ConvaTec Group on Thursday annual results were 'disappointing' even as they met the company's previously revised expectations. But the company said its 'Pivot to Growth' turnaround programme would help steady performance.
For the 12 months ended 31 December 2018, revenue rose 3.8% to $1,832.1m and just 0.2% organically. While reported earnings (EBIT) was up 8% to $267.7m due to lower restructuring and pre-IPO share-based payments.
Adjusted EBIT, however, fell 6% to $429.4m which the company blamed on increased levels of investment in commercial activities and negative mix, more than offsetting increased revenue.
The results were in line with the revised guidance provided in October 2018, but well short of initial guidance given at the start of last year.
'These are disappointing results, in light of our revenue and margin guidance at the beginning of 2018,' the company said.
The company outlined a refreshed execution model 'Pivot to Growth' to address strategy execution issues.
The turnaround plan would see an investment of around $150m laid out over three years, which it aimed to recoup within two to three years.
Around 30% of the $150m investment would be capex investment, with the remaining 70% used for restructuring, project management and other transformation costs.
By year three of the turnaround programme, the company expected to incur $50m of ongoing annual costs related to commercial spend and R&D, building from $15m in 2019.
But this would lead to higher revenue growth, with $80m gross annual cost savings expected by year three and improved profit margin.
For 2019, organic revenue growth was expected to between 1% to 2.5%, with adjusted EBIT margin 18% to 20%, including $50m of operational spend associated with the transformation initiative and costs related to Medical Device Regulation (MDR).
Excluding these transformation costs and MDR, the adjusted EBIT margin would be 21% to 22.5%, the company said.
'This model can be leveraged by an incoming CEO, without constraining any potential strategic changes they may wish to implement,' said Rick Anderson, Group Chief Executive Officer.
'The search for a permanent CEO has made significant progress since October, with a very strong short-list of candidates. The Board is moving quickly on this key appointment.'
At 8:46am: (LON:CTEC) ConvaTec Group Plc share price was -32.6p at 115.65p