- Organic sales growth accelerates
- Full-year growth targets increased
- No impact seen from obesity drugs
Medical products company Convatec (CTEC) continues to generate strong organic sales growth, prompting management to increase its full-year sales and earnings guidance for a second time.
The shares responded positively, gaining 3% to 214.8p leaving them down around 8% year-to-date.
Sales for the 10 months to 31 October increased by 6.7% on an organic basis, which analysts at Numis say implies an acceleration since the half-year to circa 6.9% from 6.6% in the first half.
Management now expects to deliver full year organic sales growth of between 6.75% and 7.5% compared with 6% and 7.5% previously. The adjusted operating profit margin is expected to expand to at least 20.5% on a constant currency basis.
WHAT DID THE CEO SAY?
Chief executive Karim Bitar commented: ‘Convatec has pivoted to a higher level of organic sales growth over recent years. We are on track to deliver a mid-20s adjusted operating margin in 2026 or 2027, and double-digit compound growth in EPS (earnings per share) and free cash flow from 2024 onwards.’
The company saw strong progress across all divisions, from high single-digit organic growth in Advanced Wound Care to mid single-digit organic growth in Ostomy Care (aftercare for patients who have undergone surgery to create an opening inside the body to the outside).
Management noted recent increased coverage of obesity drugs and their potential impact on demand for insulin pump devices but sought to reassure investors they do not expect any meaningful impact.
‘GLP-1’s (medicines used in obesity treatments) are deemed effective for patients who retain the ability to produce insulin, whereas our products serve patients on insulin-intensive therapy who no longer produce sufficient insulin endogenously’, explained the company.
EXPERT VIEW
Numis analysts have left their full year forecasts unchanged for now around the middle of the updated guided range.
‘Despite multiple periods of market-beating performance, shares have pulled back from the post-interims bounce, on what we believe to be GLP-1 related fears, which we believe are overblown’, they added.
READ MORE ABOUT CONVATEC
