28th Feb 2020 10:47
(Alliance News) - ConvaTec Group PLC on Friday said its 2019 profit was many times smaller than the previous year, due in large part to a more than USD105 million impairment.
Shares in Reading-headquartered firm were down 0.3% at 205.50 pence in London in morning trading.
The FTSE 250-listed medical device supplier reported an USD18.9 million pretax profit for 2019, less than a tenth of the previous year's USD201.2 million profit figure.
While revenue was flat at USD1.83 billion, the company incurred a USD105.5 million impairment on acquired intangible assets, versus no such impairment in 2018. The impairment came after the company's product portfolio review "resulted in the identification of impairment triggers in relation to a number of the group's intangible assets", ConvaTec explained.
On top of this, selling and distribution expenses plus general and administrative expenses were higher, as were research and development expenses. Combined, these expenses rose 6.7% to USD753.2 million from USD706.10 million.
The higher expenses resulted from ConvaTec undertaking a "transformation initiative", which involved further research and development investment, as well as spending to simplify the organisation.
Having made a USD40 million transformation cost investment in 2019, ConvaTec is now planning to increase the overall amount of its transformation investment to around USD210 million across 2019 and 2021 from the approximately USD150 million previously planned.
ConvaTec's 2019 guidance was for organic revenue growth of between 1.0% to 2.5% and an adjusted earnings before interest and taxation margin, including costs from its transformation programme, of between 18% and 20%. Adjusted figures exclude one-off items, as well as those items incurred due to acquisitions or divestitures.
Organic revenue growth was in line with guidance, growing 2.3%. This was also true of the adjusted Ebit margin, which fell to 19%, though this was behind 2018's 23% figure.
For 2020, constant currency revenue growth is forecast at between 2.0% and 3.5%, while the constant currency adjusted Ebit margin is expected to be between 16% and 18%, including transformation costs and medical device regulation.
The company maintained its annual dividend at 5.7 US cents per share.
Chief Executive Karim Bitar said: "One of the key reasons that attracted me to ConvaTec was the significant opportunity ahead of us. We operate in structurally growing markets; however, our performance in different product categories and markets varies markedly. With clear direction, an emphasis on innovation and an execution excellence culture, ConvaTec will focus on pivoting to sustainable and profitable growth.
"Since I joined ConvaTec, the ConvaTec executive leadership team and I have undertaken a strategic assessment and concluded that we need to move to a new operating model. The new model is customer-centric, more agile, focuses on innovation and ensures clear accountability. Our transformation goal and strategic intent is to pivot to sustainable and profitable growth."
Bitar was hired by ConvaTec back in March of last year from Genus PLC, where he had been CEO since 2011.
By Anna Farley; [email protected]
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