12th Nov 2024 09:33
(Alliance News) - Shares in Convatec Group PLC soared on Tuesday after the firm raised annual guidance reflecting broad-based growth across the business.
The London-based medical products and technologies company now expects 2024 organic sales growth of 7.25% to 8.0%, previously 6.0% to 7.0%. It projects a constant currency adjusted operating margin of at least 21.5%, previously at least 21.0%.
The firm said it is on-track to deliver double-digit growth in adjusted earnings per share and free cash flow to equity in the financial year.
In 2023, ConvaTec reported revenue of USD2.14 billion and an adjusted operating profit margin of 20.2%.
In a trading update the firm said organic sales rose 7.7% in the first ten months of the year, with broad-based growth across all categories. Excluding its wound dressing treatment, InnovaMatrix, OSG was 6.6%.
Progress was driven by strong execution of its "focus-innovate-simplify-build-execute" strategy and lower inflation, the company noted.
In response, shares in the firm rocketed 21% higher to 261.60 pence each in London on Tuesday morning. It was the best performing stock in the FTSE 100 which was down 0.7%.
In 2025, ConvaTec expects to further expand operating margin and to deliver double-digit adjusted EPS and free cash flow to equity growth, irrespective of the draft InnovaMatrix Local Coverage Determination outcome.
This will be driven by 5% to 7% organic growth in non-InnovaMatrix sales - which are 96% of the group.
This reflects a broadening product portfolio, new product launches, ongoing productivity initiatives and focused commercial execution, the company added.
Chief Executive Karim Bitar said: "This is further evidence that Convatec has successfully pivoted to a higher level of organic sales growth and profitability, and we are on-track to deliver a mid-20s operating margin in 2026 or 2027."
Advanced Wound Care delivered high-single digit organic growth, driven by high growth in InnovaMatrix, with particularly strong growth in indications outside the scope of the draft LCD.
The company acknowledged there is a risk InnovaMatrix may not be included in Medicare coverage lists in a final LCD, which could be issued in either 2024 or 2025.
This could have a financial impact in financial 2025, the firm said. The extent of any impact would depend on the timing of the announcement, the duration of any transition period and what amendments to the draft LCD are included, it added.
Elsewhere, Ostomy Care delivered mid-single digit organic growth, with ongoing strength in global emerging markets. Continence Care delivered high-single digit organic growth while Infusion Care delivered high single-digit organic growth.
By Jeremy Cutler, Alliance News reporter
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