ConvaTec Group (CTEC) H2 2024 earnings summary

Executive summary

• Achieved sixth consecutive year of accelerating organic revenue growth, reaching 7.7% in 2024, with broad-based gains across all categories and double-digit earnings growth.

• Operating profit margin expanded for the third year, up 100 basis points to 22%, with a cumulative 350 basis points improvement over three years.

• Successfully pivoted to sustainable, profitable growth, outpacing chronic care markets and delivering the strongest-ever new product pipeline.

• Maintained a strong balance sheet, enabling continued investment in innovation and operational efficiency.

• Maintained a robust new product pipeline, launching eight products in the last 24 months and planning eight more in the next 24-30 months.

Financial highlights

• Organic revenue growth of 7.7% in 2024, exceeding the top end of the 5%-7% target range, with all four categories contributing.

• Operating margin increased by 100 basis points (160 bps constant currency), reaching 22%; adjusted operating margin at 21.2%.

• EPS grew by 14% year-over-year, with operating profit up 12%; adjusted diluted EPS up 13.7% to 15.2¢.

• Free cash flow to equity rose 33% to $302m, supported by strong working capital management; equity cash conversion at 97%.

• Dividend per share proposed to grow 3% to 6.416¢, with payout ratio at 42%.

Outlook and guidance

• 2025 guidance: 5%-7% organic revenue growth (excluding InnovaMatrix), with a $50 million sales headwind from LCD implementation.

• Operating margin expected to expand to 22%-22.5% in 2025, despite InnovaMatrix headwind.

• Double-digit EPS growth and strong cash conversion (~80%) forecasted for 2025.

• Medium-term targets: 5%-7% organic sales growth, mid-20s operating margin by 2026/2027, and compound/double-digit growth in EPS and free cash flow.

• Headwinds anticipated from LCD implementation impacting InnovaMatrix revenue by ~$50m in FY25.