- First half earnings beat estimates
- Convatec confirms full year guidance
- Advanced wound care and infusion care the strongest divisions
Investors welcomed the latest trading update from medical solutions firm Convatec (CTEC), lifting the shares 7.3% to a new 12-month high of 247p.
While the headlines weren’t market-moving, the fact the company confirmed its full year guidance raised hopes it was moving towards sustainable as well as profitable growth.
SMALL STEPS
Sales for the first half to the end of June were 3.6% higher at $1.045 billion, slightly ahead of the consensus of $1.03 billion, despite a ‘significant’ foreign exchange headwind which masked underlying organic growth of 6.4% on last year.
First half EBIT (earnings before interest and taxes) also beat estimates by a 3% margin, reaching $205 million against a consensus of $198 million.
Advanced wound care and infusion care were the strongest divisions, with revenues up 7.3% and 14.4% respectively on a like for like basis.
The firm flagged higher prices on the back of its Convatec ‘masterbrand’, and said the half marked further progress with its new product pipeline and its entry into wound biologics.
KEEPING FORECASTS
More importantly from the market’s perspective, the firm maintained its guidance for full year organic revenue growth of between 4% and 5.5% and a constant-currency EBIT margin of at least 18% after 19.6% over the first half.
Chief executive Karim Bitar lauded the firm’s strong sales growth and its ‘robust’ profit performance, despite the ‘significant inflationary backdrop’.
Bitar also confirmed his commitment to grow the company’s sales in line with or faster than its markets and to improve the operating margin to mid-20% over time.
Analyst Miles Dixon at Peel Hunt described the update as ‘reassuringly straightforward with some small beats’, while cautioning that the rating of several of Convatec’s peers had contracted during the half making the shares look less attractive on a relative basis.
Although he didn’t see the consensus raising full year forecasts materially, Dixon stood by his buy recommendation and 285p price target on the basis of the reaffirmed outlook.
