4th Aug 2022 10:09
(Alliance News) - ConvaTec Group PLC on Thursday said half year profit was hit by a lower margin, but backed its annual guidance as revenue trended upward.
In the first half of the year, the Reading, England-based medical products and technologies company's pretax profit fell 59% to USD46.1 million from USD112.1 million a year before.
This was as its gross margin fell to 53.1% from 55.1%, and the operating margin dropped to 8.3% from 13.4%.
"The decrease in gross margin was driven by 120bps of divestiture and termination costs primarily relating to the exit from hospital care and industrial sales activities, with the remaining 80bps owing to significant inflationary pressures on both raw material and freight costs, partially offset by productivity/pricing/mix benefits," the firm explained.
Revenue edged up by 3.6% to USD1.05 billion from USD1.01 billion. It rose 8.0% on a constant currency basis, due to a "significant" foreign exchange headwind.
On an organic basis, revenue grew 6.4%, with growth seen across all divisions, in particular Advanced Wound Care, Continence & Critical Care, and Ostomy Care.
Shares in Convatec were 7.4% higher at 247.20 pence each in London on Thursday morning.
Revenue growth in North America and Rest of World of 6.4% and 12% respectively helped to offset a 3.0% decline in Europe. The decline in Europe was primarily driven by currency headwinds, Convatec explained.
The firm declared an interim dividend of 1.72 cents, unchanged from the year before.
It said its USD125 million acquisition of Triad Life Sciences in March, now operating as Advanced Tissue Technology, is integrating well within its Advanced Wound Care business.
"This performance demonstrates that Convatec is continuing to pivot to sustainable and profitable growth... Convatec has achieved strong sales growth and, despite the significant inflationary backdrop, a robust profit performance. We are confirming our guidance for the full year," said Chief Executive Officer Karim Bitar.
For 2022 as a whole, it anticipates organic revenue growth of 4.0% to 5.5%, with a constant currency adjusted operating profit margin of at least 18%, "nothwithstanding the currency inflationary backdrop".
"We remain focused on executing our strategy and are confident in Convatec's ability to grow in line or faster than its markets and to improve its operating margin to mid-20% over time," Bitar added.
By Elizabeth Winter; [email protected]
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