- Full year sales and profit beat estimates
- Medium term guidance raised
- Improved commercial execution
Shares in medical products company Convatec (CTEC) traded 7% higher to 270p after full year sales and profit came in ahead of market expectations and management raised guidance.
The shares registered new 12-month and five-year highs which means they have doubled over the last five years compared with a gain of 8% for the FTSE 100 index.
SALES GROWTH AND MARGIN EXPANSION
The company said it has seen accelerated organic revenue growth of 7.1% with broad-based contributions from all four chronic care categories.
Reported revenue for the year to 31 December 2023 increased 3.4% to $2.14 billion, slightly higher than consensus expectations but lower than organic growth due to the strategic exit of hospital care and related industrial sales.
The firm said ‘strong’ expansion of gross margin to 61.6% was driven by improved mix and better pricing, as well as productivity gains.
In turn the adjusted operating margin expanded to 20.8% in constant currencies due to further progress in simplifying productivity.
CEO Karim Bitar commented: ‘Given our innovative new product pipeline and strengthened competitive position, Convatec has pivoted to a higher level of organic sales growth.
‘We are on track to deliver our medium-term margin guidance leading to double-digit compound growth in EPS and free cash flow to equity.’
RAISED GUIDANCE
Based on strong momentum in the business and improved commercial execution, the company now expects to deliver organic revenue growth in the medium-term of between 5% and 7% compared with prior guidance of 4% to 6%.
Management also expects the business to achieve mid-20’s operating margin by 2026 or 2027 and to deliver double-digit compound annual growth in earnings per share and free cash flow to equity.
Free cash flow is the operating cash generated after deducting capital expenditures and taxes divided by equity. Free cash flow to equity increased by $123 million to $228 million in the year.
