ConvaTec (CTEC) H2 2024 earnings summary

Executive summary

• Achieved record organic revenue growth of 7.7% in 2024, marking the sixth consecutive year of accelerating growth and broad-based margin expansion across all business segments.

• Delivered double-digit growth in earnings per share (EPS) and free cash flow to equity, outpacing chronic care markets.

• Maintains leading positions in large, growing chronic care categories and boasts the richest new product pipeline in company history.

• Transformation strategy focused on innovation, operational efficiency, and a category-led operating model has driven sustainable, profitable growth.

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

Financial highlights

• Organic revenue growth reached 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) in 2024, totaling a 350 bps improvement over three years; adjusted operating margin at 21.2%.

• EPS grew by 14% year-over-year; adjusted diluted EPS grew 13.7% to 15.2¢; double-digit growth forecasted for 2025.

• Free cash flow to equity rose 33% to $302m, with equity cash conversion at 97%.

• Dividend per share increased by 3% to 6.416¢, payout ratio at 42%.

• Net debt reduced by $71 million, leverage improved to 1.8x.

Outlook and guidance

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

• Operating margin expected to expand to 22%-22.5% in 2025.

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

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