Board discussions.

–

Promotes high standards of governance.

–

Sets the Board agenda.

–

Supports and guides the CEO.

–

Leads the review of the effectiveness

and performance of the other Directors.

Senior Independent Director

–

Sounding board for the Chair.

–

Serves as intermediary for other

Directors when necessary.

–

Available to shareholders should they have

concerns where contact through the normal

channels has either failed to resolve or would

be inappropriate.

–

Leads the review of the effectiveness

andperformance of the Chair.

Non-Executive Directors (all independent as

at 31 December 2023)

–

Bring relevant skills, experience and

knowledge to provide constructive challenge

–

Provide independent judgement and serve

on the Board’s committees.

–

Support the Chair by ensuring effective

governance across the Group.

–

Monitor strategic execution in accordance

with risk and control framework.

Chief Executive Officer

–

Accountable to, and reports to, the Board.

–

Leads the executive management team

in delivery of the Group’s strategy and

objectives as determined by the Board.

–

Day-to-day responsibility for executive

management matters.

–

Responsible for maintaining dialogue

with the Chair and the Group’s stakeholders.

–

Sets the cultural tone throughout

the organisation.

Company Secretary

–

Responsible for advising the Board on

all corporate governance matters and

best practice.

–

Works with the Chair to ensure Directors

receive accurate and timely information

to enable them to discharge their duties.

–

Works with the Chair to design the induction

programme for new Board members,

ongoing training and the format of the

Board evaluation.

Overview

Strategic report

Financial statements

Additional information

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Governance

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.

–

Consideration and approval of the acquisition of an

innovative nitric oxide technology platform from 30

Technology Limited and acquisition of A Better Choice

Medical Supply LLC. (see Key decisions on page 105).

–

Regular review of progress and evolution of the FISBE

strategy, including participation in a two-day strategy

session and approval of strategic plans.

–

Review of other corporate development opportunities

and/or capital investments to ensure alignment with our

FISBE strategy and Business Unit plans.

–

Regular review of innovation and technology, including

the new product pipeline and quality and operations

enhancements to improve resilience.

–

Regular review of capital expenditure, including

approval of omnichannel investment and investment

in manufacturing expansion.

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.

–

Board evaluation completed and results reviewed in late

2023 (see page 106 for details)

–

Consideration of the composition and skills, knowledge

and experience of the Board and Board Committees.

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 2024 budget and business plan.

–

Regular CEO and CFO Reports and briefings.

–

Deepdives into business unit performance and plans

including Advance Wound Care and Global Quality

and Operations in September.

Focus

Innovate

Simplify

Build

Execute

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 Update in May

and November 2023 prior to publication.

–

Confirmation and approval of the interim dividend

and recommendation of the final dividend.

–

Approval of the 2022 Annual Report and Notice of 2023

AGM, held as a hybrid meeting.

Focus

Execute

Board focus and principal matters considered in 2023

The principal matters considered by the Board during 2023 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 CEO submits a report on business performance, including areas of progress

and areas which are not progressing to plan. The CEO’s report also addresses people and culture, including updates on voluntary

turnover, employee engagement, DE&I and wellbeing and talent to ensure those matters are considered regularly by the Board. The

Board also receives a report from the CFO providing updates onthe Group’s financial performance. Members of the CELT and senior

management regularly attend Board meetings to ensure that the Board has good visibility of business developments, opportunities,

principal and emerging risks and their mitigation, and key operating decisions. The Board also receives key functional reports

and presentations in relation to Convatec’s responsible business agenda, enterprise risk management, stakeholder engagement,

legal and compliance as well as presentations from internal and external speakers on other topics relevant to the business and

the environment it operates in.

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Governance

Areas of focus

Activities

Strategic priorities

Risk and governance

–

Ensuring the Group has

effective systems of internal

control and risk management

in place, including approving

the Group’s risk appetite.

–

Review of the effectiveness of the Group’s risk management

and internal control systems.

–

Review and approval of the Group’s Risk appetite, ensuring

that Group strategy and current performance are aligned

with risk appetite.

–

Regular Governance, Legal and Compliance briefings

including an in-person update from external advisers.

–

Briefings to the Board from the Board Committee Chairs

on the activities of the Committees.

–

Review of Board Committee terms of reference.

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.

–

Receiving and considering

the views of the Company’s

employees.

–

Briefings provided by the Investor Relations team and the

Group’s corporate brokers on investor feedback following

results announcements and investor roadshows.

–

The Board met healthcare professionals and a patient

to obtain valuable insights into their concerns and needs.

–

The Chair had meetings with two of our top 20 institutional

shareholders during the year.

–

Sharon O’Keefe continued her role as Non-Executive

Director workforce liaison champion and provided regular

post-engagement briefings to the Board and the Board

considered the 2024 plan for workforce engagement

(see page 91).

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 2024 and embedding ESG into strategy.

–

Review of talent management and progress on DE&I

initiatives including gender and ethnicity data.

–

Review of employee gender pay gap data.

–

Review of the Modern Slavery Statement.

–

Review of results collected from and management’s

responses to two employee surveys carried out following

the launch of our new employee voice platform which

aims to embed the Employee Net-Promoter Score.

Innovate

Simplify

Build

Execute

BOARD VISIT TO DEESIDE, WALES

CASE STUDY: BOARD EDUCATION AND EMPLOYEE ENGAGEMENT

In September 2023, the Board visited

the Company’s manufacturing and

research and development sites in

Deeside, Wales.

A tour of the facilities was arranged,

followed by presentations and a

meet-and-greet with colleagues

from across the manufacturing and

R&D teams. The Board was provided

with opportunity to engage with

employees and understand more

about their roles as well as challenges

and opportunities within these areas

of the business.

Employees also joined the Board

for a dinner as a chance to engage

on a more informal basis.

Further opportunities to meet with

colleagues from across the business

at various Convatec locations will be

arranged throughout 2024.

Overview

Strategic report

Financial statements

Additional information

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Governance

Board activity and actions

continued

How we engage as a Board

All of our stakeholders are important

to us. Identifying and engaging with

our key stakeholders is essential for

the continued success of our FISBE

strategy. Ultimately, our vision –

pioneering trusted medical solutions to

improve the lives we touch – can only

be fulfilled through interaction with

our stakeholders. For that reason, we

are committed to maintaining strong

relationships and good communication

lines with stakeholders. We consider this

fundamental to the successful delivery

of our strategy and long-term prospects

and alignment with our purpose. Further

information on how the Company

proactively engages with a broad range

of stakeholders to understand their

issues and to build positive relationships

can be found on pages 42 and 43.

BOARD STAKEHOLDER

ENGAGEMENT

Connecting with our stakeholders

and discharging section 172 duties

When making decisions, the Board acts

in a way that the Directors consider

most likely to promote the success

of the Company, for the benefit of its

shareholders as a whole, while also

considering the broad range of other

stakeholders who interact with the

business.

Our section 172 statement is set out

on page 42.

Our vision, values and our forever

caring promise provide a framework

which helps our employees make

decisions in the best interests of the

Group and our stakeholders. This

approach ensures that stakeholder

issues are considered throughout the

organisation and not just at Board level.

How the Board understands

stakeholders’ interests

The table below summarises how

our Board gains an understanding of

stakeholder issues. The table on page

105 describes how the Board considered

different stakeholders in making two

of our key decisions in 2023.

HOW THE BOARD ENGAGED

Stakeholders

Board-level engagement

Our people

Sharon O’Keefe was appointed in May 2022 as our dedicated Non-Executive Director for workforce

engagement. Sharon has attended several employee-related events and activities, including

interaction with the Employee Resource Groups, employee communications via Convatec’s

intranet and site visits (including meet and greet with employees). In September 2023, Sharon

met with a number of colleagues from T&I and GQO at Deeside in Wales. These focus groups

provided colleagues with an opportunity to discuss their experiences including the challenges and

opportunities they face. Sharon provided post-event briefings to the Board.

During the Deeside site visit, several employees were also invited to join the Board for dinner,

giving them a chance to engage on a more informal basis.

Members of the management team regularly attend relevant parts of Board and Committee

meetings to present on specific topics, including briefings on our people strategy. The Chairs

of the Audit and Risk Committee and Remuneration Committee engage directly with relevant

management and team members between Committee meetings.

The Board and the ARC receive reports from the Group’s compliance function detailing input from

the Group’s Compliance Helpline and website. When relevant, this includes details of investigations

arising from information provided via the Compliance Helpline and website and resulting outcomes

(see page 115).

Investors

All members of the Board are available to meet with shareholders.

The Chair had meetings with two of our institutional shareholders during the year.

The Board receives analysts’ notes published about the Group and the sector and receives regular

updates on investor relations matters. The Board considers this feedback important to understand

our investors’ views on Convatec’s progress in pivoting to sustainable and profitable growth.

Investors’ feedback and insights are taken into account by the Board in our communications to

shareholders.

The Executive Directors participate in an active IR programme, including investor roadshows.

Further information about our engagement with shareholders and potential investors is provided

on page 103.

All Directors participated in our 2023 AGM which took the form of a hybrid meeting, which enabled

shareholders to attend, vote and ask questions either in person or remotely.

Consumers/

patients/healthcare

professionals

During the year, the Board held an in-depth group discussion session with a surgeon specialising

in advanced wound care. In addition, the Board also heard from a wound care patient and her

healthcare professional. These sessions provided valuable insight into patient and HCP needs

as well as broader perspectives on the advanced wound care market, particularly the future for

skin-substitute products and decellularised extracellular matrices. These insights were applied

to the constructive challenge and debate regarding the Group and Business Unit strategies.

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Governance

HOW THE BOARD ENGAGED

CONTINUED

Stakeholders

Board-level engagement

Supply chain partners and

channel partners

During the year, the Board received reports from the Global Quality and Operations team with respect

to initiatives they are undertaking to continue to improve the resilience of our global supply chain.

The Board confirms its compliance with the UK Payment Practices Reporting Duty and similar

legislation across the Group in relation to the year ended 31 December 2023.

The Board received updates on the multi-million dollar investments in automation and capacity

across its manufacturing network to strengthen Convatec’s supply chain, resilience and readiness

for growth. Convatec has adjusted its inventory position whilst maintaining robust resilience

throughout its supply chain evidenced by its continuously improving customer service levels.

Further details of the steps taken to ensure that Convatec’s vision and values guide our operations

and supply chain, taking a zero-tolerance approach to any form of modern slavery, can be found

in our Modern Slavery Statement at www.convatecgroup.com/modern-slavery-statement/.

Governments and regulators

The Audit and Risk Committee received reports from the Global Tax function on taxation matters

across the Group and approved the Tax Statement including tax strategy, which was subsequently

agreed by the Board.

The Board and Committees also received briefings on the UK Government’s and FRC’s proposed

changes to corporate governance.

All other stakeholders

The Board receives information relating to our stakeholder groups through the executive reports

at each Board meeting and in the annual strategy sessions from Business Units.

BOARD KEY DECISIONS IN 2023

Acquisition of an innovative

nitric oxide technology

platform from 30 Technology

Limited

In April 2023, Convatec acquired an

innovative anti-infective nitric oxide

technology platform, including new

product assets in the wound care

market, from 30 Technology Limited. The

acquisition provides an opportunity for

Convatec to explore application of this

highly innovative technology platform

across its business categories, starting

with advanced wound care.

Section 172 – How the Board considered

different stakeholders in making the

decision

The acquisition was fully aligned with our FISBE

strategy.

Investors:

The acquisition provided strategic

opportunities for product development and use

of the technology platform in multiple areas

within Convatec, as well as providing future

additional revenue growth and increasing the

potential for higher shareholder returns.

Patients and HCPs:

The new technology has

the potential to provide best-in-class solutions

for patients who have chronic wounds, and

the potential to provide better outcomes for

patients with other chronic conditions as the

technology is developed and new applications

and products are introduced.

Our people:

The transaction benefited

employees of both organisations by better

serving customers, increasing the strength

of the combined business and creating

opportunities for innovation and growth in our

Advanced Wound Care business and beyond.

Communities:

The acquisition will strengthen

Convatec’s product range and reach to

the customers and patients we serve in

communities across the world.

Suppliers and distributors:

The transaction

provides an opportunity to build our

partnerships with new and existing trusted

suppliers and our distribution networks

across the globe.

Omnichannel investment

In March 2023, the Board approved an

investment of $36.8 million to deliver an

omnichannel user engagement approach.

The solution will offer customers a fully

integrated experience, giving access to

all products, offers, and support services

via all channels, platforms, and devices

through an integrated and cohesive

solution. Omnichannel seeks to provide

a consistent user experience, regardless

of the platform or method the customer

chooses to use.

Section 172

– How the Board considered

different stakeholders in making the decision

The investment was fully aligned with our

FISBE strategy. Delivering these changes

should result in a more efficient and effective

commercial organisation, with improvements

on commercial spend and effectiveness in

customer execution.

Investors:

Investment in omnichannel will

allow us to strengthen customer loyalty and

is expected to support revenue growth for

Convatec which is needed to ultimately deliver

higher returns for investors. It also underpins

confidence in Convatec’s future growth and the

overall success of the business.

Suppliers and distributors:

The solution

will expand our capacity to deliver products

and improve our service, creating increased

demand and helping to ensure a robust

supply feed.

Patients and HCPs:

The solution has the

potential to provide patients with better access

to our products and services and will enable

us to deliver closer connections with our

customers as they use more digital solutions.

Furthermore, by updating our systems and

connecting disparate data sources we will

enable a seamless view of how our customers

are interacting with us along their journey,

enabling us to better understand their needs

and how to serve them effectively.

Our people:

The solution will benefit

employees by increasing the strength of

the business and creating opportunities

for innovation and growth. We will also be

investing in developing our people with

additional skills to support inclusion of

digital into our commercial function.

of our risk management and internal

control systems and undertakes horizon

scanning to identify new emerging

risks. The Audit and Risk Committee

reviews the Group’s risk management

and internal control systems regularly

throughout theyear. The Group’s principal

and emerging risks are set out on pages

80 to 84.

Statement of review

During 2023, the Board has directly, or

through delegated authority to the Audit

and Risk Committee, monitored and

reviewed the Group’s risk management

Risk management and internal

control effectiveness

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

Audit and Risk Committee and from the

VP of Internal Audit, Enterprise Risk &

Insurance. The Board regularly reviews

the Group’s principal risks and, on an

annual basis, reviews the effectiveness

activities and processes, including a

review of the effectiveness of all material

risk mitigations and the financial,

operational and compliance internal

controls. The Audit and Risk Committee’s

activities in these areas are set out in

the Audit and Risk Committee report on

pages 114 and 115. Following this review,

the Board is satisfied that the Group’s

risk management and internal control

framework 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.

Overview

Strategic report

Financial statements

Additional information

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Convatec Group Plc Annual Report and Accounts 2023

Governance

Board evaluation

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 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 pages 96 and 97.

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 and

therefore the Board is recommending all

Non-Executive Directors for re-election at

the 2024 AGM.

Board Chair evaluation

The evaluation of the performance of the

Board Chair by the other Directors was

2022 Board evaluation

progress report and 2023

Board evaluation review

In 2022 the Board undertook an evaluation

of its effectiveness as required by the Code

(details of which are set out in the 2022 Annual

Report and Accounts). Information about the

key priorities arising from this evaluation and

progress to date is set out below.

In October 2023 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 December 2023

Board and Committee meetings, with each

considering the evaluation outcomes and

any appropriate actions.

The key findings from the 2023 Board

evaluation process, including the actions

agreed to address recommendations

led by the Senior Independent Director

(SID) and without the presence of the

Board Chair. The overall conclusion was

that he was performing very well in all

aspects of the role and that his experience,

thoughtfulness and congeniality provide

considerable value to management,

the Board and the wider business.

The review highlighted that the Chair

values the individual opinions of all

Directors and seeks and listens to their

views, but also holds them accountable

in the delivery of their respective

responsibilities. He chairs effective

meetings, allows debate and encourages

contribution and challenge, with a focus

on clarity and pragmatism in decision-

making. He has a strong and constructive

relationship with the Executive Directors,

particularly the CEO, and provides

appropriate challenge, support and advice.

The SID provided feedback to the Board

Chair after the review of his perfor

mance.

2023 BOARD EVALUATION REVIEW

Overall the Board was considered to be working effectively, with a view that the Board was well aligned and with good Board member

dynamics. The three priority recommendations arising from the Board evaluation and proposed actions are set out below.

Findings

Actions for 2024

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.

Company Secretary to work with the Board to ensure

that the Board’s 2024 and 2025 forward agendas evolve

to reflect the Board’s priorities.

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, continue the momentum

in respect of stakeholder engagement and look for

further opportunities for the Board and management

to engage with colleagues and customers.

Continue with a structured engagement programme

encompassing both formal and informal engagement

in the UK and abroad. Ensure that the Board and

Committee programmes include visits to Convatec

sites and opportunities to engage with a cross-section

of key stakeholders.

Board information, including R&D

Ensure that the Board is equipped with high quality

information to improve knowledge and oversight

and to inform its decision making.

Continue to improve the quality and clarity of Board

packs and ensure that the Board’s regular Technology

and Innovation updates continue to include information

on internal R&D efforts and the new product pipeline

and the strategy to convert this into shareholder value.

PROGRESS IN RELATION TO ACTIONS ARISING FROM THE 2022 BOARD EVALUATION

Actions

Progress

Board engagement with the CELT and future talent

In order to support succession planning and

understanding of the business, the Board would benefit

from a structured engagement programme between NEDs

and current and future leadership talent across the Group.

A structured engagement programme between NEDs,

Executive Directors, CELT and other current and future

leadership talent, encompassing both formal and informal

events in the UK and abroad, was implemented during the

year. As part of this programme, the Board and Committee

members visited a number of Convatec sites. A similar

programme has been put in place for 2024 and will be

in future years.

Board agenda

The Board would benefit from a reinforced focus on

key areas for the business, such as the competitive and

macroeconomic environments.

Deep dives into key areas for the business were included

on the Board agenda during 2023, either at scheduled

Board meetings or at the July 2023 strategy meeting.

106

Convatec Group Plc Annual Report and Accounts 2023

Governance

Nomination Committee report

A word from

the Chair

“We recognise the multiple benefits of a Board that brings a diverse range

of skills and experience to Convatec, and the value it creates for all our

stakeholders as a result.”

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 and the CELT.

–

Reviewed progress and development

of the Group’s diversity, equity &

inclusion and wellness strategy and

assessed key metrics.

–

Reviewed progress of leadership

development programme for

CELT and application of new high–

performing team principles, helping

to build and develop a sustainable,

diverse and inclusive organisation.

2024 priorities

–

Maintain focus on succession planning

and talent management for the

Board, Executive Directors and senior

management.

–

Continue to monitor progress against

the DE&I and wellbeing agenda across

the Group.

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 2023.

The Group Deputy Company Secretary

attends meetings as Secretary to the

Committee and the Company Secretary

and the Chief People Officer regularly

attend the Committee’s meetings to

provide information and support to the

Committee to enable it to carry out its

duties and responsibilities effectively.

–

Continual development in training and

support to ensure that the Committee

continues to operate in accordance with

best practice.

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

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 April 2023.

Key numbers

Meetings held

(2022: 2)

Attendance

100%

(2022: 100%)

Committee membership, meetings and attendance

Director

Member since

Attended

John McAdam (Chair)

September 2019

3/3

Margaret Ewing

May 2019

3/3

Heather Mason

September 2020

3/3

Brian May

September 2020

3/3

Constantin Coussios

January 2022

3/3

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

Overview

Strategic report

Financial statements

Additional information

107

Convatec Group Plc Annual Report and Accounts 2023

Governance

Nomination Committee report

continued

Board and Committee

composition

As a consequence of the end of the

Relationship Agreement between the

Company and Novo Holdings A/S, Sten

Scheibye resigned as Non-Executive

Director on 8 September 2023. Following

the departure of Sten, the Committee

reviewed the composition of the Board

and determined that no changes were

required at this time, but this would be

kept under review.

The composition of the Nomination

Committee is set out on page 107.

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. As at 31 December

2023 and at the date of this report,

we comply with the recommendations

of both the FTSE Women Leaders Review

and the Parker Review, as well as the

requirements of the Listing Rules 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.

Dear Shareholder

I am pleased to present the Nomination

Committee Report, which summarises

how the Committee discharged its duties

during the year.

Our role

As a Board we recognise that a balanced

and diverse Board, with a broad range

of skills, experience and knowledge,

is more likely to be an effective Board.

In support of our vision of pioneering

trusted medical solutions to improve

the lives we touch, and with the ultimate

aim of creating sustainable value for

all our stakeholders, we continue to

focus on ensuring that we have the

right balance of skills, knowledge

and diversity, both at the Board

and within our leadership team.

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 internal VP appointments, through

a leadership development programme

for mid-level leaders with emphasis

on personal development goals. This

programme aims to accelerate the

development and retention of this

important group of leaders, a group

that has a crucial role to play in delivering

on our strategic aims into the future.

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.

As part of our ongoing diversity and

inclusion strategy, our target is to achieve

40% of senior management roles to be

held by female executives by 2025 and

this currently stands at 44%.

During the year the Board has considered

diversity insights across a range of

metrics with a focus on gender and

ethnicity. In 2024 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 96 and 97.

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

56%

50%

Women

44%

50%

Note: Executive Management includes CELT members and the Company Secretary, 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)

78%

80%

Mixed/multiple ethnic groups

–

Asian/Asian British

–

10%

Black/African/Caribbean/ black British

–

Other ethnic group, including Arab

22%

10%

Note: Executive Management includes CELT members and the Company Secretary, but excludes the CEO and CFO.

108

Convatec Group Plc Annual Report and Accounts 2023

Governance

Talent and succession planning

Succession planning work during 2023

focused on the Board and CELT. The

Committee has considered succession

planning for each of the Executive

Directors and CELT members, as well as

emerging talent within the business. The

review included scoping those potential

successors ready now, those ready in one

to two years, and those anticipated to be

ready in three to five years.

Given its importance, succession planning

is scheduled for the Committee’s

consideration twice a year.

External search firms

For all independent Non-Executive

and Executive Director appointments,

we engage international search and

selection firms to support the Board,

most recently using firms including

Heidrick & Struggles, Spencer Stuart

and Russell Reynolds. None of them

have any connection with the Group,

or any Director, other than theymay

be engaged to assist with Board and

senior management appointments

and ordinary course succession

planning from time to time.

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.

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.

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. The Nomination

Committee also reviews the ongoing

commitments of candidates prior to

making recommendations for the

appointment of new Directors. Directors

are required to seek Board approval

prior to taking on additional significant

commitments 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 entire 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 16 May 2024. 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 re-appointed unless

the resolution for their re-election is

not approved.

During the year Freshfields Bruckhaus

Deringer also provided the Board with

refresher training on directors’ duties,

disclosure and conflicts of interests

and an update on governance and

regulatory matters. The Board also

received updates and training from the

Group’s senior management and external

advisers covering a range of topics.

We continued to evolve our training

programme and, in particular, its scope

was expanded to include training and

updates from external advisers to both

the Remuneration and Audit and Risk

Committees. 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 evaluation, we will focus on

appropriate training in 2024.

All Directors have access to the advice and

services of the Company Secretary and,

through her, have access to independent

professional advice in respect of their

duties, at the Group’s expense.

Committee 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 2024 are set out

under 2024 Priorities on page 106.

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

5 March 2024

Overview

Strategic report

Financial statements

Additional information

109

Convatec Group Plc Annual Report and Accounts 2023

Governance

Audit and Risk Committee report

A word from

the Chair

“The Committee is delighted with the improvements in the robustness of

the Group’s internal controls and related processes.“

Margaret Ewing

Chair of the Audit and Risk

Committee

COMMITTEE INTRODUCTION AND OVERVIEW

Highlights

–

Review of key judgements and

estimates, adjusted measures and

disclosures in respect of the 2023

financial statements

–

Monitoring the development of

ESG reporting and targets including

compliance with TCFD and other

relevant regulatory reporting

requirements and extension of

independent limited assurance

of relevant ESG metrics.

–

Considering the conclusions and

actions arising from the independent

assessment of the maturity and

effectiveness of cyber security

and data privacy activities.

2024 priorities

–

Continue to monitor the

implementation of management’s cyber

and data privacy improvement plans

–

Improve the Committee’s

understanding of the rapidly evolving

regulatory requirements related to

ESG and NFI and the implications for

the Group

–

Complete external audit tender process

and receive Board approval to appoint

preferred auditor for 2026 financial

year audit

Composition

The current members of the Committee

are listed above.

The biographies of the Committee

members on pages 96 and 97 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

(2022: 7)

Attendance

100%

(2022: 100%)

Key areas of responsibility

The roles and responsibilities of the

Committee are set out in the terms of

reference (available on the Company’s

website) which were last updated in

October 2022. The Committee agreed in

July 2023 that the Committee’s terms of

reference would be reviewed after the

release of the revised Code by the FRC,

which was published in January 2024.

The update to the terms of reference

will be reviewed and approved at the next

Committee meeting in May 2024.

The Committee’s principal responsibilities

are to oversee and provide assurance to

the Board on:

–

the integrity and quality of financial

reporting and to ensure it is fair,

balanced and understandable

–

the effectiveness of audit arrangements

–

the robustness and effectiveness of

the financial, reporting, operational

and compliance controls and risk

management processes throughout

the year

–

TCFD and ESG metrics and related

data reporting.

The Senior Assistant Company Secretary

attends meetings as the Secretary to the

Committee. The Chairman, Chief Executive

Officer, Chief Financial Officer, Company

Secretary, Deputy Company Secretary,

VP Group Financial Controller 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 the Committee

meetings. The Committee also has private

sessions with the external audit partners

and the VP Internal Audit, Enterprise Risk

& Insurance.

A summary of the Committee’s activities

during 2023 and until the date of this

report is detailed on the following pages.

Committee membership, meetings and attendance

Director

Member since

Attended

Margaret Ewing

August 2017

5/5

Heather Mason

September 2020

5/5

Brian May

March 2020

5/5

1. Ms Ewing was appointed Chair of the Committee on 28 June 2019.

110

Convatec Group Plc Annual Report and Accounts 2023

Governance

To support the Board in providing its

opinion, the Committee considered

the overall cohesion and clarity of the

ARA and assessment of the quality

of reporting through discussion with

management and the external auditor

and the assurance framework, process

and controls that were applied in its

preparation. This included:

–

A detailed verification process dealing

with the factual content

–

Comprehensive reviews undertaken

independently by senior management

and members of the Committee 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 (including limited

assurance provided in respect of

relevant ESG metrics)

–

Confirmation from management that

the assurance framework had been

adhered to for the preparation of

the 2023 ARA.

Committee conclusions

and confirmations

Taking into consideration all areas of

focus of the Committee during the year

and in reviewing the 2023 ARA, including

reviewing the supporting detailed topic

papers, presentations and reports

from management and Deloitte, the

Committee is satisfied that:

–

The Financial Statements for the

year ended 31 December 2023 have

been prepared applying appropriate

accounting policies and address the

critical accounting judgements and

key sources of estimation uncertainty,

both in respect of the amounts

reported and the disclosures made.

–

The significant assumptions used for

determining the value of assets and

liabilities have been appropriately

scrutinised and challenged and

are sufficiently robust.

–

The Group’s internal controls and

risk management processes were

operating effectively throughout the

year, with no material control failures.

–

The conclusions in relation to critical

accounting judgements, significant

assumptions and estimates and key

valuation assumptions are in line with

those drawn by the auditor, having

discussed them with the auditor during

the audit planning process and at the

finalisation of the year-end audit and

following robust challenge of both

the auditor and management.

–

The external and internal auditors

have continued to provide effective

and independent audits that have

been challenging, robust and of

a high quality.

Dear Shareholder

and other stakeholders

As Chair of the Audit and Risk Committee,

I am pleased to present the Committee’s

2023 Report.

The core responsibilities of the Committee

include ensuring the integrity of the

financial and non-financial information

published by the Group; the external and

internal audit processes are effective

and that the Company has an effective

control environment to manage risks.

The purpose of this report is to describe

how the Committee conducted its

responsibilities during the year.

Throughout the year, in addition to

the Committee’s scheduled meetings,

I met regularly with senior management,

particularly the CFO, VP Group Financial

Controller, VP Internal Audit, Enterprise

Risk & Insurance, Group General Counsel

and the lead partners of our external

auditor, Deloitte. These meetings allowed

me to understand how existing and

emerging issues were being addressed

and to adapt the Committee’s agendas

accordingly. The meetings with the VP

Enterprise Risk Management & Internal

Audit and Deloitte lead partners also

provided me with insight to inform

the Committee’s ongoing review of

the effectiveness of audit (internal and

external respectively) and to ensure the

internal audit plan prioritised controls

and processes related to the Group’s

principal and emerging key risks and the

external audit plan was focused on the

emerging and changing key audit risks.

Committee effectiveness

During the year, the Committee

members and regular attendees

(including the internal and external

auditors) undertook an evaluation

of the Committee’s effectiveness. An

external provider, Lintstock, prepared

and provided participants in the

evaluation with a questionnaire, and

collated and summarised the responses.

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 2023,

with priority areas of focus for 2024

also identified.

Fair, balanced and understandable

The Board is required to provide its

opinion on whether it considers that the

Company’s 2023 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.

Consequently, the Committee has

confirmed to the Board, in its advisory

capacity, that:

–

The key accounting estimates,

judgements and disclosures within

the Financial Statements are

appropriate and serve to provide

a true and fair view.

–

The 2023 ARA, overall, are fair,

balanced and understandable. The

Board’s statement in relation to this

confirmation is included on page 146.

–

It is reasonable for the Directors to

make the Viability and the Going

Concern statements on pages 86

and 87 and page 146 respectively.

–

The Group’s speaking up and fraud

risk processes have operated

effectively during the year, with further

improvements to be implemented

during 2024.

–

The Board is able to provide the

statement regarding the effective

operation throughout the year of

the Group’s internal controls and

risk management processes on

pages 76 to 84 of the 2023 ARA.

I would like to thank my fellow

Committee members and all teams

involved with the Committee’s activities

for their contribution during 2023

and their relentless 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 2024.

Margaret Ewing

Chair of the Audit and Risk Committee

5 March 2024

Overview

Strategic report

Financial statements

Additional information

111

Convatec Group Plc Annual Report and Accounts 2023

Governance

Audit and Risk Committee report

continued

2023 KEY MATTERS

The Committee reviewed the interim and full

year results statement and 2023 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 disclosures

with climate risks and opportunities

and related evolving regulatory

reporting requirements

–

Whether, in considering the above

factors, the Convatec Annual Report

and Accounts was fair, balanced and

understandable.

Throughout the year, the Committee

received regular updates from the CFO,

VP Group Financial Controller, VP Internal

Audit, Enterprise Risk and Insurance and

the VP Investor Relations and Treasury,

and both formal and informal reports

and feedback from the external auditor

covering the following scope:

–

Acquisition papers and related

accounting treatments and judgements,

including assessment of contingent

earn-outs and impact on the recognition

of deferred tax.

–

Alternative performance measures,

including the policy and the rationale

and non-recurring nature and quantum

of the proposed adjusting items.

–

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

related enhancement programme to

support the Committee conclusions

on the integrity of the Consolidated

Financial Statements.

–

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’s results statements

and 2023 ARA to the Board for approval.

Significant reporting matters and accounting judgements considered by the Committee

A summary of the significant areas of audit focus, as described in the Independent Auditor’s Report on pages 206 to 213, plus

additional areas of key focus by the Committee is provided below. Following discussion and review (and where appropriate,

challenge) of each significant accounting judgement with management and the external auditor, the Committee was satisfied that

there were relevant accounting policies in place in relation to these significant issues and that management had correctly applied

these policies and exercised reasonable judgement.

Issue

Committee’s conclusion and response

Acquisitions

The Committee reviewed the judgements in relation to the acquisition and investment activity in current

and prior years.

The Group has made three acquisitions in 2023 – Starlight Science Ltd in April, A Better Choice Medical Supply

LLC in July and All American Medical Supply Corp. in October. The details of the acquisitions are provided on

pages 193 to 195.

Throughout 2023, the Committee reviewed the status of the acquisitions to ensure that the valuation of

related balances at key reporting dates was appropriate. The Committee challenged the key drivers of the

valuation of intangible assets identified from acquisitions and considered the integration strategy of the

investments into the core business. The Committee discussed these key judgements with the external auditor

and considered the results of their audit review, including the conclusions of Deloitte’s valuation experts, and

ultimately considered that the accounting for acquisitions and investments was appropriate.

Valuation of

contingent

consideration

provisions

The acquisitions made in previous years continue to trigger earn-out payments requiring judgements in the

valuation of consideration. Throughout 2023, the Committee reviewed the projected contingent consideration

to ensure that the valuation of related balances at key reporting dates was appropriate. The Committee

reviewed forecasts and considered the work undertaken by external valuation experts. The Committee also

ensured that the implications of the potential maximum consideration were reflected in management’s going

concern and viability assessments. The Committee concurs with management’s review that the provision for

contingent consideration on acquisitions is a key source of estimation uncertainty. The Committee discussed

these key judgements with the external auditor and considered the results of their audit review, including

the conclusions of Deloitte’s valuation experts, and ultimately considered that the accounting for contingent

consideration was appropriate.

EXTERNAL REPORTING

112

Convatec Group Plc Annual Report and Accounts 2023

Governance

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, 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.

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 a prudent level (see page 155). The Committee

scrutinised these judgements and estimates related to revenue, and discussed the judgements and estimates

with the external auditor, ultimately concluding that the accounting for revenue was appropriate.

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 reviewed and challenged management’s detailed assessment of the Group’s viability during

the next three years and its ability to continue as a going concern in accordance with the requirements of

the Code. The Committee considered the Group’s 2024 budget, 2024 to 2028 strategic 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. The Committee attempted to understand 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 2023 ARA.

Taxation

The Committee reviewed the recognition and valuation of the deferred tax assets (DTAs) in respect of

excess US tax losses, first recognised following the ATT acquisition in 2022. The Committee challenged the

robustness of the taxable profit forecasts of the US operations, the corresponding utilisation of the tax losses

and considered the assessment and conclusion of the external auditor. The Committee concluded that the

recognition of DTAs in relation to the forecast profits in the US continued to be appropriate.

The Committee also reviewed the provision for uncertain tax positions and related disclosures. A provision

release following the successful resolution of an uncertain tax position resulted in a one-off material net tax

benefit which has been treated as an adjusting item. The Committee considered this to be appropriate.

Inventory Policy

The accounting policy for inventories was updated in the year to better align the deferral of price variances to

the stock holding period. The Committee reviewed the impact of inflation on the standard costs set annually

and considered the challenge from the external audit in 2022 to be valid, ultimately concluding that this

change in policy was appropriate.

Operating

segment

reporting

The Committee considered management’s assessment that, for the purposes of financial reporting, it remains

appropriate for the Group’s business to be treated as a single segment entity. Management’s assessment

concluded that the Chief Operating Decision Maker (CODM) has transitioned from the CEO to the Convatec

Executive Leadership Team (CELT) as the business continues to operate in a matrix structure with which

the Committee concurred. Financial information in respect of revenues is provided to CELT for decision

making purposes, both on a category and key market basis, with the primary focus of financial reporting and

decision-making based on the consolidated Group results and anticipated cashflows and available liquidity.

Resource allocation continues to be driven on a functional basis, to the global centres of excellence. The

Committee also considered the external auditor’s assessment, which took other supporting evidence into

account and concluded that management’s position was supportable. The Committee ultimately agreed

with management and the external auditor that the Group should continue to report as a single segment

for the purposes of the disclosures in the 2023 ARA, in accordance with IFRS 8.

Overview

Strategic report

Financial statements

Additional information

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Governance

Audit and Risk Committee report

continued

Matter

Committee’s conclusion and response

Alternative

Performance

Measures

The Committee reviewed the APM policy in February 2023, to ensure that the adjustments from the IFRS

statements remained appropriate and provided investors and other stakeholders with meaningful insight

to the Group’s performance. The policy was reviewed to ensure that the rationale and criteria for their use

was specific and the minimum thresholds for adjustment were appropriate. It was noted that the largest

adjustments related to the amortisation of acquired intangible assets, of which a significant proportion

related to the Bristol Myers Squibb spin-out and will be fully amortised by 2026. In addition, the costs of

the large-scale transformation of the business in line with the FISBE strategy have also been recognised

as adjusting items over recent years. The Committee considered that these items were relevant in order

to understand the ongoing performance of the Group.

The Committee requested that the CFO sought feedback from brokers as to the nature and quantum of

the adjustments, however, no specific concerns had been raised by investors and analysts. The Committee

concluded that the APM policy remained appropriate and that all proposed adjusting items would continue

to be scrutinised by the Committee prior to approval.

Dividends

The Committee reviewed the dividends recommended by management with regard to the distributable

reserves, cash resources, availability of liquidity, including 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 respectively the 2023 interim

and final dividends.

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 Company‘s compliance, fraud prevention and risk management frameworks,

and internal controls throughout the year.

Our Role

Action taken by the Committee and Outcome/future actions

Enterprise Risk Management and Insurance

–

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

–

Ensure a robust assessment of emerging and

principal risks has been undertaken, including

movements in the risk exposure, with effective

mitigations and controls established

–

Monitor the policy and process for identifying

new, emerging and existing risks, and effectively

managing their impact on the Group

–

Review effectiveness of the Company’s risk

management systems and processes

–

Review of the annual insurance renewal

strategy and programme to assess adequacy

and appropriateness of coverage of insurable

risks across the Group

The Committee regularly reviewed and challenged the principal and

emerging risks identified by management and considered the effectiveness

of the respective risk mitigations and controls. The ongoing improvements

to the risk framework were noted, including the way in which risks are

identified, managed and reported to CELT, Committee and Board and the

introduction of key risk indicators.

The Committee reviewed and recommend respectively the principal

and emerging risk management statements and disclosures, including

the priority order of risk as disclosed, reflecting the discussions held

with the CELT (collectively and with individual members). In December

the Committee challenged management on the list and prioritisation

of the principal risks. After careful deliberation and consideration of

evolving circumstances, the Committee concluded that the risks and

the prioritisation were appropriate.

Following consideration of the lessons learned from the risk simulation

exercise undertaken by CELT and relevant teams in October, the Committee

requested a further simulation exercise be expanded beyond IT and cyber

failures to better inform and prepare crisis management plans.

The Committee reviewed the maturity assessments of the management

of privacy and cyber risks performed by external advisers. Whilst

improvements have continued to be implemented throughout the year,

there remains opportunities to improve privacy controls and cyber defence

capabilities. The Committee will closely monitor management’s progress in

implementing its improvement plans during 2024.

The Committee reviewed and approved the proposed insurance renewals

programme, which had been tailored to manage specific type and location

risks to provide cost-effective incident cover, with improved risk mitigations

to improve overall business resilience.

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Governance

Our Role

Action taken by the Committee and Outcome/future actions

Internal controls

–

Promote and review sound risk management and

internal control systems over financial, reporting,

operational and compliance processes

–

Review the effectiveness of internal controls

The Committee received quarterly updates of the self-attestation of

compliance with the Group’s financial and IT general control frameworks,

including details of control failures (all immaterial during 2023), their

remediation and independent reviews of control evidence.

The Committee noted the extension of the formal control framework

to include key non-financial information disclosed. The controls reliance

approach on GBS controls adopted by the external auditors provided

additional assurance on the centralised GBS controls to the Committee

in this regard.

Based on these 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.

Compliance, including speaking up and

fraud

–

Review the Group’s codes, policies, systems and

controls in respect of fraud, bribery, corporate

conduct and regulatory and legal compliance

–

Review speaking up reports

The Committee reviewed update reports on the results of the global

compliance programme and the speaking up process. The results of the global

business risk assessments performed (jointly by the Group’s compliance team

and internal audit) across a number of key global markets were considered

and concluded that an ethical business culture exists. The key themes arising

from these risk assessments related to third party risk management (i.e. due

diligence and contracting) and interactions with healthcare professionals

(i.e. medical samples). These are being addressed through training and

implementing new and refreshed policies and procedures. Following the

completion of the assessment of the initial selected markets, the assessment

process will be cascaded to cover all markets during 2024.

The Committee reviewed the progress of the fraud risk assessment, 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.

The Committee continues to monitor our compliance culture across the Group

with strong focus on markets which have an enhanced perceived corruption

index risk score.

Whistleblowing/speaking up is reported by employees and certain third parties

through a confidential Compliance helpline or directly to the Office of Ethics

and Compliance. 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 Office of Ethics and Compliance. All reports, irrespective of

the channel, are collated, managed, are reviewed and investigated by the Office

of Ethics and Compliance. A summary of the key themes (harassment and

discrimination), locations and disposition of whistleblower/speaking up matters

together with subsequent actions are reviewed by the Committee and reported

to the Board.

During 2024, the Committee will monitor management’s development, as

appropriate, of procedures and controls to ensure compliance with the new UK

‘Failure to prevent fraud’ offence, which is expected to take effect in mid-2024.

Overview

Strategic report

Financial statements

Additional information

115

Convatec Group Plc Annual Report and Accounts 2023

Governance

Audit and Risk Committee report

continued

Our role

Action taken by the Committee and Outcome/future actions

Regulatory compliance – ESG and TCFD

–

Review and approve the TCFD disclosures and

oversee the Responsible Business Review ensuring

compliance with all applicable regulations (pages

38 to 75)

–

Approve the ESG related metrics to be subject

to limited assurance

–

Approve the appointment of the ESG assurance

partner and review their report

The Committee continued to focus on ESG and TCFD reporting during 2023,

monitoring progress to meet the increasing reporting requirements and

stakeholder expectations, develop quantitative science-based targets and

deliver against them.

In 2022, the Company disclosed three partial compliance exceptions within

its TCFD reporting. The Committee can confirm that the compliance gaps

have been closed during 2023. The Committee has reviewed the initial

draft transition plan and will continue to monitor progress in delivering the

actions required to iterate the transition plan, ensuring robust roadmaps

are in place to meet the commitments and targets.

Consistent with the prior year, the Committee approved Deloitte to provide

limited assurance over seven key ESG metrics and targets disclosed in

the Group’s ARA and other sustainability reporting, with the scope of the

metrics to be subject to limited assurance increased to include Complaints

per million (CPM), a key measure in determining senior executives’

remuneration. This involved Deloitte undertaking walkthrough procedures

to understand the processes, internal controls and evidence available

to support the provision of assurance in respect of CPM. The intention

is to include the Vitality Index as an assured (limited) key metric in 2024.

During 2024, the Committee will also review management’s roadmap for

moving to independent reasonable assurance in due course, including the

improvements in the relevant control and reporting frameworks required

to enable unqualified reasonable assurance opinions to be provided.

Regulatory developments

–

Monitor the development of regulations relating

to ESG, TCFD, climate change, fraud, audit and

corporate governance and FRC and FCA reporting

requirements and management’s preparedness

to adopt the changing requirements

The Committee continued to keep abreast of guidance regarding the

status of the Department for Business and Trade proposals following

the government response to the ’Restoring trust in audit and corporate

governance’ consultation.

Although intended related legislative changes are no longer to be introduced,

the updated UK Corporate Governance Code, issued in January 2024, requires

greater transparency of risk management and internal control processes.

The Committee is pleased with progress on no-regret actions taken by

management whilst waiting for the finalisation of the updated Code, and

will monitor further enhancements of the risk management and internal

control processes to ensure compliance in line with the timelines.

The Committee also received regular briefings from the external auditors

and Convatec’s ESG Steering Committee on regulatory and other

developments relating to sustainability, fraud and other disclosure and

reporting requirements, building the revised Code’s 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 CFO and subsequently

the VP Investor Relations and Treasury as regard to compliance with

treasury policy, covenants and other conditions of financing arrangements.

Based on the satisfactory outcome of this review, the Committee

recommended to the Board the approval of two new Group guarantees

to facilitate ISDA agreements and hedging.

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 reviewed the proposed update to the global tax strategy

statement and the alignment with the Group’s tax risk profile and was satisfied

that the Group manages its tax affairs carefully, ensuring that we operate

within our tax risk appetite. Accordingly the Committee recommended the

updated Tax Strategy statement to the Board for approval.

The Committee reviewed the structuring of the Starlight integration to

leverage tax opportunities and was satisfied that the structuring was

appropriate and within policy.

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. The treatment

of material adjustments to the uncertain tax positions upon resolution

as an adjustment item was considered and approved by the Committee.

The Committee reviewed the tax rates to be applied during the year

compared to the guidance previously disclosed and requested a detailed

explanation for movements in the estimated effective tax rate.

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Convatec Group Plc Annual Report and Accounts 2023

Governance

The Committee continued to exercise

disciplined oversight of the effectiveness

of the Internal Audit function. Throughout

the year the Committee reviewed the

results of the audits conducted (including

management’s response to the audit

findings and recommendations),

considered emerging themes of concern

and approved changes to the audit plan

to reflect changing circumstances or

risks. For those audits rated with more

significant weaknesses, the Committee

met with responsible management

to understand their response to the

audit findings and related action plan,

implementation of which has been

closely monitored by the Committee.

The proposed 2024 internal audit plan

was approved. The audit plan is aligned

to the Group’s principal and emerging

risks but also provides assurance over the

design and operating effectiveness of the

Group’s financial, reporting, compliance

and operational controls, processes and

information technology and a number

of Group priority projects and initiatives.

In addition to its continuous

consideration of the internal audit

effectiveness, in December, the

Committee undertook a formal

assessment, including obtaining direct

feedback from CELT members and other

relevant management. The Committee

noted the use of external specialists

to assist in technical areas (e.g. data

privacy and cyber security), to provide

specialist knowledge and expertise.

Both management and the Committee

concluded that the internal audit function

was effective and provided robust,

challenging and quality audits.

3. INTERNAL AUDIT

CASE STUDY: CONTROLS RELIANCE AUDIT

Building on the GBS-led audit in 2022 and the knowledge session on the global internal control programme in October 2022,

the Committee challenged Deloitte to transition to a controls reliant audit approach for the 2023 external audit processes at

the GBS centre. Whilst this approach would not give direct assurance for the purposes of the Director’s statement on internal

control, it would provide additional assurance on the operating effectiveness of controls tested and lead to greater audit

efficiencies, particularly with regard to the internal resources absorbed in the audit process, and leverage the automated

controls in the SAP platform.

Deloitte duly planned their audit to move to a controls reliant approach focusing primarily on GBS scope, and reported the

outcome to the Committee. The Committee was pleased with the conclusions from the work performed by the external audit

team. Subject to a small number of exceptions, Deloitte concluded that the controls are designed appropriately and are

operating effectively to mitigate the reporting risks. In addition, the Committee noted Deloitte’s assessment of the high quality

from the GBS component of the Group audit, and how the GBS model enables seamless service delivery mitigating the impact

of unexpected staff absences. The Committee will review the management responses to the recommendations made by the

external auditor and look forward to the further development of the internal control framework in 2024, as it continues to

broaden its scope to non financial reporting metrics and operating controls.

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 2023 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, particularly in respect of the significant revenue

audit risk, leading to an agreed plan (see below).

Having previously challenged the external auditor to centralise certain

audit activities in Lisbon to leverage the Group’s GBS operating model and

simplifying the management of the audit, the external auditor was further

challenged to evolve towards a control reliant approach for the GBS audit

which was implemented but limited to certain areas in 2023, as highlighted

in the case study, above. This approach has enabled audit procedures to

be performed earlier, allowing more time during January and February

for more detailed consideration of risk areas.

Audit materiality level including Group materiality

and component materiality.

Reviewed methodology for calculating the materiality, which was consistent

with 2022.

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 with increased scope on ESG data in 2023.

Overview

Strategic report

Financial statements

Additional information

117

Convatec Group Plc Annual Report and Accounts 2023

Governance

Audit and Risk Committee report

continued

Significant matters for review

Decisions and actions taken by the Committee

Audit scope and risk assessment.

Audit scope is aligned to Group strategy with all 12 of the Group’s focus

markets in audit scope – five were subject to full scope audit procedures,

three had the material components subject to specified audit procedures,

with desk top reviews undertaken by the central audit team for others (of

which two are also subject to statutory audit).

Deloitte undertook a thorough risk assessment process to identify the three

areas of significant audit risk (two of which are related to acquisitions) and

other areas of audit focus. The Committee sought an explanation for the

change in emphasis and particularly the downgrading of risks considered

significant in 2022 and agreed with Deloitte’s decision. The Committee did

not identify additional risks that could materially impact the consolidated

financial statements.

Having considered the proposed audit scope, risk assessment and

materiality level, all of which took into consideration key developments in

the Group’s business and changes in the environment in which the Group

operates, the Committee approved the 2023 audit plan and subsequent

changes to certain aspects of the plan to reflect the Group’s performance

and the changing external environment.

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).

The Committee’s review concluded that

the Company benefited from a capable

and knowledgeable senior audit team,

that provided the Committee with

strong opinions, views and insights,

with clear evidence of robust and

objective challenge of management

and exercise of appropriate scepticism

in relation to key audit judgements

and estimates, reliable interpretation

of evidence provided by management,

involvement of relevant specialists where

relevant and use of external sources

to support their conclusions when

appropriate. Deloitte’s audit process

and procedures were considered to be

highly appropriate and effective, and

focused on the areas of greatest risk.

Based on the Committee’s conclusions,

we recommended to the Board that

Deloitte be proposed for reappointment

by shareholders at the AGM to be held

on 16 May 2024.

Audit independence

To safeguard the external auditor’s

independence and objectivity and

in accordance with the FRC’s Ethical

Standard, our policy on the provision

of non-audit services 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 2023,

when non-audit fees principally related

to the interim review of the Group’s

half-year unaudited financial statements

and to the limited assurance on the

ESG metrics and were not considered

significant. A summary of fees paid to

the external auditor is set out in Note 3

to the Consolidated Financial Statements.

Audit quality and effectiveness

The Committee reviewed the quality of

the external audit throughout the year,

assessing the depth of review and clarity

of communication (written and verbal,

formal and informal), to ensure that the

rigour and challenge of the external audit

process are maintained. The effectiveness

of the external auditor is continuously

evaluated by the Committee and senior

finance personnel that have regular

interactions with the external auditor,

with a formal consideration undertaken

in November and immediately post

the completion of the year-end audit.

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 December 2023.

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 the

Committee anticipates her continuing

in this position for the next two

years. Dawn Harris stepped down as

engagement partner after seven years,

with David Holtam assuming this role

of engagement partner in 2023, and

also leading on the GBS audit 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 ES given Margaret

Ewing’s situation as both a former

partner of Deloitte LLP and chair

of this Committee, with Deloitte

and 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.

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Governance

As disclosed in the 2022 ARA, the

Company will undertake an audit

tender (not mandatory rotation) during

2024, and the resulting appointment

will be effective for the 2026 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.

External auditor appointment and

engagement tender

At the AGM on 18 May 2023, 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.

The Committee recommended to the

Board the proposal to reappoint Deloitte

as external auditor at the 2024 AGM.

The process will formally commence in

April 2024, when participating firms will

be provided with access to documentation

and have meetings with all Audit

Committee members and members of

senior management across the business

before having to submit a written proposal

to the Committee. Selected firms will then

be invited to give presentations to the

Audit Committee and two key members

of finance management (Selection Panel).

The proposals and presentations will be

judged against a number of key selection

criteria identified in advance of the

process, following which the proposals

of two of the participating firms (including

the Committee’s preferred choice) will be

submitted to the Board for final selection

and appointment.

October 2023

November 2023

April 2024

April/May 2024

June 2024

Committee review and approval of audit tender process.

Proposed lead partner of participating firms

meets with ARC Chair and senior management.

Decision made and communicated to participants

and via regulatory information service.

Final presentations by shortlisted firms to the Selection Panel.

Participating audit firms meet with all ARC members, senior

finance management and other key management across the

business, including site visits.

Receipt of written proposals

ARC recommendation to the Board –

preferred and second choice with justification

Request for proposal submitted to audit firms.

EXTERNAL AUDIT TENDER TIMELINE

Overview

Strategic report

Financial statements

Additional information

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Convatec Group Plc Annual Report and Accounts 2023

Governance

Directors’ Remuneration report

A word from

the Chair

“As the Company continues to navigate a dynamic external environment,

the Committee continues to monitor our remuneration policy and practices,

in order to ensure these support and enhance our winning culture and strategy,

as well as ensure alignment of executive interests with those of key stakeholders

including employees and shareholders. During 2023, shareholders approved

our new remuneration policy which we have implemented.”

Brian May

Chair of the

Remuneration Committee

COMMITTEE INTRODUCTION AND OVERVIEW

The table above shows the number

of scheduled meetings attended out

of the number of meetings members

were eligible to attend during 2023.

The Deputy Company Secretary

attends meetings as the Secretary

to the Committee. The Chair, CEO,

CFO, 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.

Activity highlights

–

Ensured remuneration arrangements

for the Executive Directors and CELT

members in 2023 continue to support

Convatec’s strategic intent to pivot to

sustainable and profitable growth.

–

Kept under review remuneration

arrangements and outcomes to

ensure continued alignment of

executive interests with those of other

stakeholder groups.

–

Completed an annual review of the

Committee’s terms of reference versus

best practice guidelines and completed

an annual performance review to

support continuous improvement.

–

Following approval at the AGM of the

new Remuneration Policy, we have been

implementing the policy throughout

the year.

2024 priorities

–

Continue to implement our 2023

Remuneration Policy to deliver

competitive and motivational

remuneration that reinforces

the successful delivery of our stated

strategic ambition and alignment with

long-term shareholder interests.

–

Continue to actively engage key

stakeholders on remuneration matters,

as appropriate.

Key areas of responsibility

–

Designs, recommends and implements

the Company’s Remuneration

Policy, packages for the Executive

Directors and CELT, 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, pages 121 and 122.

Our remuneration at a glance

Page 123.

Our Annual Report on Remuneration

How we implemented our Remuneration

Policy during 2023 and how we intend to

apply it in 2024, pages 124 to 133.

Our Remuneration Policy

Pages 134 to 142 set out the

Remuneration Policy as approved by the

shareholders at the 2023 AGM.

Key numbers

Meetings held

(2022: 5)

Attendance

94%

(2022: 95%)

Committee membership, meetings and attendance

Director

Member since

Attended

Brian May

March 2020

4/4

Constantin Coussios

January 2022

3/4

Kim Lody

February 2022

4/4

Sharon O’Keefe

March 2022

4/4

Mr May was appointed Chair of the Committee on 1 September 2020.

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Governance

Shareholder engagement in

relation to 2023 AGM voting

In 2023, we are pleased to report

strong shareholder support, with a

98% FOR vote for the remuneration

report and a 96% FOR vote for the

Remuneration Policy at our AGM.

The significant endorsement by our

shareholders reflects our commitment

to be transparent and responsible with

our executive remuneration practices.

We appreciate the trust and confidence

our shareholders have shown.

Going forward, the Remuneration

Committee is committed to continued

positive and proactive engagement

with shareholders.

Performance in the year ended

31 December 2023 and

implications for remuneration

The Board is pleased with the continued

strategic progress of the Group and

its strong performance in 2023. The

Group delivered 7.2% organic revenue

growth and 10.2% adjusted operating

profit growth on a constant currency

basis. Further details are set out in the

Financial review on pages 26 to 33.

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 2023.

Context and approach to

remuneration

I would like to start this letter by

thanking all our employees for their

dedication and strong contributions

in the past year. It is through our

employees’ impressive performance that

we have been able to increase our market

capitalisation and remain constituents

of the FTSE 100 throughout 2023. Our

FISBE strategy continues to be embedded

into the organisation and we are set to

build on this growth trajectory in 2024.

Our remuneration policy, which was

approved by shareholders at the 2023

AGM, enables us to make remuneration

decisions that continue to support the

future success of Convatec and underpin

our culture and values.

Based on performance, the Committee

approved payouts under the 2023 annual

bonus of 99.3% of maximum for the CEO

and 99.3% of maximum for the CFO.

The Committee reviewed the formulaic

bonus outcome in the context of the

wider performance of the Group, as well

as the experience of our stakeholders,

and concluded that there was no need

to make any discretionary adjustment.

Over the three-year performance

period, our adjusted profit before income

taxes (PBT) and total shareholder return

(TSR) performance resulted in 46.7%

and 66.1% of maximum vesting under

each metric. This means the 2021 LTIP

awards will vest at 51.6% of maximum.

The Committee was satisfied that

the vesting outcome under both

metrics was appropriate given the

Company’s superior performance and

so no discretionary adjustments have

been made.

Committee focus and activities in 2023

Focus areas

Activities

Policy

–

Implementation of the Remuneration Policy approved by shareholders at the 2023 AGM

Remuneration packages

–

Approved Executive Director and CELT salaries for 2023

–

Approved the 2022 bonus outcomes for Executive Directors and CELT

–

Approved 2023 LTIP award levels for Executive Directors andCELT

Setting performance targets

–

Reviewed and set financial targets for 2023 annual bonus and 2023 LTIP, in the context of

multiple internal and external reference points for performance over the relevant period

Equity incentives

–

Confirmed outcome of the 2021 award cycle

–

Reviewed developments in the executive remunerationlandscape

Workforce remuneration

–

Received updates on workforce remuneration policies and practices

–

Reviewed increases to the salary budget in light of the inflationary environment and

global living wage levels in all our locations

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

Overview

Strategic report

Financial statements

Additional information

121

Convatec Group Plc Annual Report and Accounts 2023

Governance

Against the backdrop of considerable

inflationary and wider macroeconomic

challenges to our long-term growth

plans, the Company’s financial objectives

remain ambitious. The Committee

reviewed the targets under the LTIP and

determined in line with these ambitions,

to set the organic revenue growth

range at 4% to 7% and the adjusted PBT

growth range at 6% to 14% for the 2024

LTIP awards. These stretching targets

remain consistent with the medium-

term goals shared at the Capital Markets

Day in November 2022, ongoing market

guidance and the PBT growth range

remains in excess of typical earnings

metric ranges in the FTSE 100.

The Committee will continue to review

the performance ranges on an annual

basis to ensure that maximum pay

outs are only delivered if exceptional

performance and long-term

shareholder value are delivered.

Finally, the Committee decided to

increase the salary of the CEO, CFO

and the fee of the Chairman by 4%

from 1 April 2024, 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.

Remuneration in 2024 and beyond

The remuneration in 2024 and beyond

reflects the remuneration policy that

was approved at the 2023 AGM with

some minor adjustments to the bonus

metric weightings and cash flow metric

definition as outlined below.

For 2024 the annual bonus will be

weighted 40% on adjusted operating

profit, 25% on organic revenue growth,

15% on free cash flow to equity and

20% on strategic objectives (where this

includes 5% linked to ESG priorities).

The adjusted weighting of bonus metrics

involves moving 5% of the weighting

from operating profit to the cash flow

metric. This change was made to reflect

increased business and investor focus

on the cash flow. Additionally, we will

transition from measuring adjusted free

cash flow (after tax) to free cash flow to

equity for 2024’s bonus determinations,

which we believe aligns better with

shareholder expectations.

2024 LTIP awards will continue to

be measured 50% on adjusted PBT,

25% on organic revenue growth and

25% on relative TSR equally weighted

against the FTSE 50-150 excluding

investment trusts and the S&P Global

Healthcare Equipment & Services

Index. Further details are set out in

the Annual Report on Remuneration,

on page 132 of this report.

Concluding remarks

On behalf of the Committee, I would like

to thank you for your support and I trust

you will find the Directors’ Remuneration

report useful and informative.

Brian May

Chair of the Remuneration Committee

5 March 2024

Directors’ Remuneration report

continued

122

Convatec Group Plc Annual Report and Accounts 2023

Governance

2023 annual bonus outcomes

The charts below show how actual performance contributed to the bonus payouts for the Executive Directors for 2023:

Annual bonus: 198.5% of salary (£1,873,483); 99.3% of maximum

bonus opportunity. LTIP: 51.6% maximum LTIP opportunity

(£1,296,937).

Annual bonus: 198.5% of salary (£1,017,313); 99.3% of maximum

bonus opportunity.

OUR REMUNERATION AT A GLANCE

This section provides a summary of outcomes relating to 2023.

Adjusted free cash flow

(10% weighting)

Adjusted operating profit¹ (45% weighting)

Target

Threshold

Actual

Maximum

$394m

$405m

$432m

$435m

Target

Threshold

Actual

Maximum

$270m

$291m

$313m

$348m

Outcome warranted by performance: 100% of maximum

for this element.

Adjusted operating profit is calculated on a constant currency basis

using a budget rate.

Outcome warranted by performance: 100% of maximum

for this element.

1. Adjusted free cash flow is calculated as free cash flow to capital plus

cash outflows from adjusting items. Further details can be found in

the Non-IFRS section on pages 34 to 37.

Personal strategic objectives including ESG

(20% weighting)

Jonny Mason

Karim Bitar

96.3%

Outcome warranted by performance: 46.7% of maximum

for this element.

Organic revenue growth

(25% weighting)

Adjusted PBT (75% weighting)

Maximum

Threshold

Actual

8.0%

15.0%

10.1%

Target

Threshold

Actual

Maximum

$2,009m

$2,048m

$2,087m

$2,091m

Outcome warranted by performance: 100% of maximum

for this element.

1. Organic revenue growth is calculated on a constant currency basis

using a budget rate.

Outcome warranted by performance: 66.1% of maximum

for this element.

Relative TSR (25% weighting)

Stretch

(upper quartile)

Threshold

(median)

Actual vesting

(66th percentile)

Maximum

(upper decile)

50%

90%

100%

65.8%

Details of the objectives set for the Executive Directors,

and performance against these, are on page 126.

Personal strategic objectives were set for each Executive Director in

relation to the following areas of strategic focus for 2023: Customer

People, Product/service improvement, Business performance

2021-2023 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 2023. Overall the LTIP vesting outcome was at 51.6% of maximum.

Karim Bitar (CEO)

Jonny Mason (CFO)

2023 remuneration: outcomes vs performance scenarios

Maximum

Minimum

On-target

£5,494,564

£4,263,900

£1,093,481

£2,578,420

Single Figure 2023

Fixed Remuneration

Annual bonus

LTIP

Single Figure 2023

Maximum

Minimum

On-target

£1,594,062

£1,586,375

£569,062

£1,078,437

Fixed Remuneration

Annual bonus

LTIP

Overview

Strategic report

Financial statements

Additional information

123

Convatec Group Plc Annual Report and Accounts 2023

Governance

Directors’ Remuneration report

continued

Our approach to implementing our Remuneration Policy in 2024

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 in 2024: Karim Bitar: £981,580; Jonny Mason: £533,000

(4% increase).

Base salaries are aligned with

the broader market trends

and UK workforce increase

of 4%.

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 2024: Karim Bitar and Jonny Mason 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.

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 2024: Maximum opportunity of 200% of salary for

Karim Bitar and Jonny Mason. The annual bonus will be based on: adjusted

operating profit¹ (weighted 40%), organic revenue growth¹ (25%), free cash

flow to equity (15%) and personal strategic objectives (20%), of which 5%

relate to quantifiable ESG metrics.

The adjusted weighting of

bonus metrics with a 5%

shift from operating profit

to cash flow was made to

reflect increased business

and investor focus on cash

flow. We will transition from

adjusted free cash flow

(after tax) to free cash flow

to equity for 2024’s bonus

determinations, aligning with

shareholder expectations.

Focus

Innovate

Simplify

Build

Execute

Long-Term

Incentive Plan

Policy: Maximum opportunity: 300% of salary. The performance conditions

and targets are agreed and set to ensure they remain appropriately

stretching and aligned to the Group’s strategy. 25% ofan award will vest at

threshold, with 100% vesting at maximum. The minimum performance and

vesting period is three years. A two-year post-vesting holding period will

apply. Malus and clawback provisions apply under certain circumstances.

Implementation in 2024: Award opportunity of 300% of salary for Karim

Bitar and 250% for Jonny Mason. Awards will vest subject to adjusted PBT

growth (weighted 50%), organic revenue growth (weighted at 25%), and TSR

versus the constituents of the FTSE 50 to 150 excluding investment trusts

(12.5%) and the S&P Global Healthcare Equipment & Services Index (12.5%)

over the three financial years to 31 December 2026.

The LTI plan continues to

underscore sustainable

growth and long-term value

creation. The performance

conditions and reward

structure are designed to

attract, incentivise and retain

high-calibre talent from the

global healthcare sector.

Focus

Innovate

Simplify

Execute

Shareholding

requirement

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.

At the end of 2023, Karim Bitar held shares worth 644% of his 2023 salary

and Jonny Mason held shares worth 44% of his 2023 salary.

Executive Directors are required to hold 100% of their in-situ

shareholding requirements for 12 months after cessation and 50% for

the next 12 months. This means 400% and 300% of salary in the first year

and 200% and 150% of salary in the second year post-cessation for the

CEO and CFO, respectively.

Our shareholding

requirement under the

existing policy continues to

demonstrate alignment with

shareholder interest and

fosters a culture of ownership

and long-term investment in

the company’s success.

Focus

1. Adjusted operating profit and organic revenue is calculated on a constant currency basis, using a budget rate.

124

Convatec Group Plc Annual Report and Accounts 2023

Governance

OUR ANNUAL REPORT

ON REMUNERATION

This section of the Remuneration

report provides details of how our

Remuneration Policy was implemented

during the financial year ended

31 December 2023, and how it will be

implemented during the year ending

31 December 2024. 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 therequirements 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 125 and

128), scheme interests awarded during

the financial year (page 127), payments

to past Directors (page 129) and the

statement of Directors’ shareholdings

(page 133). The remaining sections of

the report are not subject to audit.

Committee membership in 2023

Details of the membership of the

Committee, the number of times it

met during 2023 and attendance at

its meetings are set out on page 120.

Committee responsibilities

The Committee’s key areas of

responsibility are also set out

on page 120.

Committee performance

evaluation

A performance evaluation of the

Remuneration Committee was carried

out in 2023, facilitated by an external

consultant, Lintstock, by way of a

detailed questionnaire. The key priority

identified for 2024 was to ensure that

over the course of the year, Committee

members are provided with continuing

education (both within and outside

Committee meetings) on governance

and remuneration regulations, including

insights into investor expectations.

Advisers

The Committee conducted a

detailed review of its advisers and

appointed Willis Towers Watson from

May 2022. During the year, WillisTowers

Watson reported to the Chair of the

Committee and provided reward survey

benchmark data to the Company. Willis

Towers Watson is considered to be

independent by the Committee. Fees paid

to Willis Towers Watson aredetermined

on a time and materials basis, and totalled

£67,000 (excluding expenses and VAT) for

the 2023 financial year in its capacity as

adviser to the Committee. Willis Towers

Watson 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 2023 AGM of the advisory vote on the 2022 Annual Report on Remuneration and the

binding vote on the 2023 Remuneration Policy.

Resolution

Votes

‘for’

Votes

‘against’

Votes

withheld‘

To approve the Directors’ Remuneration Policy (2023 AGM)

95.95%

4.05%

8,682,610

To approve the Directors’ Remuneration report (2023 AGM)

98.03%

1.97%

91,373

1. Votes ‘withheld’ are not votes in law and, therefore, have not been included in the calculation of the proportion 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 2023 financial year

and compares this with the equivalent figure for the 2022 financial year.

Director

Base

salary

’000

Taxable

beneﬁts

’000

Annual

bonus

’000

LTIP

’000

Pension

beneﬁt

’000

Total

Fixed

’000

Total

Variable

’000

Total

’000

Karim Bitar

2023

£938

£76

£1,873

£1,297

£80

£1,094

£3,170

£4,264

2022

£915

£56

£1,339

£1,972

£137

£1,108

£3,311

£4,419

Jonny Mason

2023

£509

£17

£1,017

n/a

£43

£569

£1,017

£1,586

2022

£400

£13

£579

n/a

£34

£447

£579

£1,026

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). See page 126 for further details.

3. 2023 figures represent the estimated value of LTIP awards made to Karim Bitar in March 2021. These awards shall vest on the third anniversary of grant as to 51.6% of

maximum based on performance over the three-year performance period ending 31 December 2023 (further details of which are set out on page 127). The estimated

values shown in the table above use the three-month average share price for the period ended 31December 2023 (219p) 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 £168,187

for Karim Bitar since the respective award dates as a result of share price appreciation. The 2022 figure represents the actual vesting value of the 2020 LTIP award

with a share price of 216p at vest.

4. Karim Bitar’s and Jonny Mason’s pension benefits in the year, equivalent to 8.5% of base salary.

5. Total of base salary, taxable benefits and pension benefit.

6. Total of annual bonus, LTIP and other payments.

7. Appointed CFO on 12 March 2022. Income relates to the period 12 March–31 December 2022.

Overview

Strategic report

Financial statements

Additional information

125

Convatec Group Plc Annual Report and Accounts 2023

Governance

Directors’ Remuneration report

continued

Incentive outcomes for the year ended 31 December 2023 (audited)

Annual bonus in respect of performance in the 2023 financial year

For 2023, Karim Bitar and Jonny Mason had a maximum bonus opportunity of 200% of their 2023 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 2023 was based on a combination of adjusted operating profit

(weighted 45%), organic revenue growth1

(25%), adjusted free cash flow (10%) and personal strategic objectives (20%), of which

5% relate to quantifiable ESG metrics.

The tables below summarise the structure of the 2023 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

$394m

$405m

$432m

$435m

Focus

Innovate

Simplify

Organic revenue growth

$2,009m

$2,048m

$2,087m

$2,091m

Focus

Innovate

Simplify

Adjusted free cash ﬂow

$270m

$291m

$313m

$348m

Simplify

Execute

Objectives and actual performance

Karim Bitar

–

Continued the successful execution of FISBE strategy, delivering sustainable and profitable growth, a strong cash flow position

and strengthening Convatec’s competitive position.

–

Drove inorganic growth strategy with successful acquisition of a nitric oxide technology platform, as well as two bolt-on acquisitions

in our Home Services Group (US).

–

Successfully developed and started launching key new products including ConvaFoam™, GentleCath Air™ for Women and

InnovaMatrix

. We also provided new infusion sets to support key insulin pump partners such as Medtronic, Tandem Diabetes Care

and Beta Bionics.

–

Continued delivery of improvements in overall quality of products (12.2% CPM reduction), greenhouse gas emissions (55% reduction

in Scope 1 and Scope 2 over 2021), increased diversity through women in senior leadership positions (44%).

–

Drove manufacturing productivity and supply chain resilience progress while improving customer service levels.

Jonny Mason

–

Guided the business to deliver on all financial targets for the year, including: sales growth, margin expansion, earnings increase

and cash generation.

–

Expanded focus on simplification and productivity across Operations, Commercial and G&A teams, increased the scope of Global

Business Services (GBS), further improving the cost ratio.

–

Sharpened execution of strategic initiatives and mechanisms for allocation of capital.

–

Improved the management of working capital and delivered a significant increase in free cash to equity conversion.

–

Further strengthened and diversified the Finance, IT and GBS teams with key hires. Increased employee engagement and reduced

voluntary turnover.

ESG targets in scope: Complaints per million (CPM), Scope 1 and 2 greenhouse gas emissions; and Vitality Index. We successfully achieved a

reduction in CPM by at least 8%, attained a Vitality Index of at least 27%, and reduced scope 1 and 2 emissions by 55% relative to our 2021 baseline.

For a comprehensive account of our performance against these targets see pages 46 and 47 of the Annual Report.

Annual bonus in respect of performance breakdown

Director

Measure

Weighting

Maximum

opportunity

(% of salary)

Earned bonus

(% of salary)

(‘000)

Karim Bitar

Adjusted operating proﬁt

45%

90%

90.0%

£849

Organic revenue growth

25%

50%

50.0%

£472

Adjusted free cash ﬂow

10%

20%

20.0%

£189

Personal strategic objectives (inc. 5% in relation to ESG metrics)

20%

40%

38.5%

£363

Total

100%

200%

198.5%

£1,873

Jonny Mason

Adjusted operating proﬁt

45%

90%

90.0%

£461

Organic revenue growth

25%

50%

50.0%

£256

Adjusted free cash ﬂow

10%

20%

20.0%

£103

Personal strategic objectives (inc. 5% in relation to ESG metrics)

20%

40%

38.5%

£197

Total

100%

200%

198.5%

£1,017

1. Adjusted operating profit and organic revenue growth are both calculated on a constant currency basis using a budget rate.

126

Convatec Group Plc Annual Report and Accounts 2023

Governance

One-third of the bonus earned by the Executive Directors will be deferred into shares to be held for three years. Details of this

element of the bonus award will be disclosed in next year’s Annual Report.

Scheme interests vesting in respect of the year ended December 2023

In 2021, Karim Bitar was granted conditional share awards under the LTIP. These LTIP awards were subject to performance over the

three-year period ended 31 December 2023, 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

Actual performance

Weighted vesting

outcome

Three-year Relative TSR against the constituents

of the FTSE 350 excluding investment trusts

25%

Median to

90th percentile

66th percentile

16.6%

Three-year compound annualised growth in adjusted PBT

75%

8.0% to 15.0% p.a.

10.1%

35.0%

Total % vesting

51.6%

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’ 2021 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

10 March 2021

1,147,691

51.6%

592,209

Scheme interests awarded in 2023 (audited)

2023 LTIP awards

During the year ended 31 December 2023, the Executive Directors were awarded conditional share awards under the LTIP, details

of which are summarised in the table below.

Face value

Director

Date of grant

Number awarded

Award price

Value

% of

annualised salary

Vesting date

Karim Bitar

15 March 2023

1,041,628

221.0p

£2,302,000

250%

15 March 2026

Karim Bitar

5 June 2023

222,630

206.8p

£460,400

50%

5 June 2026

Jonny Mason

15 March 2023

565,610

221.0p

£1,250,000

250%

15 March 2026

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.

2. The award is granted consistent with the Remuneration Policy approved at the AGM in 2023 and is conditional upon the Company’s shareholders approving the

Company’s LTIP grant limits within the plan rules at the Company’s 2024 Annual General Meeting.

The performance conditions attached to these 2023 LTIP awards are set out in the table below.

Measure

Weighting

Threshold

(25% vesting)

Stretch

(90% vesting)

Maximum

(100% vesting)

Organic revenue growth

25%

3.5%

6.5%

Three-year compound annualised growth in adjusted PBT

50%

7% 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 2023 LTIP awards vest, vested shares will be required to be held for a further two-year post-vesting holding period.

2022 Deferred bonus

One-third of the 2022 bonus earned by Karim Bitar and Jonny Mason was deferred into shares to be held for three years under the

DBP, details of which are summarised in the table below.

Value

Director

Date of grant

Number awarded

Award price

% of 2022 bonus

Vesting date

Karim Bitar

15 March 2023

201,937

221p

£446,281

One-third

15 March 2026

Jonny Mason

15 March 2023

99,826

221p

£220,615

One-third

15 March 2026

1. The award values are determined as one-third of each Executive Director’s 2022 bonus and converted into numbers of conditional shares using the average of the

three-day share price preceding the date of grant.

Overview

Strategic report

Financial statements

Additional information

127

Convatec Group Plc Annual Report and Accounts 2023

Governance

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 2023 and 2022

financial years.

Fee

Beneﬁts

Total

Non-Executive Director

2023

’000

2022

’000

2023

’000

2022

’000

2023

’000

2022

’000

John McAdam

£334

£326

£1

£0

£335

£326

Margaret Ewing

£120

£117

£1

£121

£118

Brian May

£97

£95

£1

£98

£96

Heather Mason

£79

£75

£2

£81

£77

Constantin Coussios

£77

£75

£1

£78

£76

Kim Lody

£80

£69

£2

£82

£71

Sharon O’Keefe

£90

£69

£2

£92

£71

Sten Scheibye

£53

£75

£0

£1

£53

£76

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. Joined the Board on 1 February 2022.

4. Joined the Board on 1 March 2022.

5. Stepped down from the Board on 8 September 2023.

Percentage change in Director remuneration

The table below shows the percentage change in Director remuneration (from 2019 to 2023) compared to the average percentage

change in remuneration for other employees over the same period. As required under The Companies (Directors’ Remuneration Policy

and Directors’ Remuneration report) Regulations 2019, this analysis will continue to beexpanded to build up a five-year history.

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 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

Executive Directors

Karim Bitar

2.5%

35.9%

39.9%

2.6%

0.0%

(6.5)%

1.9%

0.0%

(16.9)%

0.0%

40.0%

Jonny Mason

2.5%

1.3%

41.9%

n/a

Non-Executive Directors

John McAdam

1.9%

197.1%

n/a

2.5%

213.0%

n/a

0.0%

n/a

0.0%

(100)%

n/a

Margaret Ewing

2.6%

6.3%

n/a

0.0%

310.1%

n/a

(5.4)%

n/a

0.9%

(100)%

n/a

Brian May

2.4%

2.3%

n/a

0.0%

443.5%

n/a

8.4%

n/a

Heather Mason

5.7%

(14)%

n/a

0.0%

134.2%

n/a

15.4%

n/a

Constantin Coussios

2.0%

(1.7)%

n/a

0.0%

247.4%

n/a

15.4%

n/a

Kim Lody

5.7%

(19.5)%

n/a

Sharon O’Keefe

6.1%

(9.7)%

n/a

Sten Scheibye

2.0%

(100.0)%

n/a

0.0%

72.9%

n/a

15.4%

n/a

8.3%

(100)%

n/a

Average per employee

7.2%

3.1%

21.2%

5.3%

10.0%

13.5%

2.7%

(16.5)%

39.2%

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 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.

3. Joined the Board on 12 March 2022 as CFO.

4. Joined the Board on 1 February 2022.

5. Joined the Board on 1 March 2022.

6. Stepped down from the Board on 8 September 2023.

128

Convatec Group Plc Annual Report and Accounts 2023

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 2023 and 31 December 2022, and the percentage change year-on-year.

2023

2022

Year-on-year

change

Total employee pay expenditure

701

649

8.1%

Shareholder distributions

127

113

12.4%

Payments to past Directors (audited)

Frank Schulkes stepped down as Executive Director on 11 March 2022. He will receive 170,211 shares on vesting of the 2021 LTIP

award in March 2024. This award reflects the 51.6% vesting outcome, pro-rated to the date of leaving. It remains subject to the two-

year post-vesting holding period, per the terms of the Remuneration Policy. Further detail can be found in the Long Term Incentive

Plan table on page 137. There were no other payments to past Directors 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 2023.

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 2023.

TSR Chart – Convatec vs the FTSE 100

Value of £100 invested on 25 October 2016 – IPO

Convatec Group Plc

FTSE 100

100

120

140

160

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

Value of £100 invested on 25 March 2019

– announcement of Karim Bitar as CEO

Convatec Group Plc

FTSE 100

100

120

140

160

180

200

220

March 19

Dec 19

Dec 20

Dec 21

Dec 22

Dec 23

Overview

Strategic report

Financial statements

Additional information

129

Convatec Group Plc Annual Report and Accounts 2023

Governance

Directors’ Remuneration report

continued

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

Karim Bitar (

from 30 September 2019)

CEO single ﬁgure (‘000)

£6,878¹

£2,786

£3,699²

£4,419

£4,264

Annual bonus (% max.)

70.2%

98.5%

79.8%

72.7%

99.3%

LTIP vesting (% max.)

n/a

44.2%

80.5%

51.6%

Rick Anderson

(15 October 2018 to

29 September 2019)

CEO single ﬁgure (‘000)

£264

£1,118

Annual bonus (% max.)

n/a

LTIP vesting (% max.)

n/a

Paul Moraviec

(to 14 October 2018)

CEO single ﬁgure (‘000)

£1,413

£917

£631

Annual bonus (% max.)

40%

n/a

LTIP vesting (% max.)

n/a

1. 2019 remuneration includes the face value of the restricted share awards made to Karim Bitar as part of his buyout.

2. Includes the actual vesting value of Karim Bitar’s Conditional Share award that formed part of his buyout arrangement on appointment of £888k.

3. Updated single figure to reflect actual vesting of 2020 LTIP award in May 2023.

4. Represents the performance outcome of the 2021 LTIP (as a % of maximum) with a final vesting date in March 2024.

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 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. 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 2023. We are confident that the three colleagues identified are a true reflection of our UK workforce; none

of these individuals received any additional or exceptional pay during 2023. We can also confirm that no adjustments were made

to the calculation of the total remuneration for these employees from the methodology set outfor the CEO’s single total figure

remuneration. Our pay ratios are set out below:

Year

Method

25th percentile

50th percentile

75th percentile

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

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

In the case of the CEO, his total remuneration comprises a significant proportion of variable pay. The single total figure therefore

varies considerably depending on the level of performance against the measures driving the annual bonus and PSP. In 2023, the

2021 LTIP will vest at 51.6% of maximum compared with 80.5% of maximum in 2022, which has resulted in a fall in the CEO’s pay ratio

numbers this year. Since 2019, the median pay ratio has fluctuated, increasing and decreasing in line with variable pay outcomes.

130

Convatec Group Plc Annual Report and Accounts 2023

Governance

Implementation of Executive Director Remuneration Policy for 2024

Base salary

Following a review of the Executive Directors’ salaries, the Committee decided to award abase salary increase of 4% in line with

the increases for the general employee population in the UK. The increase will be effective from 1 April 2024.

Director

Role

From 1 April 2024

From 1 April 2023

Karim Bitar

CEO

£981,580

£943,820

Jonny Mason

CFO

£533,000

£512,500

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

receives his pension benefit as a cash allowance.

Annual bonus

For 2024, 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 2024 will be based on the following measures and weightings:

Measure

Link to corporate strategy

Weighting

Adjusted operating proﬁt

Focus

Innovate

Simplify

40%

Organic revenue growth

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.

The Committee reaffirms its confidence in the established balance of financial measures for 2024, which continues to support our

focus on sustainable and profitable growth. The adjusted weighting of bonus metrics with a 5% shift from operating profit to cash

flow was made to reflect increased business and investor focus. We will transition from adjusted free cash flow (after tax) to free

cash flow to equity for 2024’s bonus determinations, aligning with shareholder expectations. 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 2024 financial year will be subject to the Group’s policy on deferral, and its malus and

clawback provisions (see page 136 for further details).

Overview

Strategic report

Financial statements

Additional information

131

Convatec Group Plc Annual Report and Accounts 2023

Governance

Directors’ Remuneration report

continued

Long-Term Incentive Plan (LTIP)

The 2024 LTIP will vest after three years, subject to the following performance targets assessed over the three years ending

31 December 2026:

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 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 an award vests, it will be subject to a further two-year holding period.

Implementation of Non-Executive Director Remuneration Policy for 2024

The Remuneration Committee sets the fee for the Chair and approved an increase aligned with that of the Executive Directors at 4%.

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 Chairman, 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 2024.

The fees payable to the Non-Executive Directors are set out below.

Role

Fee structure

in 2024¹

Fee structure

in 2023

Chair

£349,700

£336,200

Non-Executive Director basic fee

£80,000 or $104,750

£77,000 or $101,000

Additional fees:

Senior Independent Director

£21,000 or $28,000

Chair of the Audit and Risk Committee

£23,000 or $30,000

Chair of the Remuneration Committee

£21,000 or $28,000

Fee for acting as a Board Level Employee Representative

£10,500 or $14,000

1. Effective 1 April 2024.

132

Convatec Group Plc Annual Report and Accounts 2023

Governance

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 2023. For Executive Directors, the current shareholding is compared to their shareholding guideline.

Options

Owned outright or vested

Director

31 December

2022

31 December

2023

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

1,943,562

2,456,534

767,047

3,650,286

–

10,253

664%

400%

Jonny Mason

50,000

99,826

1,255,722

–

10,346

44%

300%

John McAdam

23,181

Margaret Ewing

10,000

Brian May

25,000

Heather Mason

10,000

Constantin Coussios

18,301

23,278

Kim Lody

10,000

Sharon O’Keefe

3,200

Former directors²

Sten Scheibye

45,000

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 219p, being the average share price during the last three

months of the 2023 financial year.

2. Reflects shareholding at the date of stepping down from the Board.

No further shares were acquired by the Directors between 31 December 2023 and 5 March 2024, being the latest practicable date

prior to publication of this Annual Report.

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 and under the Company’s

discretionary schemes to 5% in any ten-year period.

The Directors’ Remuneration report has been approved by the Board and signed on its behalf by:

Brian May

Chair of the Remuneration Committee

5 March 2024

Overview

Strategic report

Financial statements

Additional information

133

Convatec Group Plc Annual Report and Accounts 2023

Governance

Directors’ Remuneration report

continued

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 2023 Policy approved by shareholders at the 2023 AGM in May and is 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 139.

–

Proportionality:

there is a clear and direct link between performance and reward. No variable remuneration is payable

for performance below defined thresholds.

–

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 2023 Policy for the year ending 31 December 2024, are provided in the

Annual Report on Remuneration starting on page 131.

Remuneration principles

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.

134

Convatec Group Plc Annual Report and Accounts 2023

Governance

2023 Remuneration Policy for the Executive Directors

Purpose and link to strategy

Operation

Opportunity

Performance measures

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.

The maximum salary payable

to Executive Directors will

be capped at the upper

quartile of the benchmarking

comparator group for the role

under review. 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.

n/a

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 of 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

Overview

Strategic report

Financial statements

Additional information

135

Convatec Group Plc Annual Report and Accounts 2023

Governance

Directors’ Remuneration report

continued

Purpose and link to strategy

Operation

Opportunity

Performance measures

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

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.

136

Convatec Group Plc Annual Report and Accounts 2023

Governance

Purpose and link to strategy

Operation

Opportunity

Performance measures

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.

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.

Prior to awards being granted

each year, the performance

conditions and targets are

agreed and set to ensure

they remain appropriately

stretching and aligned to

the Group’s strategy.

Awards granted under the

LTIP to Executive Directors

will 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 annual LTIP

opportunity is 300% of base

salary for the CEO and 250%

of base salary for the CFO.

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.

Further details of the LTIP

awards granted to each

of the Executive Directors

will be disclosed in the

relevant Annual Report

on Remuneration.

Vesting of the LTIP is subject

to continued employment

during the performance

period and the achievement

of performance conditions

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 LTIP outcome

to ensure it takes account

of any major changes to the

Group (e.g as a result of M&A

activity) and is 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.

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 (to 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

Overview

Strategic report

Financial statements

Additional information

137

Convatec Group Plc Annual Report and Accounts 2023

Governance

Directors’ Remuneration report

continued

Notes to the Policy Table

Malus and clawback policy

Malus and clawback may be applied

to the annual bonus and LTIP awards

in certain 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.

Cash bonuses will be subject to clawback,

with deferred 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.

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 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.

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 (e.g. 400% and 200% of

salary for the CEO in year one and year

two, respectively.)

Details of the Executive Directors’ current

personal shareholdings, and progress

towards meeting the share ownership

guidelines, are provided in the Annual

Report on Remuneration.

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 the

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.

Some employees below executive

level are eligible to participate in

annual bonus schemes. 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. Other executives

are eligible for restricted share awards

on a discretionary basis. Convatec also

offers an opportunity for broader-based

participation in a share purchase plan,

as approved by shareholders at the

2017 AGM.

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 16 and 17). 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.

138

Convatec Group Plc Annual Report and Accounts 2023

Governance

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 (300% of

salary for the CEO/250% of salary for the CFO, 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 (300% of salary for the CEO/250% of salary

for the CFO) assuming no share price growth.

“On-target”:

fixed remuneration (as above), plus target bonus (50% of maximum or 100% of salary) and threshold LTIP vesting (25% of maximum or 75% of salary for

the CEO/62.5% of salary for the CFO) 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

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.

LTIP performance measures are selected

to ensure they align with the Group’s

strategy and long-term shareholder value

creation. LTIP awards to be granted in

2024 will be based on a blend of adjusted

PBT performance, organic revenue

growth, and relative TSR over a three-

year period. The Committee considers

these measures to align executive and

shareholder interests through a good

balance between external and internal

measures of performance, and between

growth and returns in the context of the

Group’s strategy.

For 2024 LTIP awards, TSR performance

will be measured relative to the FTSE

50-150 excluding investment trusts and

the S&P Global Healthcare Equipment &

Services (50%/50%).

Targets are set to be stretching

but achievable over the three-year

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

at other FTSE 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.

Pay scenarios

CEO – Karim Bitar

Maximum + 50% SPA

Minimum

Target

£7,520,964

£6,048,594

£1,140,694

£2,858,459

Maximum

Fixed Remuneration

Annual bonus

LTIP

CFO – Jonny Mason

Maximum + 50% SPA

Minimum

Target

£3,659,440

£2,993,190

£594,690

£1,460,815

Maximum

Fixed Remuneration

Annual bonus

LTIP

Overview

Strategic report

Financial statements

Additional information

139

Convatec Group Plc Annual Report and Accounts 2023

Governance

Directors’ Remuneration report

continued

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 exercises discretion to disapply time

pro-rating) and will vest based on performance

over the original performance period (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 exercises discretion to

disapply time pro-rating) and will vest subject to

performance 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.

140

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Governance

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

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 therest 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. It is the Committee’s intention to consult with major shareholders in advance of making any material changes

to remuneration arrangements for Executive Directors.

Overview

Strategic report

Financial statements

Additional information

141

Convatec Group Plc Annual Report and Accounts 2023

Governance

Directors’ Remuneration report

continued

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

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

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 in

performing their duties and may settle any tax

incurred in relation to these expenses. For any

Non-Executive Director that is based overseas,

the Group will meet travel and accommodation

expenditure as required to fulfil their Non-

Executive duties.

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.

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.

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. 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

18 May 2023

Margaret Ewing

Senior Independent Director

11 August 2017

17 August 2017

18 May 2023

Brian May

Independent Non-Executive Director

2 March 2020

26 February 2020

18 May 2023

Heather Mason

Independent Non-Executive Director

1 July 2020

8 May 2020

18 May 2023

Constantin Coussios

Independent Non-Executive Director

1 September 2020

29 June 2020

18 May 2023

Kim Lody

Independent Non-Executive Director

1 February 2022

13 December 2021

18 May 2023

Sharon O’Keefe

Independent Non-Executive Director

1 March 2022

24 February 2022

18 May 2023

Sten Scheibye

Non-Executive Director

3 July 2018

18 May 2023

Sten Scheibye stepped down from the Board on 8 September 2023.

142

Convatec Group Plc Annual Report and Accounts 2023

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 2023.

Taken together, the Strategic report on pages 4 to 87 and this Directors’ report fulfil the requirements of the Disclosure Guidance

and Transparency Rules to provide a management report.

Information incorporated by reference

The following information is provided in other sections of this Annual Report and is incorporated by reference.

Information

Section where provided

Page

Corporate governance statement

Board statements

Governance section

96 to 101, 106

Nomination, Audit and Risk and Remuneration

Committee reports

107 to 120

Directors’ Report

144

Post-balance sheet events

Financial Statements – Note 29

196

Likely future developments and research and development activities

Strategic report

48 to 51

Preparation and disclosure of Financial Statements and Annual Report

Directors’ responsibilities statement

146

Use of ﬁnancial instruments

Financial Statements – Note 23

189 and 190

Shares held by the Company’s Employee Beneﬁt Trust

Financial Statements – Note 17

180

Board membership and biographical details

Corporate governance report

96 and 97

Related party transactions

Financial Statements – Note 28

196

Employee engagement

Strategic report

42 and 43

Governance section

104 and 105

Greenhouse gas emissions

Strategic report

60 and 61

Engagement with suppliers, customers and others

in a business relationship with the Company

Strategic report

42 and 43

Governance section

104 and 105

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. Deloitte LLP have

expressed their willingness to continue

in office as auditor and a resolution to

reappoint them will be proposed at the

2024 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 203 to 205.

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. Anydecision 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 43), review of our

comparator peer group, available and

forecast distributable reserves of the

Company and the forecast cashflows and

liquidity of the Group, and other factors

the Directors deem significant.

During the year, the Directors resolved

to pay an interim dividend of 1.769 cents

per share on 28 September 2023. A scrip

dividend alternative was

oﬀered in

respect of the interim dividend allowing

shareholders to elect by 7 September

2023 to receive their dividend in the form

of new ordinary shares. On 28 September

2023, 4,199,962 ordinary shares of 10p

each were allotted to shareholders

who had elected to take the scrip

dividend alternative.

The Directors recommend a final dividend

for the year of 4.460 cents per share

(2022: 4.330 cents) which, together with

the interim dividend, makes a total for

the year of 6.229 cents per share (2022:

6.047 cents), a 3% increase over the prior

year. Thefinal dividend, if approved by

the shareholders, will be paid on 23 May

2024 to shareholders on the register

at the close of business on 26 April

2024. Following feedback from certain

shareholders, the Board re-examined

the scrip dividend programme. Taking

into consideration the recent trends in

take up the Board has taken the decision

to cease the scrip dividend option.

Capital structure

Share capital

As at 31 December 2023, 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 2023, the Company

had only one class of share consisting

of ordinary shares of 10p each.

Overview

Strategic report

Financial statements

Additional information

143

Convatec Group Plc Annual Report and Accounts 2023

Governance

Acquisition of Company’s

own shares

At the Company’s AGM on 18 May 2023

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 2024 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 Companies

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 Corporate governance report

on pages 100 and 101. 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. She 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 2023 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 5 March 2024, 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%

Direct holding

Black Creek Investment Management, Inc.

103,241,911

5.05%

Direct holding/

Indirect holding

BlackRock, Inc.

Below 5%

Indirect holding/

Financial instruments

Pelham Capital Ltd.

93,526,729

4.71%

Direct holding/

Financial instruments

Artisan Partners Limited Partnership

97,980,658

4.98%

Indirect holding

The Capital Group Companies Inc

97,418,767

4.99%

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.

Directors’ report

continued

144

Convatec Group Plc Annual Report and Accounts 2023

Governance

Relationship agreement with

controlling shareholders

Novo Holdings A/S (Novo) became a

significant shareholder on 31 March 2017.

Although Novo was not a controlling

shareholder for the purposes of the

Listing Rules, the Company and Novo

nevertheless entered into a Relationship

Agreement when Novo acquired its stake

in the Company. In September 2023,

Convatec agreed with Novo to end the

relationship agreement.As a result, Sten

Scheibye stepped down from the Board.

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 page 54.

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 132,

the Group operates an all-employee

share scheme in selected jurisdictions.

The Directors believe that this scheme

aligns 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 LR 9.8.4R

The information in the table below is required to be disclosed by LR 9.8.4R and can be found in the following locations. There are no

other disclosures required under this LR.

Section

Applicable sub-paragraph within LR 9.8.4R

Location

Interest capitalised

Group Financial Statements, Note 25, page 192

Details of long-term incentive schemes

Directors’ Remuneration report, page 127

Conﬁrmation of relationship agreement

Directors’ report, page 145

Annual General Meeting

The Annual General Meeting will be held on 16 May 2024 at 2pm and will take place at 7th Floor, 20 Eastbourne Terrace, Paddington,

London W2 6LG, 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:

Robyn Butler-Mason

Company Secretary

5 March 2024

Convatec Group Plc is registered in England No. 10361298

Overview

Strategic report

Financial statements

Additional information

145

Convatec Group Plc Annual Report and Accounts 2023

Governance

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 theDirectors

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

–

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 conditions

on the Group’s financial position and

financial performance

–

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

–

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 5 March 2024

and is signed on its behalf by:

Karim Bitar

Chief Executive Officer

Jonny Mason

Chief Financial Officer

146

Convatec Group Plc Annual Report and Accounts 2023

Governance

148 Consolidated financial statements

197 Company financial statements

206 Independent auditor�s report

Financial

statements

Financial statements

Additional information

Governance

Strategic report

Overview

Convatec Group Plc Annual Report and Accounts 2023

147

Consolidated financial statements

CONSOLIDATED INCOME STATEMENT

For the year ended 31 December 2023

2023

2022

Notes

Revenue

2,142.4

2,072.5

Cost of sales

(941.8)

(968.6)

Gross profit

1,200.6

1,103.9

Selling and distribution expenses

(612.5)

(575.9)

General and administrative expenses

(212.9)

(214.9)

Research and development expenses

(110.0)

(92.0)

Other operating expenses

(2.5)

(13.8)

Operating profit

262.7

207.3

Finance income

5.2

5.5

Finance expense

(80.7)

(57.6)

Fair value movement of contingent consideration

(24.6)

(45.1)

Non-operating income/(expense), net

4.8

(28.2)

Profit before income taxes

167.4

81.9

Income tax expense

(37.1)

(19.0)

Net profit

130.3

62.9

Earnings per share

Basic earnings per share (cents per share)

6.4¢

3.1¢

Diluted earnings per share (cents per share)

6.3¢

3.1¢

The comparatives have been re-presented as outlined in Note 1.6 to the Consolidated Financial Statements.

The accounting policies and notes on pages 152 to 196 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 2023

2023

2022

Notes

Net profit

130.3

62.9

Items that will not be reclassified subsequently to the Consolidated Income Statement

Remeasurement of defined benefit pension plans, net of tax

(0.2)

8.4

Fair value movement on equity investments

(7.8)

–

Items that may be reclassified subsequently to the Consolidated Income Statement

Foreign currency translation

54.9

(113.6)

Realisation of cumulative translation adjustments

–

12.2

Effective portion of changes in fair value of cash flow hedges

0.7

(7.7)

Changes in fair value of cash flow hedges reclassified to the Consolidated Income Statement

(0.8)

16.5

Costs of hedging

(0.5)

(1.1)

Income tax in respect of items that may be reclassified

0.1

2.4

Other comprehensive income/(expense)

46.4

(82.9)

Total comprehensive income/(expense)

176.7

(20.0)

All amounts are attributable to shareholders of the Group and wholly derived from continuing operations.

148

Convatec Group Plc Annual Report and Accounts 2023

Financial statements

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 December 2023

2023

2022

Notes

Assets

Non-current assets

Property, plant and equipment

473.8

400.4

Right-of-use assets

74.7

79.4

Intangible assets

935.3

924.9

Goodwill

1,298.8

1,224.6

Investment in financial assets

22.9

30.7

Deferred tax assets

21.2

26.6

Derivative financial assets

–

0.2

Restricted cash

5.3

7.3

Other non-current receivables

11.7

8.6

2,843.7

2,702.7

Current assets

Inventories

396.1

336.9

Trade and other receivables

333.7

339.3

Current tax receivable

16.5

24.7

Derivative financial assets

13.6

26.4

Restricted cash

12.5

18.2

Cash and cash equivalents

97.6

143.8

870.0

889.3

Total assets

3,713.7

3,592.0

Equity and liabilities

Current liabilities

Trade and other payables

388.7

346.6

Lease liabilities

20.7

20.3

Current tax payable

26.6

33.5

Derivative financial liabilities

16.7

32.5

Provisions

83.7

100.2

536.4

533.1

Non-current liabilities

Borrowings

1,226.9

1,211.9

Lease liabilities

64.8

68.0

Deferred tax liabilities

88.2

83.2

Provisions

71.3

53.1

Derivative financial liabilities

0.9

0.3

Other non-current liabilities

32.5

32.7

1,484.6

1,449.2

Total liabilities

2,021.0

1,982.3

Net assets

1,692.7

1,609.7

Equity

Share capital

251.5

250.7

Share premium

181.0

165.7

Own shares

(0.6)

(1.5)

Retained deficit

(888.7)

(892.2)

Merger reserve

2,098.9

Cumulative translation reserve

(122.2)

(177.1)

Other reserves

172.8

165.2

Total equity

1,692.7

1,609.7

Total equity and liabilities

3,713.7

3,592.0

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 5 March 2024 and signed on its behalf by:

Jonny Mason

Karim Bitar

Chief Financial Officer

Chief Executive Officer

Overview

Strategic report

Governance

Additional information

149

Convatec Group Plc Annual Report and Accounts 2023

Financial statements

Consolidated financial statements

continued

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2023

capital

premium Own shares

Retained

deficit

Merger

reserve

Cumulative

translation

reserve

Other

reserves

Total

Notes

At 1 January 2022

247.0

142.3

(2.2)

(842.0)

2,098.9

(75.7)

126.5

1,694.8

Net profit

–

62.9

–

62.9

Other comprehensive

(expense)/income:

Foreign currency translation

adjustment, net of tax

–

(113.6)

–

(113.6)

Realisation of cumulative translation

adjustments

–

12.2

–

12.2

Remeasurement of defined benefit

pension plans, net of tax

–

8.4

Changes in fair value of cash flow

hedges, net of tax

–

10.1

Other comprehensive

(expense)/income

–

(101.4)

18.5

(82.9)

Total comprehensive

(expense)/income

–

62.9

–

(101.4)

18.5

(20.0)

Dividends paid

–

(88.1)

–

(88.1)

Scrip dividend

17, 18

1.1

23.4

–

(24.5)

–

Allotment of shares to Employee

Benefit Trust

2.6

–

(2.6)

–

Share-based payments

–

16.6

Share awards vested

–

3.3

–

2.9

6.2

Excess deferred tax benefit from

share-based payments

–

0.2

Transfer between reserves

–

(0.5)

–

0.5

–

At 31 December 2022

250.7

165.7

(1.5)

(892.2)

2,098.9

(177.1)

165.2

1,609.7

Net profit

–

130.3

–

130.3

Other comprehensive

(expense)/income:

Foreign currency translation

adjustment, net of tax

–

54.9

–

54.9

Remeasurement of defined benefit

pension plans, net of tax

–

(0.2)

Changes in fair value of cash flow

hedges, net of tax

–

(0.5)

Changes in fair value of equity

investments

–

(7.8)

Other comprehensive

income/(expense)

–

54.9

(8.5)

46.4

Total comprehensive

income/(expense)

–

130.3

–

54.9

(8.5)

176.7

Dividends paid

–

(110.7)

–

(110.7)

Scrip dividend

17, 18

0.8

15.3

–

(16.1)

–

Share-based payments

–

14.5

Share awards vested

–

0.9

–

1.5

2.4

Excess deferred tax benefit from

share-based payments

–

0.1

At 31 December 2023

251.5

181.0

(0.6)

(888.7)

2,098.9

(122.2)

172.8

1,692.7

150

Convatec Group Plc Annual Report and Accounts 2023

Financial statements

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 December 2023

2023

2022

Notes

Cash flows from operating activities

Net profit

130.3

62.9

Adjustments for:

Depreciation of property, plant and equipment

37.5

39.7

Depreciation of right-of-use assets

22.7

22.1

Amortisation of intangible assets

154.6

147.4

Income tax

37.1

19.0

Non-operating (income)/expense, net

(9.6)

26.5

Fair value movement of contingent consideration

24.6

45.1

Finance costs, net

75.5

52.1

Share-based payments

14.6

16.7

Impairment/write-off of intangible assets

–

6.3

Impairment/write-off of property, plant and equipment

2.7

9.2

Impairment/write-off of right-of-use assets

1.9

–

Change in assets and liabilities:

Inventories

(49.4)

(36.3)

Trade and other receivables

18.7

(54.3)

Derivative financial assets

11.5

(9.3)

Other non-current receivables

(1.1)

3.0

Restricted cash

7.8

(11.8)

Trade and other payables

21.1

14.7

Derivative financial liabilities

(13.4)

20.7

Provisions

4.8

9.8

Other non-current payables

(1.3)

1.0

Net cash generated from operations

490.6

384.5

Interest received

5.2

5.5

Interest paid

(70.8)

(55.4)

Payment of contingent consideration arising from acquisitions

(21.7)

–

Income taxes paid

(35.9)

(52.9)

Net cash generated from operating activities

367.4

281.7

Cash flows from investing activities

Acquisition of property, plant and equipment and intangible assets

8,9

(129.2)

(144.2)

Proceeds from sale of property, plant and equipment

0.6

–

Acquisitions, net of cash acquired

(84.4)

(123.3)

Payment of contingent consideration arising from acquisitions

(73.0)

(50.0)

Net cash inflow/(outflow) arising from divestitures

0.3

(0.1)

Investment in financial assets

–

(30.7)

Net cash used in investing activities

(285.7)

(348.3)

Cash flows from financing activities

Repayment of borrowings

–

(842.5)

Proceeds from borrowings

9.4

714.2

Payment of lease liabilities

(22.7)

(20.7)

Dividends paid

(110.7)

(88.1)

Net cash used in financing activities

(124.0)

(237.1)

Net change in cash and cash equivalents

(42.3)

(303.7)

Cash and cash equivalents at beginning of the year

143.8

463.4

Effect of exchange rate changes on cash and cash equivalents

(3.9)

(15.9)

Cash and cash equivalents at end of the year

97.6

143.8

The comparatives have been re-presented as outlined in Note 1.6 to the Consolidated Financial Statements.

Overview

Strategic report

Governance

Additional information

151

Convatec Group Plc Annual Report and Accounts 2023

Financial statements

Financial statements

Notes to the consolidated financial statements

Convatec Group Plc Annual Report and Accounts 2023

152

1. BASIS OF PREPARATION

This section describes the Group’s significant 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.

1.1 General information

Convatec Group Plc (the Company) is a public limited company incorporated in the United Kingdom under the Companies Act of

2006. The Company’s registered office is 7

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 International Financial Reporting Standards (IFRS) 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.

Pages 5 to 7 in the Strategic report provide further detail of the Group’s principal activities and nature of its operations.

1.2 Significant accounting policies

The following significant accounting policies apply to the Consolidated Financial Statements as a whole:

Basis of accounting and presentation

The consolidated financial information has been prepared on a historical cost basis, except for certain financial instruments where fair

value has been applied. Historical cost is generally based on the value of the consideration given in exchange for goods and services.

Basis of consolidation

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

using consistent accounting policies.

Going concern

As discussed in the Financial review on pages 26 to 33, the overall financial performance of the business remains strong with a

robust liquidity position.

As at 31 December 2023, the Group held cash and cash equivalents of $97.6 million (31 December 2022: $143.8 million), and

borrowings of $1,226.9 million (31 December 2022: $1,211.9 million). The borrowings as at 31 December 2023 comprised of senior

notes of $500.0 million, term loan of $250.0 million, and drawn multicurrency revolving credit facilities of $490.6 million, net of

unamortised financing fees of $13.7 million. During the year, the term of the $950.0 million multicurrency revolving credit facility

was extended by an additional year and is now committed to November 2028. The term loan and senior notes remain repayable in

2027 and 2029 respectively. $459.4 million of the multicurrency revolving credit facilities remained undrawn as at 31 December 2023,

which together with cash and cash equivalents of $97.6 million, provided the Group with total liquidity of $557.0 million as at that

date (2022: $616.6 million). The principal financial covenants remain unchanged and as at 31 December 2023, the Group was in

compliance with its financial covenants.

In preparing their assessment of going concern, the Directors have considered available cash resources, financial performance

and forecast performance, including strategy delivery, together with the Group’s financial covenant compliance requirements and

principal risks and uncertainties. The Directors have used cash flow forecasts and actual performance in 2023, the Board approved

2024 budget 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 31 December 2025, which is at least 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 86 and 87. 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.

Overview

Strategic report

Governance

Financial statements

Additional information

Convatec Group Plc Annual Report and Accounts 2023

153

The Group has carried out a reverse stress test against the forecast base case to determine the performance levels that would

result in a breach of covenants. For a breach of covenants to occur in the next 12 months, before Board and management

mitigation, the Group would need to experience a sustained revenue reduction of at least 10% across all categories and markets.

This was considered to be implausible given the Group’s strong global market position and diversified portfolio of products and

the mitigations available to the Board and management, which include reducing expansionary capital investment.

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 its business model, strategy and operations and remain solvent for a period of at least 12 months from 5 March 2024.

Foreign currency translation and transactions

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 the Consolidated Income Statement.

1.3 Climate change

The Directors recognise 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. Accordingly, climate related risks have been identified as

a principal risk and discussed in greater detail in the ‘Principal Risks’ section within the Annual Report and Accounts.

Whilst the valuation of our assets and liabilities has not been materially impacted as at 31 December 2023, the Group will continue to

monitor possible implications of climate related risks that could arise in future years on both future cash flows and the valuation of

the Group’s assets and liabilities, as Government policies and the Group’s own strategy and transition plans evolve. Further detail is

provided within the ‘Responsible business review’ and ‘The Task Force on Climate-related Financial Disclosure’ sections of the

Annual Report and Accounts on pages 38 to 75.

1.4 Critical accounting judgements and key sources of estimation uncertainty

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 no critical accounting judgements have been identified. Management have

identified one key source of estimation uncertainty in respect of the provision for contingent consideration on acquisitions.

The nature of the uncertainty arises from both the estimation of the undiscounted amounts expected to be paid and the estimation

of the timing of discrete payments.

The underlying drivers of the contingent consideration are determined in accordance with the contractual terms of the purchase

agreements for each relevant acquisition and may vary depending on the amounts or timing of product revenues (including future

revenues, which are inherently uncertain), particularly when it relates to products which are relatively new to market or not yet

launched, the future achievement of regulatory clearance for new products, or other uncertainties deriving from the purchase

agreement, which may be subject to negotiation. The Group estimates provisions for contingent consideration based on

information available at the balance sheet date that includes forecasts that run up to 20 years into the future and expectations

of when future events that trigger payments will happen. Future payment forecasts are discounted to present value in accordance

with the requirements of IAS 37 Provisions, Contingent Liabilities and Contingent Assets.

Actual results may differ from estimates or there may be delays to estimated timetables for regulatory clearances which would

lead to a change in estimate of provisions for contingent consideration and may vary materially within the next financial year.

At 31 December 2023 the discounted estimate of provisions for contingent consideration was $138.0 million (see Note 26 – Acquisitions).

Management has determined that a reasonable possible range of discounted outcomes within the next financial year is $50.0 million to

$156.0 million.

As detailed further in the Group’s Audit and Risk Committee report on pages 110 to 119, the Committee has reviewed, discussed,

and challenged management on its determination that there were no identified critical accounting judgements, and the key source

of estimation uncertainty regarding the calculation of the contingent consideration provision and the Committee has subsequently

agreed with management.

Financial statements

Notes to the consolidated financial statements

continued

Convatec Group Plc Annual Report and Accounts 2023

154

1. BASIS OF PREPARATION (CONTINUED)

1.5 Accounting standards

New standards, interpretations and amendments applied for the first time

On 1 January 2023, the Group adopted the following amendments which are mandatorily effective for the period beginning

1 January 2023:

–

Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2);

–

Definition of Accounting Estimates (Amendments to IAS 8);

–

Deferred Tax Related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12);

–

IFRS 17

– Insurance contracts;

and

–

International Tax Reform – Pillar Two Model Rules (Amendments to IAS 12).

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.

New standards, interpretations and amendments not yet effective

There are a number of standards, amendments to standards and interpretations which have been issued by the IASB that are

effective in future accounting periods that the Group has decided not to adopt early.

The following amendments are effective for the period beginning 1 January 2024:

–

IFRS 16

Leases (Amendment – Liability in a Sale and Leaseback);

–

IAS 1 Presentation of Financial Statements (Amendment – Classification of Liabilities as Current or Non-current);

and

–

IAS 1 Presentation of Financial Statements (Amendment – Non-current liabilities with Covenants).

The Group is currently assessing the impact of these new accounting standards and amendments and does not believe these will

have a material impact on 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 yet been adopted by the Group because application is

not yet mandatory, or they are not relevant for the Group.

1.6 Prior year re-presentation

Certain line items in the primary statements have been disaggregated to provide greater clarity, and accordingly, the corresponding

2022 comparative amounts have been re-presented for consistency and comparability between periods.

Within the Consolidated Income Statement, the fair value movement of contingent consideration has been presented separately.

The 2022 comparative amount includes $15.6 million that was previously included within finance expense, and $29.5 million

previously included within non-operating income/(expense), net.

Within the Consolidated Statement of Financial Position, intangible assets of $924.9 million and goodwill of $1,224.6 million are now

disclosed separately; and current tax receivable of $24.7 million is disclosed separately from trade and other receivables.

Within the Consolidated Statement of Cash Flows, trade and other payables and other non-current payables have been re-presented

to separately disclose the cash impact of movements in provisions of $9.8 million.

There is no impact on net profit, net assets, cash flows or any subtotals presented previously.

Overview

Strategic report

Governance

Financial statements

Additional information

Convatec Group Plc Annual Report and Accounts 2023

155

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. REVENUE AND SEGMENTAL INFORMATION

2.1 Revenue recognition

The Group sells a broad range of products to a wide range of customers, including healthcare professionals, patients and

manufacturers. This note provides further information about how the Group generates revenue and when it is recognised

in the Consolidated Income Statement.

Accounting policy

Revenue recognition

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 or service is transferred to

a customer, distributor or wholesaler, which is generally when goods have been delivered, as most products are insured by the

Group until delivery. 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 and services

Advanced Wound Care, Ostomy Care, and Continence Care products are sold to pharmacies, hospitals and other acute and

post-acute healthcare service professionals 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 insulin pump manufacturers.

In 2023 and 2022, no single customer generated more than 10% of the Group’s revenue.

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 that date. 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

re-imbursement, retrospective rebate or other claims by an insurer, healthcare professionals 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.

Financial statements

Notes to the consolidated financial statements

continued

Convatec Group Plc Annual Report and Accounts 2023

156

2. REVENUE AND SEGMENTAL INFORMATION (CONTINUED)

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, historic 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 a prudent 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 historic 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 future years as

a result of the estimates made in the current year is very low.

Contract costs

Incremental costs in respect of obtaining a contract with a customer principally relate to commissions paid by the Group to its

sales representatives. Such costs are capitalised as an asset to the extent that they directly relate to a specific contract, are used

to generate or enhance resources used in satisfying performance obligations and are expected to be recovered.

The amortisation period for commissions can differ according to the contract term. Renewals of milestones in the contract are

taken into account when determining the amortisation period. For each contract that has sales commissions paid, the Group has

determined an appropriate amortisation period that is consistent with the transfer of control to the customer. These capitalised

costs amounted to $5.5 million (2022: $5.4 million) at 31 December 2023 and the amount of related amortisation expense for the

year ended 31 December 2023 was $4.4 million (2022: $4.3 million). There was no impairment loss in respect of the costs capitalised.

2.2 Segment information

The Board considers the Group’s business to be a single segment entity engaged in the development, manufacture and sale of

medical products, services 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 18 to 25 of the Strategic report provide further detail of category revenue.

During the year ended 31 December 2023, management reassessed its Chief Operating Decision Maker (CODM) and determined

that Convatec’s Executive Leadership Team (CELT) is now the CODM and no longer the Chief Executive Officer. 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. The financial information provided to CELT for decision-making purposes is produced on both a category and

geographic basis. 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. The change in CODM does not impact the Group’s single segment assessment.

Revenue by category

The Group generates revenue across four major product categories. The following chart sets out the Group’s revenue for the year

ended 31 December by category:

	2023	2022
	$m	$m
Advanced Wound Care	695.3	620.7
Ostomy Care	608.3	583.0
Continence Care	457.2	425.4
Infusion Care	370.9	341.1
Revenue excluding hospital care exit	2,131.7	1,970.2
Revenue from hospital care exit 1	10.7	102.3
Total	2,142.4	2,072.5

Following the exit of hospital care in 2022, effective from 1 January 2023, Flexi-Seal

, our faecal management system, moved from the Continence & Critical Care category

to the Ostomy Care category. The remaining industrial sales, predominantly continence-related supplies for B2B customers, moved from Infusion Care to Continence Care.

Continence & Critical Care has been renamed to Continence Care. The 2022 comparatives have been re-presented to reflect these changes and to separately disclose revenue

associated with the hospital care exit.

Overview

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Governance

Financial statements

Additional information

Convatec Group Plc Annual Report and Accounts 2023

157

Geographic information

Geographic markets

The following chart sets out the Group’s revenue by geographic market in which third party customers are located:

	2023	2022
	$m	$m
Europe	647.8	688.6
North America	1,186.0	1,090.3
Rest of World (RoW) 1	308.6	293.6
Total	2,142.4	2,072.5

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:

	2023	2022
	$m	$m
Geographic regions
US	821.5	749.8
Denmark	375.5	371.7
UK	116.7	131.5
Other 1	828.7	819.5
Total	2,142.4	2,072.5

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:

	2023	2022
	$m	$m
Long-lived assets 1
US	1,285.9	1,349.6
UK	866.6	695.7
Denmark	274.4	266.0
Other	355.7	318.0
Total long-lived assets	2,782.6	2,629.3

Long-lived assets consist of property, plant and equipment, right-of-use assets, intangible assets and goodwill.

3. OPERATING COSTS

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.

3.1 Operating profit

Operating profit is stated after deducting from revenue:

		2023	2022
	Notes	$m	$m
Depreciation:
Property, plant and equipment	8	37.5	39.7
Right-of-use assets	24	22.7	22.1
Amortisation of intangible assets	9	154.6	147.4
Impairment/write-off of intangible assets	9	–	6.3
Impairment/write-off of property, plant and equipment	8	2.7	9.2
Impairment of right-of-use assets	24	1.9	–
Loss on terminated leases	24	–	0.1
Amounts in respect of inventories included in cost of sales		794.4	818.3

Write-down of inventories 1		21.8	22.6

Lease expenses 2	24	2.4	3.9
Staff costs:
Wages and salaries		578.4	532.7
Share-based payment expense	19	14.6	16.7
Social security costs		77.3	67.5
Defined contribution plans post-employment costs		23.7	21.2
Defined benefit plans pension costs	15	1.4	1.7
Recruitment and other employment-related fees		5.9	8.7
Total staff costs		701.3	648.5

The write-down of inventories to their realisable value is included in cost of sales.

Lease expenses comprises the costs in respect of low-value leases and short-term leases. Refer to accounting policy in Note 24 – Leases.

The remuneration of the Executive Directors, which is set out on pages 120 to 142, has been audited and is included within staff

costs and forms part of these Consolidated Financial Statements.

3.2 Employee numbers

The average number of the Group’s employees by function

5,559

3,241

791

517

2023

10,108

Operations

Sales and

General and

R&D

marketing

administrative

5,751

3,030

873

480

10,134

2022

Operations

Sales and

General and

R&D

marketing

administrative

The average number of the Group’s employees by location

3,600

1,468

5,040

2023

10,108

Europe

North

RoW

America

4,069

1,356

4,709

10,134

2022

Europe

North

RoW

America

2022 comparatives have been re-presented to more accurately reflect the Group’s employees by function and location.

North America comprises 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.

The total number of employees as at 31 December 2023 was 10,129 (2022: 10,028).

Financial statements

Notes to the consolidated financial statements

continued

Convatec Group Plc Annual Report and Accounts 2023

158

Overview

Strategic report

Governance

Financial statements

Additional information

Convatec Group Plc Annual Report and Accounts 2023

159

3.3 Auditor’s remuneration

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:

	2023	2022
	$m	$m
Fees for audit services
Group	1.6	1.5
Subsidiaries	3.3	3.0
Total fees for audit services	4.9	4.5
Fees for non-audit services
Audit-related assurance services	0.2	0.2
Other assurance services	0.1	0.1
Total auditor remuneration	5.2	4.8

A description of the work performed by the Audit and Risk Committee to safeguard auditor independence when non-audit services

are provided is set out in the Audit and Risk Committee report on pages 110 to 119.

4. OTHER OPERATING EXPENSES

Other operating expenses were as follows:

	2023	2022
	$m	$m
Impairment of intangible assets	–	1.4
Impairment of property, plant and equipment and right-of-use assets	2.5	12.4
	2.5	13.8

Other operating expenses in the year consisted of $2.9 million of impairments in respect of property, plant and equipment and

right-of-use assets as a result of the Group’s transformation projects, offset by $0.4 million reversal of property, plant and

equipment that was impaired in 2022 from the hospital care exit. The $13.8 million in the year ended 31 December 2022 related

to the impairments of property, plant and equipment and intangible assets arising from the exit from hospital care and industrial

sales-related activities.

5. NON-OPERATING INCOME/(EXPENSE), NET

Non-operating income/(expense), net was as follows:

		2023	2022
	Notes	$m	$m
Net foreign exchange gain/(loss) 1		3.7	(13.5)
Realisation of cumulative translation adjustments		–	(12.2)
(Loss)/gain on foreign exchange forward contracts	23	(4.3)	15.8
Gain/(loss) on foreign exchange cash flow hedges	23	0.8	(16.5)
Gain/(loss) on divestiture 2		3.9	(2.0)
Other non-operating income		0.7	0.2
Non-operating income/(expense), net 3		4.8	(28.2)

The foreign exchange gain in 2023 primarily relate 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.

As part of the hospital care exit, the UnoMeter™ trademarks were sold during the year, resulting in a gain of $3.9 million (2022: loss of $2.0 million arose from the sale of a

subsidiary as part of the hospital care exit).

Of the total net non-operating expense, $4.8 million (2022: $1.7 million) relates to mark-to-market derivatives, the cash flow impact of which has been shown within the

changes in working capital section of the Consolidated Statement of Cash Flows.

Financial statements

Notes to the consolidated financial statements

continued

Convatec Group Plc Annual Report and Accounts 2023

160

6. INCOME TAXES

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.

Accounting policy

The tax expense represents the sum of current and deferred tax.

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

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

the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.

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

assets and liabilities in the period in which the matter is concluded.

Overview

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Financial statements

Additional information

Convatec Group Plc Annual Report and Accounts 2023

161

6.1 Taxation

The Group’s income tax expense is the sum of the total current and deferred tax expense.

	2023	2022
	$m	$m
Current tax
Overseas taxation	46.1	46.8
Adjustment to prior years	(5.5)	(2.0)
Total current tax expense	40.6	44.8
Deferred tax
Origination and reversal of temporary differences	2.0	(3.7)
Change in tax rates	1.6	(3.2)
Adjustment to prior years	(4.5)	1.2
Benefit from previously unrecognised tax losses	(2.6)	(20.1)
Total deferred tax benefit	(3.5)	(25.8)
Income tax expense	37.1	19.0

The adjustment to prior years included a net tax benefit of $15.1 million following the successful resolution of an uncertain tax

position.

In 2022, the deferred tax movement included a benefit of $20.1 million in respect of the recognition of previously unrecognised tax

losses in the US following the acquisition of Triad Life Sciences Inc.

6.2 Reconciliation of effective tax rate

The effective tax rate for the year ended 31 December 2023 was 22.2%, as compared with 23.2% for the year ended 31 December 2022.

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:

	2023		2022
	$m		$m
Profit before income taxes	167.4		81.9
Profit before income taxes multiplied by rate of corporation tax in the UK of 23.52%
(2022: 19.0%)	39.4		15.6
Difference between UK and overseas tax rates 1	1.6		3.0
Non-deductible/non-taxable items	7.2		14.4
Change in recognition of deferred tax assets	2.6		1.0
Recognition of previously unrecognised US deferred tax assets	(2.6)		(20.1)
Movement in provision for uncertain tax positions	(17.5)		2.5
Other 2	6.4		2.6
Income tax expense and effective tax rate	37.1	22.2%	19.0	23.2%

This includes changes in tax rates based on substantively enacted legislation across various tax jurisdictions as of 31 December.

Includes tax on unremitted earnings and prior year adjustments.

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 is monitoring tax reforms driven by the OECD’s BEPS Pillar One and Pillar Two to reform international taxation rules.

The Group has assessed the potential tax impact based on OECD model rules and draft, and substantively enacted legislation

in jurisdictions in which the Group operates and expects the tax impact to not be material in the foreseeable future. The United

Kingdom enacted Pillar Two rules in the UK Finance (No.2) Act 2023 in 2023. This has no impact on the Group’s results for the year

ended 31 December 2023. 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

Convatec Group Plc Annual Report and Accounts 2023

162

6. INCOME TAXES (CONTINUED)

6.3 Deferred tax

The components of deferred tax assets and liabilities at 31 December are as follows:

	2023	2022
	$m	$m
Deferred tax assets	21.2	26.6
Deferred tax liabilities	(88.2)	(83.2)
	(67.0)	(56.6)

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 2022	8.4	89.5	(11.0)	(182.4)	16.5	20.7	(58.3)
Recognised in income statement	(1.4)	(5.5)	5.9	(1.7)	8.5	20.0	25.8
Recognised in other
comprehensive income	–	–	–	–	2.4	–	2.4
Acquisitions	(2.4)	6.3	–	(36.2)	–	–	(32.3)
Other	–	–	–	–	–	1.1	1.1
Foreign exchange	(1.3)	(0.2)	1.6	2.7	1.0	0.9	4.7
At 31 December 2022	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)
Other	–	–	–	–	–	–	–
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)

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 $145.9 million that are not expected to reverse due to anticipated restructuring of the Group’s activities (2022: $342.7 million,

deferred tax assets of $15.4 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 $2.4 million remain unrecognised in the US based on forecasts of suitable future taxable profit and they are due to

expire within 5 years (2022: $3.9 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 $381.2 million in the year

to 31 December 2023 (2022: $351.8 million) arising on unremitted earnings as management has the ability to control any future

reversal and does not consider such a reversal in the foreseeable future to be probable.

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Convatec Group Plc Annual Report and Accounts 2023

163

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:

	2023	2022
	Losses	Losses
Trading and capital losses expiring:	$m	$m
Within 5 years	2.2	10.0
Between 5 to 10 years	0.5	12.7
More than 10 years	–	30.7
Unlimited	961.6	958.0
Total	964.3	1,011.4

The Group has Luxembourg tax losses of $944.5 million (2022: $941.9 million) which are not recognised and will not expire.

The movement in Luxembourg tax losses not recognised is mainly attributable to foreign exchange differences. Other movements

in the year are mainly due to the recognition of previously unrecognised US State tax losses.

7. EARNINGS PER SHARE

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.

	2023	2022
Net profit attributable to the shareholders of the Group ($m)	130.3	62.9
Basic weighted average ordinary shares in issue (number)	2,038,653,228	2,023,839,657
Dilutive impact of share awards (number)	13,936,032	16,407,811
Diluted weighted average ordinary shares in issue (number)	2,052,589,260	2,040,247,468
Basic earnings per share (cents per share)	6.4¢ per share	3.1¢ per share
Diluted earnings per share (cents per share)	6.3¢ per share	3.1¢ per share

The calculation of diluted earnings per share does not contain any share options that were non-dilutive for the year (2022: 404,241),

because the average market price of the Group’s ordinary shares exceeded the exercise price (2022: the exercise price exceeded the

average market price of the Group’s ordinary shares).

Financial statements

Notes to the consolidated financial statements

continued

Convatec Group Plc Annual Report and Accounts 2023

164

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”.

8. PROPERTY, PLANT AND EQUIPMENT

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.

Accounting policy

Property, plant and equipment (PP&E) are stated at cost less accumulated depreciation and impairment losses. Cost includes

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 on a straight-line basis 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).

When an asset’s recoverable amount falls below its carrying value, an impairment is charged to the Consolidated Income Statement.

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Convatec Group Plc Annual Report and Accounts 2023

165

The movement in the carrying value of each major category of PP&E is as follows:

		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 2022	15.3	129.9	490.7	98.5	734.4
Additions	–	1.8	8.2	90.0	100.0
Arising from acquisitions	–	0.5	0.3	–	0.8
Disposals 1	–	(4.0)	(17.5)	(1.8)	(23.3)
Transfers	–	13.7	24.7	(38.4)	–
Foreign exchange	(1.1)	(6.7)	(25.2)	(4.6)	(37.6)
31 December 2022	14.2	135.2	481.2	143.7	774.3
Additions	–	2.1	34.5	60.7	97.3
Arising from acquisitions (Note 26)	–	–	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
Accumulated depreciation
1 January 2022	1.0	53.1	313.6	–	367.7
Depreciation	–	6.8	32.9	–	39.7
Arising from acquisitions	–	0.2	0.1	–	0.3
Disposals 1	–	(4.0)	(17.5)	–	(21.5)
Impairment	–	1.9	5.5	–	7.4
Foreign exchange	–	(2.7)	(17.0)	–	(19.7)
31 December 2022	1.0	55.3	317.6	–	373.9
Depreciation	0.1	7.6	29.8	–	37.5
Arising from acquisitions (Note 26)	–	–	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
Net carrying amount
31 December 2022	13.2	79.9	163.6	143.7	400.4
31 December 2023	15.3	110.3	203.2	145.0	473.8

Assets with a net book value of $0.6 million were sold during the year, with sale proceeds of $0.6 million. In 2022, assets with a net book value of $1.8 million were written off.

Financial statements

Notes to the consolidated financial statements

continued

Convatec Group Plc Annual Report and Accounts 2023

166

9. INTANGIBLE ASSETS AND GOODWILL

9.1 Intangible assets

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.

Accounting policy

Recognition

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

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 48). 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

capitalised to the extent they will result in added functionality and probable future economic benefits.

Amortisation

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

Assets under construction reflects the cost of development or improvement of intangible assets that are not yet available for use.

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.

Refer to Note 9.3 – Cash Generating Unit (CGU) impairment review for consideration of impairment of indefinite-lived intangible assets.

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Convatec Group Plc Annual Report and Accounts 2023

167

The movement in the carrying value of each major category of intangible assets is as follows:

			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 2022	2,086.1	122.2	331.0	263.7	11.6	14.8	2,829.4
Additions	10.0	0.6	–	–	–	34.0	44.6
Arising from acquisitions	154.8	–	–	–	–	–	154.8
Write-offs	(50.7)	(1.8)	(0.3)	–	–	(0.6)	(53.4)
Transfers	–	11.8	–	–	–	(11.8)	–
Foreign exchange	(79.7)	(2.4)	(6.3)	(0.9)	(0.6)	(0.9)	(90.8)
31 December 2022	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 2	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
Accumulated amortisation
1 January 2022	1,620.8	83.5	203.5	9.7	9.7	–	1,927.2
Amortisation	108.6	12. 0	24.3	1.4	1.1	–	147.4
Write-offs	(50.7)	(1.8)	(0.3)	–	–	–	(52.8)
Impairment	4.3	–	1.4	–	–	–	5.7
Foreign exchange	(61.0)	(0.9)	(5.4)	–	(0.5)	–	(67.8)
31 December 2022	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)
Impairment	–	–	–	–	–	–	–
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
Net carrying amount
31 December 2022	498.5	37.6	100.9	251.7	0.7	35.5	924.9
31 December 2023	505.4	64.9	82.9	251.0	0.3	30.8	935.3

Capitalised software is in respect of purchased and internally generated software.

Acquisitions comprise assets in relation to the Starlight and A Better Choice Medical acquisitions. See Note 26 – Acquisitions.

Financial statements

Notes to the consolidated financial statements

continued

Convatec Group Plc Annual Report and Accounts 2023

168

9. INTANGIBLE ASSETS AND GOODWILL (CONTINUED)

Amortisation expenses in respect of finite-lived intangible assets for the year ended 31 December were as follows:

	2023	2022
	$m	$m
Cost of sales	112.4	113.1
Selling and distribution expenses	3.6	3.2
General and administrative expenses	31.0	29.1
Research and development expenses	7.6	2.0
Total amortisation expense	154.6	147.4

The carrying amount of trade names with indefinite life at 31 December 2023 was $249.4 million (2022: $248.9 million). Each of these

trade names are 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 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:

	2023	2022
	$m	$m	Remaining life
Trade names
Convatec trade name	234.6	234.6	Indefinite
Product-related
InnovaMatrix TM	134.5	145.6	12.3 years
NextGen Antimicrobial platform	107.0	–	14.3 years
Aquacel ® including Hydrofibre® 1	–	120.2	2.6 years
Stoma care 1	–	113.6	2.6 years

The carrying value of Aquacel

including Hydrofibre

and Stoma care was $91.3 million and $81.9 million respectively at 31 December 2023. These are no longer in excess

of 10% of the total intangible asset carrying amount.

9.2 Goodwill

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.

Accounting policy

Refer to Note 1 – Basis of preparation for the Group accounting policy in relation to the initial valuation and recognition of

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. 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

reporting period date.

The changes in the carrying value of goodwill as at 31 December were as follows:

	Total
	$m
1 January 2022	1,156.3
Arising from acquisitions	129.9
Foreign exchange	(61.6)
31 December 2022	1,224.6
Arising from acquisitions (Note 26)	45.9
Foreign exchange	28.3
31 December 2023	1,298.8

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169

9.3 Cash generating unit (CGU) impairment review

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.

Accounting policy

For impairment testing, assets are grouped together into the smallest group of assets that generate cash inflows from

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

in either 2023 or 2022.

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. The Group’s CGU groups continue to be (i) Advanced Wound Care,

(ii) Ostomy Care, (iii) Continence Care and (iv) Infusion Care. Goodwill is allocated to these CGUs, which represent the lowest

level within the Group at which the goodwill is monitored for internal management purposes.

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
	2023	2022	2023	2022
	$m	$m	$m	$m
CGU groups
Advanced Wound Care	523.7	490.0	104.8	104.8
Ostomy Care 1	154.3	116.5	91.2	91.2
Continence Care 1	535.0	535.6	41.2	41.2
Infusion Care	85.8	82.5	12.2	11.7
Total	1,298.8	1,224.6	249.4	248.9

Following the exit of hospital care in 2022, effective from 1 January 2023, Flexi-Seal

, our faecal management system, moved from the Continence Care category to the

Ostomy Care category, resulting in an increase in goodwill allocated to Ostomy Care and corresponding reduction in Continence Care of $34.6 million.

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 2023 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.

Financial statements

Notes to the consolidated financial statements

continued

Convatec Group Plc Annual Report and Accounts 2023

170

9. INTANGIBLE ASSETS AND GOODWILL (CONTINUED)

The terminal value growth rate and discount rates used were as follows:

	2023	2022
Discount rate (pre-tax) 1	%	%
CGU groups
Advanced Wound Care	14.5	13.5
Ostomy Care	13.5	12.5
Continence Care	12.0	11.5
Infusion Care	13.5	12.5
Terminal value growth rate 2	2.0	2.0

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.

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.

No impairments have been recognised in respect of the Group’s current CGU groups for the years ended 31 December 2023 and 2022.

Taking into consideration the Board-approved 2024 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 87 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

in a material adjustment in the next financial year.

10. INVESTMENT IN FINANCIAL ASSETS

Accounting policy

Investment in financial assets comprise of non-current equity investments which are initially recorded at fair value plus any

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

established, it is probable the economic benefits will flow to the entity and the amount can be measured reliably.

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 to designate the investment at fair value through other comprehensive

income (FVOCI). It was initially recorded at fair value plus transaction costs and will be remeasured at subsequent reporting dates to fair

value. The fair value of the investment at 31 December 2023 was $22.9 million (31 December 2022: $30.7 million), with the movement

of $7.8 million taken to the Statement of Other Comprehensive Income, within the ‘Fair value movement on equity investments’ line.

No dividends were recognised during the period.

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.

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The fair value of the investment has been determined 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	Market multiples (decrease of 25% to 35%)	-5% on the	+5% on the
recent investment		market	market
		multiples	multiples
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
(Discounted cash flow analysis)		+2% on the	-2% on the
	Discount rate 25.4%	discount rate	discount rate
Provides an estimation of the value of an asset		-1% to the LTGR	+1% to the LTGR
based on expectations about the cash flows	The final year of projections has been
that an asset would generate over time,	extrapolated using a reasonable long-term
discounted at the appropriate rate of return.	growth rate (LTGR) of 2%.
Probability-weighted expected return model	Discounted at 27.8%	+2% to	-2% to
		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		$19.9m	$25.9m

The impact of applying these sensitivities across the three methodologies would result in a fair value measurement range of

$19.9 million to $25.9 million, with a mid-point range of $22.9 million, which is in line with the fair value recognised at year end.

Financial statements

Notes to the consolidated financial statements

continued

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172

11. INVENTORIES

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.

Accounting policy

Inventories are valued at the lower of cost or net realisable value with the cost determined using an average cost method.

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.

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 obtain for products in their respective markets compared with historical cost and the remaining shelf life of goods

on hand.

The components of inventories at 31 December were as follows:

	2023	2022
	$m	$m
Raw and packaging materials	102.3	79.6
Work in progress	42.5	41.6
Finished goods	251.3	215.7
Inventories	396.1	336.9

Inventories are stated net of provision for obsolescence of $17.0 million (2022: $25.5 million). Adjustments to write down inventory

to its net realisable value are provided in Note 3.1 – Operating profit.

12. TRADE AND OTHER RECEIVABLES

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.

Accounting policy

Credit is extended to customers based on the evaluation of the customer’s financial condition. Creditworthiness of customers

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 factoring 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.

Refer to Note 2.1 – Revenue recognition for details on the accounting policy in respect of chargeback allowances.

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Trade and other receivables at 31 December were as follows:

	2023	2022
	$m	$m
Included within current assets:
Trade receivables	337.8	344.7
Less: allowances for expected credit losses	(27.1)	(22.0)
Less: sales discounts and chargebacks	(40.9)	(37.6)
Other receivables 1	39.0	29.5
Prepayments	24.9	24.7
Trade and other receivables 2	333.7	339.3

The most significant component of other receivables comprises receivables for taxes other than corporate income tax of $13.5 million (2022: $9.2 million).

The comparative has been re-presented to disclose the current tax receivable of $24.7 million separately on the face of the Consolidated Statement of Financial Position,

as outlined in Note 1 to the Consolidated Financial Statements.

The aged analysis of trade receivables at 31 December was as follows:

	2023	2022
	$m	$m
Current	244.2	255.0
Past due 1 to 30 days	27.7	33.6
Past due 31 to 90 days	19.2	22.5
Past due 91 to 180 days	15.1	7.9
Past due by more than 180 days	31.6	25.7
	337.8	344.7

The unimpaired amounts at 31 December that are past due were aged as follows:

	2023	2022
	$m	$m
Past due 1 to 30 days	27.2	32.1
Past due 31 to 90 days	18.5	20.6
Past due 91 to 180 days	12.7	4.7
Past due by more than 180 days	8.1	10.3
	66.5	67.7

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.

Movements in the allowance for expected credit losses for the years ended 31 December were as follows:

	2023	2022
	$m	$m
At 1 January	(22.0)	(14.6)
Charges	(14.3)	(6.6)
Utilisation of provision	9.4	1.1
Foreign exchange	(0.2)	(1.9)
At 31 December	(27.1)	(22.0)

Other non-current receivables

Other non-current receivables of $11.7 million (2022: $8.6 million) are principally in respect of deposits held with lessors, prepaid

expenses and other receivables.

Receivables financing

During the year, the Group entered into a Limited Recourse Financing Arrangement with a financial institution for certain customers

who have longer than normal 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.

As at 31 December 2023, the Group had sold $44.8 million of receivables to the financial institution, of which $27.4 million remained

unpaid by the customer.

Financial statements

Notes to the consolidated financial statements

continued

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174

13. TRADE AND OTHER PAYABLES

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.

Accounting policy

Trade payables are recognised at the value of the invoice received from the supplier and are not interest bearing. The carrying

amount of trade and other payables is considered to approximate fair value, due to their short-term maturities.

The components of trade and other payables at 31 December were as follows:

	2023	2022
	$m	$m
Included within current liabilities:
Trade payables	136.9	112.2
Taxes and social security	32.2	26.0
Other employee-related liabilities	108.2	92.3
Accruals and other payables 1	111.4	116.1
Trade and other payables	388.7	346.6

Included within accruals and other payables are customer rebates of $19.8 million (2022: $16.9 million) and amounts held in escrow of $12.3 million (2022: $18.3 million).

	2023	2022
	$m	$m
Included within non-current liabilities:
Defined benefit obligations (Note 15)	12.1	11.0
Other employee-related liabilities	5.1	7.7
Accruals and other payables	15.3	14.0
Other non-current liabilities	32.5	32.7

14. PROVISIONS

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, decommissioning, dilapidations, legal liabilities and contingent

consideration. The contingent consideration provisions 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

In line with IAS 37 – 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.

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).

When the timing of a settlement is uncertain or expected to be more than 12 months from the reporting date, amounts are

classified as non-current.

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The movements in provisions are as follows:

				Contingent
	Dilapidations	Restructuring	Legal	consideration	Total
	$m	$m	$m	$m	$m
1 January 2023	2.8	10.3	0.2	140.0	153.3
Contingent consideration from acquisitions	–	–	–	66.7	66.7
Charged to income statement	1.0	13.9	0.4	–	15.3
Fair value movement of contingent consideration	–	–	–	24.6	24.6
Released to income statement	–	(2.2)	–	–	(2.2)
Utilised	(1.3)	(8.3)	–	(94.7)	(104.3)
Foreign exchange	(0.1)	0.3	–	1.4	1.6
31 December 2023	2.4	14.0	0.6	138.0	155.0
Current					83.7
Non-current					71.3

The expected payment profile of the discounted provisions at 31 December was as follows:

	2023	2022
	$m	$m
Within 1 year	83.7	100.2
2 to 5 years	58.8	53.1
More than 5 years	12.5	–
Total	155.0	153.3

Dilapidation provisions

Dilapidation provisions are in respect of contractual obligations, on the expiry of a lease, to return leased properties in the condition

which is specified in the individual leases.

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 provision of $0.6 million is in respect of ongoing cases. Legal issues are often subject to uncertainties over the timing

and the final amounts of any settlement.

Contingent consideration

As at 31 December 2023, the discounted fair value of the contingent consideration payable in respect of the Group’s acquisitions

was $138.0 million. During the year, contingent consideration of $66.7 million was recognised in respect of the Starlight acquisition

and payments of $94.7 million were made in respect of the Triad Life Sciences acquisition ($73.0 million recognised within cash flows

from investing activities and $21.7 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 the contingent consideration (based

on the best estimates of the amounts payable as at 31 December 2023) was $24.6 million. In addition, there was a foreign exchange

movement of $1.4 million from the re-translation of non-USD denominated balances.

Refer to Note 26 – Acquisitions for further details.

Financial statements

Notes to the consolidated financial statements

continued

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176

15. POST-EMPLOYMENT BENEFITS

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 value of the funded plan in Germany

is negligible to the Group. 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.

Accounting policy

Defined contribution pension plans

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

(IFRIC 14).

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Convatec Group Plc Annual Report and Accounts 2023

177

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. Currently the Group’s plans invest primarily in debt instruments.
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.

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:

	2023	2022
	$m	$m
Defined benefit plans:
Current service cost	1.1	1.7
Past service (income)	(0.1)	(0.2)
Interest income on plan assets	(0.2)	(0.2)
Interest expense on defined benefit obligations	0.6	0.4
Total expense (Note 3)	1.4	1.7

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:

	2023	2022
	$m	$m
Remeasurement effect recognised in other comprehensive income:
Actuarial gain on liabilities due to experience	0.1	1.3
Actuarial gain arising from changes in financial assumptions	0.1	8.9
Actuarial loss on plan assets	(0.2)	(1.7)
Remeasurement gain recognised in other comprehensive income	–	8.5
Deferred tax on remeasurement loss recognised in other comprehensive income	(0.2)	(0.1)
Total amount recognised in other comprehensive income	(0.2)	8.4

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		Switzerland		Other		Total
	2023	2022	2023	2022	2023	2022	2023	2022
	$m	$m	$m	$m	$m	$m	$m	$m
Fair value of schemes’ assets	–	–	11.8	10.4	0.8	0.7	12.6	11.1
Present value of funded
schemes’ liabilities	–	–	(13.8)	(12.3)	(0.7)	(0.7)	(14.5)	(13.0)
Deficit in the funded schemes	–	–	(2.0)	(1.9)	0.1	–	(1.9)	(1.9)
Present value of unfunded
schemes’ liabilities	(8.4)	(7.4)	–	–	(1.8)	(1.7)	(10.2)	(9.1)
Net pension liability	(8.4)	(7.4)	(2.0)	(1.9)	(1.7)	(1.7)	(12.1)	(11.0)
Recognised within Consolidated Statement of Financial Position:
Defined benefit obligations (Note 13)							(12.1)	(11.0)

The weighted average duration of the Group’s defined benefit obligations at the end of the year is 16.5 years (2022: 17.0 years).

Financial statements

Notes to the consolidated financial statements

continued

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178

15. POST-EMPLOYMENT BENEFITS (CONTINUED)

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 2022	14.1	(33.8)	(19.7)
Current service cost	–	(1.7)	(1.7)
Past service income	–	0.2	0.2
Interest income/(expense)	0.2	(0.4)	(0.2)
Remeasurement (loss)/gain	(1.7)	6.5	4.8
Contributions by employer	0.6	–	0.6
Contributions by members	0.5	(0.5)	–
Benefits paid	(2.4)	2.7	0.3
Experience gain	–	3.9	3.9
Foreign exchange	(0.2)	1.0	0.8
At 31 December 2022	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 gain/(loss)	(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)

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
	2023	2022	2023	2022	2023	2022	2023	2022
	$m	$m	$m	$m	$m	$m	$m	$m
Equity instruments	–	–	3.9	3.4	–	–	3.9	3.4
Debt instruments	–	–	4.6	4.1	–	–	4.6	4.1
Property	–	–	1.8	1.6	–	–	1.8	1.6
Qualifying insurance policies	–	–	–	–	0.8	0.7	0.8	0.7
Other	–	–	1.5	1.3	–	–	1.5	1.3
Plan assets	–	–	11.8	10.4	0.8	0.7	12.6	11.1

Actuarial assumptions

The Group makes certain key assumptions in order to value the plan obligations, and the approach to how these are 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.

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Convatec Group Plc Annual Report and Accounts 2023

179

The principal actuarial assumptions for each defined benefit arrangement used at 31 December were as follows:

	German y		Switzerland		Other
	2023	2022	2023	2022	2023	2022
Discount rate	3.57%	3.56%	2.00%	1.90%	3.15% to 4.61%	3.47% to 4.05%
Rate of price inflation	N/A	N/A	1.00%	1.00%	2.00% to 2.20%	2.20% to 3.00%
Future salary increases	3.00%	3.00%	1.75%	1.75%	0.00% to 3.00%	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
	2023	2022	2023	2022	2023	2022
Life expectancy at age 65
Male	18.8 years	18.6 years	23.0 years	22.8 years	24.0 years	23.9 years
Female	22.2 years	22.0 years	23.7 years	24.6 years	28.0 years	27.9 years
Life expectancy at age 65 in 20 years’ time
Male	21.5 years	21.4 years	25.2 years	25.1 years	24.9 years	24.9 years
Female	24.4 years	24.3 years	25.7 years	26.6 years	28.9 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 2023

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)	1.0	(1.1)
Inflation	N/A	N/A	(0.4)	0.4
Future salary increases	N/A	N/A	(0.3)	0.2
	1 year increase	1 year decrease	1 year increase	1 year decrease
Life expectancy	(0.2)	0.2	(0.2)	0.2

Future funding

Payments expected to be made by the Group to its defined benefit pension plans in the year ended 31 December 2024 are

as follows:

	German y	Switzerland	Other	Total
	$m	$m	$m	$m
Expected payments	0.1	0.5	–	0.6

Financial statements

Notes to the consolidated financial statements

continued

Convatec Group Plc Annual Report and Accounts 2023

180

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.

16. CAPITAL STRUCTURE AND NET DEBT

The capital structure of the Group at 31 December was as follows:

	2023	2022
	$m	$m
Borrowings (Note 21)	1,226.9	1,211.9
Less: Cash and cash equivalents (Note 22)	(97.6)	(143.8)
Net debt (excluding lease liabilities)	1,129.3	1,068.1
Equity	1,692.7	1,609.7
Total capital	2,822.0	2,677.8

The Group’s capital structure is managed to provide ongoing returns to shareholders and service debt obligations whilst

maintaining maximum operational flexibility.

17. SHARE CAPITAL AND RESERVES

Share capital

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.

Repurchased shares are classified as own shares and are disclosed in the own shares reserve.

Share premium

The share premium represents amounts received in excess of the nominal value of the ordinary shares.

Own 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 effects, is recognised in equity and the resulting surplus or deficit on the transaction is presented within share

premium.

Merger reserve

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

benefit plans and the share-based payment reserve.

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Convatec Group Plc Annual Report and Accounts 2023

181

Share capital

Shares were allotted during the year in respect of the Group’s scrip dividend offering. 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 2022	2,014,572,935	247.0	142.3
Issue of new shares for Employee Benefit Trust	20,000,000	2.6	–
Issue of new shares for Scrip Scheme – 2021 final dividend	7,192,010	0.9	18.0
Issue of new shares for Scrip Scheme – 2022 interim dividend	2,107,103	0.2	5.4
	29,299,113	3.7	23.4
31 December 2022	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

At 31 December 2023, 3,986,597 shares (2022: 10,975,451 shares) were held in the Employee Benefit Trust. The market value of own

shares at 31 December 2023 was $12.3 million (2022: $30.8 million).

Other reserves include the share-based payment reserve of $171.1 million (2022: $155.0 million) and remeasurement of defined

benefit obligations of $4.6 million (2022: $4.8 million), the effective portion of cash flow hedges of $4.4 million (2022: $4.9 million),

and remeasurement of equity investments of $7.8 million (2022: nil). A reconciliation of movements in all reserves is provided in

the Consolidated Statement of Changes in Equity.

Distributable reserves

Retained and realised distributable reserves equate to the retained surplus of Convatec Group Plc as set out in the Company

Financial Statements on page 197. At 31 December 2023, the retained surplus of the Company was $1,539.4 million (2022:

$1,562.9 million). The capacity of the Company to make dividend payments is primarily determined by the availability of these

retained and realised distributable reserves and the Group’s cash resources including available borrowing facilities.

18. DIVIDENDS

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 80 to 84).

The Board paid the 2022 final dividend in May 2023 and the 2023 interim dividend in September 2023. 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 2023 reflects the Board’s confidence in the future performance of the Group and the underlying

financial strength, distributable reserves position and cash generation of the Group 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 143.

Accounting policy

Dividends paid are included in the Group Consolidated Financial Statements at the earlier of payment of the dividends or,

in respect of the Company’s final dividend for the year, on approval by shareholders.

Financial statements

Notes to the consolidated financial statements

continued

Convatec Group Plc Annual Report and Accounts 2023

182

18. DIVIDENDS (CONTINUED)

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 2021	3.161	4.154	77.8	58.9	18.9	7,192,010
Interim dividend 2022	1.410	1.717	34.8	29.2	5.6	2,107,103
Paid in 2022	4.571	5.871	112.6	88.1	24.5	9,299,113
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 proposed	3.517	4.460	91.4

The Company previously operated a scrip dividend scheme, allowing shareholders to elect to receive their dividend in the form of

new fully paid ordinary shares. During 2023, the Board took the decision to terminate the scrip dividend option.

The final dividend proposed for 2023, to be distributed on 23 May 2024 to shareholders on the register at the close of business on 26

April 2024, is based upon the issued and fully paid share capital as at 31 December 2023 and is subject to shareholder approval

at the Annual General Meeting on 16 May 2024. The dividend will be declared in US dollars and will be paid in Sterling at the chosen

exchange rate of $1.268/£1.00 determined on 5 March 2024.

The interim and final dividends for 2023 give a total dividend for the year of 6.229 cents per share (2022: 6.047 cents per share).

19. SHARE-BASED PAYMENTS

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 127.

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 2023 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.

Accounting policy

Equity-settled share-based payment awards are measured at the fair value of the award on the grant date, excluding the

effect 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

Consolidated Statement of Financial Position.

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Convatec Group Plc Annual Report and Accounts 2023

183

Share-based payment expenses recognised in the Consolidated Income Statement as follows:

	2023	2022
	$m	$m
LTIP	7.3	10.8
SP/MSP	5.5	3.0
DBP	1.0	1.6
Employee Plans	0.8	1.3
	14.6	16.7

During the year to 31 December 2023, $14.5 million (2022: $16.6 million) of share-based payment was equity-settled and $0.1 million

(2022: $0.1 million) was cash-settled. All amounts that were equity-settled were recognised in Other reserves, with the amounts that

were cash-settled recognised through Other 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:

	2023		2022
		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	30,800	0.33	33,707	0.43
Granted	10,987	0.22	14,225	0.32
Forfeited	(4,081)	0.47	(7,728)	0.48
Exercised	(6,267)	0.25	(9,404)	0.54
Outstanding at 31 December	31,439	0.29	30,800	0.33
Exercisable at 31 December	840	1.51	993	1.33
Weighted average fair value of awards granted (£ per share)	–	1.53	–	1.18

The average share price during 2023 was £2.21 (2022: £2.11). The share price of the Company at 31 December 2023 was £2.44.

The range of exercise prices and the weighted average remaining contractual life of options outstanding at 31 December were as follows:

	2023	2022
	Number of	Number of
	shares/options	shares/options
Range of prices	000’s	000’s
Nil	26,414	24,990
1.21	73	788
1.74	2,002	2,511
1.76	1,821	1,108
1.84	18	18
2.08	1,111	1,385
	31,439	30,800
Weighted average remaining contractual life of options outstanding	1.9 years	2.2 years

Financial statements

Notes to the consolidated financial statements

continued

Convatec Group Plc Annual Report and Accounts 2023

184

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:

	2023			2022
		SAYE &			SAYE &
		International			International
	LTIP	Share Save Plan	ESPP	LTIP	Share Save Plan	ESPP
Share price at date of grant	£2.21	£2.07	£2.07	£1.79	£2.13	£1.99
Exercise price	nil	£1.76	£1.76	nil	£1.74	£1.74
Expected life	3 years	3.6 years	2.0 years	3.0 years	3.6 years	2.0 years
Expected volatility 1	25.1%	25.1%	25.1%	28.7%	28.7%	28.7%
Risk free rate	3.3%	3.3%	3.3%	1.3%	1.3%	1.3%
Dividend yield	2.3%	2.3%	2.3%	2.5%	2.5%	2.5%
Fair value	£1.09 & £1.41	£0.38	£0.34	£1.03	£0.36	£0.33

The expected volatility was determined by calculating the observed historical volatility of share prices of peer group companies (including the Company) over the expected

life of the share award.

20. FINANCIAL RISK MANAGEMENT

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

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 2023, the Group held cash and cash equivalents of $97.6 million (2022: $143.8 million),

of which 57.5% (2022: 74.5%) 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

a going concern. For further detail on the Group’s assessment of liquidity risk, refer to the Viability statement on pages 86 to 87.

Foreign exchange risk

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.

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Convatec Group Plc Annual Report and Accounts 2023

185

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/
Currency	Closing rate	2023	2022
USD/EUR	Average	1.08	1.05
	Closing	1.10	1.07
USD/GBP	Average	1.24	1.24
	Closing	1.27	1.20
USD/DKK	Average	0.15	0.14
	Closing	0.15	0.14

During 2023, revenue was mostly USD denominated (55%). Other significant currencies were EUR (19%) and GBP (5%). The balance

comprises a basket of other currencies which, on an individual basis, were each less 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.

		2023	2022
Currenc y	Sensitivity	$m	$m
I ncrease/(decrease) in profit before income taxes
USD/GBP	+10%	4.4	4.0
USD/EUR	+10%	(10.3)	(12.8)
USD/DKK	+10%	(11.2)	(10.4)
Decrease/(increase) in total equity
USD/GBP	+10%	(88.0)	(81.6)
USD/EUR	+10%	(2.5)	(8.1)
USD/DKK	+10%	(27.0)	(24.3)

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 2023, the Group’s borrowings are denominated in USD and Euros. The Group’s credit facilities expose the Group

to SOFR and IBOR. The Group’s interest rate swaps of $425.0 million, are referenced to the SOFR and IBOR 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 2023, 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 both SOFR and EURIBOR. 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 2023 have a floating rate linked to SOFR and EURIBOR, aligned with the Group’s facilities.

See Note 23 – Financial Instruments.

Hedge accounting

Swaps with floating legs linked to SOFR and EURIBOR have also been designated as cash flow hedges and will provide interest rate

risk management beyond January 2024.

Sensitivity analysis on interest rate risk

Based on the composition and the terms of the Group’s borrowings as at 31 December 2023, 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 $3.1 million (2022: $4.0 million) or decrease by $3.1 million (2022: $4.0 million)

assuming that all other variables remain constant and excluding any effect of tax.

Financial statements

Notes to the consolidated financial statements

continued

Convatec Group Plc Annual Report and Accounts 2023

186

21. BORROWINGS

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

Borrowings are recognised at fair value less directly attributable costs on the date that they are entered into and subsequently

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

based upon the degree to which the fair value movements are observable.

The Group’s borrowings as at 31 December were as follows:

			2023	2022
		Year of	Face value	Face value
	Currenc y	maturit y	$m	$m
Revolving Credit Facility 1	USD/Euro	2028	490.6	477.2
Term Loan	USD	2027	250.0	250.0
Senior Notes	USD	2029	500.0	500.0
Interest-bearing borrowings			1,240.6	1,227.2
Financing fees 2			(13.7)	(15.3)
Total carrying value of borrowings			1,226.9	1,211.9
Current portion of borrowings			–	–
Non-current portion of borrowings			1,226.9	1,211.9

Included within the Revolving Credit Facility was €100.0 million ($110.4 million) and £8.0 million ($8.2 million) at 31 December 2023 (2022: €145.0 million ($155.2 million)),

representing 22.5% of RCF debt denominated in Euros, 2.1% of RCF debt denominated in GBP and 75.4% denominated in US dollars.

Financing fees of $13.7 million (2022: $15.3 million) related to the remaining unamortised fees incurred on the credit facilities of $7.8 million (2022: $8.4 million) and on the

senior notes of $5.9 million (2022: $6.9 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, which was refinanced in November 2022, comprises of

a $250.0 million term loan and a $950.0 million multicurrency revolving credit facility. As at 31 December 2023, the term loan was

fully drawn and $490.6 million of the revolving credit facility was drawn, with $459.4 million undrawn. During the year, the Group

extended the term of its multicurrency revolving credit facility by an additional year and this is now committed to November 2028

(originally committed for a five-year term to November 2027). Transaction costs directly attributable to the extension have been

capitalised and are amortised over the term of the facility using the effective interest rate method. The term loan remains

committed for a five-year term to November 2027.

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Financial statements

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Convatec Group Plc Annual Report and Accounts 2023

187

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.

Financial covenants

The principal financial covenants are based on a permitted net debt to covenant-adjusted EBITDA

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 2023, the permitted net debt to covenant-adjusted EBITDA

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

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 2023, with significant available

headroom on the financial covenants (in excess of $603.3 million debt headroom on net debt to covenant-adjusted EBITDA

Excluding the impact of interest rate swaps, the weighted average interest rate on borrowings for the year ended 31 December 2023

was 5.7% (2022: 3.4%). The increase in the weighted average interest rate was due to rising underlying reference base rates on debt

with floating rates.

Borrowings measured at fair value

The senior notes are listed and their fair value at 31 December 2023 of $450.1 million (2022: $430.8 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 2023, the estimated fair value of the Group’s other borrowings was

$774.9 million (2022: $762.4 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 2022
Borrowings	57.5	55.2	50.8	50.2	777.8	538.8	1,530.3	1,211.9
Lease liabilities (Note 24)	22.7	17.8	13.1	9.8	7.9	94.2	165.5	88.3
Trade and other payables (Note 13)	346.6	–	–	–	–	–	346.6	346.6
Derivative financial instruments (Note 23)
Derivative financial instruments payable	1,919.8	6.3	1.2	–	–	–	1,927.3	32.5
Derivative financial instruments receivable	1,912.5	6.9	1.0	–	–	–	1,920.4	26.6

Refer to Note 14 – Provisions for the expected payment profile in respect of the Group’s provisions and contingent consideration.

Reconciliation of movement in borrowings

	2023	2022
	$m	$m
Borrowings at 1 January	1,211.9	1,344.6
Repayment of borrowings	–	(842.5)
Proceeds of new borrowings, net of financing fees	9.4	714.2
Foreign exchange	2.8	(11.0)
Non-cash movements 2	2.8	6.6
Borrowings at 31 December	1,226.9	1,211.9

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 34 to 37.

Non-cash movements were in respect of the amortisation of deferred financing fees associated with the borrowings. 2022 included a $2.7 million write-off of the unamortised

remaining deferred financing fees following early termination of the Group’s previous credit facilities.

Financial statements

Notes to the consolidated financial statements

continued

Convatec Group Plc Annual Report and Accounts 2023

188

22. CASH, CASH EQUIVALENTS AND RESTRICTED CASH

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.

Accounting policy

Cash and cash equivalents comprise cash in hand and current balances with banks and similar institutions. All liquid investments,

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 2023 included $21.1 million (2022: $19.2 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.

Consolidated Statement of Cash Flows

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 2023 or 31 December 2022.

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

realised on cash-settled derivative financial instruments. Refer to Note 5 – Non-operating (expense)/ income, net.

Restricted cash

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

from a business combination, is also classified as restricted cash.

	2023	2022
	$m	$m
Cash at bank and in hand	57.7	42.6
Money market funds and bank deposits	39.9	101.2
Cash and cash equivalents	97.6	143.8
	2023	2022
	$m	$m
Restricted cash – current	12.5	18.2
Restricted cash – non-current	5.3	7.3
Total restricted cash	17.8	25.5

Current restricted cash of $12.5 million (2022: $18.2 million) relates to cash held in escrow in respect of the Group’s acquisitions.

Included in non-current restricted cash of $5.3 million (2022: $7.3 million) is $1.6 million (2022: $4.0 million) relating to cash

held in escrow in respect of the Group’s acquisitions. The remaining balance of $3.7 million (2022: $3.3 million) relates to amounts

held in respect of guarantees and the Group’s Share Save scheme for employees. None of these amounts are accessible

on demand.

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Financial statements

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Convatec Group Plc Annual Report and Accounts 2023

189

23. FINANCIAL INSTRUMENTS

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.

Accounting policy

Derivative financial instruments are initially recognised at fair value on the derivative contract date and are remeasured at

their 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 parties at the reporting date.

Hedge accounting

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 $425.2 million at 31 December 2023, with exposure to SOFR and EURIBOR as a reference

rate and maturing at various points in the next two years. These have been designated as cash flow hedges through other

comprehensive income.

Right to offset

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

asset and settle the liability simultaneously.

Fair value measurement

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 are classified within Level 3 of the fair value hierarchy.

The Group holds interest rate swap agreements to fix a proportion of variable interest on US dollar and EURO denominated 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.

Financial statements

Notes to the consolidated financial statements

continued

Convatec Group Plc Annual Report and Accounts 2023

190

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:

				2023		2022
					Fair value 1		Fair value 1
				Notional	assets/	Notional	assets/
				amount	(liabilities)	amount	(liabilities)
	Currenc y	Effective date	Maturity date	$m	$m	$m	$m
3 Month LIBOR Float to Fixed Interest
Rate Swap	USD	24 Jan 2020	24 Jan 2023	–	–	275.0	2.0
6 Month term SOFR Float to Fixed
Interest Rate Swap	USD	23 Jan 2023	23 Jan 2024	90.0	0.4	90.0	0.2
6 Month term SOFR Float to Fixed
Interest Rate Swap	USD	23 Jan 2023	23 Jul 2024	40.0	0.1	40.0	–
6 Month term SOFR Float to Fixed
Interest Rate Swap	USD	23 Jan 2023	23 Jan 2025	50.0	0.2	50.0	(0.3)
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	–	–	–
6 Month term SOFR Float to Fixed
Interest Rate Swap	USD	3 Aug 2023	4 Aug 2025	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	(0.5)	–	–

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:

		2023		2022
			Fair value		Fair value
		Notional	assets/	Notional	assets/
		amount	(liabilities)	amount	(liabilities)
	Term	$m	$m	$m	$m
Foreign exchange contracts	≤ 3 months	453.0	8.0	996.6	21.3
Foreign currency forward exchange contracts
designated as cash flow hedges	≤ 12 months	195.9	4.4	72.7	3.1
Derivative financial assets		648.9	12.4	1,069.3	24.4
Foreign exchange contracts	≤ 3 months	760.7	(15.2)	703.7	(30.2)
Foreign currency forward exchange contracts
designated as cash flow hedges	≤ 12 months	53.3	(1.3)	132.8	(2.3)
Derivative financial liabilities		814.0	(16.5)	836.5	(32.5)

During the year ended 31 December 2023, the Group realised a net loss of $4.3 million (2022: $15.8 million gain) on foreign exchange

forward contracts designated as FVTPL in Note 5 – Non-operating income/(expense), 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:

	2023	2022
	$m	$m
Recognised in other comprehensive income:
Effective portion of changes in fair value of cash flow hedges:
Interest rate swaps	(1.3)	3.3
Foreign currency forward exchange contracts designated as cash flow hedges	2.0	(11.0)
Changes in fair value of cash flow hedges reclassified to the Consolidated Income Statement	(0.8)	16.5
Cost of hedging	(0.5)	(1.1)
Total	(0.6)	7.7

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Convatec Group Plc Annual Report and Accounts 2023

191

24. LEASES

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.

Accounting policy

The lease liability is measured at the present value of future lease payments discounted using the rate implicit in the lease.

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

leases for the year ended 31 December 2023 were $2.4 million (2022: $3.9 million).

The movements in right-of-use assets were as follows:

	Real estate and
	other	Vehicles	Total
	$m	$m	$m
As at 1 January 2022	70.3	13.3	83.6
Lease additions	12.3	8.4	20.7
Arising from acquisitions	2.2	–	2.2
Leases terminated	(1.4)	0.1	(1.3)
Depreciation of right-of-use assets	(14.7)	(7.4)	(22.1)
Foreign exchange	(3.1)	(0.6)	(3.7)
As at 31 December 2022	65.6	13.8	79.4
Lease additions	14.2	10.9	25.1
Arising from acquisitions (Note 26)	1.6	–	1.6
Leases terminated	(7.4)	(0.9)	(8.3)
Depreciation of right-of-use assets	(14.7)	(8.0)	(22.7)
Impairment of right-of-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

Movements in lease liabilities were as follows:

	2023	2022
	$m	$m
Lease liabilities as at 1 January	88.3	90.5
Lease additions	25.1	21.0
Arising from acquisitions (Note 26)	1.6	2.9
Payment of lease liabilities	(22.7)	(20.7)
Leases terminated	(8.3)	(1.2)
Interest expense on lease liabilities (Note 25)	3.5	3.3
Interest paid on lease liabilities	(3.5)	(3.3)
Foreign exchange	1.5	(4.2)
Lease liabilities as at 31 December	85.5	88.3

Total cash outflow of lease liabilities including interest for the year ended 31 December 2023 was $26.2 million (2022: $ 24.0 million).

Interest paid during the year was $3.5 million (2022: $3.3 million).

Lease liabilities by category at 31 December were as follows:

	2023			2022
	Real estate			Real estate
	and other	Vehicles	Total	and other	Vehicles	Total
	$m	$m	$m	$m	$m	$m
Current	13.9	6.8	20.7	13.8	6.5	20.3
Non-current	55.3	9.5	64.8	60.6	7.4	68.0
Total	69.2	16.3	85.5	74.4	13.9	88.3

Financial statements

Notes to the consolidated financial statements

continued

Convatec Group Plc Annual Report and Accounts 2023

192

24. LEASES (CONTINUED)

The maturity of lease liabilities at 31 December was as follows:

	2023			2022
	Real estate			Real estate
	and other	Vehicles	Total	and other	Vehicles	Total
	$m	$m	$m	$m	$m	$m
Within 1 year	13.9	6.8	20.7	13.8	6.5	20.3
1 to 2 years	14.0	5.0	19.0	12.3	4.2	16.5
2 to 3 years	9.7	3.2	12.9	9.5	2.3	11.8
3 to 4 years	7.6	1.1	8.7	8.1	0.7	8.8
4 to 5 years	7.0	0.1	7.1	7.2	0.1	7.3
More than 5 years	17.0	0.1	17.1	23.5	0.1	23.6
Total	69.2	16.3	85.5	74.4	13.9	88.3

The undiscounted contractual cash flows in relation to the maturity of leases liabilities have been disclosed in Note 21 – Borrowings.

25. FINANCE INCOME AND EXPENSE

Finance expenses arise from interest on the Group’s borrowings and lease liabilities. Finance income arises from interest earned

on investment of surplus cash.

Accounting policy

Finance expenses, including the transaction costs for borrowings and any discount or premium on issue, are recognised in the

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

cash flow hedge reserve is reclassified immediately to profit or loss.

Finance costs, net for the year ended 31 December were as follows:

	2023	2022
	$m	$m
Finance income
Interest income on cash and cash equivalents	5.2	5.5
Total finance income	5.2	5.5
Finance expense
Interest expense on borrowings	(75.2)	(46.4)
Other financing-related fees 1	(7.2)	(8.2)
Interest expense on interest rate derivatives	–	(1.4)
Interest expense on lease liabilities	(3.5)	(3.3)
Capitalised interest 2	5.4	2.0
Other finance costs	(0.2)	(0.3)
Total finance expense	(80.7)	(57.6)
Finance costs, net	(75.5)	(52.1)

Other financing-related fees include the amortisation of deferred financing fees associated with the multicurrency revolving credit facilities, term loan facilities and senior notes.

Capitalised interest was calculated using the Group’s weighted average interest rate over the year of 5.7% (2022: 3.4%), and will be treated as tax deductible.

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Convatec Group Plc Annual Report and Accounts 2023

193

26. ACQUISITIONS

During the year to 31 December 2023, the Group completed the acquisitions of:

–

Starlight Science Limited (Starlight), a pre-commercial UK-based company.

–

A Better Choice Medical Supply LLC (ABCMS), a US-based intermittent catheter provider.

–

All American Medical Supply Corp (AAMS), a New York home supplier of urinary catheters and compression stockings.

This note provides details of the transactions and the acquisition accounting that has been recorded to reflect the fair value of assets

acquired and liabilities assumed as well as the intangible assets and goodwill recognised upon acquisition. This note also provides

details of any fair value changes identified post-acquisition in respect of previous acquisitions that the Group has completed.

Accounting policy

Acquisitions of subsidiaries and businesses are accounted for using the acquisition method of accounting. Consideration

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.

The classification of cash payments associated with contingent consideration within the Consolidated Statement of Cash Flows

is dependent on the nature of the arrangement.

Either 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 cash flows from operating activities;

alternatively, cash flows may be considered financing in nature and included within cash flows from financing activities.

Starlight Science Limited (Starlight)

On 18 April 2023, the Group completed its acquisition of 100% of the share capital of Starlight Science Limited (Starlight), a UK-based

company owned by 30 Technology Limited. The acquisition of Starlight included the anti-infective nitric oxide technology platform

and new product pipeline, which complements the Group’s Advanced Wound Care portfolio and strengthens the Group’s ability to

provide best-in-class solutions for patients.

In addition to the initial consideration of $56.7 million (£45.3 million), the sellers may earn contingent consideration up to a

maximum of $163.9 million (£131.0 million), in the form of (i) milestone payment of $58.8 million (£47.0 million) due upon regulatory

clearances in the US and Europe; and (ii) earnout payments based on sales of products over the lifetime of the acquired patents,

with the maximum earnout capped at $105.1 million (£84.0 million).

The provisional discounted fair value of the contingent consideration at the date of acquisition was $66.7 million, discounted

at 19.1%. Following completion of acquisition accounting, any changes in the fair value of the contingent consideration will be

recorded in the Consolidated Income Statement in accordance with the Group’s accounting policies.

A Better Choice Medical Supply LLC (ABCMS)

On 5 July 2023, the Group completed its acquisition of 100% of the share capital of A Better Choice Medical Supply LLC (ABCMS),

a US-based intermittent catheter provider, to further strengthen the Group’s Home Service Group. The company was founded in

2008 and is based out of White Lake, Michigan. The consideration for the acquisition was $26.6 million which included $3.0 million

of deferred consideration paid into escrow. There is no earn out associated with this acquisition.

All American Medical Supply Corp (AAMS)

On 4 October 2023, the Group completed its acquisition of 100% of the share capital of All American Medical Supply Corp (AAMS), New

York-focused home supplier of urinary catheters and compression stockings, to further strengthen the Group’s Home Service Group.

The company was founded in 2009 and is based out of Long Island, New York. The consideration for the acquisition was $1.5 million

which included $0.3 million of deferred consideration paid into escrow. There is no earn out associated with this acquisition.

Financial statements

Notes to the consolidated financial statements

continued

Convatec Group Plc Annual Report and Accounts 2023

194

26. ACQUISITIONS (CONTINUED)

Assets acquired and liabilities assumed

Each of the transactions meet the definition of a business combination and have 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 dates:

	Starlight	ABCMS	All American	Total
	Provisiona l	Provisiona l	Provisiona l	Provisiona l
	$m	$m	$m	$m
Non-current assets
Property, plant & equipment	0.4	–	–	0.4
Right-of-use assets	1.3	0.3	–	1.6
Intangible assets	112.5	4.3	–	116.8
Current assets				–
Trade and other receivables	0.1	0.6	0.1	0.8
Cash and cash equivalents	–	0.2	–	0.2
Total assets acquired	114.3	5.4	0.1	119.8
Current liabilities
Trade and other payables	(0.1)	(0.2)	–	(0.3)
Lease liabilities	(0.2)	–	–	(0.2)
Non-current liabilities				–
Lease liabilities	(1.1)	(0.3)	–	(1.4)
Deferred tax liabilities	(12.5)	–	–	(12.5)
Total liabilities assumed	(13.9)	(0.5)	–	(14.4)
Net assets acquired	100.4	4.9	0.1	105.4
Goodwill	23.0	21.5	1.4	45.9
Total	123.4	26.4	1.5	151.3
Initial cash consideration	56.7	23.5	1.2	81.4
Deferred purchase consideration paid into escrow 1	–	3.0	0.3	3.3
Working capital adjustment 2	–	(0.1)	–	(0.1)
Contingent consideration	66.7	–	–	66.7
Total consideration	123.4	26.4	1.5	151.3

Analysis of cash outflow in the Consolidated Statement of Cash Flows
	Starlight	ABCMS	All American	Total
	Provisiona l	Provisiona l	Provisiona l	Provisiona l
	$m	$m	$m	$m
Initial cash consideration	56.7	23.5	1.2	81.4
Deferred purchase consideration paid into escrow 1	–	3.0	0.3	3.3
Working capital adjustment 2	–	(0.1)	–	(0.1)
Cash and cash equivalents acquired	–	(0.2)	–	(0.2)
Net cash outflow from acquisitions, net of cash acquired	56.7	26.2	1.5	84.4

$3.0 million for the acquisition of ABCMS and $0.3 million for the acquisition of All American was paid on closing into escrow as security and indemnity by the sellers for their

obligations under the Merger Agreements. The escrow amounts are expected to be released within 2 years of the respective acquisition dates, subject to terms specified in

the Merger Agreements.

This is the Group’s calculation of the working capital adjustment and forms part of the initial consideration. The final amount was determined in accordance with the terms

of the Merger Agreement and was finalised and paid by the reporting date.

The fair values of the assets acquired and liabilities assumed are provisional at 31 December 2023. 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 dates.

The provisional fair value of trade and other receivables amounted to $0.8 million, with a gross contractual amount of $0.9 million.

At the acquisition date, the Group’s best estimate of the contractual cash flows expected not be collected amounted to $0.1 million.

The goodwill recorded, which is not deductible for tax purposes, represents the cost savings, operating synergies and future growth

opportunities expected to result from combining the operations of the acquisitions with those of the Group.

The Starlight acquisition is included in the Advanced Wound Care CGU group, whilst ABCMS and AAMS are included in the

Continence Care CGU group.

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Convatec Group Plc Annual Report and Accounts 2023

195

Acquisition-related costs

The Group incurred $6.2 million of acquisition-related costs directly related to the acquisitions completed or aborted in the year

ended 31 December 2023, primarily in respect of legal and advisers’ fees. The acquisition-related costs have been recognised in

general and administrative expenses in the Consolidated Income Statement.

Revenue and profit

As Starlight is in a pre-commercial state, there is no revenue to date. The loss for the period from the acquisition date to

31 December 2023 was $2.5 million, before recognising acquisition-related intangible asset amortisation charges of $6.0 million.

If the acquisition had been completed at 1 January 2023, reported Group revenue would have remained unchanged and the Group

profit for the period would have been $0.6 million lower for the year ended 31 December 2023, before recognising acquisition-

related intangible asset amortisation additional charges of $6.0 million.

The revenue of ABCMS for the period from the acquisition date to 31 December 2023 was $3.5 million and net profit for the period

was $1.6 million, before recognising acquisition-related intangible asset amortisation charges of $0.7 million. If the acquisition had

been completed on 1 January 2023, reported Group revenue would have been $4.3 million higher and Group profit for the year

would have been $0.8 million higher, before recognising acquisition-related intangible asset amortisation charges of $0.7 million.

The revenue of AAMS for the period from the acquisition date to 31 December 2023 was $0.9 million and net profit for the period

was $0.4 million. No intangible assets were identified during the purchase price allocation therefore there is no acquisition-related

intangible asset amortisation charge. If the acquisition had been completed at 1 January 2023, reported Group revenue would have

been $0.7 million higher and net profit would have remained unchanged.

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 2023, the discounted fair value of the contingent consideration payable in respect of the Group’s acquisitions

was $138.0 million (2022: $140.0 million).

Management has determined that the potential range of undiscounted outcomes at 31 December 2023 is between $52.4 million

and $265.4 million, from a maximum undiscounted amount of $354.2 million.

The table below shows an indicative basis of the sensitivity to the income statement and balance sheet at 31 December 2023.

	Sales forecast				Discount rate
	5%	10%	-5%	-10%	1%	2%	-1%	-2%
Increase/(decrease) in financial liability and loss/(gain)
in income statement	8.3	16.9	(8.3)	(16.5)	(2.3)	(4.4)	2.4	5.0

27. COMMITMENTS AND CONTINGENCIES

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.

Capital commitments

At 31 December 2023, the Group had non-cancellable commitments for the purchase of property, plant and equipment, capitalised

software and development of $22.3 million (2022: $39.3 million).

Contingent liabilities

Other than as disclosed elsewhere in these financial statements, there were no contingent liabilities recognised as at 31 December

2023 and 31 December 2022.

Financial statements

Notes to the consolidated financial statements

continued

Convatec Group Plc Annual Report and Accounts 2023

196

28. RELATED PARTY TRANSACTIONS

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 CELT as set out on pages 98 to 99 and

the Non-Executive Directors as set out on pages 96 to 97.

Key management personnel compensation

Key management personnel compensation for the year ended 31 December was as follows:

	2023	2022
	$m	$m
Short-term employee benefits	15.5	16.4
Share-based payment expense	7.1	9.2
Post-employment benefits	0.5	0.8
Termination benefits	–	0.4
Total	23.1	26.8

Further details of short-term employee benefits, share-based payment expense and post-employment benefits for the Executive

Directors are shown on page 125. Details of the Non-Executive Directors’ fees, included in the table above, are provided on page 128.

The Group has not been a party to any other material transaction, or proposed transactions, in which any member of the key

management personnel had or was to have a direct or indirect material interest.

29. SUBSEQUENT EVENTS

The Group has evaluated subsequent events through to 5 March 2024, the date the Consolidated Financial Statements were

approved by the Board of Directors.

On 5 March 2024, the Board proposed the final dividend in respect of 2023 subject to shareholder approval at the Annual General

Meeting on 16 May 2024, to be distributed on 23 May 2024. See Note 18 – Dividends to the Consolidated Financial Statements for

further details.

Company financial statements

COMPANY STATEMENT OF FINANCIAL POSITION

As at 31 December 2023

2023

2022

Notes

Assets

Non-current assets

Investment in subsidiaries

4,019.4

3,818.9

Deferred tax assets

3.0

2.6

4,022.4

3,821.5

Current assets

Other receivables

33.4

22.4

Total assets

4,055.8

3,843.9

Equity and liabilities

Current liabilities

Trade and other payables

4.6

5.5

4.6

5.5

Non-current liabilities

Other payables

0.1

–

Total liabilities

4.7

5.5

Net assets

4,051.1

3,838.4

Equity

Share capital

251.5

250.7

Share premium

181.0

165.7

Own shares

(0.6)

(1.5)

Retained surplus

1,539.4

1,562.9

Merger reserve

1,765.6

Cumulative translation reserve

206.6

3.7

Other reserves

107.6

91.3

Total equity

4,051.1

3,838.4

Total equity and liabilities

4,055.8

3,843.9

The Company reported a net profit for the year ended 31 December 2023 of $103.3 million (2022: $85.2 million).

The Financial Statements of Convatec Group Plc (registered number 10361298) were approved by the Board of Directors

and authorised for issue on 5 March 2024. They were signed on its behalf by:

Jonny Mason

Karim Bitar

Chief Financial Officer

Chief Executive Officer

Overview

Strategic report

Governance

Additional information

197

Convatec Group Plc Annual Report and Accounts 2023

Financial statements

Company financial statements

continued

COMPANY STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2023

Share capital

premium

Own shares

Retained

surplus

Merger

reserve

Cumulative

translation

reserve

Other

reserves

Total equity

At 1 January 2022

247.0

142.3

(2.2)

1,590.3

1,765.6

460.8

71.7

4,275.5

Net profit

–

85.2

–

85.2

Foreign currency translation

adjustment

–

(457.1)

–

(457.1)

Total comprehensive

income

–

85.2

–

(457.1)

–

(371.9)

Dividends paid

–

(88.1)

–

(88.1)

Scrip dividend

1.1

23.4

–

(24.5)

–

Share-based payments

–

16.6

Share awards vested

–

3.3

–

2.9

6.2

Excess deferred tax benefit

from share-based payments

–

0.1

Allotment of shares to

Employee Benefit Trust

2.6

–

(2.6)

–

At 31 December 2022

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

Share awards vested

–

0.9

–

1.5

2.4

Excess deferred tax benefit

from share-based payments

–

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

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.

198

Convatec Group Plc Annual Report and Accounts 2023

Financial statements

1. BASIS OF PREPARATION

This section describes the Company’s significant 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 Significant accounting policies

Basis of accounting

The Financial Statements have been prepared on the historical cost basis, except for certain financial instruments where fair value

has been applied. 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 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.

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. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision

affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Management has concluded that there are no critical accounting judgements and key sources of estimation uncertainty that could

result in a material adjustment in the next 12 months.

Overview

Strategic report

Governance

Additional information

199

Convatec Group Plc Annual Report and Accounts 2023

Financial statements

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 120 to 142 within the Remuneration Committee report.

Their aggregate remuneration comprised:

2023

2022

Wages and salaries

3.8

4.1

Share-based payment expense

3.7

3.6

Social security costs

1.1

1.0

Pension-related costs

0.2

0.3

Total

8.8

9.0

Average monthly number of employees (including Executive Directors) was 2 (2022: 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 203 to 205 for details of all the Company’s direct and indirect holdings.

Accounting policy

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.

Cost

Impairment

Net book value

At 1 January 2022

5,986.3

(1,714.8)

4,271.5

Capital contributions in respect of share-based payments to employees of subsidiaries

12.8

–

12.8

Reduction due to reimbursement upon exercised awards

(8.0)

–

(8.0)

Foreign exchange

(641.0)

183.6

(457.4)

At 31 December 2022

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

An impairment assessment was performed on the investments in subsidiaries at 31 December 2023 and 31 December 2022 with no

impairment identified. The share price of Convatec Group plc at 31 December 2023 was £2.44 (2022: £2.33), resulting in a market

valuation of £5,006 million ($6,373 million) (2022: £4,754 million ($5,744 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

200

Convatec Group Plc Annual Report and Accounts 2023

Financial statements

4. DEFERRED TAX ASSETS

Deferred tax assets mainly arise in relation to timing differences on the exercise of share-based awards, and taxable losses

arising in the normal course of business.

At 1 January 2022

2.1

Movement in income statement

0.6

Movement in other comprehensive income

0.1

Foreign exchange

(0.2)

At 31 December 2022

2.6

Movement in income statement

0.1

Movement in other comprehensive income

0.3

Foreign exchange

–

At 31 December 2023

3.0

The deferred tax asset consists of deferred tax on the following items:

2023

2022

Share-based payments

3.0

2.6

At 31 December

3.0

2.6

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.

2023

2022

Amounts falling due within one year:

Amounts owed by Group undertakings

23.0

14.9

Other receivables

10.3

7.4

Prepayments

0.1

33.4

22.4

Included in the amounts owed by Group undertakings at 31 December 2023 are intercompany loans of $6.3 million (2022: $5.7 million)

with a variable interest rate set at a margin 35bps (2022: 10bps) below SONIA. The loans are unsecured and are repayable on demand.

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.

2023

2022

Amounts falling due within one year:

Trade payables

1.1

0.9

Other taxation and social security

0.8

1.2

Accruals

2.7

3.4

4.6

5.5

Overview

Strategic report

Governance

Additional information

201

Convatec Group Plc Annual Report and Accounts 2023

Financial statements

Company financial statements

continued

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.

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.

The retained surplus of $1,539.4 million (2022: $1,562.9 million) of the Company equates to the distributable reserves. Details of the

considerations and rationale for the distribution of dividends are given in the Directors’ report on page 143.

9. FINANCIAL GUARANTEES

The Company has guaranteed certain external borrowings of subsidiaries which at 31 December 2023 amounted to $1,240.6 million

(2022: $1,227.2 million).

10. SUBSEQUENT EVENTS

On 5 March 2024, the Board proposed the final dividend in respect of 2023 subject to shareholder approval at the Annual General

Meeting on 16 May 2024, to be distributed on 23 May 2024. See Note 18 – Dividends to the Consolidated Financial Statements

for further details.

202

Convatec Group Plc Annual Report and Accounts 2023

Financial statements

Subsidiary and related undertakings

Details of the Company’s subsidiaries and associated undertakings at 31 December 2023 are as follows:

Name

Place of business and

registered oﬃce

Portion of ownership

interest

Portion of

voting power held

Akers & Dickinson Limited

United Kingdom

100%

Allied Medical (UK) Services Limited

United Kingdom

100%

Alpha-Med (Medical & Surgical) Limited

United Kingdom

100%

Amcare Limited

United Kingdom

100%

Arthur Wood Limited

United Kingdom

100%

B.C.A. Direct Limited

United Kingdom

100%

Bradgate-Unitech Limited

United Kingdom

100%

Convatec Accessories Limited

United Kingdom

100%

Convatec Holdings U.K. Limited

United Kingdom

100%

Convatec NAP Limited

United Kingdom

100%

Convatec Speciality Fibres Limited

United Kingdom

100%

Convatec International U.K. Limited

United Kingdom

100%

Convatec Limited

United Kingdom

100%

Farnhurst Medical Limited

United Kingdom

100%

Lance Blades Limited

United Kingdom

100%

M.S.B. Limited

United Kingdom

100%

Needle Industries (Sheﬃeld) Limited

United Kingdom

100%

Nottingham Medical Equipment Limited

United Kingdom

100%

Novacare UK Limited

United Kingdom

100%

Pharma-Plast Limited

United Kingdom

100%

Resus Positive Limited

United Kingdom

100%

Rotax Razor Company Limited

United Kingdom

100%

Shrimpton & Fletcher Limited

United Kingdom

100%

Starlight Science Limited

United Kingdom

100%

Steriseal Limited

United Kingdom

100%

SureCalm Healthcare Holdings Limited

United Kingdom

100%

SureCalm Healthcare Ltd

United Kingdom

100%

SureCalm Pharmacy Limited

United Kingdom

100%

Unomedical Developments Limited

United Kingdom

100%

Unomedical Holdings Limited

United Kingdom

100%

Unomedical Limited

United Kingdom

100%

Unoplast (U.K.) Limited

United Kingdom

100%

Convatec Finance Holdings Limited*

United Kingdom

100%

Convatec Management Holdings Limited*

United Kingdom

100%

Convatec Group Holdings Limited*

United Kingdom

100%

Cidron Healthcare Limited*

Jersey

100%

Convatec Healthcare Ireland Limited

Ireland

100%

Convatec France Holdings SAS

France

100%

Laboratoires ConvaTec SAS

France

100%

Convatec Healthcare D S.à.r.l.

Luxembourg

100%

Convatec Spain Holdings, S.L.

Spain

100%

Convatec Spain S.L.

Spain

100%

CVT Business Services, Unipessoal Lda.

Portugal

100%

KVTech Portugal – Produtos Medicos Unipessoal Ltda

Portugal

100%

Convatec OY

Finland

100%

Convatec (Switzerland) GmbH

Switzerland

100%

Convatec International Services GmbH

Switzerland

100%

Convatec (Austria) GmbH

Austria

100%

Convatec Italia S.r.l.

Italy

100%

Convatec Hellas Medical Products S.A.

Greece

100%

Convatec Polska Sp. Z.o.o

Poland

100%

Convatec Ceska Republika s.r.o.

Czech Republic

100%

Convatec (Australia) PTY Limited

Australia

100%

Overview

Strategic report

Governance

Additional information

203

Convatec Group Plc Annual Report and Accounts 2023

Financial statements

Subsidiary and related undertakings

continued

Name

Place of business and

registered oﬃce

Portion of ownership

interest

Portion of

voting power held

Convatec (New Zealand) Limited

New Zealand

100%

Convatec Sağlik Ürünleri Limited Şirketi

Turkey

100%

Convatec (Sweden) AB

Sweden

100%

Convatec Norway AS

Norway

100%

Convatec (Germany) GmbH

Germany

100%

EuroTec GmbH

Germany

100%

Unomedical s.r.o.

Slovakia

100%

EuroTec B.V.

Netherlands

100%

EuroTec Beheer B.V.

Netherlands

100%

Convatec Nederland B.V.

Netherlands

100%

Convatec Belgium BVBA

Belgium

100%

EuroTec BV (Belguim Branch)

Belgium

100%

Papyro-Tex A/S

Denmark

100%

Convatec Denmark A/S

Denmark

100%

Unomedical A/S

Denmark

100%

Convatec Denmark Holdings ApS

Denmark

100%

Convatec South Africa (PTY) Limited

South Africa

100%

ConvaCare Medical South Africa (PTY) Ltd

South Africa

100%

Convatec Middle East & Africa LLC

Egypt

100%

Convatec Middle East FZ-LLC

United Arab Emirates

100%

Convatec (Singapore) PTE Limited

Singapore

100%

Convatec Malaysia Sdn Bhd

Malaysia

100%

Convatec China Limited (Beijing Branch)

China

100%

Convatec China Limited (Guang Zhou Branch)

China

100%

Convatec China Limited

China

100%

Convatec Dominican Republic Inc.

100%

Boston Medical Device Dominicana S.R.L.

Dominican Republic

100%

Convatec Hong Kong Limited

Hong Kong

100%

Convatec Japan KK

Japan

100%

Convatec (Singapore) PTE Limited (Taiwan Branch)

Taiwan

100%

Convatec (Thailand) Co. Limited

Thailand

100%

ZAO ConvaTec

Russia

100%

Convatec Korea, Ltd

Korea

100%

Convatec Argentina SRL

Argentina

100%

Convatec Canada Limited

Canada

100%

Unomedical S.A de C.V.

Mexico

100%

Boston Medical Care, S. de R.L. de C.V.

Mexico

100%

Boston Medical Device de México, S. de R.L. de C.V.

Mexico

100%

Unomedical Devices S.A. de C.V.

Mexico

100%

Convatec Peru S.A.C.

Peru

100%

Convatec Brasil Ltda.

Brazil

100%

Convatec Medical Care Assistência a Paciente Ltda

Brazil

100%

Boston Medical Devices Colombia Ltda.

Colombia

100%

Boston Medical Care S.A.S IPS

Colombia

100%

Convatec Medical Care S.P.A

Chile

100%

Convatec Chile S.A.

Chile

100%

Boston Medical Device Ecuador S.A.

Ecuador

100%

Boston Medical Device de Venezuela, C.A.

Venezuela

100%

Convatec India Private Limited

India

100%

ConvaCare Medical India Private Limited

India

100%

180 Medical Acquisition Inc.

100%

180 Medical Holdings Inc.

100%

180 Medical Inc.

100%

180 Medical Distribution Inc.

100%

204

Convatec Group Plc Annual Report and Accounts 2023

Financial statements

Name

Place of business and

registered oﬃce

Portion of ownership

interest

Portion of

voting power held

AbViser Medical, LLC

100%

Boston Medical Device, Inc.

100%

Convatec Inc.

100%

Boston Medical Device International, LLC

100%

Convatec Technologies Inc.

100%

Personally Delivered, Inc.

100%

Woodbury Holdings, Inc.

100%

WPI Acquisition Corporation

100%

WPI Holdings Corporation

100%

Wilmington Medical Supply, Inc.

100%

PRN Medical Services, LLC

100%

PRNMS Investments LLC

100%

Symbius Medical Inc.

100%

South Shore Medical Supply, Inc.

100%

Unomedical America, Inc.

100%

Unomedical, Inc.

100%

J&R Medical, LLC

100%

Cure Medical LLC

100%

Convatec Triad Life Sciences, LLC

100%

Convatec NAP Holdings, Inc.

100%

A Better Choice Medical Supply, L.L.C

100%

All American Medical Supply Corp.

100%

GDC First Avenue, Deeside Industrial Park,

Deeside, Flintshire CH5 2NU, UK

20 Eastbourne Terrace, Paddington, London W2

6LG, United Kingdom

44 Esplanade, St. Helier, Jersey, JE4 9WG, Channel

Islands

10 Earlsfort Terrace, Dublin 2, D02 T380, Ireland

90, Boulevard National, La Garenne Colombes,

F-92250, Paris, France

12C, rue Guillaume Kroll, L-1882, Luxembourg

Constitucion 1, 3ªPlanta, 08960 Sant Just Desvern,

Barcelona, Spain

Avenida da Liberdade, 249 ‐1, 1250‐143 Lisbon,

Portugal

Avenida das Forças Armadas, 125, 12, 1600-079,

Lisbon, Portugal

10.

Life Science Center, Keilaranta 16 B, 02150 Espoo,

Finland

11.

Mühlentalstrasse 38, 8200 Schaffhausen,

Switzerland

12.

Mühlentalstrasse 36/38, 8200 Schaffhausen,

Switzerland

13.

Schubertring 6, 1010 Wien, Austria

14.

Via della Sierra Nevada, 60-00144 Rome, Italy

15.

392A Mesogeion Avenue, Ag. Paraskevi, 15341,

Athens, Greece

16.

Al. Armii Ludowej 26, 00-609 Warszawa, Poland

17.

Olivova 2096/4, Prague 1, 110 00, Praha 1, Czech

Republic

18.

Level 2 Building 5, Brandon Office Park, 530-540

Springvale Road, Glen Waverley VIC 3150,

Australia

19.

Crowe Horwath, Level 29, 188 Quay Street,

Auckland 1010, New Zealand

20.

Şehit İlknur Keles Sokak, Hüseyin Bağdatlioğlu

Plaza 7/3, Kozyatagi, Istanbul, Turkey 34742

21.

Box 15138, 167 51 Bromma, Stockholms Ian,

Stockholm kommun, Sweden

22.

Postboks 6464 Etterstad, 0605 Oslo, Norway

23.

Gisela-Stein-Strasse 6, 81671 Munich, Germany

24.

Solinger Strasse 93 40764 Langenfeld, Germany

25.

Priemyselný Park 3, 071 01 Michalovce, Slovakia

26.

Schotsbossenstraat 8, 4705AG Roosendaal,

Netherlands

27.

Houttuinlaan 5F, 3447 GM Woerden, Netherlands

28.

Parc d’Alliance, Boulevard de France 9, B-1420

Braine l’Alleud, Belgium

29.

Stationsstraat 35, 2950 Kapellen, Belgium

30.

ConvaTec Harlev Skinderskovvej 32-36, 2730,

Herlev, Denmark

31.

Lautruphøj 1 DK-2750 Ballerup, Denmark

32.

Åholmvej 1-3, 4320 Lejre, Denmark

33.

Workshop 17 Office 1-4, 16 Baker Street,

Rosebank, Johannesburg, Gauteng 2196, South

Africa

34.

Plot 140, Financial Center, New Cairo, Banking

Sector, 5th Settlement, Cairo, Egypt

35.

№ 604N, Floor 6, HQ Complex, Dubai, United

Arab Emirates

36.

456 Alexandra Road, Fragrance Empire Building

#18-01/02, Singapore 119962

37.

10th Floor, Menara Hap Seng, No. 1 & 3, Jalan P

Ramlee, 50250, Kuala Lumpur, Malaysia

38.

Unit 805, 8F Jinbao Tower, No.89 Jinbao Street

Dongcheng District, Beijing 100005, P.R.C.

39.

Unit 808, Level 8, Fortune plaza, No.116 Ti Yu

Dong Road, Tianhe District, Guangzhou City,

Guanghzhou Province, 510620, P.R.C.

40.

Unit 1105-1106, Crystal Plaza Office Tower 1,

No.1359 Yaolong Road, Pudong District, Shanghai

200124, P.R.C

41.

1013 Centre Road, Wilmington, County of New

Castle, Deleware, USA

42.

Avenida Winston Churchill ES1. 27 de Febrero,

Apto Plaza Central, Tercer Nivel, del Sector

PIANTINI de la Ciudad de Santo Domingo de

Guzman, Suite A-368, Dominican Republic

43.

Unit 1901 Yue Xiu Bldg 160–174, Lockhart Road,

Wan Chai, Hong Kong

44.

1-1-7 Choraku, Bunkyo-ku, Tokyo 112-0004, Japan

45.

5F.-4, No. 57, Fuxing N. Rd, Songshan Dist., Taipei

City, Taiwan (Post code: 10595)

46.

No. 87, 9th Floor M Thai Tower All Seasons Place,

Wireless Road, Lumpini, Phatumwan, Bangkok,

Thailand

47.

Kosmodamianskaya nab. 52, building 1, 9th floor,

115054, Moscow, Russia

48.

4F, American Standard B/D, Yeongdongdaero

112gil 66, Gangnam-Gu, Seoul, Republic of Korea

06083

49.

CERRITO 1070 Piso:3 Dpto:71, 1010-CIUDAD

AUTONOMA BUENOS AIRES, Argentina

50.

900-1959 Upper Water Street, Halifax, Nova

Scotia B3J 2N2, Canada

51.

Avenida Industrial Falcón, L7, Parque Industrial

del Norte, Reynosa Tamps, Mexico C.P. 88736

52.

Avenida Insurgentes sur 619, 3° Piso, CIUDAD DE

MEXICO, Nápoles, 03810, Mexico

53.

Av. Fomento Industrial L9 M3, Parque Industrial

del Norte, Reynosa Tamps, Mexico C.P. 88736

54.

Av. La Encalada 1010 of. 806, Santiago de Surco,

Lima 15023, Perú

55.

Rua Alexandre Dumas, 2100,15º. Andar, Ed

Corporate Plaza, Conj 151 e 152, – Chácará Stº

Antonio – São Paulo, Brazil Cep: 04717-913

56.

Torre los Nogales, Calle 76 # 11-17, Fifth and

Second Floor, Bogotá, Colombia

57.

Calle 82 # 18-31, Bogotá, Colombia

58.

Av. Andres Bello #2325, Oficina 8, Santiago, Chile

59.

Robles E4-136 y Av. Amazonas, Edificio Proinco

Calisto, piso 12, Quito, Ecuador EC170526

60.

Av. Sorocaima, Libertador con Venezuela, Edif

Atrium. Piso 3, Oficina 3G, Urb El Rosal, Municipio

Chacao, Edo, Miranda, Venezuela

61.

Unit No 206, Tower B, Digital Greens, Sector-61,

Golf Course Extension Road, Gurgaon-122102,

Haryana, India

62.

10th Floor 1002 B, Mangnum Tower-1, Gold

Course Extention Road, Sector 58, Gurugram,

Gurgaon, Haryana, India, 122011

63.

8516 Northwest Expressway, Oklahoma City, OK

73162, US

64.

The Corporation Trust Company, Corporation

Trust Center, 1209 Orange Street, Wilmington,

New Castle, Delaware 19801, US

65.

5314 Silvermoon Lane, Raleigh, 27606, NC, United

States

66.

200 Crossing Boulevard, Suite 101, Bridgewater,

NJ 08807 US

67.

3993 Howard Hughes Parkway Suite 250, Las

Vagas, Nevada 89169-6754, US

68.

725 Primera Blvd, Suite 230, Lake Mary, FL

32746-2127, US

69.

2626 Glenwood Ave Ste 550, Raleigh, NC 27608

70.

20333 N. 19th Avenue, Suite 101, Phoenix, AZ

85027-3627, US

71.

58 Norfolk Avenue, Unit 2, South Easton, MA

02375-1907, US

72.

5701-1 S Ware RD, McAllen, TX 78504, US

73.

4625 Southwest Freeway, Suite 800, Houston, TX

77027-7105, US

74.

3471 Via Lido, Ste 211, Newport Beach, California

92663, United States

75.

251 Little Falls Drive, Wilmington, Delaware,

19808, US

76.

3100 Dixie Hwy, Waterford Twp, MI 48328, United

States

77.

5493 Merrick Road, Massapequa, New York 11758

*Directly held investment by Convatec Group Plc

Overview

Strategic report

Governance

Additional information

205

Convatec Group Plc Annual Report and Accounts 2023

Financial statements

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 2023 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 International Financial Reporting Standards (IFRSs) 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;

–

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 IFRSs 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 Company for the year are disclosed in Note 3.3 to the Group 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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Financial statements

3. Summary of our audit approach

Key audit matters

The key audit matters that we identified in the current year were:

–

Revenue recognition in key markets;

–

Valuation of contingent consideration provisions; and

–

Acquisition of Starlight Science Limited.

The following were identified as key audit matters in 2022, that we no longer consider key audit

matters in the current year: (i) acquisition of Triad Life Sciences Inc and (ii) accounting for the exit

of hospital care and related industrial sales activities.

Within this report, key audit matters are identified as follows:

Newly identified

Increased level of risk

Similar level of risk

Decreased level of risk

Materiality

The materiality that we used for the Group Financial Statements was $10.8m which was

determined based on profit before tax adjusted for certain items.

Scoping

Combined, we performed audit procedures across 23 components in 13 countries accounting for

80% of revenue, 91% of profit before tax and 83% of net assets.

Significant changes in our

approach

In addition to changes in key audit matters discussed above, our audit approach for 2023 changed

to test and place reliance on relevant controls in certain centralised business processes.

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.

Overview

Strategic report

Governance

Additional information

207

Convatec Group Plc Annual Report and Accounts 2023

Financial statements

Independent auditor’s report

continued

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 $2,142.4m for the year ended 31 December 2023 (31 December

2022: $2,072.5m) under IFRS 15:

Revenue from contracts with customers

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, revenue recognition has been included as a key audit

matter. The Audit and Risk Committee includes its assessment of this matter on page 113.

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 to evaluate 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 with new customers against the requirements of

IFRS 15;

–

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 a sample of distributor contracts to assess the terms of sale and to support

recalculation of rebates and chargebacks associated with the revenue; and

–

We assessed whether the disclosures within the annual report and accounts are in compliance

with the requirements of IFRS 15.

Key observations

We are satisfied that revenue recognised across key markets and the disclosures made

are appropriate.

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Financial statements

5.2. Valuation of contingent consideration provisions

Key audit matter description

The Group has completed a number of significant acquisitions in the current and prior years,

which resulted in the recognition of material contingent consideration provisions, which are

a key source of estimation uncertainty.

Contingent consideration provisions of $138.0m (31 December 2022: $140.0m) comprise of various

elements including milestone-based payments due upon regulatory clearances of early-stage

products; future revenue performance and revenue-based royalty payments. There is a level of

judgement associated with evaluating the ability and likelihood of achieving underlying conditions

of milestone payments given the complexity of the regulatory approval process, the estimation of

future revenues for early-stage products and the determination of the best estimate of the timing

of settlement of these obligations.

The valuation of contingent consideration has been disclosed as a key source of estimation

uncertainty within Note 1.4 to the Group Financial Statements. The Audit and Risk Committee

includes its assessment of this matter on page 112.

How the scope of our audit

responded to the key audit

matter

We performed the following procedures:

–

We obtained an understanding of the relevant controls over the determination of contingent

consideration provisions;

–

We reviewed the terms of purchase agreements relevant to the determination of contingent

consideration provisions and made direct enquiries of the Group’s legal counsel to understand

any significant terms;

–

We challenged the assumptions underpinning the contingent consideration provisions,

including revenue projections, with reference to available market data, historical performance

where available and consistency with other accounting judgements;

–

We made direct inquiries of the Group’s Research and Development function to understand

the latest status in relation to the expected timing of regulatory approvals which determine

milestone payment obligations;

–

With involvement of our valuation experts, we evaluated applied discount rates;

–

We performed sensitivity analysis over the potential outcomes; and

–

We evaluated the appropriateness of the disclosures in the Financial Statements including the

disclosure as a key source of estimation uncertainty.

Key observations

We are satisfied the assumptions used in the valuation of contingent consideration provisions

at the year-end are reasonable and within an acceptable range and reasonable. We consider the

disclosures in relation to the range of possible outcomes to be appropriate.

5.3. Acquisition of Starlight Science Limited

Key audit matter description

In April 2023, the Group completed the acquisition of Starlight Science Limited (“Starlight”) for

a consideration of $123.4m, including deferred and contingent consideration of $66.7m. The

acquisition resulted in the recognition of identifiable product related intangible assets of $112.5m

and goodwill of $23.0m.

The key audit matter relates to key judgements in the acquisition accounting, including:

–

The valuation of intangible assets identified and resulting goodwill. Management used a third-

party expert to assist with the valuation of the acquired intangibles balance; and

–

The valuation of contingent consideration payable. Starlight was acquired in its pre-commercial

stage and as such is early in its business lifecycle. The valuation of contingent consideration

payable at 31 December 2023 has been evaluated within the Key Audit Matter above (5.2).

Full details in relation to the acquisition accounting are included within Note 26. The Audit and Risk

Committee include their assessment of this matter on page 112.

How the scope of our audit

responded to the key audit

matter

We performed the following procedures:

–

We obtained an understanding of the relevant controls over the acquisition accounting, including

the determination of contingent consideration and the fair valuation of intangible assets arising

on acquisition;

–

We assessed the significant terms of the acquisition within the purchase agreement;

–

We evaluated management’s accounting for the transaction in accordance with IFRS 3

Business Combinations

;

–

We assessed the competence, capability, and objectivity of management’s expert;

–

With involvement of our valuation experts, we evaluated management’s assumptions and the

appropriateness and application of the valuation methodology included in management’s

expert’s report; and

–

We evaluated the appropriateness of disclosures in the Financial Statements.

Key observations

We conclude the acquisition to be appropriately recognised. We consider the disclosures in relation

to the acquisition to be appropriate.

Overview

Strategic report

Governance

Additional information

209

Convatec Group Plc Annual Report and Accounts 2023

Financial statements

Independent auditor’s report

continued

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

$10.8m (2022: $9.8m)

$5.5m (2022: $5.9m)

Basis for determining materiality

4.8% (2022: 4.8%) of profit before tax adjusted

for certain items totalling $60.5m which include

acquisition and divestiture costs, termination

benefits and restructuring costs.

The Company materiality equates to 0.1% (2022:

0.2%) 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.

PBT adjusted for certain items

Group materiality $10.8m

Component materiality

range $5m to $8m

Audit Committee reporting

threshold $0.5m

PBT adjusted for certain items

Group materiality

PBT adjusted

for certain items

$226.3m

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% (2022: 70%) of Group materiality

70% (2022: 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:

our risk assessment, including our understanding of the entity and its overall

control environment;

the quality of the control environment and control reliance adopted over certain business

processes and IT systems;

the disaggregated nature of the Group and the likelihood of an individually material error; and

our cumulative experience from prior year audits and level of corrected and uncorrected

misstatements identified.

6.3. Error reporting threshold

We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of $0.5m (2022: $0.5m),

as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit

Committee on disclosure matters that we identified when assessing the overall presentation of the Financial Statements.

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Convatec Group Plc Annual Report and Accounts 2023

Financial statements

7. An overview of the scope of our audit

7.1. Identification and scoping of components

Our Group audit was scoped on an entity level basis, assessing components against the risk of material misstatement at the Group

level. We have also considered the quantum of Financial Statement balances and individual financial transactions of a significant

nature. In performing our assessment, we have considered the geographical spread of the Group and any risks presented within

each region.

Based on this assessment, we focused our work on 13 (2022: 13) components covering six (2022: seven) countries, 69% (2022: 70%)

of revenue, 79% (2022: 83%) of profit before tax and 68% (2022: 74%) of net assets. All 13 (2022: 13) components were subject to a

full scope audit. The 13 (2022: 13) components are in the US, UK, Denmark, Germany, Italy and France, which include the principal

operating units of the Group.

In addition, we have performed specified audit procedures in 10 (2022: 10) components covering nine (2022: nine) countries, 11%

(2022: 12%) of revenue, 12% (2022: 5%) of profit before tax, and 15% (2022: 7%) of net assets. The 10 (2022: 10) components are

located in: the US, UK, Switzerland, Spain, Canada, Brazil, the Dominican Republic, Slovakia and Australia.

In carrying out our work, we responded to management’s continued progress in centralising finance processes in the GBS centre in

Portugal. We centrally determined the scope of the audit procedures executed by component audit teams and at the GBS centre.

Full audit scope 69%

Review at group level 20%

Speciﬁed audit procedures 11%

Revenue

Full audit scope 79%

Review at group level 9%

Speciﬁed audit procedures 12%

Profit before tax

Full audit scope 68%

Review at group level 17%

Speciﬁed audit procedures 15%

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. As the Group’s

transformation and standardisation of

processes and controls has continued,

we have placed greater reliance on

financial controls. For relevant centralised

business processes within the GBS centre

in Portugal, we tested and placed reliance

on relevant controls, including automated

controls which directly address audit

risks of misstatement. 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 in Portugal, we

tested the general IT controls with the

involvement of our IT specialists.

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 2023 as explained

in Note 1.3 on page 153.

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 Denmark,

the US, Slovakia, GBS Portugal and the

UK. Considering the importance of

GBS Portugal 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.

Overview

Strategic report

Governance

Additional information

211

Convatec Group Plc Annual Report and Accounts 2023

Financial statements

Independent auditor’s report

continued

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 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 and the

valuation of contingent consideration

provisions. 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 and the valuation of contingent

consideration provisions as key audit

matters 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 Committee and both in-

house and external legal counsel

concerning actual and potential

litigation and claims;

212

Convatec Group Plc Annual Report and Accounts 2023

Financial statements

–

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 significant 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 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 152;

–

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 86;

–

the Directors’ statement on fair,

balanced and understandable set out

on page 111;

–

the Board’s confirmation that it has

carried out a robust assessment of the

emerging and principal risks set out

on page 76;

–

the section of the annual report that

describes the review of effectiveness of

risk management and internal control

systems set out on page 105; and

–

the section describing the work of the

Audit Committee set out on page 100.

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. Other matters which we are

required to address

15.1. Auditor tenure

Following the recommendation of the

Audit 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 8 years,

covering the years ending 31 December

2016 to 31 December 2023.

15.2. Consistency of the audit report with the

additional report to the Audit Committee

Our audit opinion is consistent with the

additional report to the Audit 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

5 March 2024

Overview

Strategic report

Governance

Additional information

213

Convatec Group Plc Annual Report and Accounts 2023

Financial statements

Transition Plan Taskforce supplementary information

ALIGNING WITH THE TRANSITION PLAN TASKFORCE DISCLOSURE FRAMEWORK

Transition Plan governance

Engagement strategy

Implementation strategy

Roles, responsibility

and accountability

The development, implementation

and monitoring of our Transition Plan

is led by our ESG Steering Committee,

with accountability shared across the

organisation. Responsibilities specific

to the Transition Plan are captured

as part of ESG and climate-related

responsibilities. See pages 40 and 41

for details on our ESG and Transition

Plan governance.

Our Executive Remuneration Policy

is linked to progress against energy

and carbon reduction. This policy is

communicated to key stakeholders

and used to drive accountability

for our climate strategic ambition,

consistent with our strategy to

embed ESG practices.

We have shared educational

materials with key stakeholders

to ensure that these topics are

appropriately understood. We have

also expanded the use of our digital

product sustainability tool.

Value chain

We acknowledge that a ‘whole

economy’ approach is necessary

to achieve a net zero transition,

and our value chain partners

are critical to Convatec’s ability

to achieve our net zero target

by 2045. When engaging with

our partners, we aim to nurture

long-term relationships based

on the principles of fairness

and transparency through both

our commercial dialogue and

supplier assessments.

We have set specific targets to

engage our supply chain, ensuring

80% are participating through the

EcoVadis platform. We also require

our highest-spend suppliers to set

science-based targets by 2026 and

are working closely to support and

improve their sustainability efforts.

In our materiality assessment (see

page 44), we reviewed stakeholder

perception and interests.

See pages 42 and 43 for further

details on our engagement relating

to our Transition Plan.

Business operations

We have identified and evaluated

near-term carbon abatement

opportunities at all our

manufacturing sites, and these

have now been incorporated

into our strategic plan.

Financial planning

Business units/functions assess the

impact of climate issues as part of

our strategic planning cycle which

informs our budgeting process.

In addition, our TCFD climate

scenario analysis (see page 68), which

quantifies potential financial climate

impacts, can be used to better

understand the level of resource and

investment that should be directed to

climate action to minimise potential

future impacts on cashflow.

Policies and condition

The following policies support the

integrity of our Transition Plan:

Environmental policy, Heath and

safety policy, Code of Ethics and

Business Conduct policy and Human

rights and Labour standards policy.

Business model Implications

Iterating our plan over time

Overcoming industry challenges

Convatec has specific industry-related challenges to

overcome when seeking to decarbonise the value chain.

One of the major challenges Convatec faces as a medical

technology company is to identify feasible sustainable

product solutions, whilst prioritising product quality,

safety and efficacy which can inhibit alternative material

and waste circularity options. Another consideration

is the R&D lead times and product line manufacturing

lifetimes, which can delay any product design-related

decarbonisation impacts.

To better understand the sustainable product

opportunities, we have implemented our Green Design

Guidelines (see page 50), which offer a framework to

assess product sustainability and guide our design

processes to minimise environmental impacts, which

includes the lowering of product life cycle emissions.

We intend to iterate our Transition Plan over time as

our maturity evolves. We have identified the following

areas of focus against the UK Transition Plan Taskforce

Guidance, https://transitiontaskforce.net/wp-content/

uploads/2023/10/TPT_Disclosure-framework-2023.pdf

which we plan to address in the coming years.

–

Synergies and trade-offs to advance social impacts

in communities where we operate (1.1d)

–

Climate adaptation and mitigation plans – key

assumptions (1.3x) and financial implications (2.4c)

–

Action planning to support product sustainability

measures (2.2)

–

Integration of our strategic ambition into financial

planning (2.4) and performance metrics (4.3d)

–

Engagement with our value chain, industry and the

public sector to support our strategic ambition and

climate goals (3.1, 3.2 and 3.3)

–

Integrating nature-based impacts into our transition

plan (4.1) and our approach to carbon credits (4.4)

–

Embedding our strategic ambition across the

business (5.3)

This year, we reviewed our carbon reduction plans and climate strategy against the Transition Plan Taskforce (TPT) requirements

to support our strategic climate ambition. The complex challenge of achieving net zero means further work is needed to advance

our plans in the coming years. However, our actions in 2023 are consistent with meeting TPT requirements. Further information

is outlined on page 58.

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Convatec Group Plc Annual Report and Accounts 2023

Additional information

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 2024

on 30 July 2024.

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 2023 was 244.2p.

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.

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.

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

Robyn Butler-Mason

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

Citigroup Global Markets Limited

UBS Limited

Solicitors

Freshfields Bruckhaus Deringer LLP

Shareholder information

Overview

Strategic report

Governance

Financial statements

215

Convatec Group Plc Annual Report and Accounts 2023

Additional information

Glossary

Adjusted free

cash flow

Net cash generated from

operations, net of PP&E

and tax paid, before cash

outflows from adjusting

items.

Adjusted or

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.

Advanced

Wound Care

(AWC)

Advanced wound

dressings and skin

care products 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.

ARA

Annual Report and

Accounts.

ARC

Audit and Risk Committee.

Articles

The Articles of Association

of the Company for the

time being in force.

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)

Net profit available for

Convatec shareholders

divided by the weighted

average number of

ordinary shares in issue

during the year.

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.

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.

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,

multiple sclerosis, spina

bifida and other causes.

Critical Care

(CC)

Devices and products used

in intensive care units and

hospital settings.

COSO

The Committee of

Sponsoring Organizations,

a global organisation

providing a framework for

risk management, internal

control, governance and

fraud deterrence.

Corporate responsibility.

Data on file

Convatec internal testing

data as of October 2022

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

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.

Effective tax

rate (ETR)

The tax charge in the

income statement as a

percentage of profit before

tax.

EMEA

Countries located in

Europe, Middle East and

Africa.

Equity cash

conversion

Free cash flow to equity

divided by adjusted net

profit.

ESG

Environmental, Social and

Governance.

ESMA

European Securities and

Markets Authority.

European Union.

EURIBOR

Euro Interbank Offered

Rate.

FCA

Financial Conduct

Authority.

FDA

US Food and Drug

Administration.

FRC

Financial Reporting

Council.

Foreign exchange.

GBS

Global Business Services

(located in Lisbon, Bogota

and Kuala Lumpur).

GDGs

Green Design Guidelines.

GDPR

General Data Protection

Regulation.

GHG emissions

Greenhouse gas

emissions.

Group

The Company and its

subsidiaries.

GPO

Group purchasing

organisations.

H&S

Health and safety.

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Convatec Group Plc Annual Report and Accounts 2023

Additional information

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.

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

for diabetes insulin pumps,

similar pumps used in

continuous infusion

treatments for conditions

such as Parkinson’s

disease and a range of

products for hospital and

home healthcare markets.

Intellectual property.

Investor Relations.

KPI – Key

Performance

Indicator

Financial and non-

financial measures that

the Group uses to assess

performance and strategic

progress.

Leverage

Net debt divided by

covenant 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.

NHS

UK National Health

Service.

OECD

Organisation for Economic

Co-operation 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: Starlight

Science Limited (April

2023), A Better Choice

Medical Supply ( July 2023)

and Triad Life Sciences

(March 2022) 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 (surgically created

opening where bodily

waste is discharged),

commonly resulting from

causes such as colorectal

cancer, inflammatory

bowel disease and bladder

cancer.

PBT

Profit before income taxes.

Peakon

Workday employee voice

platform.

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.

ROIC

Return on invested capital.

SBTi

Science Based Target

initiative.

SBTs

Science Based Targets.

SID

Senior Independent

Director.

SKU

Stock keeping unit.

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.

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.

Viability period

The three-year period from

January 2024 to December

2026 (based on the Annual

Report).

Overview

Strategic report

Governance

Financial statements

217

Convatec Group Plc Annual Report and Accounts 2023

Additional information

Important information for readers of 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.

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 80, 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.

While 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.

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.

218

Convatec Group Plc Annual Report and Accounts 2023

Additional information

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