ConvaTec Group PLC on Tuesday forecast 2024 revenue growth towards the upper end of guidance as it reported higher first half profit and sales.
In the six months to June 30, the London-based medical technology company said pretax profit rose 37% to $104.0 million from $76.0 million. Revenue rose 4.7% to $1.11 billion from $1.06 billion and diluted earnings per share increased 41% to 3.8 US cents from 2.7 cents.
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.
In the first half of 2024, operating profit margin improved to 13.4% from 11.7% a year ago. Adjusted EPS was unchanged at 6.8 US cents. Broker Peel Hunt noted this was below the mid-point of market expectations of 7.1 US cents.
Shares in ConvaTec fell 4.1% to 241.60 pence in London on Tuesday. The wider FTSE 100 was down 0.5%.
In the medium-term, ConvaTec expects 5% to 7% annual organic revenue growth, margin expansion to mid-20s in 2026 or 2027 and to achieve double-digit compound annual 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.
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