ConvaTec Group Annual Report 2023

← All annual reports

FY2023 Annual Report · ConvaTec Group

Loading PDF…

Pioneering
trusted medical solutions
to improve the lives we touch

Convatec Group Plc
Annual Report and Accounts 2023

Overview

Strategic report

Governance

Financial statements

Additional information

Welcome

We are forever caring
We are Convatec

Pioneering
trusted medical solutions
to improve the lives we touch

Convatec is a global medical products and technologies company, focused
on solutions for the management of chronic conditions, with leading positions
in advanced wound care, ostomy care, continence care and infusion care.

With around 10,000 colleagues, we provide our products and services in
almost 100 countries, united by a promise to be forever caring. Our solutions
provide a range of benefits, from infection prevention and protection of at-risk
skin, to improved patient outcomes and reduced care costs.

Overview

Governance

Financial statements

1 Our 2023 highlights

Governance at a glance

148 Consolidated financial statements

About us

Strategic report

How we realise our vision

Our business model

Chair’s statement

Investment case

Chief Executive Officer’s review

Key performance indicators

Operational review

Financial review

Non-IFRS financial information

Responsible business review

Board statements

197 Company financial statements

Chair’s governance letter

206 Independent auditor’s report

How we have applied the Code’s
core principles

Board of Directors

Convatec Executive
Leadership Team

100 How we are governed

Additional information

214 Transition Plan Taskforce

supplementary information

215 Shareholder information

216 Glossary

218 Important information for readers

102 Board activity and actions

of this Annual Report

106 Board evaluation

107 Nomination Committee report

110 Audit and Risk Committee report

120 Directors’ Remuneration report

The Task Force on Climate-related
Financial Disclosures

143 Directors’ report

Risk management

Principal risks

Non-financial and sustainability
information statement

Viability statement

146 Directors’ responsibilities statement

Help us to reduce paper by opting out of
receiving printed copies. Convatec Annual
Reports are available to view online at
convatecgroup.com/investors/reports-
results-and-presentations

OUR 2023 HIGHLIGHTS

FINANCIAL

STRATEGIC

Group revenue

$2,142m

(2022: $2,073m)

FOCUS
– 7.2% organic

revenue growth1
– >90% revenue from

chronic care

Adjusted1 operating
profit

$432m

(2022: $404m)

Diluted earnings
per share

6.3¢

(2022: 3.1¢)

Operating profit

$263m

(2022: $207m)

Adjusted1 operating
profit margin

20.2%

(2022: 19.5%)

Adjusted1 diluted
earnings per share

13.4¢

(2022: 12.6¢)

INNOVATE
– Acquired novel nitric
oxide technology
platform

– Launched ConvaFoam™,

GentleCath Air™
for Women, various
infusion sets

SIMPLIFY
– c.6% reduction
in general and
administrative spend1

– Closed plant in the

Netherlands to optimise
the network

BUILD
– Pricing Centre of
Excellence (CoE)
delivered +100 bps
benefit to gross margin

– Continued to embed
Pricing, Sales and
Marketing CoEs

EXECUTE
– c.12% reduction in

complaints per million
– Winning share in Global

Emerging Markets

Read more about our
progress on our FISBE
strategy on pages 13
to 15

We also made
considerable progress
embedding our ESG
framework, Convatec
Cares. See pages 38 to 65

1. Certain financial measures in this document, including adjusted results
above, are not prepared in accordance with International Financial
Reporting Standards (IFRS). All adjusted measures are reconciled to
the most directly comparable measure prepared in accordance with
IFRS in the Non-IFRS Financial Information (pages 34 to 37).

Convatec Group Plc Annual Report and Accounts 2023

Overview

Convatec at a glance

About us

OUR CATEGORIES

Overview

Strategic report

Governance

Financial statements

Additional information

Convatec is committed to the people we serve –
patients living with chronic conditions, their care
givers and the healthcare professionals who
support them

Since 1978 we have supported patients in managing
long-term chronic conditions, with leading market
positions in Advanced Wound Care, Ostomy Care,
Continence Care and Infusion Care

Advanced Wound Care (AWC)

Ostomy Care (OC)

Continence Care (CC)

Infusion Care (IC)

Advanced dressings for the management of acute and chronic
wounds resulting from ongoing conditions, such as diabetes,
and acute conditions resulting from traumatic injury and burns.

Devices, accessories and services for people with a stoma (a
surgically created opening where bodily waste is discharged),
commonly resulting from causes such as colorectal cancer,
inflammatory bowel disease and bladder cancer.

Read more
overleaf

Convatec Cares

Convatec Cares, our approach to
Environmental, Social and Governance
(ESG), sets out the commitments and
activities that enable us to fulfil our
forever caring promise and integrate ESG
practices throughout the organisation.
Convatec Cares is integrated within
our FISBE strategy and supports our
ability to consistently deliver sustainable

and profitable growth and underpins
our long-term success. The framework
is built around four pillars:

– Delivering for our customers
– Enabling our people
– Behaving ethically and transparently
– Protecting the planet and
supporting communities

INTRODUCING CONVATEC‘S BOARD OF DIRECTORS

Jonny Mason
Chief Financial Officer

2 Heather Mason

Independent Non-Executive Director

Karim Bitar
Chief Executive Officer

Professor Constantin Coussios OBE
Independent Non-Executive Director

Sharon O’Keefe
Independent Non-Executive Director

8 Margaret Ewing

Senior Independent Non-Executive Director

4 Dr. John McAdam CBE

Chairman

Kim Lody
Independent Non-Executive Director

Brian May
Independent Non-Executive Director

Read more about Board member skills and experience on pages 96 and 97.

There is detailed commentary against
each of these pillars in the Responsible
business review (pages 38 to 65), as well
as further insight into the ESG framework,
governance, metrics and targets and our
refreshed ESG materiality analysis, together
with information on our stakeholders and
why it is important for Convatec to actively
engage with them.

Convatec remains committed to the highest
standards of corporate governance. The
Governance report on pages 89 to 146
provides further detail on Convatec’s
wider governance framework as well as
further detail on the Board’s stakeholder
engagement activities.

Looking ahead

The considerable progress that Convatec
has made since 2019 would not have been
possible without the hard work, drive and
unwavering commitment of our employees
and leadership team, for which I would like
to thank them on behalf of the Board.

I would also like to thank our shareholders
for their support, many of whom met with
me or other members of the Board over
the last year.

Finally, the Board remains focused on
execution of the Group’s FISBE 2.0 strategy,
maintaining a sharp focus on driving the
simplification and productivity agenda.
This includes oversight of the innovation
pipeline and the global product launch
programme. While the macroeconomic
environment remains uncertain, with
challenges to shipping lanes in the Middle
East and the ongoing conflicts in the Middle
East and Ukraine, I believe the Group is
well placed to continue to strengthen
its competitive position and successfully
deliver sustainable and profitable growth
into the medium term.

Dr John McAdam CBE
Chair
5 March 2024

1. Net debt (excluding lease liabilities)/adjusted EBITDA.

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Investment case

Reasons
to invest

We believe that Convatec represents an attractive
defensive-growth opportunity for investors

By pioneering trusted medical solutions to meet the
needs of patients suffering from chronic conditions
we generate attractive returns and strong free cash
flow which can be reinvested to benefit more patients,
our wider stakeholders and society as a whole

Chronic care
is a large and
growing market

We are focused on the
chronic care market:

>90%

of our revenues are from serving chronic
care patients. These revenues are often
recurring in nature as patients rely on
our solutions

The chronic care market
is large:

$14bn

global market size1

It is fast growing:

4-8% p.a.¹

There are three global trends driving
structural growth and increasing
demand for our solutions.

1. An ageing global population
Global population aged 65+

2060

2020

0.8bn

Source: United Nations, World
Population Prospects.

1.6bn

2. Chronic conditions are rising
Approximately one in three adults
globally suffer from chronic conditions
(e.g. diabetes, cancer).

Source: The global burden of multiple chronic
conditions, Cother Hajat and Emma Stein.

3. People are now living longer
Average life expectancy
in the world (years)

2022

1950

Source: United Nations Population
Divisions estimates.

1. Market size and growth based on
aggregate of category estimates,
internal analysis and publicly
available sources, including
SmartTRAK and Global Industry
Analysts Inc. reports. See pages
18 to 25 for detail.

We have leading
positions

Refer to operational reviews on
pages 18 to 25 for further detail.

Advanced Wound Care1

Continence Care1

#3 globally

#1 in the US

Ostomy Care1

Infusion Care1

#3 globally

#1 globally

Organic revenue growth
%

Adjusted operating profit growth2
%

Revenue is now
growing
sustainably in the
5-7% range

2. APMs see pages 34 to 37.

2023

2022

2021

2020

7.2

5.6

5.3

4.2

2023

2022

7.0

11.6

2021

5.4

2020

0.9

2019

2.3

-14.3

2019

Overview

Strategic report

Governance

Financial statements

Additional information

We expect to
expand our operating
profit margin over
time by:

i. Simplification and

productivity

– Reduce adjusted G&A spend

to 7% of sales

– Improve commercial productivity
– Increase automation

ii. Improving mix
– Acquiring higher-growth,
higher-margin businesses
– Natural benefit given our
faster-growth categories
are higher margin

– Improving the margin within

our categories

iii. Increasing operating

leverage as revenue grows

The business
generates strong
cash flow

This supports future
growth and serves
stakeholders

Adjusted EBITDA1

$527m

Target leverage3
~2x over time

Free Cash Flow to Equity1,2

Invest organically in opex and capex

$228m

Progressive dividend targeting
payout ratio of 35-45% of net profit4

Bolt-on M&A

Any surplus capital
returned to shareholders

This results in attractive financial outcomes

MEDIUM-TERM
TARGETS

OPPORTUNITY

MEDIUM-TERM
OUTCOME

Sustainable
top-line
growth

Expanding
operating
profit
margin1,4

Potential
M&A to
enhance
growth

5-7%
organic revenue
growth p.a.

Mid-20%
operating
profit margin
by 2026 or 2027

Strengthen
positions in
technology,
geography and
capability

Sustainable
and profitable
growth

Double digit
EPS4 and Free
Cash Flow to
Equity1,4 CAGR

1. APMs see pages 34 to 37.
2. Free cash flow to equity is a new non-IFRS financial measure introduced in the year. Refer to the Non-IFRS financial information section for how this is calculated.

The Directors consider that this new measure provides improved definition, clarity and insight.

3. Net debt (excluding lease liabilities) / adjusted EBITDA1.
4. Adjusted.

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Overview

Strategic report

Governance

Financial statements

Additional information

Chief Executive Officer’s review

Strong strategic
progress and
positive outlook

OUR FISBE STRATEGY

Focus
on strengthening
customer loyalty in key
markets and categories

Innovate
to increase vitality
and velocity of trusted
medical solutions

Simplify
to improve productivity
across our organisation

Build
and embed
mission-critical
capabilities and
winning culture

Execute
with excellence
while integrating
environmental, social
and governance (ESG)

Convatec’s revenue
growth accelerated
and was broad-
based across all
our categories. We
further expanded our
operating margin and
increased earnings per
share and free cash
flow to equity.

Given our innovative
new product pipeline
and strengthened
competitive position,
Convatec has pivoted
to a higher level of
organic sales growth
and we remain on
track to deliver our
medium-term
margin guidance.

Karim Bitar
Chief Executive Officer

Convatec continued to successfully
execute its FISBE 2.0 strategy,
strengthening its competitive position
and delivering on our forever caring
promise for patients and customers.
The various strategic initiatives actioned
during the period enhanced the quality
of the business and improved our
financial performance and prospects.

Attractive growth prospects

Convatec operates in four categories
of the structurally-growing, attractive
chronic care markets. These have a
combined market size1 of $14 billion
p.a. and market growth rates1 of
between 4-8% p.a. We are among the
leaders in the categories in which we
operate and expect to grow revenue
in line with or faster than each market.

We serve a diverse set of chronic care
markets, producing high-volume,
high-quality consumables which our
customers rely on, resulting in attractive
recurring revenue. This diversity provides
resilience and synergies, notably in areas
such as biomaterial sciences, product
and clinical development, automated
manufacturing and shared supply chain
capabilities. Consistent with our FISBE 2.0
strategy we have been investing in our
innovation pipeline, building mission-
critical capabilities, expanding capacity
and increasing our resilience.

A chronic care focused business
delivering sustainable and
profitable growth

We continued to execute our FISBE
strategy, strengthening our competitive
position and our ability to consistently
deliver sustainable and profitable
growth. After a period of catch-up
investment, equity cash conversion2
has now normalised and this strong
cash generation will support continued
organic and inorganic investment for
growth, consistent with our capital
allocation priorities.

Over the course of 2023, we remained
focused on delivering for our customers.
Our continued focus on innovation
resulted in six new products launching
and the R&D function was strengthened
by an increased emphasis on clinical
and regulatory. We enhanced both
our innovation pipeline and service
proposition using cash generated
to acquire three businesses.

We further simplified our organisation,
closed a small factory in the Netherlands
and opened a new Global Business
Services centre in Kuala Lumpur, which
in combination with Lisbon and Bogota,
will provide 24/7 support. Our Centres
of Excellence continued to positively
impact the business, with better pricing
and greater salesforce productivity as
the Customer Relationship Management
platform roll-out was completed for our
top 12 markets.

Further details on the progress made
under each pillar can be found on
pages 13 to 15.

Footnotes within the CEO review are defined as follows
1. Market size and growth based on aggregate of category estimates, internal analysis and publicly available sources, including SmartTRAK and Global Industry Analysts

Inc. reports. See pages 18 to 25 for detail.

2. Equity cash conversion is a new non-IFRS financial measure introduced in the year and is calculated as Free cash to equity/Adjusted net profit. The Directors consider

that this new measure provides improved definition, clarity and insight.

3. APM see pages 34 to 37.

We achieved a strong
financial performance

Group reported revenue of $2,142
million rose 3.4% (2022: $2,073 million),
and 3.2% on a constant currency basis,
lower than organic growth because of
the strategic exit of the non-core hospital
care activities and related industrial sales
in 2022. Organic revenue growth was
7.2%, in line with our latest guidance.

Adjusted operating profit rose 7.0%
(10.2% on a constant currency basis).
Adjusted operating profit margin was
20.2% (2022: 19.5%) with mix/price,
operational productivity and G&A spend
reduction more than offsetting significant
inflation, continued investment in R&D
and commercial capabilities, as well as a
60 bps foreign exchange headwind. Over
a two-year period Convatec has delivered
250bps of improvement in its adjusted
operating profit margin.

In 2022, the Group incurred costs relating
to the exit of the hospital care business.
As a result, and also benefitting from
a higher gross margin, the reported
operating profit increased 26.7% over
the previous year.

Adjusted diluted EPS increased by
6.1% primarily due to improvements in
adjusted operating profit and a reduction
in non-operating expenses more than
offsetting an increase in finance costs
from higher market interest rates.

Reported diluted EPS increased by 105.9%
as the prior year was impacted by higher
adjusting items mostly relating to the exit
of hospital care and the Triad Life Sciences.

Capital expenditure during 2023 was
$129 million (2022: $144 million) as we
continued to invest for future growth,
expanding our manufacturing lines and
developing new digital technologies to
deliver enhanced customer experiences.

4. Net debt excludes lease liabilities
5. Net debt / adjusted EBITDA

Free cash flow to equity increased
to $228 million (2022: $105 million).
Equity cash conversion (free cash flow
to equity as a proportion of adjusted net
profit) was 83% (2022: 41.0%) primarily
driven by a significantly lower working
capital outflow, the increase in EBITDA
and lower capital expenditure.

Net debt increased by $61m to
$1,129m, following three acquisitions
and the payment of the first year
earnout for Triad Life Sciences
acquisition, together totaling $179m.
Our net debt to EBITDA ratio remained
unchanged at 2.1x. We continue to
target leverage of 2x over time but are
comfortable temporarily going higher
for appropriate M&A opportunities.

Executing on our FISBE strategy

The execution of our FISBE (Focus,
Innovate, Simplify, Build, Execute)
strategy is progressing well.

Focus

We continued to focus on our top
12 markets, achieving organic revenue
growth of 8.4%, compared with 7.2%
globally. The US was our largest market
and grew strongly, supported by the
contribution from InnovaMatrix®. China,
whilst still a small part of the overall
group, remained a key strategic market
where we continued to strengthen our
position, growing double-digit and
winning market share in both Ostomy
Care and Advanced Wound Care.

Having laid the foundations for
customer net promoter score (NPS)
insight gathering, through a series of
pilots in 2023, during 2024 we will focus
on embedding actionable NPS insight
more broadly across the business.

Innovate

We continued to invest to strengthen
our Technology & Innovation capabilities
and advance our pipeline; we increased
adjusted R&D expenditure by 12.9%
to $104 million (2022: $92 million),
equivalent to 4.8% of sales.

We started launching ConvaFoam™ in the
US, which is strengthening our competitive
position in the very large and growing
foam segment. Feedback from evaluations
has been encouraging, with healthcare
professionals particularly positive about
its exudate and adhesion properties.

In April, we acquired a highly innovative
anti-infective nitric oxide technology
platform with a unique natural
antimicrobial mode of action, backed by
compelling scientific and clinical data. We
will be looking to secure the first regulatory
approvals for the first wound care product
in 2025.

We began launching our new compact
catheter, GentleCath Air™ for Women
with FeelClean™ Technology in France in
Q4. This technology is designed for urethral
protection and to reduce the risk of UTIs.

In Infusion Care we continued to
collaborate with a number of partners
within and outside diabetes and
launched a number of products during
the period:

– Infusion set with Beta Bionics

new iLet bionic pancreas system

– Extended Wear Infusion Set in

US with Medtronic 780G

– Infusion set for new Tandem Mobi
pump, cleared by the FDA in July
– Infusion set for AbbVie Parkinson’s

therapy launch in Japan

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Overview

Strategic report

Governance

Financial statements

Additional information

Chief Executive Officer’s review continued

Looking into 2024 we expect continued
momentum with product launches.
In Q1 we have begun to launch our
new one-piece convex pouching system,
Esteem Body™ with Leak Defense™ in
Europe and the US. It is very early days
but we are encouraged by the reaction
from healthcare professionals so far.

We will also be leveraging our recent
product launches by rolling them out
in key geographies:

– InnovaMatrix® in certain GEM markets

and, in the US, with new iterations
– Begin the roll-out of ConvaFoam™

in Europe

– GentleCath Air™ for Women in

Europe and the US

– supporting AbbVie’s Parkinson’s
drug launch in Europe and, later
in the year, in the US

For 2025 and beyond we are also
developing a richer pipeline with exciting
new innovations, including:

– AWC: an enhanced hydrofibre,

Nitric oxide wound dressing and
ConvaVac™ (a single use negative
pressure treatment)

– OC: Natura Body™
– CC: GentleCath Air™ for Men v2.0
– IC: Further customer pump technology
innovations including a potential new
Parkinson’s therapy

Simplify

We continued to make progress simplifying
the organisation.

Adjusted G&A reduced to 8.1% of sales
(2022: 8.9%), declining 6.4% to $173 million
(2022: $185 million) as we continued to
transition activities to our Global Business
Services centres; allowing us to improve,
standardise and automate processes, build
internal expertise and consolidate our
corporate office facilities footprint.

We opened a new GBS facility in Kuala
Lumpur to provide 24/7 business service
support to the Group in conjunction with
Lisbon and Bogota, started the migration
of HR services and created a new IT Centre
of Excellence.

As part of our Plant Network
Optimisation initiative, we closed
a small factory in Roosendaal, the
Netherlands, and migrated machines
to our larger and more efficient site
in Michalovce, Slovakia, which already
manufactures similar Ostomy products.

In 2024, we intend to continue to
embed our Global Business Services
network, driving further efficiencies
in finance, IT and HR. Our Global
Quality and Operations function will
continue to introduce smart factory tools
and automation to the manufacturing
footprint to drive enhanced productivity.

OUR CEO AND BOARD MEMBERS ENGAGE WITH TEAMS

Build

Execution

Our Pricing Centre of Excellence (CoE),
in collaboration with our business units,
supported the delivery of 100 bps of
pricing improvement on gross margin.

During the year we further developed
our clinical and regulatory
functions with a step up in clinical
evidence generation and in scientific
publications, and another year
with more than 80 patent filings.

In 2024, we will continue to embed
our CoEs within the business and
drive commercial excellence. For
example our Marketing CoE will
drive our NPS customer loyalty
measurement programme.

Our Salesforce CoE has continued to
roll out the single CRM platform to all
of our Top 12 markets. This is driving
enhanced salesforce productivity by
increasing call rates and improving
targeting to priority (A,B,X) accounts.

Through improved commercial execution
we are winning share in the Global
Emerging Markets in both AWC and
OC. Our sales in GEM continued to
grow double digit, with revenue in
China growing 30% notwithstanding
the broader industry slow-down since
the summer.

We have continued to focus on execution
excellence within our Global Quality
and Operations function, expanding
capacity in IC, increasing automation
on certain AWC product lines and
further reducing complaints per
million by c.12% during 2023.

INTRODUCING CONVATEC‘S EXECUTIVE LEADERSHIP TEAM

4 5

Bruno Pinheiro
President & Chief Operating Officer,
Ostomy Care

2 Kjersti Grimsrud
President & Chief Operating Officer,
Infusion Care

Seth Segel
President & Chief Operating Officer,
Continence Care & Home Services Group

4 Karim Bitar

Chief Executive Officer

Jonny Mason
Chief Financial Officer

6 Moyra Withycombe

Interim Chief People Officer

Evelyn Douglas
EVP, Chief of Corporate Strategy
& Business Development and General Counsel

8 David Shepherd
President & Chief Operating Officer, Advanced
Wound Care

John Haller
EVP, Chief Quality & Operations Officer

10 Anne Belcher

President & Chief Operating Officer,
Global Emerging Markets

11 Divakar Ramakrishnan
EVP, Chief Technology Officer
and Head of Research & Development

Read more about CELT members’ skills and experience on pages 98 and 99.

We have now pivoted to sustainable
revenue growth, have started to deliver
margin expansion and expect to achieve
double digit compound growth in EPS
and free cash flow to equity over the
medium term.

Karim Bitar
Chief Executive Officer
5 March 2024

We also made further progress
embedding our Convatec Cares
responsible business strategy,
which underpins our commitment
to embedding environmental, social
and governance (ESG) practices.

In line with our goal to achieve net
zero by 2045, we reduced Scope 1 and
Scope 2 greenhouse gas emissions by
35% in 2023. We are pleased that our
manufacturing sites now use 100%
renewable electricity. In addition,
our Scope 1, 2 and 3 (near term)
targets were validated by Science-
Based Targets Initiative (SBTi). We
also received a ‘B’ from the Carbon
Disclosure Project (CDP) in their 2023
ratings, recognising our progress.

Consistent with our commitment to
diversity, equity and inclusion (DE&I)
and wellbeing, we finished 2023 with
44% of the senior management team6
being women, exceeding our 40% target.

2024 guidance and upgraded
medium term outlook

In 2024, we expect organic revenue
growth of 5-7%. We are also raising our
medium-term organic revenue growth
to 5-7% p.a. (previously 4-6% p.a.),
given growing confidence in both the
new product pipeline and improved
commercial execution. This reflects our
expectations of high single-digit growth
in AWC and IC and mid single-digit
growth in OC and CC.

We remain focused on expanding our
operating margin by growing revenue,
improving our mix/price and delivering
on our simplification and productivity
agenda. In 2024 we expect further
improvement in the adjusted operating
margin to at least 21%, on a constant
currency, based on the current geo-
political backdrop and an inflation
expectation of 3-5%.

We expect adjusted net finance expense
for 2024 to be $75-85 million. The
adjusted book tax rate is expected to
be approximately 24% with the cash tax
rate at approximately 18%. We expect
capex of $120-140 million reflecting the
continued investments we are making
across the Group.

In the medium term, we are on track to
deliver a mid-20s% adjusted operating
margin in 2026 or 2027. This requires on
average 100bps or more of expansion
per annum, compared to the delivery of
125bps expansion per year over the last
2 years in a high inflation environment.

6. Convatec Executive Leadership Team and their direct reports, excluding administrative support.

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Key performance indicators

We are continuously
tracking our progress

Overview

Strategic report

Governance

Financial statements

Additional information

At our Capital Markets Day in November 2022, we shared how
our FISBE strategy is evolving and clarified the metrics by which
stakeholders can measure progress. Having introduced a new
remuneration policy in May 2023, which is more aligned with
these metrics, we have updated our Annual KPI disclosures.

Consistent with our regular disclosures to investors,
the financial KPIs are adjusted figures. See pages 35 to 37
for reconciliation to the reported numbers.

FINANCIAL METRICS

NON-FINANCIAL METRICS1

Organic revenue
growth (%)*

Adjusted operating
profit margin (%)

Adjusted diluted EPS
growth (%)*

Free cash flow to equity
growth (%)*

Quality – Complaints
per million2

Product innovation
– Vitality index*

Environmental progress –
In Scope 1 and 2 greenhouse
gas (GHG) emissions*, 2

Diversity, Equity & Inclusion
(DE&I) – proportion of
female representation
at leadership level*, 3

%
2
7

%
4
9
1

%
5
8
1

%
7
7
1

%
2
0
2

%
5
9
1

%
6
5

%
3
5

%
2
4

%
3
2

9
1
0
2

0
2
0
2

1
2
0
2

2
2
0
2

3
2
0
2

9
1
0
2

0
2
0
2

1
2
0
2

2
2
0
2

3
2
0
2

%
3
8

%
6
2

%
)
9
6
2
(

9
1
0
2

0
2
0
2

1
2
0
2

%
)
1
3
(

2
2
0
2

%
1
6

3
2
0
2

%
7
1

9
1
0
2

%
)
4
8
1
(

0
2
0
2

%
)
2
4
1
(

1
2
0
2

%
)
4
9
4
(

2
2
0
2

%
8
6
1
1

3
2
0
2

Metric
Period-over-period growth
at constant currency, adjusted
for acquisitions, divestments
and discontinuations.

Metric
Adjusted operating profit as
a % of Group revenue. (The
definitions of adjusted measures
are as calculated within the
reconciliation tables on page 35.)

Metric
Period-over-period growth
of adjusted diluted EPS. (The
definitions of adjusted measures
are as calculated within the
reconciliation tables on page 36.)

Metric
Period-over-period growth of
Free Cash Flow to Equity. (The
definitions of adjusted measures
are as calculated within the
reconciliation tables on page 37.)

Relevance
Sustainable top-line growth
is a key tenet of our strategic
ambition and a key metric
by which investors judge our
strategic progress.

We have indicated in the medium-
term we expect revenues to grow
between 5-7% every year.

Remuneration linkage
Organic growth metric is 25%
of the annual bonus.

Organic growth metric is 25%
of the 2023 LTIP plan.

2023 performance
During 2023 we delivered
significant improvement in our
organic growth to 7.2%. This was
driven by strong high single-digit
organic growth in our Advanced
Wound Care and Infusion Care
businesses, strong organic growth
in Continence Care and good mid
single-digit organic growth in
Ostomy Care.

Relevance
Adjusted operating profit margin
reflects how effective we are
at running our business. It is
the second key tenet of our
strategic ambition and a key
metric by which investors judge
our strategic progress.

We have indicated that we believe
a mid-20% adjusted operating
margin is achievable in 2026
or 2027.

Remuneration linkage
Adjusted operating profit ($m)
metric is 45% of annual bonus.

2023 performance
Despite continued inflationary
pressures, further R&D and
commercial investments and a
foreign exchange headwind of
60 bps, we expanded the adjusted
operating profit margin by 70bps
to 20.2%.

Relevance
Growth in adjusted diluted EPS
illustrates our ability to deliver
sustainable and profitable growth
overall, including the impact of
any M&A undertaken to further
strengthen the business. It is a key
metric by which investors judge
our strategic progress.

We have indicated, after 2023,
we expect to grow our adjusted
diluted EPS by a double digit
compounded annual growth
rate over the medium term.

Remuneration linkage
Adjusted PBT growth is 50%
of 2023 LTIP.

2023 performance
Adjusted diluted EPS rose 6.1%
during 2023.

Strong growth in the adjusted
operating profit, of 7.0%, was
partially offset by increased
interest, owing to the rise in
market interest rates, and
an increase in tax expense.

Relevance
Free cash flow to equity
reflects how effectively we are
converting the profit we generate
into cash (after accounting
for working capital, capital
investments, adjusting items,
tax and interest). This cash is
then available to reinvest in the
business (i.e. through M&A),
distribute to shareholders or
be used to pay down debt. It is
a key metric by which investors
judge our strategic progress.

We have indicated that we
expect to grow our Free cash
flow to equity by a double digit
compounded annual growth
rate over the medium term.

Remuneration linkage
Previously adjusted free cash
flow post tax related to 10% of
annual bonus. Going forward
free cash flow to equity will be
the bonus metric.

2023 performance
Free cash flow to equity
increased significantly year
on year. The principal driver
was a significant improvement
in working capital. EBITDA grew
and capital expenditure remained
high as we continue to invest
to strengthen the business,
although this was lower than in
2022. An increase in interest paid
was broadly offset by a reduction
in cash tax paid.

%
)
0
0
1
(

6
0
5

2
2
0
2

%
)
2
2
1
(

5
4
4

3
2
0
2

%
)
4
6
1
(

4
4
7

0
2
0
2

%
)
4
4
2
(

2
6
5

1
2
0
2

Metric
Period-over-period reduction in
the number of complaints received
per million (CPM) products sold.

Relevance
CPM is a strong indication of our
manufacturing quality. It is key to
ensuring that we develop trusted
medical solutions, consistent with
our vision. It is a reflection of our
core capabilities and our ability to
execute effectively.

CPM features as a key ESG metric
within the customer pillar of our
Convatec Cares ESG framework
(see page 39). We targeted to
reduce CPM by 8% during 2023.

Remuneration linkage
Executive members of the Board
plus certain members of the
CELT and the Quality leadership
team are incentivised to deliver
improvement as part of their
personal objectives.

2023 performance
Year-on-year reduction
of 12.2% as the Quality
CoE continues to have a
positive impact, delivering
for our customers, driven
by implementation of
continuous improvement
across our manufacturing
and quality operations.

The CPM numbers have been
restated following the exit
from hospital care and related
industrial sales in 2022. See
page 49 for further details
on our approach to quality.

%
6
2

%
7
2

%
5
2

%
0
2

%
4

1
2
0
2

2
2
0
2

3
2
0
2

Metric
The percentage of revenues
that are generated from new or
significantly upgraded products
and services launched by Convatec
in the preceding five-year period.

Relevance
Our vision is pioneering trusted
medical solutions to improve the
lives we touch. The vitality index
is a measure of how effective our
innovation efforts are at meeting
patients’ needs and delivering
for customers.

Vitality features as a key ESG
metric within the customer
pillar of our Convatec Cares ESG
framework (see page 39). We are
targeting a vitality index of 30%
by Q4 2025.

Remuneration linkage
Executive members of the
Board plus certain members
of CELT and the R&D leadership
team are incentivised to deliver
improvement as part of their
personal objectives.

2023 performance
We brought six new products
to market, and continue to see
good performance from products
launched in the recent past.

%
)
5
1
(

9
1
0
2

0
2
0
2

1
2
0
2

%
)
2
3
(

2
2
0
2

%
)
5
3
(

3
2
0
2

%
3
2

9
1
0
2

%
4
4

%
8
3

%
2
3

%
0
3

0
2
0
2

1
2
0
2

2
2
0
2

3
2
0
2

Metric
Proportion of females in combined
CELT and senior management.

Relevance
We recognise that if we harness
the power of our differences
and encourage diverse
thinking we can deliver more
for our customers. Therefore
building a diverse workforce
with greater gender diversity
across leadership is important.

It features as a key ESG metric
within the colleagues pillar
of our Convatec Cares ESG
framework (see page 39). In
2022, we set a target achieve
at least 40% females in senior
management by Q4 2024, which
we are committed to maintaining
and advancing further.

Remuneration linkage
Executive members of the Board
plus certain members of CELT
and members of the HR leadership
team are incentivised to deliver
improvement as part of their
personal objectives.

2023 performance
During 2023 we achieved
attainment of our 40% target,
a year ahead of plan. As such
we have set a further target to
achieve 50% by Q4 2027. Baseline
population numbers are subject
to year-on-year variation3.

Metric
Period-over-period reduction
in our combined Scope 1 and 2
GHG emissions.

Relevance
We understand the importance
of the need for change in order
to achieve our ambition of net
zero carbon emissions by 2045.

Reduction in our Scope 1 and 2
features as an ESG metric within
the communities pillar of our
Convatec Cares ESG framework
(see page 39). Our target is
to reduce our Scope 1 and 2
emissions by 70% by 2030.

Remuneration linkage
Executive members of the Board
plus certain members of CELT and
the Global Operations leadership
team are incentivised to deliver
improvement as part of their
personal objectives.

2023 performance
During 2023, we further reduced
our emissions through the purchase
of renewable electricity, installation
of on-site renewables and
implementation of energy efficiency
projects. In the year the Science-
Based Target initiative (SBTi) also
validated our near-term Scope 1,
2 and 3 carbon reduction targets.

We updated our reporting
methodology in 2022 to align to
GHG protocol and SBTi guidelines.
See our basis of reporting and ESG
definitions on page 65.

See pages 60 and 61 for more
detail about carbon emissions
across all categories.

* These KPIs are new for 2023.

Convatec Group Plc Annual Report and Accounts 2023

1. As our ESG journey continues and our metrics and measurement mature it is possible we may modify our non-financial KPIs.
2. Percentage movements are calculated on actual unrounded numbers.
3. The percentage of women in CELT and senior management combined in 2023 is 44% (2022: 38%). Total population in 2023 is 79 (2022: 92).

Strategic report

Operational review

Advanced Wound Care

Market dynamics

Advanced Wound Care is a growing market globally

Prevalence of hard-to-heal
wounds is increasing

Wound healing rates need
to improve

Wound-care related costs
are increasing

100m patients1
p.a. globally

~50% unhealed
despite therapy2

Now 2-4% of
healthcare budgets3

1. Based on Convatec estimates and external study: Human Wound and Its Burden: Updated 2020 Compendium of Estimates
2. Based on Convatec estimates and external study: Cohort study evaluating the burden of wounds to the UK’s National Health Service in 2017/2018
3. Guest et al. Cohort study evaluating the Burden of wounds to the UK’s NHS in 2017/2018. BMJ, 2020

Convatec has strong positions and attractive brands in fast-growing segments

Wound biologics5

Foam

Antimicrobials

Single-use NPWT

Other5

$2.4bn

$1.9bn

$1.0bn $0.4bn $0.7bn

Overview

Strategic report

Governance

Financial statements

Additional information

Performance

Total sales

Organic growth

2023

2022

2021

2020

2019

2018

695

621

592

547

570

587

9.5%

6.8%

9.2%

-2.7%

0.5%

0.2%

We continued to make strategic
progress in AWC during 2023,
strengthening our position
in the US with the launch of
ConvaFoam™. Reaction from
healthcare professionals has
been encouraging with a number
of ongoing evaluations as well
as conversions from competitor
product to ConvaFoam.
InnovaMatrix® continued to achieve
strong momentum in the large and
rapidly growing wound biologics
segment4. Feedback from clinicians
has been positive.

– Continuing to develop the future

2025+ AWC pipeline with:
• a new nitric oxide dressing,
a new enhanced hydrofibre
dressing and ConvaVac™

– Improving commercial

performance:
• Further leverage Salesforce

Effectiveness Centre of
Excellence (CoE) in our
focus markets

• Further expand ATT salesforce

and build synergies with
existing AWC sales team

In 2024 we will focus on:

– Rolling-out recent launches

to new markets:
• Launching ConvaFoam™

in Europe

• Launching new iterations
of InnovaMatrix® in the US

David Shepherd
President & Chief Operating
Officer, Advanced Wound Care

2023 performance

Revenue of $695 million increased
12.0% on a reported basis or 11.6%
on a constant currency basis. On an
organic basis revenue rose by 9.5%.
This performance was enhanced by
InnovaMatrix®, which contributed to
organic growth from April.

The business achieved strong sales
growth in North America supported
by the growing position in the
wound biologics segment4, broad-
based double-digit growth in GEM
despite some market softness in
China in H2 and good growth in
Europe. Continued leadership in the
antimicrobial segment enhanced the
overall performance of the division.

~6%

~13%

~5%

STRENGTHENING OUR FOAM PRESENCE WITH CONVAFOAM

Aquacel®Ag+

Extra

Convatec has been committed
to pioneering Advanced Wound
Care solutions for more than
40 years.

By actively listening to the needs
of patients and HCPs, we have
created ConvaFoam™. ConvaFoam™
has been designed to make
choosing of dressings simpler by
providing best in class performance
with easy to access information
for healthcare professionals,
caregivers and patients.

The ConvaFoam™ family of dressings
includes our new enhanced silicone
technology for improved adhesion
and we have also improved the
absorbency and fluid handling

resulting in up to 7-days wear time.
ConvaFoam™ can be used for skin
protection and on a spectrum of
wound types making it the simple
dressing choice. ConvaFoam™
dressings includes AQUACEL®
Hydrofiber® Technology, so HCPs
can trust that every ConvaFoam™
dressing helps to create an optimal
wound healing environment.

Following the 2023 rollout in the US
and Chile, we have received positive
feedback on the performance and
benefits that ConvaFoam™ brings
to patients. As we move into 2024,
we will launch in other key global
markets so more patients will soon
have access to ConvaFoam™.

SOURCES:
4. Segment size based on SmartTrak projections for FY2023; including all sub-segments, total Advanced Wound Care market size is c.$7.5bn
5. Wound Biologics includes: skin substitutes, collagen dressings and topical delivery drugs; Other segment includes: Alignates and fibre, superabsorbers, hydrocolloids;
6. Segment market growth as projected by SmartTrak five-year CAGR ’22-’27
7. Segment positions based on SmartTrak YTD Q3 2023 reported revenues across companies

Convatec Group Plc Annual Report and Accounts 2023

t
n
e
m
g
e
S

4
e
z
i
s

t
n
e
m
g
e
S

h
t
w
o
r
g

c
e
t
a
v
n
o
C

s
d
n
a
r
b

t
n
e
m
g
e
s
r
u
O

n
o
i
t
i
s
o
p

Strategic report

Operational review

Ostomy Care

Market dynamics

Global trends driving growth

Aging population and
increase in life expectancy

Rise in underlying conditions
(obesity, cancer, etc)

Improved access in
emerging markets

~2.8m patients¹

~50% lifelong conditions

Growing 2x faster than
developed markets

Large and growing segment with attractive recurring revenues

~$3bn segment, growing at ~4-5%

Total segment size

North America

Europe

Global Emerging Markets

$700m

$1,500m

Growth rate

~2%

~5%

~7-8%

Overview

Strategic report

Governance

Financial statements

Additional information

Performance

Total sales

Organic growth

2023

2022

2021

2020

2019

2018

608

583

615

590

569

582

4.2%

1.7%

2.0%

4.5%

1.0%

-0.9%

Bruno Pinheiro
President & Chief Operating
Officer, Ostomy Care

2023 performance

Revenue of $608 million was up 4.3%
on a reported basis and increased
4.2% on constant currency and
organic bases. The Ostomy Care
category comprises Convatec ostomy
products, our Flexi-Seal™ sales (fecal
management system product) and
non-Convatec ostomy products.

We are making positive progress
with the turnaround in Ostomy Care,
particularly with Convatec ostomy
products, where revenue grew 6.3%.
The business achieved double-digit
growth in the Global Emerging Markets
as it continued to win share. In North
America 180 Medical grew ostomy
sales well from a small base and New
Patient Starts remained stable. There
was a good performance in Europe
although, as expected, further planned
declines in non-Convatec product
sales via Amcare™ UK partially offset

this positive performance. The launch
of the ESENTA™ brand of accessories
continued to progress well. As
anticipated, Flexi-Seal™ finished close
to flat for the full year, having declined
in the first half when it was lapping
tough comparatives.

Strategic progress continued in the
ostomy business, as the team prepared
for the launch of our new one-piece
convex pouching system, Esteem
Body™ with Leak Defense™ in the US
and Europe. Leak Defense™ refers to
the exclusive combination of Convatec’s
gold-standard adhesives (Durahesive®
and Modified Stomahesive®) coupled
with the comprehensive, soft convexity
range, which together are designed to
adapt to the body for a secure seal that
can help prevent leaks and achieve the
desired wear time.

In 2024 we will focus on:

– Continuing to progress our

innovation pipeline:
• Launching our new Esteem
Body™ in the US and certain
European markets

• Developing a new Flexi-Seal™

Air product

• Developing a 2-piece Body
portfolio for the future

– Further improving commercial

execution across the continuum
of care:
• Bringing all the products we sell
in the fast-growth accessories
market under the ESENTA™ brand

• Improving new patient starts
in the US, with continued
collaboration with Home
Service Group (HSG)
• Enhancing engagement

with patients, through Me+,
and the interactions with
healthcare professionals

Supporting patients across the continuum of care is critical to achieving growth

‘ESSENTIAL’ SKINCARE FOR STOMA CARE

Category position

Products

Services

#3 Global ostomy

#2 US

Home
services
group

allowing users to focus on
themselves not their stoma.

A simplified set of SKUs under a
single brand launched globally using
our Healthy Bonds campaign enables
us to participate in the attractive,
fast-growing ostomy accessories
market as awareness increases
about skin protection as part of
ostomy care.

As part of our vision to improve
the lives of the people we touch,
we identified the opportunity to
deliver more consumer-friendly
looking accessories, with one
consistent brand, in a discreet and
premium looking packaging. The
result was the continued success
of our brand ESENTA™, with the
release of our improved Sting-Free
skincare products.

ESENTA™ was developed in
collaboration with customers and
HCPs, repositioning accessories
as an essential part of the lives
of our customers. Sting-Free
products provide the performance
our patients need and expect,
with packaging designed to live
in the home not the hospital,

Source: Market dynamics, segment size, growth rates and positions based on internal analysis and publicly available sources
1. llsop M, et al. Quality of life profiles and their association with clinical and demographic characteristics and physical activity in people with a stoma: a latent profile

analysis. Qual Life Res. 2022;31(8):2435-2444. doi:10.1007/s11136-022-03102-5

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Operational review

Continence Care

Market dynamics

Core urinary intermittent catheter usage is largely in the home

Customers require manual
intervention to void their
bladders daily

In-home usage, typically
without any assistance

Enduring relationships via
chronic conditions1 and
distinctive services

3-6x per day

>95% at home

average 3-5 year
relationship with end-user

1. BPH (benign prostatic hyperplasia (prostate enlargement)), SCI (spinal cord injury), MS (multiple sclerosis), Spina Bifida,urinary retention

Large and growing segment with attractive recurring revenues

Delivering solutions for users – both service and product
How one lives with their device is equally important to the device itself

Category position

Service

Products

Forward integrated
solutions for high retention

Expansive and
growing portfolio

US service share

#1: ~40%

US manufacturing share

#2: ~23%

Overview

Strategic report

Governance

Financial statements

Additional information

Performance

Total sales

Organic growth

2023

2022

2021

2020

2019

2018

457

426

405

363

342

325

6.5%

5.1%

3.4%

5.4%

12.0%

We further strengthened the
Home Service Group by acquiring
A Better Choice Medical Supply LLC
(Michigan) and All American Medical
Supply Corp (New York), two North
American continence care service
businesses.

We made further progress building
international sales and management
teams, which has resulted in
incremental sales in GEM and
Europe which, although modest,
were supportive to overall growth.
We launched our new and improved
GentleCath Air™ for Women 2.0
in Q4 2023 in France which has
been well received by healthcare
professionals and customers.

In 2024 we will focus on:

– Rolling-out launches

to new markets:
• Launching GC Air for
Women in additional
European markets and the US
• Introducing Cure products into
European and GEM markets

– Further improving commercial

execution globally:
• Integrating recent HSG
acquisitions in the US
• Continuing to build out

and strengthen commercial
teams in Europe

• Leveraging improved

customer service performance
at Amcare UK

Seth Segel
President & Chief Operating
Officer, Continence Care and
Home Services Group

2023 performance

Revenue of $457 million rose 7.5%
on a reported basis and 7.4% on
a constant currency, with modest
incremental contribution from the
two acquisitions. On an organic
basis revenue rose 6.5%.

A strong operating performance was
supported by higher reimbursement
pricing in the US during the year
and increasing patient adoption of
Convatec products (Cure Medical
and GentleCath™). The quality and
breadth of the Convatec product
portfolio have resulted in it growing
as a proportion of overall sales,
which is beneficial to the gross
margin. In the US home service
market (direct to consumer) we
continued to gain share by providing
world-class customer service.

GENTLECATH AIR™ FOR WOMEN: GENTLE PROTECTION AND CONFIDENT LIVING

The Continence Care forever caring
promise to HCPs and intermittent
catheter users is to champion higher
standards of continence care for all.
Our aim is to provide intermittent
catheter users with products and
services that allow them to live their
lives confidently.

In Q4, we started launching
GentleCath Air™ for Women, our
new compact catheter that blends
gentle, protective cathing with
everyday discretion and ease of use.

GentleCath Air™ for Women uses
our next-generation FeelClean
Technology™. It uniquely integrates
hydrophilic properties into the
material of the catheter, avoiding
the sticking and tugging associated

with some coated hydrophilic
catheters1 – while minimising
mess and residue1.

It is designed to minimise damage
to the urethral mucosa, reduce
discomfort, bleeding and protect
the first line of defence against
UTIs1,2. GentleCath Air™ for Women
delivers Gentle Protection and
Confident Living.

1. Pollard D, Allen D, Irwin NJ, Moore JV,
McClelland N, McCoy CP. Evaluation
of an integrated amphiphilic surfactant
as an alternative to traditional
polyvinylpyrrolidone coatings for hydrophilic
intermittent urinary catheters. Biotribology.
Published online August 31, 2022:100223.

2. Data on file

Source: Market dynamics, segment size, growth rates and positions based on internal analysis and publicly available sources including Medicare/CMS

and Millennium Research Group

Convatec Group Plc Annual Report and Accounts 2023

$1,000m~6%~3%$900m~$2.2bn segment, growing at ~4%$300mGrowth rateTotal segment sizeEurope~2%Global Emerging MarketsUS

Strategic report

Operational review

Infusion Care

Market dynamics

Subcutaneous drug delivery is relevant to multiple therapeutic areas

Diabetes

Other therapies

~33 million

intensive insulin users¹

of which

~1.7 million (5%)

use pumps to manage daily insulin needs¹

Significant penetration opportunity as
pumps displace users currently on multiple
daily injections (~31m)

Pain management

– 7.5m patients² and 8%

Immunoglobulin
deficiency

market growth³
– Morphine and

combinations-pallative care

– 6m patients⁴ and 10%

market growth⁵

– IgG antibodies for e.g.

autoimmune and cancer

Parkinson’s disease

– 10m patients and 6%

market growth⁶

– Abbvie or Mitsubishi Tanabe
targeting advanced patients

1. Seagrove SIMM April 2023

Within insulin intensive diabetes, durable, patch and hybrid pumps will grow rapidly¹

2023-2038 CAGR of patients

~3%

Multi Daily
Injection (MDI)

Durable pumps

Patch & hybrid

~8%

~16%

Convatec’s modular technology platform can be used across an expanding spectrum
of pump solutions, in diabetes and other therapies

Existing partners in diabetes

New partners outside of diabetes

Medtronic

BetaBionics

Tandem
Diabetes Care

Ypsomed

Roche

Sooil

Abbvie

Mitsubishi Tanabe Pharma

2. WHO 2020 – Palliative Care fact sheet
3. Center to Advance Palliative Care facts and stats
4. Bousfiha et al. Primary Immunodeficiency Diseases Worldwide: More Common than Generally Thought. JClin Immunol. 2013; 33:1-7
5. MEGAN A. COOPER et al. Primary Immunodeficiencies Am Fam Physician. 2003;68(10):2001-2009
6. WHO 2022 fact sheet, estimate based on yearly new diagnoses in the US from US Parkinson’s disease foundation

Overview

Strategic report

Governance

Financial statements

Additional information

Performance

Total sales

Organic growth

2023

2022

2021

2020

2019

2018

371

341

316

283

238

227

8.7%

9.2%

11.5%

18.5%

2.2%

-5.0%

Kjersti Grimsrud
President & Chief Operating
Officer, Infusion Care

2023 performance

In 2024 we will focus on:

– Continuing to diversify

Revenue of $371 million increased
8.7% on reported, constant currency
and organic bases. This growth was
primarily driven by sustained strong
demand for our innovative infusion
sets for people with diabetes. We
supported our customers with
multiple product launches during
2023: Medtronic’s 780G insulin
pump approval in the US, Beta
Bionics iLet bionic pancreas system
launch in the US and soft launch
of Tandem’s Mobi pump.

Our neria™ brand infusion sets,
for non-insulin therapies, achieved
strong double-digit growth, and
included the launch of AbbVie’s new
Parkinson’s drug therapy in Japan.

– Delivering for our diabetes

customers given the
continued strong demand
for our infusion sets:
• Scaling up MioAdvance
Extended Wear Infusion
Set following US launch
of Medtronic’s 780G

• Supporting Tandem with the
full launch of Mobi in the US

• Supporting Beta Bionics

following its iLet launch in
the US

• Supporting Ypsomed as they
grow their durable pumps
business

patient base
• Providing Neria sets for AbbVie
Parkinson’s launch in Europe
and preparing for US launch,
expected in 2024

• Increasing penetration with
European distributors of
infusion sets for European
palliative care and pain
management

– Enhancing operations:

• Increasing production capacity

for future demand
• Optimising existing

production lines and further
improving quality

EXPANDING OUR LEADERSHIP IN DIABETES

During 2023, Convatec expanded
its leadership in the design and
manufacturing of infusion sets for
insulin pump treatment, supporting
more partners with exciting new
pump launches.

Convatec has been committed to
pioneering diabetes solutions for
more than 30 years. We remain
focused on expanding our offer by
partnering with companies, who share
our ethos of providing innovative and
simplified medical device solutions
which improve the lives we touch.

We partnered with Medtronic to
launch, in the US, the Extended
Wear Infusion Set with their
new 780G pump.

We are also sole supplier to
BetaBionics, who in Q2 launched
their iLet Bionic Pancreas – an
innovative, first of its kind device
which simplifies the user experience
by only requiring the input of the
user’s weight, the continuous
glucose monitoring (CGM) sleep
target and overall CGM target.

In Q3, Tandem received FDA approval
for Mobi, the world’s smallest
durable automated insulin delivery
system. The pump’s discrete size
provides users with new options
in wearability, the flexibility to
disconnect, and full smartphone
control. Specifically for Tandem Mobi,
Convatec developed the AutoSoft
XC™ with a new short 5” (12 cm)
tubing – enabling users to wear the
Mobi pump as an on-body system.

MioAdvance
Extended Wear Infusion Set

Infusion Set for
Betabionics iLet

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Financial review
Financial review

Overview

Strategic report

Governance

Financial statements

Additional information

“Convatec continued to build momentum in 2023. Organic
revenue growth accelerated, adjusted operating profit margin
expanded despite continued high cost inflation and cash flow
performance improved. We have now pivoted to sustainable
revenue growth and remain focused on delivering our FISBE
2.0 strategy, which will lead to double-digit compound annual
growth in adjusted diluted earnings per share and free
cash flow to equity.”

Jonny Mason
Chief Financial Officer

Group financial performance

Revenue

Gross profit

Operating profit

Profit before income taxes

Net profit

Basic earnings per share (cents per share)

Diluted earnings per share (cents per share)

Dividend per share (cents)

Reported
2023
$m

Reported
2022
$m

Adjusted1
2023
$m

Adjusted1
2022
$m

2,142.4

2,072.5

2,142.4

2,072.5

1,200.6

1,103.9

1,320.7

1,245.6

262.7

167.4

130.3

6.4¢

6.3¢

207.3

81.9

62.9

3.1¢

431.8

357.2

274.1

13.4¢

403.7

337.6

256.8

12.7¢

12.6¢

6.229¢

6.047¢

Revenue grew by 3.4% on a reported basis, 3.2% on a constant
currency basis and 7.2% on an organic basis. Constant currency
growth was lower than organic growth due to the exit from the
low-margin, low-growth hospital care activities during 2022.

The adjusted operating profit margin was 20.2%, representing
an increase of 70bps over the previous year. Adjusting for
foreign exchange headwinds, the expansion was 130bps,
with pricing and mix benefits more than offsetting inflation
and continued investment in commercial and R&D capabilities.
The adjusted operating profit margin has increased by
250bps over the past two years.

Adjusted diluted earnings per share increased by 6.1%
year-on-year to 13.4 cents per share, primarily due to
improvements in adjusted operating profit and a reduction
in adjusted non-operating expenses more than offsetting an
increase in finance expenses. Reported diluted EPS more than
doubled to 6.3 cents per share (2022: 3.1 cents per share).

Net cash generated from operations improved by 27.6% to
$490.6 million (2022: $384.5 million), with free cash flow to
equity increasing by 116.8% to $228.3 million (2022: $105.3
million), driven by higher EBITDA and significantly better
changes in working capital compared to the previous year.
Equity cash conversion improved to 83.3% (2022: 41.0%).

We further enhanced the competitive position of the Group
during the year, with the acquisition of an innovative anti-
infective nitric oxide technology platform to strengthen our
Advanced Wound Care portfolio, and two bolt-on acquisitions
to strengthen our Home Services Group in the US.

In November 2023, the Group extended the term of its
multicurrency revolving credit facility by one year and this
is now committed to 2028. The Group’s term loan and
$500.0 million senior unsecured notes remain committed
until 2027 and 2029 respectively.

We remain confident of delivering sustainable future revenue
growth and an adjusted operating margin in the mid-20s by
2026 or 2027, with double-digit compound annual growth
in adjusted diluted EPS and free cash flow to equity.

Reported revenue
growth

+3.4%

Organic revenue
growth1

+7.2%

2023

$2,142.4m

2023

+7.2%

2022

$2,072.5m

2022

+5.6%

Reported operating
profit margin growth

+230bps

Adjusted operating
profit margin growth1

+70bps

2023

2022

12.3%

10.0%

2023

2022

20.2%

19.5%

Reported diluted
earnings per share

+105.9%

2023

6.3¢

2022

3.1¢

Adjusted diluted
earnings per share1

+6.1%

2023

2022

13.4¢

12.6¢

Net cash generated
from operations

+27.6%

Equity cash
conversion1,2

83.3%

2023

$490.6m

2023

$228.3m

2022

$384.5m

2022

$105.3m

Free cash flow to equity1

Reported and Adjusted results
The Group’s financial performance, measured in accordance with IFRS, is set
out in the Consolidated Financial Statements and Notes thereto on pages 148
to 196 and referred to in this Annual Report as “reported” measures.

The commentary in this Financial review includes discussion of the Group’s
reported results and alternative performance measures (or adjusted measures)
(APMs). Management and the Board use APMs as meaningful measures in
monitoring the underlying performance of the business.

These measures are disclosed in accordance with the ESMA guidelines
and are explained and reconciled to the most directly comparable reported
measures prepared in accordance with IFRS on pages 34 to 37.

Revenue and the revenue growth on constant currency and organic bases
are non-IFRS financial measures and should not be viewed as replacements
of IFRS reported revenue. Constant currency and organic growth are defined
in the Glossary to the Annual Report and Accounts. Percentage movements
throughout this report are calculated on actual unrounded numbers.

1. These non-IFRS financial measures are explained and reconciled to the most directly comparable financial measures prepared in accordance with IFRS

on pages 34 to 37.

Revenue
Group reported revenue for the year ended 31 December 2023 of $2,142.4 million (2022: $2,072.5 million) increased 3.4% year-on-
year on a reported basis and 3.2% on a constant currency basis.

Adjusting for foreign exchange and acquisition and divestiture-related activities2, Group revenue grew by 7.2% on an organic basis.
This was driven by strong growth in Advanced Wound Care, Infusion Care and Continence Care and good growth in Ostomy Care.
For more details about category revenue performance, refer to the Operational reviews on pages 18 to 25.

Revenue by category

Advanced Wound Care (AWC)

Ostomy Care (OC)

Continence Care (CC)

Infusion Care (IC)

2023
$m

695.3

608.3

457.2

370.9

2022
$m

620.7

583.0

425.4

341.1

Revenue excluding hospital care exit

2,131.7

1,970.2

Exit of hospital care and related industrial sales

Total

10.7

102.3

(89.5)%

2,142.4

2,072.5

3.4%

Reported
growth
%

Foreign
exchange
impact
%

Constant
currency
growth
%

Organic
growth
%

12.0%

4.3%

7.5%

8.7%

8.2%

0.4%

0.1%

0.0%

0.2%

n/a

0.2%

11.6%

4.2%

7.4%

8.7%

8.0%

n/a

3.2%

9.5%

4.2%

6.5%

8.7%

7.2%

n/a

7.2%

AWC revenue of $695.3 million increased 12.0% on a reported basis, 11.6% on a constant currency basis and 9.5% on an organic
basis, with good growth in Europe and strong growth across the Global Emerging Markets and in North America, with the latter
supported by the contribution from InnovaMatrix®, which continued to grow rapidly in the large, fast-growth wound biologics
segment3. InnovaMatrix® was part of the Triad Life Sciences acquisition in 2022 and contributed to organic growth from April 2023.

OC revenue of $608.3 million increased 4.3% on a reported basis and 4.2% on constant currency and organic bases. This was
driven by a 6.3% growth of sales of Convatec Ostomy products on a constant currency basis, principally across the Global Emerging
Markets and key European markets and supported by its world-class Direct to Consumer service proposition through the Home
Services Group in the US. As expected, growth was partially offset by the ongoing planned transition away from the lower-margin
non-Convatec Ostomy products.

CC revenue of $457.2 million increased 7.5% on a reported basis, 7.4% on a constant currency basis and 6.5% on an organic basis,
driven by both higher reimbursement pricing and higher volumes of Convatec products (Cure Medical and GentleCath™) in the US.
We continued to see strong performance on customer satisfaction, retention and pricing in the US.

IC revenue of $370.9 million increased 8.7% on reported, constant currency and organic bases. This growth was primarily from
sustained strong demand for our innovative infusion sets for people with diabetes. It was also supported by double-digit growth
of our Neria™ brand infusion sets and for non-insulin therapies such as subcutaneous infusion of immunoglobulins (linked to cancer
and autoimmune diseases), pain management and Parkinson’s medications.

See pages 18 to 25 for detail on the performance of each category.

1. These non-IFRS financial measures are explained and reconciled to the most directly comparable financial measures prepared in accordance with IFRS on pages 34 to 37.
2. Equity cash conversion is calculated as free cash flow to equity divided by adjusted net profit.

2. Acquisitions were Starlight Science, A Better Choice Medical Supply and All American Medical Supply in 2023 and Triad Life Sciences in 2022. Divestitures related to the

2022 discontinuation of hospital care, related industrial sales and associated Russia operations (with the final discontinuances in early 2023).

3. Wound biologics segment as defined by SmartTRAK. Includes skin substitutes, active collagen dressings and topical drug delivery.

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Financial review continued

Reported net profit
Reported gross margin increased from 53.3% to 56.0%. This was largely driven by pricing and mix benefits being partly offset
by inflationary pressures and foreign exchange headwinds. Prior year comparatives also included higher one-time divestiture
and termination costs primarily as a result of the hospital care and related industrial sales exit in 2022.

Reported operating profit increased by 26.7% to $262.7 million, driven by improvements in the reported gross margin being partially
offset by an increase in reported operating expenses of $41.3 million to $937.9 million. Increases in selling and distribution expenses
of $36.6 million to $612.5 million and R&D of $18.0 million to $110.0 million were partly offset by a reduction in other operating
expenses of $11.3 million (down from $13.8 million).

Reported net finance costs increased by $23.4 million to $75.5 million, primarily due to an additional $28.8 million of interest
expense on borrowings due to higher market interest rates.

During the year, the fair value movement of the contingent consideration arising on acquisitions was $24.6 million (2022: $45.1 million).

Reported non-operating income/(expense) decreased by $33.0 million to $4.8 million income (2022: $28.2 million expense) and principally
consisted of foreign exchange gains of $0.2 million (2022: $14.2 million loss) and a gain of $3.9 million on divestiture-related activities
relating to the sale of the Unometer™ trademarks during the year. The prior year also included the recycling of $12.2 million of cumulative
translation losses following the closure activities associated with the hospital care exit and a $2.0 million loss on divestitures.

The reported income tax expense for the year ended 31 December 2023 was $37.1 million (2022: $19.0 million) and this is explained
further in the Taxation section below. The reported net profit was $130.3 million (2022: $62.9 million).

The basic reported earnings per share rose 105.6% to 6.4 cents (2022: 3.1 cents), reflecting the reported net profit divided by the
basic weighted average number of ordinary shares of 2,038,653,228 (2022: 2,023,839,657).

Adjusted net profit
Adjusted gross profit increased by 6.0% to $1,320.7 million (2022: $1,245.6 million). The adjusted gross margin increased year-on-
year from 60.1% to 61.6% due to a combination of price, mix and productivity benefits of 460bps being partially offset by inflation
and foreign exchange headwinds of 250bps and 60bps respectively. The Group benefited from the impact of reduced volumes of
low-margin and low-growth products following the hospital care exit in 2022 and the growing contribution from Advanced Tissue
Technology (ATT).

Adjusted operating expenses saw a net increase of $47.0 million to $888.9 million, with increases in adjusted selling and distribution
expenses and adjusted R&D partly offset by a reduction in adjusted general and administrative expenses.

Increases in adjusted selling and distribution expenses of $47.0 million to $611.9 million, primarily driven by higher headcount
associated with growing the business, expansion in the acquired ATT business and higher labour inflation, were only partially offset
by the exit of hospital care.

Increases in adjusted R&D of $11.9 million to $103.9 million reflected the continued investment in our future pipeline of new
products and new R&D talent joining the business through the recent acquisitions over the past few years.

Adjusted G&A decreased by $11.9 million to $173.1 million, reflecting the Group’s focus on simplification and productivity, notably as we
continued to build internal expertise and reduce external third party spend whilst also seeing the benefits of transitioning more activities
to our Global Business Services (GBS) centre in Lisbon. Adjusted G&A as a percentage of revenue fell to 8.1% (2022: 8.9%)

A reconciliation between reported and adjusted operating expenses is provided in the Non-IFRS financial information section on
pages 34 to 37. The Group achieved an adjusted operating profit of $431.8 million (2022: $403.7 million), delivering an adjusted
operating margin of 20.2% (2022: 19.5%) despite ongoing inflationary headwinds and continued investments for growth.

Adjusted net profit increased 6.7% to $274.1 million (2022: $256.8 million). The increases in adjusted operating expenses (as
explained above), finance expenses (driven by higher market interest rates) and adjusted income tax expense (which is explained
below) were more than offset by strong adjusted gross margin improvement and a reduction in adjusted non-operating expenses
of $14.9 million (driven by favourable foreign exchange impacts on intercompany transactions).

Adjusted basic and diluted EPS at 31 December 2023 were 13.4 cents and 13.4 cents respectively (2022: 12.7 cents and 12.6 cents).

Taxation

Reported income tax expense

Tax effect of adjustments

Other discrete tax items

Adjusted income tax expense

Year ended 31 December

2023
$m

Effective
tax rate

2022
$m

Effective
tax rate

(37.1)

(38.5)

(7.5)

(83.1)

22.2%

23.3%

(19.0)

(41.7)

(20.1)

(80.8)

23.2%

23.9%

The Group’s reported income tax expense was $37.1 million (2022: $19.0 million). The decrease in the reported effective tax rate was
mainly driven by a one-off net tax benefit following the successful resolution of an uncertain tax position, which for the purpose of
calculating the adjusted income tax expense, was treated as an adjusting item.

The adjusted effective tax rate of 23.3% for the year ended 31 December 2023 (2022: 23.9%) was after reflecting the tax impact of
items treated as adjusting items (further details can be found in the Reconciliation of reported earnings to adjusted earnings table

Overview

Strategic report

Governance

Financial statements

Additional information

in the Non-IFRS financial information section on page 35). The decrease in the adjusted effective tax rate was principally driven
by the impact of profit mix between jurisdictions in which the Group had a taxable presence.

Adjusting items
Management and the Board will make adjustments to the reported figures, where appropriate, to produce more meaningful
measures to monitor the underlying performance of the business – Alternative performance measures (APMs). The Group’s APM
policy can be found in the Non-IFRS financial information section on page 34 and in line with this, the following adjustments were
made to derive adjusted operating profit and adjusted net profit.

Reported

Amortisation of acquired intangibles

Acquisitions and divestitures

Termination benefits and related costs

Impairment of assets

Other adjusting items

Other discrete tax items

Adjusted

Operating
profit
$m

Fair value movement
of contingent
consideration
$m

Non-operating
income/(expense)
$m

Income
tax
$m

2023

262.7

136.2

10.1

9.5

–

13.3

–

2022

207.3

131.3

56.6

7.1

1.4

–

431.8

403.7

2023

(24.6)

–

24.6

–

2022

(45.1)

–

45.1

–

2023

4.8

–

(3.9)

–

2022

(28.2)

–

14.2

–

2023

(37.1)

(32.6)

(0.7)

(2.0)

–

(3.2)

(7.5)

0.9

(14.0)

(83.1)

2022

(19.0)

(29.2)

(11.3)

(1.2)

–

(20.1)

(80.8)

Adjustments made to derive adjusted operating profit in 2023 included the amortisation of acquired intangibles of $136.2 million
(2022: $131.3 million), of which $93.2 million (2022: $93.0 million) resulted from intangible assets arising from the spin-out from
Bristol-Myers Squibb in 2008 and will be fully amortised by December 2026.

Acquisition and divestiture-related costs of $10.1 million (2022: $56.6 million) consisted of acquisition-related costs of $8.3 million
(2022: $16.9 million) and divestiture-related costs of $1.8 million (2022: $39.7 million). Acquisition-related costs, which primarily
consisted of deal-related fees, also included the inventory fair value release of $1.5 million (2022: $8.7 million) in respect of the Triad
acquisition in 2022. Divestiture-related costs of $1.8 million were incurred as a result of the exit from the hospital care and related
industrial sales activities.

Termination costs of $9.5 million were in respect of one-off, fundamental transformation projects and primarily due to the migration
of HR services to our Global Business Services, the closure of the EuroTec factory in the Netherlands and a restructuring of activities
in Switzerland. The latter two projects, in addition to the office footprint optimisation programme previously announced, contributed
to other adjusting items of $13.3 million. These costs largely consisted of legal and professional fees, the impairment of right-of-use
assets and property, plant and equipment and charges related to certain office closures.

During the year, the fair value movement of the contingent consideration arising on acquisitions was $24.6 million (2022: $45.1 million).

Net adjustments of $3.9 million made to non-operating income in 2023 wholly related to a gain made from the sale of the
UnoMeter™ trademarks, previously part of hospital care. This is disclosed within Note 5 – Non-operating income/(expense),
net to the Consolidated Financial Statements.

Of the total $169.1 million of adjusting items recognised within operating profit in the Consolidated Income Statement in the year
(excluding tax impact), $16.1 million was cash-impacting in 2023 (2022: $11.1million). There was also a cash outflow of $7.5 million
during the year in respect of adjusting items recorded as accruals in the prior year. For further information on Non-IFRS financial
information, see pages 34 to 37.

In the year to 31 December 2023, other discrete tax items related to the tax benefit of $15.1 million resulting from a provision
release following the successful resolution of an uncertain tax position, partially offset by tax expenses of $7.6 million in respect
of a restructuring of activities Switzerland. In the year to 31 December 2022, other discrete tax items related to the tax benefit
of $20.1 million resulting from the recognition of deferred tax assets following the acquisition of Triad Life Sciences. For further
details on deferred taxation see Note 6 – Income taxes to the Consolidated Financial Statements.

The Board, through the Audit and Risk Committee, continuously reviews the Group’s APM policy to ensure that it remains
appropriate, aligns with regulatory guidance and represents the way in which the performance of the Group is managed.

Acquisitions
During the year, the Group completed three acquisitions. The acquisition of Starlight Science Limited in April 2023 included the highly
innovative anti-infective nitric oxide technology platform, which complements the Group’s Advanced Wound Care portfolio and has
potential applications across the Group’s other categories. In addition to the initial consideration of $56.7 million (£45.3 million), the
sellers may earn contingent consideration up to a maximum of $163.9 million (£131.0 million), in the form of (i) a milestone payment
of $58.8 million (£47.0 million) due upon regulatory clearances in the US and Europe; and (ii) earnout payments based on sales of
products over the lifetime of the acquired patents, with the maximum earnout payable capped at $105.1 million (£84.0 million).
The provisional discounted fair value of the contingent consideration recognised at the date of acquisition was $66.7 million.

We also completed two small bolt-on acquisitions in 2023 (A Better Choice Medical Supply LLC and All American Medical Supply
Corp) for a combined net cash outflow of $27.7 million to further strengthen our US Home Services Group. There was no contingent
consideration associated with these two acquisitions.

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Financial review continued

During the year, $94.7 million was paid in respect of contingent consideration associated with the Triad Life Sciences acquisition,
in addition to the $50.0 million paid in 2022 following achievement of two short-term milestones. As at 31 December 2023, the
discounted fair value of the contingent consideration payable in respect of the Group’s acquisitions was $138.0 million (2022:
$140.0 million). Refer to Note 26 – Acquisitions to the Consolidated Financial Statements for further details.

Reasonably possible changes in certain key assumptions and forecasts may cause the calculated fair value of the contingent
consideration to vary materially within the next financial year and accordingly, this has been identified as a key source of estimation
uncertainty. Refer to Note 1.4 – Critical accounting judgements and key sources of estimation uncertainty to the Consolidated
Financial Statements for further details.

Dividends
Dividends are distributed based on the distributable reserves of the Company, which are primarily derived from the dividends
received from subsidiary companies and are not based directly on the Group’s consolidated retained earnings. The distributable
reserves of the Company at 31 December 2023 were $1,539.4 million (2022: $1,562.9 million).

The Board declared an interim dividend of 1.769 cents per share in August 2023 and has recommended a final 2023 dividend of
4.460 cents per share, which would bring the full year dividend to 6.229 cents per share (2022: 6.047 cents per share), an increase
of 3% and a pay-out ratio when compared to adjusted net profit of 46%. Our stated policy is a pay-out ratio of 35% to 45% of
adjusted net profit but this is interpreted flexibly over time to reflect the underlying performance of the business and the Board’s
confidence in its future growth prospects. The Board has also taken the decision to terminate the scrip dividend option.

Further information about the Group’s dividend policy and dividends paid can be found on page 143 and information on capital
maintenance and the available distributable reserves position can be found on page 181.

Cash Flow and Net Debt

Net debt bridge $m

Reported

496.7

(1.3)

(4.8)

–

(129.2)

(35.9)

(65.6)

(22.7)

(8.9)

(110.7)

(178.8)

(65.6)

(22.7)

(8.9)

(110.7)

(129.2)

(35.9)

(178.8)

(1,129.3)

(1,068.1)

1,200

1,000

800

600

400

(8.1)

(4.8)

(23.6)

527.1

Net debt1
1 January
2023

EBITDA1

Working
capital
movement1

(Loss)
on FX
derivatives

Adjusting
items2

Capital
expenditure

Tax paid

Net interest
paid

Lease
payments

Other4

Dividends5

Acquisitions &
divestitures6

Net debt1
31 December
2023

Operating cash ﬂow1,3 $361.4m

Free cash ﬂow to capital1,3 $325.5m

Free cash ﬂow to equity1,3 $228.3m

1. These non-IFRS financial measures are explained and reconciled to the most directly comparable financial measure prepared in accordance with IFRS in the Non-IFRS

financial information section on pages 34 to 37.

2. Details of adjusting items are provided in the adjusting items cash movement table in the Non-IFRS financial information section. Of the total cash outflow of

$23.6 million during the year, $7.5 million related to accruals recorded in the prior year.

3. Compared to 2022, certain cash flow measures have been simplified in respect of their title. ’Net cash for cash conversion’ has been renamed ’Operating cash flow’
and ‘Free cash flow (post-tax)’ has been renamed ‘Free cash flow to capital’. In addition, a new measure has been introduced, ‘Free cash flow to equity’ (as defined
in the ‘Reconciliation of operating free cash flow, free cash to capital and free cash to equity’ table on page 37). The Directors consider that these changes result
in consistency of cash flow measures and provide improved definition, clarity and insight.

4. Other consisted of financing fees amortisation $2.8 million (2022: $6.6 million) and net FX loss on cash and borrowings of $6.7 million (2022: $4.9 million) offset

by proceeds from PPE sales of $0.6 million (2022: nil).

5. Dividend cash payments of $110.7 million were made to shareholders during the year. This represented 87.3% of total dividends declared in the period, with the

remaining 12.7% electing to settle via scrip dividends. The Board took the decision to terminate the scrip dividend option during the year.

6. Net acquisition and divestiture payments of $178.8 million consisted of the initial consideration payment of $56.7 million in respect of the Starlight acquisition,
$27.7 million in respect of the acquisitions of A Better Choice Medical Supply LLC and All American Medical Supply Corp and $94.7 million in respect of the Year
1 earn out associated with the Triad Life Sciences acquisition. These were offset by $0.3 million of income arising from divestiture-related activities.

Overview

Strategic report

Governance

Financial statements

Additional information

EBITDA
Adjusted EBITDA increased by $27.1 million to $527.1 million (2022: $500.0 million), with the increase in adjusted gross profit of
$75.1 million more than offsetting the increase in adjusted operating expenses of $47.0 million. These are explained in the adjusted
net profit commentary section. A reconciliation of adjusted EBITDA to the closest IFRS measure is provided in the Non-IFRS financial
information section on pages 34 to 37.

Free cash flow to capital
Free cash flow to capital increased by $138.1 million to $325.5 million (2022: $187.4 million), largely driven by a significantly lower
working capital outflow (resulting in a movement year-on-year of $90.5 million), the increase in adjusted EBITDA of $27.1 million
as explained above, a reduction in capital expenditure spend of $15.0 million and a reduction in cash tax paid of $17.0 million.
These were partly offset by an increase in adjusting cash outflow items of $8.4 million, of which details are provided in the Non-IFRS
financial information section on page 37.

The Group invested $129.2 million in capital expenditure (2022: $144.2 million) to increase manufacturing capacity and automation
and improve information technology and digital tools.

The adjusted working capital outflow of $8.1 million (2022: $98.6 million outflow) improved significantly year-on-year, with
increased inventory levels of $53.9 million on an adjusted basis largely offset by a $30.2 million decrease in trade and other
receivables, a $10.5 million increase in trade and other payables and a $7.8 million reduction in restricted cash.

Increased inventory levels reflected strategic decisions to continue to build supply chain resilience across the Group, which was
achieved in the first half of the year. There was a modest decline in inventory in the second half of the year.

The decrease in trade and other receivables reflected improving cash collections, coupled with a receivables financing arrangement
entered by the Group during the year to normalise receivable terms for certain major customers, equating to $27.4 million, and
favourable movements in the mark-to-market valuation of derivative financial assets. Further details on the receivables financing
arrangement can be found in Note 12 – Trade and Other receivables to the Consolidated Financial Statements.

The increase in trade and other payables of $10.5 million reflected standardisation of supplier payment terms implemented in the
year as part of our simplification and productivity initiatives, coupled with some favourable timing impacts which will partly reverse
in 2024. The increase was partially offset by a decrease in derivative financial liabilities as a result of the mark-to-market valuation
at the year end.

Operating cash conversion1 was 83.7% (2022: 59.5%). The increase in the ratio primarily reflected the significantly lower working
capital outflow as commented on above. Further details are provided in the Non-IFRS financial information section.

Free cash flow to equity
Free cash flow to equity increased by $123.0 million to $228.3 million (2022: $105.3 million). This was driven by an increase in free
cash flow to capital of $138.1 million as explained above and a decrease in the amortisation of financing fees of $3.8 million. These
favourable movements were partly offset by higher finance expense payments of $15.7 million due to higher market interest rates.

Equity cash conversion2 was 83.3% (2022: 41.0%).

Borrowings and net debt

Net debt excluding leases $1,129.3m (2022: $1,068.1m)

500

250

-250

-500

-750

-1,000

$143.8m

$97.6m

($88.3m )

($85.5m)

Net debt/
adjusted EBITDA
At 31 December 2023
2.1x

Net debt/
adjusted EBITDA
At 31 December 2022
2.1x

($493.1m)

($494.1m)

($718.8m)

2022

2023

2022

($732.8m)
2023

2022

2023

Senior notes

Credit facilities drawn

Cash and cash equivalents

2022

2023
Lease liabilities

1. The previous ratio called ‘Adjusted cash conversion’, calculated as Operating cash flow/Adjusted EBITDA, has been replaced by ‘Operating cash conversion’

and is now calculated as Operating cash flow/Adjusted operating profit. The Directors consider that this change results in consistency of cash flow measures
and provides improved definition, clarity and insight.

2. A new measure has been introduced. ‘Equity cash conversion’ is calculated as Free cash flow to equity/Adjusted net profit. The Directors consider that this

change results in consistency of cash flow measures and provides improved definition, clarity and insight.

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Financial review continued

As at 31 December 2023, the Group’s cash and cash equivalents were $97.6 million (31 December 2022 $143.8 million) and the debt
outstanding on borrowings (net of deferred financing fees) was $1,226.9 million (31 December 2022: $1,211.9 million).

The Group’s banking facilities comprise of a multicurrency revolving credit facility of $950.0 million and a term loan of $250.0 million.
In November 2023, the Group extended the term of its multicurrency revolving credit facility by an additional year and this is now
committed to November 2028. The term loan remains committed to November 2027.

The Group’s $500.0 million senior unsecured notes, issued in October 2021, remain in place with maturity in October 2029.

As at 31 December 2023, $459.4 million of the multicurrency revolving credit facility remained undrawn. This, combined with cash
of $97.6 million, provided the Group with total liquidity of $557.0 million at 31 December 2023 (31 December 2022: $616.6 million).
Of this, $21.1 million was held in territories where there are restrictions related to repatriation (31 December 2022: $19.2 million).

The Group ended the period with total borrowings, including IFRS 16 lease liabilities, of $1,312.4 million (2022: $1,300.2 million).
Offsetting cash of $97.6 million (2022: $143.8 million) and excluding lease liabilities, net debt was $1,129.3 million (2022:
$1,068.1 million), equivalent to 2.1x adjusted EBITDA (2022: 2.1x adjusted EBITDA).

For further information on borrowings see Note 21 – Borrowings to the Consolidated Financial Statements.

Covenants
At 31 December 2023, the Group was in compliance with all financial and non-financial covenants associated with the Group’s
outstanding debt.

The Group has two financial covenants, being net leverage and interest cover, each of which is defined, where applicable,
within the borrowing documentation. The table below summarises the Group’s most restrictive covenant thresholds and position
as at 31 December 2023 and 2022.

31 December 2023

31 December 2022

Maximum
covenant
net
leverage

Actual
covenant
net
leverage

Minimum
covenant
interest
cover1

Actual
covenant
interest
cover1

3.50x

2.30x

2.28x

3.5x

7.0x

9.9x

1. Interest cover is adjusted EBITDA/interest expense (net) and net leverage is net debt/adjusted EBITDA in accordance with the definitions contained in underlying
borrowing documentation and are not the same as the definitions of these measures presented in the Non-IFRS financial information section on pages 34 to 37
and applied in the commentary in this Financial review.

Group financial position

At 31 December

Intangible assets and goodwill

Other non-current assets

Cash and cash equivalents

Other current assets

Total assets

Current liabilities

Non-current liabilities

Equity

Total equity and liabilities

2023
$m

2022
$m

Change
$m

2,234.1

2,149.5

609.6

97.6

772.4

553.2

143.8

745.5

3,713.7

3,592.0

(536.4)

(533.1)

(1,484.6)

(1,449.2)

(1,692.7)

(1,609.7)

84.6

56.4

(46.2)

26.9

121.7

(3.3)

(35.4)

(83.0)

Overview

Strategic report

Governance

Financial statements

Additional information

Included within other non-current assets was the investment made in the preference shares of BlueWind Medical in 2022. The
fair value at 31 December 2023 decreased to $22.9 million (2022: $30.7 million) due to a downgrade in revised forecasts as a result
of delays in obtaining regulatory approvals, with the movement taken to Other Comprehensive Income. Restricted cash reduced
by $2.0 million primarily due to movements in amounts held in escrow arising from the Group’s acquisitions, whilst ROU assets
reduced by $4.7 million.

Current assets excluding cash and cash equivalents
Current assets, excluding cash and cash equivalents, increased by $26.9 million to $772.4 million (2022: $745.5 million), primarily
driven by an increase in inventories of $59.2 million. Excluding a foreign exchange effect of $9.8 million, inventory increased on
a reported basis by $49.4 million and was largely to build resilience across the Group. This was partly offset by reductions in trade
and other receivables of $5.6 million (net of foreign exchange effect of $9.8 million), current tax receivable of $8.2 million, derivative
financial assets of $12.8 million and restricted cash of $5.7 million.

Derivative financial assets decreased by $12.8 million due to movements in the mark-to-market valuations at the year end, whilst
restricted cash fell by $5.7 million, driven by movements in cash held in escrow that arose from the Group’s acquisitions.

Current liabilities
Current liabilities increased modestly by $3.3 million to $536.4 million (2022: $533.1 million), with an increase in trade and other
payables of $42.1 million largely offset by decreases in derivative financial liabilities of $15.8 million, provisions of $16.5 million
and current tax payable of $6.9 million.

Trade and other payables increased due to an extension to supplier payment terms following standardisation as part of our
simplification and productivity initiatives, coupled with some favourable timing impacts which will partly reverse in 2024.
Derivative financial liabilities decreased due to movements in the mark-to-market valuations at the year end.

Overall, provisions increased by $1.7 million, with amounts less than one year decreasing by $16.5 million and amounts greater than
one year increasing by $18.2 million. The overall increase was primarily due to an increase in restructuring provisions of $3.7 million
offset by a reduction in contingent consideration payable of $2.0 million. Refer to Note 14 – Provisions to the Consolidated Financial
Statements for further commentary.

Non-current liabilities
Non-current liabilities increased by $35.4 million to $1,484.6 million (2022: $1,449.2 million). This included an increase in non-current
borrowings of $15.0 million, an increase in provisions of $18.2 million (see comments in current liabilities above) and an increase in
deferred tax liabilities of $5.0 million primarily due to deferred tax recognised on the acquisition of Starlight Science Limited in the
year.

These were partially offset by a reduction in lease liabilities of $3.2 million, as a result of the office footprint optimisation programme
that commenced in 2023 as part of our simplification and productivity initiatives.

Going concern

In preparing their assessment of going concern, the Directors considered available cash resources, access to committed undrawn
funding, financial performance and forecast performance, including continued implementation of the FISBE strategy, together with
the Group’s financial covenant compliance requirements and principal risks and uncertainties.

Management also applied the same severe but plausible downside scenarios utilised in the preparation of the Viability Statement.
Under each scenario, the Group retained significant liquidity and covenant headroom throughout the going concern period, i.e.
12 months from the date of this report. A reverse stress test, before corporate level mitigations, was also considered to demonstrate
what reduction in revenue would be required in the next 12 months to create conditions which may lead to a potential covenant
breach. For a breach of covenants to occur in the next 12 months, before corporate mitigation, the Group would need to experience
a sustained revenue reduction of more than 10% across all categories and markets. This was considered implausible given the
Group’s strong global market position, diversified portfolio of products and the corporate mitigations available to the Board and
management. For further information on the Viability statement see pages 86 and 87 and for Going Concern, see Note 1.2 to the
Consolidated Financial Statements.

(3,713.7)

(3,592.0)

(121.7)

Accordingly, the Directors continue to adopt the going concern basis in preparing the Consolidated Financial Statements.

Intangible assets and goodwill
Intangible assets and goodwill increased by $84.6 million to $2,234.1 million (2022: $2,149.5 million). This increase was primarily
driven by intangible assets and goodwill arising from the acquisitions during the year of $162.7 million, combined with intangible
asset additions of $37.6 million and the net effect of foreign exchange of $38.9 million, being partially offset by the in-year
amortisation of intangible assets of $154.6 million.

No triggers of impairments were identified during 2023. Further detail is provided in Note 9 – Intangible assets and goodwill
to the Consolidated Financial Statements.

Other non-current assets
Other non-current assets, including property, plant and equipment (PP&E), right-of-use assets (ROU assets), investment in financial
assets, deferred tax assets, restricted cash and other assets increased by $56.4 million to $609.6 million (2022: $553.2 million).
The increase reflected the continued investment in our manufacturing facilities, with additions in PP&E of $97.3 million and the
net effect of foreign exchange of $16.5 million being partly offset by depreciation of $37.5 million and impairments of $2.7 million.

Financial control environment

The Group closely monitors the financial and IT general control environment (in respect of those IT controls that have an implication
on the financial processes) using a formal control programme to confirm the effectiveness of key reporting and IT controls across
our global operations, including self-certifications from control owners. Compliance was high throughout the year.

The Internal Controls team acts as the second of line of defence monitoring the controls framework, including monitoring responses,
undertaking random sample testing of responses to supporting evidence and reviewing all notified financial and IT control failures
to safeguard against risk of material financial misstatement.

Independent assurance on the control framework is given by the Internal Audit team, including key controls in their reviews of
specific markets and GBS. In addition, key controls in the framework were tested by the external audit team as part of their controls
reliance approach in 2023.

In response to the developments in corporate governance in the UK, the scope of the formal control programme was extended
to include key non-financial metrics reported in the ARA, notably the ESG metrics currently in scope for limited assurance.

Jonny Mason
Chief Financial Officer
5 March 2024

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Overview

Strategic report

Governance

Financial statements

Additional information

Non-IFRS financial
information

KEY

KPI Please see page 16

Non-IFRS financial information or
alternative performance measures
(APMs) are those measures used by the
Board and management on a day-to-day
basis in their assessment of profit and
performance and comparison between
periods. The adjustments applied to IFRS
measures reflect the effect of certain
cash and non-cash items that the Board
believes distort the understanding of
the quality of earnings and cashflows
as, by their size or nature, they are not
considered part of the core operations
of the business. Adjusted measures
also form the basis of performance
measures for remuneration, e.g.
adjusted operating profit.

It should be noted that the Group’s APMs
may not be comparable to other similarly
titled measures used by other companies
and should not be considered in isolation
or as a substitute for the equivalent
measures calculated and presented
in accordance with IFRS.

In determining whether an item should
be presented as an allowable adjustment
to IFRS measures, the Group considers
items which are significant either because
of their size or their nature and arise from
events that are not considered part of the
core operations of the business. These
tend to be one-off events but may still
cross more than one accounting period.
Recurring items may be considered,
particularly in respect of the amortisation
of acquisition-related intangibles assets.
If an item meets at least one of these
criteria, the Board, through the Audit
and Risk Committee, then exercises
judgement as to whether the item should
be classified as an allowable adjustment
to IFRS performance measures.

The tax effect of the adjustments is
reflected in the adjusted tax expense to
remove the tax impact from adjusted net
profit and adjusted earnings per share.

Amortisation of acquisition-
related intangible assets

The Group’s strategy is to grow both
organically and through acquisition, with
acquisitions being targeted to strengthen
our position in key geographies and/
or business categories or which provide
access to new technology. The nature
of the businesses acquired includes
the acquisition of significant intangible
assets, which are required to be
amortised. The Board and management
regard the amortisation as a distortion to
the quality of earnings and it has no cash
implications in the year. The amortisation

also distorts comparability with peer
groups where such assets may have
been internally generated and, therefore,
not reflected on their balance sheet.
Amortisation of acquisition-related
intangible assets is, by its nature,
a recurring adjustment.

Acquisition-related activities

Costs directly related to potential and
actual strategic transactions which have
been executed, aborted or are in-flight
are deemed adjusting items.

Acquisition-related costs relate to deal
costs, integration costs and earn-out
adjustments, including the discounting
impact which are incurred directly as
a result of the Group undertaking or
pursuing an acquisition. Deal costs are
wholly attributable to the deal, including
legal fees, due diligence fees, bankers’
fees/commissions and other direct
costs incurred as a result of the actual
or potential transaction. Integration
costs are wholly attributable to the
integration of the target and based
on integration plans presented at the
point of acquisition, including the cost
of retention of key people where this
is in excess of normal compensation,
redundancy of target staff and early
lease termination payments.

Adjusted measures in relation to
acquisitions also include aborted
deal costs.

Divestiture-related activities

Divestiture-related activities comprise
the gains or losses resulting from
disposal or divestment of a business as
a result of a sale, major business change
or restructuring programme. These
include write-down of non-current assets,
provisions to recognise inventories at
realisable value, provisions for costs of
exiting contracts and associated legal
fees, and any other directly attributable
costs. Any income from the ultimate
disposal of a business or subsidiary
is included in the gain or loss.

Adjusted measures in relation to
divestitures also include aborted
deal costs.

Impairment of assets

Impairments, write-offs and gains
and losses from defined programmes
and where the Group considers the
circumstances of such event are not
reflective of normal business trading
performance or when transactions
relate to acquisition-related intangible

assets where the amortisation is
already excluded from the calculation
of adjusted measures.

Termination benefits and
related costs

Termination benefits and other related
costs arise from material, one-time
Group-wide initiatives to reduce the
ongoing cost base and improve efficiency
in the business, including divestitures
from non-strategic activities. The Board
considers each project individually to
determine whether its size and nature
warrants separate disclosure. Qualifying
items are limited to termination benefits
(including retention) without condition
of continuing employment in respect of
major Group-wide change programmes.
Where discrete qualifying items are
identified these costs are highlighted
and excluded from the calculation of
adjusted measures. Due to their nature,
these adjusted costs may span more
than one year.

Other adjusting items

Other adjusting items relate to material,
one-time initiatives which are part of the
Group’s strategy to improve productivity
in the business and optimise cash
flows. The Board considers each project
individually to determine whether its size
and nature warrants separate disclosure.
Qualifying costs are limited to directly
attributable costs of the initiatives and
any realignment costs. Due to the nature
of the initiatives, these adjusted costs
may span more than one year.

Organic revenue growth

Organic revenue growth represents
the change in organic revenue year
on year. Organic revenue represents
reported revenue, as determined
under IFRS, and excludes the impact
of acquisitions, divestitures and
currency exchange movements. KPI

Cash flow measures

Operating cash flow is the net cash
generated from operations, as
determined under IFRS, less capital
expenditure. Free cash flow to capital
is defined as operating cash flow less
tax paid.

Free cash flow to equity reflects how
effectively we are converting the profit
we generate into cash (after accounting
for working capital, capital investments,
adjusting items, tax and interest). Refer
to page 37 for details on how these
measures are calculated.

Reconciliation of reported earnings to adjusted earnings for the years ended 31 December 2023 and 2022

Year ended 31 December
2023

Revenue
$m

Gross
profit
$m

Operating
costs
$m

Operating
profit
$m

As reported

2,142.4

1,200.6

(937.9)

Finance
expense,
net
$m

Fair value
movement of
contingent
consideration
$m

Non-
operating
income,
net
$m

(75.5)

(24.6)

4.8

Amortisation of acquired
intangibles

Acquisition-related costs

Divestiture-related costs/
(income)

Termination benefits and
related costs

Other adjusting items

Total adjustments
including tax effect

Other discrete tax items

Adjusted

Amortisation

Depreciation

Impairment/write-off of
assets

Share-based payments

Adjusted EBITDA

Amortisation of acquired
intangibles

Acquisition-related costs1

Divestiture-related costs

Termination benefits and
related costs

Impairment of assets

Total adjustments
including tax effect

Other discrete tax items

Adjusted

Amortisation

Depreciation

Impairment/write-off of
assets

Share-based payments

Adjusted EBITDA

–

110.4

25.8

1.5

3.6

2.1

2.5

120.1

6.8

(1.8)

7.4

10.8

49.0

262.7

136.2

8.3

1.8

9.5

13.3

169.1

–

2,142.4

1,320.7

(888.9)

431.8

(75.5)

18.4

60.2

2.1

14.6

527.1

111.6

19.7

8.7

16.6

4.8

–

141.7

8.2

23.1

2.3

1.4

54.7

207.3

131.3

16.9

39.7

7.1

1.4

196.4

–

2,072.5

1,245.6

(841.9)

403.7

(52.1)

16.1

61.8

1.7

16.7

500.0

Year ended 31 December
2022

Revenue
$m

Gross
profit
$m

Operating
costs
$m

Operating
profit
$m

As reported1

2,072.5

1,103.9

(896.6)

Finance
expense,
net
$m

Fair value
movement of
contingent
consideration
$m

Non-
operating
expense,
net
$m

(52.1)

(45.1)

(28.2)

PBT
$m

167.4

136.2

32.9

(2.1)

Income
tax
$m

Net profit
$m

(37.1)

(32.6)

(1.4)

0.7

130.3

103.6

31.5

(1.4)

9.5

(2.0)

7.5

13.3

189.8

–

357.2

(3.2)

10.1

(38.5)

151.3

(7.5)

(83.1)

(7.5)

274.1

PBT
$m

Income tax
$m

Net profit
$m

81.9

131.3

62.0

53.9

7.1

1.4

(19.0)

(29.2)

(3.5)

(7.8)

(1.2)

62.9

102.1

58.5

46.1

5.9

–

1.4

–

24.6

–

(3.9)

–

24.6

(3.9)

–

0.9

–

45.1

–

14.2

–

45.1

14.2

255.7

(41.7)

214.0

–

(14.0)

337.6

(20.1)

(80.8)

(20.1)

256.8

1. The comparatives have been re-presented as outlined in Note 1.6 to the Consolidated Financial Statements.

Adjusted operating profit margin of 20.2% (2022: 19.5%) is calculated as adjusted operating profit of $431.8 million (2022: $403.7 million)
divided by revenue of $2,142.4 million (2022: $2,072.5 million). A reconciliation of adjusted operating profit to its closest IFRS measure
is shown in the tables above. KPI

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Overview

Strategic report

Governance

Financial statements

Additional information

Non-IFRS financial information continued

Reconciliation of reported operating costs to adjusted operating costs for the years ended 31 December 2023
and 31 December 2022

Reconciliation of Operating cash flow, Free cash flow to capital and Free cash flow to equity

2023

2022

S&D
$m

G&A
$m

R&D
$m

Other
$m

Operating
costs
$m

S&D
$m

G&A
$m

R&D
$m

Other
$m

Operating
costs
$m

As reported

(612.5)

(212.9)

(110.0)

(2.5)

(937.9)

(575.9)

(214.9)

(92.0)

(13.8)

(896.6)

Amortisation of
acquired intangibles

Acquisition-related
costs

Divestiture-related
costs/(income)

Impairment of
assets

Termination benefits
and related costs

Other adjusting
items

–

19.8

6.8

(1.0)

(0.4)

–

1.6

–

5.7

7.9

6.0

–

0.1

–

25.8

6.8

(0.4)

(1.8)

–

7.4

2.9

10.8

–

9.0

–

2.0

–

19.7

8.2

1.7

–

0.3

–

Adjusted

(611.9)

(173.1)

(103.9)

–

(888.9)

(564.9)

(185.0)

(92.0)

–

19.7

8.2

12.4

23.1

1.4

–

1.4

2.3

–

(841.9)

Reconciliation of reported basic and diluted earnings per share to adjusted basic and diluted earnings
per share for the years ended 31 December 2023 and 31 December 2022

Net profit attributable to the shareholders of the Group

Basic weighted average ordinary shares in issue1

Diluted weighted average ordinary shares in issue1

Basic earnings per share

Diluted earnings per share

1. See Note 7 – Earnings per share to the Consolidated Financial Statements.

2023
$m

130.3

Adjusted
2023
$m

274.1

Number

2022
$m

62.9

Adjusted
2022
$m

256.8

Number

2,038,653,228

2,052,589,260

2,023,839,657

2,040,247,468

Cents per
share

6.4

6.3

13.4

3.1

12.7

12.6

Adjusted diluted EPS has increased by 6.1% and is calculated as adjusted diluted EPS for the current period less adjusted diluted EPS
for the prior year, divided by the prior year adjusted diluted EPS. This is calculated on actual unrounded numbers. KPI

Net cash generated from operations

Less: acquisition of property, plant and equipment and intangible assets

Operating cash flow1

Tax paid

Free cash flow to capital1

Net interest paid

Payment of lease liabilities

Financing fee amortisation

Foreign exchange (loss) on cash and borrowings

Proceeds from sale of property, plant and equipment

Free cash flow to equity1

Year ended 31 December

2023
$m

490.6

2022
$m

384.5

(129.2)

(144.2)

361.4

(35.9)

325.5

(65.6)

(22.7)

(2.8)

(6.7)

0.6

240.3

(52.9)

187.4

(49.9)

(20.7)

(6.6)

(4.9)

–

228.3

105.3

1. The cash flow measures have also been simplified. ‘Net cash for cash conversion’ has been renamed ‘Operating cash flow’ and ‘Free cash flow (post-tax)’ has been

renamed ‘Free cash flow to capital’. In addition, a new measure has been introduced, ‘Free cash flow to equity’ (as defined in the table above). The Directors consider
that these changes result in consistency of cash flow measures and provide improved definition, clarity and insight.

Free cash flow to equity has increased by 116.8% to $228.3 million (2022: $105.3 million). The increase is calculated as the movement
in free cash flow to equity year-on-year divided by the free cash flow to equity in the prior year. A reconciliation of free cash flow to
equity to its closest IFRS measure is shown in the table above. KPI

Reconciliation of reported and adjusted working capital movement

Reported working capital movement

Increase/(decrease) in respect of acquisitions and divestitures

(Decrease)/increase in termination benefits

(Decrease) in respect of other adjusting items

Adjusted working capital movement

Cash outflows from adjusting items

Year ended 31 December

2023
$m

(1.3)

3.1

(6.1)

(3.8)

(8.1)

2022
$m

(62.5)

(39.2)

3.1

–

(98.6)

Year ended 31 December

2023
$m

(13.6)

(3.4)

(6.6)

2022
$m

(5.0)

(10.2)

–

(23.6)

(15.2)

Cash flow conversion

Operating cash conversion1

Equity cash conversion1

Year ended 31 December

2023

2022

83.7%

59.5%

83.3%

41.0%

Acquisition and divestitures adjustments

Termination benefits and related costs adjustments

Other adjusting items

Cash outflows from adjusting items

1. ‘Adjusted cash conversion’, previously calculated as Operating cash flow/Adjusted EBITDA, has been replaced by ‘Operating cash conversion’ and is calculated as

Operating cash flow/Adjusted operating profit. In addition, a new measure has been introduced. ‘Equity cash conversion’ is calculated as Free cash flow to equity/
Adjusted net profit. The Directors consider that these changes result in consistency of cash flow measures and provide improved definition, clarity and insight.
Refer to the next page for the calculations of Operating cash flow and Free cash flow to equity.

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Responsible business review

We are here
for good

Convatec Cares

Karim Bitar
CEO
Chair, ESG Steering Committee

Doing business responsibly and generating value sustainably underpins
our forever caring promise to patients and customers. Convatec Cares is
our approach to integrating environmental, social and governance (ESG)
practices across the Company.

Our commitment is to ensure that words
are backed up with actions – recognising
the benefits to all stakeholders in
doing so; whether that’s more engaged
employees, better access to capital,
strengthened investor confidence, or a
stronger, healthier brand and reputation.
Because it’s all this that drives Convatec’s
value for the long term – and that’s
what makes ESG central to our vision:
Pioneering trusted medical solutions
to improve the lives we touch.

Karim Bitar, CEO
Chair, ESG Steering Committee

“Our approach to ESG
aims to drive the actions
necessary to help us
realise our vision in a way
that engenders trust with
all our stakeholders.”

In recent years, we’ve transformed
our Company, refreshed our strategy
and introduced our forever caring
promise. At the same time, we have
advanced operational, people-led and
environmental topics that are most
important to us and our stakeholders,
including customers, colleagues,
communities and shareholders.

Forever caring is the promise we make to
customers and those we serve every day
and underpins our commitment to being
a responsible business. We’re proud of
the progress achieved so far – thanks
to the care and determination of our
people. We also recognise there’s more
to do and are committed to building trust
and confidence by acting on issues that
are important to our stakeholders, and
meeting standards that demonstrate
these commitments.

We are making an increasingly positive
difference to our stakeholders and the
world around us – not only through our
products and services, but by the way
in which we operate.

Convatec Cares – our approach to ESG –
sets out the commitments and activities
across the Company that enable us to
fulfil our forever caring promise and
integrate ESG practices throughout
our organisation.

→ For a short summary of
our ESG journey click here
www.convatecgroup.com/
sustainability/our-frameworks-and-targets/

→ To find out more
about Convatec Cares,
watch our short video
www.convatecgroup.com/
sustainability/our-frameworks-and-targets/

Overview

Strategic report

Governance

Financial statements

Additional information

CONVATEC CARES: OUR ESG FRAMEWORK

Integrated within our FISBE strategy and informed
by our refreshed materiality matrix (page 44),
Convatec Cares sets out our commitments and
activities that are supporting our pivot to sustainable
and profitable growth. It focuses on the topics that
are material for Convatec and our stakeholders
and considers a dynamic range of societal and
planetary needs.

ESG mission

Underpinned by our values (page 52), our ESG
mission is to drive progress towards our vision of
Pioneering trusted medical solutions to improve
the lives we touch by aligning and enabling ESG-
related initiatives for the benefit of our customers,
colleagues, communities and shareholders.
Our ESG framework is built around four pillars.

UST O

TRAT E G

S
E
B
S

I
F

Pioneering
trusted medical
solutions
to improve the
lives we touch

OREVER C A R I N

ITIE

M ERCE

ESG PILLARS

Delivering for
our customers
Innovative patient-centric
products, services and
solutions that improve lives
(see page 48)

Enabling our people
to thrive Ensuring the health,
safety and wellbeing of our
people and using their talent
for good (see page 52)

Behaving ethically and
transparently
Protecting and enhancing
our reputation with all
our stakeholders (see page 56)

Protecting the planet and
supporting communities
How we operate and
our contribution to the
world around us
(see page 58)

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Overview

Strategic report

Governance

Financial statements

Additional information

Responsible business review continued

ESG GOVERNANCE: BOARD AND MANAGEMENT

ROLE OF
THE BOARD

Role of the Board

Our Board has ultimate oversight of ESG, including climate-related risks and opportunities, at
Convatec. The Executive Director responsible for these issues is our CEO, Karim Bitar. As a Board
member, he brings together continuity and responsibility for our ESG strategy. The Board reviews
progress in respect of the execution of our ESG strategy, including two formal touchpoints for
ESG updates.

See pages 92 to 103 for information about the Board’s activities in this area during 2023.

Role of the Audit and Risk Committee

The Board’s Audit and Risk Committee (ARC) met seven times during the year and is responsible
for reviewing and approving our ESG and Task Force on Climate-related Financial Disclosures
(TCFD) reporting, in terms of data integrity and compliance with regulatory requirements, as
well as for oversight of the annual assurance of the Responsible business review (pages 38 to 65).

See page 115 for more information on the ARC’s activities in this area.

ROLE OF
MANAGEMENT

Our ESG Steering Committee is chaired by the CEO and includes six members of our Convatec
Executive Leadership Team (CELT). Committee members provide ESG stewardship across a range
of areas for Convatec.

The Committee oversees the formulation and delivery of the ESG strategy and meets three times
a year. It drives the strategy, progress and required actions to manage our ESG-related risks and
capitalise on opportunities. This is then reported to CELT for discussion, review and challenge.
The Committee updates the Board twice a year. Together, these measures ensure that all members
of CELT understand our business response to ESG topics and are committed to delivering against
our commitments to become a more sustainable business.

The Committee oversees four sub-groups, which are composed of leaders across the business.
The TCFD working group, which includes leaders from Risk, Finance and Operations teams, met
quarterly in 2023 to advance the essential work needed to meet TCFD requirements. The Human
Rights Committee, which comprises leaders from HR, Legal, Compliance, Procurement and Supply
Chain teams, monitors progress on protecting labour and human rights in our operations and
supply chain and met twice in 2023. The Diversity, Equity & Inclusion (DE&I) and Wellbeing Council
meets annually, alongside regular engagement with CELT and the Nomination Committee on
relevant DE&I topics. In 2023, we launched a Product Sustainability and Scope 3 emissions working
group, which met three times in 2023 to develop an action plan for addressing Scope 3 emissions
as part of Convatec’s net zero transition plan.

Our central ESG team works across Convatec and brings together stakeholder activities, initiatives
and priorities, and supports the work of the Committee. We also have a dedicated Environment,
Health and Safety (EHS) team within our Global Quality & Operations function. They work across
our manufacturing and Research & Development (R&D) facilities to deliver environmental
management systems in line with our corporate requirements, aligned with ISO 14001.

INTEGRATION
INTO OUR
FISBE STRATEGY

In 2023, ESG was elevated in our Company-wide strategic planning process, with a focus on its role
in supporting execution in our FISBE strategy. Leaders from each business unit and functional area
revisited ESG priorities set in 2022 to ensure their alignment with business plans and to update
internal targets, initiatives and allocated resources. The process was designed to prioritise the
risks and opportunities presented by our ESG commitments, as well as to clarify the necessary
processes and activities needed to deliver on our targets and transition to a low-carbon economy.

Given the importance, complexity and dynamic nature of ESG considerations, the strategic
planning process also clarified various roles and responsibilities for positioning the Company
to meet our targets, particularly related to our net zero transition plan, see pages 58 to 60.

Board

Audit and
Risk
Committee

ESG Steering
Committee
Human Rights Committee

DE&I and Wellbeing Council

TCFD working group

Product Sustainability
working group

Strategic planning and
investment cycle

ESG stakeholders
drive progress,
performance,
compliance and
metrics

ESG STEERING COMMITTEE

Responsibilities
– Custodian of ESG strategy and objectives,

including our approach to key sustainability
topics such as:

– Our impact on the environment and

communities, including transition planning

– Engagement with the workforce and DE&I

and Wellbeing

– Human rights in the supply chain

– Relevant key stakeholder engagement

across Convatec

– Establishes and oversees sub-groups to drive

execution and focus in particular areas

ESG Steering
Committee

1 CEO (Chair)

6 Chief People Officer

2 CFO

3 Chief Quality &

Operations Officer

4 Chief of Corporate Strategy
& Business Development
and General Counsel

5 Chief Technology Officer

and Head of R&D

7 Head of Investor

Relations, Corporate
Communications
& Treasury1

8 Head of Global

Communications,
Engagement & ESG1

9 Company Secretary1

Details on the relevant skills and experience of our
CELT members can be found on pages 98 and 99. The VP,
Internal Audit, Enterprise Risk & Insurance regularly attends
the ESG Steering Committee, with particular focus on climate-
related risks and opportunities. ESG assurance activity is also
supported through the Group Financial Controller.

In 2024, the ESG Steering Committee will continue to
facilitate our ESG agenda through a sustained focus
on net zero transition planning, ensuring readiness for
forthcoming regulatory compliance considerations and
further integrating ESG practices across direct operations
and our value chain, as well as other measures.

1. Not members of CELT.

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Overview

Strategic report

Governance

Financial statements

Additional information

Stakeholder

Importance of stakeholders
and their key needs

How we engage

Outcomes

B2B customers

Investors and
debt providers

Our B2B customers are critical to
ensuring that Convatec’s innovative
products can be used with other
companies’ own products to address
patient needs. They need:

– Innovative products for use with

their own products

– Long-term relationships
– Fair pricing and commercial terms

Our investors and debt providers are
critical to supporting and maintaining
Convatec’s ability to operate and
deliver. They need:

– A clear corporate strategy and

delivery on that strategy

– Sustainable returns
– Responsible business practices
– Cash flow to pay dividends and

service debt obligations

– Commercial dialogue
and partnerships

– Development of long-term

partnerships focused on addressing
patient needs

– Annual General Meeting
– Active investor relations

programme: in 2023 we hosted
more than 260 investor meetings
including seven roadshows and
participation in 13 conferences

– Post-roadshow investor surveys plus
feedback from corporate brokers
– Relationship-led engagement with

debt providers

– Access to the Chair of the

Board of Directors, and other
Board members

– Quality materials to ensure the
capital markets appreciate the
health of the business and its
future prospects

– Strategy, Board composition
and succession planning and
remuneration policy take into
account feedback from investors

– Read more about our capital
allocation policy on page 11

Evaluators who hold us to account for our performance

Regulators

Regulatory bodies are critical to our
licence to operate and ability to deliver
for customers. They need:

– Regular and ad hoc dialogue in
relation to product approvals
and other matters

– Implementation of responsible
and diligent business practices

– Compliance with legislation

and regulation

– Input into relevant industry

consultations

Governments

– Adherence to legislation

and regulation

– Proactive engagement when

challenges arise

Governments set out legislative and
other frameworks which underpin our
work. They need:

– Responsible business practices
– Employment
– Income generation via taxes

– Ad hoc dialogue in relation to

specific matters, including fiscal
(e.g. taxation), employment
(e.g. apprenticeships) and
corporate governance

– Making a socio-economic
contribution to a range of
stakeholders, including through
paying taxes as described on
page 63

Responsible business review continued

Engaging stakeholders

We proactively engage with our stakeholders to understand their
perspectives, and build positive relationships which inform our practices
and decision-making.

Stakeholder

Importance of stakeholders
and their key needs

How we engage

Outcomes

The people who use our products and rely on our services

Customers/
patients

Our products and services are
designed for and delivered to our
customers and patients, who have
chronic conditions. They need:

– Safe, effective, accessible
and innovative products
– Support and information

– Direct-to-consumer channels
– Home delivery companies
– Specialist nurses and call centres
– Targeted consumer research
– Responding to specific

consumer questions, feedback
and complaints

– Training and online support

Direct enablers who help us deliver

– Ongoing clinical and commercial

dialogue

– Targeted research
– Specialist training programmes
– Advisory boards
– Key opinion leader meetings

– Incorporation of relevant consumer

feedback in our research and
development processes
– Service provision reviews

based on customer feedback,
and implementation of
enhancements as required
– Tracking and management

of customer issues

– Product and service insights inform
our development processes and our
day-to-day operations

Healthcare
professionals

Our people

Suppliers and
other supply
chain partners

Channel
partners1

Healthcare professionals provide
valuable insight into our product
development and help to ensure that
our products reach a wide range of
patients. They need:

– Products and services that meet
patients’ needs and benefit the
healthcare delivery system

– Fair pricing

Our employees bring our vision, values
and FISBE strategy to life, fostering an
inclusive and supportive culture that
enables them to deliver for customers
and patients. They need:

– Safe, healthy, ethical and fair

working environment

– Focus on DE&I and wellbeing
– Ability to make a difference to the
people who rely on our products
and services

– Career growth opportunities
– Attractive reward and recognition

Our suppliers and partners are
critical to Convatec’s ability to deliver
our products and services to our
customers and patients. They need:

– Long-term relationships
– Fair pricing and commercial terms
– Predictable business
– Transparency on suppliers’ expected

ESG standards

Our channel partners are critical to
ensure that Convatec’s products and
services are available to those with
chronic conditions. They need:

– Effective, competitively priced

products

– Fair pricing and commercial terms
– Continuity of supply

– Group-wide interaction via our

– Incorporation of insights to

intranet, app and regular town halls

– Employee recognition activities
– DE&I and wellbeing initiatives
– Customer stories
– Employee surveys
– Union representation and

works councils (where relevant)

– Board-level engagement

programme

– Performance reviews
– Compliance helpline and website

(Speak up)

– Commercial dialogue
– Supplier due diligence,
assessments and audits

shape our people strategy, talent
processes and development/
training programmes
– Ensure a cadence of

communications and engagement
that encompasses employee
feedback

– Read more about how we enable
our people to thrive on pages 52
to 55

– Development of valuable
partnerships to address
consumers’ needs

– Value chain emissions reporting
– Supplier awards
– Read more on behaving ethically
and transparently on pages 56
and 57

– Commercial dialogue
– Marketing activities
– Tender processes
– Distributor due diligence
and compliance training

– Quarterly reviews with partners

– Continued inclusion in tender

processes

– Development of valuable
relationships to address
consumer needs

Communities

Communities are core to our people
and planet commitments. They need:

– Employment opportunities
– Medical education
– Active management of
environmental impact
from operations

– Ad hoc dialogue in relation

– Investing to enhance the

to specific matters

communities where we operate

– Support for a range of medical

– Building our reputation in

education initiatives

– Charitable partnerships and

our communities and across
broader society

donations, including NGO partners

– Decarbonisation/net zero plans

Industry bodies

Industry bodies help us to ensure
that our interests are understood and
effectively communicated. They need:

– High-quality input into industry

policies and standards development

– Proactive engagement in relation

to relevant issues

– Membership of several industry
bodies, including Association of
British HealthTech Industries,
MedTech Europe, APACMed and
AdvaMed

– Participation in discussions in

relation to industry issues, including
best practice

– Contributing to improved

understanding of key industry
issues

– Helping to shape relevant agendas

and standards

Convatec Group Plc Section 172 statement

Section 172 of the Companies Act 2006 (the Act) requires each of our Directors to act in a way that he or she considers,
in good faith, would most likely promote Convatec’s success for the benefit of its shareholders as a whole, having regard
to other stakeholders. Section 172 requires our Directors to have specific regard, amongst others, to the matters set out
in section 172(1)(a-f) of the Act. On pages 42 and 43 we explain how our Board engages with stakeholders to gain an
understanding of stakeholder issues and, during the year, discharged its duty pursuant to Section 172 of the Act.

On these pages, we identify our stakeholders and how Convatec engages with them, further detailing within our
ESG materiality matrix on page 44 what we believe to be the key issues to our stakeholders. As we continue our journey
to pivot to sustainable and profitable growth, we are mindful of the importance of staying aware and responsive to
stakeholder needs.

The Directors acknowledge that every decision made will not necessarily result in a positive outcome for all stakeholders;
however, the Board aims to make well-considered decisions consistent with our vision, promise, strategy and values.

1. Including distributors, large buying organisations, integrated delivery networks, hospitals and national and regional payors.

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Overview

Strategic report

Governance

Financial statements

Additional information

Responsible business review continued

IDENTIFYING KEY ISSUES FOR STAKEHOLDERS

SUPPORTING THE UNITED NATIONS SUSTAINABLE DEVELOPMENT GOALS

Our ESG focus is on the operational, people-led
and environmental issues that are most material
to us and our stakeholders.

We regularly engage stakeholders (see page 42)
and, in 2023, reassessed ESG materiality. This helped
us to identify the most important issues for Convatec
as they relate to business success and our impact on
our value chain, people and the planet. The process
was guided by third-party expert support and aligned
to a range of good practice and standards.

The process involved document research (policies,
industry trends, regulatory horizon), engagement with
more than 100 stakeholders and an assessment of
priority topics for Convatec, our customers, colleagues,
communities and shareholders. The matrix was
reviewed and approved by our ESG Steering Committee
and Board. Insights are aligned with our approach
to enterprise risk management and established
corporate governance.

We will use the findings to strengthen stakeholder
engagement in the coming years and ensure alignment
with emerging disclosure requirements.

ESG MATERIALITY MATRIX

Product quality and patient
safety

10 Climate change

2 Responsible business

11 Corporate governance

Sustainable product and
packaging design (circular
economy)

Workers elsewhere in the
value chain (inc. health
and safety)

4 Developing user-centric

solutions

13 Waste (operational)

5 Customer access and

affordability

14 Water (operational)

6 Talent attraction and

development

15 Geopolitical risks and value

chain resilience

7 Human rights and labour
rights in own workforce

16 Local community
engagement

8 Diversity, equity & inclusion

and wellbeing

17 Natural capital and

biodiversity/ecosystems

9 Data privacy and
cybersecurity

t
e
n
a
l
p
d
n
a
e
l
p
o
e
p
n
o
t
c
a
p
m

Impact on the business

We anticipate conducting our next materiality
exercise in 2026, aligned to regulatory expectations
at that time, and to support the continued evolution
of our approach to ESG.

KEY

Products & customer

Environmental

Governance

Cross-cutting

Social

We support the United Nations Sustainable Development
Goals (SDGs) which aim to align governments, businesses
and the civil society sector in their efforts to end poverty, fight
inequality and address climate change. As a supporter since
2018, Convatec joins over 15,000 companies as a participant in
the UN Global Compact (UNGC) in which we pledge to follow the
UNGC’s ten principles on human rights, labour, environment and
anti-corruption. Our UNGC Annual Communication on Progress

can be found at www.convatecgroup.com/sustainability/esg-
reports-and-data and on the UNGC website.

Though all 17 goals are interlinked and important to
stakeholders, we have prioritised six goals where we
can contribute to a more sustainable future:

SDG target

Contributing activity and policies

SDG 3.4: By 2030, reduce by one third premature
mortality from non-communicable diseases
through prevention and treatment and promote
mental health and well-being

– Patients and HCPs served
– Improving efficacy and safety of our products through innovation
– Supporting wellbeing of colleagues (page 54)
– Improving access to products and services by focusing on

SDG 3.8: Achieve universal health coverage,
including financial risk protection, access to
quality essential health-care services and access
to safe, effective, quality and affordable essential
medicines and vaccines for all

affordability (page 50), supply chain (page 51) and education
(page 63)

– Vitality Index (page 48)
– Quality target (reducing complaints per million) (page 49)
– Target to reduce voluntary turnover (page 52)

SDG 4.4: By 2030, substantially increase the
number of youth and adults who have relevant
skills, including technical and vocational skills, for
employment, decent jobs and entrepreneurship

– Apprenticeship programmes (page 53)
– Building capabilities of our people (page 53)
– Medical education (page 63)
– NGO partnerships (page 64)

SDG 8.5: By 2030, achieve full and productive
employment and decent work for all women and
men, including for young people and persons with
disabilities, and equal pay for work of equal value

– Strengthened engagement, audit and risk assessment

of suppliers (page 57)

– Expanding apprenticeship programmes (page 53)
– Ensured 100% of our locations at or above the living wage

SDG 8.7: Take immediate and effective measures
to eradicate forced labour, end modern slavery
and human trafficking and secure the prohibition
and elimination of the worst forms of child labour,
including recruitment and use of child soldiers,
and by 2025 end child labour in all its forms

SDG 8.8: Protect labour rights and promote safe
and secure working environments for all workers,
including migrant workers, in particular women
migrants, and those in precarious employment

SDG 10.2: By 2030, empower and promote the
social, economic and political inclusion of all,
irrespective of age, sex, disability, race, ethnicity,
origin, religion or economic or other status

SDG 10.4: Adopt policies, especially fiscal, wage
and social protection policies, and progressively
achieve greater equality

(page 54)

– Health and safety programming (page 55)
– Updated Code of Conduct; Human Rights & Labour Standards

Policy; and Global Third Party Manual

– Human Resources policies

– Diversity, equity & inclusion and wellbeing commitments

(page 54)

– Strengthened and expanded our employee resource groups

(page 54)

– Our products and services help people with chronic

conditions regain increased mobility and ability to partake
in societal activities

– Updated hiring practices to reduce barriers and increase

diversity (page 54)

– Maintain a target for women in senior leadership
– Gender pay gap reporting

SDG 12.5: By 2030, substantially reduce waste
generation through prevention, reduction,
recycling and reuse

SDG 12.6: Encourage companies, especially large
and transnational companies, to adopt sustainable
practices and to integrate sustainability information
into their reporting cycle

– Waste, water and packaging waste reduction plans developed

(page 62)

– Transition plan to meet our net zero target (page 58)
– Enhanced the data completeness of our digital product

sustainability tool (page 50)

– Product sustainability working group drives the Scope 3

emissions reduction levers to meet our net zero target (page 59)

SDG 13.3: Improve education, awareness-raising
and human and institutional capacity on climate
change mitigation, adaptation, impact reduction
and early warning

– Increased depth of internal communications on climate change

topics such as COP28, driving tips, and the SBT process to engage
employees in our commitments

– Included educational resources as part of ESG Steering

Committee meetings and Board updates

– Working with our suppliers on emissions reductions
– Science-based targets and aligning with the UK Transition

Plan Taskforce guidance (page 58)

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Overview

Strategic report

Governance

Financial statements

Additional information

Responsible business review continued

Our ESG targets

We are committed to sharing progress towards our ESG
targets and milestones. We track our progress throughout
the year and report to management and the Board.

PROGRESS KEY

Achieved

New

In progress

The 2023 progress against a select set of target metrics have been reviewed as part of the external
assurance process. For further details see the assurance statement on page 65 and basis of reporting
at www.convatecgroup.com/sustainability/esg-reports-and-data

Delivering for our customers

Target

Quality: Reduce complaints per million (CPM) by 8% for 2023 against
a 2022 baseline

Progress in 2023

12.2% (2022: 10.0%)1

Reduce complaints per million (CPM) by 8% for 2024 against a 2023 baseline

Replaces 1 above

Product vitality: Vitality Index of 30% by Q4 2025

27% (2022: 26%)

Product development:

6 new products assessed by the GDGs

Expand use of Green Design Guidelines (GDGs) digital tools, with at least five
new product launches assessed by Q4 2023

Product development:

Replaces 3 above

Ensure we have complete and actionable carbon intensity data recorded in
our digital product sustainability tool for all Convatec manufactured products
raw materials by Q4 2024. Ensure data is incorporated into our new product
design process for carbon footprinting by Q4 2024, as we continue to expand
the impact of the platform

Status

Page 49

Page 48

Page 50

Enabling our people to thrive

Target

4 Health and safety:

4.1 Maintain an annual Operations Hazard Observation Rate above 200
per 200,000 hours worked

4.2 Sustain Operations Lost Time Injury Rate below 0.22 by Q4 2025

265 per 200,000 hours worked
(2022: 234)

0.22 per 200,000 hours worked
(2022: 0.20)

5 Diversity, equity & inclusion and wellbeing:

44% (2022: 38%)

5.1 At least 40% females in senior management by Q4 2024

50% of senior management are female by Q4 2027

Replaces 5.1 above

At least 25% of senior management are from ethnic minority/under-
represented groups by Q4 2027

Self-ID campaign

5.2 Reduce voluntary turnover to less than 10% by Q4 2023

10.0% (2022: 12.9%)

Sustain voluntary turnover at 10% or less by Q4 2027

Replaces 5.2 above

Page 55

Page 54

Page 52

Behaving ethically and transparently

Target

Human rights:

6.1 Launch annual compulsory training programme on Human Rights
for all employees by Q4 2023

Progress in 2023

Status

Launched Human Rights training
to all employees

6.2 Strengthen our risk management practices focused on labour standards
and modern slavery through our procurement and supply chain, including
through the introduction of a new responsible supplier assessment
platform by Q2 2023

Integrated use of risk assessment
platform in our supplier engagement
programme. Engaged with key
suppliers to join the platform.

6.3 Ensure that supplier’s sites covering 80% of spend across direct,
external manufacturing and logistics are registered with our risk
assessment platform by end Q4 2025

2023 is our baseline year

Code of conduct:

7.1 Ensure at least 95% of employees trained on an annual basis
by Q4 2023 and in subsequent years

Procurement and supply chain:

8.1 Ensure that 80% of Convatec’s in-scope spend is with suppliers with
whom we have engaged to request their participation in our EcoVadis
platform by Q4 2023

90% trained in 2023 (2022: 96%)
Change attributed to the transition to
a new learning management system.

89% of in-scope spend supported
by suppliers engaged to participate
with EcoVadis

8.2 Ensure that suppliers covering 60% of our Scope 3 category 1
emissions have committed to set science-based targets by end Q4 2026

Commenced new engagement
programme with suppliers.

Suppliers covering 19% of our category
1 emissions have committed to set
near-term science-based targets at
end Q3 2023

Protecting the planet and supporting communities

Target

Emission reduction:

See below

9.1 Achieve net zero carbon (in line with our SBTi target) by 2045

9.2 Reduce our combined Scope 1 and 2 emissions by 70% against
a 2021 baseline, in line with our SBTs, by 2030

55%2 (2022: 32%)

9.3 Reduce our Scope 3 emissions by 52% per sold product against a 2021
baseline, in line with our SBTs, by 2030

Validated target with SBTi

Science-based target commitment:

See 9.3 above

10.1 Set quantitative targets for Scope 3 GHG emissions, against
a 2021 baseline, aligned with the SBT criteria by Q4 2023

Achieved validated Scope 1, 2
and 3 targets in December 2023

Launched three-year, $2million
partnership with international NGO,
Partners In Health

Community contributions:

11.1 Establish new NGO partnership(s) and funding commitments
by Q4 2022

11.2 Contribute $2 million to our community partners to improve lives
by Q4 2025

See above

11.3 Contribute responsibly to a range of HCP and patient education
programmes. Set specific targets for 2023-25 on reach and impact

Approximately 240,000 HCPs and
patients participated in educational
programming led by Convatec.

Medical education:

See 11.3 above

12.1 Reach more than 500,000 healthcare professionals with medical
education programmes per year by 2027

12.2 Expand healthcare professional education programmes through the
development of a global medical education digital platform and review of
activity to enhance impact by end 2024

Ongoing development of Medical
& Clinical Affairs capabilities

Community impact:

By 2027, touch one million lives in our communities through medical
education programming and support of strategic community partners

Strengthened programmes
and partnerships

Page 56

Page 57

Page 56

Page 61

Page 57

Page 58

Page 60

Page 61

Page 58

Page 63

Progress in 2023

Status

Progress in 2023

Status

10.2 Achieve validated SBT for Scope 1, 2 and 3 emissions by Q4 2023

1. Excluding exit from hospital care and associated industrial sales.

2. 35% in 2023 vs 2022.

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Overview

Strategic report

Governance

Financial statements

Additional information

Responsible business review – customers

DELIVERING
FOR OUR
CUSTOMERS

Innovative and patient-centric
products, services and solutions
that improve lives

Dr. Divakar Ramakrishnan
EVP, Chief Technology Officer and
Head of Research & Development

“Forever caring means we will
never stop listening, learning
and improving our solutions for
customers and patients. Today,
we are working closer than ever
before with our customers.
We put their needs at the heart
of our innovation so that more
people can live their lives to the
fullest. We’re embedding an
innovation mindset and continue
to prioritise safety, quality and
efficacy in our solutions.”

2023 highlights
– Launched six new products
– Added antimicrobial nitric oxide
technology to our R&D portfolio

– Rolled out new customer

loyalty programme

– Enhanced quality system
– Enhanced data completeness in

our digital product sustainability tool
and assessed six projects

2024 priorities
– Support roll out of new products and

continue to develop our product pipeline

– Continue focus on product quality,

efficacy and safety

– Advance our focus on customer loyalty
– Strengthen clinical and new product

research capabilities

– Continuous improvement: While
we are building momentum and
in a position where we are now
developing and launching multiple
medical technology platforms each
year, we are also identifying learnings
to continuously improve our overall
new product scale-up process. We have
begun incorporating these learnings
into our IDEAL stage gate review
process, as well as our overall new
product operating system spanning
capabilities, metrics, governance, tools
and infrastructure. This will help ensure
we are rapidly and effectively driving
continuous improvement in terms of
quality, speed and value across our
innovation portfolio.

New products and solutions

In 2023, we launched six new products.
We also provided new infusion sets
to support four new pump launches.
Our new products offer significant
benefits for the user. ConvaFoam™
offers customers a broad portfolio of
dressings that provide longer wear times
due to better absorption and improved
adhesive technology and GentleCath Air™
for Women 2.0, is our improved female
compact catheter offering.

During 2023, a total of 82 patent filings
were made (2022: 83) and ideation has
been supported by new capabilities
in preclinical research that looks at
underlying physiological processes,
enabling our engineers to create highly
targeted solutions to address the most
challenging problems.

Convatec continued to strengthen
strategic partnerships in 2023. Partnering
with Tandem Diabetes Care, Convatec
supported the production of Tandem
Mobi, the world’s smallest durable insulin
delivery system. Specifically for Tandem
Mobi, Convatec developed new, kink-free
tubing, with discretion and flexibility. The
new insulin pump system aims to provide
people living with diabetes with new
options in wearability, the flexibility to
disconnect, and full smartphone control.

Innovation journey

To fulfil our vision and drive growth,
we continue to strengthen our research
and development (R&D) capabilities,
alongside bringing new products to
market. We have invested $104 million
(2022: $92 million) in 2023 in (adjusted)
R&D and continued to make progress
towards our goal of reaching and
sustaining a 30% Vitality Index by 2025.
Our approach to innovation continues to
build momentum in the following ways:

– Increased investment: We have

more than doubled spend on R&D
investment since 2019, enabling
our new operating model which
integrates R&D teams across functions
to leverage shared capabilities with
cross-functional reviews, new product
development process gate reviews
and semi-annual portfolio reviews.
– Innovation mindset: We recognise
that the users of our solutions are
people, not just patients. Our solutions
therefore involve digital and service
offerings as well as our products.
We also understand that many of
our products are produced and used
in high volume and must be of the
highest quality.

– Simplified processes: We use a single
business and product development
process across all four product
categories, from ideation through
to launch, that we refer to as IDEAL.
This process goes beyond R&D and
involves commercial, technical and
operations teams.

– Leadership and competencies:

We have attracted global talent for
R&D, medical, regulatory, intellectual
property and portfolio management.
We have five technology centres: one
in the US (Boston), and the others
close to our manufacturing facilities
in the UK (Flintshire and Oxfordshire),
Denmark and Slovakia.

– Portfolio management: Our

investment must be properly managed
in order to maximise value for all
our stakeholders. It starts with
detailed regular reviews as described
above. We look through all projects
to prioritise where resources are
best deployed. In between reviews,
we have our budget and strategic
planning process and regular
engagement with the Board.

Convatec partnered with Beta Bionics in
2023 on the iLet Bionic Pancreas system,
the first and only automated insulin-
delivery system that determines 100%
of all insulin doses. Convatec is the sole
supplier for the infusion set used in
the system, which, by simplifying user
experience, aims to significantly improve
diabetes management and the quality
of life and convenience for people living
with diabetes. Our partnership with
AbbVie focused on the launch of drug
Produodopa for advanced Parkinson’s
disease in Japan, a continuous under-
the-skin drug infusion delivered via
a pump through Convatec’s neria™
guard infusion set.

Strategic investments

In 2023, Convatec acquired the anti-
infective nitric oxide technology platform
of 30 Technology Limited which includes
new product assets and research and
development in the anti-infective space.
The innovative technology platform
and new product pipeline complement
Convatec’s Advanced Wound Care
portfolio and strengthen our ability
to provide best-in-class solutions for
patients. Other potential applications for
this technology include the prevention
of urinary tract infections as well as other
transformative applications. For more
information on Advanced Wound Care,
see page 18.

Strengthened customer loyalty

In 2023, we strengthened our focus on
customer loyalty with a new programme
to embed customer Net Promoter Score
(cNPS), building on work in our Home
Services Group which has established
excellent practice in using cNPS to
continuously improve its customer
support. We have built on this with a
series of pulse surveys in the US and
Europe, reaching over 30,000 healthcare
professionals (HCP) and patients.

By actively listening to what our
customers are saying, and ensuring
we act on that feedback, our customer
loyalty programme will help us become
a more customer-centric organisation.

Product quality

Product quality is key for our customers
and vital in earning Convatec a
reputation as a trusted provider. We
have established quality certifications in
place across the business. In 2023, we
set an ESG target to reduce complaints
per million (CPM) by 8% against a 2022
baseline. We met this target with a 12.2%
reduction1. Please see page 65 for the
scope of our ESG assurance, basis of
reporting and ESG definitions.

Furthermore, in 2023, we continued to
build on our commitment to improve
quality by:

– Delivering on improvements of core
quality system processes to increase
efficiency and effectiveness of
problem solving

– Simplifying and standardising core
quality processes and tools across
the business

– Leveraging data analytics and

technology solutions to improve alert
timing, decision-making and increase
our pace of execution

– Enhancing internal problem-solving

capabilities and increasing robustness
in the areas of quality systems, quality
compliance and supplier quality

In 2024, we aim to further reduce CPM
and we will also further expand our
data segmentation capability to support
prioritisation and focus on targeted
improvements to maxmise impact on
the experience of our customers.

Product safety is also a key priority for
our customers and for our reputation
as a trusted provider. In 2023, we
successfully achieved recertification
of our quality system. Regulators
consider most of the products and
solutions we develop to be of low risk to
users. Nevertheless, we have a rigorous
and robust supplier audit mechanism
and quality management system. Notified
bodies, such as the British Standards
Institute (BSI) and GMED also review
our quality processes and procedures
on an annual basis. Moreover, our
quality compliance programme focuses
on continuously improving through
a rigorous corporate internal audit
programme. By strengthening our core
capabilities, this continually enhances
our overall quality culture.

We conducted a total of 98 audits
on suppliers during 2023 (2022: 153).
Our ability to perform onsite audits
improved in 2023, so we prioritised
onsite follow-ups with our critical
suppliers. We performed fewer audits
compared to 2022, due to the exit of
our hospital care business, which saw
a reduction in our supply base.

From time to time, it may be considered
necessary to conduct a product recall,
following a detailed internal quality
investigation led by our Quality,
Regulatory and Medical and Clinical
Affairs teams. Recalls are controlled
by standard operating procedures,
all of which underwent continuous
improvements in 2023 as part of our
focus to elevate standards across the
quality system. In 2023, we executed
three product recalls (2022: 11), including
a FDA Class 1 recall in the US for an
infusion set. Each of the three recalls
in 2023 occurred where the distributed
products did not meet the requirements
of our quality system and we took all
necessary steps to ensure customers and
patients were informed and supported.

1. Excluding exit from hospital care and associated industrial sales

Access to healthcare

Access to healthcare is a basic
human right that should be
available to all who need it. This
fundamental principle is integrated
in our vision and we run our business
to ensure the following:

1 Availability: We continue to evolve
our sales channels to best meet our
customers’ needs. As an example
of how we are progressing patient
and HCP support, our mobile apps
continue to enhance patient access for
Ostomy patients. Me+ nurses are able
to enhance the support they provide
through triaging challenging cases
for telehealth intervention to provide
support and guidance for patients
needing enhanced teaching and
troubleshooting. In Global Emerging
Markets (GEM), our HCP medical
educational training programmes
continue to expand access to products
through a standardised protocol-of-
care, such as our Wound Hygiene
Acadamy. These programmes are
rapidly developing where access
has historically been limited.

2 Adaptability: Based on feedback

from users and healthcare
professionals, our products address a
broad range of patient needs reflecting
the different challenges that individual
users experience. Getting the range of
products right relies on research and
stakeholder engagement. For example,
in Ostomy Care, we launched a medical
education series on sexual health with
a successful presentation at Wound
and Ostomy Care Nursing (WOCN)
2023 and regional engagement
programmes to enhance the ability of
HCP’s to provide appropriate care and
guidance to ostomates on intimacy.

3 Usability: Products may ’do a job’
medically but given the social and
emotional context of the people we
serve, we need to provide solutions
which go beyond the provision
of a functional device. To lower
access barriers, we help patients
identify the device which best suits
their needs, provide easy-to-follow
literature, videos and online support
and deliver millions of products a year.
In Ostomy Care, we developed the first
abdominal stoma model with finite
element analysis of our convex range,
in order to guide HCPs to understand
emerging evidence on when to use
and how to select convex products.
This translational approach is the first
stage in educating the HCP and then
the patient on appropriate product
selection by visualising recent research
from an international panel of experts.

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Overview

Strategic report

Governance

Financial statements

Additional information

Responsible business review – customers continued

4 Affordability: Affordability is

a key issue which we strive to address
through competitive pricing and
innovation to increase product
effectiveness and, as a result, reduce
healthcare costs and improve
patients’ lives. Our global Pricing
Centre of Excellence considers the
role of economic affordability in
product availability. We are launching
a new Reimbursement and Market
Access Centre of Excellence in 2024.
In Ostomy Care, we completed a
health economics outcomes research
project in Norway, demonstrating
the cost savings of moldable
technology compared to cut-to-fit
products currently on the market. In
China, we set up two Patient Access
Programmes (PAPs); firstly, an Ostomy
PAP for patients from poorer economic
backgrounds, providing access to
high-quality solutions and appropriate
medical knowledge. Secondly, an
Advanced Wound Care PAP which
focuses on children suffering from
burns injuries, by helping their physical
and psychological recovery. We invite
HCPs from burns wards to collect
treatment plans and jointly explore
alternative treatment methods.

Sustainable product design

Our IDEAL processes include a review
of the proposed materials against
certain externally compiled lists of
’substances of concern’, including the
requirements of California Proposition
65 and REACH25. This approach is
consolidated within our ethical issues
and new product design policy;
www.convatec.com/marketingzone/
mediadownload/?id=f82fbf09-66c4-4301-
805f-fad37047cc0f&lid=en-GB

We are focusing on key product
development priorities, while integrating
sustainability in line with our net zero
carbon transition plan (see page 58).
Where possible, we aim to lower the
carbon intensity of our products, guided
by data obtained through our digital
product sustainability tool, Green
Design Guidelines (GDGs) and life
cycle assessments.

Our GDGs were rolled out in 2022
and are an important part of our
IDEAL process, helping us systematically
examine the environmental impact
of our solutions and consider ways
to reduce their impact. In addition
to calculating carbon footprint,
the tool assesses the impact of our
products and packaging on water use,
circularity, substances of concern and
nonquantitative ’red flags’ (e.g. potential
use of substances which are fully legal,
but could be seen as less favourable to
the wider environment). The tool can
also assess sustainability factors of new
products compared to existing products.

We will continue to identify projects
that have the potential to reduce the
environmental footprint of our portfolio.
In 2023, we assessed six launches
alongside using the tool to evaluate
design changes.

Given our focus on patient safety
and the regulatory framework in
place for MedTech products, it is
not straightforward to change device
form and components. Extensive
requalification and reapproval of
products are necessary after any
change before modified products
can be launched. It can also be
problematic to include recycled content
in device materials due to regulatory
constraints regarding quality and
traceability. We are engaging with
industry alliances and partners in
the value chain with regards to the
development of materials and solutions
that support a net zero ambition.

Due to significant regulatory restrictions
on our industry and our priority focus
on safety, quality and efficacy in our
solutions, manufacturing environmentally
sustainable products is a challenge
we face along with our industry peers.

Sustainable packaging

Primary packaging is strongly
connected to the product, forming
a sterile barrier and is therefore an
essential component of our products and
packaging. We are reviewing our primary
packaging roadmap to increase its focus
on sustainability.

For example, in 2022 we commenced a
flow wrap project to eliminate PVC and
reduce packaging weight by almost 80%
on all baseplates in our Ostomy Care
portfolio. We have continued to roll-out
flow wrap this year and through the year
ahead. We have also strengthened our
packaging team further and elevated
our focus on packaging in our strategic
planning process and ESG governance.

Secondary and tertiary packaging:
100% of our cartons and shipping boxes
are paper-based and therefore recyclable.
Moving forward we’re focusing efforts to
reduce carton size and emissions, while
maximising space efficiently.

In addition, we are working with
suppliers that support our ambition
to achieve FSC/PEFC certification.
Our focus will be to achieve certification
as part of new product development
in the coming years.

We have strengthened the quality of our
Extended Producer Responsibility (EPR)
reporting by establishing an internal
digital product sustainability tool based
on product and packaging composition
at a component level. From 2024, this
will enable more precise calculation of
packaging weights and their relative
carbon footprint.

OUR SUSTAINABLE PACKAGING DESIGN PRINCIPLES

Simplify

As we transition away from existing packaging, we intend to simplify
operations and reduce costs.

Minimise pack size

Always ensure the package size is optimal.

Recycle ready

Increased focus on recyclability of materials.

Transition existing products

Move to smaller, recycle-ready packaging for existing products.

Clinical studies

We made significant progress in 2023
to ramp up clinical evidence generation;
starting nine clinical studies, including
a global randomised clinical trial, and
also delivered three healthy volunteer
studies (HVS). This work has resulted in
16 peer-reviewed publications and 28
scientific posters and presentations to
share evidence generation work. This
represents a significant increase to
previous years.

Our HVS work took place at our user
insights and evidence facilities, based
at our technology centre in Deeside,
Wales. The face-to-face interactions
with healthy volunteers allows us to
explore our current products and inform
new knowledge and insights for future
design to our portfolio. The clinical data
generated supplements existing pre-
clinical data on our products. To ensure
diversity in our clinical data, patients from
our ConvaClinics across Latin America are
also included in our clinical studies.

Use of animals in research

At Convatec, we are always looking for
ways to improve welfare and minimise
the use of animals in research. Consistent
with other leading organisations and
established practice, we have adopted
the 3Rs – replacement, refinement and
reduction of use of animals in research,
and continue to identify innovative
solutions to gain knowledge and support
regulatory submissions without the use
of live animal models.

Every effort is made to conduct as
much of our research with benchwork,
cell cultures, and where appropriate,
ex-vivo tissue models. When live animal
models are required, our research is
highly regulated to ensure responsible,
ethical and humane treatment by
following local ethical approval boards,
laws and regulations. Animal welfare is
a priority and we conduct our research
at reputable facilities and organisations
that are Assessment and Accreditation
of Laboratory Animal Care (AAALAC)
accredited (or equivalent) with fully
trained veterinarians and dedicated
welfare teams.

All medical devices are required to
show biocompatibility prior to approval
and use, per ISO 10993-1:2018. This
requirement is enforced by government
authorities and is part of the registration
process for medical devices. As part
of this requirement, certain biological
risks are required to be evaluated and
mitigated through the use of testing.
In some cases, some biological risks
are only able to be evaluated through
the use of defined and prescribed animal
tests. As such, when mandated we
will execute the critical biocompatible
verification tests required by the ISO
standards to ensure patient safety
and registration requirements.

We do not willingly perform any
animal testing in the development
or functional verification of our devices,
as described in our Ethical Issues and
New Product Development Policy, which
we refreshed in 2023, and can be found
at www.convatecgroup.com/investors/
governance/our-policies-and-statements.

To avoid the use of living animal studies,
in 2023 we used porcine (pig) ex-vivo
tissue models to assess urethral tissue
damaged by novel urinary catheters.
All ex-vivo models were collected from
animals that were being slaughtered for
the sole purpose of meat production. Our
ex-vivo tissue suppliers are either AAALAC
accredited or are registered to supply
animal by-products (EU Article 23, No.
1069/2009).

In 2023, as part of our biological risk
assessment to determine compatibility of
our devices within a biological system, we
conducted biocompatibility tests using
nine rabbits and 100 rodents (2022: 41
rabbits and 275 rodents). Additionally,
we conducted a performance and
efficiency study of infusion catheters
using two swine at Aalborg University
Hospital, Denmark (2022: two). All
studies were approved by local animal
welfare committees and/or responsible
government authorities.

Convatec Advanced Tissue Technologies
(ATT) solutions are derived from porcine
placentas. These are derived naturally
through the birthing process and
provided in partnership with a farm.
The placentas are subsequently stored
at ultra-low temperatures until required.
No swine are destroyed or affected in
the process.

Reliability of supply

Satisfying and exceeding our customer
expectations continues to be a top
priority. Throughout 2023, we’ve
continued to make progress in ensuring
product availability and reliable delivery.
Close collaboration across all relevant
teams enables us to plan for short,
medium and long-term requirements,
anticipating demand scenarios and
to ensure production, inventory and
logistics readiness. This is supported
by a rigorous performance framework
overseeing end-to-end reliability.

2023 saw the supply chain marketplace
recovery continue, notwithstanding
present challenges to shipping lanes
in the Middle East and the ongoing
conflict in the region. We have continued
to focus on strengthening resilience
throughout our supply chain, in the
areas of manufacturing capacity and
inventory. Our manufacturing network
has seen additional capacity come online
to support service and sales growth. We
are continuing our efforts to establish
dual source raw material on our strategic
raw materials.

We have a range of partnerships with
logistics providers to support our agility
to move products without delay, respond
to our customer expectations for delivery
lead-times and balance cost.

Data privacy

We operate a privacy governance
framework to ensure that we protect
and properly process personal data
and comply with all privacy regulations
including the European Union General
Data Protection Regulation (GDPR), the
California Consumer Privacy Act (CCPA)
and the Personal Information Protection
Law PIPL (China).

This framework includes policies,
procedures, controls and records
that are implemented on a global
basis. This is supported by mandatory
employee training, which forms part
of our induction process for new
employees and annual updates for
existing employees, underpinned
by our compliance programme.
Its implementation is overseen by
several internal governance groups,
including our Cybersecurity Steering
Committee. In 2023, we undertook
external, independent assessment
and shared findings with the Board,
including opportunities for continuous
improvement. We have undertaken a
range of activities to stengthen our data
privacy programme and maturity. Our
various data policies, procedures and
controls are regularly assessed by our
internal audit team. In certain markets,
trained privacy champions, supported
by third-party experts, provide first-line
local support on privacy matters. This
framework is continually reviewed to
ensure any changes in legislation are
incorporated and is regularly reviewed
for effectiveness by the ARC.

Our new data privacy governance
structure ensures global leadership
of privacy and compliance across
Convatec. This is achieved by
implementing executive leadership,
accountability and sponsorship for critical
personal data classes, by assigning four
CELT members accountable for ensuring
that the use of four critical personal
data classes across the organisation
is properly governed.

From time to time, we may experience
theft or inadvertent disclosure of data.
In 2023, there were three reportable
issues to data protection authorities (one
report was made jointly to the Dutch
and Belgian DPA, another to the Polish
DPA and one to the US authorities). No
significant volume of data subject access
requests were received. For further
information on our information systems,
security and privacy risk, see page 81.

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Overview

Strategic report

Governance

Financial statements

Additional information

Responsible business review – colleagues

ENABLING
OUR PEOPLE
TO THRIVE

Ensuring the health, safety and
wellbeing of our people and using
their talent for good

Moyra Withycombe
Interim Chief People Officer

“2023 has been a significant
year as we commenced roll-out
of our new HR operating model,
putting employee experience
at its heart. It’s an exciting time
for our people at Convatec as
we bring forever caring to life
and create a winning culture
where our people can learn,
grow, thrive and make
a real difference.”

2023 highlights
– Refreshed people strategy and commenced

roll-out of new HR operating model
– Advanced our journey to become
a listening organisation and drive
employee engagement

– Strengthened learning and development

to embed high-performing teams

– Sustained momentum across health and
safety, DE&I and Wellbeing initiatives
– Enhanced talent management practices

2024 priorities
– Integrate and scale up our
new HR operating model

– Roll-out new employee listening
platform to support ongoing
dialogue and feedback

– Focus on supporting colleagues,
leadership development and
career progression

– Continue to elevate DE&I
and Wellbeing practices

– Advance talent development

practices and initiatives

At the end of 2023 we employed
10,1361 people (2022: 10,036).
Employee turnover in 2023 was 18.8%2
(2022: 28.1%). Voluntary turnover in 2023
was 10.0% (2022: 12.9%). Information
on our employee profile is illustrated in
the graphs on the following pages, while
our definitions for employee count and
gender diversity are detailed on page 54.

While our employees are based in 45
countries, approximately 55% of our
workforce is employed at our nine
manufacturing locations (2022: 58%). In
addition to our facilities in the Dominican
Republic, Mexico and Slovakia, we have
manufacturing operations in the UK (two
locations), Denmark (two locations) and
Memphis, United States. Consistent with
our corporate theme of simplification
and productivity, in 2023, we closed
our manufacturing site in Roosendaal,
the Netherlands, moving operations to
our larger site in Michalovce, Slovakia.
Of countries with no manufacturing
operations, China has the largest
concentration of employees.

Our people strategy

Our people strategy has evolved to
reflect where we are as a company and
the prioritisation required to win in
the coming years. Our people mission
is: Creating a winning culture where our
people can learn, grow, thrive and make
a real difference. To do this we focus on
three core areas:

– Build key capabilities: Anticipate and
embed core capabilities to support
our pivot to sustainable and profitable
growth through high-performing
leadership, talent and teams.

– Shape our winning culture: Bring

our vision, promise, strategy, values
and team principles to life so we can
attract, engage and retain the diverse
talent we need to win.

– Unlock potential to enable change:
Build a best-in-class HR team, digital
capabilities and foundation that drives
simplification and productivity and
improves employee experience.

Build key capabilities

We are on a journey to strengthen
capabilities and build stronger integrated
talent practices through key focus
areas including: democratising learning
for all employees, building strong
leaders to deliver our winning culture,
and enhancing manager capability to
attract and retain employees.

We launched new learning tools to
support colleague development including
access to best-in-class content, facilitated
by industry experts. We have designed
and developed instructor-led sessions as
part of virtual onboarding that welcomes
our new joiners to Convatec. These
enable new recruits to meet one another,
build their Convatec knowledge and
connect with the right people to grow
their internal network.

We enhanced our talent review process
by identifying development opportunities
for potential successors for critical roles
in order to build a stronger senior leader
pipeline. Additionally, we invested in mid-
level leader development and launched
an online coaching platform.

To ensure more global and standardised
hiring practices, we designed and
launched a learning journey to support
hiring managers and teams with an
end-to-end hiring process including
structured interview guides. This effort
is a meaningful step forward to strengthen
manager capability and candidate
experience to attract the best talent.

This year we continued to embed our
high performing team principles, with
a broader population of leaders across
the business, focusing on leadership
capability to build an inclusive culture.
Our goal in 2024 is to cascade our team
principles throughout the organisation.

Our values

Our values ensure we all work and act in
ways that deliver our forever caring promise,
every day.

Improve care
We are passionate about serving and
supporting people with deeply personal
and challenging medical conditions

Deliver results
We consistently deliver excellent work, say
what we do and do what we say

Grow together
We celebrate diversity and respect one
another. We help our colleagues around us
grow, develop and thrive, so they can fulfil
their potential

Own it
We take personal ownership of all our work:
taking the initiative, innovating and never
settling for second best

Do what’s right
We behave ethically, are honest and
trustworthy, operate with the highest
standards of integrity, uphold policies and
make a positive difference

1. Includes eight Non-Executive Directors. For full breakdown, see page 54.
2. This includes voluntary and involuntary turnover.

Shape our winning culture

Our people strategy was designed to
help shape an engaging, inclusive and
high-performing culture that enables all
our people to give their best and fulfil
their potential wherever they work. Our
values guide our behaviours and how
we run our business every day. They are
embedded in our policies and processes,
including our performance reviews, which
assess both the ‘what’ and ‘how’ of each
employee’s contribution.

2023 saw us redouble efforts to strengthen
employee engagement. We continued our
live global town hall series which engages
offices and manufacturing sites around
the globe with updates, patient stories
and conversation with CELT. We also
introduced CELT Live, giving colleagues
the opportunity to ask questions directly
to leadership on any topic in an open
forum, virtual ‘coffee and conversation’
series, initially focused on our CEO and
CFO. We also hosted our third iteration of
the Big Conversation, an initiative designed
to bring teams together in leader-led
discussions around core topics including
our vision, promise, strategy, values and
team principles.

In July 2023, we launched a new employee
voice platform to embed employee Net
Promoter Score (eNPS), following our last
Organisational Health Index survey in
October 2022. The platform will support
our ambition to become a listening
organisation, using regular surveys aligned
to comprehensive external benchmarks.
A representative sample of around 3,800
colleagues were invited to participate in
our pilot during 2023. We conducted two
surveys in the year, with above benchmark
results and strong participation rates (more
than 90% on an aggregated basis). We will
establish our global baseline during 2024
and set an eNPS target for the business.

Recognising colleagues and their
contribution is important. In 2023,
Convatec Champions, our way of
celebrating colleagues who go the extra
mile, surpassed more than 10,000 awards
since its launch in September 2022.
Built on a best-in-class digital platform,
any colleague can make a nomination for
an award for good work and behaviours
aligned to our promise and values.

Reports are regularly provided to the Board
to help assess and monitor workplace
practices and culture, including progress
on our people strategy, employee
engagement, DE&I and Wellbeing, and on
talent and succession planning.

Unlock potential to enable change

Some of our systems and processes
have been difficult to navigate,
including manual ways of working
and legacy tools. This has prompted
us to optimise our employee service
experience through simplification and

digitisation as part of HR transformation,
including leveraging AI and machine
learning capabilities.

This year we have shifted to more global
processes and ways of working through
a refreshed HR operating model, so that
we can bring greater consistency to
how HR and other functions support
the business and improve colleague
and people manager experience, with
a focus on:

– Processes: Standardised ways of

working and leveraging digital tools,
underpinned by data driven insights

– Improving career pathways:

Bringing to life a new, consistent
career framework, helping colleagues
around the world understand more
clearly where their role currently fits,
and their future career planning and
development

– Simplifying global payroll offering:
Strengthened payroll compliance,
efficiency and consistency, governance
and insight through improved
automation

– Refreshing our HR operating model:

Brings together our HR people
partners, Centres of Excellence, HR
Service Delivery as well as our Global
Business Services capability to support
day-to-day HR solutions that benefit
everyone.

We continued to navigate a dynamic
talent and labour market, including the
impact of flexible and hybrid working,
automation and digitalisation, cost
of living and employee wellbeing and
mental health.

Building high-performing teams

We continued our high-performing teams
programme, including our partnership
with the University of Michigan Ross
Business School. Following the roll-out
of our high-performing team principles
in 2022, we continued to engage leaders
and their teams through 2023 in order
to embed the team principles across
Convatec, in support of our values
and behaviours (see page 52).

Next generation talent

Part of building core capabilities is
engaging with and training the next
generation. In Lisbon, Portugal we
welcomed the first cohort of six finance
graduate trainees who started their initial
placements at our GBS centre. The pilot
programme offers an opportunity for
talented graduates, with high potential
and strong critical thinking skills, to
develop and learn across a range of
finance teams.

Partnering with Coleg Cambria, we
have built an apprenticeship programme
for our manufacturing site in Wales,
UK. The three-year apprenticeship
programme, aimed at students and
young adults aged 16+, adds value
through approaching multiskilling
in a structured way. In 2023, the
Deeside site successfully recruited
one engineering apprentice, who will
be working within the maintenance
team at the site, bringing the total to
nine apprentices in engineering and
manufacturing, and more are in the
pipeline for 2024.

In 2023, the Michalovce site in Slovakia
continued its partnership with Technical
University Košice by supporting students
with their diploma theses. Biomedical
engineering and mechanical engineering
students participated in career days in
which the site hired two graduates from
the university in 2023 for critical positions
within Operations and Technology &
Innovation (T&I).

Our Haina site also supports engineering
careers, as part of the Educational
Committee for the free zone sector
with the major universities in Dominican
Republic, and hosts over 200 students
from five universities. After every
graduation, the site receives resumes
of new professionals to ensure an
eligible pool of early talent candidates
is available.

To encourage innovation among
students, Convatec hosted a hackathon
in Denmark, where university students
could participate in competitions and
workshops to develop infusion care
solutions related to product design,
digital support and sustainability. As a
result, our innovation team has further
developed an idea with the winning
team: an accessory for the product Neria
Guard™ to help people with weak fine
motor skills, for example Parkinson’s
patients, apply the infusion set to the
body without any help.

For the second year, we were pleased
to send a delegation to the One Young
World Summit in Belfast, UK. The annual
summit brings together young leaders
from around the world to work on social
action programmes.

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Overview

Strategic report

Governance

Financial statements

Additional information

Pay Gap Report, which can be found at
www.convatecgroup.com/sustainability/
esg-reports-and-data.

Our disclosure is enhanced to include
all UK-based entities, including those not
in scope of the statutory requirement.
Overall, we are pleased with the progress
we have made and will continue to
ensure this is an area of focus. We also
report gender pay gap in other markets
where there is a regulatory requirement,
such as France, Italy, Portugal and Spain.

Paying a living wage
For employees globally we continue
with our annual salary review increases
and are committed to providing fair pay
for our employees. Every two years we
conduct a global living wage assessment
to ensure that 100% of our locations
continue to pay at or above the national
or local living wage. Our next review will
be conducted in 2024. We have also been
confirmed as a ’real living wage’ employer
in the UK for the seventh consecutive
year and continue to work with our
contractors to ensure they pay their
employees at the same rates. We require
all our contractors to comply with local
laws on employment rights.

Cost of living
We understand concerns from our
employees about the cost of living.
As a company, we actively look at ways
to support our colleagues in line with
our core values and our forever caring
promise. In 2023, as well as maintaining
annual pay awards, we continued to
prioritise supporting employees in lower
grades through the compensation
cycle, conducted a mid-year review to
raise salaries that had fallen below our
stated ranges and raised awareness of
financial wellbeing support available as
part of our global employee assistance
programme (EAP), which included a
range of educational sessions and other
resources to support financial planning.

Responsible business review – colleagues continued

Diversity, Equity & Inclusion (DE&I)
and Wellbeing
We are proud of the progress we’re
making to advance DE&I and Wellbeing
at Convatec and deliver on our ambitious
commitments. We recognise the multiple
benefits of ensuring our business reflects
the diversity of customers and patients
we serve, while ensuring colleagues can
be themselves.

3 Support wellbeing as a priority

for colleagues

– Continued to embed flexible and hybrid

working as part of Our Work Life.

– Celebrated our fourth annual Convatec
Day, aligned to wellbeing and global
mental health awareness day.

– Strengthened our culture of

recognition with more than 10,000
awards through Convatec Champions.

4 Enhance our reputation

through leveraging our scale,
partnerships and programmes

– Consistent pay structure, benefits

and flexibility for employees aligned
to their role.

– Reviewed parental leave policies

in order to transition to equalised
maternity and paternity leave in the
coming years.

For more on our DE&I and Wellbeing
journey, go to www.convatecgroup. com/
sustainability/enabling-our-people/dei-
spotlight-page/

Increasing diversity
At 31 December 2023, women
represented 44% of our Board
membership (2022: 40%) and 44% of
our CELT and senior management team
(2022: 38%). Our gender diversity profile
at 31 December 2023 is found below.

Our gender pay gap

In 2023, the Remuneration Committee
reviewed our UK gender pay ratio.
The median hourly pay difference
between our UK-based male and female
employees at 5 April 2023 was 3.8%
(2022: 12.2%), which is below the UK
median pay gap of 14.3% (Source: Office
for National Statistics). The fall in the
pay gap seen was due to a job levelling
exercise undertaken, to ensure that
employees are classified consistently
based on their role scope, remit and
authority. Company headcount growth
has also influenced the reduction, with
an increase in the male population with
salaries distributed in the lower quartiles
and an overall increase in the median
hourly rates for women compared to
2022. Further information about our
pay data is included in our Gender

Gender diversity demographic data

Building on momentum since launching
a refreshed approach to DE&I and
Wellbeing in 2022, we have continued
to embed DE&I and Wellbeing as part of
our overall ESG governance – including
our DE&I and Wellbeing Council led by
our Chief People Officer.

In 2023, alongside our existing Employee
Resource Groups (ERGs) – Women’s
Network, Pride Network (LGBTQIA+)
and Black Employee Network (BEN) – we
launched our fourth ERG, Latinx, for the
Latin America community, which makes
up a large part (~40%) of the workforce.
Each ERG has CELT-level sponsorship and
celebrates key moments in the calendar
such as Pride Month, Black History
Month, International Women’s Day
and Hispanic Heritage month.

We launched a self-ID campaign, in
countries where lawfully permitted,
to enable employees to self-identify
on a voluntary basis and provide their
demographic data for race/ethnicity.
The information collected will help us
measure progress so that we can respond
to a range of stakeholder requirements.

We track employee diversity through our
HR systems, and the Board reviews our
diversity profile on an annual basis. In
2023, we strengthened our HR systems
and enabled colleagues with greater control
to update their personal information,
including adding pronouns, ethnicity,
gender identity and disability if they wish.

We have four pillars to our DE&I and
Wellbeing approach, with the following
key activities in 2023:

1 Cultivate an inclusive culture

for our colleagues

– Strengthened our global DE&I and

Wellbeing Council.

– Expanded ERG membership to support

communities of interest.

– Launched our Convatec mentoring
programme, engaging more than
300 colleagues.

– Rolled out diversity-focused training,
aligned to our high performing team
principles, to our global leadership team.

2 Build a diverse workforce with

greater gender and ethnic
diversity across our leadership

Board1,2

CELT2

Senior management3

Other employees

Male

Female

Total

Number

10,050

10,136

3,765

3,812

Number

6,285

6,324

– Exceeded our ESG target of at least

Total1, 4

40% female representation in senior
management by 2025.

1. Includes seven Non-Executive Directors.
2. The CEO and the CFO are included as members of the Board and CELT. Stated total numbers are adjusted to

– Launched a campaign to enable colleagues

remove duplication.

to self-identify on our HR systems.

– Advanced talent acquisition practices to
better recruit and retain diverse talent

3. Includes direct reports of CELT, excluding administrative staff. The percentage of women in CELT and senior

management combined in 2023 is 44% (2022: 38%). Total population in 2023 is 79 (2022: 92).

4. Excludes freelancers, independent contractors or other outsourced and non-permanent workers who are

hired on a project or temporary basis

OUR PEOPLE: AT A GLANCE

Employees and contractors

Employees by geography

Employees by age

2023

2022

2021

2020

2019

10,136 301

36%

15%

10,036 350

10,142 319

9,914 341

9,197 314

2023

2022

2021

2020

2019

38%

14%

50%

52%

53%

Employees

Agency staff and independent
contractors

Geographical
areas 2019-2021

Geographical
areas 2022-2023

Americas

Europe

49%

48%

42%

41%

21%

2023

2022

20%

2021

2020

2019

22%

< 30

30-50

> 50

59%

20%

58%

21%

60%

20%

61%

17%

61%

17%

Leavers and hires by age1
Hires

864

1,059

252

Leavers

653

2023

1,219

283

862

1,514

569

APAC

EMEA

North America

Rest of World
Leavers and hires by gender1
Hires

Leavers

973

360

888

1,287

823

1,163

796

808

1,147

283

1,169

153

865

920

164

2023

2022

2021

2020

2019

< 30

30-50

> 50

2022

683

989

319

2021
436
2020

2019

750

221

856

961

215

< 30

30-50

> 50

2023

2022

2021

2020

2019

1,176

1,545

1,010

1,216

837

804

1,293

1,145

2023

2022

2021
579
2020

2019

1,257

1,688

862

1,129

828

885

1,147

Male

Female

Male

Female

1. Includes voluntary and non-voluntary turnover.

Health and safety
Our global Environment, Health
and Safety (EHS) team support the
development of strategy, policies and
standards, audit performance and
support site teams to improve working
practices, aligned to both regulatory
and company requirements. The team
report to the VP, Global Manufacturing,
who in turn reports to the Chief Quality
& Operations Officer, who is a member
of CELT and the ESG Steering Committee.
Performance is reported to senior
management including CELT and the
Board on a regular basis. Manufacturing
and R&D sites have a dedicated EHS
team at their location.

During 2023, we continued to deliver
improvements focused on key initiatives:
electrical safety, machinery and
equipment safety, developing safety-
specific standard work instructions
(SWI), and enhancing our safety
culture programme, tailoring delivery
to site specific requirements. Reviews
and development activities have
supported improved communication
and engagement, enhanced working
practices and improved performance.

Our manufacturing sites in Rhymney,
Deeside and Michalovce maintained
their ISO 14001 (Environmental
Management) certification.

Our Health and Safety performance¹

2023

2022

2021

2020

Fatalities

Convatec Lost Time Injury Rate2

Convatec Hazard Observation Rate2

Operations Lost Time Injury Rate

Operations Hazard Observation Rate

Lost Time Injuries

0.17

227

0.22

265

0.18

196

0.20

234

0.26

148

0.30

190

0.21

138

0.23

173

2019

0.27

0.30

1 The data is based on OSHA definitions and rates are calculated based on 200,000 hours worked, as described

in our basis of reporting (page 65).

2 Lower rates are desirable for Lost Time Injury Rates; higher rates are desirable for Hazard Observation Rates.

Plans are in place to expand certification
across other manufacturing sites, starting
in 2024. In addition, our Deeside and
Michalovce sites maintained their ISO
45001 (Occupational Health & Safety
Management) certification, with plans
to expand this further from 2024. We
recognise the value of aligning our
practices to international standards.

The continuation of our proactive
approach to engagement and hazard
elimination has sustained our Operations
Hazard Observation Rate above the
target of 200 per 200,000 hours worked
for 2023, enabling the identification and
elimination of a significant number of
hazards across our sites, reflecting the
safety focus of our operations teams.

There were no fatalities on our estate
in 2023, maintaining our record of zero
events. The target of sustaining our
Operations Lost Time Injury Rate (LTIR)
per 200,000 hours worked below 0.22
by 2025 remains on track.

In addition, the continued focus on
engagement, safety leadership and
proactive behaviours has also contributed to
a reduction in the total number of accidents
incurred, resulting in a 40% reduction from
2022, improving the working environment
and safety for all employees.

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Overview

Strategic report

Governance

Financial statements

Additional information

Responsible business review – commerce

BEHAVING
ETHICALLY AND
TRANSPARENTLY

Protecting and enhancing our
reputation with all our stakeholders

Evelyn Douglas
EVP, Chief of Corporate Strategy
& Business Development and
General Counsel

“At Convatec, one of our core
values is Do what’s right, as we
know that how we do business
matters. Our commitment to
responsible business practices
on important topics such as
human rights, environmental
stewardship and ethical and
transparent behaviours extends
to all those who we work with
– colleagues and through our
global supply chain. Across
Convatec, we are committed to
building stakeholder trust and
confidence by meeting standards
that demonstrate our ESG
commitments in action.”

2023 highlights
– Strengthened third party and supply
chain risk management practices
– Launched human rights training

for employees

– Enhanced conflict of interest reporting

and risk assurance processes

2024 priorities
– Expand supplier ESG engagement
– Enhance third party risk

management programme

– Increase scope of human rights

training for colleagues

Ethics and compliance governance

CELT meets with our Head of Ethics and
Compliance on a quarterly basis to review
the compliance programme, including
its risk assessment and mitigation efforts;
investigative and monitoring oversight;
and policy development and educational
delivery. Audit and Risk Committee (ARC)
meets with the Chief Compliance Officer
quarterly. This helps assure that ethics
and compliance concerns are discussed
and actioned at the highest levels of the
Company. Regular corporate-wide and
localised communications and education
assure that all of our people are aware
of the ethical standards expected of them.

Our extensive ethics and compliance
programme incorporates several policies
and procedures including:

– Maintaining a Code of Ethics and

Business Conduct (Code of Conduct)
that is updated regularly and mandating
annual training for all employees either
online, with electronic acknowledgement
of completion, or through participation
in town hall meetings.

– Making available an independently

provided Compliance Helpline
(Speak up) and web link for
employees and third parties (https://
convatec.ethicspoint.com), to seek
guidance and to report suspected
deviations or policy breaches.
– Making it easy for issues to be

reported by colleagues, reviewed by
our Ethics & Compliance team and
where appropriate, ensuring that any
resulting investigation and outcome
of any significant issues are overseen
by the ARC (see page 41).

– Regular onsite or computer-based
monitoring of business activities to
assure that they are consistent with
policy, including the Code of Conduct.
– Providing an additional line of defence
through our risk assessment process,
which involves direct engagement with
global market or functional leaders,
and our commitment, when areas of
concern are identified, to work with
those leaders on an ongoing basis
to improve business practices.

In 2021, we set a target to ensure at
least 95% of employees are trained
on our Code of Conduct annually. We
achieved that target in 2022, and due to a
transition to a new learning management
system in 2023, training rates dropped
to 90%. Plans are in place to drive
participation on our new system in 2024.

In 2023, we further enhanced our conflict
of interest measures by piloting a web-
based survey mechanism that invites

managers to identify actual or potential
conflicts of interest, with plans to expand
the scope of survey participants to
include all management roles by 2025.

We are committed to creating a
working environment where everyone
is treated fairly with respect, dignity
and consideration and where there are
opportunities for all. In recent years
we have refreshed our Human Rights
and Labour Standards Policy, which
incorporates principles and guidelines
set out in the United Nations Universal
Declaration of Human Rights, Modern
Slavery Act and the UN Guiding Principles
on Business and Human Rights, and
addresses a range of issues including
equal opportunities, anti-harassment
and dignity at work. The policy underpins
the way we work with each other, with
partners, and with suppliers and so in
2023, we launched an annual training
around the policy’s principal areas of
focus. These include:

– Compulsory labour
– Human trafficking
– Supply chain concerns

In 2023, our cross-functional Human
Rights Committee, a sub-group of our
ESG Steering Committee, continued
driving forward this important agenda.
Chaired by our Chief People Officer,
and including colleagues from legal,
compliance, supply chain, and HR,
the Committee reviewed and updated
our human rights-related policies and
practices and identified strategies to
strengthen supplier due diligence.

Consistent with our core values, we are
passionate about embedding a culture
of respect within Convatec, with this in
mind a Global Human Rights e-learning
module was developed and launched
in 2023. This interactive module guides
all Convatec colleagues through
important subjects such as human
trafficking prevention, speaking up
and environmental issues.

Our Code of Conduct, Human Rights
and Labour Standards Policy, and
Modern Slavery Act Statement can be
found here: www.convatecgroup.com/
investors/governance/our-policies-and-
statements/.

We also engage with stakeholders on
ethical topics within our sector. During
2023, we continued to participate
in a number of MedTech Europe and
AdvaMed meetings and discussions
regarding key legal, ethical, compliance
topics, including HCP interactions,
as well as other ESG areas.

Transparency, ratings,
disclosures and memberships

Being transparent with our stakeholders
about how we run our business is
a vital part of building strong, long-
term relationships based on trust. Our
disclosures and reporting are assessed and
scored by a range of external ESG analysts
and other organisations, and we use this
information to benchmark our progress.
See below for more on our approach
to disclosures and memberships.

Supplier due diligence
and contracting

To help protect against the risk of
a third party acting unethically, our
teams conduct a range of due diligence
and related activities. We require that
new suppliers agree to adhere to our
third-party compliance manual, or
demonstrate adherence to the principles
stated therein, which may derive from
their own codes of conduct. Our manual
covers a range of topics including
commitments to the International
Labour Organisation conventions
and the Principles of the UN Global
Compact (UNGC) and environmental
protections. It extends our Code of Ethics
and Business Conduct and our Human
Rights and Labour Standards Policy to the
supply chain. The manual is introduced
to all existing supplier contracts as these
are renewed. A copy of the manual is
available at www.convatecgroup.com/
investors/governance/our-policies-and-
statements/.

We monitor and assess suppliers using
third-party risk platforms, which provide
in-depth, real-time coverage of a range
of factors that could impact on supplier
performance (including geopolitical,
climatic and civil unrest), as well as
events that may have been caused
by our suppliers (for example major
pollution and strike incidents). We also
operate processes that are designed to
ensure vendors are engaged promptly
when a risk event occurs and that these
events are tracked through to satisfactory
closure of the potential risk.

Working responsibly with partners

We aim to build long-term, mutually
beneficial relationships with third parties
along the value chain, including suppliers
of materials and services, contract
manufacturers, and transport and

logistics companies. Led by our
Global Procurement and Supply Chain
teams, we are clear that relationships
with third parties must be consistent with
our vision and values, and the regulatory
framework which underpins our ethical
business practices. We believe that
developing a more sustainable supply
chain will benefit our business over the
long term through increased efficiency,
product improvements, reduced risk and
deeper, more collaborative relationships.

Convatec’s sustainability requirements
are now part of our standard Request
for Proposal and contract documentation
so that all new suppliers understand
and accept these at the start of our
trading relationship.

Our spend is concentrated towards
a relatively small number of suppliers.
For example:

– nine suppliers represent approximately
80% of our contract manufacturing
spend

– five suppliers represent approximately

60% of our logistics spend

– Our raw materials supply chain is more
diverse, with 42 suppliers representing
approximately 80% of our total raw
material spend

Like many medical device companies,
our products are often sold by third
parties, such as distributors. We
endeavour to work with partners who
share our sustainability ambitions,
aligned to our core values and can support
our journey. We have communicated
our ambitions to our partners, including
setting out our monitoring arrangements
for sustainability performance,
expectations around minimum standards
and requirements for annual disclosure
of greenhouse gas emissions (GHGs),
commitment to setting science-based
targets and the publishing of carbon
reduction plans. We will continue to
embed these standards in 2024 across
the Company, including our commitment
to monitor and ensure a risk-based audit
programme are in place. Expectations vary
based on their industry and magnitude
of the supply relationship, taking a
proportionate approach so that we focus
on the suppliers and supply categories
that have the largest impact and influence
on our sustainability performance.

In Q4 2023 we requested emissions
information from suppliers that we
calculate make up over 60% of our
Scope 3, category 1 emissions. We are
committed to working with our suppliers
to support them through briefings,
training, and other initiatives. See
page 61 for our Scope 3 emissions.

Our ESG journey in action

Convatec has been included in
Sustainalytics’ 2023 Top-Rated ESG Risk
Rating Companies List for our progress
in 2023. In 2023, Convatec received a
rating of AAA (on a scale of AAA-CCC) in
the Morgan Stanley Capital Investment
(MSCI) ESG Ratings assessment. During
the year, we achieved a B score with ISS.

Disclosures

The landscape of ESG ratings and
disclosures is complex and constantly
evolving. We continue to disclose against
various reporting schemes that we
believe offer value to our stakeholders
and align with our material ESG topics.
We keep our approach under review.

In 2023, we disclosed against Carbon
Disclosure Project (CDP), Sustainability
Accounting Standards Board (SASB) and
Global Reporting Initiative (GRI) (see
www.convatecgroup.com/sustainability/
esg-reports-and-data/), FTSE Women
Leaders Review, and maintained UK Living
Wage Foundation accreditation. In 2023,
we were shortlisted as most improved
company in the Workforce Disclosure
Initiative (WDI). Our TCFD disclosure
is found on page 64.

Partnerships

We are pleased to have maintained
our participation in the UNGC since
2018, reporting annually against the
ten principles of the UNGC. We are
proud members of FTSE4Good, a global
sustainable investment index series,
designed to identify companies that
demonstrate strong ESG practices
measured against international standards.

In the past year, we have engaged on
sustainability topics with the Advanced
Medical Technology Association
(AdvaMed), MedTech Europe, Asia
Pacific Medical Technology Association
(APACMed) and the Association of British
HealthTech Industries (ABHI). We are also
members of the All-Party Parliamentary
Corporate Responsibility Group.

Ratings

Rating organisation

ISS

Sustainalytics Risk Rating1

MSCI²

CDP

WDI

2023

16.6

AAA

73%

2022

14.5

AAA

43%

2021

14.6

54%

2020

B-

15.2

60%

2019

B-

15.3

19%

1. As at June 2023, Convatec rated low risk. Lower scores are desirable for Risk Rating.
2. Disclaimer: The use by Convatec of any MSCI ESG Research LLC or its affiliates (MSCI) data, and the

use of MSCI logos, trademarks, service marks or index names herein, do not constitute a
sponsorship, endorsement, recommendation or promotion of Convatec by MSCI. MSCI services and
data are the property of MSCI or its information providers, and are provided ’as-is’ and without
warranty. MSCI names and logos are trademarks or service marks of MSCI.

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Overview

Strategic report

Governance

Financial statements

Additional information

Responsible business review – planet and communities

CONVATEC’S AMBITION TO NET ZERO

NEAR-TERM REDUCTION-RELATED ACTIVITIES

SHORT TO MEDIUM-TERM ACTIONS FOR 2030 SBTi TARGET

PROTECTING THE
PLANET AND
SUPPORTING
COMMUNITIES

How we operate and our contribution
to the world around us

Our climate ambition and
transition plan

Convatec’s strategic climate ambition
is to achieve net zero by 2045. We are
committed to delivering our vision
whilst enabling ESG-related activities
and transitioning to a 1.5°C-aligned
net zero economy. As part of our
annual report, we are sharing an
update on our progress, in line with the
UK Transition Plan Taskforce Disclosure
framework. This section of our report
covers the commitments and actions
we are taking to support the transition.
Our plans provide the foundation of
our climate risk management response
and transition to net zero.

Convatec Cares, our ESG framework,
sets out our priorities (see page 39).
Each of the four pillars in our framework
contributes to our role in the transition
to a net zero economy.

– Customers: We are committed to

delivering products and solutions that
meet the needs of our patients and
customers, ensuring efficacy, quality
and safety, as well as seeking ways
to continually reduce their climate
impact (see page 48).

– Colleagues: We have developed

climate-related digital tools to support
teams to drive our ambition. We are
also raising awareness internally
of environmental sustainability and
our impact (see page 52).

– Communities: Our validated near-
term science-based targets include
our commitment to reduce Scope 3
emissions by 52% per sold product
by 2030, from our 2021 baseline.
This target specifically includes the
emissions from purchased goods
and services (category 1), upstream
transportation and distribution
(category 4) and waste (category 5).
– Commerce: We are working closely

with suppliers to support value chain
decarbonisation and communicated
requirements for suppliers to set SBTs
(see page 57).

For more information on our alignment
with the Transition Plan Taskforce
Disclosure framework, see page 214.

Our climate-related targets2

2030 near-term carbon
targets
70% Scope 1 and 2 absolute reduction

52% Scope 3 reduction per sold product
(including Category 1: Purchased goods
and services, Category 4: Upstream
transport and distribution and Category 5:
Waste generated in operations)

2045 long-term carbon target
90% absolute reduction Scope 1, 2 and 3
including 100% neutralisation of limited
residual emissions by 2045.

Energy:

80% renewable electricity by 2025 and
100% by 2030.

Resource use

Water:

Deliver sustainable water withdrawal
at high water-stressed locations and
develop our water management
practices at all locations.

Waste:

Reduce the amount of production waste
leaving our plants and to certify our waste
diversion from landfill practices by 2030.

Supplier engagement:

Suppliers covering 60% of our Scope 3
category 1 emissions to have committed
to set science based targets by 2026.

2. Target baseline year is 2021.

Our ESG Steering Committee brings
together CELT members who are driving
our net zero ambitions, supported
by working groups to identify and
implement decarbonisation plans

See also: Environmental policy at
www.convatecgroup.com/sustainability/
esg-reports-and-data and our TCFD
disclosure on page 66.

Renewable electricity generation installed
at our UK manufacturing site in Deeside
during 2023.

John Haller
EVP, Chief Quality & Operations
Officer

“We’ve advanced our transition
planning, have set clear emissions
reduction targets, and continued
to expand our renewable
energy infrastructure across
our manufacturing sites. We’ve
validated our Science Based
Targets and are committed to
reach net zero by 2045. While
we can more easily manage
things we control directly, we
cannot meet our targets without
working with partners in our
global supply chain.

We continued to focus on
communities, and launched an
exciting new partnership with
Partners In Health, alongside a
range of initiatives to encourage
colleagues to make a difference.”

2023 highlights
– Near-term science-based targets1
– 100% renewable electricity across

al manufacturing sites

– Shaped carbon transition plan

and identified priorities

– 240,000 HCPs engaged in medical

education programme

– Launched pilot community health worker

programmes with Partners In Health

2024 priorities
– Continue to advance our transition plan
– Progress ISO 14001 (Environmental
Standard) Certification across all
manufacturing sites

– Prepare for waste diversion from

landfill certification

– Enhance our water stewardship effort
– Expand medical education programmes

1. Validated science based target baseline in 2021.

Near-term Scope 1, 2 and selected Scope 3
science-based target validated by SBTi in 2023
Commitment to achieve net zero by 2045 to be
submitted and validated by SBTi in 2024
Scope 3 working groups established to lead
the identification and implementation of
decarbonisation initiatives in 2023

2021

2030

492,913 tCO2e

KEY

100% procurement of renewable electricity across property portfolio
Supplier engagement to encourage alignment to SBTi framework
Reduce air freight throughout logistics network
Continue implementation of projects to reduce packaging and increase recyclability

LONG-TERM ACTIONS FOR NET ZERO BY 2045

Reduce weight and/or carbon-intensity of materials
Continue decarbonisation of logistics through
supplier engagement as well as consolidation
and efficiency programmes

Continued adoption of waste hierarchy with

a focus on prevention and recycling

100% neutralisation of limited residual emissions

by 2045

2045

Neutralisation through
carbon removals

Developing plans across our
key levers

Product: We are building up a database
of emission factors for materials and products
across our portfolio. The development of
our strategy is contingent on this exercise to
highlight where our impact hotspots are, what
material change options there are as well as any
other design changes which will deliver emission
reductions. We expect this to complete in 2024.

Net zero target validation and Scope 3

milestones

Logistics: The logistics software we
use gives us a granular view on transport
movements across the network. We have
identified some key reduction levers related
to productivity efficiencies, reduction of air
freight, shifting to lower-carbon suppliers etc.

Supplier engagement: Our strategy is
in action, and we have set up a programme
for continual data collection and analysis to
increase supplier alignment to net zero.

Direct operations: We have reduction
plans for our Scope 1 and 2 and are using
emissions and energy consumption metrics
to monitor performance against targets.

Packaging: Our strategy is based on a
prioritisation of new product development
and alignment to the waste hierarchy. For
primary packaging, our focus is on recycling
and prevention, as many materials are
non-recyclable and paper/plastic blends.
For secondary and tertiary packaging our
focus is prevention as 100% of our cartons
and shipping boxes are paper-based and
therefore recyclable.

We recognise that our plans to achieve a net zero transition will require Company-wide collaboration on a range of risks, challenges
and solutions. These are outlined in the table below and in our TCFD narrative (page 66).

RISKS, CHALLENGES AND SOLUTIONS

Risks

Challenges

Solutions

Use of data

More accurate data is needed to baseline our impact and identify
potential emission reduction options. (Including T41 and T51)

Strategic
and financial
planning

Dedicated resource is needed to progress and enhance
innovation as it relates to decarbonisation at Convatec.
Otherwise Convatec risks not being able to achieve its target.
(Including T11 and R11)

Regulation

Limitations in material and design options associated with
medical safeguards and material regulation. In addition, there
is a long lag time to realise emission reductions due to lengthy
regulatory processes as well as the long lifetime of our products.
(Including P31 and P41)

There are ongoing initiatives across the business to collate
primary data and minimise assumptions. We need to ensure
the source data is used effectively. This will allow Convatec to
evidence the impact of decarbonisation initiatives.

The incorporation of climate considerations into the annual
strategic planning process is a step forward in identifying the
required financial resource required. Our intention is to further
integrate climate across other decision-making frameworks to
ensure financial resource is budgeted.

Convatec’s strategic planning is core to developing near-term
plans, and through our Product Sustainability and Scope 3
emissions working group, we are considering longer-term
actions required to achieve net zero.

Efficacy priorities Product safety is our top priority. It is essential that in achieving

our climate ambitions we do not compromise on the efficacy and
safety of products. Nonetheless, this should not stop us from
innovating design for new and legacy products. (Including T21)

Through engagement with value chain partners as well as more
broadly across the industry, we aim to overcome some of the
barriers preventing accelerated decarbonisation, such as low-
carbon materials.

Technology
limitations

Physical risk

There are limited material and design alternatives that are
readily and easily implementable given a range of regulatory
considerations in the MedTech sector. (Including T31)

Investing in resources like our Green Design Guidelines helps
to drive sustainable behaviours through the identification and
review of potential alternatives.

In addition to our decarbonisation levers, we are also cognisant
of the need to implement climate adaptation measures to ensure
the resiliency of operations at our manufacturing facilities under
physical climate hazards. (Including Ph11, Ph21, Ph31)

To supplement our contingency plans, capital investment
programmes mitigate the risks of physical climate-related risks
on our business. Measures across our broader operations and
supply chain also help to mitigate future risks, levels of safety
stockholding to minimise any impact of production downtime,
alternative production locations for key product lines and
different sources of raw material suppliers.

1. Refer to pages 68 and 69 for TCFD identified risks and opportunities.

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Overview

Strategic report

Governance

Financial statements

Additional information

Responsible business review – planet and communities continued

Scope 1 and 2 GHG emissions

GHG (market-based method) (tonnes CO2e)1,2

Scope 3 emissions

Scope 3 emissions (tCO2e)1

During 2023 we validated our near-term
science-based targets to reduce our
combined scope 1 and 2 emissions by
70% by 2030, from our 2021 baseline.

Our 2023 Greenhouse Gas (GHG)
emissions under the market-based
method totalled 16,142 tonnes CO2e
(2022: 24,653), equating to an in-year
reduction of 34.5% (2022: 31.9%).
This reduction was achieved through
improved energy efficiency and sourcing
of renewable electricity at all nine of our
global manufacturing locations. Our fleet
of 1,312 vehicles (2022: 1,157) generated
emissions of 6,790 tonnes CO2e (2022:
6,075), and our refrigerant gas emissions
amounted to 776 tonnes CO2e (2022: 746).

Energy consumption

In 2023, total global energy consumption
was 133,713 MWh (2022: 137,615 MWh).

Energy efficiency

In 2023, our overall energy intensity
ratio reduced by 6% (2022: 4.7%) through
implementation of our global energy
efficiency programme. We are prioritising
the reduction of our absolute energy
consumption as the key means for
reducing emissions. We continue to identify
and implement projects to improve our
energy efficiency by leveraging sources
such as mandatory Energy Savings
Opportunity Scheme (ESOS) audits,
voluntary internal energy audits and
best practice sharing across our sites.

Energy efficiency projects to reduce our
Scope 1 and 2 emissions in 2023 included;
energy efficient chiller installation, steam
system efficiency improvements, smart
metering, air handling unit retrofits,
compressed air heat recovery system
and LED lighting.

Renewable energy

As part of our Scope 1 and 2 science-
based targets, we have committed to
procuring 80% of our electricity from
renewable sources by 2025, reaching
100% by 2030. As of 2023, renewable
electricity accounts for 95% of total
electricity consumed (2022: 69%) with
100% renewable electricity procured
at all of our manufacturing sites.

During 2023 we expanded the amount
of renewable energy we generated from
owned sources 1,448 MWh (2022: 109
MWh), through the installation of roof-
mounted solar PV at our manufacturing
sites in Deeside, UK, and Osted, Denmark
and further generating capacity added at
our facility in Haina, Dominican Republic.
We continue to develop project feasibilities
within our efficiency project pipeline.

Information about the methodology we
use for disclosing renewable energy in
relation to our Scope 1 and 2 emissions
can be found in our basis of reporting
document (page 65).

Scope 1 (Global)

Scope 1 (UK)

Scope 2 (Global)

Scope 2 (UK)

2023

2022

2021

2020

14,632

14,395

14,931

5,608

2,867

1,510

3,202

3,107

2,012

10,258

21,255

24,650

Total GHG emissions

16,142

24,653

36,186

30,258

Total UK

2,939

3,272

3,136

2,012

GHG (location-based method) (tonnes CO2e)1,2

Scope 1 (Global)

Scope 1 (UK)

Scope 2 (Global)

Scope 2 (UK)

2023

2022

2021

2020

14,632

14,395

14,931

5,608

2,867

3,202

3,107

2,012

23,430

23,210

25,872

27,169

2,403

2,200

2,348

2,433

Total (Global) GHG emissions

38,062

37,605

40,803

32,777

Total UK

5,270

5,402

5,455

4,445

Scope 1 and 2 GHG emission intensity (tonnes/$m revenue)1,2

GHG emission intensity (location basis)

GHG emission intensity (location basis, UK)

GHG emission intensity (market basis)

GHG emission intensity (market basis, UK)

2023

17.8

2.5

7.5

1.4

2022

2021

18.1

2.6

11.9

1.6

20.0

2.7

17.8

1.5

2020

17.3

2.3

16.0

1.1

1. Please refer to our Basis of reporting for accounting methodologies (page 65).
2. In 2023, 3% of total Scope 1 and 2 emissions is estimated; 2022: 2.6%.

Total energy consumption (by function) (MWh)1,2

2023

2022

2021

2020

Manufacturing locations

95,374

103,131

103,207

95,523

Non-manufacturing locations

Company vehicles

9,969

9,770

28,370

24,713

10,736

28,017

6,205

–

Total energy consumption

133,713

137,615

141,961

101,728

Total UK energy consumption

25,922

25,856

25,339

10,381

Total energy consumption (by fuel source) (MWh)1,2

Non-renewable electricity

Renewable electricity

Natural gas

Propane

District heating

Diesel

Company vehicles

2023

3,451

64,464

35,218

1,538

671

2022

2021

2020

22,748

50,999

38,609

–

464

43,252

31,869

38,130

–

642

66,047

10,607

24,766

–

254

–

28,370

24,713

28,017

Total energy consumption

133,713

137,615

141,961

101,728

Energy intensity (GWh/$m revenue)1,2

Energy intensity

2023

0.062

2022

0.066

2021

0.070

2020

0.054

1. 2.5% is estimated for 2023 data; 2022: 2.4%.
2. See our basis of reporting (page 65) for reporting methodology.

The accuracy of Scope 3 emissions
measurement is dependent on strong
engagement with our suppliers and
partners to collect primary data to
replace spend-based emissions factors.
During 2023 we collected 8% of Scope
3 data from primary sources (2022: 2%).
These numbers were collected through
direct engagement or use of third-party
platforms such as EcoVadis, which
we encourage our suppliers to use to
improve transparency and encourage
continuous improvement. In 2023, we
achieved our target of ensuring that a
minimum of 80% of Convatec’s spend
is with suppliers with whom we have
engaged to request their participation
in EcoVadis.

In 2023, our Scope 3 GHG emissions
totalled 459,590 tonnes CO2e (2022:
491,162). The reduction in total Scope
3 emissions is due to the increased use
of primary data from suppliers and
efficiencies in transportation costs.
See our basis of reporting on page
65 for full accounting methodologies,
including exclusions.

Our GHG reporting follows the
methodologies set out in ’The GHG
Protocol: A Corporate Accounting and
Reporting Standard (Revised Edition)’,
developed by the World Business
Council for Sustainable Development
and the World Resources Institute.

Biodiversity

Guided by the results of our materiality
assessment, page 44, our focus in 2023
has been on the climate change impact
of our business and achieving validation
of our science-based carbon reduction
targets. However, we recognise the
importance of biodiversity and nature-
based topics and the associated impact
of our products and operations. In recent
years we have completed life cycle
analysis studies in each of our business
units and a water risk assessment to
analyse water quality risks at our global
manufacturing sites. The results of
these studies have provided initial data
on biodiversity and we will continue to
deepen our understanding of our impacts
on natural capital throughout the value
chain and take actions to address the
highest risk areas.

Water

During 2023, working with expert
partners, we have updated our water
risk assessment (using WRI Aqueduct
4.0 Water Risk Atlas and Ecolab Smart
Water Navigator), based on 2022
operational data. We confirmed that the
relative sustainability of our water uses
and the inherent risks to our operations
in each global location remains similar
to last year. Our manufacturing site
in Reynosa, Mexico, remains the only
site with high baseline water stress

2023

2022

2021

Category 1: Purchased goods and services

283,780

295,482

299,007

Category 2: Capital goods

54,416

51,301

31,562

Category 3: Fuel and energy related activities

7,670

8,214

8,732

Category 4: Upstream transport and distribution2

53,131

83,078

63,843

Category 5: Waste generated in operations

Category 6: Business travel

Category 7: Employee commuting2

3,524

8,576

6,635

3,055

2,698

7,315

5,200

1,428

7,284

Category 12: End of life treatment of sold products

41,858

40,020

39,670

Total Scope 3 emissions

Total emissions (Scope 1, 2 and 3)

459,590

491,162

456,727

475,732

515,815

492,913

1. Please refer to our Basis of Reporting for accounting methodologies including exclusions (page 65).
2. Data restated in 2021 and 2022 to include well-to-wheel emissions.

and consequently a medium water
withdrawal risk. As such, this site
was prioritised for target setting and
facility level engineering. A facility level
assessment was completed to identify
opportunities to reduce our clean water
demands and improve water efficiency.
Our short-term sustainability target has
been confirmed using a combination
of sub-metering, water recycling and
reuse, and low flush rest room facilities.
In addition, a desk-top survey identified
key water opportunities and challenges
within the local catchment (both surface
water and groundwater), and key water
stakeholders have been identified and
mapped. These actions are aligned
with our progress to become water
stewards, working with others in the
catchment to reach sustainable water
management. The Alliance for Water
Stewardship (AWS) Audit Ready Tool
has been used to indicate progress
against the AWS Standard at Reynosa,
and key staff members at both the
Reynosa and Haina (Dominican Republic)
facilities have undergone initial water
stewardship training.

As part of our preparation for water
stewardship certification, we have also
developed a suite of water reduction
projects at our high-risk locations, to
reduce our water withdrawal. Projects
implemented during 2023 include retro-
fit of efficient restroom appliances and
recovery of water during fire pump tests
for maintenance purposes.

In 2023, we withdrew approximately
153 megalitres of water (2022: 169
megalitres), all of which was provided by
municipal water suppliers or other public
or private water utilities. The majority
of water (95%) is withdrawn at our
manufacturing sites in the Dominican
Republic, Mexico, Slovakia and the UK.
No water is abstracted directly from
lakes, rivers or other bodies of water.
Data is compiled from invoiced amounts
and meter readings. A small percentage
of water is treated on site (2023: 0.2%,
2022: 0.01%). In 2024, our focus will

remain on achieving our sustainability
water targets and becoming positive
water stewards at all of our plants.
We will continue to monitor water
risks at our facilities and prepare
for water stewardship certification
at our priority sites.

6,015 tonnes of water (2022: 5,641
tonnes) are tankered offsite as hazardous
waste, the vast majority relating to
our Rhymney site in the UK where,
as part of the production process,
water becomes contaminated with
Industrial Denatured Alcohol (IDA) and
is segregated for further processing.
After processing, a significant proportion
of the IDA is recovered and reused at
the site. The remaining treated water
is returned to the environment via a
sewer as part of a permitted discharge.
Other uncontaminated wastewater
is discharged via a sewer.

As set out in our Environmental Policy,
we are committed to understanding,
quantifying and minimising our waste
(hazardous and non-hazardous),
and water consumption. We are also
intensifying our focus on initiatives which
will drive a reduction in waste generated
by our product, packaging and non-
manufacturing activities.

Water use
(megalitres purchased)

9
6
1

6
7
1

0
7
1

3
5
1

3
2
0
2

2
2
0
2

1
2
0
2

0
2
0
2

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Overview

Strategic report

Governance

Financial statements

Additional information

Responsible business review – planet and communities continued

Waste generated (tonnes)

Non-hazardous waste

Disposed of

Recycled

Generated

Hazardous waste

Disposed of

Recycled

Generated

2023

2022

2021

2020

8,499

2,779

9,655

3,425

13,599

11,806

2,990

2,120

11,278

13,080

16,589

13,926

6,073

6,171

5,789

5,858

5,606

5,688

5,337

5,409

Total generated

17,449

18,938

22,277

19,335

Fate of non-hazardous waste generated (%)

Recycled

Incineration (with energy recovery)

Incineration (without energy recovery)

Landfill

2023

2022

2021

2020

25%

18%

56%

26%

27%

47%

18%

16%

66%

15%

10%

75%

Socio-economic contribution to society

Through running our business, we aim to make a socio-economic contribution to
society. This contribution, which is important to a range of stakeholders, is summarised
in the table below. We also recognise that there are a range of benefits to communities
and society as a result of our products, services and jobs directly and indirectly created.

Direct economic value generated

2,142.4

2,072.5

2,038.3

1,910.8

2023
$m

2022
$m

2021
$m

2020
$m

Economic value distributed

Operating costs1

Employee wages and benefits

Payments to providers of capital2

Payments to governments3

Community investment4

Economic value retained

937.1

701.3

223.2

61.2

1.3

218.3

990.4

648.5

312.8

45.7

0.7

74.4

962.3

650.1

262.7

47.6

1.5

891.7

579.7

254.0

56.3

0.7

114.1

128.4

1. Operating costs exclude depreciation, amortisation, impairment charges, asset write-offs and operating

taxes. Employee wages and benefits, payments to governments and community investments are normally
part of operating costs, but have been excluded as they appear on separate lines in the table.

2. Payments to providers of capital have been included on an accruals basis and include interest paid on

long-term debt, capital and interest payments on right-of-use assets, net debt repayment, dividends and
own share reserve purchase paid to Convatec shareholders.

3. Payments to governments include corporate income taxes, sales taxes, real estate taxes and other taxes, but

exclude employer portion of payroll taxes, as they are included in employee wages and benefits.

4. Calculated as costs associated with charitable community donations. Excludes product donations. See page

63 for calculation of value to communities.

Waste

During 2023, we have built on the work
undertaken in recent years to analyse our
waste processes and disposal practices
globally. We have implemented waste
segregation trials at key sites to improve
data quality and identify opportunities
for increased recycling and reuse of
materials, with the aim of raising waste
streams up the waste hierarchy. This
will allow us to reduce the amount of
production waste generated and increase
our production recycling rates. Our
ambition is to achieve waste diversion
from landfill certification at all global
manufacturing sites by 2030. We intend
to stage the journey, beginning with key
sites and bring all global sites up to the
same level of maturity by 2030. During
2024 we will complete gap analysis
assessments at the first sites, for which
we aim to achieve waste diversion
from landfill certification in 2025.

The table (left) shows our waste recycling
and disposal performance over the last
four years for both hazardous and non-
hazardous waste. Non-hazardous waste
represents 65% (2022: 69%) of the total
waste generated and the chart indicates
the proportion of this waste recycled
is 25% (2022: 26%) and the proportion
disposed of to landfill is 56% (2022: 47%).
The increase in waste sent to landfill
and incinerated without energy recovery
is due to a change in waste provider
at our manufacturing site in Haina,
Dominican Republic. Work is currently
being undertaken to complete a baseline
analysis of the waste generated in
Haina, and on completion we will be
investigating opportunities to improve
disposal rates of the waste streams as
part of a drive to achieve waste diversion
from landfill certification.

Hazardous waste represents 35% of total
waste generated (2022: 31%) and 98% of
this is recycled (2022: 99%). The increase
in hazardous waste generated in 2023
is due to increased production rates
at our manufacturing site in Rhymney,
UK, where 98% of our hazardous waste
is generated (2022: 97%). The recovery
process is described on page 61. Of the
residual hazardous waste, 1% is disposed
of to landfill (2022: 1%).

Contribution to governments

We are fully committed to meeting
our legal tax obligations in each of
the countries in which we operate.
We fully support and embrace greater
transparency with tax authorities
and the initiatives being introduced
by the Organisation for Economic
Cooperation and Development (OECD)
and governments to ensure clarity
and adherence to the tax laws of
each jurisdiction in which we operate.
Our Tax Policy is available at
www.convatecgroup.com/investors/
governance/our-policies-and-
statements/.

Supporting communities

Forever caring is a promise we make
to the communities in which we operate.

Globally, our approach is to support
community partnerships on issues that
closely align with our vision and values,
and where the majority of our people
and impact is made. In recognising that
the way in which we operate enhances
the contribution we make to local
communities, we maintain partnerships
with select non-governmental
organisations (NGOs) to achieve
maximum impact. These partnerships
focus on issues of healthcare access/
equity, education and disaster relief.

Partnerships

We continued our support to the
Disasters Emergency Committee in
2023 by contributing to their Turkey-Syria
Earthquake appeal after the devastating
earthquake in February 2023. In order

to support our colleagues in the region,
we also donated products to the Wound,
Ostomy and Incontinence Nurses’ Society
(WOINS) – a registered NGO in Turkey
which provided aid to those injured. We
continued our support for the Red Cross
providing humanitarian relief in Ukraine
through donating more than $630,000
worth of Convatec products from across
our portfolio in 2023.

In line with our ESG commitment to
establish new NGO partnerships and
funding commitments, in 2023 we
launched a multi-year partnership with
the international NGO Partners In Health
(see page 64).

Engagement and volunteering

Throughout the year, Convatec colleagues
spent hundreds of hours in their
communities, participating in volunteering
activities on issues that matter to them.
For the second year, we hosted Forever
Caring month to encourage colleagues
to get involved in their communities and
utilise Company supported volunteering
time. Stories are shared and celebrated
as a way to witness our forever caring
promise for communities.

Our two-day volunteering policy makes
it easy for colleagues to engage in
community service. Business units,
functions and our ERGs contribute to
further local market activities as well.

→ For a short summary of Forever Caring
month, watch this short video
https://vimeo.com/899871065/3467918b4a

2023 VALUE TO COMMUNITIES

Medical education

In line with our forever caring promise,
we support HCPs through our medical
educational programming. We provide
grants to support HCPs and third parties
(such as regional bodies, associations,
educational and hospital institutions)
engaging with educational and scientific
meetings, programmes, workshops,
events, activities and public education,
non-contingent on the use of Convatec
products. In 2022, we set a target to
contribute responsibly to a range of HCP
and patient education programmes,
and we delivered on this in several ways
throughout 2023 – supporting almost
3,000 HCPs with medical education
grants alone.

Our commitment continues with
expansion and global reach of Wound
Hygiene Academy training, along
with the introduction of a National
Wound Hygiene day on 4 October
2023, where we partnered with
healthcare professionals to host
education events worldwide. We also
continue to collaborate with the Welsh
Wound Innovation Centre (WWIC)
through a series of scientific & clinical
e-learning programmes for healthcare
professionals worldwide. To date, from
five programmes, WWIC have educated
over 631 delegates from 12 countries,
exceeding our original goals for the
programme.

In line with our forever caring promise and our values, we
supported our communities through:

$1.3 million

to community partners through
programming and disaster relief

$2 million+

Product value donated to charity partners1 (2022 – 2023)

240,000+

HCPs and patients participated in educational programmes

$475,000+

in medical education grants supporting over 3,000 HCPs

1. Product value calculated using regional average sale price. Includes

contribution from products with shortened shelf lives.

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Overview

Strategic report

Governance

Financial statements

Additional information

Responsible business review – planet and communities continued

In 2023, Convatec began a three-year collaboration
with Partners In Health (PIH) to explore innovative
methods for recruiting, training and deploying
over 1,000 Community Health Workers (CHWs)
and enhance treatment of chronic conditions.

OUR PARTNERSHIP GOALS:

Enhance care for
underserved
communities in
Mexico, Peru and the
United States, with
potential to scale
elsewhere

Improve over
250,000 lives by
activating CHWs to
provide high-quality
services and home
visits

Share our expertise
in managing chronic
conditions to
support vulnerable
populations

IMPACT AREAS:

Financial support:
$2 million will
support training and
recruitment of CHWs,
with a 10:1 social
return on investment

Product: Convatec
will donate products
to support other PIH
sites, including
programmes in
Sierra Leone, Liberia
and Haiti

Education: Our
Medical and Clinical
Affairs teams
lead adaptation and
sharing of materials
to upskill a range
of PIH health
workers globally

CELT visited PIH colleagues in Boston in October 2023 to learn more about
the Community Health Worker model and discuss areas of collaboration.

“PIH is proud to work with Convatec in this
new, multifaceted partnership to improve
care for patients living with chronic conditions.
We’re especially pleased that Convatec deeply
understands the transformative role of
community health workers in managing
chronic health conditions and in promoting
the health and wellness of the communities
in which they live.”

Dr. Sheila Davis
CEO, Partners In Health

→ For more information on PIH, visit their website at
www.pih.org

STATEMENTS

Independent assurance

In line with our commitment to transparency, we commissioned Deloitte LLP to perform limited assurance procedures
on selected key performance indicators as detailed in our Responsible business review 2023. The assurance was
completed in accordance with the International Standard on Assurance Engagements 3000 (revised) (ISAE 3000)
and 3410 (ISAE 3410). Details of the procedures performed are outlined in Deloitte’s independent assurance opinion,
which can be located at www.convatecgroup.com/investors/governance/our-policies-and-statements/.

Performance data

The scope of Deloitte’s work covered the following 2023 disclosures (performance data) from the review:

– Greenhouse gas emissions: Scope 1 (14,632 tonnes CO2e); Scope 2 (market based) (1,510 tonnes CO2e ); Scope 2

(location based) (23,430 tonnes CO2e ) (page 60)

– Emission intensity (location based: 17.8 tonnes CO2e/$million revenue and market based: 7.5 tonnes CO2e/$million

revenue) (page 60)

– Energy consumption (133,713 MWh) (page 60)
– Energy intensity (0.062 MWh/$million revenue) (page 60)
– Health and safety: operations lost time injuries and rate (0.22) and hazard observation rate (265) (page 55)
– DE&I and Wellbeing: percentage of females in senior management and CELT (44%) (page 54)
– Quality: Complaints per million, added to the assurance scope in 2023 (44.5) (page 17)

Deloitte’s full Assurance Statement, including opinion and basis of opinion is available at
www.convatecgroup.com/sustainability/esg-reports-and-data/.

Basis of reporting and ESG definitions

We regularly assess the scope of our ESG assurance and covered metrics. Convatec’s basis of reporting for the above metrics
and all other ESG target definitions can be found at www.convatecgroup.com/sustainability/esg-reports-and-data/.

Completeness of information

The information contained in the Responsible business review section of our 2023 Annual Report and Accounts covers all
operations over which we had financial control for the 2023 financial and calendar year. It also covers all of the issues identified
in our ESG framework and places emphasis on the most material issues.

Where a reported KPI does not relate to the entire organisation for the whole year, the scope of its boundaries is indicated.
Businesses acquired or disposed of during the year are not included in our reporting for that year except where disclosed otherwise.

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

TCFD disclosure

The Task Force on Climate-related
Financial Disclosures

Statement of Compliance

Convatec is committed to continued adoption and alignment with the recommendations of the Task Force on Climate-related
Financial Disclosures (TCFD). Our disclosure follows the recommendations and is compliant with the UK Government’s introduction
of reporting requirements through the Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations 2022.

We are compliant with the requirements of the FCA Listing Rule LR 9.8.6R(8) on climate-related disclosure, the table below
summarises where we are reporting consistently against the TCFD recommendations and recommended disclosures. Further
supporting information can be viewed in our ESG section of the annual report under the Protecting the planet and supporting
communities pillar on pages 58 to 65.

Recommendations

Relevant information

Status

Page ref

GOVERNANCE

a) Board oversight

– Responsibility for the identification and management

Comply

of climate-related matters

Page 67

– Frequency of engagements on climate-related matters

b) Management’s role

– How climate is integrated across business processes

and frameworks

Comply

Page 67

STRATEGY

a) Climate-related risks
and opportunities

– Description of time horizons used in the analysis

Comply

Page 68

– Climate risks and opportunities identified

b) The impact of climate-related

– Climate scenario analysis, including qualitative and

risks and opportunities

quantitative impact assessment results and the management
response measures

Comply

Page 68

– Climate integration in financial planning processes and climate

transition plan on alignment to net zero

– Description of climate scenarios used

Comply

Page 72

– Conclusion on climate resilience under different scenarios

c) The resilience of the

organisation’s strategy

RISK MANAGEMENT

a) Describe the organisation’s

– Process and methodology to identify and assess climate risks

Comply

processes for identifying and
assessing climate-related risks

and opportunities

Page 73

b) Managing climate-related risks

– Process to identify and select risk controls

Comply

Page 73

c) Integration into overall

risk management

METRICS AND TARGETS

– Overview of climate integration in Convatec enterprise risk

Comply

management framework

Page 73

a) Climate metrics

– Overview of climate metrics and targets used to

monitor performance

Comply

Page 75

– Climate metrics used to monitor risk and opportunity exposure

included in R+O table

b) GHG emissions

– Scope 1, 2 and 3 GHG emissions reported in responsible

Comply

business section

c) Climate targets

– Climate commitments to align with the low-carbon transition

Comply

and to reduce our exposure

Page 75

Overview

Strategic report

Governance

Financial statements

Additional information

We have adopted a two-layered approach
for climate scenario analysis, assessing
climate-related financial impacts both
qualitatively and quantitatively, to
ensure a solid foundation is in place as
we advance our ways of working in line
with our net zero strategic ambitions.
Using a qualitative approach in the
first instance has provided a baseline
score for all identified material risks and
opportunities across climate scenarios
and timeframes, which supports the
prioritisation of further mitigating action.

As a result of our in-depth climate
scenario analysis, we have been able
to incorporate climate factors into our
strategy planning process and financial
statements disclosures (refer to Note 1.3
on page 153). This is an important step as
we invest in environmental sustainability
initiatives and ensure suitable action is
taken to drive resilience and value under
uncertain climate scenarios.

Governance

Our ESG framework, described on pages
39-41, outlines the responsibility of the
Board and management specifically
around climate-related issues and the
frequency of meetings where these
topics are discussed. Whilst the Board
has oversight and the CEO overall
responsibility for climate matters, the
following describes the governance roles
involved in identifying and managing
climate risks and opportunities (R+Os)
and reporting these to the business.

– Identifying R+Os: Climate-related

risks and opportunities are identified
by the TCFD working group. The risks
and opportunities are discussed and
reviewed by the working group team
members and Subject Matter Experts
(SMEs) from each business unit. This
information is cascaded to the ESG
Steering Committee who then refers up
to the Audit and Risk Committee (ARC)
and the Board.

– Managing R+Os: Risk controls are

identified by affected business units,
with the support of the TCFD working
group and risk team. In a bottom-up
approach, risk owners are identified
in each business unit and are given
responsibility to identify appropriate
controls, monitor risk exposure and
provide updates each quarter. In
addition, some controls are defined in
a top-down manner as climate change
is managed under the Principal Risk:
Environment and Communities. The
ARC is responsible for reviewing and
approving Convatec’s management
of all risks.

– Frequency of engagements on

climate-related matters: Climate is
a standing agenda item across most
Board and management committees.
There were over nine discussions on
climate-related matters in 2023. For
further details on the frequency of
meetings please see page 40.

Climate change is considered across
different business units and functions
to ensure accountability and action
against our commitments. For example,
the ESG Steering Committee, chaired
by the CEO, met three times during
the year to discuss climate change
matters and approve key climate-related
activities, i.e. SBTi validation of Convatec’s
near-term science-based target, the
establishment of a Scope 3 working
group to drive decarbonisation, and the
elevation of ESG activities in strategy
and financial planning.

Strategy

Our approach to climate resilience
Climate-related risks and opportunities
have been assessed and managed as
a Principal Risk since 2021. However, in
recent years, in response to regulatory
requirements and as we advance our
understanding of climate issues through
our approach to ESG strategy, we have
undertaken climate scenario analysis to
assess and enhance the resilience of our
business.

Our climate scenario analysis approach

1. Engage with the
business including
senior leadership to
build awareness of how
climate change may
impact operations. Identify
whether climate risks and
opportunities are already
being managed.

3. Conduct a climate
scenario analysis to
systematically assess all
risks and opportunities.
Quantify the potential
financial impact of the
physical risk of selected
critical sites within our
value chain.

5. Conduct further
research, and where
possible quantification of
potential financial impact
for selected transition risks
and opportunities.

7. Continue to address
climate change in
Convatec’s business
strategic planning cycle
to ensure appropriate
resources are dedicated.

9. Continue efforts to
identify longer-term
actions required to meet
net zero commitments
and iterate Transition
Plan accordingly.

2022
Risk and opportunities
Identification and
qualitative assessment

2023
Quantification of financial
impact and development
of transition planning

2024
Continued monitoring
and strengthening of
integration

2. Contextualise identified
risks and opportunities
based on our business
operations and market
landscape to better
understand the cause
and consequence.

4. Integrate results of
physical risk analysis into
impairment testing, as well
as in business continuity
and risk management
plans. Incorporate priority
transition risks and
opportunities into the
strategic planning process.

6. Develop the first
Transition Plan (page 58)
using the outcomes of
the identification and
assessment, to inform
decision-making on
strategic priorities. Actions
required to align with the
net zero transition.

8. Ensure a robust and
integrated approach is
taken to identify and
assess climate risks and
opportunities, under
the Environment and
Communities Principal
Risk. Refreshing climate
scenario analysis.

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

TCFD disclosure continued

Introduction to climate scenarios

The future is increasingly uncertain over the long time horizons used in climate scenario analysis. As such, we draw upon scenarios
from the Intergovernmental Panel on Climate Change (IPCC), the International Energy Agency (IEA), the Regional Model of
Investment and Development and the Model of Agricultural Production and its Impact on the Environment (REMIND-MAgPie) and
the Network for Greening the Financial System (NGFS) to inform the assessment of climate impacts, ensuring our assessment is
robust and evidence-based. The temperature outcome scenarios used are diverse, to identify the transition and physical risks. The
table below summarises the scenario sources Convatec has used in analysis to date, which are commonly referenced by our sector.

Scenario storyline

Ambitious policy

Middle of the road

High warming

Paris agreement aligned scenario,
where global CO2 emissions are cut
severely, with ambitious and gradual
efforts to limit temperature rise.

Slow, less ambitious policy action or
a time lag before sudden ambitious
action. Emissions remain stagnant
in the near-term with notable shifts
occurring between 2030 and 2050.

Limited to no action, with society
continuing along past trends and
emissions increasing significantly,
resulting in extreme warming.

Scenario sources

NGFS Orderly transition

NGFS Disorderly transition

NGFS Hot House World

REMIND-MAgPie Net Zero scenario

IEA Net Zero scenario

IPPC’s SSP1-2.6

REMIND-MAgPie Delayed
Action scenario

REMIND-MAgPie Current
Policy scenario

IEA Announced Pledges scenario

IEA Stated Policies scenario

Temperature outcome (2100)

1.4°C – 1.8°C

IPPC’s SSP2-4.5

1.6°C – 2.7°C

IPPC’s SSP5 8.5

2.6°C – 4.4°C

The time horizons used for this assessment are short-term (0 to one year) to reflect baseline risk and align with our business plan,
medium-term (one to five years) to align with the strategic planning cycle in which climate matters are integrated, and long-term
(five years to 2045) to align with Convatec’s goal of achieving net zero and the longer-term nature in which climate issues may manifest.

Risk and opportunity qualitative
assessment

In the qualitative assessment, we score
each risk identified against impact and
likelihood; and opportunity against size
and ability to execute. This assessment is
granular, and the outcomes provide us with
detail on the significance of each risk and
opportunity at different intersects of time
and future climate scenario.

In the risk and opportunity matrices,
we present all risks and opportunities
identified and show the relative significance
of the potential impact over time,

across all climate scenarios. The relative
significance is determined by averaging
the qualitative assessment scores for
each scenario and time horizon intersect.
Refer to Convatec’s Annual Report 2022,
page 80 for our assessment results by
climate scenario and time horizon. While
it is important to understand the possible
shift of risk impact over time and climate
scenario, this aggregate view helps to
simplify the results and supports the
overall prioritisation of the risks. We believe
that Convatec has a high ability to execute
across all identified opportunities, as
these align with our business strategy. As
such, whilst we may face some barriers

related to the cost and development of
technology, plans are being developed
or are being executed.

The identified risks and opportunities
to Convatec’s business can be
grouped into four broad areas of
impact which help to understand the
relationship between different risks
and associated opportunities:

1. Supply chain and sustainable design

2. Direct operations and processes

3. Stakeholder expectations

4. Physical damage and disruption

Risk matrix: consolidated risk scores across time horizons and climate scenarios

e
d
u
t
i
n
g
a
M

Ph1

Ph2

Ph3

Likelihood

RISK CATEGORY KEY

Supply chain and
sustainable design

Direct operations
and processes

Stakeholder
expectations

Physical damage
and disruption

Overview

Strategic report

Governance

Financial statements

Additional information

Opportunity matrix: consolidated opportunity scores across time horizons and climate scenarios

y
t
i
n
u
t
r
o
p
p
o
f
o
e
z
i
S

RE2

PM1

OR3

RE3

OR1

RE1

RE4

OR2

OPPORTUNITY CATEGORY KEY

Supply chain and
sustainable design

Direct operations
and processes

Stakeholder
expectations

Physical damage
and disruption

Ability to execute

Supply chain and sustainable design

Stakeholder expectations

Risk

– M1. Increase in price for purchased goods and services
– M3. Increased competition to buy oil and gas by-products

(e.g. chemicals, plastics)

– M4. Higher costs to procure sustainable materials
– P4. Increase in regulation on raw materials used in our products
– T2. Restricted access to alternative materials due to efficacy priorities
– T3. Increased competition for IP ownership on new low-emission

products and materials

– R3. Customers opt for suppliers providing more sustainable products
– R4. Sudden and rapid change in consumer perception of

materials used

Opportunity

– P1. Additional costs to comply with evolving regulations and exposure

to climate-related litigation

– T4. Unsuitable or ineffective use of data to inform decision-making

on climate issues

– T5. Gap in the use of AI which is fast developing as a critical tool

to manage climate risk

– R1. Increased investor concern and scrutiny over climate credentials
– R2. Customers request greater climate ambition and transparency

Opportunity

– PM1. Development of lower emission and sustainable materials in

– OR1. Increase resilience in the supply chain to be able to better

products

absorb climate-related shocks

– OR2. Use of data to manage climate risk and seize opportunities
– OR3. Collaboration in industry and lobbying of governments to

address climate impacts

Direct operations and processes

Physical damage and disruption

Risk

– M2. Change and volatility in energy prices, increase the operating

– Ph1. Increase in repair costs, and loss of productivity at

costs of direct operations

– M5. Limited availability of renewable energy
– P2. Increased pricing of GHG emissions applied to direct operations
– P3. Increase in regulations that affect our manufacturing processes
– T1. Cost to invest in climate mitigation and adaptation of operations

manufacturing sites due to extreme and gradual changes to weather
and climate (acute and chronic hazards respectively)

– Ph2. Delays in receiving goods or unfilled orders from suppliers

disrupted by climatic events

– Ph3. Disruption in transportation both upstream and downstream

due to extreme weather conditions

Opportunity

– RE1. Implementing energy efficiency projects in manufacturing

– RE4. Reduce water intensity of operations

and non-manufacturing locations

– RE2. Investment in onsite renewable generations or PPA
– RE3. Decarbonisation of heat to reduce reliance on fossil fuels

in manufacturing operations

In the risk and opportunity detail in the following pages, we describe the risk and opportunity drivers. The potential strategic and
financial impact is supported by examples of current and future management response options. For additional detail on how we
are managing the identified climate risks and opportunities, please refer to our Transition Plan on pages 58-62.

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

TCFD disclosure continued

Supply chain and sustainable design
The largest proportion of emissions in our value chain are derived from the materials Convatec uses, the majority of which come from
petrochemicals. Exploring the feasibility of sustainable design options across our product portfolios, as well as packaging, with a focus on new
product development is an essential activity required to reduce the embodied GHG emissions and to manage transition risks associated with
a change in material availability and price.

Risk drivers
– Suppliers face increased costs during transition to a low-carbon economy, which may be passed on to Convatec.
– Lack of opportunity for sustainable material alternatives, and possible bottlenecks in advanced materials due to expected high demand.
– Period of increased competition for petrochemical-based materials as road transport demand for oil declines.
– Regulation (e.g. taxes on single-use plastics), as well as sudden shifts in consumer perception of materials, could inhibit the use of

certain materials.

– Limited options to use sustainable materials without compromising product efficacy, or restricted access to solutions if competitors

patent designs.

Opportunity drivers
– Implementation of Convatec’s Green Design Guidelines (GDG) digital tool to identify potential alternative lower-emission options in the design/

redesign phase to promote alignment of our product portfolio with the low-carbon transition.

– Lower emission materials may also increase diversity and resilience of supply, e.g. by reducing reliance on petrochemicals.
– Increase data accuracy through supplier data collection, and increase alignment across the value chain to the SBTi framework.

Possible strategic and financial impact
– Material shortages due to increased competition

could result in disruption to production.

– Increased costs for procurement from increased
carbon cost which could impact profit margins,
or result in loss of sales if products are not
priced competitively.

– Investment in R&D to identify and use
sustainable material alternatives and
to also achieve regulatory compliance.

2023 management response
– In 2023, we created a supplier engagement
strategy to increase the number of suppliers
with green credentials.

– Continued integration of the Green

Design Guidelines and the associated digital
product sustainability tool that calculates the
emissions associated with materials used
in Convatec’s product library as well as our
packaging solutions.

Key KPIs and targets
– Emissions from raw material

purchases, with the goal to reduce
embodied emissions of products.

– Convatec has committed to

reducing Scope 3 GHG emissions,
from Purchased Goods and
Service, Upstream Transport and
Distribution, and Waste by 52%
per sold product by 2030 from
a 2021 base year.

Future management response
– Further roll-out of the GDGs and digital

product sustainability tool across the product
development team.

– Invest in suitable resources to monitor trends

in material alternatives and availability.

Direct operations and processes:
In a transition to a low-carbon economy, Convatec will be affected by global and national policy interventions aimed at increasing the cost of
emitting carbon. While Convatec is not currently subject to global carbon pricing mechanisms, Convatec may face a change in the cost of energy
as well as restrictions on energy intensive processes such as sterilisation. During the energy transition, there is uncertainty about how the supply
of renewable sources will meet the exponential increase in demand and Convatec could be faced with the reduced availability of renewable energy
or price volatility.

Risk drivers
– Incentives to shift to low-carbon energy driven by changes in energy prices and the introduction or expansion of carbon pricing mechanisms

in regions Convatec operates in.

– In the energy transition there may be limited availability of renewable energy due to a lack of procurement opportunities, extreme costs and

in constraints in the availability of renewable sources.

– Resource and financial investment into the implementation of low-emission and renewable technologies are required to achieve decarbonisation

through the value chain.

Opportunity drivers
– Continued implementation of energy efficiency and GHG reduction measures (e.g. LED lighting, low GWP refrigerant-charged cooling and

heating systems).

– Increasing the number of sites with self-generation renewables will decrease Convatec’s exposure to potential future increases and volatility

of electricity prices.

– Switching from natural gas to lower-carbon or renewable energy sources for heating will reduce Convatec’s exposure to future increases

in the cost of consumption of fossil fuels.

Possible strategic and financial impact
– Increased operational costs associated with

renewable energy procurement.

– Large upfront costs to direct capital towards

decarbonisation.

– Operational cost savings through the

implementation of efficiency measures
and avoided transition costs.

2023 management response
– We have decarbonised a selection of our sites
through improved efficiency and renewable
electricity procurement.

– We have installed on-site renewable energy

at three manufacturing sites, and are currently
procuring 95% renewable energy.

Future management response
– Introduction of a bespoke carbon price to
use within capital allocation to support the
investment direction towards projects that
avoid GHG emissions or deliver GHG reductions.

– Switch our company cars to all be electric

vehicles by 2030.

Key KPIs and targets
Non-renewable energy with the aim
to reach 100% renewable electricity
throughout the estate by 2030.

Scope 1 and 2 SBT.

– SBTi target of reducing absolute
Scope 1 and 2 GHG emissions
by 70% by 2030 from a 2021
base year.

Overview

Strategic report

Governance

Financial statements

Additional information

Stakeholder expectations:
Convatec recognises that managing climate-related risks and opportunities is essential for delivering long-term value and building climate
resilience. Stakeholder expectations on transparency, ambition level and performance against ESG and climate matters are evolving rapidly.

Risk drivers
– Increased volume of legislation and reporting requirements will require us to direct appropriate resources to respond and manage increasing

stakeholder scrutiny.

– Ineffective or limited use of data and AI could result in us having a limited understanding of baseline impacts and the direction of travel of

climate performance. As a result, if Convatec does not have suitable data, Convatec will not be able to make informed decisions in regard to
climate action.

– Stakeholder (including investors and customers) requests for climate information are rising with high expectations on ambition, transparency
of disclosure and management of risks and opportunities. For example, the NHS has laid out a supplier roadmap to net zero which sets out
requirements to 2030, such as reporting progress against net zero and enhancing product specific data.

Opportunity drivers
Convatec is best placed to respond to stakeholder expectations if Convatec is able to manage our climate risks appropriately, for example:

– Diversifying our supply chain with supplier duality to better absorb climate-related shocks, including product scarcity, price volatility

and extreme weather.

– Continued investment, use and roll-out of data management tools and software, e.g. increasing supplier engagement through EcoVadis

and use of TransVoyant to reduce and monitor distribution costs and increase the efficiency of logistics.

– Implementation of GDG digital product sustainability tool to improve reporting of emissions across the current and future product portfolio.
– Collaboration in industry and lobbying of governments, to drive innovation and identify sustainable solutions which support the decarbonisation

of the sector while meeting the needs of patients.

Possible strategic and financial impact
– Impact on tenders if Convatec does not meet

the ‘rules of engagement’ or does not progress
to its SBTi target.

– Customers switch to alternative suppliers
demonstrating accelerated climate action,
and Convatec loses sales and market share.

– Reduced access or increased cost of

capital if investors switch to better climate-
performing stocks.

2023 management response
– Frequent review of investor priorities through
consistent engagement to ensure Convatec
meets expectations.

– Reviewing performance and reporting on
progress against environmental targets.

– Use of ESG rating indices to indicate evolving
investor expectations in climate performance.

Future management response
– Continued review of investor priorities as

they evolve and assessment of any additional
environmental reporting requirements.

Key KPIs and targets
Benchmarking of our ESG metrics
and targets against government
regulations, peers and key
stakeholders to ensure Convatec
meets our commitments and
reduction targets.

Physical damage and disruption:
In the future, gradual climate changes and increased frequency of extreme weather events will have an impact across global value chains. While
Convatec is aware of the physical climate hazards most prevalent across our manufacturing sites and can implement adaptation and control
measures to reduce the risk, Convatec has less influence over how suppliers are managing climate risk.

Risk drivers
– Damage and disruption at manufacturing sites due to extreme and gradual changes to weather and climate (acute and chronic hazards

respectively).

– Delays in receiving goods from suppliers due to disruption from climatic events at supplier sites.
– Disruption in transportation both upstream and downstream due to extreme weather conditions, which, for example, may prevent travel

on roads (snowstorms) or unloading/loading at ports (storms).
– Rising temperatures and increased frequency of heatwave events.
– Water security issues due to increasing demand and a shrinking supply of water, especially considering the decline in water quality.
– Floods and storms (e.g. hurricanes) increase in severity and frequency, driven predominantly by the increased likelihood of extreme precipitation

events.

Opportunity drivers
– Implementation of water efficiency measures including replenishment initiatives and exploring alternative water sources at priority sites

(especially those in high water risk regions – Haina and Reynosa). This will mitigate the potential impact of degrading water quality and water
availability due to climate change.

Possible strategic and financial impact
– Increased costs to manage damage and disruption

at manufacturing sites.

– Unable to meet customer orders on time due

to unforeseen disruption in the value chain both
at supplier sites and in logistics.
– Forced to move operations to an

alternative location.

– Loss of revenue and missed growth targets.
– Increased cost of insurance and reduced cover

for climate events.

2023 management response
– Convatec has site-specific dependency flows
and business contingency plans for each
manufacturing and distribution location.

– Infrastructure investment to mitigate potential

climate-related business disruption, e.g. back-up
generators at our plant in Mexico to address
power disruption due to extreme cold weather in
the US and additional drainage measures at our
plant in Deeside, UK to address flood risk.

Future management response
– Monitor need for further adaptation measures
to reduce risk, i.e. flood defences, temperature
control at heat-stressed sites.

Key KPIs and targets
Capital expenditure on climate
adaptation. 100% of high-risk
sites to have implemented business
continuity plans.

Identify efficiency metrics and
develop monitoring to track
impact on performance.

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

TCFD disclosure continued

Risk and opportunity deep dive
and financial impact assessment

Over the past year, to strengthen our
understanding of climate impacts on the
business, we have expanded the depth
of our risk and opportunity assessment.
Further information on this process can
be found on page 74. Our further analysis
has included:

– Financial impact assessment of physical

risks on key manufacturing assets

– Financial impact assessment of

costs associated with the low carbon
transition (energy price change, and
carbon pricing mechanisms)

– Further research into the potential

future disruption in our plastics supply
chain associated with regulation and
change in supply.

Avoided costs from achievement
of target: The implementation of
decarbonisation measures and
achievement of target will reduce
our emissions intensity of operations
and inherently reduce our exposure
to transition risks. This presents an
opportunity for Convatec to minimise
the potential financial impact and
demonstrate resilience to uncertain
climate changes.

The financial analysis results below
show the potential range of impact under
different climate scenarios. We present
the results as climate-adjusted net present
value for the period 2024-2050 in line with
a long-term time horizon, indicating the
extent and probability of potential losses
in the future. Our calculation methodology
and key assumptions are described on
page 75.

– Physical risk: We have considered

the potential increase in losses over
time, and as such have calculated
the delta of future years against this
year as a baseline. We have presented
this as the net present value of the
cumulative cash flow impact for the
period 2024-2050, discounted at
the Convatec WACC. The results are
presented for the 50th percentile,
indicating the ‘best guess’ on the
potential impact under each scenario.
To provide a ‘worst-case’ view for the
purpose of ensuring appropriate risk
controls we have not accounted for
physical risk mitigation or adaptation
measures that reduce our exposure.
Active contingency plans are in place
which are described on page 71.

Physical climate ﬁnancial impact: NPV (2024-2050)

m
7
2
$

m
1
2
$

m
6
1
$

m
0
3
$

m
4
2
$

m
8
1
$

m
2
$

m
3
$

Damage to assets (Ph1)

Productivity loss (Ph1)

Climate physical risk-
adjusted net present value

Ambitious policy

Middle of the road

High warming

Climate transition gross ﬁnancial impact: NPV (2024-2050)1

– Transition risk and opportunity:
These are hypothetical absolute
costs which could affect the cost
base of our operations in the future.
To understand the potential downside,
we have assumed a ‘worst-case’ and
less likely scenario where our major
operations (all manufacturing assets
and material suppliers) are subjected
to carbon pricing as a proxy to
transition costs. The results presented
account for our decarbonisation plan
as we are committed to transition to
a net zero economy.

Based on the risks and opportunities
quantified only, the results show that
transition impacts are more significant
to the business than physical climate
change. The greatest risk stems
from our value chain, reflecting
the exposure of high transition costs
from procurement of raw materials
used in products and packaging. Our
commitment to decarbonisation and
associated actions (detailed in our
Transition Plan on page 58) greatly
reduces our exposure to these potential
net zero transition financial impacts and
contributes to the achievement of our
climate strategy.

We believe Convatec is resilient to the
potential impacts under different climate
scenarios including those that could limit
global warming to 1.50C as well as on the
opposite end of the spectrum with more
than 40C warming. Whilst our qualitative
and quantitative climate scenario analysis
illustrate the potential unmitigated level
of financial impact, in reality we already
have mitigations in place which reduce our
exposure and minimise potential impacts
to climate-related events. This is because
climate change is a key component of our
strategy through our ESG framework.

m
m
4
4
$
$

m
4
$

m
3
$

m
0
1
1
$

m
8
9
$

m
4
6
$

m
3
2
$

m
6
5
$

m
1
5
$

m
)
9
8
(
$

m
)
5
9
(
$

m
)
3
0
1
(
$

Change in
energy price (M2)

Cost of Renewable
Energy Certiﬁcates (M2)

Carbon taxes
on energy
consumption (P2)

Increased
transition cost of
raw materials (M1)

Climate transition-
adjustment net
present value2

Ambitious policy

Middle of the road

High warming

1. These represent gross financial impacts. The results of our climate scenario analysis are indicative, in recognition of the uncertainty of future climate impacts.
The intention is that the results are used to inform risk management and financial planning discussions. Please refer to the scenario sources used on page 68,
and our calculation methodology on page 75.

2. This includes planned capital investment in decarbonisation (T1).

Overview

Strategic report

Governance

Financial statements

Additional information

EVOLVING REGULATORY AND ENVIRONMENTAL IMPACTS*

US – A new bill in California
will require all plastic
packaging to be recyclable
or compostable by 2032.

With a large share of
our market output, the
value chain operations
throughout the US
contributes the most to
the overall financial impact.

UK – The UK has introduced
a plastic packaging tax of
approximately £200 per
tonne. Increasing use of
renewable energy sources
and efficiency measures
at our UK sites.

Flood is the primary risk
driver at our manufacturing
plant in Deeside, UK,
driving an increase in
repair and maintenance
costs. The risk is mitigated
at our site, but we have
limited influence on the
adaptive capacity of
local infrastructure.

Our manufacturing operations in Dominican
Republic and Mexico are expected to be
increasingly affected by heat stress impacting
productivity levels, according to climate analytics
used in our financial impact assessment. For
more detail refer to Convatec Annual Report
2022, pages 83-84.

EU – The EU’s Packaging and
Packaging Waste Directive aims to
increase recycling to 70% by 2030.

*not an exhaustive overview

Risk and opportunity –
actual impacts

Convatec’s assessment of actual impacts
is based on experiences across its
manufacturing sites over recent years.
This includes the closure of our plant
in Haina as a result of a severe tropical
storm and power disruption to our plant
in Reynosa as a result of extreme cold
weather in the US. In both examples,
our business continuity plans were
implemented to carefully manage any
impact on our business and the financial
impact was negligible.

To date, we have not recognised additional
costs in our procurement of energy or raw
materials associated with climate-related
policy specifically. Our manufacturing
operations and those of our supply chain
are not knowingly subject to any current
carbon pricing mechanisms. However,
in some cases, it may be that we are
experiencing higher costs passed on
in procurement which is partly driven
by climate transition costs which are
not delineated on invoices or pricing
agreement structures. Beyond financial
impacts, in recent years we have noticed
a step change in stakeholder interest in our
ESG and climate-related actions. As such,
we are dedicating more internal resources
towards responding to stakeholder
questions and customer requests.

Risk governance

Climate-related issues are considered
within the ‘Environment and Communities’
Principal Risk. This reflects the strategic
importance the business places on the
need to align with a net zero transition,
through the adoption, transition, and
integration of a low-carbon economy.

The Board undertakes a bi-annual
assessment of Convatec’s principal risks.
The Convatec Executive Leadership
Team (CELT) is supported by the risk
team and a network of champions
across the business, who are tasked with
maintaining identification, assessment,
management and awareness of key risks
and control measures on an ongoing
basis throughout the year.

Ownership and management of all risks
are assigned to relevant members of
CELT, who are responsible for ensuring
the operating effectiveness of the internal
control processes and for implementing
effective key risk-mitigation plans.
Environment and Communities is owned
by the Chief Quality & Operations Officer.

Integration of climate
in risk management

The ongoing review of climate issues
is integrated into Convatec’s risk
management approach, described
on pages 76 to 84. In addition to the
company-wide assessment, Convatec
uses climate scenario analysis to ensure a
complete and thorough review of climate
issues across long-term time horizons.

Risks and opportunities are identified
for Convatec but are considered
in the context of the geographies,
business units, functions and assets
that are affected.

Many of the management response
options used to mitigate identified
risks and impacts can be considered
opportunities for the business to
strengthen resilience and capitalise on
cost savings and revenue growth and
are already part of our strategy to align
with the net zero transition. Annually,
our strategic planning process helps to
identify the commitments and actions
of each business unit to respond to key
risks and opportunities, as well as to
contribute to the net zero alignment.

Decisions to control, mitigate or
accept climate-related risk impacts
are informed by top-down and bottom-
up risk management processes. The
risk appetite for the Environment and
Communities Principal Risk is used to
determine the level of resources and
investment that should be dedicated.
This overarching principal risk is further
informed by bottom-up climate scenario
analysis which indicates the scale of
potential impact across time frames
and climate scenarios. More information
on the measures in place, or that are
planned, to respond to our climate
risks and opportunities are described
on pages 58-62, and 70-71.

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

TCFD disclosure continued

CLIMATE RISK MANAGEMENT PROCESS

CLIMATE SCENARIO
ANALYSIS

CLIMATE RISK
RESPONSE

CLIMATE RISK
REGISTER

Identify

Assess and
prioritise

Quantify
gross/net
impact

Risk
tolerance
determined

Indentify
controls and
actions

Function
and category
risk register

Convatec
risk
register

RISK MANAGEMENT GOVERNANCE

Board, CELT, ARC, Function leadership, Risk champions, Risk owners, ERM team, IA

Climate key risk
indicators

Identifying, assessing, and
managing climate risks using a
climate scenario approach

Convatec has conducted a scenario-
based assessment of identified risks and

opportunities, as described on
pages 68-71. The staged approach
to assessment means we have a
foundational understanding of all
identified risks and opportunities to
reference to. This means that where,

to date, we have not been able
to quantify the potential financial
impact we still have a comprehensive
assessment to reference.

ENVIRONMENT AND COMMUNITIES: PRINCIPAL RISK – CLIMATE RELATED RISK

In each area of business, the risks to the delivery of Convatec’s strategy are identified, assessed and prioritised
using the Convatec risk assessment criteria, which includes establishing the risk drivers and mitigation.

Risk ratings are used to prioritise risks and are a product of the expected impact
and the likelihood of that impact to occur due to an event.

Each business unit has an individual risk register, where it is also responsible for the application of additional
management and mitigation per risk as required.

The financial risk assessment of climate issues assesses the potential losses attributable to sites to
help inform decision-making.

TOP DOWN

BOTTOM UP

– Identification: Risk identification was
based on a range of sources including
a review of regulatory requirements
related to climate change, climate
policy and climate scenario research,
review of peer disclosures and
interviews with internal experts. Once
risks were identified and scored, they
were then validated in a workshop with
senior stakeholders representing all
relevant functions. These risks were
then presented to the ARC for review
and, where appropriate, incorporated
into the principal risk assessment.

– Qualitative assessment: To assess
the potential impact to its business
and cashflows, identified climate-
related risks have been assessed
against likelihood of occurrence,
magnitude of impact and vulnerability,
where vulnerability is a function of
exposure, sensitivity and adaptive
capacity. Sensitivity reflects the
predisposition of organisations, assets,
societies, processes, or systems to be
adversely affected by risk. Adaptive
capacity refers to characteristics or
actions that may reduce the level of risk
posed by a hazard and thereby alleviate
vulnerability. Climate opportunities
have been scored based on the

potential size of opportunity through
avoided costs or increased revenue,
as well as the ability to realise the
opportunity. Each term is scored on a
five-point scale and scoring thresholds
are defined for each indicator to
ensure a consistent and comparable
approach is applied across all impacts,
climate scenarios and time horizons.
The potentially subjective nature of
qualitative scoring is countered by
reference to sector and policy research,
interviews with internal experts, as well
as climate scenario databases including
the IPCC WGI Interactive Atlas and
NGFS IIASA Scenario Explorer.

Overview

Strategic report

Governance

Financial statements

Additional information

– Climate-related opportunities:
A qualitative climate scenario
analysis was conducted for
opportunities. Internally Convatec
is using the assessment results to
prioritise the areas which could have
the greatest impact, and to inform
management response options
for identified opportunities.
– Capital deployment: Convatec

has an estimated capex spend of
circa $30 million of mitigation and
adaptation projects across eight
manufacturing sites that have or will
be starting from 2024 to 2028. These
initiatives include projects to increase
green electricity generation (for
example, through solar panel schemes
and decarbonisation of heat through
electrification with air source heat
pumps), upgrades to more efficient
HVAC systems (Heating, Ventilation
and Air Conditioning), improved
water treatment solutions and energy
efficiency improvement projects.

– Remuneration: There are ESG

objectives in the personal objectives
of CELT members aligned to their
remuneration. In respect of the two
executive directors, the new Executive
Remuneration Policy includes ESG
objectives, contributing 5% of their
overall bonus.

While measuring and monitoring our
environmental performance is valuable,
having associated targets keeps us
responsible for the active management
of climate impacts. Our commitments to
minimise environmental impact and align
with the low-carbon transition are listed
on page 58, alongside the actions we are
taking to achieve these targets. Across
the board, we are leveraging different
tools and software to understand where
the largest impact areas are and what
the drivers are. This information will
support the identification of suitable
measures that address the root cause
to have the greatest impact. For further
information on measures implemented
in the last year to manage our impacts,
see pages 58-62.

– Selecting risks and opportunities
for quantification: The qualitative
scoring allows for the prioritisation
of possible impacts on which the
business agrees to focus control
measures and investment. Where
methodologies allow, Convatec has
sought to better understand the
business impact from a selection
of priority physical and transition
impacts through the quantification
of potential financial impact
across different climate scenarios.

Financial assessment
methodology

Physical risk:
Convatec has undertaken a financial
assessment of potential losses associated
with physical climate risk across seven
key manufacturing sites, selected based
on their contribution to Group revenues
or criticality on product delivery. The
forward-looking assessment modelled
the potential impact of productivity loss
and asset damage driven by 12 climate
indicators which are categorised into
the following hazards: flood, heat stress,
storms, and water stress.

The climate analytics are sourced from
Climate Insights, a tool owned and
developed by CLIMsystems (part of SLR).
The data from the Climate Insights tool
shows the potential future change in
climate variables based on global climate
models (GCMs), using the scenarios
described on page 68. The climate data
provided is correlated to our business
data, including revenue generation
and building value, to provide an annual
assessment of the potential value at
risk (VaR) experienced from repair costs
for asset damage, and revenue loss
due to decreased productivity driven by
the likes of employee efficiency and site
closures. As such, it is not a forecast of
potential annual costs or revenue losses
but is a helpful indication of the potential
impacts of physical climate change
events which are likely to increase over
time. The analysis does not consider
any mitigation actions that the business
would implement.

Transition risk:
Our financial assessment of transition
risks has focused on the potential
increases in costs of direct operations at
our manufacturing sites, associated with
energy price and carbon taxes, as well
as increases in costs from raw material
suppliers, using carbon tax as a proxy.
The potential impacts are determined
for two business cases. A reference case
where no further decarbonisation action
beyond what is known and planned
is taken, and a mitigation case where
Convatec achieves its near- and long-
term emission reduction targets.

SLR Consulting supported Convatec in
quantifying the potential future financial
impact of the low-carbon transition
referencing climate scenario data from
the International Energy Agency. This
data included regional carbon price and
energy price projections which were
overlayed onto our emissions and energy
profile. The climate-related information
is sourced from the International Energy
Agency’s World Energy Outline which
outlines current trajectories as well as
required level of policy action to limit
global warming to 1.50C by the end of
the century. This information is overlayed
with our business data on projected energy
consumption and emissions profile to 2050.

The projections on our energy and
emissions correspond with the same
data used for our net zero and Transition
Plan modelling to ensure consistency
and alignment in the level of investment
required to mitigate risks, achieve
targets, seize opportunities, and
align with the low-carbon transition.
The outcome provides a climate-adjusted
view of cashflows. Across the different
scenarios analysed, we used the price
projections to inform the range in
ambition level but assumed a start date
of carbon tax impact in 2030 for our raw
materials as there is uncertainty in the
applicability and likelihood of suppliers
being subject to additional transition
costs that will be wholly passed on to us.

Metrics and targets

Convatec use a range of metrics to
understand our baseline impact on the
environment. There are four key areas
that Convatec monitors: emissions,
energy use, waste and water. As disclosed
on pages 58-62, some of these metrics
are used to measure our exposure to
certain risks and to track performance
over time. For example, if a performance
trend was upward this would indicate
the potential impact may be greater
and therefore highlight that additional
action and mitigation are needed. Further
information on our performance against
climate metrics are included on pages
58-62, while the detail below shows our
alignment against the TCFD cross-industry
climate-related metric categories.

– Scopes 1-3 emissions: Convatec’s

operational emissions are calculated
and reported annually (Scope 3
emissions data is on page 61).
– Climate-related risks: In 2023,

Convatec undertook qualitative and
quantitative climate scenario analysis
for transition and physical risks
respectively. Internally Convatec is
using the results of this assessment
to inform the appropriate response
for priority risks.

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Risk management

Understanding and appropriately managing our risk
maximises potential opportunities to deliver our strategy
and realise our vision.

Risk culture

Our risk appetite

Board risk appetite statements

The Board is responsible for risk
management. The Board promotes a
transparent and accountable culture,
which does not inhibit sensible risk-
taking, critical to growth and delivery
of the Group’s vision and strategy, but
also sets the boundaries for such risk-
taking. The Board and its committees
set the tone for the Convatec Executive
Leadership Team (CELT) and other senior
management to promote and cascade
this culture through the Group and with
external stakeholders.

The Board, its committees and CELT
ensure that our risk management
systems are robust, effective and take
account of appropriate exposures.
The Board supports effective risk
management across the Group
by implementing and overseeing
a framework of appropriate and
effective controls that enable risk
to be assessed and managed.

The risk-related responsibilities of
the Board’s committees

Audit and Risk Committee (ARC)

Monitors and reviews all risk management
processes, including the effectiveness of
risk identification, appetite, mitigation
and control measures.

Nomination Committee

Oversight to ensure that the Group has
a talented, diverse and effective Board
and CELT, combining extensive corporate
experience with knowledge of our
markets and regulatory environment, as
well as a pipeline of future senior talent
capable of identifying and managing risk
to enable effective strategy delivery.

Remuneration Committee

Oversees the implementation of
appropriate reward arrangements
to drive a high-performing culture
that manages risk in line with our
risk appetite.

The Board sets the level of risk we
are prepared to accept to deliver our
strategy and realise our vision. In 2023,
we formally reviewed our risk appetite
and the risk tolerance levels of each
principal risk. Our risk appetite is defined
through four risk appetite statements,
which are detailed on this page, and
each principal risk is aligned to one of the
four statements, with risk tolerance levels
set in line with the current and forecast
business environment.

On an ongoing basis, the ARC monitors
the level of risk to which the Group is
exposed and how the business continues
to mitigate the risk and operate within the
stated risk appetite levels. In 2024, we will
continue to enhance our approach to risk
appetite through continuing to embed
identified metrics and obtain assurance
over the key controls for each of our
principal risks to support the Group to
operate within our risk appetite, and as a
management tool for business decisions.

Seek

Risk is taken in order to choose strategic
options that offer potentially higher
business rewards and/or there is
confidence in the level of robust systems
of internal control to respond effectively
and limit the duration of potential impact.

Risks that arise from events that
are outside realistic boundaries for
Convatec’s immediate direct influence
and control. A focus is required to build
a reasonable level of resilience to impacts
on strategic objectives.

Manage

Risk is accepted by Convatec in order to
achieve strategic objectives, and where
the risk is able to be managed to a level
that would not result in material impact
to strategic objectives.

Cautious

Risks arising from Convatec’s people,
processes, and systems that are
controllable and where there is no appetite
for risk taking in this area. The objective is
to eliminate the risk or to reduce it to an
absolute minimal level of tolerance.

RISK MANAGEMENT FRAMEWORK

Strategic enterprise level

Board risk
appetite
statements

Articulation into principal risks

Overview

Strategic report

Governance

Financial statements

Additional information

Risk management framework

Governance and oversight

We continue to strengthen our risk management approach
through the development of a process that is based upon ISO
31000, Risk Management, and complies with the requirements
of the UK Corporate Governance Code.

Our process undertakes a continuous bottom-up review of
risk (current and emerging), across each area of our business,
to identify the main threats to delivery of our strategy. The
resulting business risk profile is used to inform our biannual
principal risk update process, working with subject matter
experts from the business and supported by the CELT
sponsor(s). We identify, assess and prioritise our business
and principal risks in accordance with our defined risk
assessment criteria. Risk ratings are used to prioritise our risks
and are a product of the expected impact and the likelihood
of that impact to occur as a result of an event. Risk controls
have been identified and certain additional risk mitigation
measures implemented and monitored to further reduce our
risk exposure and ensure alignment with our risk appetite.
Consequently, this process results in our principal risks being
managed at the residual risk level rather than inherent risk.
The ARC oversees the risk management process each quarter.
For further information see page 114.

The work of the Board and the ARC is underpinned by a
formal structure of delegated authority and supported by
Group policies covering key areas of operation, including
risk management. The diagram below shows the key roles,
responsibilities and overall arrangements for collecting,
monitoring and reviewing risk information.

Board
– Sets the Group’s risk appetite.
– Ensures appropriate risk management and internal

control systems are in place to enable the identification
and robust assessment of the principal and emerging
risks.

– Ensures effective processes exist to manage the

principal risks and takes a balanced view of those
risks against Convatec’s strategy and risk appetite.

– Assesses the Group’s prospects and resilience

through the Viability Statement.

– Sets the tone from the top and the culture

for managing risk.

– Sets strategic priorities in light of the Group’s

risk profile.

n
w
o
d
p
o
t
n
o
i
t
a
m
r
o
f
n

k
s
i
R

Strategy and objectives

Risk analysis

Risk identification

Risk description

Risk assessment

Risk categorisation

Risk response

Tolerate
Treat

Terminate
Transfer

Audit and Risk Committee (ARC)
– Considers the risk environment through reporting
from management, internal audit and the external
auditor and considering external developments
(e.g. geopolitical events).

– Reviews, and reports to the Board on the

effectiveness of the internal control environment
and risk management systems.

– Sets the internal audit annual plan and external audit
scope to provide assurance on a materiality basis that
the Group operates within the Board’s approved risk
appetite through appropriate and effective controls
and mitigations.

Convatec Executive Leadership Team (CELT)
– Sponsors a coordinated approach to establishing
and embedding enterprise risk management.

– Employs a central risk team to establish and facilitate
the risk management process across the Group to
provide risk information for management oversight
and decision.

– Manages the principal risks appropriately to operate

within the Group’s risk appetite.

– Ensures that risk recognition and appetite are integral

to determining strategy.

– Delivers strategy by managing risks.

Principal risks: Risks with potential material
consequences at a Group level or where the risk is
connected and may trigger a succession of events that,
in aggregate, become material to the Group. Risks may
materialise individually, simultaneously or in combination
to impact the delivery of our strategic priorities and the
long-term value of Convatec.

Business risks: Risks identified from any aspect of
the Group that are relevant to one or more categories,
functions and/or Centres of Excellence, and can be
owned at that level.

Leadership teams
– Identify new and emerging risks to the Group’s

strategy.

– Review management of their specific risks against

the Group’s risk appetite.

– Identify additional mitigations to reduce risk exposure

on an ongoing basis.

– Assign senior business representatives (risk

champions) for each category and function to take
a lead role in the identification of risk, and updating
risk information for senior management oversight.

p
u
m
o
t
t
o
b
n
o
i
t
a
m
r
o
f
n

k
s
i
R

Business risks and tolerance

Risk reporting

Operational exposure management

Monitoring and challenge

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Risk management continued

2023 risk landscape

Our overall risk profile has moved to
reflect both the ongoing enhancement
in our business resilience capability
and the continuing challenges from
the macroeconomic and political
environment. Following year-end review,
we took the decision to remove our
principal risk for Strategy and Execution
Delivery. Strategically, we are pivoting
into FISBE 2.0 and, with work carried
out to date, this principal risk is now
considered normal business activity.
Since 2020, the risk profile has been
elevated as a result of various global
forces, and we continue to manage the
challenges facing the wider business
landscape and build further resilience
into our operations. As such we remain
well placed to successfully deliver our
strategy. To support our objectives and
mitigate specific external events we
increased our focus in certain areas
as detailed below.

Strategic risks
In 2023, we demonstrated good
momentum in the business with strong
sales growth and margin expansion by
further strengthening our competitive
position, accelerating our simplification
and productivity agenda and acquiring
businesses to strengthen our positions.
In our product development pipeline,
we successfully delivered six key
products to our targeted markets and
continue to focus on improving pipeline
delivery through our defined innovation
framework. Our ESG agenda continues
to develop our transition plan that will
deliver our net zero commitment and
science-based target initiative, as well
as the recommendations of the TCFD.

Operational risks
The current climate, driven by global
inflationary pressures, continues to
bring challenge to the business. We have
experienced persistent external supply
chain pressures with cost inflation for
raw materials, freight, utilities and on all
other aspects of the business cost base.
The business continues to effectively
manage and respond to the issues faced
and to work closely with third parties on
potential areas of exposure to minimise
any possible impact, including through
building the right level of strategic
resilience in our inventory holding. The
cost of living challenges and competition
for talent continues to place pressure on
our people risk and we remain focused
on delivering programmes of initiatives
to support having the right level of key
talent, roles and skills in place to deliver
our strategic objectives. Over the course
of 2023, we have continued to improve
the robustness of our IT infrastructure
and cybersecurity, data management
and privacy framework in line with the
changing business environment.

Financial risks
We have continued to positively manage
the adverse effects of the macroeconomic
environment on our business and,
overall, drove continued strong organic
revenue growth in 2023. Over the year,
we continued to improve margin through
our improved portfolio mix across and
within categories, and by simplifying our
business and driving productivity through
improving business cost efficiencies
(including extending our global business
services with another location in Asia
to provide round the clock support to
our organisation), driving automation
and efficiencies in our manufacturing
operations and improving commercial,
sales and marketing productivity. Driven
by our pricing centre of excellence,
improving pricing practices across
the Group has continued to positively
impact our strong financial performance.
We have implemented additional tax
solutions to enhance our level of tax
governance, and further refinancing of
bank facilities and credit facility extension
initiatives have continued to strengthen
our balance sheet and reflect our robust
credit standing.

Compliance risks
We have strengthened and adapted
our compliance framework as we
grow in mature markets and target
investment in emerging markets. We
took steps to ensure the maintenance
of ongoing compliance in our markets,
including the continued provision of
ethics training and focused global
compliance resources and initiatives.
During the period, we identified
exposures and addressed risks of non-
compliance through implementation of
appropriate mitigation programmes.
We have continued to progress
improvements in our third-party risk
management and contract procurement
to maintain expected standards
of compliance within our third-party
partners. Third-party activity continued
to be monitored and managed through
due diligence by our Compliance team
and an independent, expert third party.

2024 anticipated risks

We expect certain risks to impact in
2024 and have put in place mitigation
measures to reduce any adverse
implications for the Group’s financial
results, operations, reputation and
strategy. While these specific risks are
embedded in many of our principal
risks, further details are provided below.

Global macroeconomic pressures
Our operating and financial performance
is influenced, amongst other factors, by
the economic conditions of the countries
and markets in which we operate, and
our ability to manage exposure to volatile
economic measures. Pressure from
economic deterioration, the persistence
of inflation, interest rate uncertainty,
recessionary impacts and the additional
challenge of transitioning to lower
carbon generation can all contribute
to challenging market conditions.
Global economic conditions have broadly
improved since 2023, but we continue
to focus on delivering efficiencies to
our manufacturing and operating cost
base in response to the environment
and the reality of delivering, and the
required investment to achieve, net
zero. Whilst the management of our
supply chain is a core competence,
we continue to monitor the evolving
situation and take appropriate steps
to prepare for foreseeable challenges in
the current environment over persistent
inflation on commodities, lead times
and shortages for raw materials and
manufactured goods, fluctuations and
adverse movement in shipping costs,
congestion and capacity constraints,
which are all expected to have
continued uncertainty into 2024.

Geopolitical tensions
Volatility in the international political
climate increases pressure on our
operations. We are reliant on supply chain
partners predominantly in North America
and Europe, but also from across the
world. The integrity of our supply chain
depends on access to and the reliability
of raw material and energy supply and
the storage, logistics, processing and
manufacturing infrastructure operated
by us and our third parties. The continued
worsening international political climate
increases the possibility of commodity
and energy price volatility, unstable
exchange rates, implementation of
additional sanctions or other trade limiting
actions that could impact our ability to
source commodities and raw materials,
or maintain a presence in current and
future markets and countries. Any break in
this supply chain, for example as a result
of interstate conflict, regional tensions,
terrorist activity including acts and threats
to shipping channels or cyber-attacks,
or as a result of heightening operating
costs, could jeopardise our revenues and/
or manufacturing productivity and impact
supply to customers.

Overview

Strategic report

Governance

Financial statements

Additional information

New market growth and
product delivery
We expect to launch a new product for
Ostomy and leverage recent product
launches by rolling them out in key
geographies in 2024. We expect to
continue launching new products across
all of our categories into 2025 and
beyond. Delivery of our product pipeline
is supported by our product development
and launch process, which acts end-to-
end to govern our actions and milestones
from ideation through development to
scale-up and finally approval and launch
in a consistent manner. We continue
to focus on our 12 key markets around
the world, with a particular emphasis on
the US and China. In China, during 2023,
there was a small impact (principally for
AWC) from the nationwide anti-bribery
and corruption campaign because
of the reduced access to healthcare
professionals. We anticipate the slower
AWC growth rate and industry-wide
regulatory restriction will be temporary,
and that market activity will normalise
in 2024 with no material impact on the
overall Group. In 2024, from a markets
perspective, we will continue to invest in
China as a key market going forward and
continue to grow our market share in the
US. We will strengthen our competitive
position by evaluating potential
partnerships and acquisitions. Any delays
or failure to meet market expectations
in our growth plans, however, may result
in a lack of stakeholder confidence to
deliver against stated plans.

Emerging risks

On a biannual basis, our risk
management process engages with
senior management to identify any
emerging risks, which represent a
significant change in the business
environment that may impact over
a longer timeline than that of the
current business objectives. In 2023,
we continued to enhance our emerging
risk model with each area of the business
against the principal risks to further
develop our measurement of the key
exposures and the resilience in place.
In 2024, we will develop this model
further to enhance our measurement
of these key exposures, the resilience
in place and identify relevant metrics
to aid with detection. As at the date of
this report, the following emerging risks
have been identified:

Medical advances
Technology and innovation are essential
if we are to meet customer demands.
If we do not develop the right products,
have access to the right technology
or deploy it effectively within our key
markets, or adjust to medical and surgical
advancements and improvements in
detection, cure and prevention (including
in the development of smart ‘artificial
device’ technology, the emergence of
new drugs to treat chronic conditions and
artificial intelligence), we may lose market
share in multiple key markets to existing
and new-entrant competitors.

Other factors

For further information relevant to our
risk profile see:

– Our business model – pages 6 and 7
– Key performance indicators – pages

16 and 17

– Operational review – pages 18 to 25
– Responsible business review – pages

38 to 65

– The Task Force on Climate-related

Financial Disclosures – pages 66 to 75
– Viability statement – pages 86 and 87
– Governance – pages 89 to 146

Future material and
operational restrictions
Our future business is dependent
on our ability to anticipate and/or
adapt to future health, safety and
environmental legislation, concerns,
studies or the loss of stakeholder
confidence in the materials and
processes used in the manufacture of
current and future products, or where
there is a proven greener alternative,
for example to single-use plastics.

Long-term third-party
management
Our current and future products rely
on regulated manufacturing processes
and approved supply chains. We are
dependent on our ability to effectively
manage the security of supply in our
key raw materials and unfinished goods,
critical services and manufacturing
energy supply to avoid any future chronic
sourcing issues/cessation in service by
single or sole source suppliers for key
product lines.

Future market environment
Our ambition to drive growth and further
develop our business is reliant on our
ability to adapt to future market and
healthcare models, market competition
and major unforeseen economic events.
The value of customer data and the
emergence of artificial intelligence
has increased and any shortfall in
our ability to adapt to an increase in
the management of customer data,
expanding data commercialisation
capability and technology and
widening range of virtual capability
allows for potential disintermediation
and/or bundling of other products and
services by emerging, non-traditional,
competitors entering the market.

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Principal risks

Below is an overview of the Group’s principal risks that
could impact the delivery of our strategy and the
realisation of our vision, in order of priority. The Board has
oversight of all principal risks that the Group faces.

The Board reviews and agrees our principal risks on a
biannual basis, taking account of our risk appetite together
with our evolving strategy, current business environment
and any emerging risks. Our principal risks are set out
over the following pages in order of priority (based on
the rating of residual likelihood and impact, as described
opposite). They are also reflected in the key adverse scenarios
underlying the Viability statement (see pages 86 to 87).

Risk heatmap

The graphic below summarises our assessment of the expected
impact and the likelihood of that impact to happen as a result
of our principal risks occurring after taking into consideration
the mitigating actions and effective controls in place to manage
each risk, with an indication of the change in the risk profile
since December 2022.

t
c
a
p
m

KEY

1. Operational Resilience and Quality

2. Information Systems, Security and Privacy

3. Customer and Markets

4. Political and Economic Environment

5. Innovation and Regulatory

6. People

7. Legal and Compliance

8. Environment and Communities

9. Tax and Treasury

Risk category:

Strategic

Operational

Financial

Compliance

Increased

Unchanged

Decreased

Likelihood

1. OPERATIONAL RESILIENCE AND QUALITY

Risk

Supply and manufacture of products and packaging are reliant on the resilience of supply chain partners and manufacturing assets, and robust
clinical and quality system processes. We invest in and develop our assets, systems and processes to provide a level of operational integrity and
performance. Failure to respond to events, including geopolitical issues and any increase in extreme weather patterns from climate change,
that result in production and/or supply chain delays, adverse product quality and health, safety and environmental incidents could result
in underperformance, a requirement to recall a product, reputational harm or a loss of stakeholder confidence in our ability to deliver our
strategic ambitions.

Key drivers

Risk mitigation

– Business continuity management.
– Supply chain resilience capabilities.
– Quality standards and resolution of existing and emerging
quality issues within the supply chain, manufacturing and
packaging processes.

– Health and safety of employees and contractors.
– Protection of the environment.
– Maintaining manufacturing plant performance.
– Single source or sole suppliers for raw materials and services.

– Business continuity plans for manufacturing facilities, inventory

movement and our key supply chain processes to maintain capability
to respond rapidly and appropriately to any incident.

– Procurement and supply chain processes to monitor, manage

and provide assurance to supply-based risk across our markets,
inventory, energy security, key suppliers and supply routes, ports
and countries of operation.

– Dedicated engineering, health, safety and environment, and

quality project teams and processes to prioritise and address risk
to manufacturing processes, facilities and people.

Overview

Strategic report

Governance

Financial statements

Additional information

2. INFORMATION SYSTEMS, SECURITY AND PRIVACY

Risk

Failure to ensure that our systems, data management and related controls supporting our global business are effective, available, integral and
secure, and recoverable, including those of our third-party partners, could adversely affect our ability to maintain continuity in our operations and
the trust of our customers and other stakeholders. Information security breaches can lead to data theft, fraud or accidental disclosure and result
in non-compliance with global data protection laws. Any real or perceived failure to comply with laws and regulations, or to adjust to a change in
conditions and increase in scrutiny, could result in adverse consequences such as penalties, regulatory investigation, a decrease in corporate trust
from stakeholders or additional compliance measures.

Key drivers

Risk mitigation

– Data management and privacy.
– Cybersecurity.
– IT and network resilience, business continuity and disaster recovery

arrangements.

– Digitisation.
– IT network alignment to business needs.
– Data optimisation.

– Cybersecurity leadership council, ethics committee and privacy

leadership team provide governance and oversight with policies,
methodologies, training and accountability framework in place to
manage the protection and use of personal data.

– Global Information Security and Compliance function supports
the business with an IT general control framework in place to
protect systems and data. Independent cyber assessment and
data review programme in place. Third party partner contracts in
place. Programmes of enhancements in data and cyber security
effectiveness being implemented during 2024.

– Security operations team respond to threats and ensure the security
of IT. Policies, technical standards and guidance documents in place
to manage the use and governance of IT systems.

Risk details and link to strategy

Opportunity

Risk profile change

Category: Operational

Appetite: Manage

Accountability: Jonny Mason,
Chief Financial Officer

Link to strategy:

Enhance the efficiency and resilience of our IT
and data management systems and processes
to support effective delivery of our operations.

2023: no material change

Read more on pages 26 to 33

Overview

Strategic report

Governance

Financial statements

Additional information

Non-financial and sustainability
information statement

In accordance with the requirements of Section 414CB of the Companies Act 2006, the information below is provided
to help our stakeholders understand our position in relation to key non-financial and sustainability matters including, where
appropriate, the relevant policies and processes we operate.

Key matter

Position and policies and processes we implement

Page

Environmental matters

Climate change and environmental strategy

Employees

Our vision and values

Climate-related financial disclosures

Code of Conduct

Diversity, Equity & Inclusion and Wellbeing

Our people strategy

Employee induction, training and development programmes

Employee engagement

Pages 38 to 64

Pages 66 to 75

Pages 5

Page 56

Page 54

Pages 52 and 53

Page 53

Diversity targets and review of metrics

Pages 54 and 55

Human rights

Human Rights and Labour Standards

Modern Slavery Act Statement

Page 56

Social and community matters

Community engagement

Pages 63 and 64

Anti-corruption and anti-bribery

Third Party Compliance Manual

Compliance helpline and website

Principal risks and impact of
business activity

Non-financial key
performance indicators

Our business model

Page 57

Pages 58 and 59
and 76 to 84

Pages 16 and 17,
60 to 62, and 75

Page 6

→ You can find more information, including copies of our policies, processes and statements at:
www.convatecgroup.com/investors/governance/our-policies-and-statements/
www.convatecgroup.com/sustainability/esg-reports-and-data/

Convatec Group Plc Annual Report and Accounts 2023

Strategic report

Viability statement

The Group’s future
prospects and viability

An understanding of the Group’s strategy,
to deliver sustainable revenue growth
and expanding operating margin,
and its business model (pages 12 to
15 and pages 6 and 7), are central to
allowing the Board to assess the Group’s
prospects, liquidity, resilience and
viability. The principal and emerging
risks being addressed by the Company
(see pages 80 to 84) are reflected in the
determination of the Group’s strategy
and its successful implementation.

Assessment of future prospects

The Directors are of the view that the
appropriate period of assessment
remains a three-year period from January
2024 to December 2026 (the Viability
Period). Although the Directors have no
reason to believe that the Group will not
be viable over a longer period, the Board
has chosen to conduct the assessment
for this three-year period because:

– Our R&D and production cycles tend
to be of a duration of less than three
years with key innovation pipeline
programmes targeting launch within
the Viability Period.

– Significant capital investments are
being made to realise the Group’s
strategy over the medium to long
term. The Group’s business model
means that its capital investment
is discretionary, and it has the ability
to respond in a timely manner to
reasonably possible Group specific
and market events, and therefore
does not require a longer time
horizon assessment.

– Implicitly, it is harder to accurately
forecast the latter years of a five-
year plan.

The Group’s management process
consists of monthly monitoring of
progress against the financial budget
and key objectives for the current year
by CELT and the Board, and reforecasting
throughout the year in respect of the
expected outcome for the current
year. It also includes the preparation
of a detailed budget for the following
year and updating a rolling five-year
strategic plan, which forms the main
basis on which to assess the longer-
term prospects of the Group.

In 2023, the Board approved a detailed
operational plan and execution model
to deliver sustainable and profitable
growth including the financial plan
that underpins the Group’s five-year
strategic plan. The five-year financial
plan from 2023 to 2028 forecasts the
Group’s profitability, cash flows and
funding requirements, inclusive of
the Viability Period.

Our strategy is consumer-centric,
agile, focuses on innovation and
ensures clear accountability. It has been
developed from strategic plans for each
of our business units and functional
areas, supplemented by items managed
at a Group level and assumptions such
as macroeconomic activity, market sector
growth forecasts, competitor activity
and exchange rates. This has then
been supplemented by CELT’s plans for
improving the operational effectiveness
and execution across the Group.

Key factors affecting the Board’s
view of the Group’s prospects over
the period of the viability assessment
and the longer term are:

– The fundamentals of our markets,

products and brands remain sound,
as does our current and future strategy
of leveraging our product portfolio
for growth in attractive segments
and geographies, developing and
commercialising new technologies
and services and striving to reduce
complexity and increase efficiency.

– Established positions in large,

structurally growing markets; strong
brands and a range of differentiated
products; a well-diversified business
platform across a range of market
segments and geographies.

– Strong cash generation capabilities

with no refinancing requirement within
the Viability Period with the Group’s
$250 million term loan committed
until 2027, $950 million revolving
credit facilities committed until 2028,
and the Group’s $500 million senior
unsecured notes due in 2029.

– The evolved five strategic pillars that
support the delivery of the strategy,
which are set out on pages 12 to 15.

The key assumptions considered in
the strategic plan, on which this viability
assessment is based, include:

– Our markets remain structurally sound
and continue to grow at existing levels
with no significant change to re-
imbursement environments.

– Margin improvement is driven by

successful execution of our operational
excellence programmes in order to
deliver productivity gains in excess
of inflation and other headwinds.
– Climate risk has been considered

but is not expected to have an impact
during the viability assessment period
of three years.

– Through the execution of our strategy,

we simplify our business, remove
excess costs and re-invest in capacity
and future innovation.

– Dividend growing progressively over

the viability period.

Viability assessment

Throughout the year, the Board has
undertaken a robust assessment of the
principal risks affecting the Group and
also emerging risks, particularly those that
could threaten the business model and the
Group’s viability over an extended period,
including an assessment of the likelihood
of them materialising. These risks and
the actions being taken to manage or
mitigate these risks are explained in detail
on pages 80 to 84. This analysis has then
been applied to allow the Board to assess
the prospects, liquidity, resilience and
viability of the Group.

The viability assessment has consisted
of stress testing the forecasts underlying
the strategic plan by modelling severe
but plausible scenarios in which a
number of the Group’s principal risks
and uncertainties materialise within
the Viability Period. We have modelled
scenarios which group together principal
risks where we believe interdependencies
exist between risks, in addition to
scenarios where unconnected risks occur
simultaneously. These scenarios focused
on both external factors, such as the
impact of economic recession leading
to higher interest rates and increased
inflation headwinds, and affecting
reimbursement rates, and internal factors,
such as a major EHS incident resulting
in a loss of revenues.

We continue to strengthen and develop
the link between the Group’s principal
risks and the viability assessment and
scenarios. The Group’s principal risks
are updated through the lens of our
risk appetite together with assessing
our evolving strategy, current business
environment and any emerging risks.
We reviewed the severe but plausible
risk events from each principal risk
and prioritised those by relative impact to
form revised long-term viability scenarios.

Overview

Strategic report

Governance

Financial statements

Additional information

As a result of ongoing investment in our
operational resilience over the course of
2023, we have decided to shift focus in
our EHS incident scenario from our plant
in Slovakia as modelled in 2022, to our
manufacturing facilities in Deeside, UK.
We have also incorporated a significant
adverse change to reimbursement rates
to our market distress scenario, which
is in addition to sustained inflationary
pressures and high interest rates. We
have maintained our risk scenarios in
relation to significant cyber incident,
regulatory issues within product lines,
and macroeconomic forces and/or
sanctions restricting access to a key
global market due to geopolitical
challenges. This reflects the importance
of all these areas to our business as we
grow new and emerging markets as well
as the changing and emerging external
environment that our current and
future operations work within.

The scenarios and sensitivity testing
have been based upon the current
Board-approved strategic plan and
forecast revenues, operating profit
and balance sheets and were reviewed
against the current and projected
liquidity and funding position. The
main severe but plausible scenarios
are included in the table below.

Consideration was also given to a
number of other scenarios as well
as the combination of the main
severe but plausible scenarios,
reflecting individual risks and events.
In the Board’s estimation these events
would not plausibly occur to a level of
materiality that, in themselves, would
endanger the Group’s viability.

The scenarios took no account of
the likely corporate mitigating actions
available to and within control of the
Directors, through adjustments to the
Group’s strategy and other means in the
normal course of business, for example
reducing expansionary capital investment.

This assessment was informed by
Management’s and the Board’s combined
judgement as to the potential financial
(particularly liquidity) impact of these
risks if they were to materialise, together
with their likelihood of occurrence.
The Board reviewed and discussed the
process undertaken by Management
and also reviewed the results of reverse
stress testing performed against the
forecast base case to determine the
performance levels that would result
in a breach of covenants. For a breach
of covenants to occur in the next 12
months, before corporate mitigation,
the Group would need to experience a
sustained revenue reduction of at least
10% across all categories and markets.
This was considered to be implausible
given the Group’s strong global market
position and diversified portfolio of
products and mitigations available
to the Board and management.

In addition, the Board undertook
an independent review of market
information, including investors’ and
analysts’ views on the future viability
of the Group and market prospects.
This review was undertaken to ensure
that where there was an external view
or information that was contradictory
to the views of Management, the
Board understood the rationale for the
difference of opinion and agreed with
Management’s view. This independent
review and the scenario tests enabled
the Board to conclude on the Group’s
viability and resilience.

Viability statement

Having assessed the Group’s principal
risks and uncertainties, and the
consolidated financial impact of sensitivity
analysis (including a severe but plausible
set of scenarios, which did not take into
consideration any corporate mitigating
actions available to the Group, that can
be deployed in the unlikely event that two
of the scenarios occur at the same time),
plus the Group’s level of cash generation
and existing financing facilities, and the
timing of the forecast peak cash outflows,
the Board has determined that it has a
reasonable expectation that the Group
will be able to continue to operate within
its existing bank covenants and meet
its liabilities over the Viability Period
to December 2026.

The Group’s Going Concern statement
is detailed on pages 152 to 153.

The Strategic Report comprising pages
5 to 87 was approved by the Board on
5 March 2024.

Karim Bitar
Chief Executive Officer

Jonny Mason
Chief Financial Officer

Scenarios

Impacts from a significant manufacturing incident modelled on a plant fire,
for example Deeside, UK

– Impact on supplying customers before plant production is restored
– Reduced production or extended period of shut down
– Loss of sales could have a material adverse impact on the Group’s reputation
– Impact of supply disruption

Linkage to risks on pages 80 to 84

– Operational Resilience and Quality

Impacts from a significant cyber incident producing a significant interruption

– Information Systems, Security

– A significant data privacy breach, leading to a regulatory penalty and subsequent costs

for investigation and remediation

– We have modelled a one-off significant fine resulting from a privacy issue in 2024

Impacts from significant regulatory issues in a key product line

– Significant breach of regulatory compliance in a product line
– Reduced production and loss of sales due to adverse impact on the Group’s reputation
– Impact of supply disruption

Market distress

– Significant reimbursement reduction in a major market resulting in adverse change to pricing
– Increased costs as a result of sustained inflationary pressure matched by sustained high

interest rates

– Impact of sustained geopolitical unrest on financial markets and confidence

Macroeconomic forces and/or sanctions restrict access to key global markets

– Failure to deliver stated growth targets in a key global focus market
– Supply chain issues to our manufacturing and distribution from the affected key global focus market

and Privacy

– Operational Resilience and Quality

– Legal and Compliance
– Innovation and Regulatory
– Operational Resilience and Quality

– Customer and Markets
– Political and Economic Environment
– Tax and Treasury

– Customer and Markets
– Political and Economic Environment
– Legal and Compliance

Convatec Group Plc Annual Report and Accounts 2023

What’s inside

Governance

Governance at a glance

Board statements

Chair’s governance letter

How we have applied the Code’s core principles

Board of Directors

Convatec Executive Leadership Team

100 How we are governed

102 Board activity and actions

106 Board evaluation

107 Nomination Committee report

110 Audit and Risk Committee report

120 Directors’ Remuneration report

143 Directors’ report

146 Directors’ responsibilities statement

Overview

Strategic report

Governance

Financial statements

Additional information

Governance at a glance

GOVERNANCE HIGHLIGHTS

BOARD STATISTICS

Board

Gender1

– Consideration of, and agreement for, the acquisition
of an innovative anti-infective nitric oxide technology
platform from 30 Technology Limited for initial
consideration of £45 million, plus potential milestone
and future payments of up to £131 million.

– Consideration of, and agreement for, two bolt-on

acquisitions: A Better Choice Medical Supply and All
American Medical Supply Corp. for a total of $28 million,
which will further strengthen our HSG business in the US.

– Ongoing review of other M&A opportunities.

– Oversight of execution against the FISBE 2.0 strategy.

– Capital expenditure discussions and approvals
for omnichannel commercial transformation
and manufacturing expansion.

– Review and approval of the Group’s Strategic Plans

and Budget.

– Review of quality and operations.

– Oversight of the Group’s ESG framework and progress

against sustainability targets and priorities.

Nomination Committee

– Review of Board and Committee composition,

considering Directors’ skills, knowledge and experience.

– Consideration of progress against diversity, equity
and inclusion, and wellbeing strategic targets.

– Review of succession planning and talent at Board,

CELT and wider global leadership team.

Audit and Risk Committee

– Consideration of the Group’s internal controls

environment, including cyber security and data privacy.

– Review of interim and full-year results statements prior

to recommending to the Board for approval.

– Oversight of Convatec’s enterprise risk management

framework and risk reporting.

– Review and approval of the external audit plan for the

2023 external audit.

– Review of 2023 internal audit reports and 2024 internal

audit plan.

– Evaluation of the effectiveness of the external auditor

and internal audit function.

– Planning the audit tender process.

– Review of management’s response to proposed
Department for Business and Trade corporate
governance reforms and revised UK Corporate
Governance Code.

– Review of TCFD and other non-financial reporting

and disclosures.

Remuneration Committee

– Implementation of the Remuneration Policy approved

by shareholders at the 2023 AGM.

– Review and approval of 2023 Executive Director and

CELT salaries and LTIP awards.

– Review and approval of the 2022 Executive Directors

and CELT bonus outcomes.

– Received regular updates on workforce remuneration

policies and practices.

– Conducted peer-group benchmarking on executive

remuneration with support from Willis Towers Watson.

Length of tenure2

Male:

Female:

56%

44%

1–2 years:

3–4 years:

4 years or more:

BOARD AND COMMITTEE MEETING

Board
scheduled meetings

Nomination
Committee meetings

Audit and Risk
Committee meetings

Remuneration
Committee meetings

1. As at 31 December 2023 and at 5 March 2024.
2. As at 31 December 2023.
3. In addition, there were further routine Board meetings to approve the release
of annual results, interim results and trading updates. There were also several
strategic or project-specific meetings of the Board and sub-committees thereof
held at short notice throughout the year.

Convatec Group Plc Annual Report and Accounts 2023

Governance

Board statements

Throughout 2023, Convatec was subject to the requirements of the UK Corporate Governance Code 2018 (Code). During the
year, we have complied with the Code other than provisions 40 and 41, employee engagement on executive remuneration.
The Remuneration Committee has not undertaken consultation with the workforce when considering executive remuneration,
however the Committee has considered wider pay practices across the Group and is mindful when applying salary increases.

During 2024, the Board will consider the implications of the UK Corporate Governance Code 2024, which will apply to financial
years beginning on or after 1 January 2025. In accordance with the Code, the Board is required to make a number of statements.
These are set out in the table below.

REQUIREMENT

BOARD STATEMENT

MORE INFORMATION

UK Corporate Governance
Code 2018 compliance

Throughout the financial year ended 31 December 2023,
except as explained above, the Company has complied
with the Code.

Pages 93 to 95

Going concern

Viability statement

The Directors are satisfied that the Group has sufficient
financial resources to continue operating for at least
12 months from the date of signing of the 2023 Annual
Report and Accounts and, therefore, have adopted
the going concern basis in preparing the Group’s 2023
Financial Statements.

Page 152

The Directors have assessed the viability of the Group
over a three-year period ending 31 December 2026, taking
into account the principal risks identified by the Board as
set out on pages 80 to 84. This assessment led the Board
to the reasonable expectation that the Group will remain
viable and continue in operation and meet its liabilities as
they become due over the Viability Period.

Pages 86 and 87

Fair, balanced, and
understandable

The Directors consider that the 2023 Annual Report
and Accounts, taken as a whole, are fair, balanced and
understandable, and provide the necessary information
for all stakeholders to assess the Group’s position and
performance and its business model and strategy.

Page 111

Assessment of the Group’s
principal and emerging
risks

The Directors confirm that they have undertaken a robust
assessment of the principal and emerging risks facing the
Group.

Pages 76 to 84

Annual review of risk
management and internal
control systems

The Board undertook, throughout the year, a review of the
effectiveness of the Group’s risk management framework
and internal controls, including those over the financial
reporting period, and concluded that these provided
assurance that there were no control failures in the year
which could materially impact the financial statements or
the future financial performance of the Group.

Page 105

Stakeholder engagement

The Board has taken steps to understand stakeholders’
views and has considered them in its discussions and
decision-making process.

Pages 104 to 105

Overview

Strategic report

Governance

Financial statements

Additional information

Chair’s governance letter

Firm foundations
for the future

The Board remains committed to
promoting a culture with our values
and forever caring promise at the heart.
We were pleased to be able to connect
with employees during our visit to
our manufacturing site and research
and development facility at Deeside in
Wales. The Board used the visit as an
opportunity to engage with staff at all
levels of the organisation on both a
formal and informal basis, and assess
the culture of the Company. We have also
continued to monitor culture through
reports provided regularly to the Board
and Nomination Committee, as well as
receiving reports on progress against
our people strategy and talent and
succession planning.

Convatec’s Our Work Life initiative
continued to gather momentum and
reinforces our approach to working in
more agile and flexible ways, as well
as supporting employees’ physical and
mental health. This initiative includes
our annual Convatec Day, a global mental
health awareness campaign, as well as
workshops, activities and focus groups.

Our Board

Through the Nomination Committee,
we focus on Board succession and
composition to ensure we have
the appropriate balance of skills,
independence, experience and diversity
to fulfil the Company’s vision and support
the delivery of the FISBE strategy.

In September, Convatec ended its
relationship agreement with Novo
Holdings A/S and consequently Sten
Scheibye stood down from the Board
after five years of excellent service.

Membership of each of the Board’s
committees is set out in the respective
committee reports on pages 107, 110
and 120.

Workforce engagement

This year we have continued with our
chosen workforce engagement approach,
with Sharon O’Keefe serving as our
designated Workforce Liaison Champion.
Sharon met with a number of employees
from across the business throughout
2023. Key discussion topics from the
meetings this year included:

– Ways of working, including increasing

agility in our decision making

– Focus on manufacturing simplification

and productivity, increasing the
standardisation of processes
– Clarity of purpose and customer

orientation, with an emphasis on the
value of engagement with customers
and patients

– Employee experience, noting the

importance of continuing employee
recognition and investment in
development opportunities.

The Board is committed to understanding
the views of Convatec’s stakeholders
to inform the decisions that we make.
Further details of Board-level workforce
engagement can be found on pages
103 and 104. We are planning yet more
direct and indirect employee engagement
activities for Sharon and the Board in
2024, including additional site-based
focus groups, holding Board and
Committee meetings at various Convatec
locations and Board member attendance
at our 2024 Global Leaders’ Meeting.

Other key stakeholders

Our key stakeholder groups are
identified and detailed on pages
42 and 43. Recognising that the
sustainable success of our business
is dependent on our stakeholders, we
have ensured that all Directors have
timely access to information about
stakeholder issues and concerns.
Information about how the Board
has taken account of section 172
considerations in our Board discussions
and decision-making processes is set
out on pages 104 and 105. Our section
172 statement is on page 42.

Dr. John McAdam CBE
Chair

Dear Shareholder

I am pleased to present this
Governance report for the year
ended 31 December 2023. The report
that follows, in conjunction with the
Nomination, Remuneration and Audit
and Risk Committee reports, seeks to
demonstrate our robust governance
framework and key governance
developments throughout the year,
progress against our diversity strategy
at Board and senior management levels,
open engagement with stakeholders, and
prudent risk management.

Our culture

We have a clear vision statement which
encapsulates our purpose and ambition,
a promise to be forever caring and a set of
values that reflect our culture, all of which
have become embedded throughout
the Group and influence our everyday
behaviours, and how we do business.
During the year, we have continued to
embed Convatec Cares, our ESG framework,
which supports what we do and reflects
our promise, vision and values, and how
they are integral to our wider strategic
framework, set out on pages 5 to 7.

Our governance practices
are enabling Convatec to
pivot to sustainable and
profitable growth.

Convatec Group Plc Annual Report and Accounts 2023

Governance

Overview

Strategic report

Governance

Financial statements

Additional information

Chair’s governance letter continued

How we have applied the Code’s core principles

Environmental, social
and governance (ESG)

The Board oversees our responsible
business programme and details of work
in this area during the year are included
on page 103.

In recent years, we have laid strong
foundations to ensure we operate in
a responsible and sustainable way
(see pages 38 to 65) and in 2023, we
made further progress with our ESG
agenda particularly with respect to
building a business where our people
can thrive. We rolled out an executive
education series to engage our senior
leaders in diversity, equity and inclusion
practices and have had our ESG-targets
approved by the SBTi. In addition,
we have met our target to introduce
100% renewable energy across all our
manufacturing sites.

Our CELT-led ESG Steering Committee,
chaired by the CEO, met three times
during the year. The remit of the ESG
Steering Committee includes reviewing
progress on our sustainability targets,
setting new targets where required and
enhancing our TCFD disclosures. The
Committee provided regular updates
to the Board on progress against ESG
strategic aims; and, to the Audit and Risk
Committee in relation to TCFD disclosures
and compliance with ESG-related
regulatory requirements including
relevant assurance.

Our governance practices

During the year the Board held four
in-person Board meetings, in March,
July, September and December, and four
Board meetings by video conference, in
April, May, July and October, a pattern
which we expect to continue through
2024 and beyond.

Our 2023 AGM took place as a hybrid
meeting, enabling shareholders to attend
either in person or remotely. Our 2024
AGM will similarly be held as a hybrid
meeting, full details can be found in
the Notice of Meeting.

Board evaluation

In accordance with the Code
requirements, a performance evaluation
of the Board and Board Committees was
carried out in the autumn of 2023. This
was conducted by way of an externally
facilitated questionnaire to Board
members and select senior managers,
with findings then collated externally and
reports provided to the Board and Board
Committees. Details of the evaluation
process and key points arising from
the 2023 Board review can be found
on page 106.

Diversity

The Code

We explain how we have applied the
Code’s principles on pages 93 to 95.
These core principles also serve as a
framework for the following sections
of this Annual Report which explain our
governance structure and the processes
we operate to support the Group’s long-
term success.

During 2024, the Board will consider
the implications of the UK Corporate
Governance Code 2024, which will apply
to financial years beginning on or after
1 January 2025.

2024 priorities

The Board remains committed to the
highest levels of corporate governance.
As a Board, we will continue to oversee
delivery of our FISBE strategy.

We will also continue to track progress
on our simplification and productivity
initiatives, including the continuing
transition of key central functions to
our Global Business Services teams
in Lisbon, Bogota and Kuala Lumpur
and our Plant Network Optimisation
to simplify and create efficiencies in
our manufacturing operations.

In 2023, we saw the launch of several
key new products including ConvaFoam™
in the US. The Board will continue to
monitor the successful development and
launch of a range of new products, at the
same time overseeing the continuing
build of our wider supply chain resilience.
After much progress over the last few
years, we will also continue to track the
ESG and climate agenda, evolving societal
expectations and Convatec’s response
and actions.

Dr. John McAdam CBE
Chair
5 March 2024

The Board is committed to achieving
diversity and inclusion across the Group
and, in doing so, ensuring transparency
against our targets. As at 31 December
2023 and the date of this report, we
have met the diversity targets under
the Listing Rules. Further details
can be found within the Nomination
Committee Report on page 108.

We are compliant with the
recommendations of the Parker
Review on ethnic diversity and the FTSE
Women Leaders Review on gender
diversity, and will continue to monitor
Board composition to ensure that we
maintain an appropriately diverse
Board in all respects. As at 31 December
2023 and the date of this report, the
proportion of women on our Board
was 44% (2022: 40%) and two members
of our Board self-identify as being from
a minority ethnic background.

Our objective was to achieve over 40% of
senior management roles (members of
CELT and their direct reports, excluding
administrative staff) held by women
by the end of 2025. As at 31 December
2023, we are pleased to announce that
we have exceeded our target with 44%
of our senior management roles held
by women (2022: 38%).

Despite this great progress, we recognise
that there is no room for complacency
and in order to continue to achieve
greater diversity at senior management
level, greater representation needs
to be achieved across all levels of the
organisation. Nurturing a diverse
pipeline of talent has been an area
of focus throughout the business.

During the year, the Board and
Nomination Committee has considered
diversity, equity and inclusion and
wellbeing insights globally across a range
of metrics, as well as insights from our
Employee Resource Groups. Initiatives
to increase DE&I and wellbeing are being
consistently implemented across the
Group and the Board and Nomination
Committee will continue to review the
Group’s efforts and the implementation
of our people strategy.

Our diversity policy for the Board, senior
management and the wider workforce
is a key pillar of our ESG strategy and is
fully aligned to our FISBE strategy and
our people strategy. The objectives of our
diversity policy are set out on page 54.

BOARD LEADERSHIP AND COMPANY PURPOSE

Code principles

Application

Where further information is available

The Board discharges its responsibilities through a
programme of activities that include review and approval
of the Group’s strategy, regular progress reviews of its
execution and implementation, discussion on arising
key issues and monitoring of performance, to enable
the Group to deliver sustainable and profitable growth.

Board focus and principal
matters considered in 2023

Pages 102 and 103

A
An effective and
entrepreneurial
Board that promotes
long-term sustainable
success of the Company
and which generates
value for shareholders
and contributes to
wider society

B
Establishment of
purpose, values and
strategy and promotion
of desired culture

The Board endorses the Group’s vision statement (which
encapsulates our promise, purpose and ambition), its
values and our forever caring promise. During the year,
it has reviewed the Group’s strategy and continued to
assess and monitor culture to ensure their alignment.

How we realise our vision

Page 5

Shaping our winning culture

Page 53

Chair’s statement

Pages 8 and 9

Chair’s governance letter

Pages 91 and 92

Culture

Page 101

The Group’s KPIs

Pages 16 and 17

The Group’s risk management
framework

Page 76

Audit and Risk Committee report

Pages 110 to 119

Engaging stakeholders and
section 172 statement

Pages 42 and 43

Board stakeholder engagement

Pages 104 and 105

Board key decisions

Page 105

Enabling our people to thrive

Pages 52 to 55

Compliance Helpline and website

Page 56

Audit and Risk Committee report

Pages 110 to 119

C
Ensuring resources are in
place to meet objectives,
measuring performance
and establishing controls
which assess and
manage risk

The Board regularly reviews the Group’s financial
and non-financial resources to ensure that it has the
resources available to deliver its strategy. The Board
has approved and regularly reviews a series of KPIs
that monitor performance and delivery of strategy.
The Board has established an effective governance
and risk management framework.

To fulfil its duty to promote the Group’s long-term
success and generate value for shareholders,
stakeholders and wider society, the Board has
designated a Non-Executive Director for workforce
engagement. A number of mechanisms have also been
established to facilitate shareholder, workforce and wider
stakeholder engagement and ensure that the Directors
consider all relevant stakeholder issues and concerns.

The Board has ensured that workforce policies and
practices are consistent with the Group’s values and has
established mechanisms, including an independently
provided whistleblowing/speaking-up facility, to allow
the workforce to raise concerns anonymously.

D
Effective stakeholder
engagement and
participation

E
Ensuring workforce
policies and practices
are consistent with
the Company’s values
and support long-term
sustainable success,
and that mechanisms
are in place to allow the
workforce to raise concerns

Convatec Group Plc Annual Report and Accounts 2023

Governance

Overview

Strategic report

Governance

Financial statements

Additional information

How we have applied the Code’s core principles continued

DIVISION OF RESPONSIBILITIES

AUDIT RISK AND INTERNAL CONTROL

Code principles

Application

Where further information is available

Code principles

Application

Where further information is available

F
The Chair’s role

G
Clear division of
responsibilities and
appropriate combination
of executive and non-
executive roles

H
Time commitment,
constructive challenge
and strategic guidance

I
Effective and
efficient Board

The Chair was independent on appointment and is
responsible for the leadership of the Board. The Chair
effectively facilitates robust discussions at Board meetings
and active participation from all Board members.

Key Board roles and
responsibilities

Page 101

The Board includes seven Non-Executive Directors and two
Executive Directors. Their responsibilities are clearly defined.

Key Board roles and
responsibilities

Page 101

All Directors have demonstrated that they have sufficient
time to fulfil their duties and responsibilities, including
taking into account any new significant external
appointments during the year. In their roles, the Non-
Executive Directors have provided constructive challenge,
strategic guidance and held management to account.

The Board and Nomination Committee regularly reviews
the skills and experience of its members to ensure that
the Board continues to be effective.

All Directors have access to an encrypted electronic portal
system which enables them to receive accurate and timely
information. The Board works with the Company Secretary
to ensure it has processes in place to function effectively
and efficiently.

Nomination Committee report

Pages 107 to 109

Board evaluation

Page 106

Board and Committee meetings

Page 101

Board evaluation

Page 106

COMPOSITION, SUCCESSION AND EVALUATION

Code principles

Application

Where further information is available

J
Board appointments
and succession

A Nomination Committee is established and Board
appointments are made in accordance with a formal,
rigorous and transparent procedure, with diversity a key
consideration as well as relevant knowledge, skills and
experience. The Nomination Committee regularly considers
Board and senior management succession.

K
Combination of skills,
experience and knowledge,
with regard also to tenure

Our Board is balanced and diverse and its members
have proven leadership capabilities as well as relevant
healthcare, operational skills, financial expertise and
experience. Board member tenure is such that there is
a balance of deep knowledge of the Company and fresh
perspective and challenge.

L
Annual evaluation

In compliance with the Code, during 2023, the Board
undertook an evaluation of its performance and that of
its committees. The evaluation was by way of an externally
facilitated questionnaire and reporting process, the
conclusions of which are contained within this report.

Nomination Committee report
and Board appointment
procedure

Pages 107 to 109

Board appointments

Page 109

Talent and succession planning

Page 109

Directors’ biographical
information

Pages 96 and 97

Skills and experience matrix

Page 96

Board member tenure

Page 89

Board evaluation

Page 106

The Non-Executive Directors meet with the Chair, without the
Executive Directors present, to discuss performance against
agreed objectives. Led by the Senior Independent Director, the
Non-Executive Directors also meet without the Chair to appraise
his performance. The Chair provides performance feedback to
each Non-Executive Director throughout the year as and when
the need arises.

M
Independent and
effective internal and
external audit functions

N
Fair, balanced and
understandable
assessment

O
Risk management and
internal control systems

REMUNERATION

The Board has delegated a number of responsibilities to
the Audit and Risk Committee (ARC) including oversight
of the Group’s financial reporting processes, and ensuring
the effectiveness and independence of the external
and internal auditors. The ARC Chair regularly briefs
the Board on how the Committee has discharged its
responsibilities. The ARC assesses throughout the year the
effectiveness of the internal and external audit functions,
including a formal assessment, taking into consideration
management’s views, once per year.

Audit and Risk Committee report

Pages 110 to 119

The Board has established procedures and processes
to ensure that reports and other information published
by the Group are fair, balanced and understandable.

Audit and Risk Committee report

Page 111

The Board sets the Group’s risk appetite and assesses the
nature and extent of its principal risks. Annually, the Board
reviews the Company’s principal and emerging risks, and
the effectiveness of the Group’s risk management and
internal control systems and processes. The ARC regularly
reviews the effectiveness of these systems and processes
throughout the year.

Risk management

Pages 76 to 84

Audit and Risk Committee report

Pages 110 to 119

Code principles

Application

Where further information is available

P
Remuneration policy
and practices

Q
Development of
remuneration policy
and packages

R
Independent judgement
and discretion

The Group’s Remuneration Policy, which was approved
by shareholders at the 2023 AGM, is designed to support
our strategy, be aligned to our vision and our employee
and, shareholder interests, and promote long-term
sustainable success.

Remuneration Policy

Pages 134 to 142

Directors’ Remuneration report

Pages 120 to 142

The Remuneration Committee reviews remuneration
packages of CELT members to ensure that they support
our strategy and provide an appropriate balance between
motivating and challenging our senior leaders. Executive
Directors are not involved in making decisions on their
own remuneration.

Following a formal procedure, the Remuneration
Committee sets the remuneration for the Executive
Directors and oversees the remuneration of senior
management. In doing so it applies judgement and,
if required, discretion to ensure a considered outcome
on remuneration issues.

Remuneration Policy

Pages 134 to 142

Directors’ Remuneration report

Pages 120 to 142

Directors’ Remuneration report

Pages 120 to 142

Convatec Group Plc Annual Report and Accounts 2023

Governance

Board of Directors

Experienced
leadership

A diversely skilled Board with proven leadership capabilities and relevant
healthcare, operational and financial skills and experience.

Dr John McAdam CBE
Chair

Karim Bitar
Chief Executive Officer

Jonny Mason
Chief Financial Officer

Margaret Ewing
Senior Independent
Director

AR*

Date of appointment:
September 2019

Independent:
Yes (on appointment)

Date of appointment:
September 2019

Date of appointment:
March 2022

Date of appointment:
August 2017

Independent:
No

Independent:
Yes

Relevant skills and experience
– Extensive chair and board

Relevant skills and experience
– Significant board level and

Relevant skills and experience
– Seasoned CFO with an extensive

Relevant skills and experience
– Chartered Accountant with

Overview

Strategic report

Governance

Financial statements

Additional information

Brian May
Non-Executive Director

Heather Mason
Non-Executive Director

Prof Constantin Coussios OBE
Non-Executive Director

Date of appointment:
March 2020

Independent:
Yes

Date of appointment:
July 2020

Independent:
Yes

Date of appointment:
September 2020

Independent:
Yes

Relevant skills and experience:
– Significant financial and international

business experience, including as Chief
Financial Officer of Bunzl PLC from 2006 to
2019. Prior to that, Brian held a number of
senior management finance roles with Bunzl,
including divisional Finance Director, Group
Treasurer and Head of Internal Audit.
– Experience as a Non-Executive Director
including of United Utilities Group PLC
between 2012 and 2021, where he was
also Chair of the Audit Committee.
– Extensive experience of significant

strategic initiatives that delivered growth
and sustained shareholder returns over
the long term.

– Chartered accountant.

Current external appointments
Non-Executive Director of Ferguson PLC, where
Brian is also a member of its Nominations and
Governance Committee and Audit Committee.
Non-Executive Director of OFI Group Limited.

Relevant skills and experience
– Significant international healthcare
experience leading fully integrated
global businesses, including 27 years with
Abbott Laboratories, where Heather held
a number of global senior operational
and strategic leadership roles, including
Senior Vice President of Abbott Diabetes
Care and most recently Executive Vice
President of Abbott Nutrition.
– Extensive relevant international,

commercial and operational experience.

– Proven track record of overseeing the

development of commercially viable new
product pipelines and brand building.

Current external appointments
Interim CEO of Assertio Therapeutics, Inc.;
Chair of SCA Pharmaceuticals, LLC. Non-
Executive Director of Immatics, Inc., and
Non-Executive Director of Pendulum
Therapeutics, Inc.

Relevant skills and experience
– Internationally recognised key opinion

leader, recognised with an OBE for Services
to Biomedical Engineering.

– Proven track record of translating research
into commercial technologies through
academic entrepreneurship including as
Founder, Chief Technology Officer and Chief
Scientific Officer of three successful spinouts.

– Significant experience of drug delivery devices

and technologies, including directing and leading
the Oxford Centre for Drug Delivery Devices,
a cross-disciplinary centre working across
pharmaceutical and medical device companies
and the NHS, between 2014 and 2020.

Current external appointments
Director, Institute of Biomedical Engineering,
University of Oxford. Professorial Fellow Magdalen
College, Oxford, Founder and Director of OrganOx
Limited, OxSonics Limited and OrthoSon Limited.
Trustee of the Oxford Transplant Foundation.
Transplant Foundation.

leadership experience, including
as former Chair of Rentokil
Initial plc and United Utilities
Group PLC and as a Non-
Executive Director of a number
of FTSE 100 and US companies.

leadership experience including
as Non-Executive Director of
Spectris PLC between 2017
and 2021 and Chief Executive
Officer of Genus PLC between
2011 and 2019.

– Extensive experience of

– Successful business

leading companies undergoing
transformation including as
Chief Executive of ICI PLC
between 2003 and 2008.

Current external appointments
Adviser to BlackRock’s Long Term
Investment Group.

transformation track record.

– Extensive and broad

management experience.

– Relevant sector knowledge and
experience, including 15 years
with Eli Lilly, where from 2008,
Karim was President of Europe,
Australia and Canada.

Current external appointments
Member of the Advisory Board
of the University of Michigan,
Ross School of Business.

track record in listed and
international businesses.
– Was formerly CFO of Dixons
Carphone PLC, now known
as Currys Plc from 2018-2021,
CFO of Halfords PLC from 2015
to 2018, CFO of Scandi Standard
AB, CFO at Odeon and UCI
Cinemas and FD of
Sainsbury’s Supermarkets.

Current external appointments
None.

significant financial experience,
including as former Managing
Partner of Deloitte LLP and
CFO of BAA PLC.

– Extensive audit and risk

management experience.
– Strong board experience,
having served as a Non-
Executive Director of Whitbread
plc and Standard Chartered PLC
and CFO of BAA PLC and Trinity
Mirror PLC (now Reach PLC).

Current external appointments
Non-Executive Director, Chair of
the Audit and Risk Committee
and member of the Nomination
Committee of ITV PLC. Non-
Executive Director, Chair of the
Audit and Compliance Committee
and a member of the Nominations
Committee of International
Consolidated Airlines Group, S.A.

Skills and experience

Board Experience

Corp. Transactions & M&A

ESG

Finance

Global

Healthcare

Leadership

Operational

Strategy, Transformation
& Org Design

T&I

John
McAdam

Karim
Bitar

Jonny
Mason

Margaret
Ewing

Brian
May

Constantin
Coussios

Kim
Lody

Heather
Mason

Sharon
O’Keefe

Key

Advanced. Director
demonstrates significant
skill and knowledge and/
or previous experience.
(5-8 years)

Expert. Director
demonstrates extensive
experience, identifiable
by occupation,
profession and career.
(8+ years)

Nil value for more
limited understanding
or skill

Kim Lody
Non-Executive Director

Sharon O’Keefe
Non-Executive Director

Date of appointment:
February 2022

Independent:
Yes

Date of appointment:
March 2022

Independent:
Yes

Relevant skills and experience
– Extensive healthcare, reimbursement, and

MedTech experience specialising in branding,
business development, innovation and growth.

– Leadership experience as President and
CEO of NYSE listed Sonida Senior Living
Corporation (retired); President of GN Hearing
North America, President of Resound US;
President of Coloplast Chronic Care US, Chief
Operating Officer of Senior Home Care, and
Executive Vice President and Chief Marketing
Officer of Gentiva Health Services.

Current external appointments
Non-Executive Director and Chair of the Talent
& Compensation Committee, Ball Ventures; Non-
Executive Director and Chair of the Nominating,
Governance, and Compensation Committee
of Invacare Corporation; and, Non-Executive
Director and member of the Audit Committee
of Mozarc Medical.

Relevant skills and experience
– Extensive healthcare and executive

experience, with focus on driving quality,
efficiency and innovation.

– Previously President and Chief
Operating Officer of UChicago
Medicine, Non-Executive Director of Aviv
REIT and of Vocera Communications.

– Holds an M.S. in Nursing Administration from
the Loyola University of Chicago, and a B.S.
in Nursing from Northern Illinois University.

Current external appointments
Non-Executive Director of Adtalem Global
Education Inc.

Convatec Group Plc Annual Report and Accounts 2023

Governance

Overview

Strategic report

Governance

Financial statements

Additional information

Convatec Executive Leadership Team (CELT)

CELT is responsible for the management and performance of the individual
business units with frequent reporting to, and oversight by, the Board.

Karim Bitar1
Chief Executive Officer

Jonny Mason1
Chief Financial Officer

Board membership

Karim Bitar, CEO and Jonny Mason, CFO, are also members of CELT.
Their biographical details are provided on page 96.

More detailed CELT member biographical information is available at
www.convatecgroup.com

Dr Divakar Ramakrishnan1
Executive Vice President,
Chief Technology Officer & Head
of Research & Development

Bruno Pinheiro
President & Chief Operating Officer,
Ostomy Care

Evelyn Douglas1,2
Executive Vice President,Chief Corporate
Strategy and Business Development Officer
and General Counsel

Appointed to CELT: 2020

Appointed to CELT: 2021

Appointed to CELT: 2020

Prior to joining Convatec, Divakar served
as Chief Digital Officer and Vice President
for Eli Lilly’s Drug Delivery, Device and
Digital Health groups, where he led a
global R&D team focused on developing
innovative and digitally enabled devices
to improve patient care. Divakar’s
career in healthcare spans more than
20 years. He served as Eli Lilly’s Vice
President of Manufacturing Science and
Technology, a role in which he oversaw
all the company’s process development
across its entire product portfolio.

Bruno worked for Bristol Myers Squibb
prior to its sale of Convatec in 2008.
Bruno’s diverse experience spans
across Sales, Business Development
& Global Emerging Markets. Prior to
his appointment as interim President
& COO, Global Emerging Markets, Bruno
led a diverse team across eight countries
in his role as Head of Convatec’s Latin
America business. Bruno was appointed
as President & Chief Operating Officer,
Ostomy Care, in May 2022.

Evy has in-depth expertise in the
MedTech sector, having spent 20 years
at Becton, Dickinson and Company
(BD) prior to joining Convatec in 2020.
At BD, she was Senior Vice President of
Corporate Development and Strategy,
where she supported the company
to build its capabilities, focusing
on opportunities for partnerships,
acquisitions and divestitures. Prior to her
role in corporate development at BD, Evy
held senior positions in their legal team.

Moyra Withycombe1
Interim Chief People Officer

Kjersti Grimsrud
President & Chief Operating Officer,
Infusion Care

Seth Segel
President & Chief Operating Officer,
Continence Care and Home Services Group

John Haller1
Executive Vice President,
Chief Quality & Operations Officer

Anne Belcher
President & Chief Operating Officer,
Global Emerging Markets

David Shepherd
President & Chief Operating Officer,
Advanced Wound Care

Appointed to CELT: 2023

Appointed to CELT: 2018

Appointed to CELT: 2020

Appointed to CELT: 2022

Appointed to CELT: 2018

Moyra joined Convatec in January 2021.
She was previously VP, HR Business
Partner for our Advanced Wound
Care business. Prior to Convatec, she
held several HR leadership roles at
GE Healthcare, GE Aviation and NXP
(formerly Motorola Semiconductors).
For over a decade at GE, she held
a variety of regional and global
roles including leading HR for their
European Healthcare business.

Kjersti joined Convatec and the CELT in
2018. She was a member of the founding
team at Axis-Shield and appointed
President Europe and the Middle East
and President International at Alere,
Inc., following its acquisition. Kjersti’s
25 years of experience in the MedTech
sector includes roles within diabetes care,
including General Manager, Operations,
Sales, Marketing and R&D positions.

Seth served as CEO of Woodbury
Health Products for five years until
it was acquired by Convatec in 2017. Prior
to this, Seth was Executive Vice President
at Cantel Medical Corp, a speciality
healthcare company dedicated to
Infection Prevention and Control. Seth
has lived and worked in North America,
Asia and Europe, holding positions
in investment banking, management
consulting, and as head of operations.

John joined Convatec in 2022 from Next
Press, where he was General Manager.
Previously, he spent 26 years with Stryker
Corporation, a leading global MedTech
business, where he played a pivotal role
in helping Stryker grow from a $1 billion
revenue company to a $13 billion revenue
company. John has lived and worked in
countries around the world.

Anne joined Convatec in 2022 after
30 years at GlaxoSmithKline (GSK),
where she most recently served as
Senior Vice President & General Manager,
Nordics. She originally joined GSK as a
sales representative in New Zealand in
1991 and went on to hold senior roles
globally within GSK. Anne has experience
in diverse market environments,
including both mature and emerging
markets across Asia Pacific, EMEA and
the Americas.

David joined Convatec and CELT in 2018,
having previously worked for Johnson
& Johnson for 26 years, where he
held a variety of sales, marketing,
strategic and operations roles, most
recently being Vice President, Southern
EMEA with responsibility for 15 businesses
across the region. Prior to that, he was
the US President for Cardiovascular
and Speciality Services.

Convatec Group Plc Annual Report and Accounts 2023

1. Members of the ESG Steering Committee.
2. Evy also acted as Company Secretary until August
2023. From 1 September 2023, the Board was
supported by Robyn Butler-Mason following her
appointment as Company Secretary.

Governance

How we are governed

INTRODUCTION TO OUR GOVERNANCE FRAMEWORK

The Board is collectively accountable to
the Company’s shareholders for the proper
conduct of the Group’s business and its
long-term success. The Board is responsible
for effective oversight, delegating some
of its responsibilities to Board Committees
through agreed terms of reference which are
subject to regular review. Terms of reference
for each Board Committee and matters
reserved for the Board can be found at www.
convatecgroup.com/investors/governance.

The Board also delegates responsibility
for the day-to-day operational management
of the Company to the Chief Executive
Officer, who is supported by the Convatec
Executive Leadership Team, which is chaired
by the CEO.

The independent Non-Executive Directors
exercise independent, objective judgement
in respect of decisions of the Board, and
scrutinise and challenge management.

Through the various committees of the
Board, they have responsibility for ensuring
the robustness and integrity of financial
information; internal controls and the
risk management framework; that the
Board has an appropriate mix of skills,
knowledge, experience and diversity
to fulfil the Board’s vision and support the
delivery of the Company’s FISBE strategy;
and, that remuneration arrangements
appropriately support the Group’s culture
and strategic ambition.

GOVERNANCE FRAMEWORK
Our governance framework, which includes the Board and its committees, is set out below.

Board

Responsibilities:

– Oversees and is responsible for the

– Sets the Group’s strategic aims,

– Determines the Group’s purpose and

long-term success of the Group and for
ensuring that there is a framework of
appropriate and effective governance and
controls which enables risk to be assessed
and managed.

determines resource allocation to
ensure that the necessary financial and
human resources are in place for the
Group to meet its objectives and reviews
management performance

values. Monitors and assesses the Group’s
culture and ensures that its obligations
to shareholders and other stakeholders
are understood and met.

Nomination Committee

Audit and Risk Committee

Remuneration Committee

Responsibilities:

– Reviews Board composition and

proposes appointments to the Board.

– Considers succession planning for
the Board and senior management.

– Oversees diversity and inclusion
targets and objectives for Board
and senior management.

– Oversees the integrity of the Group’s
financial reporting, internal controls
and risk management framework.
– Ensures the Group complies with
legal and regulatory governance
requirements, including those
related to financial reporting,
environmental and climate change-
related matters.

– Assesses the independence and
effectiveness of the external and
internal auditors.

– Ensures the Remuneration Policy
and wider remuneration practices
are designed to support the Group’s
strategy and promote long-term
sustainable success.

– Oversees Remuneration Policy
implementation for Executive
Directors and senior management.

– Reviews workforce remuneration

and related policies.

Convatec Executive Leadership Team

Responsibilities:

– Implements Group strategy for the long-
term success of the Group, monitoring
performance and significant business
projects and initiatives against budget
and the agreed strategy.

– Assists the CEO in executing the authority

delegated by the Board, making and
implementing day-to-day operational
decisions and exercising oversight of
the Group’s commercial issues.

– Monitors and assesses the Group’s
cultural activities, execution against
the ESG strategy and day-to-day
behaviours to ensure that they are
aligned with the Group’s vision,
promise, strategy and values.

Other key committees

ESG Steering Committee

Market Disclosure Committee

Treasury, Tax & Finance Committee

An executive committee chaired by the
CEO that drives the ESG agenda within
the Group, monitoring performance
of the ESG programme and regularly
reporting to the Board.

A Board committee chaired by the Chair that
oversees the disclosure of information by the
Company to meet its obligations under the
Market Abuse Regulation, Listing Rules and
Disclosure Guidance and Transparency Rules.

An executive committee chaired by the
CFO that oversees day-to-day tax and
treasury matters and treasury related
financial liabilities.

Overview

Strategic report

Governance

Financial statements

Additional information

Strategy setting

Culture

The CEO, CFO and other members of
CELT take the lead in developing the
Group’s strategy. A dedicated two-
day strategy meeting is held annually
between the Board and CELT, at which
the strategy is reviewed, constructively
challenged and approved by the Board.

The Board has the responsibility
of ensuring that Convatec’s culture
remains fully aligned with the
Company’s purpose, values, promise
and strategy. Our values frame the
Group’s culture and our employees’
behaviours, in turn determining how
we do business. To this end, the Board
continues to assess and monitor culture
in different ways, including:

– Regular briefings from the CEO,

the Chief People Officer and other
members of the senior management
team on progress against our FISBE
and people strategies.

– Review of Convatec’s Organisational

Health Index survey results and output
from our Big Conversation initiatives.

– Post-engagement briefings from

Sharon O’Keefe, the Board’s workforce
liaison champion.

– Review of compliance and Speaking

Up hotlines investigation reports and
internal and external audit reports.

Key Board roles and responsibilities Matters reserved for the Board

Board and Committee meetings

Chair

– Independent on appointment.
– Leads the Board and facilitates constructive

Board discussions.

– Promotes high standards of governance.
– Sets the Board agenda.
– Supports and guides the CEO.
– Leads the review of the effectiveness

and performance of the other Directors.

Senior Independent Director

The Board has a schedule of matters reserved
for its approval and a formal structure of
delegated authority.

This schedule of matters clearly defines
the decisions which can only be made by
the Board and largely relates to matters
of strategic importance, particularly high-value
or governance related, where independence
from executive management is important. It is
available at www.convatecgroup.com/investors/
governance.

– Sounding board for the Chair.
– Serves as intermediary for other

Directors when necessary.

– Available to shareholders should they have
concerns where contact through the normal
channels has either failed to resolve or would
be inappropriate.

– Leads the review of the effectiveness

and performance of the Chair.

The Board has delegated certain responsibilities
and authority to the Board Committees, which
all operate in accordance with Board-approved
terms of reference. The Board has also
delegated specified management control to the
Executive Directors and CELT. The written terms
of reference that each of the Board Committees
operates under can also be found within the
web link referenced above.

Non-Executive Directors (all independent as
at 31 December 2023)

– Bring relevant skills, experience and

knowledge to provide constructive challenge

The principal activities undertaken during
the year by the Nomination, Audit and Risk and
Remuneration Committees are set out in their
respective reports in this Annual Report.

– Provide independent judgement and serve

Board attendance

Director

Member
since

Attended

John McAdam (Chair)

Sept 2019

Karim Bitar

Sept 2019

Jonny Mason

March 2022

Brian May

March 2020

Margaret Ewing

Aug 2017

Constantin Coussios

Sept 2020

Heather Mason

Kim Lody

July 2020

Feb 2022

Sharon O’Keefe

March 2022

8/8

Sten Scheibye
(Board member until
8 September 2023)

July 2018

4/5

on the Board’s committees.

– Support the Chair by ensuring effective

governance across the Group.

– Monitor strategic execution in accordance

with risk and control framework.

Chief Executive Officer

– Accountable to, and reports to, the Board.
– Leads the executive management team
in delivery of the Group’s strategy and
objectives as determined by the Board.
– Day-to-day responsibility for executive

management matters.

– Responsible for maintaining dialogue

with the Chair and the Group’s stakeholders.

– Sets the cultural tone throughout

the organisation.

Company Secretary

– Responsible for advising the Board on
all corporate governance matters and
best practice.

– Works with the Chair to ensure Directors
receive accurate and timely information
to enable them to discharge their duties.
– Works with the Chair to design the induction

programme for new Board members,
ongoing training and the format of the
Board evaluation.

Details of the number of Board and Committee
meetings which took place during the year can
be found at page 89. Four of the scheduled
Board meetings were held in person in the
UK, and four meetings were conducted using
video and audio conference facilities, a format
which the Board intends to continue to follow
during 2024. In addition to the scheduled
meetings, several meetings were held at short
notice to consider specific matters, projects or
transactions, for example the acquisitions of
the nitric-oxide technology platform from 30
Technology Limited and All American Medical
Supply Corp.

The Non-Executive Directors met on one
occasion during the year without the Chair
and Executive Directors present.

The Company Secretary and the Group Deputy
Company Secretary attend all Board meetings.
External advisers also attend meetings
where independent guidance and expertise
is required to facilitate the Board in carrying
out its duties. Members of CELT (who are not
Board members) and other senior executives
regularly attend relevant parts of meetings
to make presentations and provide their
input on a range of topics.

The Board and its Committees are provided
with appropriate and timely information.
For scheduled meetings, agendas are drafted
based on a previously agreed annual forward
agenda schedule and are then reviewed with
the relevant Board or Committee Chair. Agendas
may then be amended, if deemed appropriate,
to reflect current business priorities.

The Directors have access to an encrypted
electronic portal system, which enables them
to receive and review Board and Committee
papers quickly and securely.

Scheduled Board and Committee
meetings held

100

Convatec Group Plc Annual Report and Accounts 2023

101

Governance

Board activity and actions

Board focus and principal matters considered in 2023

The principal matters considered by the Board during 2023 and their linkage to the Company’s strategic priorities are set out in the
table below.

As part of the business of each Board meeting, the CEO submits a report on business performance, including areas of progress
and areas which are not progressing to plan. The CEO’s report also addresses people and culture, including updates on voluntary
turnover, employee engagement, DE&I and wellbeing and talent to ensure those matters are considered regularly by the Board. The
Board also receives a report from the CFO providing updates on the Group’s financial performance. Members of the CELT and senior
management regularly attend Board meetings to ensure that the Board has good visibility of business developments, opportunities,
principal and emerging risks and their mitigation, and key operating decisions. The Board also receives key functional reports
and presentations in relation to Convatec’s responsible business agenda, enterprise risk management, stakeholder engagement,
legal and compliance as well as presentations from internal and external speakers on other topics relevant to the business and
the environment it operates in.

Areas of focus

Activities

Strategic priorities

Strategy and delivery
– Considering and approving

the Group’s strategy and any
changes and monitoring
execution and delivery.

– Considering and approving major

transactions, capital projects,
corporate actions or investments
by the Company.

Leadership
– Recommendation of directors

for re-election, following
recommendations from the
Nomination Committee.

– Reviewing the performance of
the Board and its committees,
individual Directors and the
Group’s overall corporate
governance framework.

Business plan and
performance
– Approving annual budget and
business plan and regularly
reviewing actual performance
and latest forecasts against
the budget and business plan.

Financial reporting
– Approving final and interim
results, trading updates, the
Annual Report and the release
of price-sensitive information.
– Approving the dividend policy,
determination of any interim
dividend and the recommendation
(subject to the approval of
shareholders) of any final dividend
to be paid by the Company.

– Consideration and approval of the acquisition of an
innovative nitric oxide technology platform from 30
Technology Limited and acquisition of A Better Choice
Medical Supply LLC. (see Key decisions on page 105).
– Regular review of progress and evolution of the FISBE
strategy, including participation in a two-day strategy
session and approval of strategic plans.

– Review of other corporate development opportunities

and/or capital investments to ensure alignment with our
FISBE strategy and Business Unit plans.

– Regular review of innovation and technology, including
the new product pipeline and quality and operations
enhancements to improve resilience.

– Regular review of capital expenditure, including

approval of omnichannel investment and investment
in manufacturing expansion.

Focus

Innovate

Simplify

Build

Execute

– Board evaluation completed and results reviewed in late

2023 (see page 106 for details)

– Consideration of the composition and skills, knowledge
and experience of the Board and Board Committees.

Build

Execute

– Approved 2024 budget and business plan.
– Regular CEO and CFO Reports and briefings.
– Deepdives into business unit performance and plans
including Advance Wound Care and Global Quality
and Operations in September.

– Approval of the Viability and Going Concern statements.
– Approval of half-year and full-year results.
– Consideration and approval of Trading Update in May

and November 2023 prior to publication.

– Confirmation and approval of the interim dividend

and recommendation of the final dividend.

– Approval of the 2022 Annual Report and Notice of 2023

AGM, held as a hybrid meeting.

Focus

Innovate

Simplify

Build

Execute

Focus

Execute

Overview

Strategic report

Governance

Financial statements

Additional information

Areas of focus

Activities

Strategic priorities

Risk and governance
– Ensuring the Group has

effective systems of internal
control and risk management
in place, including approving
the Group’s risk appetite.

Stakeholder engagement
– Considering the balance of

interests between the Group’s
stakeholders.

– Receiving and considering
the views of the Company’s
shareholders.

– Receiving and considering
the views of the Company’s
employees.

Responsible business
– Overseeing the Group’s

responsible business programme.

– Reviewing the Group’s

responsible business strategy
and its implementation.

– Considering the Group’s people

and their welfare.

– Review of the effectiveness of the Group’s risk management

and internal control systems.

– Review and approval of the Group’s Risk appetite, ensuring
that Group strategy and current performance are aligned
with risk appetite.

– Regular Governance, Legal and Compliance briefings
including an in-person update from external advisers.
– Briefings to the Board from the Board Committee Chairs

on the activities of the Committees.

– Review of Board Committee terms of reference.

– Briefings provided by the Investor Relations team and the
Group’s corporate brokers on investor feedback following
results announcements and investor roadshows.

– The Board met healthcare professionals and a patient

to obtain valuable insights into their concerns and needs.
– The Chair had meetings with two of our top 20 institutional

shareholders during the year.

– Sharon O’Keefe continued her role as Non-Executive

Director workforce liaison champion and provided regular
post-engagement briefings to the Board and the Board
considered the 2024 plan for workforce engagement
(see page 91).

– Regular briefings from the ESG Steering Committee.
– Oversight of the Group’s ESG framework.
– Reviewed progress against sustainability targets and

agreed priorities for 2024 and embedding ESG into strategy.

– Review of talent management and progress on DE&I

initiatives including gender and ethnicity data.

– Review of employee gender pay gap data.
– Review of the Modern Slavery Statement.
– Review of results collected from and management’s

responses to two employee surveys carried out following
the launch of our new employee voice platform which
aims to embed the Employee Net-Promoter Score.

Focus

Innovate

Simplify

Build

Execute

Innovate

Build

Execute

Innovate

Simplify

Build

Execute

CASE STUDY: BOARD EDUCATION AND EMPLOYEE ENGAGEMENT

BOARD VISIT TO DEESIDE, WALES

In September 2023, the Board visited
the Company’s manufacturing and
research and development sites in
Deeside, Wales.

A tour of the facilities was arranged,
followed by presentations and a
meet-and-greet with colleagues
from across the manufacturing and
R&D teams. The Board was provided
with opportunity to engage with
employees and understand more
about their roles as well as challenges
and opportunities within these areas
of the business.

Employees also joined the Board
for a dinner as a chance to engage
on a more informal basis.

Further opportunities to meet with
colleagues from across the business
at various Convatec locations will be
arranged throughout 2024.

102

Convatec Group Plc Annual Report and Accounts 2023

103

Governance

Overview

Strategic report

Governance

Financial statements

Additional information

Board activity and actions continued

BOARD STAKEHOLDER
ENGAGEMENT
Connecting with our stakeholders
and discharging section 172 duties

When making decisions, the Board acts
in a way that the Directors consider
most likely to promote the success
of the Company, for the benefit of its
shareholders as a whole, while also
considering the broad range of other
stakeholders who interact with the
business.

Our section 172 statement is set out
on page 42.

How we engage as a Board

All of our stakeholders are important
to us. Identifying and engaging with
our key stakeholders is essential for
the continued success of our FISBE
strategy. Ultimately, our vision –
pioneering trusted medical solutions to
improve the lives we touch – can only
be fulfilled through interaction with
our stakeholders. For that reason, we
are committed to maintaining strong
relationships and good communication
lines with stakeholders. We consider this
fundamental to the successful delivery
of our strategy and long-term prospects
and alignment with our purpose. Further
information on how the Company
proactively engages with a broad range
of stakeholders to understand their
issues and to build positive relationships
can be found on pages 42 and 43.

Our vision, values and our forever
caring promise provide a framework
which helps our employees make
decisions in the best interests of the
Group and our stakeholders. This
approach ensures that stakeholder
issues are considered throughout the
organisation and not just at Board level.

How the Board understands
stakeholders’ interests

The table below summarises how
our Board gains an understanding of
stakeholder issues. The table on page
105 describes how the Board considered
different stakeholders in making two
of our key decisions in 2023.

HOW THE BOARD ENGAGED

Stakeholders

Our people

Board-level engagement

Sharon O’Keefe was appointed in May 2022 as our dedicated Non-Executive Director for workforce
engagement. Sharon has attended several employee-related events and activities, including
interaction with the Employee Resource Groups, employee communications via Convatec’s
intranet and site visits (including meet and greet with employees). In September 2023, Sharon
met with a number of colleagues from T&I and GQO at Deeside in Wales. These focus groups
provided colleagues with an opportunity to discuss their experiences including the challenges and
opportunities they face. Sharon provided post-event briefings to the Board.

During the Deeside site visit, several employees were also invited to join the Board for dinner,
giving them a chance to engage on a more informal basis.

Members of the management team regularly attend relevant parts of Board and Committee
meetings to present on specific topics, including briefings on our people strategy. The Chairs
of the Audit and Risk Committee and Remuneration Committee engage directly with relevant
management and team members between Committee meetings.

The Board and the ARC receive reports from the Group’s compliance function detailing input from
the Group’s Compliance Helpline and website. When relevant, this includes details of investigations
arising from information provided via the Compliance Helpline and website and resulting outcomes
(see page 115).

Investors

All members of the Board are available to meet with shareholders.

The Chair had meetings with two of our institutional shareholders during the year.

The Board receives analysts’ notes published about the Group and the sector and receives regular
updates on investor relations matters. The Board considers this feedback important to understand
our investors’ views on Convatec’s progress in pivoting to sustainable and profitable growth.
Investors’ feedback and insights are taken into account by the Board in our communications to
shareholders.

The Executive Directors participate in an active IR programme, including investor roadshows.
Further information about our engagement with shareholders and potential investors is provided
on page 103.

All Directors participated in our 2023 AGM which took the form of a hybrid meeting, which enabled
shareholders to attend, vote and ask questions either in person or remotely.

During the year, the Board held an in-depth group discussion session with a surgeon specialising
in advanced wound care. In addition, the Board also heard from a wound care patient and her
healthcare professional. These sessions provided valuable insight into patient and HCP needs
as well as broader perspectives on the advanced wound care market, particularly the future for
skin-substitute products and decellularised extracellular matrices. These insights were applied
to the constructive challenge and debate regarding the Group and Business Unit strategies.

Consumers/
patients/healthcare
professionals

HOW THE BOARD ENGAGED CONTINUED

Stakeholders

Board-level engagement

Supply chain partners and
channel partners

Governments and regulators

During the year, the Board received reports from the Global Quality and Operations team with respect
to initiatives they are undertaking to continue to improve the resilience of our global supply chain.

The Board confirms its compliance with the UK Payment Practices Reporting Duty and similar
legislation across the Group in relation to the year ended 31 December 2023.

The Board received updates on the multi-million dollar investments in automation and capacity
across its manufacturing network to strengthen Convatec’s supply chain, resilience and readiness
for growth. Convatec has adjusted its inventory position whilst maintaining robust resilience
throughout its supply chain evidenced by its continuously improving customer service levels.

Further details of the steps taken to ensure that Convatec’s vision and values guide our operations
and supply chain, taking a zero-tolerance approach to any form of modern slavery, can be found
in our Modern Slavery Statement at www.convatecgroup.com/modern-slavery-statement/.

The Audit and Risk Committee received reports from the Global Tax function on taxation matters
across the Group and approved the Tax Statement including tax strategy, which was subsequently
agreed by the Board.

The Board and Committees also received briefings on the UK Government’s and FRC’s proposed
changes to corporate governance.

All other stakeholders

The Board receives information relating to our stakeholder groups through the executive reports
at each Board meeting and in the annual strategy sessions from Business Units.

BOARD KEY DECISIONS IN 2023

Acquisition of an innovative
nitric oxide technology
platform from 30 Technology
Limited
In April 2023, Convatec acquired an
innovative anti-infective nitric oxide
technology platform, including new
product assets in the wound care
market, from 30 Technology Limited. The
acquisition provides an opportunity for
Convatec to explore application of this
highly innovative technology platform
across its business categories, starting
with advanced wound care.

Omnichannel investment
In March 2023, the Board approved an
investment of $36.8 million to deliver an
omnichannel user engagement approach.

The solution will offer customers a fully
integrated experience, giving access to
all products, offers, and support services
via all channels, platforms, and devices
through an integrated and cohesive
solution. Omnichannel seeks to provide
a consistent user experience, regardless
of the platform or method the customer
chooses to use.

Section 172 – How the Board considered
different stakeholders in making the
decision
The acquisition was fully aligned with our FISBE
strategy.

Investors: The acquisition provided strategic
opportunities for product development and use
of the technology platform in multiple areas
within Convatec, as well as providing future
additional revenue growth and increasing the
potential for higher shareholder returns.

Patients and HCPs: The new technology has
the potential to provide best-in-class solutions
for patients who have chronic wounds, and
the potential to provide better outcomes for
patients with other chronic conditions as the
technology is developed and new applications
and products are introduced.

Section 172 – How the Board considered
different stakeholders in making the decision

The investment was fully aligned with our
FISBE strategy. Delivering these changes
should result in a more efficient and effective
commercial organisation, with improvements
on commercial spend and effectiveness in
customer execution.

Investors: Investment in omnichannel will
allow us to strengthen customer loyalty and
is expected to support revenue growth for
Convatec which is needed to ultimately deliver
higher returns for investors. It also underpins
confidence in Convatec’s future growth and the
overall success of the business.

Suppliers and distributors: The solution
will expand our capacity to deliver products
and improve our service, creating increased
demand and helping to ensure a robust
supply feed.

Our people: The transaction benefited
employees of both organisations by better
serving customers, increasing the strength
of the combined business and creating
opportunities for innovation and growth in our
Advanced Wound Care business and beyond.

Communities: The acquisition will strengthen
Convatec’s product range and reach to
the customers and patients we serve in
communities across the world.

Suppliers and distributors: The transaction
provides an opportunity to build our
partnerships with new and existing trusted
suppliers and our distribution networks
across the globe.

Patients and HCPs: The solution has the
potential to provide patients with better access
to our products and services and will enable
us to deliver closer connections with our
customers as they use more digital solutions.

Furthermore, by updating our systems and
connecting disparate data sources we will
enable a seamless view of how our customers
are interacting with us along their journey,
enabling us to better understand their needs
and how to serve them effectively.

Our people: The solution will benefit
employees by increasing the strength of
the business and creating opportunities
for innovation and growth. We will also be
investing in developing our people with
additional skills to support inclusion of
digital into our commercial function.

Risk management and internal
control effectiveness

The Board is ultimately responsible
for overseeing how we manage both
internal and external risks (current
and emerging) that could impact our
business model and strategic goals.
The Board also determines the Group’s
risk appetite and monitors adherence
to it through reports received by the
Audit and Risk Committee and from the
VP of Internal Audit, Enterprise Risk &
Insurance. The Board regularly reviews
the Group’s principal risks and, on an
annual basis, reviews the effectiveness

of our risk management and internal
control systems and undertakes horizon
scanning to identify new emerging
risks. The Audit and Risk Committee
reviews the Group’s risk management
and internal control systems regularly
throughout the year. The Group’s principal
and emerging risks are set out on pages
80 to 84.

Statement of review

During 2023, the Board has directly, or
through delegated authority to the Audit
and Risk Committee, monitored and
reviewed the Group’s risk management

activities and processes, including a
review of the effectiveness of all material
risk mitigations and the financial,
operational and compliance internal
controls. The Audit and Risk Committee’s
activities in these areas are set out in
the Audit and Risk Committee report on
pages 114 and 115. Following this review,
the Board is satisfied that the Group’s
risk management and internal control
framework provided assurance that there
were no control failures in the year that
could have a material impact on the
Group’s financial statements or its future
financial situation.

104

Convatec Group Plc Annual Report and Accounts 2023

105

PROGRESS IN RELATION TO ACTIONS ARISING FROM THE 2022 BOARD EVALUATION

Actions

Progress

Dr. John McAdam CBE
Chair of the Nomination
Committee

Governance

Board evaluation

2022 Board evaluation
progress report and 2023
Board evaluation review
In 2022 the Board undertook an evaluation
of its effectiveness as required by the Code
(details of which are set out in the 2022 Annual
Report and Accounts). Information about the
key priorities arising from this evaluation and
progress to date is set out below.

In October 2023 the Board undertook
a questionnaire-based evaluation,
externally facilitated by Lintstock. The
questionnaire included both quantitative
and qualitative questions.

Lintstock analysed the results and
provided reports for the Board and Board
Committees, with unattributed scoring and
comments. The reports and key findings
were discussed at the December 2023
Board and Committee meetings, with each
considering the evaluation outcomes and
any appropriate actions.

The key findings from the 2023 Board
evaluation process, including the actions
agreed to address recommendations

resulting from the review process, are
set out below. Lintstock has no other
connection with Convatec or any of the
individual Convatec Directors.

Individual Director evaluation
As part of the annual evaluation process,
there is a review of the effectiveness and
commitment of individual Directors. In
respect of the Non-Executive Directors
this includes a review of an individual’s
commitment of time to the Company in
light of their other commitments (as noted
in their biographies on pages 96 and 97.
Except in relation to his own, the Chair
leads the individual Director evaluations.

All Non-Executive Directors were
considered to be providing valuable input
and robust challenge to management and
therefore the Board is recommending all
Non-Executive Directors for re-election at
the 2024 AGM.

Board Chair evaluation
The evaluation of the performance of the
Board Chair by the other Directors was

led by the Senior Independent Director
(SID) and without the presence of the
Board Chair. The overall conclusion was
that he was performing very well in all
aspects of the role and that his experience,
thoughtfulness and congeniality provide
considerable value to management,
the Board and the wider business.

The review highlighted that the Chair
values the individual opinions of all
Directors and seeks and listens to their
views, but also holds them accountable
in the delivery of their respective
responsibilities. He chairs effective
meetings, allows debate and encourages
contribution and challenge, with a focus
on clarity and pragmatism in decision-
making. He has a strong and constructive
relationship with the Executive Directors,
particularly the CEO, and provides
appropriate challenge, support and advice.

The SID provided feedback to the Board
Chair after the review of his performance.

Board engagement with the CELT and future talent

In order to support succession planning and
understanding of the business, the Board would benefit
from a structured engagement programme between NEDs
and current and future leadership talent across the Group.

Board agenda
The Board would benefit from a reinforced focus on
key areas for the business, such as the competitive and
macroeconomic environments.

2023 BOARD EVALUATION REVIEW

A structured engagement programme between NEDs,
Executive Directors, CELT and other current and future
leadership talent, encompassing both formal and informal
events in the UK and abroad, was implemented during the
year. As part of this programme, the Board and Committee
members visited a number of Convatec sites. A similar
programme has been put in place for 2024 and will be
in future years.

Deep dives into key areas for the business were included
on the Board agenda during 2023, either at scheduled
Board meetings or at the July 2023 strategy meeting.

Overall the Board was considered to be working effectively, with a view that the Board was well aligned and with good Board member
dynamics. The three priority recommendations arising from the Board evaluation and proposed actions are set out below.

Findings

Actions for 2024

Board education and understanding around
external developments and competition
Reinforce focus on key areas for the business
including: broad emerging trends, IT, talent and
the competitive landscape.

Engaging with stakeholders, particularly
through site visits
In order to gain better insight into stakeholder
priorities and concerns and to provide opportunities
to improve relationships, continue the momentum
in respect of stakeholder engagement and look for
further opportunities for the Board and management
to engage with colleagues and customers.

Board information, including R&D
Ensure that the Board is equipped with high quality
information to improve knowledge and oversight
and to inform its decision making.

Company Secretary to work with the Board to ensure
that the Board’s 2024 and 2025 forward agendas evolve
to reflect the Board’s priorities.

Continue with a structured engagement programme
encompassing both formal and informal engagement
in the UK and abroad. Ensure that the Board and
Committee programmes include visits to Convatec
sites and opportunities to engage with a cross-section
of key stakeholders.

Continue to improve the quality and clarity of Board
packs and ensure that the Board’s regular Technology
and Innovation updates continue to include information
on internal R&D efforts and the new product pipeline
and the strategy to convert this into shareholder value.

Overview

Strategic report

Governance

Financial statements

Additional information

Nomination Committee report

A word from
the Chair

“We recognise the multiple benefits of a Board that brings a diverse range
of skills and experience to Convatec, and the value it creates for all our
stakeholders as a result.”

Committee membership, meetings and attendance

Director

John McAdam (Chair)

Margaret Ewing

Heather Mason

Brian May

Constantin Coussios

Kim Lody

Sharon O’Keefe

Member since

Attended

September 20191

May 2019

September 2020

January 2022

February 2022

March 2022

3/3

1. Dr. McAdam was appointed Chair of the Committee on 30 September 2019

The table above shows Committee
members and the number of
scheduled meetings attended out of
the number of meetings members
were eligible to attend during 2023.

The Group Deputy Company Secretary
attends meetings as Secretary to the
Committee and the Company Secretary
and the Chief People Officer regularly
attend the Committee’s meetings to

provide information and support to the
Committee to enable it to carry out its
duties and responsibilities effectively.

COMMITTEE INTRODUCTION AND OVERVIEW

Activity highlights
– Reviewed skills, experience and

characteristics of Board members
and determined that the Board
was balanced, diverse and with an
appropriate level of skills, knowledge
and experience.

– Reviewed talent and succession

planning for the Board and the CELT.
– Reviewed progress and development
of the Group’s diversity, equity &
inclusion and wellness strategy and
assessed key metrics.

– Reviewed progress of leadership
development programme for
CELT and application of new high–
performing team principles, helping
to build and develop a sustainable,
diverse and inclusive organisation.

2024 priorities
– Maintain focus on succession planning

and talent management for the
Board, Executive Directors and senior
management.

– Continue to monitor progress against
the DE&I and wellbeing agenda across
the Group.

– Continual development in training and
support to ensure that the Committee
continues to operate in accordance with
best practice.

Key numbers

Meetings held

(2022: 2)

Attendance

100%

(2022: 100%)

Key areas of responsibility
– Reviews regularly the Board’s

composition.

– Leads Board appointments process

as necessary.

– Oversees and recommends orderly

Board succession and oversees senior
management succession planning.
– Reviews whether each Non-Executive
Director is devoting enough time to
his or her duties.

– Oversees the balance of skills and
experience within the Group and
on the Board.

– Monitors diversity within the Board

and across the Group.

The role and responsibilities of the
Committee are set out in the terms
of reference and available at www.
convatecgroup.com/investors/governance/.
These are subject to annual review and
were last reviewed in April 2023.

106

Convatec Group Plc Annual Report and Accounts 2023

107

Governance

Overview

Strategic report

Governance

Financial statements

Additional information

Nomination Committee report continued

Dear Shareholder

I am pleased to present the Nomination
Committee Report, which summarises
how the Committee discharged its duties
during the year.

Our role

As a Board we recognise that a balanced
and diverse Board, with a broad range
of skills, experience and knowledge,
is more likely to be an effective Board.
In support of our vision of pioneering
trusted medical solutions to improve
the lives we touch, and with the ultimate
aim of creating sustainable value for
all our stakeholders, we continue to
focus on ensuring that we have the
right balance of skills, knowledge
and diversity, both at the Board
and within our leadership team.

An equally important role for the
Committee is ensuring that we have an
appropriate pipeline of future talent within
the business. The Committee regularly
reviews succession plans, not only for
the Board, but also for CELT. In support
of Convatec’s succession planning, the
Committee received reports on talent
management, DE&I and Wellbeing
initiatives as well as progress of the
Group’s efforts to increase the number
of internal VP appointments, through
a leadership development programme
for mid-level leaders with emphasis
on personal development goals. This
programme aims to accelerate the
development and retention of this
important group of leaders, a group
that has a crucial role to play in delivering
on our strategic aims into the future.

Board and Committee
composition

As a consequence of the end of the
Relationship Agreement between the
Company and Novo Holdings A/S, Sten
Scheibye resigned as Non-Executive
Director on 8 September 2023. Following
the departure of Sten, the Committee
reviewed the composition of the Board
and determined that no changes were
required at this time, but this would be
kept under review.

The composition of the Nomination
Committee is set out on page 107.

Diversity

The Board endorses the aims of The
FTSE women leaders review and the
Parker Review. At Board level we have
members of various nationalities,
gender and ethnicity who have an
excellent range of appropriate skills
and expertise. As at 31 December
2023 and at the date of this report,
we comply with the recommendations
of both the FTSE Women Leaders Review
and the Parker Review, as well as the
requirements of the Listing Rules in
relation to gender and ethnicity at a
Board and executive management level.
On this page, we have provided data
on Board and executive management
gender and ethnicity. For the purposes
of gathering this information, individuals
were asked to self-declare their gender
and ethnicity against the Office for
National Statistics classification.

Board and senior leadership gender representation

The Committee will continue to monitor
Board diversity in other respects,
including experience, skills, personal
attributes, age and ethnicity. In all
instances individuals will continue to be
appointed on merit and the Committee
will remain focused on always ensuring
that the Board has the relevant skills
and expertise to perform effectively.

As part of our ongoing diversity and
inclusion strategy, our target is to achieve
40% of senior management roles to be
held by female executives by 2025 and
this currently stands at 44%.

During the year the Board has considered
diversity insights across a range of
metrics with a focus on gender and
ethnicity. In 2024 the Committee and
the Board will continue to monitor the
ongoing development of DE&I and
Wellbeing initiatives across the Group.

Relevant skills and expertise

The Board benefits from a wide variety
of relevant skills, experience and
knowledge, details of which are set
out in the biographies and skills matrix
on pages 96 and 97.

Men

Women

Number of Board

members Percentage of Board

Number of senior
positions on the
Board (CEO, CFO,
SID and Chair)

Number in executive
management

56%

44%

Percentage
of executive
management

50%

Note: Executive Management includes CELT members and the Company Secretary, but excludes the CEO and CFO.

Board and senior leadership ethnicity representation

Number of Board

members Percentage of Board

Number of senior
positions on the
Board (CEO, CFO,
SID and Chair)

Number in
executive
management

Percentage
of executive
management

White British or other white (including
minority-white groups)

Mixed/multiple ethnic groups

Asian/Asian British

Black/African/Caribbean/ black British

Other ethnic group, including Arab

–

78%

–

22%

–

80%

–

10%

–

10%

Note: Executive Management includes CELT members and the Company Secretary, but excludes the CEO and CFO.

Board appointments

Talent and succession planning

Appointments to our Board are made
solely on merit with the overarching
objective of ensuring that the Board
maintains the correct balance of diversity,
experience, skills, length of service and
knowledge of the Group to successfully
establish and oversee the delivery of the
Group’s strategy, whilst also providing
constructive challenge as necessary.
Appointments are made based on the
recommendation of the Nomination
Committee with due consideration given
to the benefits of diversity in its widest
sense, including gender, social and
ethnic backgrounds. The Nomination
Committee also reviews the ongoing
commitments of candidates prior to
making recommendations for the
appointment of new Directors. Directors
are required to seek Board approval
prior to taking on additional significant
commitments to ensure that existing
roles and responsibilities continue
to be met and conflicts are avoided
or managed.

When recruiting new Non-Executive
Directors, meetings are held between
potential candidates and the Chair,
CEO, CFO and Non-Executive Directors.
Members of the Nomination Committee
review feedback and recommend
candidates for appointment to the Board.
Decisions relating to such appointments
are made by the entire Board based
on a number of criteria including the
candidate’s skills and experience,
the contribution they can make to our
business and their ability to devote
sufficient time to properly fulfil their
duties and responsibilities.

Reappointment of Directors

All Directors are subject to annual
re-election and will be proposed for
re-election by shareholders at the AGM
to be held on 16 May 2024. Following
evaluation, all Directors continue to be
effective and have the time available to
commit to their role, and the Board has
recommended that all directors are put
forward for re-election.

Non-Executive Directors are initially
appointed for a three-year term and
retiring Directors, if willing to act, will
be deemed to be re-appointed unless
the resolution for their re-election is
not approved.

Succession planning work during 2023
focused on the Board and CELT. The
Committee has considered succession
planning for each of the Executive
Directors and CELT members, as well as
emerging talent within the business. The
review included scoping those potential
successors ready now, those ready in one
to two years, and those anticipated to be
ready in three to five years.

Given its importance, succession planning
is scheduled for the Committee’s
consideration twice a year.

External search firms

For all independent Non-Executive
and Executive Director appointments,
we engage international search and
selection firms to support the Board,
most recently using firms including
Heidrick & Struggles, Spencer Stuart
and Russell Reynolds. None of them
have any connection with the Group,
or any Director, other than they may
be engaged to assist with Board and
senior management appointments
and ordinary course succession
planning from time to time.

Board induction, training and
development

On joining the Board, all Non-Executive
Directors participate in a formal
induction programme. The programme
is monitored by the Chair (other than
in relation to his own induction, which
is guided by the Senior Independent
Director) and is the responsibility of the
Company Secretary. Its purpose is to
ensure that each newly appointed Non-
Executive Director is able to contribute to
Board discussions as quickly as possible.

While each induction programme is
tailored to the individual Director’s
needs based on their skills and
experience, typically each programme
provides new Directors with insight
into the Group’s strategy, culture and
operations and informs them about the
governance and compliance processes
and procedures we operate.

During the year Freshfields Bruckhaus
Deringer also provided the Board with
refresher training on directors’ duties,
disclosure and conflicts of interests
and an update on governance and
regulatory matters. The Board also
received updates and training from the
Group’s senior management and external
advisers covering a range of topics.

We continued to evolve our training
programme and, in particular, its scope
was expanded to include training and
updates from external advisers to both
the Remuneration and Audit and Risk
Committees. Training focused on matters
specific to their respective committee
activities, including corporate governance
updates, executive remuneration,
corporate reporting and audit updates.
In line with the results of the Board and
Committee evaluation, we will focus on
appropriate training in 2024.

All Directors have access to the advice and
services of the Company Secretary and,
through her, have access to independent
professional advice in respect of their
duties, at the Group’s expense.

Committee evaluation

The Committee conducted an evaluation
of its performance in the form of a
detailed questionnaire facilitated by an
external provider, Lintstock, the results
of which were highly rated overall. Matters
identified for attention in 2024 are set out
under 2024 Priorities on page 106.

Copies of all Non-Executive Directors’
appointment letters are available
for inspection at the Company’s
registered office.

On behalf of the Nomination Committee.

Dr. John McAdam CBE
Chair of the Nomination Committee
5 March 2024

108

Convatec Group Plc Annual Report and Accounts 2023

109

Governance

Overview

Strategic report

Governance

Financial statements

Additional information

Audit and Risk Committee report

A word from
the Chair

“The Committee is delighted with the improvements in the robustness of
the Group’s internal controls and related processes.“

Committee membership, meetings and attendance

Director

Margaret Ewing1

Heather Mason

Brian May

Member since

Attended

August 2017

September 2020

March 2020

5/5

1. Ms Ewing was appointed Chair of the Committee on 28 June 2019.

Margaret Ewing
Chair of the Audit and Risk
Committee

COMMITTEE INTRODUCTION AND OVERVIEW

Highlights
– Review of key judgements and

estimates, adjusted measures and
disclosures in respect of the 2023
financial statements

– Monitoring the development of

ESG reporting and targets including
compliance with TCFD and other
relevant regulatory reporting
requirements and extension of
independent limited assurance
of relevant ESG metrics.

– Considering the conclusions and

actions arising from the independent
assessment of the maturity and
effectiveness of cyber security
and data privacy activities.

2024 priorities
– Continue to monitor the

implementation of management’s cyber
and data privacy improvement plans

– Improve the Committee’s

understanding of the rapidly evolving
regulatory requirements related to
ESG and NFI and the implications for
the Group

– Complete external audit tender process
and receive Board approval to appoint
preferred auditor for 2026 financial
year audit

Composition
The current members of the Committee
are listed above.

The biographies of the Committee
members on pages 96 and 97 outline
the members’ collective wide finance,
audit, risk management and relevant
sector and business experience enabling

the Committee to provide constructive
challenge and support to management
and the auditors. In accordance with
the Code, the Board has determined
that Margaret Ewing and Brian May
possess an appropriate breadth of
recent and relevant financial experience
and is satisfied that the Committee has
competence relevant to the sector and
its overall responsibilities.

Key numbers

Meetings held

(2022: 7)

Attendance

100%

(2022: 100%)

Key areas of responsibility
The roles and responsibilities of the
Committee are set out in the terms of
reference (available on the Company’s
website) which were last updated in
October 2022. The Committee agreed in
July 2023 that the Committee’s terms of
reference would be reviewed after the
release of the revised Code by the FRC,
which was published in January 2024.
The update to the terms of reference

will be reviewed and approved at the next
Committee meeting in May 2024.

The Committee’s principal responsibilities
are to oversee and provide assurance to
the Board on:

– the integrity and quality of financial
reporting and to ensure it is fair,
balanced and understandable

– the effectiveness of audit arrangements
– the robustness and effectiveness of
the financial, reporting, operational
and compliance controls and risk
management processes throughout
the year

– TCFD and ESG metrics and related

data reporting.

The Senior Assistant Company Secretary
attends meetings as the Secretary to the
Committee. The Chairman, Chief Executive
Officer, Chief Financial Officer, Company
Secretary, Deputy Company Secretary,
VP Group Financial Controller and the VP
Internal Audit, Enterprise Risk & Insurance
and representatives of the external
auditor attend the meetings on a regular
basis. Other Board members have an
open invitation to attend the Committee
meetings. The Committee also has private
sessions with the external audit partners
and the VP Internal Audit, Enterprise Risk
& Insurance.

A summary of the Committee’s activities
during 2023 and until the date of this
report is detailed on the following pages.

Dear Shareholder
and other stakeholders

As Chair of the Audit and Risk Committee,
I am pleased to present the Committee’s
2023 Report.

The core responsibilities of the Committee
include ensuring the integrity of the
financial and non-financial information
published by the Group; the external and
internal audit processes are effective
and that the Company has an effective
control environment to manage risks.
The purpose of this report is to describe
how the Committee conducted its
responsibilities during the year.

Throughout the year, in addition to
the Committee’s scheduled meetings,
I met regularly with senior management,
particularly the CFO, VP Group Financial
Controller, VP Internal Audit, Enterprise
Risk & Insurance, Group General Counsel
and the lead partners of our external
auditor, Deloitte. These meetings allowed
me to understand how existing and
emerging issues were being addressed
and to adapt the Committee’s agendas
accordingly. The meetings with the VP
Enterprise Risk Management & Internal
Audit and Deloitte lead partners also
provided me with insight to inform
the Committee’s ongoing review of
the effectiveness of audit (internal and
external respectively) and to ensure the
internal audit plan prioritised controls
and processes related to the Group’s
principal and emerging key risks and the
external audit plan was focused on the
emerging and changing key audit risks.

Committee effectiveness
During the year, the Committee
members and regular attendees
(including the internal and external
auditors) undertook an evaluation
of the Committee’s effectiveness. An
external provider, Lintstock, prepared
and provided participants in the
evaluation with a questionnaire, and
collated and summarised the responses.
The findings were discussed initially by
the Committee and then shared with
the Board. Overall, it was concluded that
the Committee continued to perform
very effectively and had addressed its
key priorities and action plan for 2023,
with priority areas of focus for 2024
also identified.

Fair, balanced and understandable
The Board is required to provide its
opinion on whether it considers that the
Company’s 2023 ARA taken as a whole
are fair, balanced and understandable,
and provide the information necessary
for shareholders and other stakeholders
to assess the Company’s position and
performance, business model and
strategy and key risks that challenge
the Group.

To support the Board in providing its
opinion, the Committee considered
the overall cohesion and clarity of the
ARA and assessment of the quality
of reporting through discussion with
management and the external auditor
and the assurance framework, process
and controls that were applied in its
preparation. This included:

Consequently, the Committee has
confirmed to the Board, in its advisory
capacity, that:

– The key accounting estimates,

judgements and disclosures within
the Financial Statements are
appropriate and serve to provide
a true and fair view.

– The 2023 ARA, overall, are fair,

– A detailed verification process dealing

with the factual content

– Comprehensive reviews undertaken

balanced and understandable. The
Board’s statement in relation to this
confirmation is included on page 146.

– It is reasonable for the Directors to
make the Viability and the Going
Concern statements on pages 86
and 87 and page 146 respectively.
– The Group’s speaking up and fraud

risk processes have operated
effectively during the year, with further
improvements to be implemented
during 2024.

– The Board is able to provide the

statement regarding the effective
operation throughout the year of
the Group’s internal controls and
risk management processes on
pages 76 to 84 of the 2023 ARA.

I would like to thank my fellow
Committee members and all teams
involved with the Committee’s activities
for their contribution during 2023
and their relentless focus on quality,
sound judgements, controls and risk
in a challenging global environment,
politically and economically.

I hope that you find this report
informative and can take assurance from
the work undertaken by the Committee
during the year and planned for 2024.

Margaret Ewing
Chair of the Audit and Risk Committee
5 March 2024

independently by senior management
and members of the Committee to
consider messaging, adequacy of
disclosures, compliance with regulatory
and legal reporting requirements,
and balance

– Specific reviews by the Board and

CELT in relation to key sections of the
ARA and relevant sections of the ARA
audited by Deloitte (including limited
assurance provided in respect of
relevant ESG metrics)

– Confirmation from management that
the assurance framework had been
adhered to for the preparation of
the 2023 ARA.

Committee conclusions
and confirmations
Taking into consideration all areas of
focus of the Committee during the year
and in reviewing the 2023 ARA, including
reviewing the supporting detailed topic
papers, presentations and reports
from management and Deloitte, the
Committee is satisfied that:

– The Financial Statements for the

year ended 31 December 2023 have
been prepared applying appropriate
accounting policies and address the
critical accounting judgements and
key sources of estimation uncertainty,
both in respect of the amounts
reported and the disclosures made.
– The significant assumptions used for
determining the value of assets and
liabilities have been appropriately
scrutinised and challenged and
are sufficiently robust.

– The Group’s internal controls and
risk management processes were
operating effectively throughout the
year, with no material control failures.
– The conclusions in relation to critical
accounting judgements, significant
assumptions and estimates and key
valuation assumptions are in line with
those drawn by the auditor, having
discussed them with the auditor during
the audit planning process and at the
finalisation of the year-end audit and
following robust challenge of both
the auditor and management.
– The external and internal auditors

have continued to provide effective
and independent audits that have
been challenging, robust and of
a high quality.

110

Convatec Group Plc Annual Report and Accounts 2023

111

Governance

Overview

Strategic report

Governance

Financial statements

Additional information

Audit and Risk Committee report continued

2023 KEY MATTERS

1. EXTERNAL REPORTING

The Committee reviewed the interim and full
year results statement and 2023 ARA, with
supporting materials, focusing on the:

– Integrity of the Group’s financial

reporting process
– Clarity of disclosure
– Compliance with relevant legal and
financial reporting standards and
regulatory guidance

– Application of accounting policies

and judgements

– The consistency of the disclosures

with climate risks and opportunities
and related evolving regulatory
reporting requirements

– Whether, in considering the above

factors, the Convatec Annual Report
and Accounts was fair, balanced and
understandable.

Throughout the year, the Committee
received regular updates from the CFO,
VP Group Financial Controller, VP Internal

Audit, Enterprise Risk and Insurance and
the VP Investor Relations and Treasury,
and both formal and informal reports
and feedback from the external auditor
covering the following scope:

– Acquisition papers and related

accounting treatments and judgements,
including assessment of contingent
earn-outs and impact on the recognition
of deferred tax.

– Alternative performance measures,

including the policy and the rationale
and non-recurring nature and quantum
of the proposed adjusting items.
– The results of the monitoring of the
effectiveness of internal controls,
particularly financial and IT general
controls related to financial reporting,
and the fraud risk assessment and
related enhancement programme to
support the Committee conclusions
on the integrity of the Consolidated
Financial Statements.

– Appropriateness of going concern
and viability assessment, including
basis of preparation and management
reports on all key judgements, risk
scenarios and underlying assumptions,
supporting analysis and evidence.
– Treasury matters including policy,
activity, funding and ongoing
compliance with debt covenants.

– Tax matters including the Tax Strategy
Statement, tax transparency, key tax
risks, ongoing and new local tax audits
and investigations, estimated tax rates
applied in the Financial Statements and
provisions for uncertain tax positions.

As a result of the reviews performed and
related discussions and challenges, the
Committee was able to recommend the
interim and full year’s results statements
and 2023 ARA to the Board for approval.

Significant reporting matters and accounting judgements considered by the Committee

A summary of the significant areas of audit focus, as described in the Independent Auditor’s Report on pages 206 to 213, plus
additional areas of key focus by the Committee is provided below. Following discussion and review (and where appropriate,
challenge) of each significant accounting judgement with management and the external auditor, the Committee was satisfied that
there were relevant accounting policies in place in relation to these significant issues and that management had correctly applied
these policies and exercised reasonable judgement.

Issue

Committee’s conclusion and response

Acquisitions

The Committee reviewed the judgements in relation to the acquisition and investment activity in current
and prior years.

The Group has made three acquisitions in 2023 – Starlight Science Ltd in April, A Better Choice Medical Supply
LLC in July and All American Medical Supply Corp. in October. The details of the acquisitions are provided on
pages 193 to 195.

Throughout 2023, the Committee reviewed the status of the acquisitions to ensure that the valuation of
related balances at key reporting dates was appropriate. The Committee challenged the key drivers of the
valuation of intangible assets identified from acquisitions and considered the integration strategy of the
investments into the core business. The Committee discussed these key judgements with the external auditor
and considered the results of their audit review, including the conclusions of Deloitte’s valuation experts, and
ultimately considered that the accounting for acquisitions and investments was appropriate.

The acquisitions made in previous years continue to trigger earn-out payments requiring judgements in the
valuation of consideration. Throughout 2023, the Committee reviewed the projected contingent consideration
to ensure that the valuation of related balances at key reporting dates was appropriate. The Committee
reviewed forecasts and considered the work undertaken by external valuation experts. The Committee also
ensured that the implications of the potential maximum consideration were reflected in management’s going
concern and viability assessments. The Committee concurs with management’s review that the provision for
contingent consideration on acquisitions is a key source of estimation uncertainty. The Committee discussed
these key judgements with the external auditor and considered the results of their audit review, including
the conclusions of Deloitte’s valuation experts, and ultimately considered that the accounting for contingent
consideration was appropriate.

Valuation of
contingent
consideration
provisions

Issue

Committee’s conclusion and response

Revenue
recognition in
key markets

The calculation of revenue includes a number of areas of estimation, at the point of recognition, including
rebates, discounts, allowances, product returns and consideration expected to be received. The arrangements
in different countries and with individual customers vary, but broadly they are all dependent upon
interactions with the customer, including the submission of claims that can extend to up to 24 months
after the initial point of revenue recognition.

The nature of the estimations means that there is considerable variability in the ultimate outcomes when
considered on an individual customer basis. As a result, the Group applies a limit on variable revenue
consideration, in order to ensure that revenue is recognised at a prudent level (see page 155). The Committee
scrutinised these judgements and estimates related to revenue, and discussed the judgements and estimates
with the external auditor, ultimately concluding that the accounting for revenue was appropriate.

The Committee considered the key risks, facts and judgements for the following areas:

Matter

Committee’s conclusion and response

Going concern
and
Viability
statements

The Committee reviewed and challenged management’s detailed assessment of the Group’s viability during
the next three years and its ability to continue as a going concern in accordance with the requirements of
the Code. The Committee considered the Group’s 2024 budget, 2024 to 2028 strategic plan, and updated
forecasts and projections, taking into account reasonably possible changes in trading performance and
the potential impact of principal and emerging risks. The stress test scenarios, including the underlying
scenario assumptions and the reverse stress test, were reviewed and assessed against the Group’s financing
facilities and covenants. In addition, the Committee obtained a summary of external views from analysts
and other industry commentators, to understand the wider market’s perception of the Group’s future
financial performance and viability. The Committee attempted to understand the possible implications of
the rapidly evolving geopolitical and economic environment in which the Group operates. It also considered
the potential ‘corporate’ mitigations that would be available to management should the environment and
Group’s performance deteriorate beyond that reflected in the stress test scenarios, and discussed the external
auditor’s findings and conclusions.

Following this assessment, the Committee considered the scenarios applied were severe but plausible and
the extent of the analysis made by management to be appropriate and ultimately recommended the Viability
and going concern statements and their respective related disclosures to the Board for approval and inclusion
in the 2023 ARA.

Taxation

The Committee reviewed the recognition and valuation of the deferred tax assets (DTAs) in respect of
excess US tax losses, first recognised following the ATT acquisition in 2022. The Committee challenged the
robustness of the taxable profit forecasts of the US operations, the corresponding utilisation of the tax losses
and considered the assessment and conclusion of the external auditor. The Committee concluded that the
recognition of DTAs in relation to the forecast profits in the US continued to be appropriate.

The Committee also reviewed the provision for uncertain tax positions and related disclosures. A provision
release following the successful resolution of an uncertain tax position resulted in a one-off material net tax
benefit which has been treated as an adjusting item. The Committee considered this to be appropriate.

Inventory Policy

The accounting policy for inventories was updated in the year to better align the deferral of price variances to
the stock holding period. The Committee reviewed the impact of inflation on the standard costs set annually
and considered the challenge from the external audit in 2022 to be valid, ultimately concluding that this
change in policy was appropriate.

Operating
segment
reporting

The Committee considered management’s assessment that, for the purposes of financial reporting, it remains
appropriate for the Group’s business to be treated as a single segment entity. Management’s assessment
concluded that the Chief Operating Decision Maker (CODM) has transitioned from the CEO to the Convatec
Executive Leadership Team (CELT) as the business continues to operate in a matrix structure with which
the Committee concurred. Financial information in respect of revenues is provided to CELT for decision
making purposes, both on a category and key market basis, with the primary focus of financial reporting and
decision-making based on the consolidated Group results and anticipated cashflows and available liquidity.
Resource allocation continues to be driven on a functional basis, to the global centres of excellence. The
Committee also considered the external auditor’s assessment, which took other supporting evidence into
account and concluded that management’s position was supportable. The Committee ultimately agreed
with management and the external auditor that the Group should continue to report as a single segment
for the purposes of the disclosures in the 2023 ARA, in accordance with IFRS 8.

112

Convatec Group Plc Annual Report and Accounts 2023

113

Governance

Overview

Strategic report

Governance

Financial statements

Additional information

Audit and Risk Committee report continued

Matter

Committee’s conclusion and response

Alternative
Performance
Measures

The Committee reviewed the APM policy in February 2023, to ensure that the adjustments from the IFRS
statements remained appropriate and provided investors and other stakeholders with meaningful insight
to the Group’s performance. The policy was reviewed to ensure that the rationale and criteria for their use
was specific and the minimum thresholds for adjustment were appropriate. It was noted that the largest
adjustments related to the amortisation of acquired intangible assets, of which a significant proportion
related to the Bristol Myers Squibb spin-out and will be fully amortised by 2026. In addition, the costs of
the large-scale transformation of the business in line with the FISBE strategy have also been recognised
as adjusting items over recent years. The Committee considered that these items were relevant in order
to understand the ongoing performance of the Group.

The Committee requested that the CFO sought feedback from brokers as to the nature and quantum of
the adjustments, however, no specific concerns had been raised by investors and analysts. The Committee
concluded that the APM policy remained appropriate and that all proposed adjusting items would continue
to be scrutinised by the Committee prior to approval.

Dividends

The Committee reviewed the dividends recommended by management with regard to the distributable
reserves, cash resources, availability of liquidity, including the effect of sensitivities aligned to the viability
statement and concluded that it was able to advise the Board that there were sufficient realised distributable
reserves and cash resources to enable the Board to approve and recommend respectively the 2023 interim
and final dividends.

2. RISK MANAGEMENT AND COMPLIANCE

Throughout the year, the Committee reviewed risk management and compliance matters to be able to provide assurance to the
Board that it could conclude on the effectiveness of the Company‘s compliance, fraud prevention and risk management frameworks,
and internal controls throughout the year.

Our Role

Action taken by the Committee and Outcome/future actions

Enterprise Risk Management and Insurance

– Assist the Board to establish and articulate overall
risk appetite, oversee specific risk exposures and
mitigations and ensure the Group is operating
within the Board’s risk appetite

– Ensure a robust assessment of emerging and
principal risks has been undertaken, including
movements in the risk exposure, with effective
mitigations and controls established

– Monitor the policy and process for identifying

new, emerging and existing risks, and effectively
managing their impact on the Group

– Review effectiveness of the Company’s risk

management systems and processes
– Review of the annual insurance renewal

strategy and programme to assess adequacy
and appropriateness of coverage of insurable
risks across the Group

The Committee regularly reviewed and challenged the principal and
emerging risks identified by management and considered the effectiveness
of the respective risk mitigations and controls. The ongoing improvements
to the risk framework were noted, including the way in which risks are
identified, managed and reported to CELT, Committee and Board and the
introduction of key risk indicators.

The Committee reviewed and recommend respectively the principal
and emerging risk management statements and disclosures, including
the priority order of risk as disclosed, reflecting the discussions held
with the CELT (collectively and with individual members). In December
the Committee challenged management on the list and prioritisation
of the principal risks. After careful deliberation and consideration of
evolving circumstances, the Committee concluded that the risks and
the prioritisation were appropriate.

Following consideration of the lessons learned from the risk simulation
exercise undertaken by CELT and relevant teams in October, the Committee
requested a further simulation exercise be expanded beyond IT and cyber
failures to better inform and prepare crisis management plans.

The Committee reviewed the maturity assessments of the management
of privacy and cyber risks performed by external advisers. Whilst
improvements have continued to be implemented throughout the year,
there remains opportunities to improve privacy controls and cyber defence
capabilities. The Committee will closely monitor management’s progress in
implementing its improvement plans during 2024.

The Committee reviewed and approved the proposed insurance renewals
programme, which had been tailored to manage specific type and location
risks to provide cost-effective incident cover, with improved risk mitigations
to improve overall business resilience.

Our Role

Internal controls

– Promote and review sound risk management and
internal control systems over financial, reporting,
operational and compliance processes

– Review the effectiveness of internal controls

Compliance, including speaking up and
fraud

– Review the Group’s codes, policies, systems and
controls in respect of fraud, bribery, corporate
conduct and regulatory and legal compliance

– Review speaking up reports

Action taken by the Committee and Outcome/future actions

The Committee received quarterly updates of the self-attestation of
compliance with the Group’s financial and IT general control frameworks,
including details of control failures (all immaterial during 2023), their
remediation and independent reviews of control evidence.

The Committee noted the extension of the formal control framework
to include key non-financial information disclosed. The controls reliance
approach on GBS controls adopted by the external auditors provided
additional assurance on the centralised GBS controls to the Committee
in this regard.

Based on these quarterly updates, and the reports from the internal and
external auditors, the Committee is satisfied that the Group’s internal
controls operated effectively throughout the year, with no occurrence of
material weaknesses. Controls relating to Compliance are covered in the
paragraph below.

The Committee reviewed update reports on the results of the global
compliance programme and the speaking up process. The results of the global
business risk assessments performed (jointly by the Group’s compliance team
and internal audit) across a number of key global markets were considered
and concluded that an ethical business culture exists. The key themes arising
from these risk assessments related to third party risk management (i.e. due
diligence and contracting) and interactions with healthcare professionals
(i.e. medical samples). These are being addressed through training and
implementing new and refreshed policies and procedures. Following the
completion of the assessment of the initial selected markets, the assessment
process will be cascaded to cover all markets during 2024.

The Committee reviewed the progress of the fraud risk assessment, the
associated control framework and the improved reporting on measures taken
to prevent and detect fraud in accordance with the enhanced requirements
of the Code.

The Committee continues to monitor our compliance culture across the Group
with strong focus on markets which have an enhanced perceived corruption
index risk score.

Whistleblowing/speaking up is reported by employees and certain third parties
through a confidential Compliance helpline or directly to the Office of Ethics
and Compliance. Reports of a speaking up nature or of breaches of the Code
of Conduct that are made directly to senior management or HR personnel are
also reported to the Office of Ethics and Compliance. All reports, irrespective of
the channel, are collated, managed, are reviewed and investigated by the Office
of Ethics and Compliance. A summary of the key themes (harassment and
discrimination), locations and disposition of whistleblower/speaking up matters
together with subsequent actions are reviewed by the Committee and reported
to the Board.

During 2024, the Committee will monitor management’s development, as
appropriate, of procedures and controls to ensure compliance with the new UK
‘Failure to prevent fraud’ offence, which is expected to take effect in mid-2024.

114

Convatec Group Plc Annual Report and Accounts 2023

115

Governance

Overview

Strategic report

Governance

Financial statements

Additional information

Audit and Risk Committee report continued

Our role

Action taken by the Committee and Outcome/future actions

Regulatory compliance – ESG and TCFD

– Review and approve the TCFD disclosures and

oversee the Responsible Business Review ensuring
compliance with all applicable regulations (pages
38 to 75)

– Approve the ESG related metrics to be subject

to limited assurance

– Approve the appointment of the ESG assurance

partner and review their report

Regulatory developments

– Monitor the development of regulations relating
to ESG, TCFD, climate change, fraud, audit and
corporate governance and FRC and FCA reporting
requirements and management’s preparedness
to adopt the changing requirements

Treasury, debt and insurance

– Provide oversight of the treasury function
– Annually review and approve the Group’s

treasury policy

– Review activities of the treasury function including

the status of the treasury instruments, the
indebtedness of the Group and compliance with
covenants within its debt instruments and the
treasury policy

Tax

– Provide oversight of the tax function
– Review the key aspects of taxation, including

compliance, accounting judgements, reporting,
tax strategy and the external reporting
requirements of regulators and tax bodies

– Annually review and recommend to the Board for
approval the Group’s updated Global Tax Strategy
statement for publication

The Committee continued to focus on ESG and TCFD reporting during 2023,
monitoring progress to meet the increasing reporting requirements and
stakeholder expectations, develop quantitative science-based targets and
deliver against them.

In 2022, the Company disclosed three partial compliance exceptions within
its TCFD reporting. The Committee can confirm that the compliance gaps
have been closed during 2023. The Committee has reviewed the initial
draft transition plan and will continue to monitor progress in delivering the
actions required to iterate the transition plan, ensuring robust roadmaps
are in place to meet the commitments and targets.

Consistent with the prior year, the Committee approved Deloitte to provide
limited assurance over seven key ESG metrics and targets disclosed in
the Group’s ARA and other sustainability reporting, with the scope of the
metrics to be subject to limited assurance increased to include Complaints
per million (CPM), a key measure in determining senior executives’
remuneration. This involved Deloitte undertaking walkthrough procedures
to understand the processes, internal controls and evidence available
to support the provision of assurance in respect of CPM. The intention
is to include the Vitality Index as an assured (limited) key metric in 2024.
During 2024, the Committee will also review management’s roadmap for
moving to independent reasonable assurance in due course, including the
improvements in the relevant control and reporting frameworks required
to enable unqualified reasonable assurance opinions to be provided.

The Committee continued to keep abreast of guidance regarding the
status of the Department for Business and Trade proposals following
the government response to the ’Restoring trust in audit and corporate
governance’ consultation.

Although intended related legislative changes are no longer to be introduced,
the updated UK Corporate Governance Code, issued in January 2024, requires
greater transparency of risk management and internal control processes.
The Committee is pleased with progress on no-regret actions taken by
management whilst waiting for the finalisation of the updated Code, and
will monitor further enhancements of the risk management and internal
control processes to ensure compliance in line with the timelines.

The Committee also received regular briefings from the external auditors
and Convatec’s ESG Steering Committee on regulatory and other
developments relating to sustainability, fraud and other disclosure and
reporting requirements, building the revised Code’s proposed timelines for
implementation of related changes into the Committee’s forward agenda.

The Committee received regular updates from the CFO and subsequently
the VP Investor Relations and Treasury as regard to compliance with
treasury policy, covenants and other conditions of financing arrangements.

Based on the satisfactory outcome of this review, the Committee
recommended to the Board the approval of two new Group guarantees
to facilitate ISDA agreements and hedging.

The Committee reviewed the proposed update to the global tax strategy
statement and the alignment with the Group’s tax risk profile and was satisfied
that the Group manages its tax affairs carefully, ensuring that we operate
within our tax risk appetite. Accordingly the Committee recommended the
updated Tax Strategy statement to the Board for approval.

The Committee reviewed the structuring of the Starlight integration to
leverage tax opportunities and was satisfied that the structuring was
appropriate and within policy.

The judgements underpinning the provision for uncertain tax positions
were scrutinised by the Committee and considered to be prudent,
appropriate and in line with the requirements of IFRIC 23. The treatment
of material adjustments to the uncertain tax positions upon resolution
as an adjustment item was considered and approved by the Committee.

The Committee reviewed the tax rates to be applied during the year
compared to the guidance previously disclosed and requested a detailed
explanation for movements in the estimated effective tax rate.

3. INTERNAL AUDIT

The Committee continued to exercise
disciplined oversight of the effectiveness
of the Internal Audit function. Throughout
the year the Committee reviewed the
results of the audits conducted (including
management’s response to the audit
findings and recommendations),
considered emerging themes of concern
and approved changes to the audit plan
to reflect changing circumstances or
risks. For those audits rated with more
significant weaknesses, the Committee
met with responsible management
to understand their response to the
audit findings and related action plan,
implementation of which has been
closely monitored by the Committee.

The proposed 2024 internal audit plan
was approved. The audit plan is aligned
to the Group’s principal and emerging
risks but also provides assurance over the
design and operating effectiveness of the
Group’s financial, reporting, compliance
and operational controls, processes and
information technology and a number
of Group priority projects and initiatives.

In addition to its continuous
consideration of the internal audit
effectiveness, in December, the
Committee undertook a formal
assessment, including obtaining direct
feedback from CELT members and other
relevant management. The Committee
noted the use of external specialists

to assist in technical areas (e.g. data
privacy and cyber security), to provide
specialist knowledge and expertise.
Both management and the Committee
concluded that the internal audit function
was effective and provided robust,
challenging and quality audits.

CASE STUDY: CONTROLS RELIANCE AUDIT

Building on the GBS-led audit in 2022 and the knowledge session on the global internal control programme in October 2022,
the Committee challenged Deloitte to transition to a controls reliant audit approach for the 2023 external audit processes at
the GBS centre. Whilst this approach would not give direct assurance for the purposes of the Director’s statement on internal
control, it would provide additional assurance on the operating effectiveness of controls tested and lead to greater audit
efficiencies, particularly with regard to the internal resources absorbed in the audit process, and leverage the automated
controls in the SAP platform.

Deloitte duly planned their audit to move to a controls reliant approach focusing primarily on GBS scope, and reported the
outcome to the Committee. The Committee was pleased with the conclusions from the work performed by the external audit
team. Subject to a small number of exceptions, Deloitte concluded that the controls are designed appropriately and are
operating effectively to mitigate the reporting risks. In addition, the Committee noted Deloitte’s assessment of the high quality
from the GBS component of the Group audit, and how the GBS model enables seamless service delivery mitigating the impact
of unexpected staff absences. The Committee will review the management responses to the recommendations made by the
external auditor and look forward to the further development of the internal control framework in 2024, as it continues to
broaden its scope to non financial reporting metrics and operating controls.

4. EXTERNAL AUDIT

The Committee is responsible for overseeing the relationship with the external auditor, the audit process and, most importantly,
the effectiveness and quality of the audit. The following table summarises the steps taken by the Committee in overseeing the
effectiveness of the 2023 audit and its quality.

Significant matters for review

Decisions and actions taken by the Committee

The annual audit plan and strategy including
the scope of the audit, changes in approach and
methodology, emerging industry and Group specific
risks.

Reviewed and challenged, particularly in respect of the significant revenue
audit risk, leading to an agreed plan (see below).

Having previously challenged the external auditor to centralise certain
audit activities in Lisbon to leverage the Group’s GBS operating model and
simplifying the management of the audit, the external auditor was further
challenged to evolve towards a control reliant approach for the GBS audit
which was implemented but limited to certain areas in 2023, as highlighted
in the case study, above. This approach has enabled audit procedures to
be performed earlier, allowing more time during January and February
for more detailed consideration of risk areas.

Audit materiality level including Group materiality
and component materiality.

Reviewed methodology for calculating the materiality, which was consistent
with 2022.

Audit fee and terms of engagement.

Approved the audit fee and terms of engagement, ensuring no impact on
scope of audit or quality of resource engaged due to the agreed fee level.

The Committee also approved the engagement of Deloitte to provide
continued limited assurance with increased scope on ESG data in 2023.

116

Convatec Group Plc Annual Report and Accounts 2023

117

Governance

Overview

Strategic report

Governance

Financial statements

Additional information

Audit and Risk Committee report continued

Significant matters for review

Decisions and actions taken by the Committee

Audit scope and risk assessment.

Audit scope is aligned to Group strategy with all 12 of the Group’s focus
markets in audit scope – five were subject to full scope audit procedures,
three had the material components subject to specified audit procedures,
with desk top reviews undertaken by the central audit team for others (of
which two are also subject to statutory audit).

Deloitte undertook a thorough risk assessment process to identify the three
areas of significant audit risk (two of which are related to acquisitions) and
other areas of audit focus. The Committee sought an explanation for the
change in emphasis and particularly the downgrading of risks considered
significant in 2022 and agreed with Deloitte’s decision. The Committee did
not identify additional risks that could materially impact the consolidated
financial statements.

Having considered the proposed audit scope, risk assessment and
materiality level, all of which took into consideration key developments in
the Group’s business and changes in the environment in which the Group
operates, the Committee approved the 2023 audit plan and subsequent
changes to certain aspects of the plan to reflect the Group’s performance
and the changing external environment.

Audit findings, significant issues and other
accounting judgements.

Discussed with Deloitte and management throughout the year, and
particularly during the year-end audit.

Deloitte’s independence, objectivity and quality
control procedures.

Independence and objectivity confirmed and quality control procedures
reviewed (see below).

Audit quality and effectiveness

The Committee reviewed the quality of
the external audit throughout the year,
assessing the depth of review and clarity
of communication (written and verbal,
formal and informal), to ensure that the
rigour and challenge of the external audit
process are maintained. The effectiveness
of the external auditor is continuously
evaluated by the Committee and senior
finance personnel that have regular
interactions with the external auditor,
with a formal consideration undertaken
in November and immediately post
the completion of the year-end audit.
The Committee also reviewed the
FRC’s most recent Audit Quality Review
conclusions relating to Deloitte as a
firm and any specific findings that may
relate to Convatec. The findings from
the evaluation and agreed actions were
reviewed and approved by the Committee
in December 2023.

The Committee’s review concluded that
the Company benefited from a capable
and knowledgeable senior audit team,
that provided the Committee with
strong opinions, views and insights,
with clear evidence of robust and
objective challenge of management
and exercise of appropriate scepticism
in relation to key audit judgements
and estimates, reliable interpretation
of evidence provided by management,
involvement of relevant specialists where
relevant and use of external sources
to support their conclusions when
appropriate. Deloitte’s audit process
and procedures were considered to be
highly appropriate and effective, and
focused on the areas of greatest risk.
Based on the Committee’s conclusions,
we recommended to the Board that
Deloitte be proposed for reappointment
by shareholders at the AGM to be held
on 16 May 2024.

Audit independence

To safeguard the external auditor’s
independence and objectivity and
in accordance with the FRC’s Ethical
Standard, our policy on the provision
of non-audit services requires non-audit
engagements performed by the external
auditor to be approved by the Committee.
Permissible services are subject to a fee
cap of 10% of average audit fees billed
to the Company by the auditor in the
past three financial years. The Group
was compliant with the policy in 2023,
when non-audit fees principally related
to the interim review of the Group’s
half-year unaudited financial statements
and to the limited assurance on the
ESG metrics and were not considered
significant. A summary of fees paid to
the external auditor is set out in Note 3
to the Consolidated Financial Statements.

In addition, the Committee’s review
of the independence of the external
auditor included:

– Confirmation to the Directors

from Deloitte that they remained
independent and objective
within the context of applicable
professional standards.

– Monitoring the tenure and rotation

of the lead and engagement partners.
Claire Faulkner rotated into the role
of Lead partner in 2021 and the
Committee anticipates her continuing
in this position for the next two
years. Dawn Harris stepped down as
engagement partner after seven years,
with David Holtam assuming this role
of engagement partner in 2023, and
also leading on the GBS audit and the
limited assurance of ESG.

– Monitoring the tenure and rotation

of other key personnel.

– Observing the relationship and tone of
communication between management
and the auditor.

– Deloitte reconsidering and

reconfirming their audit independence
under 2019 ES given Margaret
Ewing’s situation as both a former
partner of Deloitte LLP and chair
of this Committee, with Deloitte
and Committee (excluding Margaret)
concluding that this relationship
does not affect the external auditor’s
independence.

The Committee concluded that Deloitte
remained appropriately independent
in the role of external auditor.

External auditor appointment and
engagement tender

At the AGM on 18 May 2023, shareholders
approved the reappointment of Deloitte
as the Group’s external auditor. Deloitte
has been the Group’s external auditor
since the Company’s Listing in October
2016 and prior to this were the Company’s
external auditor for the period 2008 to
2016, whilst the Company was in private
equity ownership. For the purposes
of complying with the requirements
of The Statutory Audit Services for
Large Companies Market Investigation
(Mandatory Use of Competitive Tender
Processes and Audit Responsibilities)
Order 2014 (2014 Order), Deloitte’s
‘qualifying’ tenure as the Group’s external
auditor commenced in October 2016.
The Committee recommended to the
Board the proposal to reappoint Deloitte
as external auditor at the 2024 AGM.

As disclosed in the 2022 ARA, the
Company will undertake an audit
tender (not mandatory rotation) during
2024, and the resulting appointment
will be effective for the 2026 audit. Six
firms were approached during 2023,
including all members of the ‘Big Four’
and two mid-tier firms, to gauge their
willingness to participate in the audit
tender in 2024. Three firms declined to
participate, citing resourcing issues and
limited engagement and knowledge of
the Group.

The process will formally commence in
April 2024, when participating firms will
be provided with access to documentation
and have meetings with all Audit
Committee members and members of
senior management across the business
before having to submit a written proposal
to the Committee. Selected firms will then
be invited to give presentations to the
Audit Committee and two key members
of finance management (Selection Panel).
The proposals and presentations will be
judged against a number of key selection
criteria identified in advance of the
process, following which the proposals
of two of the participating firms (including
the Committee’s preferred choice) will be
submitted to the Board for final selection
and appointment.

EXTERNAL AUDIT TENDER TIMELINE

October 2023

Committee review and approval of audit tender process.

November 2023

Proposed lead partner of participating firms
meets with ARC Chair and senior management.

April 2024

Request for proposal submitted to audit firms.

April/May 2024

Participating audit firms meet with all ARC members, senior
finance management and other key management across the
business, including site visits.

Receipt of written proposals

June 2024

Final presentations by shortlisted firms to the Selection Panel.

ARC recommendation to the Board –
preferred and second choice with justification

June 2024

Decision made and communicated to participants
and via regulatory information service.

118

Convatec Group Plc Annual Report and Accounts 2023

119

Governance

Overview

Strategic report

Governance

Financial statements

Additional information

Directors’ Remuneration report

A word from
the Chair

“As the Company continues to navigate a dynamic external environment,
the Committee continues to monitor our remuneration policy and practices,
in order to ensure these support and enhance our winning culture and strategy,
as well as ensure alignment of executive interests with those of key stakeholders
including employees and shareholders. During 2023, shareholders approved
our new remuneration policy which we have implemented.”

Committee membership, meetings and attendance

Director

Brian May1

Constantin Coussios

Kim Lody

Sharon O’Keefe

Member since

Attended

March 2020

January 2022

February 2022

March 2022

4/4

3/4

4/4

1 Mr May was appointed Chair of the Committee on 1 September 2020.

The Deputy Company Secretary
attends meetings as the Secretary
to the Committee. The Chair, CEO,
CFO, Company Secretary, Chief
People Officer and VP Head of Global
Total Rewards & Recognition attend

meetings of the Committee by
invitation, as does the Committee’s
appointed adviser. Executives are
absent when their own remuneration
is under consideration.

Brian May
Chair of the
Remuneration Committee

The table above shows the number
of scheduled meetings attended out
of the number of meetings members
were eligible to attend during 2023.

COMMITTEE INTRODUCTION AND OVERVIEW

Activity highlights
– Ensured remuneration arrangements
for the Executive Directors and CELT
members in 2023 continue to support
Convatec’s strategic intent to pivot to
sustainable and profitable growth.

– Kept under review remuneration
arrangements and outcomes to
ensure continued alignment of
executive interests with those of other
stakeholder groups.

– Completed an annual review of the

Committee’s terms of reference versus
best practice guidelines and completed
an annual performance review to
support continuous improvement.
– Following approval at the AGM of the

new Remuneration Policy, we have been
implementing the policy throughout
the year.

2024 priorities
– Continue to implement our 2023
Remuneration Policy to deliver
competitive and motivational
remuneration that reinforces

the successful delivery of our stated
strategic ambition and alignment with
long-term shareholder interests.
– Continue to actively engage key

stakeholders on remuneration matters,
as appropriate.

Key areas of responsibility
– Designs, recommends and implements

the Company’s Remuneration
Policy, packages for the Executive
Directors and CELT, and sets the fee for
the Non-Executive Chair.

– Ensures appropriate alignment of
executive remuneration with the
remuneration approach across the
wider organisation.

In this section you will find

Letter from the Chair of the Remuneration
Committee, pages 121 and 122.

Our remuneration at a glance

Page 123.

Our Annual Report on Remuneration

How we implemented our Remuneration
Policy during 2023 and how we intend to
apply it in 2024, pages 124 to 133.

Our Remuneration Policy

Pages 134 to 142 set out the
Remuneration Policy as approved by the
shareholders at the 2023 AGM.

Key numbers

Meetings held

(2022: 5)

Attendance

94%

(2022: 95%)

LETTER FROM THE CHAIR
OF THE REMUNERATION
COMMITTEE
Dear Shareholder

On behalf of the Board, I am pleased to
present the report of the Remuneration
Committee for the year ended
31 December 2023.

Context and approach to
remuneration

I would like to start this letter by
thanking all our employees for their
dedication and strong contributions
in the past year. It is through our
employees’ impressive performance that
we have been able to increase our market
capitalisation and remain constituents
of the FTSE 100 throughout 2023. Our
FISBE strategy continues to be embedded
into the organisation and we are set to
build on this growth trajectory in 2024.
Our remuneration policy, which was
approved by shareholders at the 2023
AGM, enables us to make remuneration
decisions that continue to support the
future success of Convatec and underpin
our culture and values.

Shareholder engagement in
relation to 2023 AGM voting

In 2023, we are pleased to report
strong shareholder support, with a
98% FOR vote for the remuneration
report and a 96% FOR vote for the
Remuneration Policy at our AGM.
The significant endorsement by our
shareholders reflects our commitment
to be transparent and responsible with
our executive remuneration practices.
We appreciate the trust and confidence
our shareholders have shown.

Going forward, the Remuneration
Committee is committed to continued
positive and proactive engagement
with shareholders.

Performance in the year ended
31 December 2023 and
implications for remuneration

The Board is pleased with the continued
strategic progress of the Group and
its strong performance in 2023. The
Group delivered 7.2% organic revenue
growth and 10.2% adjusted operating
profit growth on a constant currency
basis. Further details are set out in the
Financial review on pages 26 to 33.

Based on performance, the Committee
approved payouts under the 2023 annual
bonus of 99.3% of maximum for the CEO
and 99.3% of maximum for the CFO.
The Committee reviewed the formulaic
bonus outcome in the context of the
wider performance of the Group, as well
as the experience of our stakeholders,
and concluded that there was no need
to make any discretionary adjustment.

Over the three-year performance
period, our adjusted profit before income
taxes (PBT) and total shareholder return
(TSR) performance resulted in 46.7%
and 66.1% of maximum vesting under
each metric. This means the 2021 LTIP
awards will vest at 51.6% of maximum.
The Committee was satisfied that
the vesting outcome under both
metrics was appropriate given the
Company’s superior performance and
so no discretionary adjustments have
been made.

Committee focus and activities in 2023

Focus areas

Policy

Remuneration packages

Activities

– Implementation of the Remuneration Policy approved by shareholders at the 2023 AGM

– Approved Executive Director and CELT salaries for 2023
– Approved the 2022 bonus outcomes for Executive Directors and CELT
– Approved 2023 LTIP award levels for Executive Directors and CELT

Setting performance targets

– Reviewed and set financial targets for 2023 annual bonus and 2023 LTIP, in the context of
multiple internal and external reference points for performance over the relevant period

Equity incentives

– Confirmed outcome of the 2021 award cycle
– Reviewed developments in the executive remuneration landscape

Workforce remuneration

– Received updates on workforce remuneration policies and practices
– Reviewed increases to the salary budget in light of the inflationary environment and

global living wage levels in all our locations

Effectiveness

– Undertook an annual performance review of the Committee
– Worked with Willis Towers Watson to analyse AGM trends and conduct comprehensive

market benchmarking to make sure we are aligned

120

Convatec Group Plc Annual Report and Accounts 2023

121

Governance

Overview

Strategic report

Governance

Financial statements

Additional information

Concluding remarks

On behalf of the Committee, I would like
to thank you for your support and I trust
you will find the Directors’ Remuneration
report useful and informative.

Brian May
Chair of the Remuneration Committee
5 March 2024

Directors’ Remuneration report continued

Remuneration in 2024 and beyond

The remuneration in 2024 and beyond
reflects the remuneration policy that
was approved at the 2023 AGM with
some minor adjustments to the bonus
metric weightings and cash flow metric
definition as outlined below.

For 2024 the annual bonus will be
weighted 40% on adjusted operating
profit, 25% on organic revenue growth,
15% on free cash flow to equity and
20% on strategic objectives (where this
includes 5% linked to ESG priorities).
The adjusted weighting of bonus metrics
involves moving 5% of the weighting
from operating profit to the cash flow
metric. This change was made to reflect
increased business and investor focus
on the cash flow. Additionally, we will
transition from measuring adjusted free
cash flow (after tax) to free cash flow to
equity for 2024’s bonus determinations,
which we believe aligns better with
shareholder expectations.

2024 LTIP awards will continue to
be measured 50% on adjusted PBT,
25% on organic revenue growth and
25% on relative TSR equally weighted
against the FTSE 50-150 excluding
investment trusts and the S&P Global
Healthcare Equipment & Services
Index. Further details are set out in
the Annual Report on Remuneration,
on page 132 of this report.

Against the backdrop of considerable
inflationary and wider macroeconomic
challenges to our long-term growth
plans, the Company’s financial objectives
remain ambitious. The Committee
reviewed the targets under the LTIP and
determined in line with these ambitions,
to set the organic revenue growth
range at 4% to 7% and the adjusted PBT
growth range at 6% to 14% for the 2024
LTIP awards. These stretching targets
remain consistent with the medium-
term goals shared at the Capital Markets
Day in November 2022, ongoing market
guidance and the PBT growth range
remains in excess of typical earnings
metric ranges in the FTSE 100.

The Committee will continue to review
the performance ranges on an annual
basis to ensure that maximum pay
outs are only delivered if exceptional
performance and long-term
shareholder value are delivered.

Finally, the Committee decided to
increase the salary of the CEO, CFO
and the fee of the Chairman by 4%
from 1 April 2024, in line with the
increases provided to the general
employee population in the UK. The
Committee considered these increases
to be appropriate in the context of
the continued strong performance of
the Group. The pension allowance for
the CEO and CFO remains at 8.5% of
salary which is aligned with the wider
UK workforce.

OUR REMUNERATION AT A GLANCE
This section provides a summary of outcomes relating to 2023.

2023 remuneration: outcomes vs performance scenarios

Karim Bitar (CEO)

Jonny Mason (CFO)

Maximum

Single Figure 2023

On-target

Minimum

£5,494,564

Maximum

£4,263,900

Single Figure 2023

£1,594,062

£1,586,375

£2,578,420

£1,093,481

On-target

Minimum

£1,078,437

£569,062

Fixed Remuneration

Annual bonus

LTIP

Fixed Remuneration

Annual bonus

LTIP

Annual bonus: 198.5% of salary (£1,873,483); 99.3% of maximum
bonus opportunity. LTIP: 51.6% maximum LTIP opportunity
(£1,296,937).

Annual bonus: 198.5% of salary (£1,017,313); 99.3% of maximum
bonus opportunity.

2023 annual bonus outcomes
The charts below show how actual performance contributed to the bonus payouts for the Executive Directors for 2023:

Adjusted operating profit¹ (45% weighting)

Adjusted free cash flow1 (10% weighting)

Threshold

Target

Maximum

Actual1

$394m

$405m

$432m

$435m

Threshold

Target

Maximum

Actual

$270m

$291m

$313m

$348m

Outcome warranted by performance: 100% of maximum
for this element.

1. Adjusted operating profit is calculated on a constant currency basis

using a budget rate.

1. Adjusted free cash flow is calculated as free cash flow to capital plus
cash outflows from adjusting items. Further details can be found in
the Non-IFRS section on pages 34 to 37.

Organic revenue growth1 (25% weighting)

Threshold

Target

Maximum

Actual

$2,009m

$2,048m

$2,087m

$2,091m

Outcome warranted by performance: 100% of maximum
for this element.

1. Organic revenue growth is calculated on a constant currency basis

using a budget rate.

Personal strategic objectives including ESG
(20% weighting)

Personal strategic objectives were set for each Executive Director in
relation to the following areas of strategic focus for 2023: Customer
People, Product/service improvement, Business performance

Karim Bitar

Jonny Mason

96.3%

Details of the objectives set for the Executive Directors,
and performance against these, are on page 126.

2021-2023 LTIP outcomes
The charts below show how actual performance contributed to the LTIP awards vesting for the Executive Director for the three-year
period ended 31 December 2023. Overall the LTIP vesting outcome was at 51.6% of maximum.

Adjusted PBT (75% weighting)

Relative TSR (25% weighting)

Threshold

Maximum

Actual

8.0%

10.1%

15.0%

Outcome warranted by performance: 46.7% of maximum
for this element.

Threshold
(median)

Stretch
(upper quartile)
Maximum
(upper decile)

Actual vesting
(66th percentile)

50%

65.8%

90%

100%

Outcome warranted by performance: 66.1% of maximum
for this element.

122

Convatec Group Plc Annual Report and Accounts 2023

123

Governance

Overview

Strategic report

Governance

Financial statements

Additional information

Directors’ Remuneration report continued

Our approach to implementing our Remuneration Policy in 2024

Rationale

Link to strategy

Base salary

Reviewed
annually

Policy: Benchmarked periodically against comparable roles at international
Medtech peers, as well as UK-listed companies of similar size and
complexity. In deciding base salary levels, the Committee considers
personal performance including the individual’s contribution to the
achievement of the Group’s strategic objectives. The Committee will also
consider employment conditions and salary levels across the Group,
and prevailing market conditions in the geographies in which the Group
competes for talent. Base salaries are reviewed annually with any increases
normally aligned with those of the wider workforce, and effective from
1 April.

Implementation in 2024: Karim Bitar: £981,580; Jonny Mason: £533,000
(4% increase).

Base salaries are aligned with
the broader market trends
and UK workforce increase
of 4%.

Innovate

Build

Pension
and benefits

Policy: Executives may receive a contribution to a personal pension plan,
a cash allowance in lieu or a combination thereof. Other benefits normally
include car allowance, medical insurance and life insurance, and are set
at a level considered appropriate taking into account market practice and
consistent with the wider workforce.

Pension levels for all
Executive Directors are
aligned to the wider
workforce rate, in line
with prior commitment
to investors.

Annual bonus

Long-Term
Incentive Plan

Implementation in 2024: Karim Bitar and Jonny Mason receive a pension
benefit of 8.5%, aligned to that of the wider UK workforce.

Policy: Maximum opportunity: 200% of salary (target: 50% of maximum).
Performance measures, targets and weightings are set at the start of each
year. Financial performance will normally be weighted 80% of the overall
opportunity, with the remainder (up to 20%) linked to the achievement of
personal strategic objectives. A minimum of 5% of the bonus opportunity
will be based on quantifiable ESG metrics. One-third of any bonus earned
is deferred into shares normally for three years. Malus and clawback
provisions apply.

Implementation in 2024: Maximum opportunity of 200% of salary for
Karim Bitar and Jonny Mason. The annual bonus will be based on: adjusted
operating profit¹ (weighted 40%), organic revenue growth¹ (25%), free cash
flow to equity (15%) and personal strategic objectives (20%), of which 5%
relate to quantifiable ESG metrics.

Policy: Maximum opportunity: 300% of salary. The performance conditions
and targets are agreed and set to ensure they remain appropriately
stretching and aligned to the Group’s strategy. 25% of an award will vest at
threshold, with 100% vesting at maximum. The minimum performance and
vesting period is three years. A two-year post-vesting holding period will
apply. Malus and clawback provisions apply under certain circumstances.

Implementation in 2024: Award opportunity of 300% of salary for Karim
Bitar and 250% for Jonny Mason. Awards will vest subject to adjusted PBT
growth (weighted 50%), organic revenue growth (weighted at 25%), and TSR
versus the constituents of the FTSE 50 to 150 excluding investment trusts
(12.5%) and the S&P Global Healthcare Equipment & Services Index (12.5%)
over the three financial years to 31 December 2026.

Shareholding
requirement

Policy: Executives are required to build up shareholdings of 400%
of salary for the CEO and 300% of salary for the CFO. These must be
retained whilst the Executive Directors remain on the Board. 50% of
any net vested share awards (after sales to meet tax liabilities) must
be retained until the minimum shareholding requirements are met.

At the end of 2023, Karim Bitar held shares worth 644% of his 2023 salary
and Jonny Mason held shares worth 44% of his 2023 salary.

Executive Directors are required to hold 100% of their in-situ
shareholding requirements for 12 months after cessation and 50% for
the next 12 months. This means 400% and 300% of salary in the first year
and 200% and 150% of salary in the second year post-cessation for the
CEO and CFO, respectively.

Focus

Innovate

Simplify

Build

Execute

Focus

Innovate

Simplify

Execute

Focus

The adjusted weighting of
bonus metrics with a 5%
shift from operating profit
to cash flow was made to
reflect increased business
and investor focus on cash
flow. We will transition from
adjusted free cash flow
(after tax) to free cash flow
to equity for 2024’s bonus
determinations, aligning with
shareholder expectations.

The LTI plan continues to
underscore sustainable
growth and long-term value
creation. The performance
conditions and reward
structure are designed to
attract, incentivise and retain
high-calibre talent from the
global healthcare sector.

Our shareholding
requirement under the
existing policy continues to
demonstrate alignment with
shareholder interest and
fosters a culture of ownership
and long-term investment in
the company’s success.

OUR ANNUAL REPORT
ON REMUNERATION
This section of the Remuneration
report provides details of how our
Remuneration Policy was implemented
during the financial year ended
31 December 2023, and how it will be
implemented during the year ending
31 December 2024. It has been prepared
in accordance with the provisions of the
Companies Act 2006 and Schedule 8 of
the Large and Medium-sized Companies
and Groups (Accounts and Reports)
Regulations 2008 (as amended). It also
meets the requirements of the FCA’s
Listing Rules.

In accordance with the Regulations, the
following sections of the Remuneration
report are subject to audit: the single
total figure of remuneration for Executive
Directors and Non-Executive Directors,
and accompanying notes (pages 125 and
128), scheme interests awarded during
the financial year (page 127), payments
to past Directors (page 129) and the
statement of Directors’ shareholdings
(page 133). The remaining sections of
the report are not subject to audit.

Committee membership in 2023

Advisers

Details of the membership of the
Committee, the number of times it
met during 2023 and attendance at
its meetings are set out on page 120.

Committee responsibilities

The Committee’s key areas of
responsibility are also set out
on page 120.

Committee performance
evaluation

A performance evaluation of the
Remuneration Committee was carried
out in 2023, facilitated by an external
consultant, Lintstock, by way of a
detailed questionnaire. The key priority
identified for 2024 was to ensure that
over the course of the year, Committee
members are provided with continuing
education (both within and outside
Committee meetings) on governance
and remuneration regulations, including
insights into investor expectations.

The Committee conducted a
detailed review of its advisers and
appointed Willis Towers Watson from
May 2022. During the year, Willis Towers
Watson reported to the Chair of the
Committee and provided reward survey
benchmark data to the Company. Willis
Towers Watson is considered to be
independent by the Committee. Fees paid
to Willis Towers Watson are determined
on a time and materials basis, and totalled
£67,000 (excluding expenses and VAT) for
the 2023 financial year in its capacity as
adviser to the Committee. Willis Towers
Watson is a member of the Remuneration
Consultants Group and, as such,
voluntarily operates under the Code
of Conduct in relation to executive
remuneration consulting in the UK (www.
remunerationconsultantsgroup.com).

Summary of shareholder voting

The following table shows the results at the 2023 AGM of the advisory vote on the 2022 Annual Report on Remuneration and the
binding vote on the 2023 Remuneration Policy.

Resolution

To approve the Directors’ Remuneration Policy (2023 AGM)

To approve the Directors’ Remuneration report (2023 AGM)

Votes
‘for’

Votes
‘against’

Votes
withheld‘1

95.95%

98.03%

4.05% 8,682,610

1.97%

91,373

1. Votes ‘withheld’ are not votes in law and, therefore, have not been included in the calculation of the proportion of votes ‘for’ or ‘against’ each resolution.

Single total figure of remuneration for Executive Directors (audited)

The following table sets out a single figure for the total remuneration received by each Executive Director for the 2023 financial year
and compares this with the equivalent figure for the 2022 financial year.

Director

Karim Bitar

Jonny Mason

Base
salary
’000

£938

£915

£509

£400

Taxable
benefits1
’000

Annual
bonus2
’000

£76

£56

£17

£13

£1,873

£1,339

£1,017

£579

LTIP3
’000

£1,297

£1,972

n/a

Pension
benefit4
’000

Total
Fixed5
’000

Total
Variable6
’000

£80

£1,094

£137

£1,108

£43

£34

£569

£447

£3,170

£3,311

£1,017

£579

Total
’000

£4,264

£4,419

£1,586

£1,026

2023

2022

2023

20227

1. For Karim Bitar and Jonny Mason, benefits consist primarily of car allowance, private medical insurance, life assurance and permanent health insurance.

For Karim Bitar, private medical is provided in the form of a healthcare allowance of £50,000 payable per annum.

2. Reflects the total bonus awarded for performance in the relevant financial year. One-third of the bonus earned by Karim Bitar and Jonny Mason is deferred into shares

for three years (the vesting of which is not subject to any further performance conditions). See page 126 for further details.

3. 2023 figures represent the estimated value of LTIP awards made to Karim Bitar in March 2021. These awards shall vest on the third anniversary of grant as to 51.6% of
maximum based on performance over the three-year performance period ending 31 December 2023 (further details of which are set out on page 127). The estimated
values shown in the table above use the three-month average share price for the period ended 31 December 2023 (219p) and will be trued up in next year’s report to
reflect their value (including any accrued distribution which were reinvested into shares) on the vesting date. The value of vested shares has increased by £168,187
for Karim Bitar since the respective award dates as a result of share price appreciation. The 2022 figure represents the actual vesting value of the 2020 LTIP award
with a share price of 216p at vest.

4. Karim Bitar’s and Jonny Mason’s pension benefits in the year, equivalent to 8.5% of base salary.
5. Total of base salary, taxable benefits and pension benefit.
6. Total of annual bonus, LTIP and other payments.
7. Appointed CFO on 12 March 2022. Income relates to the period 12 March–31 December 2022.

1. Adjusted operating profit and organic revenue is calculated on a constant currency basis, using a budget rate.

124

Convatec Group Plc Annual Report and Accounts 2023

125

Governance

Overview

Strategic report

Governance

Financial statements

Additional information

Directors’ Remuneration report continued

Incentive outcomes for the year ended 31 December 2023 (audited)

Annual bonus in respect of performance in the 2023 financial year
For 2023, Karim Bitar and Jonny Mason had a maximum bonus opportunity of 200% of their 2023 base salary. Any payments
under the annual bonus are normally payable two-thirds in cash and one-third in shares, deferred for three years. The on-
target opportunity was 50% of maximum. The annual bonus for 2023 was based on a combination of adjusted operating profit1
(weighted 45%), organic revenue growth1 (25%), adjusted free cash flow (10%) and personal strategic objectives (20%), of which
5% relate to quantifiable ESG metrics.

The tables below summarise the structure of the 2023 annual bonus, the targets set, our performance over the financial year
and the resulting annual bonus payout.

Financial measure

Link to corporate strategy

Adjusted operating profit1

Threshold
0% payout

Target
50% payout

Maximum
100% payout

Actual
performance

$394m

$405m

$432m

$435m

Performance targets

One-third of the bonus earned by the Executive Directors will be deferred into shares to be held for three years. Details of this
element of the bonus award will be disclosed in next year’s Annual Report.

Scheme interests vesting in respect of the year ended December 2023

In 2021, Karim Bitar was granted conditional share awards under the LTIP. These LTIP awards were subject to performance over the
three-year period ended 31 December 2023, and performance conditions based on a combination of: Relative TSR and adjusted PBT
growth, both over a three-year period, weighted 25% and 75% respectively.

The table below sets out details of the targets, and performance against these:

Measure

Weighting

Performance range

Actual performance

Three-year Relative TSR against the constituents
of the FTSE 350 excluding investment trusts

25%

Median to
90th percentile

66th percentile

Three-year compound annualised growth in adjusted PBT1

75%

8.0% to 15.0% p.a.

10.1%

Total % vesting

Weighted vesting
outcome

16.6%

35.0%

51.6%

Organic revenue growth1

$2,009m

$2,048m

$2,087m

$2,091m

Accordingly, Executive Directors’ 2021 LTIP awards will vest on the third anniversary of grant as set out below:

Focus

Innovate

Simplify

1. Final vesting outturns on the PBT measure have been adjusted to reflect the impact of M&A over the period in line with the Remuneration Policy.

Adjusted free cash flow

$270m

$291m

$313m

$348m

Focus

Innovate

Simplify

Execute

Objectives and actual performance

Karim Bitar

– Continued the successful execution of FISBE strategy, delivering sustainable and profitable growth, a strong cash flow position

and strengthening Convatec’s competitive position.

– Drove inorganic growth strategy with successful acquisition of a nitric oxide technology platform, as well as two bolt-on acquisitions

in our Home Services Group (US).

– Successfully developed and started launching key new products including ConvaFoam™, GentleCath Air™ for Women and

InnovaMatrix®. We also provided new infusion sets to support key insulin pump partners such as Medtronic, Tandem Diabetes Care
and Beta Bionics.

– Continued delivery of improvements in overall quality of products (12.2% CPM reduction), greenhouse gas emissions (55% reduction

in Scope 1 and Scope 2 over 2021), increased diversity through women in senior leadership positions (44%).
– Drove manufacturing productivity and supply chain resilience progress while improving customer service levels.

Jonny Mason

– Guided the business to deliver on all financial targets for the year, including: sales growth, margin expansion, earnings increase

and cash generation.

– Expanded focus on simplification and productivity across Operations, Commercial and G&A teams, increased the scope of Global

Business Services (GBS), further improving the cost ratio.

– Sharpened execution of strategic initiatives and mechanisms for allocation of capital.
– Improved the management of working capital and delivered a significant increase in free cash to equity conversion.
– Further strengthened and diversified the Finance, IT and GBS teams with key hires. Increased employee engagement and reduced

voluntary turnover.

ESG targets in scope: Complaints per million (CPM), Scope 1 and 2 greenhouse gas emissions; and Vitality Index. We successfully achieved a
reduction in CPM by at least 8%, attained a Vitality Index of at least 27%, and reduced scope 1 and 2 emissions by 55% relative to our 2021 baseline.
For a comprehensive account of our performance against these targets see pages 46 and 47 of the Annual Report.

Annual bonus in respect of performance breakdown

Director

Measure

Karim Bitar

Adjusted operating profit1

Organic revenue growth1

Adjusted free cash flow

Personal strategic objectives (inc. 5% in relation to ESG metrics)

Maximum
opportunity
(% of salary)

Weighting

(% of salary)

45%

25%

10%

20%

90%

50%

20%

40%

90.0%

50.0%

20.0%

38.5%

Earned bonus

(‘000)

£849

£472

£189

£363

Total

100%

200%

198.5%

£1,873

Jonny Mason

Adjusted operating profit1

Organic revenue growth1

Adjusted free cash flow

Personal strategic objectives (inc. 5% in relation to ESG metrics)

45%

25%

10%

20%

90%

50%

20%

40%

90.0%

50.0%

20.0%

38.5%

£461

£256

£103

£197

Total

100%

200%

198.5%

£1,017

1. Adjusted operating profit and organic revenue growth are both calculated on a constant currency basis using a budget rate.

Director

Karim Bitar

Date of grant

Number awarded

% vesting

Number vesting

10 March 2021

1,147,691

51.6%

592,209

Scheme interests awarded in 2023 (audited)

2023 LTIP awards
During the year ended 31 December 2023, the Executive Directors were awarded conditional share awards under the LTIP, details
of which are summarised in the table below.

Date of grant

Number awarded

Award price1

Face value

Value

% of
annualised salary

Director

Karim Bitar

Jonny Mason

15 March 2023

5 June 2023

1,041,628

222,6302

565,610

221.0p

206.8p

221.0p

£2,302,000

£460,400

£1,250,000

250%

50%

250%

Vesting date

15 March 2026

5 June 2026

15 March 2026

1. The LTIP face values are determined as a percentage of each Executive Director’s annualised salary on the date of grant and converted into numbers of conditional

shares using the average of the three-day closing price preceding the date of grant.

2. The award is granted consistent with the Remuneration Policy approved at the AGM in 2023 and is conditional upon the Company’s shareholders approving the

Company’s LTIP grant limits within the plan rules at the Company’s 2024 Annual General Meeting.

The performance conditions attached to these 2023 LTIP awards are set out in the table below.

Measure

Organic revenue growth

Three-year compound annualised growth in adjusted PBT

Three-year Relative TSR rank vs constituents of FTSE 50 to 150
excluding investment trusts and using three-month average
opening and closing values

Three-year Relative TSR rank vs constituents of S&P Global
Healthcare Equipment & Services index (calculated in GBP)

Weighting

Threshold
(25% vesting)

Stretch
(90% vesting)

Maximum
(100% vesting)

25%

50%

12.5%

3.5%

7% p.a.

Median

12.5%

Median

6.5%

14% p.a.

≥ 90th
percentile

75th
percentile

To the extent the 2023 LTIP awards vest, vested shares will be required to be held for a further two-year post-vesting holding period.

2022 Deferred bonus
One-third of the 2022 bonus earned by Karim Bitar and Jonny Mason was deferred into shares to be held for three years under the
DBP, details of which are summarised in the table below.

Director

Karim Bitar

Jonny Mason

Date of grant

Number awarded

Award price1

% of 2022 bonus

Vesting date

15 March 2023

201,937

99,826

221p

£446,281

£220,615

One-third

15 March 2026

One-third

15 March 2026

1. The award values are determined as one-third of each Executive Director’s 2022 bonus and converted into numbers of conditional shares using the average of the

three-day share price preceding the date of grant.

Value

126

Convatec Group Plc Annual Report and Accounts 2023

127

Governance

Overview

Strategic report

Governance

Financial statements

Additional information

Directors’ Remuneration report continued

Fees retained for external non-executive directorships

Relative importance of spend on pay

Executive Directors may hold one external appointment and retain the fees paid for such a role. Neither of the Executive Directors
held an external non-executive director appointment during the year.

The table below shows shareholder distributions (i.e. dividends) and total employee pay expenditure for the financial years ended
31 December 2023 and 31 December 2022, and the percentage change year-on-year.

Single total figure of remuneration for Non-Executive Directors (audited)

The table below sets out a single figure for the total remuneration received by each Non-Executive Director for the 2023 and 2022
financial years.

Non-Executive Director

John McAdam

Margaret Ewing

Brian May

Heather Mason

Constantin Coussios

Kim Lody3

Sharon O’Keefe4

Sten Scheibye5

Fee1

2023
’000

£334

£120

£97

£79

£77

£80

£90

£53

2022
’000

£326

£117

£95

£75

£69

£75

Benefits2

2023
’000

2022
’000

£1

£2

£1

£2

£0

£1

£2

£1

£2

£1

Total

2023
’000

£335

£121

£98

£81

£78

£82

£92

£53

2022
’000

£326

£118

£96

£77

£76

£71

£76

1. Effective 1 April 2023, US dollar and Euro fee levels were introduced alongside the Sterling fee rates. Where a Non-Executive Director receives fees in US dollar or Euro,

the fees have been converted to Sterling using the average exchange rate at the time of payment.
2. In addition to the fees payable to each of the Directors, the Group reimburses reasonable expenses.
3. Joined the Board on 1 February 2022.
4. Joined the Board on 1 March 2022.
5. Stepped down from the Board on 8 September 2023.

Percentage change in Director remuneration

The table below shows the percentage change in Director remuneration (from 2019 to 2023) compared to the average percentage
change in remuneration for other employees over the same period. As required under The Companies (Directors’ Remuneration Policy
and Directors’ Remuneration report) Regulations 2019, this analysis will continue to be expanded to build up a five-year history.

Convatec Group Plc does not have any other employees other than Executive Directors. For the comparator group, we have used
the population of UK-based employees whose remuneration is based on overall Group business performance rather than that of a
particular Business Unit. In determining the annual change in average employee remuneration, we have looked at average annual
pay increase (excluding promotions) and actual bonus payments. We have only included employees who were in the Group in both
years of the comparison to ensure consistency.

Annualised percentage
change from 2022 to 2023

Annualised percentage
change from 2021 to 2022

Annualised percentage
change from 2020 to 2021

Annualised change
from 2019 to 2020

Salary or

fees¹ Benefits²

Bonus

fees¹ Benefits²

Bonus

fees¹ Benefits²

Bonus

fees¹ Benefits²

Bonus

Total employee pay expenditure

Shareholder distributions

Payments to past Directors (audited)

2023
$m

701

127

2022
$m

Year-on-year
change

649

113

8.1%

12.4%

Frank Schulkes stepped down as Executive Director on 11 March 2022. He will receive 170,211 shares on vesting of the 2021 LTIP
award in March 2024. This award reflects the 51.6% vesting outcome, pro-rated to the date of leaving. It remains subject to the two-
year post-vesting holding period, per the terms of the Remuneration Policy. Further detail can be found in the Long Term Incentive
Plan table on page 137. There were no other payments to past Directors during the year

Review of past performance

The first graph shows the Group’s TSR compared to the FTSE 100 index, an index of which the Group is a constituent. Performance,
as required by legislation, is measured by TSR over the period from commencement of conditional dealing (26 October 2016) to
31 December 2023.

The second graph shows TSR performance of the Group compared with the FTSE 100 index since the announcement of Karim Bitar
as CEO (25 March 2019) to 31 December 2023.

TSR Chart – Convatec vs the FTSE 100
Value of £100 invested on 25 October 2016 – IPO

Value of £100 invested on 25 March 2019
– announcement of Karim Bitar as CEO

160

140

120

100

220

200
200
180
180

160

140

120

100

40
25/10/16 31/12/16 31/12/17 31/12/18 31/12/19 31/12/20 31/12/21 31/12/22 31/12/23

40
March 19

Dec 19

Dec 20

Dec 21

Dec 22

Dec 23

Convatec Group Plc

FTSE 100

Convatec Group Plc

FTSE 100

Executive Directors

Karim Bitar

Jonny Mason3

Non-Executive Directors

John McAdam

Margaret Ewing

Brian May

Heather Mason

1.9% 197.1%

2.6%

2.4%

5.7%

6.3%

2.3%

(14)%

Constantin Coussios

2.0%

(1.7)%

Kim Lody4

Sharon O’Keefe5

Sten Scheibye6

5.7% (19.5)%

6.1%

(9.7)%

2.0% (100.0)%

2.5%

35.9%

39.9%

2.6%

0.0%

(6.5)%

2.5%

1.3%

41.9%

n/a

1.9%

n/a

0.0%

(5.4)%

8.4%

15.4%

n/a

15.4%

0.0% (16.9)%

0.0%

40.0%

n/a

0.0%

(100)%

0.9%

(100)%

n/a

8.3%

(100)%

n/a

2.5% 213.0%

0.0%

310.1%

0.0% 443.5%

0.0% 134.2%

0.0% 247.4%

n/a

72.9%

n/a

0.0%

5.3%

Average per employee

7.2%

3.1%

21.2%

10.0%

13.5%

2.7% (16.5)%

39.2%

2.7%

16.0%

Former Directors (who did not serve on the Board during the financial year under review) have been removed from the table. Relevant prior data and commentary can
be found in last year’s annual report.
1. Salary/fee figures have been annualised for this analysis to permit a meaningful comparison over time. Effective 1 September 2020, the Non-Executive Director fee

structure was changed: the base fee was increased and committee membership fees were discontinued.

2. The year-on-year increase in benefits reflects the Group’s best estimate for the change in the average value of benefits for other employees. Non-Executive Directors’
benefits relate to taxable expenses (largely travel to attend meetings. Karim receives a healthcare allowance instead of private medical insurance which was set at
£30,000 per annum in 2019. Due to the rising cost of healthcare and inflation, Karim’s medical benefit was reviewed during the year and the Committee approved
an increase to £50,000 per annum.

3. Joined the Board on 12 March 2022 as CFO.
4. Joined the Board on 1 February 2022.
5. Joined the Board on 1 March 2022.
6. Stepped down from the Board on 8 September 2023.

128

Convatec Group Plc Annual Report and Accounts 2023

129

Governance

Overview

Strategic report

Governance

Financial statements

Additional information

Directors’ Remuneration report continued

The table below details the CEO’s single total figure of remuneration and incentive outcomes over the same period:

Implementation of Executive Director Remuneration Policy for 2024

2016

2017

2018

2019

2020

2021

2022

2023

Base salary
Following a review of the Executive Directors’ salaries, the Committee decided to award a base salary increase of 4% in line with
the increases for the general employee population in the UK. The increase will be effective from 1 April 2024.

£6,878¹

£2,786

£3,699²

£4,4193

70.2%

98.5%

n/a

79.8%

44.2%

72.7%

80.5%

£4,264

99.3%

51.6%4

Director

Karim Bitar

Jonny Mason

Role

CEO

CFO

From 1 April 2024

From 1 April 2023

£981,580

£533,000

£943,820

£512,500

Karim Bitar (from 30 September 2019)

CEO single figure (‘000)

Annual bonus (% max.)

LTIP vesting (% max.)

Rick Anderson (15 October 2018 to
29 September 2019)

CEO single figure (‘000)

Annual bonus (% max.)

LTIP vesting (% max.)

Paul Moraviec (to 14 October 2018)

CEO single figure (‘000)

Annual bonus (% max.)

LTIP vesting (% max.)

£264

£1,118

n/a

£1,413

£917

£631

40%

n/a

1. 2019 remuneration includes the face value of the restricted share awards made to Karim Bitar as part of his buyout.
2. Includes the actual vesting value of Karim Bitar’s Conditional Share award that formed part of his buyout arrangement on appointment of £888k.
3. Updated single figure to reflect actual vesting of 2020 LTIP award in May 2023.
4. Represents the performance outcome of the 2021 LTIP (as a % of maximum) with a final vesting date in March 2024.

CEO pay ratio

The table below discloses the ratio of CEO pay for 2023, comparing the single total figure of remuneration for Karim Bitar
to the full-time equivalent total reward of those colleagues whose pay is ranked at the 25th, 50th and 75th percentiles in our
total UK workforce.

Methodology Option A has been chosen to calculate the ratio, as it provides a fair comparison of colleague pay with that of our
CEO by using a consistent methodology to value remuneration and identify our colleagues ranked at the 25th, 50th and 75th
percentiles. Colleague pay was calculated based on actual pay and benefits for the 12 monthly payrolls in respect of the full financial
year to 31 December 2023. We are confident that the three colleagues identified are a true reflection of our UK workforce; none
of these individuals received any additional or exceptional pay during 2023. We can also confirm that no adjustments were made
to the calculation of the total remuneration for these employees from the methodology set out for the CEO’s single total figure
remuneration. Our pay ratios are set out below:

Year

2023

2022

2021

2020

2019

Method

Option A

106:1

125:1

115:1

83:1

163:1

80:1

98:1

89:1

65:1

123:1

51:1

59:1

52:1

40:1

76:1

The table below provides information on the salary and total pay and benefits paid to our colleagues ranked at the 25th, 50th
and 75th percentiles.

Year

2023

2022

2021

2020

2019

Method

Salary

Total pay and benefits

Salary

Total pay and benefits

Salary

Total pay and benefits

Salary

Total pay and benefits

Salary

Total pay and benefits

25th percentile

50th percentile

75th percentile

£31,639

£40,145

£29,892

£34,757

£27,638

£32,663

£26,660

£33,425

£23,500

£30,652

£41,076

£53,121

£38,000

£44,418

£34,521

£41,964

£34,487

£42,641

£32,798

£40,601

£60,000

£82,799

£55,017

£73,336

£58,739

£71,619

£52,415

£69,668

£39,542

£65,922

In the case of the CEO, his total remuneration comprises a significant proportion of variable pay. The single total figure therefore
varies considerably depending on the level of performance against the measures driving the annual bonus and PSP. In 2023, the
2021 LTIP will vest at 51.6% of maximum compared with 80.5% of maximum in 2022, which has resulted in a fall in the CEO’s pay ratio
numbers this year. Since 2019, the median pay ratio has fluctuated, increasing and decreasing in line with variable pay outcomes.

25th percentile

50th percentile

75th percentile

Personal strategic objectives (including ESG)

Focus

Build

20%
(of which 5%
relates to ESG)

Pension
Karim Bitar and Jonny Mason receive a pension benefit of 8.5% of base salary in line with that available to the wider UK workforce.
Karim Bitar receives his pension benefit as a combination of a contribution to pension and the balance as a cash allowance. Jonny
receives his pension benefit as a cash allowance.

Annual bonus
For 2024, Karim Bitar and Jonny Mason will continue to have a maximum bonus opportunity of 200% of salary. The on-target bonus
opportunity remains 50% of maximum. Two-thirds of any bonus earned will be paid in cash, with the remainder deferred into
Convatec Group Plc shares for a further three-year period.

The annual bonus for 2024 will be based on the following measures and weightings:

Measure

Link to corporate strategy

Weighting

Adjusted operating profit1

Focus

Innovate

Simplify

40%

Organic revenue growth1

Focus

Innovate

Simplify

25%

Free cash flow to equity

Simplify

Execute

15%

1. Adjusted operating profit and organic revenue growth are both calculated on a constant currency basis using a budget rate.

The Committee reaffirms its confidence in the established balance of financial measures for 2024, which continues to support our
focus on sustainable and profitable growth. The adjusted weighting of bonus metrics with a 5% shift from operating profit to cash
flow was made to reflect increased business and investor focus. We will transition from adjusted free cash flow (after tax) to free
cash flow to equity for 2024’s bonus determinations, aligning with shareholder expectations. The use of organic revenue growth
as a key metric reinforces our commitment to long-term value creation, and complements operating profit in driving our strategic
objectives forward. ESG is within the personal strategic objective metric of the bonus to place importance on this and responsible
business practices within our operations.

The Board currently considers these targets to be commercially sensitive and intends to disclose retrospectively in next year’s
Annual Report on Remuneration. In the event the Board considers these targets to remain commercially sensitive, they will be
disclosed as soon as possible once they are no longer considered to be sensitive.

In line with our Policy, bonuses for the 2024 financial year will be subject to the Group’s policy on deferral, and its malus and
clawback provisions (see page 136 for further details).

130

Convatec Group Plc Annual Report and Accounts 2023

131

Governance

Overview

Strategic report

Governance

Financial statements

Additional information

Directors’ Remuneration report continued

Long-Term Incentive Plan (LTIP)
The 2024 LTIP will vest after three years, subject to the following performance targets assessed over the three years ending
31 December 2026:

Directors’ shareholdings (audited)

The table below sets out details of the current shareholdings of each Director (and any relevant connected persons) as at
31 December 2023. For Executive Directors, the current shareholding is compared to their shareholding guideline.

Measure

Organic revenue growth

Three-year compound annualised growth in adjusted PBT

Three-year Relative TSR rank vs constituents of FTSE 50 to 150 excluding
investment trusts and using three-month average opening and closing values

Three-year Relative TSR rank vs constituents of S&P Global Healthcare Equipment
& Services index (calculated in GBP)

Weighting

Threshold
(25% vesting)

Stretch
(90% vesting)

Maximum
(100% vesting)

25%

50%

12.5%

4% p.a.

6% p.a.

Median

12.5%

Median

7% p.a.

14% p.a.

≥ 90th
percentile

75th
percentile

To the extent an award vests, it will be subject to a further two-year holding period.

Implementation of Non-Executive Director Remuneration Policy for 2024

The Remuneration Committee sets the fee for the Chair and approved an increase aligned with that of the Executive Directors at 4%.

The fees for the Non-Executive Directors, other than the Chair, are reviewed and set by the Non-Executive Director Fee Committee
comprised of the Chairman, CEO and CFO. The Non-Executive Fee Committee reviewed and approved an increase to the basic fees
aligned with the that of the wider UK employee workforce.

The fee increases will take effect on 1 April 2024.

The fees payable to the Non-Executive Directors are set out below.

Role

Chair

Non-Executive Director basic fee

Additional fees:

Senior Independent Director

Chair of the Audit and Risk Committee

Chair of the Remuneration Committee

Fee structure
in 2024¹

£349,700

Fee structure
in 2023

£336,200

£80,000 or $104,750

£77,000 or $101,000

£21,000 or $28,000

£23,000 or $30,000

£21,000 or $28,000

Fee for acting as a Board Level Employee Representative

£10,500 or $14,000

1. Effective 1 April 2024.

Owned outright or vested

Options

31 December
2022

31 December
2023

Unvested and
not subject to
performance
conditions

Unvested and
subject to
performance
conditions

Vested but not
exercised

Unvested and
not subject to
performance
conditions

Current
shareholding¹
(% salary)

Shareholding
guideline
(% salary)

–

10,253

10,346

664%

44%

400%

300%

1,943,562

2,456,534

767,047

3,650,286

99,826

1,255,722

50,000

23,181

10,000

25,000

10,000

18,301

10,000

3,200

50,000

23,181

10,000

25,000

10,000

23,278

10,000

3,200

Director

Current directors

Karim Bitar

Jonny Mason

John McAdam

Margaret Ewing

Brian May

Heather Mason

Constantin Coussios

Kim Lody

Sharon O’Keefe

Former directors²

Sten Scheibye

45,000

1. Executive Director shareholdings calculated based on the number of shares that are owned outright or vested plus an estimated number of unvested shares that are
not subject to performance conditions, on a net of tax basis. These shares are valued using a share price of 219p, being the average share price during the last three
months of the 2023 financial year.

2. Reflects shareholding at the date of stepping down from the Board.

No further shares were acquired by the Directors between 31 December 2023 and 5 March 2024, being the latest practicable date
prior to publication of this Annual Report.

Share scheme dilution limits

The Company complies with the guidelines laid down by the Investment Association. These restrict the issue of new shares under
all the Company’s share schemes in any ten-year period to 10% of the issued ordinary share capital and under the Company’s
discretionary schemes to 5% in any ten-year period.

The Directors’ Remuneration report has been approved by the Board and signed on its behalf by:

Brian May
Chair of the Remuneration Committee
5 March 2024

132

Convatec Group Plc Annual Report and Accounts 2023

133

Governance

Overview

Strategic report

Governance

Financial statements

Additional information

Directors’ Remuneration report continued

OUR REMUNERATION POLICY
This section of the Directors’ Remuneration report has been prepared in accordance with the Remuneration Reporting Regulations,
and sets out details of the 2023 Policy approved by shareholders at the 2023 AGM in May and is effective for a period of up to three
years from that date.

We also describe below how our Policy reflects the principles of Provision 40 of the 2018 UK Corporate Governance Code:

– Clarity: we are committed to transparent disclosure of our remuneration structures and decisions, including clear rationale

and context for these.

– Simplicity: our Policy and approach to its implementation is simple and well-understood internally and externally.
– Risk: remuneration arrangements are designed not to encourage or reward excessive risk taking, with targets set to be stretching

and achievable, and retaining Committee discretion to adjust formulaic bonus and LTIP outcomes to align with underlying
performance.

– Predictability: there are defined threshold and maximum pay scenarios, which we have disclosed on page 139.
– Proportionality: there is a clear and direct link between performance and reward. No variable remuneration is payable

for performance below defined thresholds.

– Alignment to culture: the Committee has designed the Policy to align with the Group’s culture, driving behaviours that promote

the long-term and sustainable success of the Group for the benefit of all stakeholders.

Details of how the Company plans to implement the 2023 Policy for the year ending 31 December 2024, are provided in the
Annual Report on Remuneration starting on page 131.

Remuneration principles

When setting remuneration for the Executive Directors, the Committee considers the following principles:

– Incentivise sustained strong financial performance.
– Align rewards with the delivery of the Group’s strategy and long-term interests of shareholders.
– Help attract, motivate and retain the best talent to deliver the Group’s strategy and create long-term shareholder value.
– Reflect market best practice and consistently adhere to principles of good corporate governance and encourage good

risk management.

2023 Remuneration Policy for the Executive Directors

Purpose and link to strategy

Operation

Opportunity

Performance measures

Base salary

To attract and retain talented
Executive Directors to deliver
the Group’s strategy, by
ensuring base salaries and
the implied total package
are competitive in relevant
talent markets, while not
overpaying.

Pension

To provide an appropriate
level of post-retirement
benefit for Executive
Directors in a cost-efficient
manner, taking account
of the provisions for the
wider workforce.

Base salaries will be reviewed
by the Committee annually,
and benchmarked periodically
against comparable roles at
international MedTech peers,
as well as UK-listed companies
of similar size and complexity.
Any resulting changes
are normally effective
from 1 April, in line with
the effective date for
salary increases for the
broader workforce.

In deciding base salary levels,
the Committee considers
personal performance
including the individual’s
contribution to the
achievement of the Group’s
strategic objectives. The
Committee will also consider
employment conditions
and salary levels across the
Group, and prevailing market
conditions in the geographies
in which the Group competes
for talent.

Base salary increases for
the Executive Directors
will normally be no higher
than those of the wider
workforce, but may be made
above or below this level
in exceptional circumstances
such as a material change
in responsibilities, size or
complexity of the role, or if
a Director was intentionally
appointed on a below-
market salary.

Executive Directors may
receive a contribution to
a personal pension plan,
a cash allowance in lieu,
or a combination thereof.

Salary is the only
element of remuneration
that is pensionable.

n/a

The maximum salary payable
to Executive Directors will
be capped at the upper
quartile of the benchmarking
comparator group for the role
under review. Salaries will be
set on a case-by-case basis
to reflect the role and the
experience and qualifications
of the individual.

Base salaries for the year
under review and the
following year, as well as the
rationale for any increases,
will be disclosed in the
relevant year’s Annual Report
on Remuneration.

Karim Bitar and Jonny Mason
receive a pension benefit
from the Group of 8.5% of
salary, in line with the wider
UK workforce.

n/a

Details of the pension
contributions made to
Executive Directors during
the year are disclosed
in the Annual Report
on Remuneration.

134

Convatec Group Plc Annual Report and Accounts 2023

135

Governance

Overview

Strategic report

Governance

Financial statements

Additional information

Directors’ Remuneration report continued

Purpose and link to strategy

Operation

Opportunity

Performance measures

Purpose and link to strategy

Operation

Opportunity

Performance measures

n/a

Benefits for Executive
Directors are set at a level
which the Committee
considers appropriate
compared to wider employee
benefits, as well as competitive
practices in relevant markets.

Long-Term Incentive Plan (LTIP)

To align the interests of
Executive Directors and
shareholders in growing the
value of the Group over the
long term.

Other benefits

To provide non-cash benefits
which are competitive in the
market in which the Executive
Director is employed.

Annual bonus

To incentivise Executive
Directors to deliver strong
financial performance
on an annual basis and
reward the delivery of the
Group’s strategic aims that
will underpin the longer-
term health and growth
of the business.

Deferral into shares enhances
alignment with shareholders.

The Group may provide
benefits in kind including,
but not limited to, a company
car or car allowance, private
medical insurance (or
allowance in lieu), permanent
health insurance, and life
insurance. Executive Directors
may also be provided certain
other benefits to take account
of individual circumstances
such as, but not limited to,
payment of financial, and/or
legal adviser fees, expatriate
allowance, relocation
expenses, housing allowance
and tax equalisation
(including associated interest,
penalties or fees plus,
in certain circumstances
or where the Committee
consider it appropriate, any
tax incurred on such benefits).
Executive Directors may also
be offered any other future
benefits made available
either to all senior employees
globally or in the region in
which the Executive Director
is employed.

Performance measures,
targets and weightings are
set by the Committee at the
start of the year. After the
end of the financial year, the
Committee determines the
level of bonus to be paid,
taking into account the extent
to which these targets have
been achieved.

To the extent that the
performance criteria have
been met, one-third of the
annual bonus earned will
normally be compulsorily
deferred into shares for a
period of three years under
the Deferred Bonus Plan.
The remainder of the bonus
will be paid in cash.

Dividends may accrue on
deferred bonus shares over
the deferral period and, if
so, will be paid on deferred
shares at the time deferred
shares are released to the
Executive Director.

Malus and clawback
provisions apply to the
annual bonus in certain
circumstances (as set out in
the Notes to the Policy Table).

The value of annual benefits
will normally not exceed
10% of salary. The Committee
retains discretion to approve
non-material increases
in cost. In addition, the
Committee retains discretion
to approve a higher cost in
exceptional circumstances
(e.g. to facilitate recruitment,
relocation, expatriation,
etc.) or in circumstances
where factors outside the
Group’s control have changed
(e.g. market increases in
insurance costs).

Benefits in respect of the
year under review are
disclosed in the Annual
Report on Remuneration.

The maximum annual
bonus opportunity is 200%
of base salary for both
Executive Directors.

The payout for on-target
performance is 50% of
maximum; threshold
performance results
in a payout of no more
than 25% of maximum.

Bonuses are based on a
combination of stretching
annual financial and
non-financial/strategic
performance measures,
selected to reflect the Group’s
short-term KPIs, financial
goals and strategic drivers.

The financial element of the
annual bonus will normally
be weighted 80% of the overall
bonus opportunity, with the
balance based on personal
strategic objectives, including
a minimum of 5% linked to
qualifiable ESG metrics.

The Committee may adjust
the formulaic annual bonus
outcomes (including to
zero) to avoid unintended
outcomes, align pay outcomes
with underlying Group
performance and ensure
fairness to shareholders
and participants.

Further details will be
disclosed in the relevant
Annual Report on
Remuneration. Performance
targets set for each year will
be disclosed retrospectively,
usually in the Annual Report
on Remuneration in respect
of the year to which such
performance targets relate.

The maximum annual LTIP
opportunity is 300% of base
salary for the CEO and 250%
of base salary for the CFO.

25% of an award will vest if
performance against each
performance condition is
at threshold and 100% if it
is at maximum, normally
with straight-line vesting
in between.

Further details of the LTIP
awards granted to each
of the Executive Directors
will be disclosed in the
relevant Annual Report
on Remuneration.

Vesting of the LTIP is subject
to continued employment
during the performance
period and the achievement
of performance conditions
aligned with the Group’s
strategic plan and shareholder
value creation. Measures
and their weightings will be
determined by the Committee
prior to making an award.

The Committee may adjust
the formulaic LTIP outcome
to ensure it takes account
of any major changes to the
Group (e.g as a result of M&A
activity) and is a fair reflection
of the underlying financial
performance of the Group
over the performance period.

Further details, including
the performance targets
attached to the LTIP in respect
of each year, will be disclosed
in the relevant Annual Report
on Remuneration.

Executive Directors are eligible
to receive annual awards of
Convatec Group Plc shares
under the LTIP either in the
form of conditional share
awards or nil cost options.

Prior to awards being granted
each year, the performance
conditions and targets are
agreed and set to ensure
they remain appropriately
stretching and aligned to
the Group’s strategy.

Awards granted under the
LTIP to Executive Directors
will have a performance
period of three years and a
minimum vesting period of
three years. If no entitlement
has been earned at the end
of the relevant performance
period, awards will not vest.
Shares received as a result of
an award vesting will normally
be subject to an additional
two-year holding period.

Dividends may accrue on LTIP
awards over the vesting period
and, if so, will be delivered in
shares that vest at the end
of the vesting period.

LTIP awards granted to
Executive Directors will be
subject to malus and clawback
provisions, as set out in the
Notes to the Policy Table.

Save-As-You-Earn (SAYE) or equivalent scheme

To align the interests of
employees and shareholders
by encouraging employees to
buy and own Convatec Group
Plc shares.

n/a

Employees are limited to
saving a maximum in line
with the monthly savings
limit imposed by the
Committee (which will not
exceed any limits imposed by
legislation) at the time they
are invited to participate.

Executive Directors are
entitled to participate in
the Group’s all-employee
share plan if available in the
jurisdiction in which they are
based on identical terms as
other eligible employees. A
UK or Europe-based Executive
Director may make monthly
savings over a period of
three or five years or other
period set by any relevant
tax authority linked to the
grant of an option over Group
shares. The option price will
be set at a discount of up to
15% of the market value of
the shares at grant (to align
with similar all-employee
arrangements in the US).

136

Convatec Group Plc Annual Report and Accounts 2023

137

Governance

Overview

Strategic report

Governance

Financial statements

Additional information

Directors’ Remuneration report continued

Notes to the Policy Table

Malus and clawback policy
Malus and clawback may be applied
to the annual bonus and LTIP awards
in certain circumstances including:

– cases of fraud, negligence or gross

misconduct by the Executive Director;
– material financial misstatement in the
audited financial results of the Group;

– error in calculation; or
– other exceptional circumstances at the

Committee’s discretion.

Cash bonuses will be subject to clawback,
with deferred shares being subject to
malus, over the deferral period. LTIP
awards will be subject to malus over the
vesting period and clawback from the
vesting date to the second anniversary
of the relevant vesting date.

Share ownership guidelines

The Committee recognises the
importance of aligning Executive
Directors’ and shareholders’ interests
through significant shareholdings in
the Group. The Group’s policy is to
require Executive Directors to build
up shareholdings worth 400% of base
salary for the CEO, and 300% of base
salary for other Executive Directors, and
to retain these shares whilst an Executive
remains on the Board of Directors. 50%
of any net vested share awards (after
sales to meet tax liabilities) must be
retained until the minimum shareholding
requirements are met. Shareholdings will
be valued at the higher of the acquisition
price of the shares and the average share
price over the last three months of the
financial year.

Post-exit shareholding
requirement

The Committee further recognises
the expectation of shareholders that
a requirement is placed on Executive
Directors to maintain a meaningful
shareholding for a period of time after
they leave the Company. In keeping
with prior commitments, the 2023 Policy
introduced a requirement for Executive
Directors to hold 100% of their in-situ
guideline in the first year post-exit and
50% in year two (e.g. 400% and 200% of
salary for the CEO in year one and year
two, respectively.)

Details of the Executive Directors’ current
personal shareholdings, and progress
towards meeting the share ownership
guidelines, are provided in the Annual
Report on Remuneration.

Use of discretion
The Committee may apply its
discretion (as set out below)
when agreeing remuneration
outcomes, to help ensure that the
implementation of our Remuneration
Policy is consistent with the guiding
principles set out in this report.

Payments from outstanding awards

The Committee reserves the right, in
certain circumstances, to make any
remuneration payments and payments
for loss of office (including exercising any
discretions available to it in connection
with such payments) where the terms
of the payment were agreed: before the
Policy in force at that time came into
effect; or at a time when the relevant
individual was not a Director of the
Group provided that, in the opinion of
the Committee, the payment was not
agreed in consideration of the individual
becoming a Director of the Group. For
these purposes, payments include the
satisfaction of variable remuneration
awards previously granted, but not
vested, to an individual.

Minor changes to Policy

The Committee retains discretion to
make minor, non-significant changes
to the Policy set out above (for reasons
including, but not limited to, regulatory,
exchange control, tax or administrative
purposes or to take account of a
change in legislation) without reverting
to shareholders for approval for
that amendment, where seeking
such shareholder approval would be
disproportionate to the discretion
being exercised.

LTIP awards

The Committee may exercise its
discretion as provided for in the
LTIP rules approved by shareholders. The
Committee may also adjust the number
of shares comprising an LTIP award (or
the exercise price if the award comprises
options) in the event of a variation of
share capital, demerger, special dividend,
distribution or any other corporate event
which may affect the current or future
value of an award. It is intended that any
adjustment will be made on a neutral
basis, i.e. to not be to the benefit or
detriment of participants. Any use of
discretion by the Committee during
a financial year will be detailed in the
relevant Annual Report on Remuneration
and may be the subject of consultation
with the Group’s major shareholders,
as appropriate.

Remuneration Policy for the wider
workforce
The Remuneration Policy for other
employees is based on principles that are
broadly consistent with those applied to
Executive Director remuneration, with
a common objective of driving financial
performance and the achievement of
strategic objectives, and contributing
to the long-term success of the Group.
Remuneration supports our ability to
attract, motivate and retain skilled and
dedicated individuals, whose contribution
will be a critical factor in the Group’s
success. Annual salary reviews take
into account Group performance, local
pay and market conditions, and salary
levels for similar roles in comparable
companies. Pension entitlements
and other benefits vary according
to jurisdiction, to ensure these remain
appropriately competitive for the
local market.

Some employees below executive
level are eligible to participate in
annual bonus schemes. Opportunities
and performance measures vary by
organisational level, geographical
location and an individual’s role.
Employee ownership of Convatec
Group Plc shares is promoted across
the Group. Senior executives are
eligible for LTIP awards on similar terms
as the Executive Directors, although
award opportunities are lower and vary
by organisational level. Other executives
are eligible for restricted share awards
on a discretionary basis. Convatec also
offers an opportunity for broader-based
participation in a share purchase plan,
as approved by shareholders at the
2017 AGM.

Approach to target setting and
performance measure selection
The Committee considers carefully the
selection of performance measures
at the start of each performance
cycle, taking into consideration the
Group’s strategic objectives and the
macroeconomic environment.

Annual bonus measures are selected
to align with the Group’s KPIs (see
pages 16 and 17). Measures may
change from year-to-year (subject to the
Remuneration Policy), and the rationale
for any changes to the bonus measures
selected will therefore be disclosed in the
relevant Annual Report on Remuneration.

LTIP performance measures are selected
to ensure they align with the Group’s
strategy and long-term shareholder value
creation. LTIP awards to be granted in
2024 will be based on a blend of adjusted
PBT performance, organic revenue
growth, and relative TSR over a three-
year period. The Committee considers
these measures to align executive and
shareholder interests through a good
balance between external and internal
measures of performance, and between
growth and returns in the context of the
Group’s strategy.

For 2024 LTIP awards, TSR performance
will be measured relative to the FTSE
50-150 excluding investment trusts and
the S&P Global Healthcare Equipment &
Services (50%/50%).

Targets are set to be stretching
but achievable over the three-year
performance period, taking account of
multiple relevant reference points, for
example, internal forecasts, external
expectations for future performance at
both the Group and its closest sector
peers, and typical performance ranges
at other FTSE companies of comparable
size and complexity. The Committee
also retains discretion, in exceptional
circumstances, to vary, substitute or
waive the performance conditions
attaching to incentive awards (within the
relevant limits set out in the Policy table)
if there is a significant and material event
which causes the Committee to believe
the original conditions are no longer
appropriate, and the new performance
conditions are deemed reasonable and
not materially less difficult to satisfy
than the original conditions.

Pay-for-performance:
scenario analysis

The charts below provide an estimate of
the potential future reward opportunities
for Karim Bitar and Jonny Mason, and
the potential split between the different
elements of remuneration under four
different performance scenarios:
“Maximum + 50% share price growth”,
“Maximum”, “On target” and “Minimum”.

Potential reward opportunities are
based on the forward-looking policy,
applied to 2024 base salaries and
incentive opportunities. LTIP awards
granted in a year will not normally vest
until the third anniversary of the date
of grant, and the projected value of the
“Maximum”, “On target” and “Minimum”
scenarios excludes the impact of share
price movement.

Pay scenarios

CEO – Karim Bitar
Maximum + 50% SPA

£7,520,964

CFO – Jonny Mason
Maximum + 50% SPA

Maximum

Target

£6,048,594

£2,858,459

Maximum

Target

£1,460,815

Minimum

£1,140,694

Minimum

£594,690

Fixed Remuneration

Annual bonus

LTIP

Fixed Remuneration

Annual bonus

LTIP

£3,659,440

£2,993,190

The above charts are based on the following assumptions:
“Maximum + 50% SPA”: fixed remuneration (salary, pension, other benefits), plus maximum bonus (200% of salary) and full vesting of the 2024 LTIP awards (300% of
salary for the CEO/250% of salary for the CFO, and reflecting 50% share price growth over the vesting period).
“Maximum”: fixed remuneration (as above), plus maximum bonus (200% of salary) and full vesting of the 2024 LTIP awards (300% of salary for the CEO/250% of salary
for the CFO) assuming no share price growth.
“On-target”: fixed remuneration (as above), plus target bonus (50% of maximum or 100% of salary) and threshold LTIP vesting (25% of maximum or 75% of salary for
the CEO/62.5% of salary for the CFO) assuming no share price growth.
“Minimum”: fixed remuneration only, being the only element of Executive Directors’ remuneration not linked to performance.

Executive Director service contracts

In accordance with general market practice, each of the Executive Directors has a rolling service contract. Karim Bitar and Jonny
Mason have service contracts with the Company (copies of which are available to view at the Company’s registered office) that are
terminable on 12 months’ notice from the Group and six months’ notice from the Executive Director. This practice will also apply
for any new Executive Directors. The following table shows the date of the service contract for each Executive Director that served
during the year:

Executive Director

Position

Date of appointment

Date of service agreement

Karim Bitar

Jonny Mason

CEO

CFO

30 September 2019

12 March 2022

24 March 2019

8 December 2021

Exit payments policy

The Group’s policy on termination payments is to consider the circumstances on a case-by-case basis, taking into account the
relevant contractual terms in the executive’s service contract and the circumstances of termination. Executive Directors’ contracts
provide for the payment of a pre-determined sum in the event of termination of employment in certain circumstances (but excluding
circumstances where the Group is entitled to dismiss without compensation), comprising base salary, pension benefit and benefits
in respect of the unexpired portion of the notice period. Termination payments may take the form of payments in lieu of notice.
Payments would normally be made on a phased basis and subject to mitigation. If the employment is terminated by the Group, the
Committee retains the discretion to settle any other amount the Committee considers reasonable to the Executive Director including
in settlement of claims, in respect of legal fees incurred in connection with the termination and fees for outplacement services and
relocation costs.

138

Convatec Group Plc Annual Report and Accounts 2023

139

Governance

Overview

Strategic report

Governance

Financial statements

Additional information

Directors’ Remuneration report continued

In addition to contractual provisions, the following table summarises how awards under each discretionary incentive plan
are typically treated in specific circumstances, with the final treatment remaining subject to the Committee’s discretion as provided
under the rules of the plan. In the event of termination, any outstanding options granted under the SAYE, or equivalent, scheme
will be treated in accordance with the rules of the scheme, which do not include discretion. Disclosure in relation to any departing
Executive Director, including details of any remuneration payment made to them after they cease to be a Director, will be made
on the Company’s website in accordance with Section 430(2B) of the Companies Act 2006.

Treatment of awards on cessation of employment

Reason for cessation

Calculation of vesting/payment

Timing of vesting/payment

Annual bonus

Injury, disability, death, redundancy,
retirement, or other such event as
the Committee determines

All other reasons (including voluntary
resignation)

Deferred bonus shares

The Committee may determine that a bonus is
payable on cessation of employment (normally
pro-rated for the proportion of the performance
year worked) and the Committee retains discretion
to determine that the bonus should be paid wholly
in cash. The bonus payable will be determined
based on the performance of the Group and of
the individual over the relevant period, and the
circumstances of the Director’s loss of office.

At the normal payment date,
taking into account actual
Company performance for
the performance period.

No bonus will be paid for the financial year.

Not applicable.

Resignation or dismissal for cause

Awards normally lapse.

Not applicable.

All other reasons (e.g. injury, disability,
death, redundancy, retirement, or other
such event as the Committee determines)

Awards will normally vest in full (i.e. not pro-rated
for time) unless the Committee determines that
time pro-rating should apply.

Change of control

LTIP awards

Awards will normally vest in full (i.e. not pro-rated
for time). Awards may alternatively be exchanged for
equivalent replacement awards, where appropriate.

At the normal vesting
date, unless the Committee
decides that awards should
vest earlier (e.g. in the event
of death).

On change of control.

Approach to remuneration on recruitment

External appointments

In cases of hiring or appointing a new Executive Director from outside the Group, the Committee may make use of all existing
components of remuneration set out in the Policy table, up to the disclosed maximum opportunities (where applicable).

When determining the remuneration package for a new Executive Director, the Committee will take into account all relevant factors
based on the circumstances at that time to ensure that arrangements are in the best interests of the Group and its shareholders.
This may include factors such as the experience and skills of the individual, internal comparisons and relevant market data.

The Committee may also make an award in respect of a new appointment to “buy-out” incentive arrangements forfeited on leaving
a previous employer, i.e. over and above the maximum limits on incentive opportunities set out in the Policy table. In doing so, the
Committee will consider relevant factors, including any performance conditions attached to these awards, the likelihood of those
conditions being met, and the time over which they would have vested. The intention is that the expected value of any “buy-out”
award would be no higher than the expected value of the forfeited arrangements, and that the structure will replicate (as far as
reasonably possible) that of the awards being forfeited. The Committee may consider it appropriate to structure “buy-out” awards
differently from the structure described in the Policy table, exercising its discretion under the LTIP rules to structure awards in
other forms (including market value options, restricted shares, forfeitable shares or phantom awards) and may use the exemption
permitted within the Listing Rules where necessary to make a one-off award to an Executive Director in this context.

Internal promotion

Where a new Executive Director is appointed by way of internal promotion, the Policy will be consistent with that for external
appointees, as detailed above (other than in relation to “buy-out” awards). Any commitments made prior to an individual’s promotion
will continue to be honoured even if they would not otherwise be consistent with the Policy prevailing when the commitment is
fulfilled, although the Group may, where appropriate, seek to revise an individual’s existing service contract on promotion to ensure
it aligns with other Executive Directors and good practice.

Disclosure on the remuneration structure of any new Executive Director, including details of any “buy-out” awards, will be disclosed
in the RNS notification made at the time of appointment and in the Annual Report on Remuneration for the year in which
recruitment occurred.

External appointments held by Executive Directors

Executive Directors may accept one external appointment subject to approval by the Board, there being no conflicts of interest and
the appointment not leading to deterioration in the individual’s performance. Executive Directors may retain the fees paid for such
roles. Details of external appointments and the associated fees received will be included in the Annual Report on Remuneration.

Consideration of conditions elsewhere in the Group

The Committee seeks to promote and maintain good relations with employees as part of its broader employee engagement
strategy, considers pay practices across the Group and is mindful of the salary increases applying across the rest of the business
in relevant markets when considering any increases to salaries for Executive Directors.

Resignation or dismissal for cause

Awards normally lapse.

Not applicable.

Consideration of shareholder views

All other reasons (e.g. injury, disability,
death, redundancy, retirement, or other
such event as the Committee determines)

Awards will normally be pro-rated for time (unless
the Committee exercises discretion to disapply time
pro-rating) and will vest based on performance
over the original performance period (unless the
Committee decides to measure performance to
the date of cessation).

At the normal vesting
date, unless the Committee
decides that awards should
vest earlier (e.g. in the event
of death).

Change of control

LTIP awards will normally be pro-rated for time
(unless the Committee exercises discretion to
disapply time pro-rating) and will vest subject to
performance over the performance period to the
change of control.

LTIP awards may alternatively be exchanged for
equivalent replacement awards, where appropriate.

On change of control.

The Committee will take into consideration all shareholder views received during the year and at the Annual General Meeting
each year, as well as guidance from shareholder representative bodies more broadly, in shaping the Group’s implementation of its
Remuneration Policy. It is the Committee’s intention to consult with major shareholders in advance of making any material changes
to remuneration arrangements for Executive Directors.

140

Convatec Group Plc Annual Report and Accounts 2023

141

Governance

Overview

Strategic report

Governance

Financial statements

Additional information

Directors’ Remuneration report continued

Directors’ report

Remuneration Policy for the Non-Executive Directors

Details of the Policy on fees paid to our Non-Executive Directors are set out in the table below:

Purpose and link to strategy

Operation

Opportunity

Performance measures

The Directors present their Annual Report on the affairs of the Group,
together with the financial statements and auditor’s report, for the year
ended 31 December 2023.

Non-Executive Director fees

To attract and retain
Non-Executive Directors
of the highest calibre with
broad commercial and
other experience relevant
to the Group

n/a

The maximum
aggregate annual fee
for all Non-Executive
Directors (including
the Chair) as provided
in the Group’s Articles
of Association is
£1,500,000.

Fee increases will be
applied taking into
account the outcome
of the annual review.

The fees of the Chair are determined by the
Committee. The fees paid to Non-Executive
Directors are determined by the Chair and
Executive Directors. Additional fees are payable
for acting as Senior Independent Director and
for chairing the Audit and Risk Committee or
the Remuneration Committee. An additional
fee is also payable for acting as a Board Level
Representative for the workforce. Flexibility to
introduce Committee membership fees is also
retained if deemed to be necessary.

Fee levels are reviewed annually (with any
increases normally effective 1 April), taking into
account external advice on best practice and
competitive levels, in particular at other FTSE
companies of comparable size and complexity.
Time commitment and responsibility are also
taken into account when reviewing fees.

Chair and Non-Executive Director fees are paid
in cash.

The Committee reimburses the Chair and Non-
Executive Directors for reasonable expenses in
performing their duties and may settle any tax
incurred in relation to these expenses. For any
Non-Executive Director that is based overseas,
the Group will meet travel and accommodation
expenditure as required to fulfil their Non-
Executive duties.

The fees paid to the Chair and Non-Executive
Directors are disclosed in the Annual Report
on Remuneration.

Non-Executive Directors are not eligible to join the Group’s pension, incentives or share schemes or to participate in any of the
Group’s other benefit arrangements.

In recruiting a new Non-Executive Director, the Committee will use the Policy set out above.

Non-Executive Director letters of appointment

None of the Non-Executive Directors has a service contract with the Group. They do have letters of appointment, and will be
submitted for re-election annually. The dates relating to the appointments of the Chair and Non-Executive Directors who served
during the reporting period are as follows:

Director

Role

Date of appointment

Date of letter of
appointment

Date of election/
re-election

John McAdam

Non-Executive Chair

30 September 2019

18 August 2019

18 May 2023

Margaret Ewing

Senior Independent Director

11 August 2017

17 August 2017

18 May 2023

Brian May

Independent Non-Executive Director

2 March 2020

26 February 2020

18 May 2023

Heather Mason

Independent Non-Executive Director

1 July 2020

8 May 2020

Constantin Coussios

Independent Non-Executive Director

1 September 2020

29 June 2020

18 May 2023

Kim Lody

Independent Non-Executive Director

1 February 2022

13 December 2021

18 May 2023

Sharon O’Keefe

Independent Non-Executive Director

1 March 2022

24 February 2022

18 May 2023

Sten Scheibye

Non-Executive Director

3 July 2018

18 May 2023

Sten Scheibye stepped down from the Board on 8 September 2023.

Page

96 to 101, 106

107 to 120

144

196

48 to 51

146

189 and 190

180

96 and 97

196

42 and 43

104 and 105

60 and 61

42 and 43

104 and 105

Taken together, the Strategic report on pages 4 to 87 and this Directors’ report fulfil the requirements of the Disclosure Guidance
and Transparency Rules to provide a management report.

Information incorporated by reference
The following information is provided in other sections of this Annual Report and is incorporated by reference.

Information

Corporate governance statement

Post-balance sheet events

Section where provided

Board statements

Governance section

Nomination, Audit and Risk and Remuneration
Committee reports

Directors’ Report

Financial Statements – Note 29

Likely future developments and research and development activities

Strategic report

Preparation and disclosure of Financial Statements and Annual Report Directors’ responsibilities statement

Use of financial instruments

Financial Statements – Note 23

Shares held by the Company’s Employee Benefit Trust

Financial Statements – Note 17

Board membership and biographical details

Related party transactions

Employee engagement

Greenhouse gas emissions

Engagement with suppliers, customers and others
in a business relationship with the Company

Disclosure of information
to the auditor

Each of the Directors, as at the date
of this Annual Report, confirms that:

– the Director has taken all steps that he/
she ought to have taken as a Director
in order to make him/herself aware of
any relevant audit information and to
establish that the Company’s auditor
is aware of that information; and

– so far as the Director is aware, there is
no relevant audit information of which
the Company’s auditor is unaware.

This confirmation is given and should
be interpreted in accordance with
the provision of Section 418 of the
Companies Act 2006. Deloitte LLP have
expressed their willingness to continue
in office as auditor and a resolution to
reappoint them will be proposed at the
2024 AGM.

Branches of the Company

The Group, through various subsidiary
and related undertakings, has branches
in a number of different jurisdictions in
which the business operates. Further
details are included in subsidiary
undertakings on pages 203 to 205.

Corporate governance report

Financial Statements – Note 28

Strategic report

Governance section

Strategic report

Governance section

Dividends

Our stated policy is to target a payout
ratio of between 35% and 45% of adjusted
net profit. This is interpreted flexibly over
time to reflect the development of the
business. The Board is recommending
a 3% increase in the full year dividend
to reflect the underlying improvement
in business performance.

We annually assess the application of
the policy when proposing the dividend,
taking into account, among other things,
our growth prospects, capital efficiency,
investment plans and the profitability of the
Group, whilst also maintaining appropriate
levels of dividend cover. Any decision to
declare and pay dividends will be made
at the discretion of the Directors and
will depend on, among other things,
applicable law, regulation, restrictions,
strategic objectives, capital management,
the Group’s various stakeholders (for
further information see the section 172
statement on page 43), review of our
comparator peer group, available and
forecast distributable reserves of the
Company and the forecast cashflows and
liquidity of the Group, and other factors
the Directors deem significant.

During the year, the Directors resolved
to pay an interim dividend of 1.769 cents
per share on 28 September 2023. A scrip
dividend alternative was oﬀered in
respect of the interim dividend allowing
shareholders to elect by 7 September
2023 to receive their dividend in the form

of new ordinary shares. On 28 September
2023, 4,199,962 ordinary shares of 10p
each were allotted to shareholders
who had elected to take the scrip
dividend alternative.

The Directors recommend a final dividend
for the year of 4.460 cents per share
(2022: 4.330 cents) which, together with
the interim dividend, makes a total for
the year of 6.229 cents per share (2022:
6.047 cents), a 3% increase over the prior
year. The final dividend, if approved by
the shareholders, will be paid on 23 May
2024 to shareholders on the register
at the close of business on 26 April
2024. Following feedback from certain
shareholders, the Board re-examined
the scrip dividend programme. Taking
into consideration the recent trends in
take up the Board has taken the decision
to cease the scrip dividend option.

Capital structure

Share capital
As at 31 December 2023, the Company’s
issued share capital consisted of
2,049,789,559 ordinary shares of 10p
each. Further details of the authorised
and issued share capital, together
with details of the movements in the
Company’s issued share capital during
the year, are shown in Note 17 to the
Consolidated Financial Statements.
As at 31 December 2023, the Company
had only one class of share consisting
of ordinary shares of 10p each.

142

Convatec Group Plc Annual Report and Accounts 2023

143

Governance

Directors’ report continued

Acquisition of Company’s
own shares
At the Company’s AGM on 18 May 2023
the Directors’ authority was renewed
under shareholders’ resolution to
purchase through the market up to
10% of the Company’s ordinary shares
at a maximum price per share of the
higher of: (i) an amount equal to 105%
of middle market quotations of the price
of shares for the five business days
prior to the date of purchase; and (ii)
an amount equal to the higher of the
last independent trade and the highest
current independent bid at the time of
purchase. This authority will expire at
the end of Company’s 2024 AGM and
the Company will seek its renewal at the
AGM. It is confirmed that no acquisition
of the Company’s own shares has been
made under such authority.

Shareholders’ rights
The rights attaching to the ordinary
shares are governed by the Company’s
Articles of Association (the Articles)
and prevailing legislation. There are
no specific restrictions on the size of
a holding. Subject to applicable law
and the Articles, holders of ordinary
shares are entitled to receive all
shareholder documents, including
notice of any general meeting, attend,
speak and exercise voting rights at
general meetings, either in person
or by proxy, and participate in any
distribution of income or capital.

Restrictions on voting
There are no specific restrictions on
voting rights, save in situations where
the Company is legally entitled to impose
such restrictions (usually where amounts
remain unpaid on shares after request,
or the shareholder is otherwise in
default of an obligation to the Company).
Currently all issued ordinary shares
are fully paid. There are no agreements
between holders of securities in the

Company that are known to the Company
and may result in restrictions on transfer
or on voting rights.

Restrictions on the transfer
of ordinary shares
The transfer of ordinary shares is
governed by the general provisions of
the Company’s Articles and applicable
legislation. There are no restrictions on
the transfer of ordinary shares other
than: (i) as set out in the Articles; and
(ii) certain restrictions which may from
time to time be imposed by laws and
regulations and pursuant to the Listing
Rules whereby Directors and certain
officers and employees of the Company
require approval to deal in the ordinary
shares in accordance with the Company’s
share dealing policies and the Market
Abuse Regulation.

Directors’ appointment,
replacement and powers

The appointment and replacement of
Directors of the Company is governed
by its Articles, the Code, the Companies
Act and related legislation. The Articles
themselves may be amended by special
resolution. Details of the powers of the
Board and its Committees are described
in the Corporate governance report
on pages 100 and 101. The powers of
the Board are set out in the Articles
and the Terms of Reference of each
of the Board’s committees set out their
respective duties and responsibilities.
The aforementioned documents can
be found at www.convatecgroup.com/
investors/governance.

Significant agreements

There are a number of agreements that
take eﬀect, alter or terminate upon
a change of control of the Company
such as commercial contracts, bank
loan agreements, property lease
arrangements and employees’ share
plans. Other than the Group’s main

funding agreements referenced in the
following paragraph, none of these are
considered to be significant in terms
of their likely impact on the business
of the Group as a whole. Furthermore,
the Directors are not aware of any
agreements between the Group and
its Directors or employees that provide
for compensation for loss of oﬃce
or employment that occurs because
of a change of control resulting from
a takeover bid.

In the event of a change of control
of the Company, the Group’s main
funding agreements allow the lenders
to give notice of repayment for all
outstanding amounts under the
relevant facilities.

Directors’ indemnities

The Group has made qualifying third-
party indemnity provisions for the
benefit of its Directors, which remain
in force at the date of this report.

Company Secretary

The Company Secretary provides
ongoing support to the Board in
relation to corporate governance
issues and compliance with the
Listing Rules. She is responsible
for establishing, implementing and
monitoring the corporate governance
framework, attending (directly or through
a designate) all Board and Committee
meetings, advising on effective Board
processes, advising on Directors’
statutory duties, disclosure obligations
and requirements under the Listing
Rules, and working in conjunction with
the investor relations team regarding
dialogue with investors.

Political donations

No political donations, including to non-
UK political parties, were made during
the period.

Substantial shareholdings

At 31 December 2023 the Company had been notified in accordance with Chapter 5 of the Disclosure Guidance and Transparency
Rules, of the following voting rights as a shareholder of the Company. At 5 March 2024, being the latest practicable date prior to the
publication of this Annual Report, the Company had not received any further notifications pursuant to Chapter 5 of the Disclosure
Guidance and Transparency Rules.

Shareholder

Novo Holdings A/S

No. of ordinary shares

395,318,793

Percentage of
voting rights

20.25%

Black Creek Investment Management, Inc.

103,241,911

5.05%

BlackRock, Inc.

Pelham Capital Ltd.

Artisan Partners Limited Partnership

The Capital Group Companies Inc

Below 5%

93,526,729

97,980,658

97,418,767

4.71%

4.98%

4.99%

Nature of holding

Direct holding
Direct holding/
Indirect holding
Indirect holding/
Financial instruments
Direct holding/
Financial instruments

Indirect holding

It should be noted that the percentages are shown as notified and that these holdings may have changed since the Company was notified, however notification of any
change is not required until the next notifiable threshold is crossed.

Overview

Strategic report

Governance

Financial statements

Additional information

Relationship agreement with
controlling shareholders

Novo Holdings A/S (Novo) became a
significant shareholder on 31 March 2017.
Although Novo was not a controlling
shareholder for the purposes of the
Listing Rules, the Company and Novo
nevertheless entered into a Relationship
Agreement when Novo acquired its stake
in the Company. In September 2023,
Convatec agreed with Novo to end the
relationship agreement.As a result, Sten
Scheibye stepped down from the Board.

Diversity and inclusion

We are committed to creating a values-
led, performance-driven culture which
starts with our employees, and we aim
to bring together a rich diversity of
backgrounds, experiences, preferences
and capabilities which unite together
to improve people’s lives through their
work at Convatec. The Board considers
a diverse workforce as critical to the
Company’s success. Information
about the Group’s initiatives to achieve
diversity across the business, including
specific objectives, are contained
on page 54.

Employment of disabled people

Applications for employment by disabled
people are always fully considered,
bearing in mind the aptitudes of the
applicant concerned. In the event of
members of staﬀ becoming disabled
every eﬀort is made to ensure that
their employment with the Group
continues and that appropriate training
is arranged. It is the policy of the Group
that the training, career development
and promotion of anyone with a disability
should, as far as possible, be equitable
with that of other employees.

Employee share schemes

In addition to the discretionary share
schemes operated as part of the Group’s
long-term incentives, detailed in the
Remuneration Policy on page 132,
the Group operates an all-employee
share scheme in selected jurisdictions.
The Directors believe that this scheme
aligns the interests of employees
and shareholders by encouraging
employees to buy and own shares in the
Company, thus enabling them to benefit
directly from the anticipated growth and
success of the Group in the future.

Listing Rules – compliance with LR 9.8.4R

Executive Directors may also participate
in the UK all-employee share scheme,
which is an HMRC-approved savings-
related share option plan, on the same
basis as other eligible employees. All
participants may invest up to the limits
set in line with HMRC guidance and as
operated by the Group.

Shares acquired through the Group’s
share plans rank pari passu with
existing ordinary shares in issue and
have no special rights with regards to
voting, rights to dividend, control of
the Company or otherwise.

All of the Group’s employee share
plans contain provisions relating to
a change of control. On a change of
control, options and awards granted to
employees under the Group’s share plans
may vest and become exercisable, subject
to the satisfaction of any applicable
performance conditions at that time.

The information in the table below is required to be disclosed by LR 9.8.4R and can be found in the following locations. There are no
other disclosures required under this LR.

Section

Applicable sub-paragraph within LR 9.8.4R

Interest capitalised

Details of long-term incentive schemes

Confirmation of relationship agreement

Annual General Meeting

Location

Group Financial Statements, Note 25, page 192

Directors’ Remuneration report, page 127

Directors’ report, page 145

The Annual General Meeting will be held on 16 May 2024 at 2pm and will take place at 7th Floor, 20 Eastbourne Terrace, Paddington,
London W2 6LG, United Kingdom, in the form of a hybrid meeting. Notice of the meeting, containing details of the resolutions to be
put to the meeting, will be available at www.convatecgroup.com/investors/shareholder-centre/agm-information/.

By order of the Board:

Robyn Butler-Mason
Company Secretary
5 March 2024

Convatec Group Plc is registered in England No. 10361298

144

Convatec Group Plc Annual Report and Accounts 2023

145

Governance

Overview

Strategic report

Governance

Financial statements

Additional information

This responsibility statement was approved
by the Board of Directors on 5 March 2024
and is signed on its behalf by:

Karim Bitar
Chief Executive Officer

Jonny Mason
Chief Financial Officer

Directors’ responsibilities statement

The Directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the Group
and Company’s transactions and disclose
with reasonable accuracy at any time
the financial position of the Group and
Company and enable them to ensure
that the Financial Statements comply
with the Companies Act 2006. They are
also responsible for safeguarding the
assets of the Group and Company and
hence for taking reasonable steps for
the prevention and detection of fraud
and other irregularities.

The Directors are responsible
for the maintenance and integrity
of the corporate and financial
information included on the Group’s
website. Legislation in the United
Kingdom governing the preparation
and dissemination of financial
statements may differ from
legislation in other jurisdictions.

Responsibility statement

We confirm that to the best of our
knowledge:

– the Financial Statements, prepared in
accordance with the relevant financial
reporting framework, give a true
and fair view of the assets, liabilities,
financial position and profit or loss
of the Company and the undertakings
included in the consolidation taken
as a whole

– the Strategic report includes a fair
review of the development and
performance of the business and
the position of the Company and
the undertakings included in the
consolidation taken as a whole,
together with a description of the
principal risks and uncertainties
that they face

– the Annual Report and Financial

Statements, taken as a whole, are
fair, balanced and understandable and
provide the information necessary for
shareholders to assess the Group and
Company’s performance and position,
business model and strategy.

The Directors are responsible for
preparing the Annual Report and the
Financial Statements in accordance
with applicable law and regulations.

Company law requires the Directors
to prepare financial statements for each
financial year. Under that law the Directors
are required to prepare the Group
Financial Statements in accordance with
United Kingdom adopted International
Accounting Standards and have elected
to prepare the parent company financial
statements in accordance with United
Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting
Standards and applicable law), including
FRS 101 “Reduced Disclosure Framework”.
Under company law the Directors must
not approve the accounts unless they are
satisfied that they give a true and fair view
of the state of affairs of the Group and
Company and of the profit or loss of the
Group and Company for that period.

In preparing the parent company’s
financial statements, the Directors
are required to:

– select suitable accounting policies
and then apply them consistently
– make judgements and accounting
estimates that are reasonable
and prudent

– state whether applicable UK

Accounting Standards have been
followed, subject to any material
departures disclosed and explained
in the Financial Statements

– prepare the Financial Statements
on the going concern basis unless
it is inappropriate to presume that
the Company will continue in business.

In preparing the Group Financial
Statements, International Accounting
Standard 1 requires that Directors:

– properly select and apply accounting

policies; present information, including
accounting policies, in a manner that
provides relevant, reliable, comparable
and understandable information

– provide additional disclosures
when compliance with the
specific requirements in IFRSs
are insufficient to enable users to
understand the impact of particular
transactions, other events conditions
on the Group’s financial position and
financial performance

– make an assessment of the Group’s

ability to continue as a going concern.

Financial
statements

148 Consolidated financial statements

197 Company financial statements

206 Independent auditor�s report

146

Convatec Group Plc Annual Report and Accounts 2023

147

Financial statements
Financial statements

Consolidated financial statements

CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2023

Revenue
Cost of sales
Gross profit

Selling and distribution expenses
General and administrative expenses
Research and development expenses
Other operating expenses
Operating profit

Finance income
Finance expense1
Fair value movement of contingent consideration1
Non-operating income/(expense), net1
Profit before income taxes
Income tax expense
Net profit

Earnings per share
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)

Notes
2

4
3

25
25
14
5

7
7

2023
$m
2,142.4
(941.8)
1,200.6

(612.5)
(212.9)
(110.0)
(2.5)
262.7

5.2
(80.7)
(24.6)
4.8
167.4
(37.1)
130.3

2022
$m
2,072.5
(968.6)
1,103.9

(575.9)
(214.9)
(92.0)
(13.8)
207.3

5.5
(57.6)
(45.1)
(28.2)
81.9
(19.0)
62.9

6.4¢
6.3¢

3.1¢
3.1¢

1. The comparatives have been re-presented as outlined in Note 1.6 to the Consolidated Financial Statements.

The accounting policies and notes on pages 152 to 196 form an integral part of the Consolidated Financial Statements. All amounts
are attributable to shareholders of the Group and wholly derived from continuing operations.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2023

Net profit
Items that will not be reclassified subsequently to the Consolidated Income Statement
Remeasurement of defined benefit pension plans, net of tax
Fair value movement on equity investments
Items that may be reclassified subsequently to the Consolidated Income Statement
Foreign currency translation
Realisation of cumulative translation adjustments
Effective portion of changes in fair value of cash flow hedges
Changes in fair value of cash flow hedges reclassified to the Consolidated Income Statement
Costs of hedging
Income tax in respect of items that may be reclassified
Other comprehensive income/(expense)
Total comprehensive income/(expense)

Notes

15
10

23
23
23

2023
$m
130.3

(0.2)
(7.8)

54.9
–
0.7
(0.8)
(0.5)
0.1
46.4
176.7

2022
$m
62.9

8.4
–

(113.6)
12.2
(7.7)
16.5
(1.1)
2.4
(82.9)
(20.0)

All amounts are attributable to shareholders of the Group and wholly derived from continuing operations.

Overview

Strategic report

Governance

Financial statements

Additional information

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2023

Assets
Non-current assets
Property, plant and equipment
Right-of-use assets
Intangible assets1
Goodwill1
Investment in financial assets
Deferred tax assets
Derivative financial assets
Restricted cash
Other non-current receivables

Current assets
Inventories
Trade and other receivables1
Current tax receivable1
Derivative financial assets
Restricted cash
Cash and cash equivalents

Total assets
Equity and liabilities
Current liabilities
Trade and other payables
Lease liabilities
Current tax payable
Derivative financial liabilities
Provisions

Non-current liabilities
Borrowings
Lease liabilities
Deferred tax liabilities
Provisions
Derivative financial liabilities
Other non-current liabilities

Total liabilities
Net assets
Equity
Share capital
Share premium
Own shares
Retained deficit
Merger reserve
Cumulative translation reserve
Other reserves
Total equity
Total equity and liabilities

Notes

2023
$m

2022
$m

8
24
9
9
10
6
23
22
12

11
12

23
22
22

13
24

23
14

21
24
6
14
23
13

17
17
17

473.8
74.7
935.3
1,298.8
22.9
21.2
–
5.3
11.7
2,843.7

396.1
333.7
16.5
13.6
12.5
97.6
870.0
3,713.7

388.7
20.7
26.6
16.7
83.7
536.4

1,226.9
64.8
88.2
71.3
0.9
32.5
1,484.6
2,021.0
1,692.7

251.5
181.0
(0.6)
(888.7)
2,098.9
(122.2)
172.8
1,692.7
3,713.7

400.4
79.4
924.9
1,224.6
30.7
26.6
0.2
7.3
8.6
2,702.7

336.9
339.3
24.7
26.4
18.2
143.8
889.3
3,592.0

346.6
20.3
33.5
32.5
100.2
533.1

1,211.9
68.0
83.2
53.1
0.3
32.7
1,449.2
1,982.3
1,609.7

250.7
165.7
(1.5)
(892.2)
2,098.9
(177.1)
165.2
1,609.7
3,592.0

The comparatives have been re-presented as outlined in Note 1.6 to the Consolidated Financial Statements.

The Consolidated Financial Statements of Convatec Group Plc, company number 10361298, were approved by the Board of Directors
and authorised for issue on 5 March 2024 and signed on its behalf by:

Jonny Mason
Chief Financial Officer

Karim Bitar
Chief Executive Officer

148
148

Convatec Group Plc Annual Report and Accounts 2023
Convatec Group Plc Annual Report and Accounts 2023

149
149

Financial statements
Financial statements

Consolidated financial statements continued

Overview

Strategic report

Governance

Financial statements

Additional information

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2023

CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2023

At 1 January 2022
Net profit
Other comprehensive
(expense)/income:
Foreign currency translation
adjustment, net of tax
Realisation of cumulative translation
adjustments
Remeasurement of defined benefit
pension plans, net of tax
Changes in fair value of cash flow
hedges, net of tax
Other comprehensive
(expense)/income
Total comprehensive
(expense)/income
Dividends paid
Scrip dividend
Allotment of shares to Employee
Benefit Trust
Share-based payments
Share awards vested
Excess deferred tax benefit from
share-based payments
Transfer between reserves
At 31 December 2022
Net profit
Other comprehensive
(expense)/income:
Foreign currency translation
adjustment, net of tax
Remeasurement of defined benefit
pension plans, net of tax
Changes in fair value of cash flow
hedges, net of tax
Changes in fair value of equity
investments
Other comprehensive
income/(expense)
Total comprehensive
income/(expense)
Dividends paid
Scrip dividend
Share-based payments
Share awards vested
Excess deferred tax benefit from
share-based payments
At 31 December 2023

Notes

Share
capital
$m
247.0
–

premium Own shares
$m
(2.2)
–

$m
142.3
–

Retained
deficit
$m
(842.0)
62.9

Merger
reserve
$m
2,098.9
–

Cumulative
translation
reserve
$m
(75.7)
–

Other
reserves
$m
126.5
–

Total
$m
1,694.8
62.9

18
17, 18

17
19

18
17, 18
19

–

–
–
1.1

2.6
–
–

–
–
250.7
–

–

–
–
0.8
–
–

–

–
–
23.4

–
–
–

–
–
165.7
–

–

–
–
15.3
–
–

–

–
–
–

(2.6)
–
3.3

–
–
(1.5)
–

–

–
–
–
–
0.9

–

62.9
(88.1)
(24.5)

–
–
–

–

–
–
–

(113.6)

12.2

–

(113.6)

12.2

–

8.4

10.1

(101.4)

18.5

(82.9)

(101.4)
–
–

–
–
–

18.5
–
–

–
16.6
2.9

(20.0)
(88.1)
–

–
16.6
6.2

–
(0.5)
(892.2)
130.3

–
–
2,098.9
–

–
–
(177.1)
–

0.2
0.5
165.2
–

0.2
–
1,609.7
130.3

–

130.3
(110.7)
(16.1)
–
–

–

–
–
–
–
–

54.9

–

54.9

–

(0.2)

(0.5)

(7.8)

54.9

(8.5)

46.4

54.9
–
–
–
–

(8.5)
–
–
14.5
1.5

176.7
(110.7)
–
14.5
2.4

–
251.5

–
181.0

–
(0.6)

–
(888.7)

–
2,098.9

–
(122.2)

0.1
172.8

0.1
1,692.7

Cash flows from operating activities
Net profit
Adjustments for:
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Amortisation of intangible assets
Income tax
Non-operating (income)/expense, net1
Fair value movement of contingent consideration
Finance costs, net1
Share-based payments
Impairment/write-off of intangible assets
Impairment/write-off of property, plant and equipment
Impairment/write-off of right-of-use assets

Change in assets and liabilities:

Inventories
Trade and other receivables
Derivative financial assets
Other non-current receivables
Restricted cash
Trade and other payables1
Derivative financial liabilities
Provisions1
Other non-current payables1

Net cash generated from operations
Interest received
Interest paid
Payment of contingent consideration arising from acquisitions
Income taxes paid
Net cash generated from operating activities

Cash flows from investing activities
Acquisition of property, plant and equipment and intangible assets
Proceeds from sale of property, plant and equipment
Acquisitions, net of cash acquired
Payment of contingent consideration arising from acquisitions
Net cash inflow/(outflow) arising from divestitures
Investment in financial assets
Net cash used in investing activities
Cash flows from financing activities
Repayment of borrowings
Proceeds from borrowings
Payment of lease liabilities
Dividends paid
Net cash used in financing activities
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Effect of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at end of the year

1. The comparatives have been re-presented as outlined in Note 1.6 to the Consolidated Financial Statements.

Notes

2023
$m

2022
$m

130.3

62.9

8
24
9
6
5
14
25
19
9
8
24

8,9
8
26
26

21
21
24
18

37.5
22.7
154.6
37.1
(9.6)
24.6
75.5
14.6
–
2.7
1.9

(49.4)
18.7
11.5
(1.1)
7.8
21.1
(13.4)
4.8
(1.3)
490.6
5.2
(70.8)
(21.7)
(35.9)
367.4

(129.2)
0.6
(84.4)
(73.0)
0.3
–
(285.7)

–
9.4
(22.7)
(110.7)
(124.0)
(42.3)
143.8
(3.9)
97.6

39.7
22.1
147.4
19.0
26.5
45.1
52.1
16.7
6.3
9.2
–

(36.3)
(54.3)
(9.3)
3.0
(11.8)
14.7
20.7
9.8
1.0
384.5
5.5
(55.4)
–
(52.9)
281.7

(144.2)
–
(123.3)
(50.0)
(0.1)
(30.7)
(348.3)

(842.5)
714.2
(20.7)
(88.1)
(237.1)
(303.7)
463.4
(15.9)
143.8

150
150

Convatec Group Plc Annual Report and Accounts 2023
Convatec Group Plc Annual Report and Accounts 2023

151
151

Financial statements
Financial statements

Notes to the consolidated financial statements

1. BASIS OF PREPARATION

This section describes the Group’s significant accounting policies that relate to the Consolidated Financial Statements and
explains critical accounting judgements and estimates that management has identified as having a potentially material impact
to the Group. Specific accounting policies relating to the Notes to the Consolidated Financial Statements are described within
that note.

1.1 General information

Convatec Group Plc (the Company) is a public limited company incorporated in the United Kingdom under the Companies Act of
2006. The Company’s registered office is 7th Floor, 20 Eastbourne Terrace, London, W2 6LG, United Kingdom.

The Consolidated Financial Statements have been prepared in accordance with United Kingdom adopted international accounting
standards and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

The Consolidated Financial Statements are presented in US dollars (USD), which is also the functional currency as the revenue and
operating profits of the Company and its subsidiaries (collectively, the Group) are primarily generated in US dollars and US dollar-
linked currencies. All values are rounded to $0.1 million except where otherwise indicated.

Pages 5 to 7 in the Strategic report provide further detail of the Group’s principal activities and nature of its operations.

1.2 Significant accounting policies

The following significant accounting policies apply to the Consolidated Financial Statements as a whole:

Basis of accounting and presentation
The consolidated financial information has been prepared on a historical cost basis, except for certain financial instruments where fair
value has been applied. Historical cost is generally based on the value of the consideration given in exchange for goods and services.

Basis of consolidation
The Consolidated Financial Statements include the results of the Company and all of its subsidiary undertakings. Subsidiaries are
entities controlled ultimately by the Company. Control exists when the Company ultimately: (i) has power over the investee; (ii) is
exposed, or has rights, to variable returns from its involvement in the investee; and (iii) has the ability to use its power to affect its
returns. The Company reassesses whether or not it ultimately controls an entity if facts and circumstances indicate that there are
changes to one or more of the three elements of control listed above.

The consolidated financial information of the Company’s subsidiaries is included within the Group’s Consolidated Financial
Statements from the date that control commences until the date that control ceases and is prepared for the same year-end date
using consistent accounting policies.

Going concern
As discussed in the Financial review on pages 26 to 33, the overall financial performance of the business remains strong with a
robust liquidity position.

As at 31 December 2023, the Group held cash and cash equivalents of $97.6 million (31 December 2022: $143.8 million), and
borrowings of $1,226.9 million (31 December 2022: $1,211.9 million). The borrowings as at 31 December 2023 comprised of senior
notes of $500.0 million, term loan of $250.0 million, and drawn multicurrency revolving credit facilities of $490.6 million, net of
unamortised financing fees of $13.7 million. During the year, the term of the $950.0 million multicurrency revolving credit facility
was extended by an additional year and is now committed to November 2028. The term loan and senior notes remain repayable in
2027 and 2029 respectively. $459.4 million of the multicurrency revolving credit facilities remained undrawn as at 31 December 2023,
which together with cash and cash equivalents of $97.6 million, provided the Group with total liquidity of $557.0 million as at that
date (2022: $616.6 million). The principal financial covenants remain unchanged and as at 31 December 2023, the Group was in
compliance with its financial covenants.

In preparing their assessment of going concern, the Directors have considered available cash resources, financial performance
and forecast performance, including strategy delivery, together with the Group’s financial covenant compliance requirements and
principal risks and uncertainties. The Directors have used cash flow forecasts and actual performance in 2023, the Board approved
2024 budget and longer-term strategic plan as foundations. The forecasts reflected the full potential funding requirements in
relation to the remaining estimated contingent consideration payable in relation to the Group’s acquisitions. The Directors have
considered a going concern period to 31 December 2025, which is at least 12 months from the date of approval of the Consolidated
Financial Statements.

In accordance with FRC guidance, management applied severe but plausible downside scenarios linked to the Group’s principal
and emerging risks, including supply chain disruption, cyber security disruption, significant regulatory breaches, financial market
distress and geopolitical events. Scenarios combining certain risks were also considered. Further details of the specific scenarios
are provided in the Viability statement on pages 86 and 87. The Board has reviewed these scenarios as part of the going concern
assessment and has concluded that these scenarios are in line with the Group’s principal and emerging risks and continue to reflect
the potential financial risk of severe but plausible downside events and circumstances during the going concern period. Under each
scenario, the Group is forecast to retain significant liquidity and covenant headroom throughout the going concern period.

Overview

Strategic report

Governance

Financial statements

Additional information

The Group has carried out a reverse stress test against the forecast base case to determine the performance levels that would
result in a breach of covenants. For a breach of covenants to occur in the next 12 months, before Board and management
mitigation, the Group would need to experience a sustained revenue reduction of at least 10% across all categories and markets.
This was considered to be implausible given the Group’s strong global market position and diversified portfolio of products and
the mitigations available to the Board and management, which include reducing expansionary capital investment.

Accordingly, at the time of approving these Consolidated Financial Statements, the Directors have a reasonable expectation that the
Group and the Company will have adequate liquid resources to meet their respective liabilities as they become due and will be able
to sustain its business model, strategy and operations and remain solvent for a period of at least 12 months from 5 March 2024.

Foreign currency translation and transactions
Assets and liabilities of subsidiaries whose functional currency is not US dollars are translated into US dollars at the rate of exchange
at the period end. Equity is translated into US dollars at historic rate. Income and expenses are translated into US dollars at
the average rates of exchange prevailing during the year. Foreign currency gains and losses resulting from the translation of
subsidiaries into US dollars are recognised in the Consolidated Statement of Comprehensive Income. Exchange differences arising
from the translation of the net investment in foreign operations are taken to the cumulative translation reserve within equity. They
are recycled and recognised in the Consolidated Income Statement upon disposal of the operation.

In preparing the financial statements of the individual companies, transactions in currencies other than the entity’s functional
currency (foreign currencies) are recognised at the rates of exchange prevailing on the dates of the transactions. At each reporting
date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing at that date.
Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the
date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency
are not retranslated. Any gain or loss arising from subsequent exchange rate movements is included as an exchange gain or loss
in the Consolidated Income Statement.

1.3 Climate change

The Directors recognise the risk of climate change on the business and acknowledge that the Group must take appropriate action
to mitigate and, where feasible, prevent further climate change impact. Accordingly, climate related risks have been identified as
a principal risk and discussed in greater detail in the ‘Principal Risks’ section within the Annual Report and Accounts.

Whilst the valuation of our assets and liabilities has not been materially impacted as at 31 December 2023, the Group will continue to
monitor possible implications of climate related risks that could arise in future years on both future cash flows and the valuation of
the Group’s assets and liabilities, as Government policies and the Group’s own strategy and transition plans evolve. Further detail is
provided within the ‘Responsible business review’ and ‘The Task Force on Climate-related Financial Disclosure’ sections of the
Annual Report and Accounts on pages 38 to 75.

1.4 Critical accounting judgements and key sources of estimation uncertainty

The preparation of financial statements, in conformity with United Kingdom adopted international accounting standards and
International Financial Reporting Standards (IFRS), requires management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported value of assets and liabilities, income and expense. Actual results
may differ from these estimates or judgements of likely outcome. Management regularly reviews, and revises as necessary, the
accounting judgements that significantly impact the amounts recognised in the Consolidated Financial Statements and the sources
of estimation uncertainty that are considered to be key estimates due to their potential to give rise to material adjustments in the
Group’s Consolidated Financial Statements within the next financial year.

In preparing the Consolidated Financial Statements no critical accounting judgements have been identified. Management have
identified one key source of estimation uncertainty in respect of the provision for contingent consideration on acquisitions.
The nature of the uncertainty arises from both the estimation of the undiscounted amounts expected to be paid and the estimation
of the timing of discrete payments.

The underlying drivers of the contingent consideration are determined in accordance with the contractual terms of the purchase
agreements for each relevant acquisition and may vary depending on the amounts or timing of product revenues (including future
revenues, which are inherently uncertain), particularly when it relates to products which are relatively new to market or not yet
launched, the future achievement of regulatory clearance for new products, or other uncertainties deriving from the purchase
agreement, which may be subject to negotiation. The Group estimates provisions for contingent consideration based on
information available at the balance sheet date that includes forecasts that run up to 20 years into the future and expectations
of when future events that trigger payments will happen. Future payment forecasts are discounted to present value in accordance
with the requirements of IAS 37 Provisions, Contingent Liabilities and Contingent Assets.

Actual results may differ from estimates or there may be delays to estimated timetables for regulatory clearances which would
lead to a change in estimate of provisions for contingent consideration and may vary materially within the next financial year.
At 31 December 2023 the discounted estimate of provisions for contingent consideration was $138.0 million (see Note 26 – Acquisitions).
Management has determined that a reasonable possible range of discounted outcomes within the next financial year is $50.0 million to
$156.0 million.

As detailed further in the Group’s Audit and Risk Committee report on pages 110 to 119, the Committee has reviewed, discussed,
and challenged management on its determination that there were no identified critical accounting judgements, and the key source
of estimation uncertainty regarding the calculation of the contingent consideration provision and the Committee has subsequently
agreed with management.

152
152

Convatec Group Plc Annual Report and Accounts 2023
Convatec Group Plc Annual Report and Accounts 2023

153
153

Financial statements
Financial statements

Overview

Strategic report

Governance

Financial statements

Additional information

Notes to the consolidated financial statements continued

1. BASIS OF PREPARATION (CONTINUED)
1.5 Accounting standards

New standards, interpretations and amendments applied for the first time
On 1 January 2023, the Group adopted the following amendments which are mandatorily effective for the period beginning
1 January 2023:

– Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2);
– Definition of Accounting Estimates (Amendments to IAS 8);
– Deferred Tax Related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12);
– IFRS 17 – Insurance contracts; and
– International Tax Reform – Pillar Two Model Rules (Amendments to IAS 12).

The adoption during the year of the amendments and interpretations has not had a material impact on the Consolidated Financial
Statements.

Apart from these changes, the accounting policies set out in the Notes have been applied consistently to both years presented
in these Consolidated Financial Statements.

New standards, interpretations and amendments not yet effective
There are a number of standards, amendments to standards and interpretations which have been issued by the IASB that are
effective in future accounting periods that the Group has decided not to adopt early.

The following amendments are effective for the period beginning 1 January 2024:

– IFRS 16 Leases (Amendment – Liability in a Sale and Leaseback);
– IAS 1 Presentation of Financial Statements (Amendment – Classification of Liabilities as Current or Non-current); and
– IAS 1 Presentation of Financial Statements (Amendment – Non-current liabilities with Covenants).

The Group is currently assessing the impact of these new accounting standards and amendments and does not believe these will
have a material impact on the Group.

Other interpretations and amendments
In addition to these issued standards, there are a number of other interpretations, amendments and annual improvement project
recommendations that have been issued but not yet effective that have not yet been adopted by the Group because application is
not yet mandatory, or they are not relevant for the Group.

1.6 Prior year re-presentation

Certain line items in the primary statements have been disaggregated to provide greater clarity, and accordingly, the corresponding
2022 comparative amounts have been re-presented for consistency and comparability between periods.

Within the Consolidated Income Statement, the fair value movement of contingent consideration has been presented separately.
The 2022 comparative amount includes $15.6 million that was previously included within finance expense, and $29.5 million
previously included within non-operating income/(expense), net.

Within the Consolidated Statement of Financial Position, intangible assets of $924.9 million and goodwill of $1,224.6 million are now
disclosed separately; and current tax receivable of $24.7 million is disclosed separately from trade and other receivables.

Within the Consolidated Statement of Cash Flows, trade and other payables and other non-current payables have been re-presented
to separately disclose the cash impact of movements in provisions of $9.8 million.

There is no impact on net profit, net assets, cash flows or any subtotals presented previously.

RESULTS OF OPERATIONS

This section includes disclosures explaining the Group’s performance for the year, including segmental information, operating
costs, other expenses, taxation and earnings per share.

2. REVENUE AND SEGMENTAL INFORMATION
2.1 Revenue recognition

The Group sells a broad range of products to a wide range of customers, including healthcare professionals, patients and
manufacturers. This note provides further information about how the Group generates revenue and when it is recognised
in the Consolidated Income Statement.

Accounting policy

Revenue recognition
The Group measures revenue for goods sold based on the consideration specified in a contract with a customer, net of discounts,
chargeback allowances and sales-related taxes. Revenue is recognised when control over a product or service is transferred to
a customer, distributor or wholesaler, which is generally when goods have been delivered, as most products are insured by the
Group until delivery. Due to the short-term nature of the receivables from sale of goods, the Group measures them at the
original transaction price without discounting.

Nature of goods and services
Advanced Wound Care, Ostomy Care, and Continence Care products are sold to pharmacies, hospitals and other acute and
post-acute healthcare service professionals directly or through distributors and wholesalers. Products are also sold directly to
end customers (patients) through the Group’s home services entities and a small number of clinical and retail outlets.

Infusion Care primarily serves business-to-business customers, consisting principally of the leading insulin pump manufacturers.

In 2023 and 2022, no single customer generated more than 10% of the Group’s revenue.

Nature, timing of satisfaction of performance obligations
Principally the Group’s contracts with customers contain a single performance obligation, that is the delivery of products to
customers. Revenue is typically recognised when the customer receives the product but is subject to the shipping terms in each
individual contract. Where non-standard shipping arrangements exist, revenue is recognised when control of the goods has
transferred. Allowances for returns, where the contract specifies these terms, are made at the point of sale.

For sales to distributors, revenue is recognised when title is transferred to the distributor and the distributor has assumed
control, the timing of which depends on the contractual terms with each distributor. Chargeback allowances or contractual
deductions relating to end-customer agreements, which may differ from distributor contracts, are made at the point of title
transfer to the distributor. In certain European countries, rebates are provided to governments and are often mandated by
laws or government regulations. These rebates are estimated based on government regulations and unbudgeted spending,
laws and terms of individual rebate agreements, and are recorded as a deduction from revenue at the time the related revenue
is recorded. The estimates are adjusted periodically to reflect actual experience.

When distributors buy products from the Group at a contract price and sell these products to end-customers at a price agreed
with the Group that is lower than the distributors’ list price, a chargeback may arise and a claim may be submitted to the
Group by the distributor. The provision for chargebacks is based on expected sell-through levels by the Group’s distributors to
contracted customers, as well as estimated distributor inventory levels. Retrospective claims are reviewed against estimations
to ensure provisions are regularly updated.

Volume discounts
The Group offers certain prospective volume discounts to customers who achieve a specified volume amount or value of
purchases in any given year. Volume discounts that meet the definition of a material right are recognised as a separate
performance obligation. Material rights are the option to purchase additional products at a discount which would not have been
given had the contract not been entered into and are incremental to the range of discounts typically given for those goods to
that class of customer.

The stand-alone selling price of these volume discounts is based on the discount that the customer would obtain when exercising
the option, adjusted for any discount the customer could receive without exercising the option and the likelihood that the option
will be exercised. The revenue allocated to volume discounts is short-term in nature and recognised proportionally to the pattern
of options exercised by the customer or when the option expires.

Variable consideration
The transaction price for revenue recognised is the amount the Group expects to receive at that date. In certain Group
businesses, the transaction price is estimated based on the levels of rebates, discounts, allowances, product returns and
consideration expected to be received. In estimating the amounts to be recognised, the Group assesses historical performance
and collection patterns. The arrangements in different countries and with individual customers vary, but broadly they are all
dependent upon interactions with the customer, including the submission of claims that can extend to up to 24 months after
the initial point of revenue recognition. This can include factors outside the direct trading relationship with the customer such as
re-imbursement, retrospective rebate or other claims by an insurer, healthcare professionals or governmental agency which are
not the Group’s direct customers and may also be impacted by the timing of when a product is used by a customer. Where there
is variability in relation to the consideration that will ultimately be received from a customer, the Group estimates the amount of
consideration to be recognised as revenue during the period using the expected value method, taking into account the nature
of the customer, the contractual arrangements, and other circumstances where known and relevant.

154
154

Convatec Group Plc Annual Report and Accounts 2023
Convatec Group Plc Annual Report and Accounts 2023

155
155

Financial statements
Financial statements

Overview

Strategic report

Governance

Financial statements

Additional information

Notes to the consolidated financial statements continued

2. REVENUE AND SEGMENTAL INFORMATION (CONTINUED)

Revenue is not recognised in full until it is highly probable that a significant reversal in the amount of cumulative revenue
recognised will not occur.

Accruals and allocations against gross accounts receivables balances are recorded at the time of sales for the estimated rebates,
chargebacks, retrospective discounts, other allowances and returns based on contractual obligations, historic experience and
other information available at that point in time. Given the large number of variables involved in calculating these accruals it is
not practicable to provide meaningful sensitivity analysis for the resultant accruals.

The nature of the estimations means that there is considerable variability in the ultimate outcomes when considered on an
individual customer basis. As a result, the Group applies a limit on variable revenue consideration, in order to ensure that
revenue is recognised at a prudent level. The objective of the limit is to ensure that there is a low probability of a significant
reversal of revenue when the uncertainties behind the estimations are resolved for the transactions of individual customers.

The limit is applied by making prudent estimates of the inputs and assumptions used in estimating the variable consideration.
These estimates are driven by historic information, but also take into account the nature of customer and the specific contractual
arrangements we have with them. The limit means that the risk of a material downward adjustment to revenue in future years as
a result of the estimates made in the current year is very low.

Contract costs
Incremental costs in respect of obtaining a contract with a customer principally relate to commissions paid by the Group to its
sales representatives. Such costs are capitalised as an asset to the extent that they directly relate to a specific contract, are used
to generate or enhance resources used in satisfying performance obligations and are expected to be recovered.

The amortisation period for commissions can differ according to the contract term. Renewals of milestones in the contract are
taken into account when determining the amortisation period. For each contract that has sales commissions paid, the Group has
determined an appropriate amortisation period that is consistent with the transfer of control to the customer. These capitalised
costs amounted to $5.5 million (2022: $5.4 million) at 31 December 2023 and the amount of related amortisation expense for the
year ended 31 December 2023 was $4.4 million (2022: $4.3 million). There was no impairment loss in respect of the costs capitalised.

2.2 Segment information

The Board considers the Group’s business to be a single segment entity engaged in the development, manufacture and sale of
medical products, services and technologies. R&D, manufacturing and central support functions are managed globally for the
Group, supporting all categories of sales. Revenues are managed both on a category and regional basis. This note presents the
performance and activities of the Group as a single segment.

Pages 18 to 25 of the Strategic report provide further detail of category revenue.

During the year ended 31 December 2023, management reassessed its Chief Operating Decision Maker (CODM) and determined
that Convatec’s Executive Leadership Team (CELT) is now the CODM and no longer the Chief Executive Officer. The CODM is
the function that allocates resources and evaluates the Group’s global product portfolios on a revenue basis and evaluates
profitability and associated investment on an enterprise-wide basis due to shared infrastructures and support functions between
the categories. The financial information provided to CELT for decision-making purposes is produced on both a category and
geographic basis. Resources are allocated on a Group-wide basis, with a focus on both category and the key markets but primarily
based on the merits of individual proposals. The change in CODM does not impact the Group’s single segment assessment.

Revenue by category
The Group generates revenue across four major product categories. The following chart sets out the Group’s revenue for the year
ended 31 December by category:

Advanced Wound Care
Ostomy Care
Continence Care
Infusion Care
Revenue excluding hospital care exit
Revenue from hospital care exit1
Total

2023
$m
695.3
608.3
457.2
370.9
2,131.7
10.7
2,142.4

2022
$m
620.7
583.0
425.4
341.1
1,970.2
102.3
2,072.5

1. Following the exit of hospital care in 2022, effective from 1 January 2023, Flexi-SealTM, our faecal management system, moved from the Continence & Critical Care category
to the Ostomy Care category. The remaining industrial sales, predominantly continence-related supplies for B2B customers, moved from Infusion Care to Continence Care.
Continence & Critical Care has been renamed to Continence Care. The 2022 comparatives have been re-presented to reflect these changes and to separately disclose revenue
associated with the hospital care exit.

Geographic information
Geographic markets
The following chart sets out the Group’s revenue by geographic market in which third party customers are located:

Europe
North America
Rest of World (RoW)1
Total

2023
$m
647.8
1,186.0
308.6
2,142.4

2022
$m
688.6
1,090.3
293.6
2,072.5

1. Rest of World (RoW) comprises all countries in Asia Pacific, Latin America (including Mexico and the Caribbean), the Middle East (including Turkey) and Africa.

Geographic regions
The following table sets out the Group’s revenue on the basis of where the legal entity generating the revenue resides, including
countries representing over 10% of Group revenue and the UK, where the Group is domiciled:

Geographic regions
US
Denmark
UK
Other1
Total

1. Other consists primarily of other countries in Europe, Asia-Pacific, Latin America and Canada.

The following table sets out the Group’s long-lived assets by country in which the legal entity resides:

Long-lived assets1
US
UK
Denmark
Other
Total long-lived assets

1. Long-lived assets consist of property, plant and equipment, right-of-use assets, intangible assets and goodwill.

2023
$m

2022
$m

821.5
375.5
116.7
828.7
2,142.4

749.8
371.7
131.5
819.5
2,072.5

2023
$m

2022
$m

1,285.9
866.6
274.4
355.7
2,782.6

1,349.6
695.7
266.0
318.0
2,629.3

156
156

Convatec Group Plc Annual Report and Accounts 2023
Convatec Group Plc Annual Report and Accounts 2023

157
157

Financial statements
Financial statements
Financial statements

Overview

Strategic report

Governance

Financial statements

Additional information

Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued

3. OPERATING COSTS
3. OPERATING COSTS

The Group incurs operating costs associated with the day-to-day operation of the business. These operating costs are deducted
The Group incurs operating costs associated with the day-to-day operation of the business. These operating costs are deducted
from revenue to calculate operating profit.
from revenue to calculate operating profit.

3.3 Auditor’s remuneration

The total remuneration of the Group’s auditor, Deloitte LLP, for services provided to the Group during the year ended 31 December
is analysed below:

3.1 Operating profit
3.1 Operating profit

Operating profit is stated after deducting from revenue:
Operating profit is stated after deducting from revenue:

Depreciation:
Depreciation:

Property, plant and equipment
Property, plant and equipment
Right-of-use assets
Right-of-use assets

Amortisation of intangible assets
Amortisation of intangible assets
Impairment/write-off of intangible assets
Impairment/write-off of intangible assets
Impairment/write-off of property, plant and equipment
Impairment/write-off of property, plant and equipment
Impairment of right-of-use assets
Impairment of right-of-use assets
Loss on terminated leases
Loss on terminated leases
Amounts in respect of inventories included in cost of sales
Amounts in respect of inventories included in cost of sales
Write-down of inventories1
Write-down of inventories1
Lease expenses2
Lease expenses2
Staff costs:
Staff costs:

Wages and salaries
Wages and salaries
Share-based payment expense
Share-based payment expense
Social security costs
Social security costs
Defined contribution plans post-employment costs
Defined contribution plans post-employment costs
Defined benefit plans pension costs
Defined benefit plans pension costs
Recruitment and other employment-related fees
Recruitment and other employment-related fees

Total staff costs
Total staff costs

Notes
Notes

8
8
24
24
9
9
9
9
8
8
24
24
24
24

24
24

19
19

15
15

2023
2023
$m
$m

37.5
37.5
22.7
22.7
154.6
154.6
–
–
2.7
2.7
1.9
1.9
–
–
794.4
794.4
21.8
21.8
2.4
2.4

578.4
578.4
14.6
14.6
77.3
77.3
23.7
23.7
1.4
1.4
5.9
5.9
701.3
701.3

2022
2022
$m
$m

39.7
39.7
22.1
22.1
147.4
147.4
6.3
6.3
9.2
9.2
–
–
0.1
0.1
818.3
818.3
22.6
22.6
3.9
3.9

532.7
532.7
16.7
16.7
67.5
67.5
21.2
21.2
1.7
1.7
8.7
8.7
648.5
648.5

1. The write-down of inventories to their realisable value is included in cost of sales.
1. The write-down of inventories to their realisable value is included in cost of sales.
2. Lease expenses comprises the costs in respect of low-value leases and short-term leases. Refer to accounting policy in Note 24 – Leases.
2. Lease expenses comprises the costs in respect of low-value leases and short-term leases. Refer to accounting policy in Note 24 – Leases.

The remuneration of the Executive Directors, which is set out on pages 120 to 142, has been audited and is included within staff
The remuneration of the Executive Directors, which is set out on pages 120 to 142, has been audited and is included within staff
costs and forms part of these Consolidated Financial Statements.
costs and forms part of these Consolidated Financial Statements.

3.2 Employee numbers
3.2 Employee numbers
The average number of the Group’s employees by function1:
The average number of the Group’s employees by function1:

The average number of the Group’s employees by location1:
The average number of the Group’s employees by location1:

2023

Operations

20221

Operations

5,559

3,241

791

517

3,600

1,468

5,040

10,108

2023

10,108

Sales and
marketing

General and
administrative

R&D

5,751

3,030

873 480

10,134

Sales and
marketing

General and
administrative

R&D

Europe

20221

Europe

North
America2

RoW2

4,069

1,356

North
America2

RoW2

4,709

10,134

1. 2022 comparatives have been re-presented to more accurately reflect the Group’s employees by function and location.
1. 2022 comparatives have been re-presented to more accurately reflect the Group’s employees by function and location.
2. North America comprises United States and Canada, and Rest of World (RoW) comprises all countries in Asia Pacific, Latin America (including Mexico and the Caribbean),
2. North America comprises United States and Canada, and Rest of World (RoW) comprises all countries in Asia Pacific, Latin America (including Mexico and the Caribbean),

the Middle East (including Turkey) and Africa.
the Middle East (including Turkey) and Africa.

The total number of employees as at 31 December 2023 was 10,129 (2022: 10,028).
The total number of employees as at 31 December 2023 was 10,129 (2022: 10,028).

Fees for audit services
Group
Subsidiaries
Total fees for audit services
Fees for non-audit services
Audit-related assurance services
Other assurance services
Total auditor remuneration

2023
$m

2022
$m

1.6
3.3
4.9

0.2
0.1
5.2

1.5
3.0
4.5

0.2
0.1
4.8

A description of the work performed by the Audit and Risk Committee to safeguard auditor independence when non-audit services
are provided is set out in the Audit and Risk Committee report on pages 110 to 119.

4. OTHER OPERATING EXPENSES
Other operating expenses were as follows:

Impairment of intangible assets
Impairment of property, plant and equipment and right-of-use assets

2023
$m
–
2.5
2.5

2022
$m
1.4
12.4
13.8

Other operating expenses in the year consisted of $2.9 million of impairments in respect of property, plant and equipment and
right-of-use assets as a result of the Group’s transformation projects, offset by $0.4 million reversal of property, plant and
equipment that was impaired in 2022 from the hospital care exit. The $13.8 million in the year ended 31 December 2022 related
to the impairments of property, plant and equipment and intangible assets arising from the exit from hospital care and industrial
sales-related activities.

5. NON-OPERATING INCOME/(EXPENSE), NET
Non-operating income/(expense), net was as follows:

Net foreign exchange gain/(loss)1
Realisation of cumulative translation adjustments
(Loss)/gain on foreign exchange forward contracts
Gain/(loss) on foreign exchange cash flow hedges
Gain/(loss) on divestiture2
Other non-operating income
Non-operating income/(expense), net3

Notes

23
23

2023
$m
3.7
–
(4.3)
0.8
3.9
0.7
4.8

2022
$m
(13.5)
(12.2)
15.8
(16.5)
(2.0)
0.2
(28.2)

1. The foreign exchange gain in 2023 primarily relate to the foreign exchange impact on intercompany transactions, including loans transacted in non-functional currencies.

The Group uses foreign exchange forward contracts to manage these exposures in accordance with the Group’s foreign exchange risk management policy.

2. As part of the hospital care exit, the UnoMeter™ trademarks were sold during the year, resulting in a gain of $3.9 million (2022: loss of $2.0 million arose from the sale of a

subsidiary as part of the hospital care exit).

3. Of the total net non-operating expense, $4.8 million (2022: $1.7 million) relates to mark-to-market derivatives, the cash flow impact of which has been shown within the

changes in working capital section of the Consolidated Statement of Cash Flows.

158
158
158

Convatec Group Plc Annual Report and Accounts 2023
Convatec Group Plc Annual Report and Accounts 2023
Convatec Group Plc Annual Report and Accounts 2023

Convatec Group Plc Annual Report and Accounts 2023
Convatec Group Plc Annual Report and Accounts 2023

159
159

Financial statements
Financial statements

Overview

Strategic report

Governance

Financial statements

Additional information

Notes to the consolidated financial statements continued

6. INCOME TAXES

The note below sets out the current and deferred tax charges, which together comprise the total tax expense in the Consolidated
Income Statement. The deferred tax section of the note also provides information on expected future tax charges or benefits and
sets out the deferred tax assets and liabilities held across the Group.

6.1 Taxation

The Group’s income tax expense is the sum of the total current and deferred tax expense.

Accounting policy

The tax expense represents the sum of current and deferred tax.

Current tax

Current tax is the expected tax payable or receivable on the taxable profit or loss for the year, using tax rates enacted or
substantively enacted at the reporting date, and any adjustment to tax payable in respect of prior years. Taxable profit differs
from profit before income taxes because taxable profit excludes items that are either never taxable or tax deductible or items
that are taxable or tax deductible in a different period.

Deferred tax

Deferred tax is recognised using the balance sheet liability method for temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not
recognised for temporary differences:

– On the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither

accounting nor taxable profit or loss;

– Arising on the initial recognition of goodwill; and
– On investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the

foreseeable future.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to temporary differences when the asset
is realised or the liability is settled, based on the laws that have been enacted or substantively enacted by the reporting date.

Deferred tax assets are recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it
is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reviewed
at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and
they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they
intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

Current tax and deferred tax for the year

Current tax and deferred tax are recognised in the Consolidated Income Statement, except when they relate to items that
are recognised in other comprehensive income or directly in equity, in which case, the current tax and deferred tax are also
recognised in other comprehensive income or directly in equity, respectively. Where current tax or deferred tax arises from
the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.

Tax provisions

The Group is subject to income taxes in numerous tax jurisdictions. Judgement is sometimes required in determining the
worldwide provision for income taxes. There may be transactions for which the ultimate tax determination is uncertain and may
be challenged by the tax authorities. The Group recognises liabilities for anticipated or actual tax audit issues based on estimates
of whether additional taxes will be due. Where an outflow of funds to a tax authority is considered probable and the Group can
make a reliable estimate of the outcome of the issue, management calculates the provision for the best estimate of the liability.
In assessing its uncertain tax provisions, management takes into account the specific facts of each issue, the likelihood of
settlement and the input of professional advice where required. The Group assumes that where a tax authority has a right to
examine amounts reported to it, they will do so and will have full knowledge of all relevant information. Where the ultimate
liability as a result of an issue varies from the amounts provided, such differences could impact the current and deferred tax
assets and liabilities in the period in which the matter is concluded.

Current tax
Overseas taxation
Adjustment to prior years
Total current tax expense
Deferred tax
Origination and reversal of temporary differences
Change in tax rates
Adjustment to prior years
Benefit from previously unrecognised tax losses
Total deferred tax benefit
Income tax expense

2023
$m

46.1
(5.5)
40.6

2.0
1.6
(4.5)
(2.6)
(3.5)
37.1

2022
$m

46.8
(2.0)
44.8

(3.7)
(3.2)
1.2
(20.1)
(25.8)
19.0

The adjustment to prior years included a net tax benefit of $15.1 million following the successful resolution of an uncertain tax
position.

In 2022, the deferred tax movement included a benefit of $20.1 million in respect of the recognition of previously unrecognised tax
losses in the US following the acquisition of Triad Life Sciences Inc.

6.2 Reconciliation of effective tax rate

The effective tax rate for the year ended 31 December 2023 was 22.2%, as compared with 23.2% for the year ended 31 December 2022.

Tax reconciliation to UK statutory rate
The table below reconciles the Group’s profit before income taxes at the UK statutory rate to the Group’s total income tax expense:

Profit before income taxes
Profit before income taxes multiplied by rate of corporation tax in the UK of 23.52%
(2022: 19.0%)
Difference between UK and overseas tax rates1
Non-deductible/non-taxable items
Change in recognition of deferred tax assets
Recognition of previously unrecognised US deferred tax assets
Movement in provision for uncertain tax positions
Other2
Income tax expense and effective tax rate

2023
$m
167.4

39.4
1.6
7.2
2.6
(2.6)
(17.5)
6.4
37.1

22.2%

2022
$m
81.9

15.6
3.0
14.4
1.0
(20.1)
2.5
2.6
19.0

23.2%

1. This includes changes in tax rates based on substantively enacted legislation across various tax jurisdictions as of 31 December.
2. Includes tax on unremitted earnings and prior year adjustments.

The Group has worldwide operations and therefore is subject to several factors that may affect future tax charges, principally the
levels and mix of profitability in different tax jurisdictions, transfer pricing regulations, tax rates imposed and tax regime reforms.
The calculation of the Group’s tax expense involves a degree of estimation and judgements in respect of certain items for which the
tax treatment cannot be finally determined until resolution has been reached with the relevant tax authority, specifically in relation
to open tax and transfer pricing matters. Due to the high volume of intercompany transactions, the Group’s evolving business
model and the increasing complexity in interaction between multiple tax laws and regulations, transfer pricing requires judgement
in determining the appropriate allocation of profits between jurisdictions. The Group assessed the impact of ongoing changes to the
Group’s operating model, the supporting documentation for the tax and transfer pricing positions, existing tax authority challenges,
and the likelihood of new challenges by tax authorities.

The Group continues to believe it has made adequate provision for uncertain tax positions on open issues in accordance with
IFRIC 23 Uncertainty over Income Tax Treatments. The ultimate liability for such matters may vary from the amounts provided and is
dependent upon the outcome of discussions with relevant tax authorities or, where applicable, appeal proceedings. The movement
includes resolutions of uncertain tax positions in the year.

The Group is monitoring tax reforms driven by the OECD’s BEPS Pillar One and Pillar Two to reform international taxation rules.
The Group has assessed the potential tax impact based on OECD model rules and draft, and substantively enacted legislation
in jurisdictions in which the Group operates and expects the tax impact to not be material in the foreseeable future. The United
Kingdom enacted Pillar Two rules in the UK Finance (No.2) Act 2023 in 2023. This has no impact on the Group’s results for the year
ended 31 December 2023. The Group has applied the temporary exception as detailed in the IASB announcement “International Tax
Reform – Pillar Two Model Rules”, which amended IAS 12 Income Taxes, and therefore has not recognised nor disclosed information
about deferred tax assets and liabilities related to Pillar Two income taxes.

160
160

Convatec Group Plc Annual Report and Accounts 2023
Convatec Group Plc Annual Report and Accounts 2023

161
161

Financial statements
Financial statements

Overview

Strategic report

Governance

Financial statements

Additional information

Notes to the consolidated financial statements continued

6. INCOME TAXES (CONTINUED)
6.3 Deferred tax

The components of deferred tax assets and liabilities at 31 December are as follows:

Deferred tax assets
Deferred tax liabilities

2023
$m
21.2
(88.2)
(67.0)

2022
$m
26.6
(83.2)
(56.6)

6.4 Movement in deferred tax assets and liabilities

Deferred tax is measured on the basis of the tax rates enacted or substantively enacted at the reporting date. The movements in
the deferred tax assets and liabilities were as follows:

At 1 January 2022
Recognised in income statement
Recognised in other
comprehensive income
Acquisitions
Other
Foreign exchange
At 31 December 2022
Recognised in income statement
Recognised in other
comprehensive income
Acquisitions
Other
Foreign exchange
At 31 December 2023

Inventory
$m
8.4
(1.4)

Tax losses
$m
89.5
(5.5)

PP&E
$m
(11.0)
5.9

Intangibles
$m
(182.4)
(1.7)

Interest
$m
16.5
8.5

–
(2.4)
–
(1.3)
3.3
6.4

–
–
–
(0.1)
9.6

–
6.3
–
(0.2)
90.1
(13.0)

–
–
–
0.4
77.5

–
–
–
1.6
(3.5)
(1.7)

–
–
–
(0.2)
(5.4)

–
(36.2)
–
2.7
(217.6)
11.0

–
(13.1)
–
(3.1)
(222.8)

2.4
–
–
1.0
28.4
7.6

–
–
–
0.5
36.5

Other
$m
20.7
20.0

–
–
1.1
0.9
42.7
(6.8)

0.7
–
–
1.0
37.6

Total
$m
(58.3)
25.8

2.4
(32.3)
1.1
4.7
(56.6)
3.5

0.7
(13.1)
–
(1.5)
(67.0)

Net deferred tax liabilities provided in relation to intangible assets are predominantly in respect of temporary differences arising
on assets and liabilities acquired as part of business combinations. An amount relating to deductible tax amortisation of intangible
assets of $145.9 million that are not expected to reverse due to anticipated restructuring of the Group’s activities (2022: $342.7 million,
deferred tax assets of $15.4 million) is not recognised.

Net deferred tax assets recognised in relation to tax losses are predominantly in respect of the US. Deferred tax assets on foreign
tax credits of $2.4 million remain unrecognised in the US based on forecasts of suitable future taxable profit and they are due to
expire within 5 years (2022: $3.9 million).

Deferred tax on inventory predominantly relates to a deferred tax asset recognised on intra-Group profits arising on intercompany
inventory that are eliminated in the Consolidated Financial Statements. As intra-Group profits are not eliminated from the individual
entities’ tax returns, a temporary difference arises and will reverse when the inventory is sold externally.

Other net temporary differences include accrued expenses, employee costs and pensions, for which a tax deduction is only available
on a paid basis, research and development expenses, unremitted earnings and share-based payments.

To the extent that dividends remitted from overseas subsidiaries and branches are expected to result in additional taxes,
appropriate amounts have been provided for. Deferred tax is not provided on temporary differences of $381.2 million in the year
to 31 December 2023 (2022: $351.8 million) arising on unremitted earnings as management has the ability to control any future
reversal and does not consider such a reversal in the foreseeable future to be probable.

6.5 Unrecognised tax losses carried forward

Deferred tax assets are only recognised where it is probable that future taxable profits will be available to utilise the tax losses.
The following table shows the unrecognised tax losses carried forward, including anticipated period of expiration:

Trading and capital losses expiring:
Within 5 years
Between 5 to 10 years
More than 10 years
Unlimited
Total

2023
Losses
$m
2.2
0.5
–
961.6
964.3

2022
Losses
$m
10.0
12.7
30.7
958.0
1,011.4

The Group has Luxembourg tax losses of $944.5 million (2022: $941.9 million) which are not recognised and will not expire.
The movement in Luxembourg tax losses not recognised is mainly attributable to foreign exchange differences. Other movements
in the year are mainly due to the recognition of previously unrecognised US State tax losses.

7. EARNINGS PER SHARE

Basic earnings per share is calculated based on the Group’s net profit for the year attributable to shareholders divided by the
weighted average number of ordinary shares in issue during the year. The weighted average number of shares is net of shares
purchased by the Group and held as own shares.

Diluted earnings per share take into account the dilutive effect of all outstanding share options priced below the market price in
arriving at the number of shares used in its calculation.

Net profit attributable to the shareholders of the Group ($m)
Basic weighted average ordinary shares in issue (number)
Dilutive impact of share awards (number)
Diluted weighted average ordinary shares in issue (number)
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)

2023
130.3
2,038,653,228
13,936,032
2,052,589,260
6.4¢ per share
6.3¢ per share

2022
62.9
2,023,839,657
16,407,811
2,040,247,468
3.1¢ per share
3.1¢ per share

The calculation of diluted earnings per share does not contain any share options that were non-dilutive for the year (2022: 404,241),
because the average market price of the Group’s ordinary shares exceeded the exercise price (2022: the exercise price exceeded the
average market price of the Group’s ordinary shares).

162
162

Convatec Group Plc Annual Report and Accounts 2023
Convatec Group Plc Annual Report and Accounts 2023

163
163

Financial statements
Financial statements

Overview

Strategic report

Governance

Financial statements

Additional information

Notes to the consolidated financial statements continued

OPERATING ASSETS AND LIABILITIES

This section set outs the assets and liabilities that the Group holds in order to operate the business on a day-to-day basis,
including long-term assets which generate future revenues and profits for the Group.

Liabilities relating to the Group’s financing activities are addressed in “Capital structure and financial costs”.

8. PROPERTY, PLANT AND EQUIPMENT

The Group invests in buildings, equipment and manufacturing machinery to operate the business and to generate revenue
and profits. Assets are depreciated over their estimated useful economic life reflecting the reduction in value of the asset due,
in particular, to wear and tear.

Accounting policy

Property, plant and equipment (PP&E) are stated at cost less accumulated depreciation and impairment losses. Cost includes
expenditures that are directly attributable to the acquisition of an asset including subsequent additions and improvements when
it is probable that future economic benefit associated with the item will flow to the Group and the cost can be reliably measured.

Depreciation is provided on a straight-line basis from the point an asset becomes available for use. Depreciation is calculated to
reduce the asset’s cost to its residual value over the asset’s estimated useful economic life. Assets are depreciated as follows:

Asset category
Land
Land improvements
Leasehold improvements
Buildings
Machinery, equipment and fixtures

Useful life
not depreciated
15 to 40 years
shorter of useful life or lease tenure
15 to 50 years
3 to 20 years

The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sale proceeds, less
any selling expenses, and the carrying amount of the asset. This difference is recognised in the Consolidated Income Statement.

Assets under construction reflects the cost of construction or improvement of items of PP&E that are not yet available for use.
Assets under construction are not depreciated whilst under construction and depreciation commences once the asset is
completed and ready for use. Finance costs incurred in the construction of assets that take more than one year to complete
are capitalised using the Group’s weighted average borrowing cost during the period in which the asset is under construction.
Capitalisation of finance costs ceases when the asset becomes available for use.

Consideration of useful economic lives

The assets’ residual values, depreciation methods and useful economic lives are reviewed annually and adjusted if appropriate.

Impairment of assets

The carrying values of PP&E are reviewed for indicators of impairment annually or when events or changes in circumstances
indicate the carrying value may be impaired. If any such indication exists, the recoverable amount of the asset is estimated,
being the higher of an asset’s fair value less costs to sell and the net present value of its expected pre-tax future cash flows
(value in use).

When an asset’s recoverable amount falls below its carrying value, an impairment is charged to the Consolidated Income Statement.

The movement in the carrying value of each major category of PP&E is as follows:

Land & land
improvements
$m

Building, building
equipment and
leasehold
improvements
$m

Machinery,
equipment and
fixtures
$m

Assets under
construction
$m

Cost
1 January 2022
Additions
Arising from acquisitions
Disposals1
Transfers
Foreign exchange
31 December 2022
Additions
Arising from acquisitions (Note 26)
Disposals1
Transfers
Foreign exchange
31 December 2023

Accumulated depreciation
1 January 2022
Depreciation
Arising from acquisitions
Disposals1
Impairment
Foreign exchange
31 December 2022
Depreciation
Arising from acquisitions (Note 26)
Disposals1
Impairment
Foreign exchange
31 December 2023

Net carrying amount
31 December 2022
31 December 2023

15.3
–
–
–
–
(1.1)
14.2
–
–
–
1.7
0.5
16.4

1.0
–
–
–
–
–
1.0
0.1
–
–
–
–
1.1

129.9
1.8
0.5
(4.0)
13.7
(6.7)
135.2
2.1
–
(3.3)
31.9
7.9
173.8

53.1
6.8
0.2
(4.0)
1.9
(2.7)
55.3
7.6
–
(3.1)
1.2
2.5
63.5

13.2
15.3

79.9
110.3

490.7
8.2
0.3
(17.5)
24.7
(25.2)
481.2
34.5
1.1
(24.4)
31.4
13.7
537.5

313.6
32.9
0.1
(17.5)
5.5
(17.0)
317.6
29.8
0.7
(24.0)
1.5
8.7
334.3

163.6
203.2

98.5
90.0
–
(1.8)
(38.4)
(4.6)
143.7
60.7
–
–
(65.0)
5.6
145.0

–
–
–
–
–
–
–
–
–
–
–
–
–

143.7
145.0

Total
$m

734.4
100.0
0.8
(23.3)
–
(37.6)
774.3
97.3
1.1
(27.7)
–
27.7
872.7

367.7
39.7
0.3
(21.5)
7.4
(19.7)
373.9
37.5
0.7
(27.1)
2.7
11.2
398.9

400.4
473.8

1. Assets with a net book value of $0.6 million were sold during the year, with sale proceeds of $0.6 million. In 2022, assets with a net book value of $1.8 million were written off.

164
164

Convatec Group Plc Annual Report and Accounts 2023
Convatec Group Plc Annual Report and Accounts 2023

165
165

Financial statements
Financial statements

Overview

Strategic report

Governance

Financial statements

Additional information

Notes to the consolidated financial statements continued

9. INTANGIBLE ASSETS AND GOODWILL
9.1 Intangible assets

The Group’s intangible assets are those that have been recognised at fair value as part of business combinations, investment in
product development and software purchased to support business operations. These are assets that are not physical in nature
but can be sold separately or arise from legal rights.

The movement in the carrying value of each major category of intangible assets is as follows:

Product-related
$m

Capitalised
software1
$m

Customer
relationships
and non-
compete
agreements
$m

Trade names
$m

Development
cost
$m

Assets under
construction
$m

Accounting policy

Recognition
Measurement on initial recognition of intangible assets is determined at cost for assets acquired by the Group and at fair value
at the date of acquisition if acquired in business combinations. Following initial recognition of the intangible asset, the asset is
carried at cost less any subsequent accumulated amortisation and accumulated impairment losses.

Purchased computer software and certain costs of information technology are capitalised as intangible assets. Software that is
integral to purchased computer hardware is capitalised as PP&E.

The Group accounts for its software-as-a-service (SaaS) arrangements by applying the guidance in the 2021 IFRIC agenda decision to
determine whether the configuration and customisation expenditure gives rise to an asset, including whether the Group has control
of the software that is being configured or customised or whether the configuration or customisation activities create a resource
controlled by the Group that is separate from the software and can be transferred to another provider.

Where the recognition criteria of IAS 38 Intangible Assets are satisfied, including configuration and customisation costs which
are distinct and within the control of the Group, these are capitalised and carried at cost less any accumulated amortisation
and impairment, and amortised on a straight-line basis over the period which the developed software is expected to be used.
Where these recognition criteria are not met, the Group recognises configuration and customisation costs, along with the
ongoing fees to obtain access to the SaaS provider’s application software, as operating expenses as the services are received.

R&D
R&D expenses are comprised of all activities involving investigative, technical and regulatory processes related to obtaining
appropriate approvals to market our products. It also includes new product development aimed at developing more sustainable
product portfolios for the longer term, as mentioned within the Responsible Business review section (refer to page 48). Costs include
payroll, clinical manufacturing and pre-launch clinical trial costs, manufacturing development and scale-up costs, product
development, regulatory costs including costs incurred to comply with legislative changes, contract services and other external
contractors costs, research licence fees, depreciation and amortisation of laboratory facilities, and laboratory supplies.

Research costs are expensed as incurred. Development costs are capitalised only if the expenditure can be measured reliably, the
product or process is technically and commercially feasible, future economic benefits are probable and the Group intends to and
has sufficient resources to complete development and use or sell the asset. Subsequent to initial recognition, development costs
are measured at cost less accumulated amortisation and any accumulated impairment losses. Upgrades and enhancements are
capitalised to the extent they will result in added functionality and probable future economic benefits.

Amortisation
Intangible assets with an indefinite life are not amortised. Amortisation of intangible assets with a finite life is calculated using
the straight-line method based on the following estimated useful lives:

Asset category
Product-related
Capitalised software
Customer relationships and non-compete agreements
Trade names – finite
Trade names – indefinite
Development costs

Useful life
3 to 20 years
3 to 10 years
2 to 20 years
2 to 10 years
Indefinite
5 years

Assets under construction reflects the cost of development or improvement of intangible assets that are not yet available for use.

Impairment of assets
Intangible assets with finite life are reviewed for indicators of impairment at each reporting period or when events or changes in
circumstances indicate the carrying value may be impaired. If any such indication exists, the recoverable amount of the asset is
estimated, being the higher of an asset’s fair value less costs to sell and the net present value of its expected pre-tax future cash
flows (value in use).

When an asset’s recoverable amount falls below its carrying value, an impairment is charged to the Consolidated Income Statement.

Refer to Note 9.3 – Cash Generating Unit (CGU) impairment review for consideration of impairment of indefinite-lived intangible assets.

Cost
1 January 2022
Additions
Arising from acquisitions
Write-offs
Transfers
Foreign exchange
31 December 2022
Additions
Arising from acquisitions2
Write-offs
Transfers
Foreign exchange
31 December 2023

Accumulated amortisation
1 January 2022
Amortisation
Write-offs
Impairment
Foreign exchange
31 December 2022
Amortisation
Write-offs
Impairment
Foreign exchange
31 December 2023

Net carrying amount
31 December 2022
31 December 2023

2,086.1
10.0
154.8
(50.7)
–
(79.7)
2,120.5
–
112.5
–
1.5
35.6
2,270.1

1,620.8
108.6
(50.7)
4.3
(61.0)
1,622.0
114.5
–
–
28.2
1,764.7

498.5
505.4

122.2
0.6
–
(1.8)
11.8
(2.4)
130.4
2.0
–
(1.1)
39.8
2.5
173.6

83.5
12.0
(1.8)
–
(0.9)
92.8
16.3
(1.1)
–
0.7
108.7

37.6
64.9

331.0
–
–
(0.3)
–
(6.3)
324.4
–
4.3
–
–
3.0
331.7

203.5
24.3
(0.3)
1.4
(5.4)
223.5
22.3
–
–
3.0
248.8

100.9
82.9

263.7
–
–
–
–
(0.9)
262.8
–
–
–
–
0.4
263.2

9.7
1.4
–
–
–
11.1
1.1
–
–
–
12.2

251.7
251.0

11.6
–
–
–
–
(0.6)
11.0
–
–
–
–
0.3
11.3

9.7
1.1
–
–
(0.5)
10.3
0.4
–
–
0.3
11.0

0.7
0.3

1. Capitalised software is in respect of purchased and internally generated software.
2. Acquisitions comprise assets in relation to the Starlight and A Better Choice Medical acquisitions. See Note 26 – Acquisitions.

Total
$m

2,829.4
44.6
154.8
(53.4)
–
(90.8)
2,884.6
37.6
116.8
(1.1)
–
42.8
3,080.7

1,927.2
147.4
(52.8)
5.7
(67.8)
1,959.7
154.6
(1.1)
–
32.2
2,145.4

14.8
34.0
–
(0.6)
(11.8)
(0.9)
35.5
35.6
–
–
(41.3)
1.0
30.8

–
–
–
–
–
–
–
–
–
–
–

35.5
30.8

924.9
935.3

166
166

Convatec Group Plc Annual Report and Accounts 2023
Convatec Group Plc Annual Report and Accounts 2023

167
167

Financial statements
Financial statements

Overview

Strategic report

Governance

Financial statements

Additional information

Notes to the consolidated financial statements continued

9. INTANGIBLE ASSETS AND GOODWILL (CONTINUED)
Amortisation expenses in respect of finite-lived intangible assets for the year ended 31 December were as follows:

Cost of sales
Selling and distribution expenses
General and administrative expenses
Research and development expenses
Total amortisation expense

2023
$m
112.4
3.6
31.0
7.6
154.6

2022
$m
113.1
3.2
29.1
2.0
147.4

The carrying amount of trade names with indefinite life at 31 December 2023 was $249.4 million (2022: $248.9 million). Each of these
trade names are considered to have an indefinite life, given the strength and durability of the current trade name and the level of
marketing support. The trade names are in relatively similar stable and profitable market sectors, with similar risk profiles, and
their size, diversification and market shares mean that the risk of market-related factors causing a reduction in the lives of the
trade names is considered to be relatively low. The Group is not aware of any material legal, regulatory, contractual, competitive,
economic or other factor which could limit their useful lives.

Individual intangible assets with a carrying amount in excess of 10% of the total intangible asset carrying amount were as follows:

Trade names

Convatec trade name

Product-related

InnovaMatrixTM
NextGen Antimicrobial platform
Aquacel® including Hydrofibre®1
Stoma care1

2023
$m

2022
$m

Remaining life

234.6

Indefinite

134.5
107.0
–
–

145.6
–
120.2
113.6

12.3 years
14.3 years
2.6 years
2.6 years

1. The carrying value of Aquacel® including Hydrofibre® and Stoma care was $91.3 million and $81.9 million respectively at 31 December 2023. These are no longer in excess

of 10% of the total intangible asset carrying amount.

9.2 Goodwill

The Group recognises goodwill resulting from business combinations where there are future economic benefits from assets
which cannot be individually separated and recognised. Goodwill represents the amount paid in excess of the fair value of the
net assets of the acquired business.

Accounting policy

Refer to Note 1 – Basis of preparation for the Group accounting policy in relation to the initial valuation and recognition of
goodwill arising from acquisitions.

Goodwill is not subject to amortisation but is tested for impairment annually or when events or changes in circumstances
indicate the carrying value may be impaired. Refer to Note 9.3 – Cash Generating Unit (CGU) impairment review for consideration
of impairment of goodwill.

Goodwill is denominated in the functional currency of the acquired entity and revalued to the closing exchange rate at each
reporting period date.

The changes in the carrying value of goodwill as at 31 December were as follows:

9.3 Cash generating unit (CGU) impairment review

An impairment assessment is required to be performed annually for goodwill and indefinite-lived intangibles or when events or
changes in circumstances indicate the carrying value may be impaired. An impairment is a reduction in the recoverable amount
of an asset compared to the carrying value of the asset. Recoverable amount is the higher of value in use and fair value less costs
to sell.

This note provides details of the annual impairment assessment that has been performed.

Accounting policy

For impairment testing, assets are grouped together into the smallest group of assets that generate cash inflows from
continuing use that are largely independent of the cash inflows of other assets or CGUs. Additionally, goodwill arising from
a business combination is allocated to a CGU or groups of CGUs that are expected to benefit from the synergies of the
combination. An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount.

The recoverable amounts of the CGUs are determined based on value in use calculations, which reflect the estimated future cash
flows of each CGU discounted by an estimated weighted average cost of capital that represents the rate of return an outside
investor would expect to earn. This discount rate is based on the weighted average cost of capital for comparable public
companies and is adjusted for risks specific to the CGU including differences in risk due to its size, geographic concentration
and trading history.

Future cash flows are determined using the latest available Board-approved forecasts and strategic plans. These forecasts and
strategic plans are based on specific assumptions for each CGU during the five-year planning period with respect to revenue,
results of operations, working capital, capital investments and other general assumptions for the projected period. The forecast
assumptions that derive the future cash flows are based on the historical results of each CGU combined with external market
information and defined strategic initiatives.

If identified, impairment losses are recognised in the Consolidated Income Statement. They are allocated first to reduce the
carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the remaining assets in the
CGU, on a pro-rated basis.

An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent
that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation
or amortisation, if no impairment loss had been recognised. The Group has not recognised any reversal of previous impairments
in either 2023 or 2022.

The Group continues to operate under the same operating model as prior year and determined that there has not been any
triggers for a change in CGU groups. Profitability continues to be assessed on a consolidated basis, and management’s focus
is predominantly category revenue and key market focus. The Group’s CGU groups continue to be (i) Advanced Wound Care,
(ii) Ostomy Care, (iii) Continence Care and (iv) Infusion Care. Goodwill is allocated to these CGUs, which represent the lowest
level within the Group at which the goodwill is monitored for internal management purposes.

Goodwill and intangible assets with an indefinite life (trade names) are allocated to the Group’s CGU groups as at 31 December
as follows:

CGU groups
Advanced Wound Care
Ostomy Care1
Continence Care1
Infusion Care
Total

Goodwill
2023
$m

523.7
154.3
535.0
85.8
1,298.8

2022
$m

490.0
116.5
535.6
82.5
1,224.6

Indefinite-lived intangible assets

2023
$m

104.8
91.2
41.2
12.2
249.4

2022
$m

104.8
91.2
41.2
11.7
248.9

1 January 2022
Arising from acquisitions
Foreign exchange
31 December 2022
Arising from acquisitions (Note 26)
Foreign exchange
31 December 2023

Total
$m
1,156.3
129.9
(61.6)
1,224.6
45.9
28.3
1,298.8

1. Following the exit of hospital care in 2022, effective from 1 January 2023, Flexi-SealTM, our faecal management system, moved from the Continence Care category to the

Ostomy Care category, resulting in an increase in goodwill allocated to Ostomy Care and corresponding reduction in Continence Care of $34.6 million.

Determining the estimated recoverable amount of a CGU group is judgemental in nature. The key input used in the estimation
of value in use as at 31 December 2023 is the Group’s five-year Board approved strategic plan, with key assumptions including
forecast sales growth rates, terminal value growth rate and discount rates. Forecast sales growth rates are based on past
experience adjusted for macroeconomic activity, sector market growth forecasts, competitor activity and strategic decisions
made in respect of each CGU group.

168
168

Convatec Group Plc Annual Report and Accounts 2023
Convatec Group Plc Annual Report and Accounts 2023

169
169

Financial statements
Financial statements

Overview

Strategic report

Governance

Financial statements

Additional information

Notes to the consolidated financial statements continued

9. INTANGIBLE ASSETS AND GOODWILL (CONTINUED)
The terminal value growth rate and discount rates used were as follows:

Discount rate (pre-tax)1
CGU groups
Advanced Wound Care
Ostomy Care
Continence Care
Infusion Care
Terminal value growth rate2

2023
%

14.5
13.5
12.0
13.5
2.0

2022
%

13.5
12.5
11.5
12.5
2.0

1. The discount rate is based on the weighted average cost of capital for comparable public companies and is adjusted for risks specific to the CGU group including differences

in risk due to its size, geographic concentration and trading history.

2. The estimated terminal value growth rate for the CGU groups is a prudent estimate based on expectations concerning the growth trends of the CGU groups and taking into

account global gross domestic product growth, general long-term inflation and population expectations.

No impairments have been recognised in respect of the Group’s current CGU groups for the years ended 31 December 2023 and 2022.

Taking into consideration the Board-approved 2024 budget and longer-term strategic plan as foundations, sensitivity analysis was
performed considering changes in key assumptions including discount rates and terminal value growth rate and consideration of
risk-based severe but plausible downside scenarios consistent with those identified as part of the viability assessment (refer to
page 87 for full details of scenarios). As part of the assessment, an external benchmarking assessment was also carried out on the
forecast sales growth rates.

Under all severe but plausible scenarios, headroom remained on all CGU groups, demonstrating that the impairment of goodwill
and indefinite-lived intangible assets is not a key source of estimation uncertainty and any possible impairment would not result
in a material adjustment in the next financial year.

10. INVESTMENT IN FINANCIAL ASSETS

Accounting policy

Investment in financial assets comprise of non-current equity investments which are initially recorded at fair value plus any
directly attributable transaction costs and subsequently recognised at fair value at each balance sheet date.

Unrealised gains and losses are recognised in other comprehensive income.

On disposal of the equity investment, any gains and losses that have been deferred in other comprehensive income are
transferred directly to retained earnings.

Dividends on equity investments are recognised in the income statement when the Group’s right to receive payment is
established, it is probable the economic benefits will flow to the entity and the amount can be measured reliably.

The investment is in relation to the Group’s investment in BlueWind Medical Limited in 2022 and the Group considers this
investment to be strategic in nature and it is not held for trading.

The Group made an irrevocable election on initial recognition to designate the investment at fair value through other comprehensive
income (FVOCI). It was initially recorded at fair value plus transaction costs and will be remeasured at subsequent reporting dates to fair
value. The fair value of the investment at 31 December 2023 was $22.9 million (31 December 2022: $30.7 million), with the movement
of $7.8 million taken to the Statement of Other Comprehensive Income, within the ‘Fair value movement on equity investments’ line.
No dividends were recognised during the period.

In line with IFRS 13 Fair Value Measurement, this investment has been classified as Level 3 in the fair value hierarchy as its
measurement is derived from significant unobservable inputs by reference to available information, including the current market
value of similar instruments, recent financing rounds and discounted cash flows of the underlying net assets.

The fair value of the investment has been determined by using an average of three valuation methodologies, those being the precedent
transaction method, the income approach method and the probability-weighted expected return model. The table below summarises
the various methodologies used by the Group to fair value the investment, the inputs and the sensitivities applied.

Methodology
Precedent transaction method/Price of
recent investment

Inputs
Market multiples (decrease of 25% to 35%)

Low range
-5% on the
market
multiples

Sensitivity applied to input
High range
+5% on the
market
multiples

The initial transaction involving BlueWind
Medical itself was the most relevant starting
point and then this was calibrated by
considering exogenous and idiosyncratic
factors to apply a discount or uplift as applicable.

Income approach method
(Discounted cash flow analysis)

Internal cash flow projections

Discount rate 25.4%

Provides an estimation of the value of an asset
based on expectations about the cash flows
that an asset would generate over time,
discounted at the appropriate rate of return.

The final year of projections has been
extrapolated using a reasonable long-term
growth rate (LTGR) of 2%.

Probability-weighted expected return model

Discounted at 27.8%

+2% on the
discount rate
-1% to the LTGR

-2% on the
discount rate
+1% to the LTGR

+2% to
discount rate

-2% to
discount rate

Assesses multiple scenarios for the future
proceeds to be received by the holders of the
shares and weighting them according to their
relative probability of occurring. The PWERM is
a market approach based on comparable
companies’ market multiples.

Fair value measurement

$19.9m

$25.9m

The impact of applying these sensitivities across the three methodologies would result in a fair value measurement range of
$19.9 million to $25.9 million, with a mid-point range of $22.9 million, which is in line with the fair value recognised at year end.

170
170

Convatec Group Plc Annual Report and Accounts 2023
Convatec Group Plc Annual Report and Accounts 2023

171
171

Financial statements
Financial statements

Overview

Strategic report

Governance

Financial statements

Additional information

Notes to the consolidated financial statements continued

11. INVENTORIES

Trade and other receivables at 31 December were as follows:

Inventories are the materials used in manufacturing, products manufactured or purchased to be sold by the Group in the
ordinary course of business. Inventories include finished goods, goods which are in the process of being manufactured (work in
progress) and raw and packaging materials awaiting use in production.

Accounting policy

Inventories are valued at the lower of cost or net realisable value with the cost determined using an average cost method.
The cost of finished goods and work in progress comprises raw materials, direct labour, other direct costs and indirect
production overheads. Production overheads comprises indirect material and labour costs, maintenance and depreciation
of the machinery and production buildings used in the manufacturing process, as well as costs of production administration
and management.

Net realisable value is defined as anticipated selling price or anticipated revenue less cost to completion. Estimates of net
realisable value are based on the average selling prices at the end of the reporting period, net of applicable direct selling
expenses. Subsequent events related to the fluctuation of prices and costs are also considered, if relevant. If net realisable
values are below inventory costs, a provision corresponding to this difference is recognised.

Provisions are also made for obsolescence of inventories that (i) do not meet the Group’s specifications, (ii) have exceeded their
expiration date, or (iii) are considered slow-moving. The Group evaluates the carrying value of inventories on a regular basis,
taking into account such factors as historical and anticipated future sales compared with quantities on hand, the price the Group
expects to obtain for products in their respective markets compared with historical cost and the remaining shelf life of goods
on hand.

The components of inventories at 31 December were as follows:

Raw and packaging materials
Work in progress
Finished goods
Inventories

2023
$m
102.3
42.5
251.3
396.1

2022
$m
79.6
41.6
215.7
336.9

Inventories are stated net of provision for obsolescence of $17.0 million (2022: $25.5 million). Adjustments to write down inventory
to its net realisable value are provided in Note 3.1 – Operating profit.

12. TRADE AND OTHER RECEIVABLES

Trade receivables consist of amounts billed and currently due from customers. Gross trade receivables are presented before
allowances for expected credit losses, sales discounts and chargeback allowances. Credit risk with respect to trade receivables
is generally diversified due to the large dispersion and type of customers across many different geographies.

Other receivables include amounts due from third parties not related to revenue and prepaid expenses.

Accounting policy

Credit is extended to customers based on the evaluation of the customer’s financial condition. Creditworthiness of customers
is evaluated on a regular basis. Exposure to credit risk is managed through credit approvals, credit limits and monitoring
procedures. The Group considers a default event to be one where the customer does not have sufficient funds to make their
required payments and/or is in the process of being liquidated.

An allowance is maintained for expected lifetime credit losses that result from the failure or inability of customers to make
required payments. It is not necessary for a credit event to have occurred before credit losses are recognised. Instead, the Group
accounts for expected lifetime credit losses and changes in those expected lifetime credit losses. In determining the allowance,
consideration includes the probability of recoverability based on past experience and general economic factors, incorporating
forward-looking information and adjustments for customers who represent a lower risk of default, which includes public or
private medical insurance customers and customers guaranteed by local government. The amount of expected credit losses,
if any, is required to be updated at each reporting date.

Certain trade and other receivables may be fully reserved when specific collection issues are known to exist, such as pending
bankruptcy. The Group writes off uncollectable receivables at the time it is determined the receivable is no longer collectable.

Trade and other receivables are not collateralised. Where the Group has entered into a receivables factoring arrangement,
these receivables are derecognised at the point of sale in accordance with IFRS 9 if we have substantially transferred all risks
and rewards of ownership and there is no option to return the receivables to the Group.

Refer to Note 2.1 – Revenue recognition for details on the accounting policy in respect of chargeback allowances.

Included within current assets:
Trade receivables
Less: allowances for expected credit losses
Less: sales discounts and chargebacks
Other receivables1
Prepayments
Trade and other receivables2

2023
$m

337.8
(27.1)
(40.9)
39.0
24.9
333.7

2022
$m

344.7
(22.0)
(37.6)
29.5
24.7
339.3

1. The most significant component of other receivables comprises receivables for taxes other than corporate income tax of $13.5 million (2022: $9.2 million).
2. The comparative has been re-presented to disclose the current tax receivable of $24.7 million separately on the face of the Consolidated Statement of Financial Position,

as outlined in Note 1 to the Consolidated Financial Statements.

The aged analysis of trade receivables at 31 December was as follows:

Current
Past due 1 to 30 days
Past due 31 to 90 days
Past due 91 to 180 days
Past due by more than 180 days

The unimpaired amounts at 31 December that are past due were aged as follows:

Past due 1 to 30 days
Past due 31 to 90 days
Past due 91 to 180 days
Past due by more than 180 days

2023
$m
244.2
27.7
19.2
15.1
31.6
337.8

2023
$m
27.2
18.5
12.7
8.1
66.5

2022
$m
255.0
33.6
22.5
7.9
25.7
344.7

2022
$m
32.1
20.6
4.7
10.3
67.7

The Group believes that the unimpaired amounts that are past due are still collectible in full, based on historic payment behaviour
and extensive analysis of customer credit risk.

Movements in the allowance for expected credit losses for the years ended 31 December were as follows:

At 1 January
Charges
Utilisation of provision
Foreign exchange
At 31 December

Other non-current receivables

2023
$m
(22.0)
(14.3)
9.4
(0.2)
(27.1)

2022
$m
(14.6)
(6.6)
1.1
(1.9)
(22.0)

Other non-current receivables of $11.7 million (2022: $8.6 million) are principally in respect of deposits held with lessors, prepaid
expenses and other receivables.

Receivables financing

During the year, the Group entered into a Limited Recourse Financing Arrangement with a financial institution for certain customers
who have longer than normal terms. It has been assessed that the Group has substantially transferred all the risks and rewards of
ownership to the financial institution and accordingly, these receivables have been derecognised at the point of sale in accordance
with IFRS 9.

As at 31 December 2023, the Group had sold $44.8 million of receivables to the financial institution, of which $27.4 million remained
unpaid by the customer.

172
172

Convatec Group Plc Annual Report and Accounts 2023
Convatec Group Plc Annual Report and Accounts 2023

173
173

Financial statements
Financial statements

Overview

Strategic report

Governance

Financial statements

Additional information

Notes to the consolidated financial statements continued

13. TRADE AND OTHER PAYABLES

Trade payables consist of amounts owed to third-party suppliers and represent a contractual obligation to deliver cash in
the future.

Other payables include taxes and social security, accruals and liabilities for other employee-related benefits.

Accounting policy

Trade payables are recognised at the value of the invoice received from the supplier and are not interest bearing. The carrying
amount of trade and other payables is considered to approximate fair value, due to their short-term maturities.

The components of trade and other payables at 31 December were as follows:

Included within current liabilities:
Trade payables
Taxes and social security
Other employee-related liabilities
Accruals and other payables1
Trade and other payables

2023
$m

136.9
32.2
108.2
111.4
388.7

2022
$m

112.2
26.0
92.3
116.1
346.6

1. Included within accruals and other payables are customer rebates of $19.8 million (2022: $16.9 million) and amounts held in escrow of $12.3 million (2022: $18.3 million).

Included within non-current liabilities:
Defined benefit obligations (Note 15)
Other employee-related liabilities
Accruals and other payables
Other non-current liabilities

14. PROVISIONS

2023
$m

12.1
5.1
15.3
32.5

2022
$m

11.0
7.7
14.0
32.7

A provision is an obligation recognised when there is uncertainty over the timing or amount that will be paid. Provisions
recognised by the Group are primarily in respect of restructuring, decommissioning, dilapidations, legal liabilities and contingent
consideration. The contingent consideration provisions recognised by the Group is in respect of acquisitions and includes
amounts contingent on future events such as development milestones and sales performance.

Accounting policy

In line with IAS 37 – Provisions, Contingent Liabilities and Contingent Assets, a provision is recognised when there is a present
legal or constructive obligation as a result of a past event, it is probable that the Group will be required to settle the obligation
and that obligation can be measured reliably. Restructuring provisions are only recognised when a constructive obligation exists,
which requires both a detailed formal plan and a valid expectation being raised in those affected by starting to implement that
plan or announcing the main features. Provisions are measured at the best estimate of the expenditure required to settle the
obligation and are discounted to present value if the effect is material. Provisions are reviewed on a regular basis and adjusted to
reflect management’s best current estimates. Due to the judgemental nature of these items, future settlements may differ from
amounts recognised.

Contingent consideration arising from a business combination is recognised at fair value on acquisition. Contingent
consideration classified as a liability is a financial instrument and within the scope of IFRS 9 – Financial Instruments and is
subsequently measured at fair value, with the changes in fair value recognised in the Consolidated Income Statement, in
accordance with IFRS 9. This is classified within Level 3 of the fair value hierarchy (Note 23 – Financial Instruments).

When the timing of a settlement is uncertain or expected to be more than 12 months from the reporting date, amounts are
classified as non-current.

The movements in provisions are as follows:

1 January 2023
Contingent consideration from acquisitions
Charged to income statement
Fair value movement of contingent consideration
Released to income statement
Utilised
Foreign exchange
31 December 2023

Current
Non-current

Dilapidations
$m
2.8
–
1.0
–
–
(1.3)
(0.1)
2.4

Restructuring
$m
10.3
–
13.9
–
(2.2)
(8.3)
0.3
14.0

Legal
$m
0.2
–
0.4
–
–
–
–
0.6

Contingent
consideration
$m
140.0
66.7
–
24.6
–
(94.7)
1.4
138.0

The expected payment profile of the discounted provisions at 31 December was as follows:

Within 1 year
2 to 5 years
More than 5 years
Total

Dilapidation provisions

2023
$m
83.7
58.8
12.5
155.0

Total
$m
153.3
66.7
15.3
24.6
(2.2)
(104.3)
1.6
155.0

83.7
71.3

2022
$m
100.2
53.1
–
153.3

Dilapidation provisions are in respect of contractual obligations, on the expiry of a lease, to return leased properties in the condition
which is specified in the individual leases.

Restructuring provisions

Restructuring provisions are in respect of the Group’s strategic transformation activities. All restructuring provisions are supported
by detailed plans and a valid expectation has been raised in those affected as required by the Group’s accounting policy.

Legal provision

The legal provision of $0.6 million is in respect of ongoing cases. Legal issues are often subject to uncertainties over the timing
and the final amounts of any settlement.

Contingent consideration

As at 31 December 2023, the discounted fair value of the contingent consideration payable in respect of the Group’s acquisitions
was $138.0 million. During the year, contingent consideration of $66.7 million was recognised in respect of the Starlight acquisition
and payments of $94.7 million were made in respect of the Triad Life Sciences acquisition ($73.0 million recognised within cash flows
from investing activities and $21.7 million recognised within cash flows from operating activities in the Consolidated Statement of
Cash Flows). The net charge to the income statement in respect of changes in the fair value of the contingent consideration (based
on the best estimates of the amounts payable as at 31 December 2023) was $24.6 million. In addition, there was a foreign exchange
movement of $1.4 million from the re-translation of non-USD denominated balances.

Refer to Note 26 – Acquisitions for further details.

174
174

Convatec Group Plc Annual Report and Accounts 2023
Convatec Group Plc Annual Report and Accounts 2023

175
175

Financial statements
Financial statements

Overview

Strategic report

Governance

Financial statements

Additional information

Notes to the consolidated financial statements continued

15. POST-EMPLOYMENT BENEFITS

Risks

The Group has over 10,000 employees globally and operates a number of defined benefit and defined contribution pension plans
for its employees. Each individual plan is subject to the applicable laws and regulations of the country in which the plan operates.

Defined contribution arrangements are where the Group pays fixed payments as they fall due into a separate fund on behalf of
employees participating in the plan and has no further legal or constructive obligations. The cost of Group contributions to
defined contribution arrangements during the year is provided in Note 3 – Operating costs.

A defined benefit plan is a pension or other post-employment benefit plan under which the Group has an obligation to provide
agreed benefits to current and former employees. The Group bears the risk that its obligation may increase or that the value
of the assets in the pension fund may decline. The benefit payable in the future by the Group is discounted to the present value
and the fair value of plan assets is deducted to measure the defined benefit pension position.

The Group has defined benefit plans in a number of European countries. The most significant plans are: Switzerland, a state
mandated plan that remains open to all Swiss employees; and Germany, with one unfunded plan, that remains open to German
employees but closed to new entrants, and a funded plan put in place from April 2019. The value of the funded plan in Germany
is negligible to the Group. The Group’s other defined benefit plans are located in Austria, France and Italy (referred to as “Other”
in the tables below).

For plans in Switzerland, Germany and Austria, asset funds for each country are being accumulated to meet the accruing
liabilities. The assets of each of these funds are either held under trusts or managed by insurance companies and are entirely
separate from the Group’s assets.

Accounting policy

Defined contribution pension plans
Payments to defined contribution pension plans are recognised as an expense when employees have rendered service entitling
them to the contributions. Payments made to state-managed retirement benefit plans are treated as payments to defined
contribution pension plans where the Group’s obligations under the plans are equivalent to those arising in a defined
contribution pension plan.

Defined benefit pension plans
The Group records an asset or liability related to its defined benefit pension plans as the difference between the fair value of the
plan assets and the present value of the plan liabilities. The obligations of the plans are calculated using the Projected Unit Credit
Method, with actuarial valuations being performed by an independent actuary at the end of each reporting period. The valuation
requires estimates and judgements to be made to calculate the Group’s liabilities, and results in actuarial gains and losses
being recorded.

Actuarial gains and losses, movements in the return on plan assets (excluding interest) and the impact of the asset ceiling
(if applicable) are recognised immediately in the Consolidated Statement of Financial Position with a charge or credit to the
Consolidated Statement of Comprehensive Income. Remeasurements recorded in the Consolidated Statement of Comprehensive
Income are not subsequently reclassified to the Consolidated Income Statement.

Past service cost is recognised in the Consolidated Income Statement in the period of plan amendment, where relevant.
Net interest is calculated by applying a discount rate to the net defined benefit liability or asset.

The assets of the plans are held at fair value, which is equal to market value, and are held in separate trustee-administered funds
or similar structures in the countries concerned. Surplus assets within the plan are only recognised to the extent that they are
recoverable in accordance with IFRIC Interpretation 14, IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding
Requirements and their Interaction (IFRIC 14).

The defined benefit plans typically expose the Group to risks. The most significant risks impacting the Group as a result of these
plans are as follows:

Investment risk

The present value of the defined benefit plan liability is calculated using a discount rate determined by
reference to high-quality corporate bond yields; if the return on plan assets is below this rate, it will create
a plan deficit. Currently the Group’s plans invest primarily in debt instruments.

Interest risk

A decrease in the interest rate will increase the plan liability, but this will be partially offset by an increase
in the return on the plan’s fixed rate debt instruments.

Longevity risk

The present value of the defined benefit plan liability is calculated by reference to the best estimate of the
mortality of plan participants both during and after their employment. An increase in the life expectancy
of the plan participants will increase the plan’s liability.

Salary risk

The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan
participants. As such, an increase in the salary of the plan participants will increase the plan’s liability.

Amounts recorded in the Consolidated Financial Statements

Consolidated Income Statement
The aggregate expense for all post-employment defined benefit plans recognised in the Consolidated Income Statement for the
year ended 31 December was as follows:

Defined benefit plans:
Current service cost
Past service (income)
Interest income on plan assets
Interest expense on defined benefit obligations
Total expense (Note 3)

2023
$m

1.1
(0.1)
(0.2)
0.6
1.4

Consolidated Statement of Comprehensive Income
Aggregate actuarial gains and losses for all defined benefit plans recognised in the Consolidated Statement of Comprehensive
Income for the year ended 31 December were as follows:

Remeasurement effect recognised in other comprehensive income:
Actuarial gain on liabilities due to experience
Actuarial gain arising from changes in financial assumptions
Actuarial loss on plan assets
Remeasurement gain recognised in other comprehensive income
Deferred tax on remeasurement loss recognised in other comprehensive income
Total amount recognised in other comprehensive income

2023
$m

0.1
0.1
(0.2)
–
(0.2)
(0.2)

2022
$m

1.7
(0.2)
(0.2)
0.4
1.7

2022
$m

1.3
8.9
(1.7)
8.5
(0.1)
8.4

Consolidated Statement of Financial Position
The amount recognised for each defined benefit arrangement in the Consolidated Statement of Financial Position at 31 December
was as follows:

Germany
2023
$m
–

2022
$m

–

Fair value of schemes’ assets
Present value of funded
schemes’ liabilities
Deficit in the funded schemes
Present value of unfunded
schemes’ liabilities
Net pension liability
Recognised within Consolidated Statement of Financial Position:
Defined benefit obligations (Note 13)

(7.4)
(7.4)

(8.4)
(8.4)

–
–

Switzerland
2023
$m
11.8

(13.8)
(2.0)

–
(2.0)

2022
$m
10.4

(12.3)
(1.9)

–
(1.9)

Other

2023
$m
0.8

(0.7)
0.1

(1.8)
(1.7)

2022
$m
0.7

(0.7)
–

(1.7)
(1.7)

Total

2023
$m
12.6

(14.5)
(1.9)

(10.2)
(12.1)

2022
$m
11.1

(13.0)
(1.9)

(9.1)
(11.0)

(12.1)

(11.0)

176
176

Convatec Group Plc Annual Report and Accounts 2023
Convatec Group Plc Annual Report and Accounts 2023

177
177

The weighted average duration of the Group’s defined benefit obligations at the end of the year is 16.5 years (2022: 17.0 years).

Financial statements
Financial statements

Overview

Strategic report

Governance

Financial statements

Additional information

Notes to the consolidated financial statements continued

15. POST-EMPLOYMENT BENEFITS (CONTINUED)
Fair value of assets and present value of the liabilities of the plan

The amount included in the Consolidated Statement of Financial Position arising from its obligations in respect of its defined benefit
plans was as follows:

At 1 January 2022
Current service cost
Past service income
Interest income/(expense)
Remeasurement (loss)/gain
Contributions by employer
Contributions by members
Benefits paid
Experience gain
Foreign exchange
At 31 December 2022
Current service cost
Past service income
Interest income/(expense)
Remeasurement gain/(loss)
Contributions by employer
Contributions by members
Benefits paid
Experience gain
Foreign exchange
At 31 December 2023

Plan assets

Assets
$m
14.1
–
–
0.2
(1.7)
0.6
0.5
(2.4)
–
(0.2)
11.1
–
–
0.2
(0.2)
0.7
0.6
(0.9)
–
1.1
12.6

Liabilities
$m
(33.8)
(1.7)
0.2
(0.4)
6.5
–
(0.5)
2.7
3.9
1.0
(22.1)
(1.2)
0.1
(0.6)
0.1
–
(0.6)
1.0
0.1
(1.5)
(24.7)

Total
$m
(19.7)
(1.7)
0.2
(0.2)
4.8
0.6
–
0.3
3.9
0.8
(11.0)
(1.2)
0.1
(0.4)
(0.1)
0.7
–
0.1
0.1
(0.4)
(12.1)

The fair value of defined benefit plan assets at 31 December, which has been determined in accordance with IFRS 13, Fair Value
Measurements, is analysed below. All assets have a quoted market price and are categorised as a Level 1 measurement in the fair
value hierarchy.

Equity instruments
Debt instruments
Property
Qualifying insurance policies
Other
Plan assets

Actuarial assumptions

Germany
2023
$m
–
–
–
–
–
–

2022
$m

–
–
–
–
–
–

Switzerland
2023
$m
3.9
4.6
1.8
–
1.5
11.8

2022
$m
3.4
4.1
1.6
–
1.3
10.4

Other

Total

2023
$m
–
–
–
0.8
–
0.8

2022
$m

–
–
–
0.7
–
0.7

2023
$m
3.9
4.6
1.8
0.8
1.5
12.6

2022
$m
3.4
4.1
1.6
0.7
1.3
11.1

The Group makes certain key assumptions in order to value the plan obligations, and the approach to how these are set was
as follows:

Discount rate

Approach taken
Calculated by reference to the yields on high-quality corporate bonds which match expected
cash flows in each territory in which a defined benefit plan is present.

Inflation

Calculated using the difference on yields between fixed and index-linked government bonds.

Future salary increases

Based on historical expectations and known future increases, including expected inflation rates.

Mortality

Based on mortality tables derived from assessments performed by national governments
and based upon recommendations by plan actuaries.

The principal actuarial assumptions for each defined benefit arrangement used at 31 December were as follows:

Discount rate
Rate of price inflation
Future salary increases

Germany
2023
3.57%
N/A
3.00%

2022
3.56%
N/A
3.00%

Switzerland
2023
2.00%
1.00%
1.75%

2022
1.90%
1.00%
1.75%

Other

2023
3.15% to 4.61%
2.00% to 2.20%
0.00% to 3.00%

2022
3.47% to 4.05%
2.20% to 3.00%
0.00% to 3.00%

Discount rates have remained consistent year-on-year.

The current mortality assumptions underlying the values of the obligations in the defined benefit plans were as follows:

Life expectancy at age 65
Male
Female

Life expectancy at age 65 in 20 years’ time
Male
Female

Sensitivity analysis

Germany
2023

2022

Switzerland
2023

2022

Other

2023

2022

18.8 years
22.2 years

18.6 years
22.0 years

23.0 years
23.7 years

22.8 years
24.6 years

24.0 years
28.0 years

23.9 years
27.9 years

21.5 years
24.4 years

21.4 years
24.3 years

25.2 years
25.7 years

25.1 years
26.6 years

24.9 years
28.9 years

The effect of movements in the key actuarial assumptions in respect of the Germany and Switzerland plans at 31 December 2023
would be an (increase)/decrease to the defined benefit asset/liabilities as follows:

Discount rate
Inflation
Future salary increases

Life expectancy

Future funding

Germany

Switzerland

Increase 0.5%
0.7
N/A
N/A
1 year increase
(0.2)

Decrease 0.5%

(0.8)
N/A
N/A
1 year decrease
0.2

Increase 0.5%
1.0
(0.4)
(0.3)
1 year increase
(0.2)

Decrease 0.5%
(1.1)
0.4
0.2
1 year decrease
0.2

Payments expected to be made by the Group to its defined benefit pension plans in the year ended 31 December 2024 are
as follows:

Expected payments

Germany
$m
0.1

Switzerland
$m
0.5

Other
$m
–

Total
$m
0.6

178
178

Convatec Group Plc Annual Report and Accounts 2023
Convatec Group Plc Annual Report and Accounts 2023

179
179

Financial statements
Financial statements

Overview

Strategic report

Governance

Financial statements

Additional information

Notes to the consolidated financial statements continued

CAPITAL STRUCTURE AND FINANCIAL COSTS

Share capital

The Group ensures that all entities within the Group have sufficient funding to deliver the Group’s strategy while maximising
the return to shareholders through the debt and equity balance. The capital structure of the Group consists of net debt
(which includes borrowings less cash and cash equivalents and excluding lease liabilities) and equity of the Group, comprising
issued capital, reserves and earnings as disclosed in the Consolidated Statement of Changes in Equity.

16. CAPITAL STRUCTURE AND NET DEBT
The capital structure of the Group at 31 December was as follows:

Borrowings (Note 21)
Less: Cash and cash equivalents (Note 22)
Net debt (excluding lease liabilities)
Equity
Total capital

2023
$m
1,226.9
(97.6)
1,129.3
1,692.7
2,822.0

2022
$m
1,211.9
(143.8)
1,068.1
1,609.7
2,677.8

The Group’s capital structure is managed to provide ongoing returns to shareholders and service debt obligations whilst
maintaining maximum operational flexibility.

17. SHARE CAPITAL AND RESERVES

Share capital

Called up share capital is the total number of shares in issue at their par value. The rights attaching to the ordinary shares are
uniform in all respects. They form a single class for all purposes, including with respect to voting and for all dividends and other
distributions thereafter declared, made or paid on the ordinary share capital of the Group. Incremental costs directly attributable
to the issue of new ordinary shares are shown in equity as a deduction from the proceeds, net of tax.

Repurchased shares are classified as own shares and are disclosed in the own shares reserve.

Share premium

The share premium represents amounts received in excess of the nominal value of the ordinary shares.

Own shares

Own shares are ordinary shares in the Group purchased and held by an Employee Benefit Trust to satisfy obligations under the
Group’s employee share ownership programmes.

When any Group company purchases the Company’s equity share capital (own shares), the consideration paid, including any
directly attributable incremental costs (net of tax), is deducted from equity until the shares are cancelled, reissued or disposed
of. Where such shares are subsequently sold or reissued, any consideration received, net of any directly attributable costs
and the related tax effects, is recognised in equity and the resulting surplus or deficit on the transaction is presented within share
premium.

Merger reserve

In 2016, the Consolidated Financial Statements were prepared under merger accounting principles. Under these principles,
no acquirer was required to be identified and all entities were included at their pre-combination carrying amounts.
This accounting treatment led to differences on consolidation between issued share capital and the book value of the
underlying net assets. This difference is included within equity as a merger reserve.

Cumulative translation reserve

The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial
statements of foreign subsidiaries.

Other reserves

Other reserves comprises of the cumulative changes in the effective portion of cash flow hedges, remeasurement of defined
benefit plans and the share-based payment reserve.

Shares were allotted during the year in respect of the Group’s scrip dividend offering. The movements in ordinary shares of
10 pence each were as follows:

Issued and fully paid or credited as fully paid
1 January 2022
Issue of new shares for Employee Benefit Trust
Issue of new shares for Scrip Scheme – 2021 final dividend
Issue of new shares for Scrip Scheme – 2022 interim dividend

31 December 2022
Issue of new shares for Scrip Scheme – 2022 final dividend
Issue of new shares for Scrip Scheme – 2023 interim dividend

31 December 2023

Ordinary shares
number
2,014,572,935
20,000,000
7,192,010
2,107,103
29,299,113
2,043,872,048
1,717,549
4,199,962
5,917,511
2,049,789,559

Share capital Share premium
$m
142.3
–
18.0
5.4
23.4
165.7
4.5
10.8
15.3
181.0

$m
247.0
2.6
0.9
0.2
3.7
250.7
0.2
0.6
0.8
251.5

At 31 December 2023, 3,986,597 shares (2022: 10,975,451 shares) were held in the Employee Benefit Trust. The market value of own
shares at 31 December 2023 was $12.3 million (2022: $30.8 million).

Other reserves include the share-based payment reserve of $171.1 million (2022: $155.0 million) and remeasurement of defined
benefit obligations of $4.6 million (2022: $4.8 million), the effective portion of cash flow hedges of $4.4 million (2022: $4.9 million),
and remeasurement of equity investments of $7.8 million (2022: nil). A reconciliation of movements in all reserves is provided in
the Consolidated Statement of Changes in Equity.

Distributable reserves

Retained and realised distributable reserves equate to the retained surplus of Convatec Group Plc as set out in the Company
Financial Statements on page 197. At 31 December 2023, the retained surplus of the Company was $1,539.4 million (2022:
$1,562.9 million). The capacity of the Company to make dividend payments is primarily determined by the availability of these
retained and realised distributable reserves and the Group’s cash resources including available borrowing facilities.

18. DIVIDENDS

The Group ensures that adequate realised distributable reserves are available in the Company in order to meet proposed
shareholder dividends, and the purchase of shares for employee share scheme incentives. The Company principally derives
distributable reserves from dividends received from subsidiary companies.

In determining the level of dividend for the year, the Board considers the following factors and risks that may influence the
proposed dividend:

– Availability of realised distributable reserves;
– Available cash resources and commitments;
– Strategic opportunities and investments, in line with the Group’s strategic plan; and
– Principal risks of the Group (as disclosed on pages 80 to 84).

The Board paid the 2022 final dividend in May 2023 and the 2023 interim dividend in September 2023. The Board has taken into
consideration balancing the return to shareholders and the additional investment in transformation in the period. The decision
to increase the dividend for 2023 reflects the Board’s confidence in the future performance of the Group and the underlying
financial strength, distributable reserves position and cash generation of the Group when assessing cash flow forecasts for the
next two years from the date of the dividend payment. Further details of the Group’s considerations and rationale for its policy
in respect of the dividend distribution are given in the Directors’ report on page 143.

Accounting policy

Dividends paid are included in the Group Consolidated Financial Statements at the earlier of payment of the dividends or,
in respect of the Company’s final dividend for the year, on approval by shareholders.

180
180

Convatec Group Plc Annual Report and Accounts 2023
Convatec Group Plc Annual Report and Accounts 2023

181
181

Financial statements
Financial statements

Overview

Strategic report

Governance

Financial statements

Additional information

Notes to the consolidated financial statements continued

18. DIVIDENDS (CONTINUED)
Dividends paid and proposed were as follows:

Final dividend 2021
Interim dividend 2022
Paid in 2022
Final dividend 2022
Interim dividend 2023
Paid in 2023
Final dividend 2023 proposed

Pence
per share
3.161
1.410
4.571
3.657
1.380
5.037
3.517

Cents
per share
4.154
1.717
5.871
4.330
1.769
6.099
4.460

Total
$m
77.8
34.8
112.6
92.4
34.4
126.8
91.4

Settled in
cash
$m
58.9
29.2
88.1
87.7
23.0
110.7

Settled via
scrip
$m
18.9
5.6
24.5
4.7
11.4
16.1

No of scrip
shares issued
7,192,010
2,107,103
9,299,113
1,717,549
4,199,962
5,917,511

The Company previously operated a scrip dividend scheme, allowing shareholders to elect to receive their dividend in the form of
new fully paid ordinary shares. During 2023, the Board took the decision to terminate the scrip dividend option.

The final dividend proposed for 2023, to be distributed on 23 May 2024 to shareholders on the register at the close of business on 26
April 2024, is based upon the issued and fully paid share capital as at 31 December 2023 and is subject to shareholder approval
at the Annual General Meeting on 16 May 2024. The dividend will be declared in US dollars and will be paid in Sterling at the chosen
exchange rate of $1.268/£1.00 determined on 5 March 2024.

The interim and final dividends for 2023 give a total dividend for the year of 6.229 cents per share (2022: 6.047 cents per share).

19. SHARE-BASED PAYMENTS

The Group operates a number of plans used to award shares to Executive Directors and other senior employees as part of their
remuneration package. A charge is recognised over the vesting period in the Consolidated Income Statement to record the cost
of these, based on the fair value of the award at the grant date.

The Group’s share-based payment schemes in place are as follows:

Long Term Incentive Plan (LTIP)

Provides Performance Share Plan (PSP) awards subject to Group performance and market conditions and Restricted Stock Units
(RSU) subject only to remaining employed up to the vesting date. Details on share-based payments in relation to Executive
Directors is set out on page 127.

Deferred Bonus Plan (DBP)

Provides for the grant of share awards to defer a portion of the participant’s bonus as determined by the Remuneration
Committee. The awards vest subject only to remaining employed up to the vesting date.

Share Plan/Matching Share Plan (SP/MSP)

Provides for the grant of discretionary share awards. Awards granted in 2023 will vest to employees still employed on the
vesting date.

Employee Plans

The Group also operates Employee Plans which provide eligible employees the opportunity to save up to £500 per month
(or local currency equivalent) with an option to acquire shares using these savings at a 15% discount to the market price at date
of grant. The Employee Plans are available to employees under the following schemes:

– Save-As-You-Earn (SAYE) – Available to all employees in the UK employed by participating Group companies.
– Employee Stock Purchase Plan (ESPP) – Available to all employees in the US.
– International Share Save Plan – Available to all employees in the rest of the world.

Accounting policy

Equity-settled share-based payment awards are measured at the fair value of the award on the grant date, excluding the
effect of non-market-based vesting conditions. The fair value of the awards at the date of the grant is expensed to general
and administrative expenses in the Consolidated Income Statement over the vesting period on a straight-line basis.

Appropriate adjustments are made to reflect expected and actual forfeitures during the vesting period due to uncertainties
in satisfying service conditions or non-market performance conditions. The corresponding credit is to other reserves in the
Consolidated Statement of Financial Position.

Share-based payment expenses recognised in the Consolidated Income Statement as follows:

LTIP
SP/MSP
DBP
Employee Plans

2023
$m
7.3
5.5
1.0
0.8
14.6

2022
$m
10.8
3.0
1.6
1.3
16.7

During the year to 31 December 2023, $14.5 million (2022: $16.6 million) of share-based payment was equity-settled and $0.1 million
(2022: $0.1 million) was cash-settled. All amounts that were equity-settled were recognised in Other reserves, with the amounts that
were cash-settled recognised through Other liabilities.

Awards outstanding

The movements in the number of share and share option awards and the weighted average exercise price of share options are
detailed below:

Outstanding at 1 January
Granted
Forfeited
Exercised
Outstanding at 31 December
Exercisable at 31 December
Weighted average fair value of awards granted (£ per share)

2023

2022

Number of
shares/
options
000’s
30,800
10,987
(4,081)
(6,267)
31,439
840
–

Weighted
average
exercise price
of options
£ per share
0.33
0.22
0.47
0.25
0.29
1.51
1.53

Number of
shares/
options
000’s
33,707
14,225
(7,728)
(9,404)
30,800
993
–

Weighted
average
exercise price
of options
£ per share
0.43
0.32
0.48
0.54
0.33
1.33
1.18

The average share price during 2023 was £2.21 (2022: £2.11). The share price of the Company at 31 December 2023 was £2.44.

The range of exercise prices and the weighted average remaining contractual life of options outstanding at 31 December were as follows:

Range of prices
Nil
1.21
1.74
1.76
1.84
2.08

Weighted average remaining contractual life of options outstanding

2023
Number of
shares/options
000’s
26,414
73
2,002
1,821
18
1,111
31,439
1.9 years

2022
Number of
shares/options
000’s
24,990
788
2,511
1,108
18
1,385
30,800
2.2 years

182
182

Convatec Group Plc Annual Report and Accounts 2023
Convatec Group Plc Annual Report and Accounts 2023

183
183

Financial statements
Financial statements

Overview

Strategic report

Governance

Financial statements

Additional information

Notes to the consolidated financial statements continued

19. SHARE-BASED PAYMENTS (CONTINUED)
Valuation assumptions

All share awards granted are valued directly by reference to the share price at date of grant except:

– PSP shares awarded under the LTIP and MSP plans are subject to both market based measures and non-market based measures.
Values under the market-based element are based on relative Total Shareholder Return (TSR) performance conditions and are
valued using a Monte Carlo simulation.

– Options granted under the Employee Plans are valued using the Black-Scholes model.

The principal assumptions used in these valuations were:

Share price at date of grant
Exercise price
Expected life
Expected volatility1
Risk free rate
Dividend yield
Fair value

2023

SAYE &
International
Share Save Plan
£2.07
£1.76
3.6 years
25.1%
3.3%
2.3%
£0.38

LTIP
£2.21
nil
3 years
25.1%
3.3%
2.3%
£1.09 & £1.41

ESPP
£2.07
£1.76
2.0 years
25.1%
3.3%
2.3%
£0.34

2022

SAYE &
International
Share Save Plan
£2.13
£1.74
3.6 years
28.7%
1.3%
2.5%
£0.36

LTIP
£1.79
nil
3.0 years
28.7%
1.3%
2.5%
£1.03

ESPP
£1.99
£1.74
2.0 years
28.7%
1.3%
2.5%
£0.33

1. The expected volatility was determined by calculating the observed historical volatility of share prices of peer group companies (including the Company) over the expected

life of the share award.

20. FINANCIAL RISK MANAGEMENT

The Group’s treasury policy seeks to minimise the Group’s principal financial risks. No trading or speculative transactions in
financial instruments are undertaken. This note presents information about the Group’s exposure to financial risks and the
Group’s objectives, policies and processes for measuring and managing risks.

Financial risk management objectives

Based on the global operations of the Group, management consider the key financial risks to be liquidity, foreign exchange, interest
rate and counterparty credit. The management of counterparty credit risk is discussed in Note 12 – Trade and other receivables.

Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due. The Group
manages and minimises liquidity risk by using global cash management solutions and actively monitoring both actual and projected
cash outflows to ensure that it will have sufficient liquidity to meet its liabilities when due and have headroom to provide against
unforeseen obligations. As at 31 December 2023, the Group held cash and cash equivalents of $97.6 million (2022: $143.8 million),
of which 57.5% (2022: 74.5%) was held centrally.

Medium and long-term borrowing requirements are met through committed bank facilities and capital market funding as detailed in
Note 21 – Borrowings. Short-term borrowing requirements, if necessary, may be met from drawings under the multicurrency facility.

Longer term, the Group has assessed its liquidity forecast as part of the viability assessment and its ability to continue trading as
a going concern. For further detail on the Group’s assessment of liquidity risk, refer to the Viability statement on pages 86 to 87.

Foreign exchange risk

As a result of the global nature of operations, the Group is exposed to market risk arising from changes in foreign currency
exchange rates.

Where possible, the Group manages foreign exchange risk by matching same currency revenues and expenses. It will also
denominate debt in certain currencies and use foreign exchange forward contracts and swap contracts to further minimise
transactional foreign exchange risk, with certain currency contracts designated as cash flow hedges; refer to Note 23 – Financial
instruments for details. As a result, the impacts of the fluctuations in the market values of assets and liabilities and the settlement
of foreign currency transactions are reduced.

The following table summarises the exchange rates used for the translation of currencies into US dollars that have the most
significant impact on the Group results:

Currency
USD/EUR

USD/GBP

USD/DKK

Average rate/
Closing rate
Average
Closing
Average
Closing
Average
Closing

2023
1.08
1.10
1.24
1.27
0.15
0.15

2022
1.05
1.07
1.24
1.20
0.14
0.14

During 2023, revenue was mostly USD denominated (55%). Other significant currencies were EUR (19%) and GBP (5%). The balance
comprises a basket of other currencies which, on an individual basis, were each less than 2% of revenue.

Sensitivity analysis on foreign exchange risk
The sensitivity analysis below assumes a 10% strengthening of the US dollar against the principal currencies to highlight the
sensitivity of profit before income taxes and total equity to translation foreign exchange risk as at 31 December, with all other
variables held constant.

Currency
Increase/(decrease) in profit before income taxes
USD/GBP
USD/EUR
USD/DKK
Decrease/(increase) in total equity
USD/GBP
USD/EUR
USD/DKK

Interest rate risk

Sensitivity

+10%
+10%
+10%

2023
$m

4.4
(10.3)
(11.2)

(88.0)
(2.5)
(27.0)

2022
$m

4.0
(12.8)
(10.4)

(81.6)
(8.1)
(24.3)

The Group’s principal exposure to interest rate risk is in relation to interest expense on borrowings made under the Group’s credit
facilities which attract interest at floating rates plus a fixed margin as well as any cash or investments that result in interest income
at floating rates. Floating rate instruments expose the Group to interest rate cash flow and expense risk. The Group manages this
exposure on a net basis within Board approved policy parameters, including the use of interest rate swaps designated as cash flow
hedges to maintain an appropriate mix between fixed and floating rate borrowings.

As at 31 December 2023, the Group’s borrowings are denominated in USD and Euros. The Group’s credit facilities expose the Group
to SOFR and IBOR. The Group’s interest rate swaps of $425.0 million, are referenced to the SOFR and IBOR benchmark (see Note 23
– Financial Instruments).

IBOR Reform

Non-derivative financial liabilities
The Group’s facilities are based on a floating rate and reflect IBOR reform. Whilst one of the Group’s facilities is multicurrency,
most borrowings are expected to be denominated in USD and EUR with the reference rates of SOFR and EURIBOR respectively.

Derivatives
As of 31 December 2023, the Group held interest rate swaps for the purpose of risk management that are designated in cash flow
hedge relationships. The floating legs of these swaps are linked to both SOFR and EURIBOR. The Group’s derivatives are governed
by contracts based on the master agreement of the International Swaps and Derivatives Association (ISDA).

All interest rate swaps at 31 December 2023 have a floating rate linked to SOFR and EURIBOR, aligned with the Group’s facilities.
See Note 23 – Financial Instruments.

Hedge accounting
Swaps with floating legs linked to SOFR and EURIBOR have also been designated as cash flow hedges and will provide interest rate
risk management beyond January 2024.

Sensitivity analysis on interest rate risk

Based on the composition and the terms of the Group’s borrowings as at 31 December 2023, and including the 0% interest rate
floor and after the effect of the interest rate swaps and cash, if interest rates were to increase or decrease by 100 basis points, the
interest expense on borrowings would increase by $3.1 million (2022: $4.0 million) or decrease by $3.1 million (2022: $4.0 million)
assuming that all other variables remain constant and excluding any effect of tax.

184
184

Convatec Group Plc Annual Report and Accounts 2023
Convatec Group Plc Annual Report and Accounts 2023

185
185

Financial statements
Financial statements

Overview

Strategic report

Governance

Financial statements

Additional information

Notes to the consolidated financial statements continued

21. BORROWINGS

Senior notes

The Group’s sources of borrowing for funding and liquidity purposes derive from senior notes and credit facilities including
a committed revolving credit facility.

Accounting policy

Borrowings are recognised at fair value less directly attributable costs on the date that they are entered into and subsequently
measured at amortised cost using the effective interest rate method. Borrowing costs directly attributable to the facility are
capitalised and amortised over the period of the loan.

The effective interest rate method is a method of calculating the amortised cost of a financial liability and allocating the interest
expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments
through the expected life of the financial liability, or, where appropriate, a shorter period, to the net carrying amount on
initial recognition.

Borrowings are classified as non-current when the repayment date is more than 12 months from the period-end date or where
they are drawn on a facility with more than 12 months to expiry.

The Group derecognises borrowings when its contractual obligations are discharged, terminated or expired.

Fair value measurement
Borrowings are classified as Level 1 or Level 2 in the fair value hierarchy in accordance with IFRS 13, Fair Value Measurements,
based upon the degree to which the fair value movements are observable.

The Group’s borrowings as at 31 December were as follows:

Revolving Credit Facility1
Term Loan
Senior Notes
Interest-bearing borrowings
Financing fees2
Total carrying value of borrowings

Current portion of borrowings
Non-current portion of borrowings

Currency
USD/Euro
USD
USD

Year of
maturity
2028
2027
2029

2023
Face value
$m
490.6
250.0
500.0
1,240.6
(13.7)
1,226.9

2022
Face value
$m
477.2
250.0
500.0
1,227.2
(15.3)
1,211.9

–
1,226.9

–
1,211.9

1. Included within the Revolving Credit Facility was €100.0 million ($110.4 million) and £8.0 million ($8.2 million) at 31 December 2023 (2022: €145.0 million ($155.2 million)),

representing 22.5% of RCF debt denominated in Euros, 2.1% of RCF debt denominated in GBP and 75.4% denominated in US dollars.

2. Financing fees of $13.7 million (2022: $15.3 million) related to the remaining unamortised fees incurred on the credit facilities of $7.8 million (2022: $8.4 million) and on the

senior notes of $5.9 million (2022: $6.9 million).

Credit facilities

The credit facilities held by the Group are committed and available for the refinancing of certain existing financial indebtedness and
general corporate purposes. The Group’s bank credit facility of $1.2 billion, which was refinanced in November 2022, comprises of
a $250.0 million term loan and a $950.0 million multicurrency revolving credit facility. As at 31 December 2023, the term loan was
fully drawn and $490.6 million of the revolving credit facility was drawn, with $459.4 million undrawn. During the year, the Group
extended the term of its multicurrency revolving credit facility by an additional year and this is now committed to November 2028
(originally committed for a five-year term to November 2027). Transaction costs directly attributable to the extension have been
capitalised and are amortised over the term of the facility using the effective interest rate method. The term loan remains
committed for a five-year term to November 2027.

Unsecured senior notes of $500.0 million are subject to an interest cover financial covenant as defined in the indentures which is
a minimum of 2.0 times, with testing required annually at 31 December on the last 12 calendar months’ financial performance.

Financial covenants
The principal financial covenants are based on a permitted net debt to covenant-adjusted EBITDA1 ratio and interest cover test
as defined in the credit facilities agreement. Testing is required on a semi-annual basis, at June and December, based on the last
12 months’ financial performance. At 31 December 2023, the permitted net debt to covenant-adjusted EBITDA1 ratio was
a maximum of 3.50 times and the interest cover a minimum of 3.50 times, terms as defined by the credit facilities agreement.
In accordance with the credit facilities agreement, the net debt to covenant-adjusted EBITDA1 ratio can increase to a maximum
4.00 times for permitted acquisitions or investments.

The Group was in compliance with all financial and non-financial covenants at 31 December 2023, with significant available
headroom on the financial covenants (in excess of $603.3 million debt headroom on net debt to covenant-adjusted EBITDA1).

Excluding the impact of interest rate swaps, the weighted average interest rate on borrowings for the year ended 31 December 2023
was 5.7% (2022: 3.4%). The increase in the weighted average interest rate was due to rising underlying reference base rates on debt
with floating rates.

Borrowings measured at fair value

The senior notes are listed and their fair value at 31 December 2023 of $450.1 million (2022: $430.8 million) has been obtained
from quoted market data and therefore categorised as a Level 1 measurement in the fair value hierarchy under IFRS 13, Fair Value
Measurements. For the Group’s other borrowings, the fair value is based on discounted cash flows using a current borrowing rate
and is categorised as a Level 2 measurement. At 31 December 2023, the estimated fair value of the Group’s other borrowings was
$774.9 million (2022: $762.4 million).

Maturity of financial liabilities

The contractual undiscounted future cash flows, including contractual interest payments, related to the Group’s financial liabilities
were as follows:

At 31 December 2023
Borrowings
Lease liabilities (Note 24)
Trade and other payables (Note 13)
Derivative financial instruments (Note 23)
Derivative financial instruments payable
Derivative financial instruments receivable
At 31 December 2022
Borrowings
Lease liabilities (Note 24)
Trade and other payables (Note 13)
Derivative financial instruments (Note 23)
Derivative financial instruments payable
Derivative financial instruments receivable

Within 1 year or
on demand
$m

1 to 2
years
$m

58.6
25.6
388.7

1,486.9
1,483.1

57.5
22.7
346.6

1,919.8
1,912.5

49.8
19.5
–

6.8
5.4

55.2
17.8
–

6.3
6.9

Contractual cash flows

2 to 3
years
$m

47.7
14.6
–

–
–

50.8
13.1
–

1.2
1.0

3 to 4
years
$m

298.0
10.1
–

–
–

50.2
9.8
–

–
–

4 to 5
years
$m

More than
5 years
$m

Total
$m

Carrying
amount
$m

532.8
8.2
–

519.4
18.5
–

1,506.3
96.5
388.7

1,226.9
85.5
388.7

–
–

1,493.7
1,488.5

17.6
13.6

777.8
7.9
–

538.8
94.2
–

1,530.3
165.5
346.6

1,211.9
88.3
346.6

–
–

1,927.3
1,920.4

32.5
26.6

Refer to Note 14 – Provisions for the expected payment profile in respect of the Group’s provisions and contingent consideration.

Reconciliation of movement in borrowings

Borrowings at 1 January
Repayment of borrowings
Proceeds of new borrowings, net of financing fees
Foreign exchange
Non-cash movements2
Borrowings at 31 December

2023
$m
1,211.9
–
9.4
2.8
2.8
1,226.9

2022
$m
1,344.6
(842.5)
714.2
(11.0)
6.6
1,211.9

1. Covenant-adjusted EBITDA is calculated based on terms as defined in the credit facilities agreement. This is different to adjusted EBITDA, which is an alternative performance

measure (APM) as disclosed on pages 34 to 37.

2. Non-cash movements were in respect of the amortisation of deferred financing fees associated with the borrowings. 2022 included a $2.7 million write-off of the unamortised

remaining deferred financing fees following early termination of the Group’s previous credit facilities.

186
186

Convatec Group Plc Annual Report and Accounts 2023
Convatec Group Plc Annual Report and Accounts 2023

187
187

Financial statements
Financial statements

Overview

Strategic report

Governance

Financial statements

Additional information

Notes to the consolidated financial statements continued

22. CASH, CASH EQUIVALENTS AND RESTRICTED CASH

23. FINANCIAL INSTRUMENTS

Cash held at bank is used for the Group’s day-to-day operations. The Group utilises bank deposits or money market funds which
have a maturity of three months or less as liquid investments that enable short-term liquidity requirements to be met.

Accounting policy

Cash and cash equivalents comprise cash in hand and current balances with banks and similar institutions. All liquid investments,
including term deposits and money market funds, have original maturities of three months or less, are subject to insignificant
risk of changes in value and are repayable within one business day with no significant loss of interest, resulting in classification
as cash equivalents.

Cash at bank earns interest at rates based on daily bank deposit rates. Term deposits and money market funds earn interest
at the respective short-term deposit rate.

Cash and cash equivalents at 31 December 2023 included $21.1 million (2022: $19.2 million) of cash held in territories where there
are restrictions related to timely repatriation. The amounts meet the definition of cash and cash equivalents but are not deemed
to be readily available for general use by the wider Group.

Consolidated Statement of Cash Flows

Under certain circumstances, the Group utilises bank overdrafts to manage temporary fluctuations in cash positions. The bank
overdrafts are repayable on demand, used as part of the Group’s overall cash management strategy and form part of cash
and cash equivalents for the purpose of the Consolidated Statement of Cash Flows. The Group had no bank overdrafts as at
31 December 2023 or 31 December 2022.

The Group reports cash flows from operating activities using the indirect method in accordance with IAS 7, Statement of Cash Flows.
The Group has elected to classify net interest paid (including interest on lease liabilities) as cash flows from operating activities.
Short-term lease payments and payments for leases of low-value assets are included in cash flows from operating activities.

Changes in working capital assets and liabilities as reported in cash flows from operating activities reflect the changes in the
Consolidated Statement of Financial Position between the current and previous financial year end, including adjustments for
amounts relating to acquisitions and disposals (when necessary), as well as currency translation adjustments.

Cash payments for the principal portion of lease liabilities is included within cash flows from financing activities.

Acquisition of property, plant and equipment, and intangible assets reflects additions to the related assets, including adjustments
for changes in capital accruals. Acquisition of intangible assets relates to capitalised software, development and product-related
licences. Refer to Note 9 – Intangible assets and goodwill for further details.

The adjustment for non-operating expense, net in the Consolidated Statement of Cash Flows excludes the gains and losses
realised on cash-settled derivative financial instruments. Refer to Note 5 – Non-operating (expense)/ income, net.

Restricted cash

In certain instances, there are requirements to set aside cash to support payment guarantees and obligations, including the
payment of value-added taxes, custom duties on imports, tender programmes and lease arrangements. Such amounts are
classified by the Group as restricted cash, which do not form part of cash and cash equivalents. Cash paid into escrow, arising
from a business combination, is also classified as restricted cash.

Cash at bank and in hand
Money market funds and bank deposits
Cash and cash equivalents

Restricted cash – current
Restricted cash – non-current
Total restricted cash

2023
$m
57.7
39.9
97.6

2023
$m
12.5
5.3
17.8

2022
$m
42.6
101.2
143.8

2022
$m
18.2
7.3
25.5

Current restricted cash of $12.5 million (2022: $18.2 million) relates to cash held in escrow in respect of the Group’s acquisitions.

Included in non-current restricted cash of $5.3 million (2022: $7.3 million) is $1.6 million (2022: $4.0 million) relating to cash
held in escrow in respect of the Group’s acquisitions. The remaining balance of $3.7 million (2022: $3.3 million) relates to amounts
held in respect of guarantees and the Group’s Share Save scheme for employees. None of these amounts are accessible
on demand.

A derivative financial instrument is a contract that derives its value from the performance of an underlying variable, such as
foreign exchange rates or interest rates. The Group uses derivative financial instruments to manage foreign exchange and
interest rate risk arising from its operations and financing. Derivative financial instruments used by the Group are foreign
exchange forwards and interest rate swaps.

The Group utilises interest rate swap agreements, designated as cash flow hedges, to manage its exposure to variability in
expected future cash outflows attributable to the changes in interest rates on the Group’s committed borrowing facilities.

Accounting policy

Derivative financial instruments are initially recognised at fair value on the derivative contract date and are remeasured at
their fair value at subsequent reporting dates. Derivative financial instruments are classified at fair value through profit or
loss (FVTPL) unless they are designated and qualify as an effective cash flow hedge. The fair value of forward foreign exchange
contracts is determined by using the difference between the contract exchange rate and the quoted forward exchange rate from
third parties at the reporting date.

Hedge accounting
The Group has elected to apply the IFRS 9, Financial Instruments hedge accounting requirements. Changes in the fair values
of derivatives designated as cash flow hedges are recognised in other comprehensive income to the extent the hedges are
effective. The fair value is the estimated amount that the Group would receive or pay to terminate the forward or swap at the
reporting date, taking into account current market rates, the Group’s current creditworthiness, as well as that of the financial
instrument counterparties.

The cumulative gain or loss is then reclassified to the Consolidated Income Statement in the same period when the relevant
hedged transaction is realised. Any ineffectiveness on hedging instruments is recognised in the Consolidated Income Statement
as they arise. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or no
longer qualifies for hedge accounting. The discontinuation is accounted for prospectively. Any gain or loss recognised in other
comprehensive income and accumulated in the cash flow hedge reserve at that time remains in equity and is reclassified to
profit or loss when the forecast transaction occurs. When a forecast transaction is no longer expected to occur, the gain or loss
accumulated in the cash flow hedge reserve is immediately reclassified to profit or loss.

The Group held interest rate swaps of $425.2 million at 31 December 2023, with exposure to SOFR and EURIBOR as a reference
rate and maturing at various points in the next two years. These have been designated as cash flow hedges through other
comprehensive income.

Right to offset

Financial assets and liabilities are offset and the net amount presented in the Consolidated Statement of Financial Position when,
and only when, the Group has a legal right to offset the amounts and intends either to settle them on a net basis or to realise the
asset and settle the liability simultaneously.

Fair value measurement
Financial instruments are classified as Level 1, Level 2 or Level 3 in the fair value hierarchy in accordance with IFRS 13, Fair Value
Measurements, based upon the degree to which the fair value movements are observable. Level 1 fair value measures are defined
as those with quoted (unadjusted) market prices in active markets for identical assets or liabilities. Level 2 fair value
measurements are defined as those derived from inputs other than quoted prices that are observable for the asset or liability,
either directly (prices from third parties) or indirectly (derived from third-party prices). Level 3 fair value measurements are
defined as those derived from significant unobservable inputs.

The only instrument classified as Level 1 are the senior notes, given the availability of quoted market price (Note 21 –
Borrowings). The Group’s derivative financial instruments, discussed below, are classified as Level 2. The Group’s equity
investment in preference shares (Note 10 – Investment in financial assets) and contingent consideration arising on business
combinations are classified within Level 3 of the fair value hierarchy.

The Group holds interest rate swap agreements to fix a proportion of variable interest on US dollar and EURO denominated debt, in
accordance with the Group’s risk management policy. The interest rate swaps are designated as hedging instruments in a cash flow
hedging relationship.

In accordance with Group policy, the Group uses forward foreign exchange contracts, designated as cash flow hedges, to hedge
certain forecast third-party foreign currency transactions. When a commitment is entered into a layered approach is taken when
hedging the currency exposure, ensuring that no more than 100% of the transaction exposure is covered. The currencies hedged
by forward foreign exchange contracts are US dollars, Swiss francs, Pound sterling, Danish krone and Japanese yen.

The Group further utilises foreign exchange contracts and swaps classified as FVTPL to manage short-term foreign exchange exposure.

188
188

Convatec Group Plc Annual Report and Accounts 2023
Convatec Group Plc Annual Report and Accounts 2023

189
189

Financial statements
Financial statements

Overview

Strategic report

Governance

Financial statements

Additional information

Notes to the consolidated financial statements continued

23. FINANCIAL INSTRUMENTS (CONTINUED)
Cash flow hedges

The fair values are based on market values of equivalent instruments at 31 December. The following table presents the Group’s
outstanding interest rate swaps, which were designated as cash flow hedges at 31 December:

24. LEASES

The Group principally leases real estate and vehicles. Leases are recognised as a right-of-use asset with a corresponding liability
recorded at the date at which the leased asset is available for use by the Group.

3 Month LIBOR Float to Fixed Interest
Rate Swap
6 Month term SOFR Float to Fixed
Interest Rate Swap
6 Month term SOFR Float to Fixed
Interest Rate Swap
6 Month term SOFR Float to Fixed
Interest Rate Swap
6 Month term SOFR Float to Fixed
Interest Rate Swap
6 Month term SOFR Float to Fixed
Interest Rate Swap
6 Month term SOFR Float to Fixed
Interest Rate Swap
6 Month term EURIBOR Float to Fixed
Interest Rate Swap
6 Month term SOFR Float to Fixed
Interest Rate Swap

Currency Effective date Maturity date

USD 24 Jan 2020 24 Jan 2023

USD 23 Jan 2023 23 Jan 2024

USD 23 Jan 2023 23 Jul 2024

USD 23 Jan 2023 23 Jan 2025

USD 3 Aug 2023 3 Aug 2024

USD 3 Aug 2023 3 Feb 2025

USD 3 Aug 2023 4 Aug 2025

EUR 29 Sep 2023 29 Sep 2024

USD 29 Sep 2023 29 Sep 2025

2023

2022

Notional
amount
$m

Fair value1
assets/
(liabilities)
$m

Notional
amount
$m

Fair value1
assets/
(liabilities)
$m

–

90.0

40.0

50.0

55.2

40.0

–

275.0

0.4

0.1

0.2

–

(0.2)

(0.5)

90.0

40.0

50.0

–

2.0

0.2

–

(0.3)

–

1. The fair values of the interest rate swaps were disclosed in non-current derivative financial liabilities, current derivative financial liabilities and current derivative assets in the

Consolidated Statement of Financial Position. There was no ineffectiveness recognised in the Consolidated Income Statement.

Foreign exchange forward contracts

The following table presents the Group’s outstanding foreign exchange forward contracts valued at FVTPL and foreign currency
forward contracts designated as cash flow hedges, disclosed in current derivative financial assets and liabilities, at 31 December:

Foreign exchange contracts
Foreign currency forward exchange contracts
designated as cash flow hedges
Derivative financial assets

Foreign exchange contracts
Foreign currency forward exchange contracts
designated as cash flow hedges
Derivative financial liabilities

Term
≤ 3 months

≤ 12 months

≤ 3 months

≤ 12 months

2023

2022

Notional
amount
$m
453.0

Fair value
assets/
(liabilities)
$m
8.0

195.9
648.9

760.7

53.3
814.0

4.4
12.4

(15.2)

(1.3)
(16.5)

Notional
amount
$m
996.6

72.7
1,069.3

703.7

132.8
836.5

Fair value
assets/
(liabilities)
$m
21.3

3.1
24.4

(30.2)

(2.3)
(32.5)

During the year ended 31 December 2023, the Group realised a net loss of $4.3 million (2022: $15.8 million gain) on foreign exchange
forward contracts designated as FVTPL in Note 5 – Non-operating income/(expense), net in the Consolidated Income Statement.

Impact of hedging on other comprehensive income

The following table presents the impact of hedging on other comprehensive income:

Recognised in other comprehensive income:
Effective portion of changes in fair value of cash flow hedges:

Interest rate swaps
Foreign currency forward exchange contracts designated as cash flow hedges

Changes in fair value of cash flow hedges reclassified to the Consolidated Income Statement
Cost of hedging
Total

2023
$m

(1.3)
2.0
(0.8)
(0.5)
(0.6)

2022
$m

3.3
(11.0)
16.5
(1.1)
7.7

Accounting policy

The lease liability is measured at the present value of future lease payments discounted using the rate implicit in the lease.
If this rate is not readily determinable, the Group uses its incremental borrowing rate. Generally, the Group uses its incremental
borrowing rate as the discount rate.

Options such as lease extensions or terminations on lease contracts are considered on a case-by-case basis by regular
management assessment.

Each lease payment is allocated between amounts paid for principal and interest. The interest cost is charged to the Consolidated
Income Statement over the lease term to produce a constant periodic rate of interest on the remaining balance of the liability
for each period. The right-of-use asset is depreciated on a straight-line basis over the lease term.

Payments associated with short-term leases and low-value leases are recognised on a straight-line basis as an expense in the
Consolidated Income Statement. Short-term leases are leases with a lease term of 12 months or less and low-value leases
comprise of leases with an underlying asset value of less than $5,000. Expenses recognised for these short-term and low-value
leases for the year ended 31 December 2023 were $2.4 million (2022: $3.9 million).

The movements in right-of-use assets were as follows:

As at 1 January 2022
Lease additions
Arising from acquisitions
Leases terminated
Depreciation of right-of-use assets
Foreign exchange
As at 31 December 2022
Lease additions
Arising from acquisitions (Note 26)
Leases terminated
Depreciation of right-of-use assets
Impairment of right-of-use assets
Foreign exchange
As at 31 December 2023

Movements in lease liabilities were as follows:

Lease liabilities as at 1 January
Lease additions
Arising from acquisitions (Note 26)
Payment of lease liabilities
Leases terminated
Interest expense on lease liabilities (Note 25)
Interest paid on lease liabilities
Foreign exchange
Lease liabilities as at 31 December

Real estate and
other
$m
70.3
12.3
2.2
(1.4)
(14.7)
(3.1)
65.6
14.2
1.6
(7.4)
(14.7)
(1.9)
0.9
58.3

Vehicles
$m
13.3
8.4
–
0.1
(7.4)
(0.6)
13.8
10.9
–
(0.9)
(8.0)
–
0.6
16.4

2023
$m
88.3
25.1
1.6
(22.7)
(8.3)
3.5
(3.5)
1.5
85.5

Total
$m
83.6
20.7
2.2
(1.3)
(22.1)
(3.7)
79.4
25.1
1.6
(8.3)
(22.7)
(1.9)
1.5
74.7

2022
$m
90.5
21.0
2.9
(20.7)
(1.2)
3.3
(3.3)
(4.2)
88.3

Total cash outflow of lease liabilities including interest for the year ended 31 December 2023 was $26.2 million (2022: $ 24.0 million).
Interest paid during the year was $3.5 million (2022: $3.3 million).

Lease liabilities by category at 31 December were as follows:

Current
Non-current
Total

Real estate
and other
$m
13.9
55.3
69.2

2023

Vehicles
$m
6.8
9.5
16.3

Total
$m
20.7
64.8
85.5

Real estate
and other
$m
13.8
60.6
74.4

2022

Vehicles
$m
6.5
7.4
13.9

Total
$m
20.3
68.0
88.3

191
191

190
190

Convatec Group Plc Annual Report and Accounts 2023
Convatec Group Plc Annual Report and Accounts 2023

Financial statements
Financial statements

Overview

Strategic report

Governance

Financial statements

Additional information

Notes to the consolidated financial statements continued

24. LEASES (CONTINUED)
The maturity of lease liabilities at 31 December was as follows:

Within 1 year
1 to 2 years
2 to 3 years
3 to 4 years
4 to 5 years
More than 5 years
Total

2023

2022

Real estate
and other
$m
13.9
14.0
9.7
7.6
7.0
17.0
69.2

Vehicles
$m
6.8
5.0
3.2
1.1
0.1
0.1
16.3

Total
$m
20.7
19.0
12.9
8.7
7.1
17.1
85.5

Real estate
and other
$m
13.8
12.3
9.5
8.1
7.2
23.5
74.4

Vehicles
$m
6.5
4.2
2.3
0.7
0.1
0.1
13.9

Total
$m
20.3
16.5
11.8
8.8
7.3
23.6
88.3

The undiscounted contractual cash flows in relation to the maturity of leases liabilities have been disclosed in Note 21 – Borrowings.

25. FINANCE INCOME AND EXPENSE

Finance expenses arise from interest on the Group’s borrowings and lease liabilities. Finance income arises from interest earned
on investment of surplus cash.

Accounting policy

Finance expenses, including the transaction costs for borrowings and any discount or premium on issue, are recognised in the
Consolidated Income Statement using the effective interest rate method.

When existing debt is derecognised in the financial statements any transaction costs not amortised are recognised immediately
in the Consolidated Income Statement.

Upon derecognition of financial liabilities, any unamortised financing fees are recognised immediately in the Consolidated
Income Statement.

Interest related to qualifying assets under construction included within PP&E is capitalised (refer to Note 8 – Property, plant
and equipment).

Refer to Note 24 – Leases for accounting policy on interest expense on lease liabilities.

Interest arising from interest rate swaps is recorded as either interest income or expense over the term of the agreement. Hedge
accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or no longer qualifies for
hedge accounting. The discontinuation is accounted for prospectively. Any gain or loss recognised in other comprehensive
income and accumulated in the cash flow hedge reserve at that time remains in equity and is reclassified to profit or loss when
the forecast transaction occurs. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in the
cash flow hedge reserve is reclassified immediately to profit or loss.

Finance costs, net for the year ended 31 December were as follows:

Finance income
Interest income on cash and cash equivalents
Total finance income

Finance expense
Interest expense on borrowings
Other financing-related fees1
Interest expense on interest rate derivatives
Interest expense on lease liabilities
Capitalised interest2
Other finance costs
Total finance expense
Finance costs, net

2023
$m

5.2
5.2

(75.2)
(7.2)
–
(3.5)
5.4
(0.2)
(80.7)
(75.5)

2022
$m

5.5
5.5

(46.4)
(8.2)
(1.4)
(3.3)
2.0
(0.3)
(57.6)
(52.1)

1. Other financing-related fees include the amortisation of deferred financing fees associated with the multicurrency revolving credit facilities, term loan facilities and senior notes.
2. Capitalised interest was calculated using the Group’s weighted average interest rate over the year of 5.7% (2022: 3.4%), and will be treated as tax deductible.

26. ACQUISITIONS

During the year to 31 December 2023, the Group completed the acquisitions of:

– Starlight Science Limited (Starlight), a pre-commercial UK-based company.
– A Better Choice Medical Supply LLC (ABCMS), a US-based intermittent catheter provider.
– All American Medical Supply Corp (AAMS), a New York home supplier of urinary catheters and compression stockings.

This note provides details of the transactions and the acquisition accounting that has been recorded to reflect the fair value of assets
acquired and liabilities assumed as well as the intangible assets and goodwill recognised upon acquisition. This note also provides
details of any fair value changes identified post-acquisition in respect of previous acquisitions that the Group has completed.

Accounting policy

Acquisitions of subsidiaries and businesses are accounted for using the acquisition method of accounting. Consideration
transferred in respect of an acquisition is measured at the fair value of the assets acquired, equity instruments issued and
liabilities incurred or assumed on the date of the acquisition. Identified assets acquired and liabilities assumed are measured
at their respective acquisition-date fair values.

The excess of the fair value of the consideration given over the fair value of the identifiable net assets acquired is recorded as
goodwill. If the fair value of the identifiable net assets acquired is greater than the fair value of the consideration given, the
excess is recognised immediately in the Consolidated Income Statement as a bargain purchase gain. Acquisition-related costs
are expensed as incurred.

The operating results of the acquired business are reflected in the Group’s Consolidated Financial Statements from the date
of acquisition.

The classification of cash payments associated with contingent consideration within the Consolidated Statement of Cash Flows
is dependent on the nature of the arrangement.

Either the settlement of the amount initially recognised upon acquisition is reflected in cash flows from investing activities, with
the element of the payment relating to any subsequent remeasurement included within cash flows from operating activities;
alternatively, cash flows may be considered financing in nature and included within cash flows from financing activities.

Starlight Science Limited (Starlight)

On 18 April 2023, the Group completed its acquisition of 100% of the share capital of Starlight Science Limited (Starlight), a UK-based
company owned by 30 Technology Limited. The acquisition of Starlight included the anti-infective nitric oxide technology platform
and new product pipeline, which complements the Group’s Advanced Wound Care portfolio and strengthens the Group’s ability to
provide best-in-class solutions for patients.

In addition to the initial consideration of $56.7 million (£45.3 million), the sellers may earn contingent consideration up to a
maximum of $163.9 million (£131.0 million), in the form of (i) milestone payment of $58.8 million (£47.0 million) due upon regulatory
clearances in the US and Europe; and (ii) earnout payments based on sales of products over the lifetime of the acquired patents,
with the maximum earnout capped at $105.1 million (£84.0 million).

The provisional discounted fair value of the contingent consideration at the date of acquisition was $66.7 million, discounted
at 19.1%. Following completion of acquisition accounting, any changes in the fair value of the contingent consideration will be
recorded in the Consolidated Income Statement in accordance with the Group’s accounting policies.

A Better Choice Medical Supply LLC (ABCMS)

On 5 July 2023, the Group completed its acquisition of 100% of the share capital of A Better Choice Medical Supply LLC (ABCMS),
a US-based intermittent catheter provider, to further strengthen the Group’s Home Service Group. The company was founded in
2008 and is based out of White Lake, Michigan. The consideration for the acquisition was $26.6 million which included $3.0 million
of deferred consideration paid into escrow. There is no earn out associated with this acquisition.

All American Medical Supply Corp (AAMS)

On 4 October 2023, the Group completed its acquisition of 100% of the share capital of All American Medical Supply Corp (AAMS), New
York-focused home supplier of urinary catheters and compression stockings, to further strengthen the Group’s Home Service Group.
The company was founded in 2009 and is based out of Long Island, New York. The consideration for the acquisition was $1.5 million
which included $0.3 million of deferred consideration paid into escrow. There is no earn out associated with this acquisition.

192
192

Convatec Group Plc Annual Report and Accounts 2023
Convatec Group Plc Annual Report and Accounts 2023

193
193

Financial statements
Financial statements

Overview

Strategic report

Governance

Financial statements

Additional information

Notes to the consolidated financial statements continued

26. ACQUISITIONS (CONTINUED)
Assets acquired and liabilities assumed
Each of the transactions meet the definition of a business combination and have been accounted for under the acquisition method
of accounting. The following table summarises the provisional fair values of the assets acquired and liabilities assumed as at the
acquisition dates:

Non-current assets

Property, plant & equipment
Right-of-use assets
Intangible assets

Current assets

Trade and other receivables
Cash and cash equivalents

Total assets acquired

Current liabilities

Trade and other payables
Lease liabilities

Non-current liabilities

Lease liabilities
Deferred tax liabilities
Total liabilities assumed
Net assets acquired
Goodwill
Total

Initial cash consideration
Deferred purchase consideration paid into escrow1
Working capital adjustment2
Contingent consideration
Total consideration

Analysis of cash outflow in the Consolidated Statement of Cash Flows

Initial cash consideration
Deferred purchase consideration paid into escrow1
Working capital adjustment2
Cash and cash equivalents acquired
Net cash outflow from acquisitions, net of cash acquired

Starlight
Provisional
$m

ABCMS All American
Provisional
$m

Provisional
$m

Total
Provisional
$m

0.4
1.3
112.5

0.1
–
114.3

(0.1)
(0.2)

(1.1)
(12.5)
(13.9)
100.4
23.0
123.4

56.7
–
–
66.7
123.4

–
0.3
4.3

0.6
0.2
5.4

(0.2)
–

(0.3)
–
(0.5)
4.9
21.5
26.4

23.5
3.0
(0.1)
–
26.4

–
–
–

0.1
–
0.1

–
–

–
–
–
0.1
1.4
1.5

1.2
0.3
–
–
1.5

0.4
1.6
116.8
–
0.8
0.2
119.8

(0.3)
(0.2)
–
(1.4)
(12.5)
(14.4)
105.4
45.9
151.3

81.4
3.3
(0.1)
66.7
151.3

Starlight
Provisional
$m
56.7
–
–
–
56.7

ABCMS All American
Provisional
$m
1.2
0.3
–
–
1.5

Provisional
$m
23.5
3.0
(0.1)
(0.2)
26.2

Total
Provisional
$m
81.4
3.3
(0.1)
(0.2)
84.4

1. $3.0 million for the acquisition of ABCMS and $0.3 million for the acquisition of All American was paid on closing into escrow as security and indemnity by the sellers for their
obligations under the Merger Agreements. The escrow amounts are expected to be released within 2 years of the respective acquisition dates, subject to terms specified in
the Merger Agreements.

2. This is the Group’s calculation of the working capital adjustment and forms part of the initial consideration. The final amount was determined in accordance with the terms

of the Merger Agreement and was finalised and paid by the reporting date.

The fair values of the assets acquired and liabilities assumed are provisional at 31 December 2023. The Group will finalise these
amounts as it obtains the information necessary to complete the measurement process. Any changes resulting from facts and
circumstances that existed as of the acquisition dates may result in retrospective adjustments to the provisional amounts
recognised at the acquisition date. The Group will finalise these amounts no later than one year from the acquisition dates.

The provisional fair value of trade and other receivables amounted to $0.8 million, with a gross contractual amount of $0.9 million.
At the acquisition date, the Group’s best estimate of the contractual cash flows expected not be collected amounted to $0.1 million.

The goodwill recorded, which is not deductible for tax purposes, represents the cost savings, operating synergies and future growth
opportunities expected to result from combining the operations of the acquisitions with those of the Group.

The Starlight acquisition is included in the Advanced Wound Care CGU group, whilst ABCMS and AAMS are included in the
Continence Care CGU group.

Acquisition-related costs
The Group incurred $6.2 million of acquisition-related costs directly related to the acquisitions completed or aborted in the year
ended 31 December 2023, primarily in respect of legal and advisers’ fees. The acquisition-related costs have been recognised in
general and administrative expenses in the Consolidated Income Statement.

Revenue and profit
As Starlight is in a pre-commercial state, there is no revenue to date. The loss for the period from the acquisition date to
31 December 2023 was $2.5 million, before recognising acquisition-related intangible asset amortisation charges of $6.0 million.
If the acquisition had been completed at 1 January 2023, reported Group revenue would have remained unchanged and the Group
profit for the period would have been $0.6 million lower for the year ended 31 December 2023, before recognising acquisition-
related intangible asset amortisation additional charges of $6.0 million.

The revenue of ABCMS for the period from the acquisition date to 31 December 2023 was $3.5 million and net profit for the period
was $1.6 million, before recognising acquisition-related intangible asset amortisation charges of $0.7 million. If the acquisition had
been completed on 1 January 2023, reported Group revenue would have been $4.3 million higher and Group profit for the year
would have been $0.8 million higher, before recognising acquisition-related intangible asset amortisation charges of $0.7 million.

The revenue of AAMS for the period from the acquisition date to 31 December 2023 was $0.9 million and net profit for the period
was $0.4 million. No intangible assets were identified during the purchase price allocation therefore there is no acquisition-related
intangible asset amortisation charge. If the acquisition had been completed at 1 January 2023, reported Group revenue would have
been $0.7 million higher and net profit would have remained unchanged.

Fair value of contingent consideration at reporting date
Contingent consideration arising on business combinations is classified as a recurring fair value measurement within Level 3 of
the fair value hierarchy, in line with IFRS 13, Fair Value Measurements. Key unobservable inputs in respect of the Group’s acquisitions
include actual results, management forecasts and an appropriate discount rate.

As at 31 December 2023, the discounted fair value of the contingent consideration payable in respect of the Group’s acquisitions
was $138.0 million (2022: $140.0 million).

Management has determined that the potential range of undiscounted outcomes at 31 December 2023 is between $52.4 million
and $265.4 million, from a maximum undiscounted amount of $354.2 million.

The table below shows an indicative basis of the sensitivity to the income statement and balance sheet at 31 December 2023.

Increase/(decrease) in financial liability and loss/(gain)
in income statement

27. COMMITMENTS AND CONTINGENCIES

Sales forecast

Discount rate

10%

-5%

-10%

-1%

-2%

8.3

16.9

(8.3)

(16.5)

(2.3)

(4.4)

2.4

5.0

Commitments represent the Group’s future capital expenditure which is not recognised as a liability in the Consolidated Financial
Statements but represents a non-cancellable commitment.

A contingent liability is a possible liability that is not sufficiently certain to qualify for recognition as a provision because the
amount cannot be measured reliably or because settlement is not considered probable.

Capital commitments

At 31 December 2023, the Group had non-cancellable commitments for the purchase of property, plant and equipment, capitalised
software and development of $22.3 million (2022: $39.3 million).

Contingent liabilities

Other than as disclosed elsewhere in these financial statements, there were no contingent liabilities recognised as at 31 December
2023 and 31 December 2022.

194
194

Convatec Group Plc Annual Report and Accounts 2023
Convatec Group Plc Annual Report and Accounts 2023

195
195

Financial statements
Financial statements

Overview

Strategic report

Governance

Financial statements

Additional information

Notes to the consolidated financial statements continued

Company financial statements

28. RELATED PARTY TRANSACTIONS
The Directors have not identified any related parties to the Group, other than the key management personnel. The Group considers
key management personnel as defined in IAS 24, Related Party Disclosures to be the members of CELT as set out on pages 98 to 99 and
the Non-Executive Directors as set out on pages 96 to 97.

Key management personnel compensation

Key management personnel compensation for the year ended 31 December was as follows:

Short-term employee benefits
Share-based payment expense
Post-employment benefits
Termination benefits
Total

2023
$m
15.5
7.1
0.5
–
23.1

2022
$m
16.4
9.2
0.8
0.4
26.8

Further details of short-term employee benefits, share-based payment expense and post-employment benefits for the Executive
Directors are shown on page 125. Details of the Non-Executive Directors’ fees, included in the table above, are provided on page 128.

The Group has not been a party to any other material transaction, or proposed transactions, in which any member of the key
management personnel had or was to have a direct or indirect material interest.

29. SUBSEQUENT EVENTS
The Group has evaluated subsequent events through to 5 March 2024, the date the Consolidated Financial Statements were
approved by the Board of Directors.

On 5 March 2024, the Board proposed the final dividend in respect of 2023 subject to shareholder approval at the Annual General
Meeting on 16 May 2024, to be distributed on 23 May 2024. See Note 18 – Dividends to the Consolidated Financial Statements for
further details.

COMPANY STATEMENT OF FINANCIAL POSITION
As at 31 December 2023

Assets
Non-current assets
Investment in subsidiaries
Deferred tax assets

Current assets
Other receivables
Total assets
Equity and liabilities
Current liabilities
Trade and other payables

Non-current liabilities
Other payables
Total liabilities
Net assets
Equity
Share capital
Share premium
Own shares
Retained surplus
Merger reserve
Cumulative translation reserve
Other reserves
Total equity
Total equity and liabilities

Notes

2023
$m

2022
$m

3
4

7
7
7

4,019.4
3.0
4,022.4

33.4
4,055.8

4.6
4.6

0.1
4.7
4,051.1

251.5
181.0
(0.6)
1,539.4
1,765.6
206.6
107.6
4,051.1
4,055.8

3,818.9
2.6
3,821.5

22.4
3,843.9

5.5
5.5

–
5.5
3,838.4

250.7
165.7
(1.5)
1,562.9
1,765.6
3.7
91.3
3,838.4
3,843.9

The Company reported a net profit for the year ended 31 December 2023 of $103.3 million (2022: $85.2 million).

The Financial Statements of Convatec Group Plc (registered number 10361298) were approved by the Board of Directors
and authorised for issue on 5 March 2024. They were signed on its behalf by:

Jonny Mason
Chief Financial Officer

Karim Bitar
Chief Executive Officer

196
196

Convatec Group Plc Annual Report and Accounts 2023
Convatec Group Plc Annual Report and Accounts 2023

197
197

Financial statements
Financial statements

Company financial statements continued

COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2023

At 1 January 2022
Net profit
Foreign currency translation
adjustment
Total comprehensive
income
Dividends paid
Scrip dividend
Share-based payments
Share awards vested
Excess deferred tax benefit
from share-based payments
Allotment of shares to
Employee Benefit Trust
At 31 December 2022
Net profit
Foreign currency translation
adjustment
Total comprehensive
income
Dividends paid
Scrip dividend
Share-based payments
Share awards vested
Excess deferred tax benefit
from share-based payments
At 31 December 2023

Share capital
$m
247.0
–

Share
premium
$m
142.3
–

Own shares
$m
(2.2)
–

Retained
surplus
$m
1,590.3
85.2

Merger
reserve
$m
1,765.6
–

Cumulative
translation
reserve
$m
460.8
–

–

–
–
1.1
–
–

–

2.6
250.7
–

–

–
–
0.8
–
–

–

–
–
23.4
–
–

–

–
165.7
–

–

–
–
15.3
–
–

–

–
–
–
–
3.3

–

(2.6)
(1.5)
–

–

–
–
–
–
0.9

–

85.2
(88.1)
(24.5)
–
–

–

–
–
–
–
–

–

–
1,562.9
103.3

–
1,765.6
–

–

103.3
(110.7)
(16.1)
–
–

–

–
–
–
–
–

–
251.5

–
181.0

–
(0.6)

–
1,539.4

–
1,765.6

(457.1)

(457.1)
–
–
–
–

–

–
3.7
–

202.9

202.9
–
–
–
–

–
206.6

Other
reserves
$m
71.7
–

Total equity
$m
4,275.5
85.2

–

(457.1)

–
–
–
16.6
2.9

0.1

–
91.3
–

(371.9)
(88.1)
–
16.6
6.2

0.1

–
3,838.4
103.3

–

202.9

–
–
–
14.5
1.5

306.2
(110.7)
–
14.5
2.4

0.3
107.6

0.3
4,051.1

For further information on share-based payments, refer to Note 19 – Share-based payments, and for dividends refer to Note 18 –
Dividends to the Consolidated Financial Statements.

Overview

Strategic report

Governance

Financial statements

Additional information

1. BASIS OF PREPARATION

This section describes the Company’s significant accounting policies in respect of the Company Financial Statements and explains
critical accounting judgements and estimates that management has identified as having a potentially material impact to the
Company. Specific accounting policies relating to the Notes to the Company Financial Statements are described within that note.

1.1 General information

The separate Financial Statements of the Company are presented as required by the Companies Act 2006. The Company meets
the definition of a qualifying entity under Financial Reporting Standard 100 (FRS 100) issued by the Financial Reporting Council (FRC).
Accordingly, the Financial Statements have been prepared in accordance with Financial Reporting Standard 101 (FRS 101) Reduced
Disclosure Framework as issued by the FRC.

As permitted by FRS 101, the Company has taken advantage of the disclosure exemptions available under that standard in respect of
share-based payments, financial instruments, capital management, comparative information, presentation of a cash flow statement,
new but not yet effective IFRSs and certain related party transactions.

As permitted by s408 of the Companies Act 2006 the Company has elected not to present its own Income Statement for the current
or prior year. The profit attributable to the Company is disclosed in the footnote to the Company’s Statement of Financial Position.

Where required, equivalent disclosures are given in the Consolidated Financial Statements.

The auditor’s remuneration for audit and other services is disclosed in Note 3.3 – Auditor’s remuneration to the Consolidated
Financial Statements.

1.2 Significant accounting policies

Basis of accounting
The Financial Statements have been prepared on the historical cost basis, except for certain financial instruments where fair value
has been applied. The principal accounting policies adopted are the same as those set out in the Consolidated Financial Statements
except as noted below.

Foreign currencies
The functional currency of the Company is Sterling, being the currency of the primary economic environment in which it operates.

The Company has adopted US dollars as the presentation currency for its Financial Statements, in line with the presentation
currency for the Consolidated Financial Statements. For the purpose of presenting individual company financial statements, assets
and liabilities of the Company are translated into US dollars at exchange rates prevailing on the balance sheet date. Equity is
translated into US dollars at historic rate. Income and expense items are translated at the average exchange rates for the period,
unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the date of transactions are
used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in a separate
component of equity, the cumulative translation reserve, in accordance with IAS 21, The Effects of Changes in Foreign Exchange Rates.

Share-based payments
The Company has implemented the generally accepted accounting principle for accounting for share-based payments with
subsidiary undertakings under FRS 101, whereby the Company has granted rights to issue its shares to employees of its subsidiary
undertakings under an equity-settled arrangement and the subsidiaries have not reimbursed the Company for these rights. Under
this arrangement, the Company treats the share-based payment recognised in the subsidiary’s financial statements as an increase
in the cost of investment in the subsidiary and credits equity with an equal amount.

1.3 Critical accounting judgements and key sources of estimation uncertainty

The preparation of the Company’s Financial Statements in accordance with FRS 101 requires management to make judgements,
estimates and assumptions that affect the application of accounting policies and the reported value of assets and liabilities,
income and expense. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on
an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision
affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Management has concluded that there are no critical accounting judgements and key sources of estimation uncertainty that could
result in a material adjustment in the next 12 months.

198
198

Convatec Group Plc Annual Report and Accounts 2023
Convatec Group Plc Annual Report and Accounts 2023

199
199

Financial statements
Financial statements

Company financial statements continued

Overview

Strategic report

Governance

Financial statements

Additional information

2. STAFF COSTS

4. DEFERRED TAX ASSETS

The Executive Directors of Convatec Group Plc are the only employees of the Company. The remuneration of the Executive
Directors is set out on pages 120 to 142 within the Remuneration Committee report.

Deferred tax assets mainly arise in relation to timing differences on the exercise of share-based awards, and taxable losses
arising in the normal course of business.

Their aggregate remuneration comprised:

Wages and salaries
Share-based payment expense
Social security costs
Pension-related costs
Total

2023

2022

$m
3.8
3.7
1.1
0.2
8.8

$m
4.1
3.6
1.0
0.3
9.0

At 1 January 2022
Movement in income statement
Movement in other comprehensive income
Foreign exchange
At 31 December 2022
Movement in income statement
Movement in other comprehensive income
Foreign exchange
At 31 December 2023

Average monthly number of employees (including Executive Directors) was 2 (2022: 2).

3. INVESTMENTS IN SUBSIDIARIES

Investments in subsidiaries represent the cost of the Company’s investment in its subsidiary undertakings, net of any
impairment charges. Refer to pages 203 to 205 for details of all the Company’s direct and indirect holdings.

Accounting policy

Investments in Group undertakings are stated at cost less any provision for impairment. The Company assesses investments
for impairment whenever events or changes in circumstances indicate that the carrying value of an investment may not be
recoverable. If any such indication of impairment exists, the Company makes an estimate of the recoverable amount. If the
recoverable amount of the investment is less than the carrying amount of the investment, the investment is considered to be
impaired and is written down to its recoverable amount.

Any impairment charge is initially taken to retained earnings and subsequently offset against any merger reserve by way of a
reserves transfer.

At 1 January 2022
Capital contributions in respect of share-based payments to employees of subsidiaries
Reduction due to reimbursement upon exercised awards
Foreign exchange
At 31 December 2022
Capital contributions in respect of share-based payments to employees of subsidiaries
Reduction due to reimbursement upon exercised awards
Foreign exchange
At 31 December 2023

Cost
$m
5,986.3
12.8
(8.0)
(641.0)
5,350.1
12.1
(16.4)
286.9
5,632.7

Impairment Net book value
$m
4,271.5
12.8
(8.0)
(457.4)
3,818.9
12.1
(16.4)
204.8
4,019.4

$m
(1,714.8)
–
–
183.6
(1,531.2)
–
–
(82.1)
(1,613.3)

An impairment assessment was performed on the investments in subsidiaries at 31 December 2023 and 31 December 2022 with no
impairment identified. The share price of Convatec Group plc at 31 December 2023 was £2.44 (2022: £2.33), resulting in a market
valuation of £5,006 million ($6,373 million) (2022: £4,754 million ($5,744 million)).

The following UK subsidiaries are exempt from the requirement to file audited accounts by virtue of Section 479A of the Companies
Act 2006:

Convatec Group Holdings Limited
Starlight Science Limited
Convatec International U.K. Limited

Company
registration
number
12698069
14419310
06622355

$m
2.1
0.6
0.1
(0.2)
2.6
0.1
0.3
–
3.0

2022
$m
2.6
2.6

2022
$m

14.9
7.4
0.1
22.4

The deferred tax asset consists of deferred tax on the following items:

Share-based payments
At 31 December

2023
$m
3.0
3.0

Deferred tax assets are only recognised where it is probably that future profit will be available to utilise the tax losses.

5. OTHER RECEIVABLES

Other receivables consist of amounts due from Group undertakings, other receivables and prepaid insurance.

Amounts falling due within one year:
Amounts owed by Group undertakings
Other receivables
Prepayments

2023
$m

23.0
10.3
0.1
33.4

Included in the amounts owed by Group undertakings at 31 December 2023 are intercompany loans of $6.3 million (2022: $5.7 million)
with a variable interest rate set at a margin 35bps (2022: 10bps) below SONIA. The loans are unsecured and are repayable on demand.

6. TRADE AND OTHER PAYABLES

Trade payables consist of amounts payable to third parties related predominantly to the Company’s corporate responsibilities.

Other payables represent amounts owed to Group undertakings, accruals and other taxation and social security.

Amounts falling due within one year:
Trade payables
Other taxation and social security
Accruals

2023
$m

1.1
0.8
2.7
4.6

2022
$m

0.9
1.2
3.4
5.5

200
200

Convatec Group Plc Annual Report and Accounts 2023
Convatec Group Plc Annual Report and Accounts 2023

Convatec Group Plc Annual Report and Accounts 2023

201

Financial statements
Financial statements

Overview

Strategic report

Governance

Financial statements

Additional information

Company financial statements continued

Subsidiary and related undertakings

7. RESERVES

All reserve balances included in this note are components of Equity and are non-distributable.

Share capital, share premium and own shares

Details of the Company’s share capital, share premium and own shares are detailed in Note 17 – Share capital and reserves to the
Consolidated Financial Statements.

Merger reserve

The merger reserve represents the fair value in excess of the par value of shares issued as part of a share exchange upon
incorporation of the Company.

Currency translation reserve

The currency translation reserve comprise the exchange differences arising on the translation of the assets and liabilities of the
Company into US dollars at the prevailing balance sheet rate and income and expense items being translated at the average
exchange rates for the period.

Other reserves

Other reserves are in respect of movements on equity-settled share-based payments.

8. DISTRIBUTABLE RESERVES

As the Company is a holding company with no direct operations the capacity of the Company to make dividend payments is
primarily derived from dividends received from subsidiary companies.

The retained surplus of $1,539.4 million (2022: $1,562.9 million) of the Company equates to the distributable reserves. Details of the
considerations and rationale for the distribution of dividends are given in the Directors’ report on page 143.

9. FINANCIAL GUARANTEES
The Company has guaranteed certain external borrowings of subsidiaries which at 31 December 2023 amounted to $1,240.6 million
(2022: $1,227.2 million).

10. SUBSEQUENT EVENTS
On 5 March 2024, the Board proposed the final dividend in respect of 2023 subject to shareholder approval at the Annual General
Meeting on 16 May 2024, to be distributed on 23 May 2024. See Note 18 – Dividends to the Consolidated Financial Statements
for further details.

Details of the Company’s subsidiaries and associated undertakings at 31 December 2023 are as follows:

Name

Akers & Dickinson Limited1

Allied Medical (UK) Services Limited1

Alpha-Med (Medical & Surgical) Limited1

Amcare Limited1

Arthur Wood Limited1

B.C.A. Direct Limited1

Bradgate-Unitech Limited1

Convatec Accessories Limited1

Convatec Holdings U.K. Limited1

Convatec NAP Limited1

Convatec Speciality Fibres Limited1

Convatec International U.K. Limited1

Convatec Limited1

Farnhurst Medical Limited1

Lance Blades Limited1

M.S.B. Limited1

Needle Industries (Sheffield) Limited1

Nottingham Medical Equipment Limited1

Novacare UK Limited1

Pharma-Plast Limited1

Resus Positive Limited1

Rotax Razor Company Limited1

Shrimpton & Fletcher Limited1

Starlight Science Limited1

Steriseal Limited1

SureCalm Healthcare Holdings Limited1

SureCalm Healthcare Ltd1

SureCalm Pharmacy Limited1

Unomedical Developments Limited1

Unomedical Holdings Limited1

Unomedical Limited1

Unoplast (U.K.) Limited1

Convatec Finance Holdings Limited*1

Convatec Management Holdings Limited*1

Convatec Group Holdings Limited*1

Cidron Healthcare Limited*3

Convatec Healthcare Ireland Limited4

Convatec France Holdings SAS5

Laboratoires ConvaTec SAS5

Convatec Healthcare D S.à.r.l.6

Convatec Spain Holdings, S.L.7

Convatec Spain S.L.7

CVT Business Services, Unipessoal Lda.8

KVTech Portugal – Produtos Medicos Unipessoal Ltda9

Convatec OY10

Convatec (Switzerland) GmbH11

Convatec International Services GmbH12

Convatec (Austria) GmbH13

Convatec Italia S.r.l.14

Convatec Hellas Medical Products S.A.15

Convatec Polska Sp. Z.o.o16

Convatec Ceska Republika s.r.o.17

Convatec (Australia) PTY Limited18

Place of business and
registered office

Portion of ownership
interest
%

Portion of
voting power held
%

United Kingdom

Jersey

Ireland

France

Luxembourg

Spain

Portugal

Finland

Switzerland

Austria

Italy

Greece

Poland

Czech Republic

Australia

100%

202

Convatec Group Plc Annual Report and Accounts 2023

203

Financial statements

Overview

Strategic report

Governance

Financial statements

Additional information

Subsidiary and related undertakings continued

Name

Convatec (New Zealand) Limited19

Convatec Sağlik Ürünleri Limited Şirketi20

Convatec (Sweden) AB21

Convatec Norway AS22

Convatec (Germany) GmbH23

EuroTec GmbH24

Unomedical s.r.o.25

EuroTec B.V.26

EuroTec Beheer B.V.26

Convatec Nederland B.V.27

Convatec Belgium BVBA28

EuroTec BV (Belguim Branch)29

Papyro-Tex A/S30

Convatec Denmark A/S31

Unomedical A/S32

Convatec Denmark Holdings ApS32

Convatec South Africa (PTY) Limited33

ConvaCare Medical South Africa (PTY) Ltd33

Convatec Middle East & Africa LLC34

Convatec Middle East FZ-LLC35

Convatec (Singapore) PTE Limited36

Convatec Malaysia Sdn Bhd37

Convatec China Limited (Beijing Branch)38

Convatec China Limited (Guang Zhou Branch)39

Convatec China Limited40

Convatec Dominican Republic Inc.41

Place of business and
registered office

New Zealand

Turkey

Sweden

Norway

Germany

Slovakia

Netherlands

Belgium

Denmark

South Africa

Egypt

United Arab Emirates

Singapore

Malaysia

China

Boston Medical Device Dominicana S.R.L.42

Dominican Republic

Convatec Hong Kong Limited43

Convatec Japan KK44

Convatec (Singapore) PTE Limited (Taiwan Branch)45

Convatec (Thailand) Co. Limited46

ZAO ConvaTec47

Convatec Korea, Ltd48

Convatec Argentina SRL49

Convatec Canada Limited50

Unomedical S.A de C.V.51

Boston Medical Care, S. de R.L. de C.V.52

Boston Medical Device de México, S. de R.L. de C.V.52

Unomedical Devices S.A. de C.V.53

Convatec Peru S.A.C.54

Convatec Brasil Ltda.55

Convatec Medical Care Assistência a Paciente Ltda55

Boston Medical Devices Colombia Ltda.56

Boston Medical Care S.A.S IPS57

Convatec Medical Care S.P.A58

Convatec Chile S.A.58

Boston Medical Device Ecuador S.A.59

Boston Medical Device de Venezuela, C.A.60

Convatec India Private Limited61

ConvaCare Medical India Private Limited62

180 Medical Acquisition Inc.63

180 Medical Holdings Inc.63

180 Medical Inc.63

180 Medical Distribution Inc.64

Hong Kong

Japan

Taiwan

Thailand

Russia

Korea

Argentina

Canada

Mexico

Peru

Brazil

Colombia

Chile

Ecuador

Venezuela

India

Portion of ownership
interest
%

Portion of
voting power held
%

100%

Name

AbViser Medical, LLC65

Boston Medical Device, Inc.66

Convatec Inc.66

Boston Medical Device International, LLC66

Convatec Technologies Inc.67

Personally Delivered, Inc.68

Woodbury Holdings, Inc.68

WPI Acquisition Corporation68

WPI Holdings Corporation68

Wilmington Medical Supply, Inc.69

PRN Medical Services, LLC70

PRNMS Investments LLC70

Symbius Medical Inc.70

South Shore Medical Supply, Inc.71

Unomedical America, Inc.72

Unomedical, Inc.72

J&R Medical, LLC73

Cure Medical LLC74

Convatec Triad Life Sciences, LLC75

Convatec NAP Holdings, Inc.75

A Better Choice Medical Supply, L.L.C76

All American Medical Supply Corp.77

Place of business and
registered office

Portion of ownership
interest
%

Portion of
voting power held
%

100%

4.
5.

6.
7.

10.

GDC First Avenue, Deeside Industrial Park,
Deeside, Flintshire CH5 2NU, UK
20 Eastbourne Terrace, Paddington, London W2
6LG, United Kingdom
44 Esplanade, St. Helier, Jersey, JE4 9WG, Channel
Islands
10 Earlsfort Terrace, Dublin 2, D02 T380, Ireland
90, Boulevard National, La Garenne Colombes,
F-92250, Paris, France
12C, rue Guillaume Kroll, L-1882, Luxembourg
Constitucion 1, 3ªPlanta, 08960 Sant Just Desvern,
Barcelona, Spain
Avenida da Liberdade, 249 ‐1, 1250‐143 Lisbon,
Portugal
Avenida das Forças Armadas, 125, 12, 1600-079,
Lisbon, Portugal
Life Science Center, Keilaranta 16 B, 02150 Espoo,
Finland

11. Mühlentalstrasse 38, 8200 Schaffhausen,

Switzerland

12. Mühlentalstrasse 36/38, 8200 Schaffhausen,

Lautruphøj 1 DK-2750 Ballerup, Denmark

31.
32. Åholmvej 1-3, 4320 Lejre, Denmark
33. Workshop 17 Office 1-4, 16 Baker Street,

Rosebank, Johannesburg, Gauteng 2196, South
Africa

54. Av. La Encalada 1010 of. 806, Santiago de Surco,

Lima 15023, Perú

55. Rua Alexandre Dumas, 2100,15º. Andar, Ed

Corporate Plaza, Conj 151 e 152, – Chácará Stº
Antonio – São Paulo, Brazil Cep: 04717-913

34. Plot 140, Financial Center, New Cairo, Banking

56. Torre los Nogales, Calle 76 # 11-17, Fifth and

Sector, 5th Settlement, Cairo, Egypt

Second Floor, Bogotá, Colombia

35. № 604N, Floor 6, HQ Complex, Dubai, United

Arab Emirates

36. 456 Alexandra Road, Fragrance Empire Building

#18-01/02, Singapore 119962

37. 10th Floor, Menara Hap Seng, No. 1 & 3, Jalan P
Ramlee, 50250, Kuala Lumpur, Malaysia
38. Unit 805, 8F Jinbao Tower, No.89 Jinbao Street
Dongcheng District, Beijing 100005, P.R.C.

39. Unit 808, Level 8, Fortune plaza, No.116 Ti Yu
Dong Road, Tianhe District, Guangzhou City,
Guanghzhou Province, 510620, P.R.C.
40. Unit 1105-1106, Crystal Plaza Office Tower 1,

No.1359 Yaolong Road, Pudong District, Shanghai
200124, P.R.C

57. Calle 82 # 18-31, Bogotá, Colombia
58. Av. Andres Bello #2325, Oficina 8, Santiago, Chile
59. Robles E4-136 y Av. Amazonas, Edificio Proinco
Calisto, piso 12, Quito, Ecuador EC170526
60. Av. Sorocaima, Libertador con Venezuela, Edif

Atrium. Piso 3, Oficina 3G, Urb El Rosal, Municipio
Chacao, Edo, Miranda, Venezuela

61. Unit No 206, Tower B, Digital Greens, Sector-61,
Golf Course Extension Road, Gurgaon-122102,
Haryana, India

62. 10th Floor 1002 B, Mangnum Tower-1, Gold

Course Extention Road, Sector 58, Gurugram,
Gurgaon, Haryana, India, 122011

63. 8516 Northwest Expressway, Oklahoma City, OK

Switzerland

41. 1013 Centre Road, Wilmington, County of New

73162, US

13. Schubertring 6, 1010 Wien, Austria
14. Via della Sierra Nevada, 60-00144 Rome, Italy
15. 392A Mesogeion Avenue, Ag. Paraskevi, 15341,

Athens, Greece

16. Al. Armii Ludowej 26, 00-609 Warszawa, Poland
17. Olivova 2096/4, Prague 1, 110 00, Praha 1, Czech

18.

Republic
Level 2 Building 5, Brandon Office Park, 530-540
Springvale Road, Glen Waverley VIC 3150,
Australia

Castle, Deleware, USA

42. Avenida Winston Churchill ES1. 27 de Febrero,

Apto Plaza Central, Tercer Nivel, del Sector
PIANTINI de la Ciudad de Santo Domingo de
Guzman, Suite A-368, Dominican Republic
43. Unit 1901 Yue Xiu Bldg 160–174, Lockhart Road,

64. The Corporation Trust Company, Corporation
Trust Center, 1209 Orange Street, Wilmington,
New Castle, Delaware 19801, US

65. 5314 Silvermoon Lane, Raleigh, 27606, NC, United

States

66. 200 Crossing Boulevard, Suite 101, Bridgewater,

Wan Chai, Hong Kong

NJ 08807 US

44. 1-1-7 Choraku, Bunkyo-ku, Tokyo 112-0004, Japan
45. 5F.-4, No. 57, Fuxing N. Rd, Songshan Dist., Taipei

67. 3993 Howard Hughes Parkway Suite 250, Las

Vagas, Nevada 89169-6754, US

City, Taiwan (Post code: 10595)

68. 725 Primera Blvd, Suite 230, Lake Mary, FL

19. Crowe Horwath, Level 29, 188 Quay Street,

46. No. 87, 9th Floor M Thai Tower All Seasons Place,

32746-2127, US

Auckland 1010, New Zealand

20. Şehit İlknur Keles Sokak, Hüseyin Bağdatlioğlu

Wireless Road, Lumpini, Phatumwan, Bangkok,
Thailand

69. 2626 Glenwood Ave Ste 550, Raleigh, NC 27608
70. 20333 N. 19th Avenue, Suite 101, Phoenix, AZ

Plaza 7/3, Kozyatagi, Istanbul, Turkey 34742

47. Kosmodamianskaya nab. 52, building 1, 9th floor,

85027-3627, US

21. Box 15138, 167 51 Bromma, Stockholms Ian,

115054, Moscow, Russia

71. 58 Norfolk Avenue, Unit 2, South Easton, MA

Stockholm kommun, Sweden

48. 4F, American Standard B/D, Yeongdongdaero

02375-1907, US

22. Postboks 6464 Etterstad, 0605 Oslo, Norway
23. Gisela-Stein-Strasse 6, 81671 Munich, Germany
24. Solinger Strasse 93 40764 Langenfeld, Germany
25. Priemyselný Park 3, 071 01 Michalovce, Slovakia
26. Schotsbossenstraat 8, 4705AG Roosendaal,

112gil 66, Gangnam-Gu, Seoul, Republic of Korea
06083

72. 5701-1 S Ware RD, McAllen, TX 78504, US
73. 4625 Southwest Freeway, Suite 800, Houston, TX

49. CERRITO 1070 Piso:3 Dpto:71, 1010-CIUDAD
AUTONOMA BUENOS AIRES, Argentina
50. 900-1959 Upper Water Street, Halifax, Nova

77027-7105, US

74. 3471 Via Lido, Ste 211, Newport Beach, California

92663, United States

Netherlands

Scotia B3J 2N2, Canada

75. 251 Little Falls Drive, Wilmington, Delaware,

27. Houttuinlaan 5F, 3447 GM Woerden, Netherlands
28. Parc d’Alliance, Boulevard de France 9, B-1420

Braine l’Alleud, Belgium

51. Avenida Industrial Falcón, L7, Parque Industrial

19808, US

del Norte, Reynosa Tamps, Mexico C.P. 88736
52. Avenida Insurgentes sur 619, 3° Piso, CIUDAD DE

76. 3100 Dixie Hwy, Waterford Twp, MI 48328, United

States

29. Stationsstraat 35, 2950 Kapellen, Belgium
30. ConvaTec Harlev Skinderskovvej 32-36, 2730,

MEXICO, Nápoles, 03810, Mexico

77. 5493 Merrick Road, Massapequa, New York 11758

53. Av. Fomento Industrial L9 M3, Parque Industrial

*Directly held investment by Convatec Group Plc

Herlev, Denmark

del Norte, Reynosa Tamps, Mexico C.P. 88736

204

Convatec Group Plc Annual Report and Accounts 2023

205

Financial statements

Independent auditor’s report

Overview

Strategic report

Governance

Financial statements

Additional information

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF CONVATEC GROUP PLC

3. Summary of our audit approach

Report on the audit of the Financial Statements

1. Opinion

In our opinion:

– the Financial Statements of Convatec Group Plc (the ‘Company’) and its subsidiaries (the ‘Group’) give a true and fair

view of the state of the Group’s and of the Company’s affairs as at 31 December 2023 and of the Group’s profit for the
year then ended;

– the Group Financial Statements have been properly prepared in accordance with United Kingdom adopted international
accounting standards and International Financial Reporting Standards (IFRSs) as issued by the International Accounting
Standards Board (IASB);

– the Company Financial Statements have been properly prepared in accordance with United Kingdom Generally Accepted

Accounting Practice, including Financial Reporting Standard 101 “Reduced Disclosure Framework”; and

– the Financial Statements have been prepared in accordance with the requirements of the Companies Act 2006.

We have audited the Financial Statements which comprise:

– the Consolidated Income Statement;
– the Consolidated Statement of Comprehensive Income;
– the Consolidated and Company Statements of Financial Position;
– the Consolidated and Company Statements of Changes in Equity;
– the Consolidated Statement of Cash Flows;
– the related Notes 1 to 29 of the Consolidated Financial Statements and Notes 1 to 10 of the Company Financial Statements.

The financial reporting framework that has been applied in the preparation of the Group Financial Statements is applicable law and
United Kingdom adopted international accounting standards and IFRSs as issued by the IASB. The financial reporting framework
that has been applied in the preparation of the Company Financial Statements is applicable law and United Kingdom Accounting
Standards, including FRS 101 “Reduced Disclosure Framework” (United Kingdom Generally Accepted Accounting Practice).

2. Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the Financial Statements
section of our report.

We are independent of the Group and the Company in accordance with the ethical requirements that are relevant to our audit
of the Financial Statements in the UK, including the Financial Reporting Council’s (the ‘FRC’s’) Ethical Standard as applied to listed
public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. The non-audit
services provided to the Group and Company for the year are disclosed in Note 3.3 to the Group Financial Statements. We confirm
that we have not provided any non-audit services prohibited by the FRC’s Ethical Standard to the Group or the Company.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters

The key audit matters that we identified in the current year were:

– Revenue recognition in key markets;
– Valuation of contingent consideration provisions; and
– Acquisition of Starlight Science Limited.

The following were identified as key audit matters in 2022, that we no longer consider key audit
matters in the current year: (i) acquisition of Triad Life Sciences Inc and (ii) accounting for the exit
of hospital care and related industrial sales activities.

Within this report, key audit matters are identified as follows:

Newly identified

Increased level of risk

Similar level of risk

Decreased level of risk

Materiality

Scoping

The materiality that we used for the Group Financial Statements was $10.8m which was
determined based on profit before tax adjusted for certain items.

Combined, we performed audit procedures across 23 components in 13 countries accounting for
80% of revenue, 91% of profit before tax and 83% of net assets.

Significant changes in our
approach

In addition to changes in key audit matters discussed above, our audit approach for 2023 changed
to test and place reliance on relevant controls in certain centralised business processes.

4. Conclusions relating to going concern
In auditing the Financial Statements, we have concluded that the Directors’ use of the going concern basis of accounting in the
preparation of the Financial Statements is appropriate.

Our evaluation of the Directors’ assessment of the Group’s and Company’s ability to continue to adopt the going concern basis
of accounting included:

– Obtaining an understanding of the Directors’ process for determining the appropriateness of the use of the going concern basis;
– Assessing the availability of financing facilities including nature of facilities, repayment terms and covenants;
– Testing the accuracy of management’s models, including agreement to the most recent Board-approved budgets and forecasts;
– Challenging the key assumptions used in these forecasts by determining whether there was adequate support for the

assumptions, including consideration of ongoing global macroeconomic uncertainty;

– Assessing the historical accuracy of forecasts prepared by management;
– Evaluating sensitivity analysis and its impact on available financial headroom; and
– Assessing the appropriateness of the disclosures within the Financial Statements.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the Group’s and Company’s ability to continue as a going concern for
a period of at least 12 months from when the Financial Statements are authorised for issue.

In relation to the reporting on how the Group has applied the UK Corporate Governance Code, we have nothing material to add
or draw attention to in relation to the Directors’ Statement in the Financial Statements about whether the Directors considered
it appropriate to adopt the going concern basis of accounting.

Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections
of this report.

206

Convatec Group Plc Annual Report and Accounts 2023

207

Financial statements

Overview

Strategic report

Governance

Financial statements

Additional information

Independent auditor’s report continued

5. Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial
Statements of the current period and include the most significant assessed risks of material misstatement (whether or not due
to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy; the allocation
of resources in the audit and directing the efforts of the engagement team.

These matters were addressed in the context of our audit of the Financial Statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.

5.1. Revenue recognition in key markets

Key audit matter description

The Group recorded revenue of $2,142.4m for the year ended 31 December 2023 (31 December
2022: $2,072.5m) under IFRS 15: Revenue from contracts with customers.

How the scope of our audit
responded to the key audit
matter

As disclosed in Note 2.1 to the Group Financial Statements, the Group’s policy is to recognise
revenue when control over a product has transferred, generally on delivery, to a customer,
distributor or wholesaler. The Group measures revenue for goods sold based on the consideration
specified in a contract with a customer, net of discounts, rebates, chargeback allowances and sales-
related taxes. Further information is included in the geographic segment information in Note 2.2.

For certain sales of new and recently launched products to individual doctors, medical centres and
hospitals, there is judgement in estimating the transaction price due to:

– Uncertainties over the payment and timing of the customers’ insurance reimbursements; and
– The limited established market practice and customer payment history.

As the audit of revenue is one of the key determinants of our overall audit strategy requiring
significant allocation of audit resources, revenue recognition has been included as a key audit
matter. The Audit and Risk Committee includes its assessment of this matter on page 113.

We performed the following procedures:

– We completed walkthroughs of the revenue cycle to gain an understanding of the end-to-end

revenue processes and to evaluate relevant controls across the Group;

– We tested the general IT controls and relevant automated business controls in the main financial

reporting system used by the Group;

– We evaluated the accounting policy for revenue with new customers against the requirements of

IFRS 15;

– We assessed the relevance and reliability of the underlying data used in determining the

transaction price for certain contracts with customers for new and recently launched products;

– We performed analytical procedures to assess the relationship between revenue, receivables

and cash collections for new and recently launched products;

– We performed analytical reviews to identify potentially unusual sales trends and obtained an

explanation for any such movements;

– We held direct enquiries with category and geographic market leaders, assessing changes
in customer demand and new product introductions that might impact sales patterns;

– We performed detailed transaction testing on a sample basis, agreeing sales through to invoice,

final sales contracts and delivery notes;

– We reviewed a sample of distributor contracts to assess the terms of sale and to support

recalculation of rebates and chargebacks associated with the revenue; and

– We assessed whether the disclosures within the annual report and accounts are in compliance

with the requirements of IFRS 15.

Key observations

We are satisfied that revenue recognised across key markets and the disclosures made
are appropriate.

5.2. Valuation of contingent consideration provisions

Key audit matter description

The Group has completed a number of significant acquisitions in the current and prior years,
which resulted in the recognition of material contingent consideration provisions, which are
a key source of estimation uncertainty.

Contingent consideration provisions of $138.0m (31 December 2022: $140.0m) comprise of various
elements including milestone-based payments due upon regulatory clearances of early-stage
products; future revenue performance and revenue-based royalty payments. There is a level of
judgement associated with evaluating the ability and likelihood of achieving underlying conditions
of milestone payments given the complexity of the regulatory approval process, the estimation of
future revenues for early-stage products and the determination of the best estimate of the timing
of settlement of these obligations.

The valuation of contingent consideration has been disclosed as a key source of estimation
uncertainty within Note 1.4 to the Group Financial Statements. The Audit and Risk Committee
includes its assessment of this matter on page 112.

We performed the following procedures:

– We obtained an understanding of the relevant controls over the determination of contingent

consideration provisions;

– We reviewed the terms of purchase agreements relevant to the determination of contingent

consideration provisions and made direct enquiries of the Group’s legal counsel to understand
any significant terms;

– We challenged the assumptions underpinning the contingent consideration provisions,

including revenue projections, with reference to available market data, historical performance
where available and consistency with other accounting judgements;

– We made direct inquiries of the Group’s Research and Development function to understand
the latest status in relation to the expected timing of regulatory approvals which determine
milestone payment obligations;

– With involvement of our valuation experts, we evaluated applied discount rates;
– We performed sensitivity analysis over the potential outcomes; and
– We evaluated the appropriateness of the disclosures in the Financial Statements including the

disclosure as a key source of estimation uncertainty.

We are satisfied the assumptions used in the valuation of contingent consideration provisions
at the year-end are reasonable and within an acceptable range and reasonable. We consider the
disclosures in relation to the range of possible outcomes to be appropriate.

How the scope of our audit
responded to the key audit
matter

Key observations

5.3. Acquisition of Starlight Science Limited

Key audit matter description

In April 2023, the Group completed the acquisition of Starlight Science Limited (“Starlight”) for
a consideration of $123.4m, including deferred and contingent consideration of $66.7m. The
acquisition resulted in the recognition of identifiable product related intangible assets of $112.5m
and goodwill of $23.0m.

How the scope of our audit
responded to the key audit
matter

The key audit matter relates to key judgements in the acquisition accounting, including:

– The valuation of intangible assets identified and resulting goodwill. Management used a third-

party expert to assist with the valuation of the acquired intangibles balance; and

– The valuation of contingent consideration payable. Starlight was acquired in its pre-commercial
stage and as such is early in its business lifecycle. The valuation of contingent consideration
payable at 31 December 2023 has been evaluated within the Key Audit Matter above (5.2).

Full details in relation to the acquisition accounting are included within Note 26. The Audit and Risk
Committee include their assessment of this matter on page 112.

We performed the following procedures:

– We obtained an understanding of the relevant controls over the acquisition accounting, including
the determination of contingent consideration and the fair valuation of intangible assets arising
on acquisition;

– We assessed the significant terms of the acquisition within the purchase agreement;
– We evaluated management’s accounting for the transaction in accordance with IFRS 3

Business Combinations;

– We assessed the competence, capability, and objectivity of management’s expert;
– With involvement of our valuation experts, we evaluated management’s assumptions and the
appropriateness and application of the valuation methodology included in management’s
expert’s report; and

– We evaluated the appropriateness of disclosures in the Financial Statements.

Key observations

We conclude the acquisition to be appropriately recognised. We consider the disclosures in relation
to the acquisition to be appropriate.

208

Convatec Group Plc Annual Report and Accounts 2023

209

Financial statements

Overview

Strategic report

Governance

Financial statements

Additional information

Independent auditor’s report continued

6. Our application of materiality
6.1. Materiality

We define materiality as the magnitude of misstatement in the Financial Statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of
our audit work and in evaluating the results of our work.

Based on our professional judgement, we determined materiality for the Financial Statements as a whole as follows:

Materiality

$10.8m (2022: $9.8m)

$5.5m (2022: $5.9m)

Group Financial Statements

Company Financial Statements

Basis for determining materiality 4.8% (2022: 4.8%) of profit before tax adjusted

Rationale for the benchmark
applied

for certain items totalling $60.5m which include
acquisition and divestiture costs, termination
benefits and restructuring costs.

In determining our materiality benchmark,
we considered the focus of the users of the
Financial Statements. Profit before tax is the
base from which key performance measures
are calculated as well as key metrics used
in providing trading updates. We have
adjusted profit before tax for certain items
as summarised above.

The Company materiality equates to 0.1% (2022:
0.2%) of net assets.

In determining our materiality, we considered
net assets as the appropriate benchmark given
the Company is primarily a holding company
for the Group.

PBT adjusted for certain items

PBT adjusted
for certain items
$226.3m

PBT adjusted for certain items
Group materiality

6.2. Performance materiality

Group materiality $10.8m

Component materiality
range $5m to $8m

Audit Committee reporting
threshold $0.5m

We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and
undetected misstatements exceed the materiality for the Financial Statements as a whole.

Group Financial Statements

Company Financial Statements

Performance materiality

70% (2022: 70%) of Group materiality

70% (2022: 70%) of Company materiality

Basis and rationale for
determining performance
materiality

We set performance materiality at a level that we consider normal for the audit of public
companies. In determining performance materiality, we considered the following factors:

a. our risk assessment, including our understanding of the entity and its overall

control environment;

b. the quality of the control environment and control reliance adopted over certain business

processes and IT systems;

c. the disaggregated nature of the Group and the likelihood of an individually material error; and

d. our cumulative experience from prior year audits and level of corrected and uncorrected

misstatements identified.

6.3. Error reporting threshold

We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of $0.5m (2022: $0.5m),
as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit
Committee on disclosure matters that we identified when assessing the overall presentation of the Financial Statements.

7. An overview of the scope of our audit
7.1. Identification and scoping of components

Our Group audit was scoped on an entity level basis, assessing components against the risk of material misstatement at the Group
level. We have also considered the quantum of Financial Statement balances and individual financial transactions of a significant
nature. In performing our assessment, we have considered the geographical spread of the Group and any risks presented within
each region.

Based on this assessment, we focused our work on 13 (2022: 13) components covering six (2022: seven) countries, 69% (2022: 70%)
of revenue, 79% (2022: 83%) of profit before tax and 68% (2022: 74%) of net assets. All 13 (2022: 13) components were subject to a
full scope audit. The 13 (2022: 13) components are in the US, UK, Denmark, Germany, Italy and France, which include the principal
operating units of the Group.

In addition, we have performed specified audit procedures in 10 (2022: 10) components covering nine (2022: nine) countries, 11%
(2022: 12%) of revenue, 12% (2022: 5%) of profit before tax, and 15% (2022: 7%) of net assets. The 10 (2022: 10) components are
located in: the US, UK, Switzerland, Spain, Canada, Brazil, the Dominican Republic, Slovakia and Australia.

In carrying out our work, we responded to management’s continued progress in centralising finance processes in the GBS centre in
Portugal. We centrally determined the scope of the audit procedures executed by component audit teams and at the GBS centre.

Revenue

Profit before tax

Net assets

Full audit scope 69%
Speciﬁed audit procedures 11%
Review at group level 20%

Full audit scope 79%
Speciﬁed audit procedures 12%
Review at group level 9%

Full audit scope 68%
Speciﬁed audit procedures 15%
Review at group level 17%

7.2. Our consideration of the control
environment

We obtained an understanding of the
relevant internal controls over the
financial reporting process for our
audit risk assessment. As the Group’s
transformation and standardisation of
processes and controls has continued,
we have placed greater reliance on
financial controls. For relevant centralised
business processes within the GBS centre
in Portugal, we tested and placed reliance
on relevant controls, including automated
controls which directly address audit
risks of misstatement. Within other
components, we have obtained an
understanding of relevant controls.

We identified IT systems relevant to
the audit of the Group and obtained an
understanding of relevant IT controls. For
some operating companies, including the
main financial reporting IT environment
in the GBS centre in Portugal, we
tested the general IT controls with the
involvement of our IT specialists.

7.3. Our consideration of climate-related risks

In planning our audit, we have
considered the potential impact
of climate change on the Group’s
business and its Financial Statements.
The Group has reassessed the risk
and opportunities relevant to climate
change and maintained the Environment

& Communities risk as a principal risk
across the Group. This risk grading has
been maintained at the same level as the
prior year and has been considered and
embedded into the business as explained
in the Strategic Report.

As a part of our audit procedures, we
have reviewed the Group’s environment
related risk assessment and held
discussions with the Audit and Risk
Committee to understand the process
of identifying climate-related risks, the
determination of mitigating actions
and the impact on the Group’s Financial
Statements. While management has
acknowledged that the transition and
physical risks posed by climate change
have the potential to impact the medium
to long-term success of the business,
they have assessed that there is no
material impact arising from climate
change on the judgements and estimates
made in the Group Financial Statements
as at 31 December 2023 as explained
in Note 1.3 on page 153.

We performed our own qualitative risk
assessment of the potential impact of
climate change on the Group’s account
balances and classes of transactions and
did not identify any additional risks of
material misstatement. Our procedures
include reviewing disclosures included in
the Strategic Report to consider whether
they are materially consistent with the

Financial Statements and our knowledge
obtained in the audit.

7.4. Working with other auditors

As part of our oversight of the
component teams, planning meetings
were held with all component auditors.
The purpose of these planning
meetings was to determine whether
the component teams had sufficient
understanding of the Group’s businesses,
its core strategy and significant risks.

We issued our component teams
detailed instructions, included them
in our team briefings and discussed
their risk assessment. We also provided
direction in response to enquiries
made by the component auditors. All
the findings observed were discussed
with the component auditors in detail
and instructions to perform further
procedures were issued where relevant.

We visited local operations in Denmark,
the US, Slovakia, GBS Portugal and the
UK. Considering the importance of
GBS Portugal to the Group Financial
Statements, and the evolution of the
audit strategy to greater testing of and
reliance on financial controls in certain
global processes, we maintained frequent
interactions with management and
component teams during the planning
and audit execution stages.

210

Convatec Group Plc Annual Report and Accounts 2023

211

Financial statements

Overview

Strategic report

Governance

Financial statements

Additional information

Independent auditor’s report continued

8. Other information
The other information comprises the
information included in the annual
report, other than the Financial
Statements and our auditor’s report
thereon. The Directors are responsible
for the other information contained
within the annual report.

Our opinion on the Financial Statements
does not cover the other information
and, except to the extent otherwise
explicitly stated in our report, we do
not express any form of assurance
conclusion thereon.

Our responsibility is to read the other
information and, in doing so, consider
whether the other information is
materially inconsistent with the Financial
Statements or our knowledge obtained
in the course of the audit, or otherwise
appears to be materially misstated.

If we identify such material
inconsistencies or apparent material
misstatements, we are required to
determine whether this gives rise to a
material misstatement in the Financial
Statements themselves. If, based on the
work we have performed, we conclude
that there is a material misstatement of
this other information, we are required
to report that fact.

We have nothing to report in
this regard.

9. Responsibilities of directors
As explained more fully in the Directors’
responsibilities statement, the Directors
are responsible for the preparation of
the Financial Statements and for being
satisfied that they give a true and fair
view, and for such internal control as
the directors determine is necessary
to enable the preparation of Financial
Statements that are free from material
misstatement, whether due to fraud
or error.

In preparing the Financial Statements,
the Directors are responsible for
assessing the Group’s and the Company’s
ability to continue as a going concern,
disclosing as applicable, matters
related to going concern and using
the going concern basis of accounting
unless the Directors either intend to
liquidate the Group or the Company or
to cease operations, or have no realistic
alternative but to do so.

10. Auditor’s responsibilities
for the audit of the Financial
Statements
Our objectives are to obtain reasonable
assurance about whether the Financial
Statements as a whole are free from
material misstatement, whether due to
fraud or error, and to issue an auditor’s
report that includes our opinion.
Reasonable assurance is a high level
of assurance, but is not a guarantee

that an audit conducted in accordance
with ISAs (UK) will always detect a
material misstatement when it exists.
Misstatements can arise from fraud
or error and are considered material
if, individually or in the aggregate,
they could reasonably be expected
to influence the economic decisions
of users taken on the basis of these
Financial Statements.

A further description of our
responsibilities for the audit of the
Financial Statements is located on
the FRC’s website at: www.frc.org.uk/
auditorsresponsibilities. This description
forms part of our auditor’s report.

11. Extent to which the audit was
considered capable of detecting
irregularities, including fraud
Irregularities, including fraud, are
instances of non-compliance with laws
and regulations. We design procedures
in line with our responsibilities, outlined
above, to detect material misstatements
in respect of irregularities, including
fraud. The extent to which our
procedures are capable of detecting
irregularities, including fraud is
detailed below.

11.1. Identifying and assessing potential risks
related to irregularities

In identifying and assessing risks of
material misstatement in respect of
irregularities, including fraud and non-
compliance with laws and regulations,
we considered the following:

– the nature of the industry and sector,
control environment and business
performance including the design of
the Group’s remuneration policies, key
drivers for Directors’ remuneration,
bonus levels and performance targets;

– the Group’s own assessment of the
risks that irregularities may occur
either as a result of fraud or error
that was approved by the Board;

– results of our enquiries of

management, internal audit, the
Directors and the Audit Committee
about their own identification
and assessment of the risks of
irregularities, including those that
are specific to the Group’s sector;
– any matters we identified having

obtained and reviewed the Group’s
documentation of their policies and
procedures relating to:
– identifying, evaluating and

complying with laws and regulations
and whether they were aware of any
instances of non-compliance;
– detecting and responding to the

risks of fraud and whether they have
knowledge of any actual, suspected
or alleged fraud;

– the internal controls established

to mitigate risks of fraud or
non-compliance with laws
and regulations;

– the matters discussed among the
audit engagement team including
significant component audit teams
and relevant internal specialists,
including tax, valuations, IT and
forensics specialists regarding how
and where fraud might occur in the
Financial Statements and any potential
indicators of fraud.

As a result of these procedures, we
considered the opportunities and
incentives that may exist within the
organisation for fraud and identified the
greatest potential for fraud in certain
elements of revenue recognition and the
valuation of contingent consideration
provisions. In common with all audits
under ISAs (UK), we are also required to
perform specific procedures to respond
to the risk of management override.

We also obtained an understanding
of the legal and regulatory frameworks
that the Group operates in, focusing
on provisions of those laws and
regulations that had a direct effect
on the determination of material
amounts and disclosures in the Financial
Statements. The key laws and regulations
we considered in this context included
the UK Companies Act, Listing Rules,
pensions legislation and tax legislation.

In addition, we considered provisions
of other laws and regulations that do
not have a direct effect on the Financial
Statements but compliance with which
may be fundamental to the Group’s ability
to operate or to avoid a material penalty.
These included the Food and Drug
Administration (“FDA”) regulations and the
Medical Devices Regulations (“MDR”).

11.2. Audit response to risks identified

As a result of performing the above,
we identified revenue recognition in key
markets and the valuation of contingent
consideration provisions as key audit
matters related to the potential risk of
fraud. The key audit matters section of
our report explains the matter in more
detail and also describes the specific
procedures we performed in response
to those key audit matters.

In addition to the above, our procedures
to respond to risks identified included
the following:

– reviewing the Financial Statement

disclosures and testing to supporting
documentation to assess compliance
with provisions of relevant laws and
regulations described as having a direct
effect on the Financial Statements;

– enquiring of management, the
Audit Committee and both in-
house and external legal counsel
concerning actual and potential
litigation and claims;

– performing analytical procedures to
identify any unusual or unexpected
relationships that may indicate risks
of material misstatement due to fraud;
– reading minutes of meetings of those
charged with governance, reviewing
internal audit reports and reviewing
correspondence with tax authorities
in jurisdictions in which the Group
operates; and

– in addressing the risk of fraud through

management override of controls,
testing the appropriateness of journal
entries and other adjustments;
assessing whether the judgements
made in making accounting estimates
are indicative of a potential bias; and
evaluating the business rationale of
any significant transactions that are
unusual or outside the normal course
of business.

We also communicated relevant identified
laws and regulations and potential
fraud risks to all engagement team
members including internal specialists
and significant component audit teams,
and remained alert to any indications of
fraud or non-compliance with laws and
regulations throughout the audit.

Report on other legal and
regulatory requirements

12. Opinions on other matters
prescribed by the Companies
Act 2006

In our opinion the part of the directors’
remuneration report to be audited has
been properly prepared in accordance
with the Companies Act 2006.

In our opinion, based on the work
undertaken in the course of the audit:

– the information given in the strategic

report and the Directors’ report for the
financial year for which the Financial
Statements are prepared is consistent
with the Financial Statements; and

– the strategic report and the
Directors’ report have been
prepared in accordance with
applicable legal requirements.

In the light of the knowledge and
understanding of the Group and the
Company and their environment
obtained in the course of the audit,
we have not identified any material
misstatements in the strategic report
or the Directors’ report.

13. Corporate Governance
Statement
The Listing Rules require us to review the
Directors’ Statement in relation to going
concern, longer-term viability and that part
of the Corporate Governance Statement
relating to the Group’s compliance with the
provisions of the UK Corporate Governance
Code specified for our review.

14.2. Directors’ remuneration

Under the Companies Act 2006 we
are also required to report if in our
opinion certain disclosures of directors’
remuneration have not been made or the
part of the directors’ remuneration report
to be audited is not in agreement with
the accounting records and returns.

Based on the work undertaken as part
of our audit, we have concluded that
each of the following elements of the
Corporate Governance Statement is
materially consistent with the Financial
Statements and our knowledge obtained
during the audit:

– the Directors’ statement with regards

to the appropriateness of adopting the
going concern basis of accounting and
any material uncertainties identified
set out on page 152;

– the Directors’ explanation as to its

assessment of the Group’s prospects,
the period this assessment covers and
why the period is appropriate set out
on page 86;

– the Directors’ statement on fair,

balanced and understandable set out
on page 111;

– the Board’s confirmation that it has

carried out a robust assessment of the
emerging and principal risks set out
on page 76;

– the section of the annual report that

describes the review of effectiveness of
risk management and internal control
systems set out on page 105; and

– the section describing the work of the
Audit Committee set out on page 100.

14. Matters on which we are
required to report by exception
14.1. Adequacy of explanations received and
accounting records

Under the Companies Act 2006 we
are required to report to you if, in our
opinion:

– we have not received all the

information and explanations we
require for our audit; or

– adequate accounting records have not
been kept by the Company, or returns
adequate for our audit have not been
received from branches not visited by
us; or

– the Company Financial Statements are
not in agreement with the accounting
records and returns.

We have nothing to report in
respect of these matters.

15. Other matters which we are
required to address
15.1. Auditor tenure

Following the recommendation of the
Audit Committee, we were appointed
by the Directors on 12 December 2016
to audit the Financial Statements for
the year ending 31 December 2016 and
subsequent financial periods. The period
of total uninterrupted engagement
including previous renewals and
reappointments of the firm is 8 years,
covering the years ending 31 December
2016 to 31 December 2023.

15.2. Consistency of the audit report with the
additional report to the Audit Committee

Our audit opinion is consistent with the
additional report to the Audit Committee
we are required to provide in accordance
with ISAs (UK).

16. Use of our report
This report is made solely to the
Company’s members, as a body, in
accordance with Chapter 3 of Part 16 of
the Companies Act 2006. Our audit work
has been undertaken so that we might
state to the Company’s members those
matters we are required to state to them
in an auditor’s report and for no other
purpose. To the fullest extent permitted
by law, we do not accept or assume
responsibility to anyone other than the
Company and the Company’s members as
a body, for our audit work, for this report,
or for the opinions we have formed.

As required by the Financial Conduct
Authority (FCA) Disclosure Guidance and
Transparency Rule (DTR) 4.1.15R – DTR
4.1.18R, these Financial Statements
form part of the Electronic Format
Annual Financial Report filed on the
National Storage Mechanism of the FCA
in accordance with DTR 4.1.15R – DTR
4.1.18R. This auditor’s report provides no
assurance over whether the Electronic
Format Annual Financial Report has been
prepared in compliance with DTR 4.1.15R
– DTR 4.1.18R.

Claire Faulkner, FCA
(Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London, United Kingdom
5 March 2024

212

Convatec Group Plc Annual Report and Accounts 2023

213

Additional information

Overview

Strategic report

Governance

Financial statements

Additional information

Transition Plan Taskforce supplementary information

Shareholder information

This year, we reviewed our carbon reduction plans and climate strategy against the Transition Plan Taskforce (TPT) requirements
to support our strategic climate ambition. The complex challenge of achieving net zero means further work is needed to advance
our plans in the coming years. However, our actions in 2023 are consistent with meeting TPT requirements. Further information
is outlined on page 58.

ALIGNING WITH THE TRANSITION PLAN TASKFORCE DISCLOSURE FRAMEWORK

Transition Plan governance

Engagement strategy

Implementation strategy

Roles, responsibility
and accountability

The development, implementation
and monitoring of our Transition Plan
is led by our ESG Steering Committee,
with accountability shared across the
organisation. Responsibilities specific
to the Transition Plan are captured
as part of ESG and climate-related
responsibilities. See pages 40 and 41
for details on our ESG and Transition
Plan governance.

Our Executive Remuneration Policy
is linked to progress against energy
and carbon reduction. This policy is
communicated to key stakeholders
and used to drive accountability
for our climate strategic ambition,
consistent with our strategy to
embed ESG practices.

We have shared educational
materials with key stakeholders
to ensure that these topics are
appropriately understood. We have
also expanded the use of our digital
product sustainability tool.

Value chain

We acknowledge that a ‘whole
economy’ approach is necessary
to achieve a net zero transition,
and our value chain partners
are critical to Convatec’s ability
to achieve our net zero target
by 2045. When engaging with
our partners, we aim to nurture
long-term relationships based
on the principles of fairness
and transparency through both
our commercial dialogue and
supplier assessments.

We have set specific targets to
engage our supply chain, ensuring
80% are participating through the
EcoVadis platform. We also require
our highest-spend suppliers to set
science-based targets by 2026 and
are working closely to support and
improve their sustainability efforts.
In our materiality assessment (see
page 44), we reviewed stakeholder
perception and interests.

See pages 42 and 43 for further
details on our engagement relating
to our Transition Plan.

Business operations

We have identified and evaluated
near-term carbon abatement
opportunities at all our
manufacturing sites, and these
have now been incorporated
into our strategic plan.

Financial planning

Business units/functions assess the
impact of climate issues as part of
our strategic planning cycle which
informs our budgeting process.

In addition, our TCFD climate
scenario analysis (see page 68), which
quantifies potential financial climate
impacts, can be used to better
understand the level of resource and
investment that should be directed to
climate action to minimise potential
future impacts on cashflow.

Policies and condition

The following policies support the
integrity of our Transition Plan:
Environmental policy, Heath and
safety policy, Code of Ethics and
Business Conduct policy and Human
rights and Labour standards policy.

Business model Implications

Iterating our plan over time

Overcoming industry challenges

Convatec has specific industry-related challenges to
overcome when seeking to decarbonise the value chain.
One of the major challenges Convatec faces as a medical
technology company is to identify feasible sustainable
product solutions, whilst prioritising product quality,
safety and efficacy which can inhibit alternative material
and waste circularity options. Another consideration
is the R&D lead times and product line manufacturing
lifetimes, which can delay any product design-related
decarbonisation impacts.

To better understand the sustainable product
opportunities, we have implemented our Green Design
Guidelines (see page 50), which offer a framework to
assess product sustainability and guide our design
processes to minimise environmental impacts, which
includes the lowering of product life cycle emissions.

We intend to iterate our Transition Plan over time as
our maturity evolves. We have identified the following
areas of focus against the UK Transition Plan Taskforce
Guidance, https://transitiontaskforce.net/wp-content/
uploads/2023/10/TPT_Disclosure-framework-2023.pdf
which we plan to address in the coming years.

– Synergies and trade-offs to advance social impacts

in communities where we operate (1.1d)

– Climate adaptation and mitigation plans – key

assumptions (1.3x) and financial implications (2.4c)
– Action planning to support product sustainability

measures (2.2)

– Integration of our strategic ambition into financial

planning (2.4) and performance metrics (4.3d)

– Engagement with our value chain, industry and the
public sector to support our strategic ambition and
climate goals (3.1, 3.2 and 3.3)

– Integrating nature-based impacts into our transition
plan (4.1) and our approach to carbon credits (4.4)

– Embedding our strategic ambition across the

business (5.3)

Our corporate website:
www.convatecgroup.com
Information about our Stock Exchange
announcements, key dates in our
financial calendar, our share price
information and background information
is available on our corporate website
at www.convatecgroup.com/investors.

We will release our interim results
for the six months ended 30 June 2024
on 30 July 2024.

Shareholders may also receive
information by email by signing up to the
news alert service available at www.
convatecgroup.com/investors/sign-up-
for-more-information.

Share price information
Our closing share price as at
31 December 2023 was 244.2p.

Managing your shareholding
You can manage your shareholding online
by registering to use Investor Centre, a
free and secure website. Investor Centre
is available 24 hours a day, 365 days a year.
To find out more about Investor Centre visit
www.investorcentre.co.uk. Registration is
a straightforward process and all you will
need is your shareholder reference number
(SRN) and registered address details.

Shareholders who prefer not to manage
their shareholding online can contact
our Registrars, Computershare Investor
Services PLC, who manage our share
register. The shareholder helpline number
is +44 (0) 370 703 6219 and further
information about Computershare
Investor Services PLC is set out below.

Share fraud
We would like to warn all of our
shareholders to be very wary of any
unsolicited telephone calls or letters
which offer investment advice, offer to
buy your shares at a discounted price,
or sell them at an inflated price or offers
free company reports. This type of call
should be treated as an investment scam.
Further information about investment
scams and how they should be reported
is available at www.convatecgroup.com/
investors/shareholder-services/.

Company Secretary
and registered office
Robyn Butler-Mason
7th Floor, 20 Eastbourne Terrace
Paddington
London
W2 6LG
United Kingdom

Registrar
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS13 8AE
United Kingdom
Telephone: +44 (0) 370 703 6219
Contact: www.investorcentre.co.uk/
contactus

Auditor
Deloitte LLP

Brokers
Citigroup Global Markets Limited
UBS Limited

Solicitors
Freshfields Bruckhaus Deringer LLP

Internet share dealing
Please note that, if you wish to purchase
shares in the Company, you may do
so through a bank or stockbroker.
Alternatively, please go to www.
computershare.com/dealing/uk for a
range of dealing services made available
by Computershare; this service is only
available to shareholders in the UK.
This service provides shareholders
with a convenient way to buy or sell
the Company’s ordinary shares on the
London Stock Exchange. The commission
is 1.4%, subject to a minimum charge of
£40. In addition, stamp duty, currently
0.5%, is payable on purchases. Real-
time dealing is available during market
hours. In addition, there is a convenient
facility to place your order outside
of market hours.

Up to 90-day limit orders are available for
sales. Before you can trade you will need
to register for the service. To access go to
www.computershare.com/dealing/uk.

Shareholders should have their SRN
available. The SRN appears on share
certificates as it will be required as part
of the registration process. A bank debit
card will be required for purchases.

Postal share dealing
Please note this service is, at present,
only available to shareholders resident
in the UK. The commission is 1.4% plus
a charge of £40. In addition, stamp duty,
currently 0.5%, is payable on purchases.
The service is available from 8.00am to
4.30pm Monday to Friday, excluding bank
holidays, on telephone number +44 (0)
370 703 0084. Before you trade you will
need to register for this service. This can
be done by going online at
www.computershare.com/dealing/uk.
Shareholders should have their SRN ready
when making the call. The SRN appears
on share certificates. A bank debit card will
be required for purchases. Detailed terms
and conditions are available on request
by telephoning +44 (0) 370 703 0084.

Please note that due to the regulations
in the UK, Computershare are required
to check that you have read and accepted
their Terms and Conditions before being
able to trade, which could delay your
first telephone trade. If you wish to trade
quickly, we suggest visiting their website
and registering online first.

214

Convatec Group Plc Annual Report and Accounts 2023

215

Additional information

Glossary

Overview

Strategic report

Governance

Financial statements

Additional information

Cash-
generating
units (CGUs)

CE mark

CELT

Code

The smallest identifiable
groups of assets that
generate cash inflows that
are largely independent
of the cash inflows from
other assets or groups of
assets.

Certification mark that
indicates conformity
with health, safety, and
environmental protection
standards for products
sold within the European
Economic Area.

Convatec Executive
Leadership Team.

UK Corporate Governance
Code 2018 in effect from
1 January 2019, issued by
the FRC.

Diluted
earnings per
share

Director

The calculation of diluted
earnings per share
includes the dilutive
impact of share awards
where the average market
price of the Group’s
ordinary shares exceeds
the exercise price.

A member of the Board
of Directors of Convatec
Group Plc.

Disclosure
guidance and
transparency
rules (DTRs)

FCA disclosure guidance
and transparency rules
with which the Group must
comply.

EBITDA

Effective tax
rate (ETR)

Earnings before interest,
tax, depreciation and
amortisation.

The tax charge in the
income statement as a
percentage of profit before
tax.

Countries located in
Europe, Middle East and
Africa.

Code of conduct Our code of conduct which

covers business conduct
and compliance issues,
including bribery and
corruption.

EMEA

Audit and Risk Committee.

CoE

Centre of Excellence.

Home Services
Group (HSG)

IASB

IBOR

IFRS

IFRIC

Infusion Care
(IC)

The Group’s US home
services business unit for
distribution catheter and
ostomy products.

International Accounting
Standards Board – the
independent standard
setting body of the IFRS
Foundation.

Interbank Offered Rate.

International Financial
Reporting Standards as
issued by the IASB.

International Financial
Reporting Interpretations
as issued by the IASB.

Disposable infusion sets
for diabetes insulin pumps,
similar pumps used in
continuous infusion
treatments for conditions
such as Parkinson’s
disease and a range of
products for hospital and
home healthcare markets.

Transformation
Initiative

TSL

TSR

Initiatives and associated
investment focused on
transforming the business
to deliver sustainable and
profitable growth.

Total Safety Leadership.

Total shareholder return.

UKLA

The UK’s Listing Authority.

US dollar, $,
cent or ¢

The currency of the United
States of America.

UTI

Urinary tract infection.

Viability period

The three-year period from
January 2024 to December
2026 (based on the Annual
Report).

Opex

Organic growth

Operating expenses, being
the total of selling and
distribution expenses,
general administrative
expenses and research
and development, and
other operating expenses.

Period-over-period growth
at constant currency,
adjusted for: Starlight
Science Limited (April
2023), A Better Choice
Medical Supply (July 2023)
and Triad Life Sciences
(March 2022) acquisitions;
and the discontinuation
of hospital care, related
industrial sales and
associated Russia
operations.

Organisational
Health Index
(OHI)

McKinsey index tracking
organisational health that
drives performance.

Ostomy Care
(OC)

Devices, accessories and
services for people with a
stoma (surgically created
opening where bodily
waste is discharged),
commonly resulting from
causes such as colorectal
cancer, inflammatory
bowel disease and bladder
cancer.

COGS

Cost of Goods Sold.

Equity cash
conversion

Free cash flow to equity
divided by adjusted net
profit.

Intellectual property.

Investor Relations.

Companies Act

Companies Act 2006, as
amended, of England and
Wales.

ESG

Convatec Group Plc.

ESMA

Environmental, Social and
Governance.

European Securities and
Markets Authority.

Company
or parent
company

Constant
currency
growth

Continence
Care (CC)

Constant currency growth
is calculated by applying
the applicable prior period
average exchange rates
to the Group’s actual
performance in the
respective period.

Products and services
for people with urinary
continence issues related
to spinal cord injuries,
multiple sclerosis, spina
bifida and other causes.

Critical Care
(CC)

Devices and products used
in intensive care units and
hospital settings.

COSO

The Committee of
Sponsoring Organizations,
a global organisation
providing a framework for
risk management, internal
control, governance and
fraud deterrence.

Corporate responsibility.

Data on file

Convatec internal testing
data as of October 2022

DE&I

Diversity, equity and
inclusion.

Derivatives

Financial instruments used
to reduce risk, the price
of which is derived from
an underlying asset, index
or rate.

European Union.

EURIBOR

Euro Interbank Offered
Rate.

FCA

FDA

FRC

GBS

GDGs

GDPR

Financial Conduct
Authority.

US Food and Drug
Administration.

Financial Reporting
Council.

Foreign exchange.

Global Business Services
(located in Lisbon, Bogota
and Kuala Lumpur).

Green Design Guidelines.

General Data Protection
Regulation.

GHG emissions

Greenhouse gas
emissions.

Group

GPO

H&S

The Company and its
subsidiaries.

Group purchasing
organisations.

Health and safety.

KPI – Key
Performance
Indicator

Financial and non-
financial measures that
the Group uses to assess
performance and strategic
progress.

PBT

Profit before income taxes.

Peakon

Workday employee voice
platform.

Leverage

Net debt divided by
covenant adjusted EBITDA.

PP&E

Property, plant and
equipment.

LTIP

LTIR

M&A

MAR

MDR

Net debt

NHS

OECD

Long-term incentive plan.

Product
categories

Lost time injury rate.

Mergers and acquisitions.

Market abuse regulation.

Medical Device Regulations
introduced in the EU with
required transition by
May 2021. MDR imposes
rigorous requirements in
relation to a number of
areas including clinical
data and post market
surveillance.

Borrowings less cash and
cash equivalents and
excluding lease liabilities.

R&D

ROIC

SBTi

SBTs

SID

SKU

SOFR

The Group has four
product groups, being
Advanced Wound Care,
Ostomy Care, Continence
Care and Infusion Care.

Research and
Development.

Return on invested capital.

Science Based Target
initiative.

Science Based Targets.

Senior Independent
Director.

Stock keeping unit.

Secured Overnight
Financing Rate.

MedTech

Medical technology.

UK National Health
Service.

SONIA

Sterling Overnight Index
Rate.

Organisation for Economic
Co-operation and
Development.

Sterling, £,
pence or p

The currency of the United
Kingdom.

Operating cash
conversion

Operating cash flow
divided by adjusted
operating profit.

Subsidiary

A company over which the
Group exercises control.

TCFD

Task Force on Climate-
related Financial
Disclosures.

Adjusted free
cash flow

Adjusted or
alternative
performance
measures
(APMs)

Advanced
Wound Care
(AWC)

AGM

ARA

ARC

Articles

Base erosion
and profit
shifting (BEPS)
initiative

Basic earnings
per share

Basis points
(bps)

Net cash generated from
operations, net of PP&E
and tax paid, before cash
outflows from adjusting
items.

Certain financial measures
in this Annual Report and
Accounts not prepared
in accordance with IFRS
and used as a meaningful
supplement to reported
measures.

Advanced wound
dressings and skin
care products for the
management of acute and
chronic wounds resulting
from ongoing conditions
such as diabetes and acute
conditions resulting from
traumatic injury and burns.

Annual General Meeting of
the Company.

Annual Report and
Accounts.

The Articles of Association
of the Company for the
time being in force.

OECD initiative which
seeks to close gaps in
international taxation for
companies that allegedly
avoid tax or reduce tax
burden in their home
country by engaging in tax
inversions.

Net profit available for
Convatec shareholders
divided by the weighted
average number of
ordinary shares in issue
during the year.

Board

The Board of Directors of
Convatec Group Plc.

Book tax rate

Compound
annual growth
rate (CAGR)

The tax charge in the
income statement as a
percentage of profit before
tax.

CAGR shows the rate of
growth over a certain
period of time, expressed
in annual percentage
terms.

Capital
expenditure
(capex)

Purchases of property,
plant and equipment and
intangible assets.

216

Convatec Group Plc Annual Report and Accounts 2023

217

Convatec Group Plc

7th Floor, 20 Eastbourne Terrace
Paddington
London
W2 6LG
United Kingdom

www.convatecgroup.com
Company No: 10361298

Additional information

Important information for readers of this Annual Report

Forward-looking statements are not
guarantees of future performance and
such uncertainties and contingencies,
including the factors set out in the
Principal Risks section of the Strategic
report which begins on page 80, could
cause the actual results of operations,
financial condition and liquidity, and the
development of the industry in which the
Group operates, to differ materially from
the position expressed or implied in the
forward-looking statements set out in
this Annual Report. Past performance of
the Group cannot be relied on as a guide
to future performance. Nothing in this
Annual Report should be construed as
a profit forecast.

Forward-looking statements are based only
on knowledge and information available
to the Group at the date of preparation
of this document and speak only as at the
date of this Annual Report. The Group and
its Directors, officers, employees, agents,
affiliates and advisers expressly disclaim
any obligations to update any forward-
looking statements (except to the extent
required by applicable law or regulation).

Third-party data
The industry and market data contained
in this Annual Report has come from
third-party sources and from the Group’s
own internal research and estimates
based on the knowledge and experience
of the Group’s management in the
market in which the Group operates.
While the Group believes that such
sources, research and estimates are
reasonable and reliable, they have
not been independently verified and
are subject to change without notice.
Accordingly, undue reliance should
not be placed on any of the industry
or market data in this Annual Report.

Convatec website
Information on or accessible through
our website www.convatecgroup.com
and other websites mentioned in this
Annual Report, does not form part
of and is not incorporated into this
Annual Report.

Figures
Figures in parentheses in tables and
in the Financial Statements are used
to represent negative numbers.

Cautionary statement regarding
forward-looking statements
The purpose of this Annual Report is
to provide information to the members
of the Company. The Group and its
Directors, employees, agents and
advisers do not accept or assume
responsibility to any other person to
whom this Annual Report is shown or
into whose hands it may come and
any such responsibility or liability is
expressly disclaimed. In order, among
other things, to utilise the “safe harbour”
provisions of the US Private Securities
Litigation Reform Act 1995 and the UK
Companies Act 2006, we are providing
the following cautionary statement: This
Annual Report contains certain forward-
looking statements with respect to the
operations, performance and financial
condition of the Group, including
among other things, statements about
expected revenues, margins, earnings
per share or other financial or other
measures. Forward-looking statements
are generally identified by the use of
terms such as “believes”, “estimates”,
“aims”, “anticipates”, “expects”, “intends”,
“plans”, “predicts”, “may”, “will”, “could”,
“targets”, “continues” or , in each
case, their negatives or other similar
expressions. These forward-looking
statements include all matters that
are not historical facts.

Forward-looking statements are
necessarily based upon a number
of estimates and assumptions that, while
considered reasonable by the Company,
are inherently subject to significant
business, economic and competitive risks,
uncertainties and contingencies that are
difficult to predict and many of which are
outside the Group’s control. As such, no
assurance can be given that such future
results, including guidance provided by
the Group, will be achieved.

Credits

Designed and produced by

Conran Design Group

Printed by

Pureprint Group, ISO14001, FSC® certified
and CarbonNeutral®

This Annual Report is printed on Revive Silk 100 paper,
manufactured from FSC® Recycled certified fibre derived from
100% pre and post-consumer waste and Carbon Balanced.

Printed sustainably in the UK by Pureprint, a CarbonNeutral®
company with FSC® chain of custody and an ISO 14001
certified environmental management system recycling
100% of all dry waste.

218

Convatec Group Plc Annual Report and Accounts 2023