30th Jul 2024 14:24
(Alliance News) - ConvaTec Group PLC shares fell on Tuesday after an earnings miss, though German bank Berenberg still believes the firm's prospects in the long-term are strong.
Shares in the FTSE 100 listing fell 6.0% to 236.60 pence each in London on Tuesday afternoon.
In the six months to June 30, the London-based medical technology company said pretax profit rose 37% to USD104.0 million from USD76.0 million. Revenue rose 4.7% to USD1.11 billion from USD1.06 billion and diluted earnings per share increased 41% to 3.8 US cents from 2.7 cents.
Adjusted operating profit increased 4.1% to USD222.8 million, from USD214.1 million a year earlier.
However, Berenberg said this outcome fell short of consensus by 4%. It believes ConvaTec share price fall is due to the miss.
"While we do not think anything in today’s results alters our longer-term thesis, the margin miss is unhelpful and adds to the noise around the shares," the German bank said.
Looking ahead, ConvaTec confirmed 2024 guidance with organic revenue growth expected to be in the upper half of the 5% to 7% range. The firm expects an adjusted operating profit margin of at least 21.0% on constant currency basis and double-digit growth in adjusted EPS and free cash flow to equity.
Chief Executive Karim Bitar said the results demonstrated the "improving strength of our business - showing broad-based growth across all four categories".
"Our pipeline of innovative new products is beginning to deliver growth in segment share and we made further progress improving our profitability. We are pleased with this performance and are confident of delivering another year of strong revenue growth and further progress on profit and cashflow."
ConvaTec also updated investors on prospects for InnovaMatrix, its wound dressing treatment.
The company said it had, so far, seen no impact from the draft Local Coverage Determination proposal from the US Medicare Administrative Contractors, published in May.
"The outcome is uncertain but as currently drafted it could, for a period of time, lead to a curtailment of Medicare coverage of InnovaMatrix for diabetic foot ulcers and venous leg ulcers," ConvaTec explained.
However, the firm said "we have seen no impact from the publication and there is a reasonable probability that the draft LCD proposal will be modified and/or delayed."
ConvaTec said in the first half, around 20% of InnovaMatrix's revenue was in indications or points of care not impacted by the draft LCD proposal. In the second half, the firm plans to grow sales further in these other indications, and intends to launch InnovaMatrix outside of the US.
The company proposed an interim dividend of 1.82 cents per share, up 32% from 1.38 cents a year prior.
By Eric Cunha, Alliance News news editor
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