ConvaTec Group Plc

Good morning, everybody. Nice to see you. Welcome to ConvoTec's first half of 2026 results announcements. The usual disclaimers apply. And today we're going to follow the normal format, which is that I'll give a few words of introduction. Fiona will talk you through the performance, financial and outlook. and then I'll update on strategic progress before we'll be happy to take any questions that you've got. So let's start with a quick recap from the Capital Markets Day just back in April. These were the three things we suggested should be the key takeaways. We operate in large and growing markets with leading positions. We're focused on four chronic care categories, which leads to a high proportion of recurring revenue. CombiTech is a strong and resilient business. We're delivering broad-based growth and we've got a track record of operational improvements which increase profitability. And then the growth opportunity is substantial. We have new products launching across all of those four categories, which means that we will grow ahead of those growing markets. And there's more to come, as you'll hear today. Those structurally growing markets, with the leading positions and the recurring revenue, with our new products launching, that all drives the Comfortec Frywheel. And that's what leads to the sustainable level of growth at 6-8% for organic revenue and double digits for EPS, every year starting from next year. and at an operating margin of mid-20s, the cash generation is strong and that will enable us to invest organically in OPEX and CAPEX to sustain the growth, to grow the dividend in line with earnings and there will be further capital available to increase returns for shareholders. So that's what we said in April and I'm pleased to say that from the first half of this year we are on track. We said that faster sales growth would start in 2027 and that 2026 would be second half weighted and that is still how we see it. In the first half of 2026 revenue growth was good it was right on track but in the second half it will be faster for good reasons and we'll get into that in the first half operationally and strategically our delivery was strong our new products are launching and winning market share we are investing across all our four categories in increasing capacity to meet the rising demand, and that's especially in infusion care. We made good progress on our simplification and productivity initiatives, and that's what improves cost efficiency and drives operating margin improvement. And we're confirming today that we still expect to reach at least 23% in FY26. and that will lead to double-digit EPS growth, the third year in a row of double-digit EPS growth, with strong cash conversion, enough for the increase in growth capex that we're deploying this year and to increase the dividend and we're announcing today a share buyback of $200 million, all of that within our target leverage ratio of 2 times EBITDA. and then we're also confirming today that we are on track to deliver our medium term targets which were set out in the accelerate strategy. So H2 then, accelerating. The sales will grow faster in H2 principally because of infusion care. and there we have high visibility of customer orders, they are uneven but not unpredictable, and demand is strong. And we also have new products launching in wound care and in ostomy care, that's Convafoam and Esteem Body respectively, and so the growth will build slowly through the year. and in continence care we expect the growth from H1 to continue into H2 supported by the expansion of GCF for women and the international growth. So we're on track to deliver our FY26 organic revenue guidance and today we're narrowing the range which means that for the second half of the year growth will be between 6 and 8%. and then for 2027 we are on track to reach mid-20s in operating margin and for the faster growth rates of six to eight percent in sales and double-digit EPS for each year thereafter. We'll get into all of that but for now let me hand you over to Fiona, I'll come back shortly.

Good morning everybody. So I will present a summary of our first half performance plus the outlook for the full year before handing back to Jonny for the strategic review. We are pleased to report another good financial performance and we are on track for our full year targets. Organic revenue growth, excluding an overmatrix, which I'll talk about shortly, was 5%, in line with expectations. Operating margin was 21.2%, down 10 basis points year on year, but up 50 basis points at constant currency. EPS growth was 6%, and we are on track for another year of double-digit EPS growth. Free cash flow to equity was lower than last year due to timing effects of working capital and capex. We still expect around 100% cash conversion for the year. Our interim dividend grew by 15% as we move towards a one-thirds interim, two-thirds final dividend pattern. Thank you for joining us. With all four categories contributing materially to sales growth. On the right, you can see the impact of the significant market uncertainty in skin substitutes. In overmatrix sales decreased $37 million year on year to $2.5 million in the first half, which represented just over 3% headwind to group revenue growth, And we now estimate full year 26 revenue of between $5 and $10 million, representing a full year headwind to group revenues of about 2.5% and an H2 headwind of about 2%. As a result of these challenging conditions we have reduced expectations for the year to between five to ten million dollars revenue and as a result we've taken a non-cash impairment of 69 million dollars. This means that Innova Matrix will not have any material negative impact on our results beyond 2026. Now let's look at sales by category starting with advanced wound care where sales were up 3.4% excluding Innova Matrix. Overall markets were a little bit slower than in 2025 and compared with our four-month trading update May and June were slightly softer. This was due to some phasing of orders in Aquacel which we expect to pick up in the second half. Advanced wound care growth is expected to build in the second half, supported by further convifoam growth. In ostomy care, organic growth was 4.3%, matching H225. The highlight was the performance of Esteem Body, our one-piece soft convex pouch which grew ahead of expectations and is now annualising at around $60 million of revenue and continuing to win share. Growth was supported by our updated Essenta accessories range which is now 20% of ostomy care revenue. FlexiSeal, which represented about 10% of ostomy care, was down 4%, with fewer intensive care unit procedures due to a less severe flu season than prior year. We expect ostomy care growth to build in the second half, led by esteemed body scale-up and new patient starts, and we're starting to see the early flow of new patients from our recent GPO wins. In continence care, organic growth of 5.9% was driven by further volume increases in the USA, backed by outstanding customer service and our broadening product portfolio. We saw faster growth in ConvoTec product, which is now over 60% of our sales, given our improved portfolio of products, and faster growth of hydrophilic product, which again was over 60% of revenue. This included excellent growth in gentle care fare for women, which has more than doubled year on year and added one percentage point to continence care growth. We again grew strongly outside the USA from a low base and non-US growth contributed over one percentage point to the category growth rate. And then infusion care, where organic growth was 7.4%. There was continued strong demand in diabetes across both long-standing and newer customers, as the penetration of automated insulin delivery over multiple daily injections is increasing. Outside diabetes growth was again excellent, high double digit, led by infusion sets for AbbVie's Parkinson's disease treatment. Other therapies represented over 15% of our infusion care revenue, up from about 10% in 2024, with scope to grow further as a share of the category. We have a strong position in infusion care, with increasing diversity across customers and products. We expect growth to accelerate in the second half based on visible customer orders, with double-digit growth in the second half driving high single-digit growth for full year 26. Moving on to profitability. Operating margin decreased by 10 basis points but increased by 50 basis points in constant currency. Operations productivity and price and mix improvements more than offset inflation. The drop in Innova Matrix caused 140 basis points drag to operating margin in the first half. Simplification and productivity initiatives continue to deliver with commercial and G&A efficiency adding a further 130 basis points. Overall, in the first half, Opex decreased by 70 basis points as a percentage of revenue to 38.2%. Currency represented a 60 basis points headwind, which is expected to moderate to 40 basis points for the full year based on current spot prices. This slide shows the bridge to higher margin in H2 as part of our at least 23% margin guidance. This will be driven by four areas. Our H2 revenue is materially higher than H1, as it has been in previous years. This is driven by customer buying activity and four additional trading days in the second half versus the first half, which was the same in 2025. Given that operating expenses are broadly spread throughout the year, this drives an H2 margin versus H1 of over 200 basis points. InfusionCare Phasing In the full year 2026, InfusionCare sales are weighted towards the second half. This has a positive operational leverage and margin mix effect and explains a further 50 basis points. Combined, these factors drive around about 260 basis points margin uplift versus the first half. For Innova Matrix, the operating margin drag is lower in the second half 26. This drives about 40 basis points uplift versus H1. Lastly, in the second half, there will be further benefits of operational productivity initiatives started in H2 25 and H1 26, including automation, strategic sourcing and de-bottlenecking. and this is coupled with specific organisational simplification. These initiatives offset inflation and are expected to deliver about 80 basis points margin uplift versus H1. This slide shows our margin history plus a bridge to our mid-term guide of mid-20s margin. We are on track to deliver this in 2027, driven by a continuation of our productivity initiatives, leverage from 6-8% revenue growth and further OPEX efficiencies. This is achievable with inflation at prevailing price levels. EPS We are on track for another year of double-digit EPS growth. EPS grew 6% in the first half and will accelerate in the second half as we benefit from lower interest rates following our recent refinancing and a lower number of shares in issue following our £300 million buyback in the second half 2025. On cash, consistent with normal seasonality, net debt increased in the first half. Our CapEx programme is advancing well and was first half weighted. I shall come back to this shortly. Working capital was higher than the prior year predominantly due to timing. Slightly higher inventory, timing and mix of trade receivables and payables and some timing of other accruals that build through the year. We expect working capital flow to reverse in the second half, as it does each year. And as such, we continue to expect around about 100% free cash flow to equity conversion in full year 26. Leverage was 2.3 turns at the half year. As you can see on the right-hand side of this chart, it is usual for leverage to be higher at the half year. Last year was an exception. We expect to be at about two times leverage at the year end, inclusive of the $200 million share buyback announced earlier today. As you know, we are currently investing significantly to expand capacity to meet rising market demand. This slide gives some colour on the movement year on year and the areas that we are investing in. We have been busy in the first half with CAPEX H1 weighted. Our full year guidance is unchanged. The largest component of the 90 million growth CAPEX was for infusion care where we are adding significant capacity in many cases backed by long-term contracts. Some new infusion care capacity will come on stream later this year with significantly more in 2027 and beyond. Elsewhere, we are investing to support launches in advanced wound care, ostomy care and continence care, and we expect this growth capex to be accretive to group returns. Operational capex was also H1 weighted, including some IT projects which have now completed. We continue to expect operational capex to be about 2.5% of revenue for the year. We are confirming our guidance for full year 26 and here's a summary to help you model. On operating margin we continue to expect to reach at least 23% inclusive of Innova Matrix headwinds of about 80 basis points for the full year and FX headwinds of about 40 basis points. I would also like to draw your attention to the fact that the legacy Bristol Myers Squibb amortisation charge ended last month in July and that was over $95 million annually. And so going forward that will significantly reduce the difference between our reported and our adjusted financials. In conclusion, we saw a further good financial performance in the first half and we are on track to hit our targets. We are investing to underpin faster future growth and returning capital to our shareholders. Thank you. I'll hand back to Jonny.

Thank you very much. So I'll now say a few words about how we're getting on implementing the strategy. And just as a recap, we are very focused in four chronic care categories. And each one of those is growing because the population is increasing, the population is aging, and the prevalence of the diseases which cause the conditions we support is increasing. Because of the chronic nature of these conditions it leads to a very high level of recurring revenue and that's a solid and durable foundation for long-term growth. Now in each of those categories we're going to grow faster than the market by implementing our Accelerate strategy. Customer growth will be focused, identifying and satisfying unmet needs. We'll be investing in R&D to innovate and continue to launch more products. More on that later in a moment. We'll be very focused on execution, cross-functional collaboration, seamless delivery across the organization to support the faster growth. and all of this will be underpinned by a strong culture in the organisation, purpose-led, performance-driven. You can see on the right of this chart the growth rates for each of the categories, same as we announced at the Capital Markets Day. They combine to deliver the faster growth rate at group level of 6-8% per annum on an ongoing basis. Now, we have been busy in the first half. Wave 1 products are scaling up. Wave 2 products are progressing well through their launch processes and building on lessons from Wave 1, we are going at a faster cadence. We're investing in all four categories. Organic investment in both opex and capex is our top cash allocation priority. And that is, as I say, building capacity to support faster growth. We're strengthening the quality in everything we do with an emphasis on right first time. This is cross-functional, seamless delivery to support the faster growth. And we're making good progress on remediating the FDA's observations regarding our quality management system. We're scaling technology, we're scaling enterprise AI, we're embedding agentic AI and co-pilot across commercial supply chain operations, financial, which leads to faster decision making and measurable productivity improvements. Simplifying the operating model. Outside of North America and Europe, we've been de-layering, which allows for faster decision-making and reduced OPEX. And we will also be opening our fourth CombiTech Business Services Centre later this year in India, in Hyderabad, which will focus on technology and innovation. and then we're strengthening the leadership team. Again, this is with a focus on cross-functional collaboration and delivery of our faster growth. So these are our wave one products and they're scaling successfully and adding over half of the organic growth in the first half. Launched between 2022 and 2025, they provide strong evidence that our innovation model is working and that we could successfully bring new products to market and scale them. All of these products are in the market and scaling up, except for Innova Matrix. Now, Fiona spoke a bit about Innova Matrix just now. The first half was very challenging. The diabetic foot ulcer market in particular in the physician's office is basically frozen at the moment. Important point is that this technology works for patients. The feedback and the evidence we've got is strong. And we expect sales will start to increase. Thank you for watching. For the rest of the list, products such as Mio Advanced Extended Wear ComboFoam Infusion Sets for diabetes and for Parkinson's therapies, Gentle Cath Air and Esteem Body are scaling well and are gaining market share. So here are the Wave 2 launches and they're progressing well. We're securing regulatory approvals, building manufacturing, generating clinical evidence, establishing reimbursement pathways and ensuring commercial readiness. Products are advancing in line with our plans. We've got a little key here in the middle of the chart, these balls, to show the approximate status of each of the launches. ConvaNiox, ConvaFiber and ConvaVac are in limited market release and customer evaluation. Curaqua, GC Air Pocket and Set are scheduled for launch later this year. The infusion sets for Tanabe Pharma and for Supernus Parkinson's treatments are ready to go pending some customer approvals. and Natura Body is on schedule for launch next year. FlexiSeal Air has been delayed into next year, originally targeted this year, but that's to accommodate for some refinements in design following customer evaluation. Listen, I hope you get a sense from these two slides that there is a lot going on. This is more than ConvoTec has ever tried to launch previously and it's going really well. Now I wanted to share a bit more on two of the products in Wave 2, starting with ConvoNiox. We're creating an entirely new category in wound care through a multi-modal dressing designed to address multiple barriers to healing simultaneously. The initial focus is diabetic foot ulcers where the unmet need is substantial. Around 16.5 million patients are diagnosed each year, with many wounds failing to heal and leading to significant costs for the healthcare systems of the order of $10 billion. We have strong clinical evidence that Convaniox works better than the standard of care. The first RCT demonstrated 60% more ulcers healed within 12 weeks and three times faster wound area reduction. We're continuing to build more evidence with a large US RCT study recruiting ahead of schedule and results due in 2027. We're also seeing early encouraging signs of adoption, supported by regulatory approvals, reimbursement progress and positive clinician feedback. Most recently in the UK, we were added to the drug tariff list at a price of £40 per dressing, which is a very strong proof point of superior performance. Importantly, we see Convaniox as a platform opportunity, not a single product, with potential to expand into other wound types, including venous leg ulcers, surgical wound complications, and even into other categories. Convaniox will be a strong contributor to growth, not in 2026 or 2027, but we expect it to start to ramp from 2028. And as we've previously said, this has the potential to become our biggest brand. The second area I wanted to say a bit more on is infusion sets for Parkinson's disease. This is an excellent example of diversifying our infusion care category beyond diabetes. Subcutaneous treatment for Parkinson's is a relatively new therapy, but it is a growing market with very low penetration today and a long runway for growth. In the markets in which we operate there are 4 million people with Parkinson's and regrettably about a million of those have advanced Parkinson's requiring continuous treatment. Today around 95% of those advanced Parkinson's patients are still treated with oral medication and only 5% are using pumps. Oral therapies lead to greater fluctuation in dopamine on and off periods and can lead to significant patient discomfort. Pumps provide better treatment. Breakthroughs like AbbVie's ViaLev, where we are the exclusive supplier of infusion sets, are dramatically improving patient outcomes by automating the pro-duodopa delivery. Since 2023, pump adoption has grown over 25%, CAGA, and we expect it to increase significantly over time. We're now supporting additional therapies, including Tanabe Pharma's and Supernas' new treatment, and this creates a really attractive growth opportunity. Parkinson's therapies will be a strong underpin of our double digit growth in infusion care going forward. Now, as we said at the Capital Markets Day in April, we describe our product innovation in three waves of new products, just for ease of reference. Prior to wave one, there were clear gaps in our product portfolio. and the Wave 1 launches between 2022 and 2025 substantially strengthened our competitive position and those products are now scaling up and delivering growth. Wave 2 are the products which are starting to launch now in 2026 and in 2027 and building on lessons from Wave 1 They are targeting faster growing segments and being delivered quicker. Wave one and wave two together underpin the acceleration of growth to six to eight percent for the next planned period. And then we've got wave three, which at the moment is in earlier development stage and will deliver growth in later years. The good news is that these innovations are across all four categories and continuing the theme of broad-based growth. We'll say a bit less about Wave 3 at the moment for obvious reasons, but it does represent our next horizon of value creation. The strategy is to maximise our internal manufacturing capabilities To leverage the proprietary science across all four categories and to back it up with clinical validation. It reflects a deliberate move towards higher growth, stronger differentiation and attractive new segments, all of which will represent better economics. You can see in the centre box on this slide the ideas that we have to build on our existing capabilities and to deliver new and better solutions for users. Predominantly organic, built on platforms that we have already invested in, But we remain open to external innovation by way of partnership or deals if they would accelerate our roadmap or help us access new technologies. So this is all very exciting and ensures the sustainability of our growth model for years to come.