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"value": "1. BASIS OF PREPARATION This section describes the Group\u2019s significant accounting policies that relate to the Consolidated Financial Statements
\nand explains critical accounting judgements and estimates that management has identified as having a potentially
\nmaterial impact to the Group. Specific accounting policies relating to the Notes to the Consolidated Financial Statements
\nare described within that note.
\n1.1 General information
\nConvatec Group Plc (the Company) is a public limited company incorporated in the United Kingdom under the Companies
\nAct of 2006. The Company's registered office is 3 Forbury Place, 23 Forbury Road, Reading RG1 3JH, United Kingdom.
\nThe Consolidated Financial Statements have been prepared in accordance with United Kingdom adopted international
\naccounting standards and International Financial Reporting Standards (IFRS) as issued by the International Accounting
\nStandards Board (IASB).
\nThe Consolidated Financial Statements are presented in US dollars (USD), reflecting the profile of the Company and its
\nsubsidiaries (collectively, the Group) revenue and operating profit, which are primarily generated in US dollars and US dollar-
\nlinked currencies. All values are rounded to $0.1 million except where otherwise indicated.
\nPages 2 and 3 in the Strategic report provide further detail of the Group's principal activities and nature of its operations.
\n1.2 Significant accounting policies
\nThe following significant accounting policies apply to the Consolidated Financial Statements as a whole:
\nBasis of accounting and presentation
\nThe consolidated financial information has been prepared on a historical cost basis, except for certain financial instruments
\nwhere fair value has been applied. Historical cost is generally based on the fair value of the consideration given in exchange
\nfor goods and services.
\nBasis of consolidation
\nThe Consolidated Financial Statements include the results of the Company and all its subsidiary undertakings. Subsidiaries
\nare entities controlled by the Group. Control exists when the Group: (i) has power over the investee; (ii) is exposed, or has
\nrights, to variable returns from its involvement in the investee; and (iii) has the ability to use its power to affect its returns.
\nThe Group reassesses whether or not it controls an entity if facts and circumstances indicate that there are changes to one
\nor more of the three elements of control listed above.
\nThe consolidated financial information of the Company's subsidiaries is included within the Group's Consolidated Financial
\nStatements from the date that control commences until the date that control ceases and is prepared for the same year-end
\ndate using consistent accounting policies.
\nGoing concern
\nAs discussed in the Financial review on pages 30 to 38, the overall financial performance of the business remains strong with a
\nrobust liquidity position.
\nAs at 31 December 2022, the Group held cash and cash equivalents of $143.8 million (31 December 2021: $463.4 million), and
\nborrowings of $1,211.9 million (31 December 2021: $1,344.6 million). During the year, the Group refinanced its bank facilities with
\n$1.2 billion committed for five years at the appropriate reference rate plus margins of 1.75% and 2.00% for the multicurrency
\nrevolving credit facility and the term loan facility respectively. The new credit facility of $1.2 billion comprises a $250.0 million
\nterm loan and a $950.0 million multicurrency revolving facility. The borrowings as at 31 December 2022 comprised senior
\nnotes of $500.0 million, term loan of $250.0 million, and multicurrency revolving credit facilities of $477.2 million, net of
\nunamortised financing fees of $15.3 million. The senior notes are repayable in 2029 and the term loan and multicurrency
\nrevolving credit facilities are repayable in 2027. $472.8 million of the multicurrency revolving credit facilities remained
\nundrawn as at 31 December 2022, which together with cash and cash equivalents of $143.8 million, provided the Group with
\ntotal liquidity of $616.6 million as at that date (2021: $663.4 million). The principal financial covenants remained unchanged
\nand as at 31 December 2022, the Group was in compliance with its financial covenants.
\nIn preparing their assessment of going concern, the Directors have considered available cash resources, financial performance
\nand forecast performance, including strategy delivery, together with the Group\u2019s financial covenant compliance requirements
\nand principal risks and uncertainties. The Directors have used cash flow forecasts derived from actual performance in 2022,
\nthe Board approved 2023 budget and longer-term strategic plan as foundations. The forecasts reflected the full potential
\nfunding requirements in relation to the remaining estimated contingent consideration payable in relation to the Triad Life
\nSciences and Cure Medical acquisitions, and the impact of exiting hospital care and industrial sales activities. The Directors
\nhave considered a going concern period to 31 December 2024, which is at least 21 months from the date of approval of the
\nConsolidated Financial Statements.
\nNotes to the Consolidated Financial Statements
\nConvatec Group Plc Annual Report and Accounts 2022
172
\nFinancial statements
In accordance with FRC guidance, management applied severe but plausible downside scenarios linked to the Group\u2019s
\nprincipal and emerging risks, including supply chain disruption, cyber security disruption, significant regulatory breaches,
\nfinancial market distress and geopolitical events and sanctions to a key global market. Further details of the specific
\nscenarios are provided in the Viability statement on page 99. The Board has reviewed these scenarios as part of the going
\nconcern assessment and has concluded that these scenarios are in line with the Group\u2019s principal and emerging risks and
\ncontinue to reflect the financial risk of severe but plausible downside events and circumstances during the going concern
\nperiod. Under each scenario, the Group is forecast to retain significant liquidity and covenant headroom throughout the
\ngoing concern period.
\nThe Group has carried out reverse stress test against the forecast base case to determine the performance levels that would
\nresult in a breach of covenants. For a breach of covenants to occur in the next 12 months, before mitigation, the Group would
\nneed to experience a sustained revenue reduction of more than 10% across all categories and markets. This was considered to
\nbe implausible given the Group\u2019s strong global market position and diversified portfolio of products and the mitigations
\navailable to the Board and management, which include minimising capital expenditure to critical requirements and reducing
\nlevels of discretionary spend.
\nAccordingly, at the time of approving these Consolidated Financial Statements, the Directors have a reasonable expectation
\nthat the Group and the Company will have adequate liquid resources to meet their respective liabilities as they become due
\nand will be able to sustain its business model, strategy and operations and remain solvent for a period of at least 12 months
\nfrom 8 March 2023.
\nForeign currency translation and transactions
\nAssets and liabilities of subsidiaries whose functional currency is not US dollars are translated into US dollars at the rate of
\nexchange at the period end. Income and expenses are translated into US dollars at the average rates of exchange prevailing
\nduring the year. Foreign currency gains and losses resulting from the translation of subsidiaries into US dollars are recognised
\nin the Consolidated Statement of Comprehensive Income. Exchange differences arising from the translation of the net
\ninvestment in foreign operations are taken to the cumulative translation reserve within equity. They are recycled and
\nrecognised in the Consolidated Income Statement upon disposal of the operation.
\nIn preparing the financial statements of the individual companies, transactions in currencies other than the entity\u2019s functional
\ncurrency (foreign currencies) are recognised at the rates of exchange prevailing on the dates of the transactions. At each
\nreporting date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates
\nprevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated
\nat the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of
\nhistorical cost in a foreign currency are not retranslated. Any gain or loss arising from subsequent exchange rate movements
\nis included as an exchange gain or loss in the Consolidated Income Statement.
\n1.3 Climate change
\nThe Directors recognise the risk of climate change on the business and acknowledge that the Group must take appropriate
\naction to mitigate and, where feasible, prevent further climate change impact. Accordingly, climate related risks are considered
\nwithin the \u201cEnvironment and Communities\u201d principal risks and are discussed in greater detail in the \u201cPrincipal risks\u201d section
\nwithin the Annual Report and Accounts.
\nWhilst the valuation of our assets and liabilities has not been materially impacted as at 31 December 2022, the Group will
\ncontinue to monitor possible implications of climate related risks that could arise in future years on both future cash flows
\nand the valuation of the Group\u2019s assets and liabilities, as Government policies and the Group\u2019s own strategy and transition
\nplans evolve. Further detail is provided within the \u201cResponsible business review \u2013 communities\u201d and \u201cTCFD disclosure\u201d
\nsections of the Annual Report and Accounts on pages 66 to 87.
\n1.4 Critical accounting judgements and key sources of estimation uncertainty
\nThe preparation of financial statements, in conformity with adopted IFRS, requires management to make judgements,
\nestimates and assumptions that affect the application of accounting policies and the reported value of assets and liabilities,
\nincome and expense. Actual results may differ from these estimates or judgements of likely outcome. Management regularly
\nreviews, and revises as necessary, the accounting judgements that significantly impact the amounts recognised in the
\nConsolidated Financial Statements and the sources of estimation uncertainty that are considered to be \u201ckey estimates\u201d
\ndue to their potential to give rise to material adjustments in the Group\u2019s Consolidated Financial Statements within the next
\nfinancial year.
\nConsiderations for the identification of critical accounting judgements and key estimates
\nA detailed assessment was performed by management of the potential impact on each balance sheet caption and associated
\naccounting estimates and judgements at each reporting date during the year. In preparing the Consolidated Financial
\nStatements, no critical accounting judgements have been identified. A key estimate has been identified in relation to the
\nvaluation of the contingent consideration related to the acquisition of Triad Life Sciences Inc (Triad Life Sciences).
\nAs detailed further in the Group\u2019s Audit and Risk Committee report on pages 126 to 138, the Committee has reviewed,
\ndiscussed, and challenged management on identification and, where appropriate, the determination of its critical accounting
\njudgements and key estimates.
\n173
Convatec Group Plc Annual Report and Accounts 2022
\nAdditional information
Governance
Strategic report
Overview
Financial statements
1. BASIS OF PREPARATION (CONTINUED)
\nValuation of the contingent consideration in relation to the acquisition of Triad Life Sciences
\nThe contingent consideration is based on both specified post-acquisition financial and non-financial performance targets
\nas defined by the Merger Agreement. The contingent consideration is fair valued at the date of acquisition with key inputs
\nincluding a weighted probability of different scenarios and revenue projections based on internal forecasts, discounted using
\nan appropriate discount rate that reflects the relative risk of the investment as well as the time value of money.
\nActual revenue results may differ from estimates, leading to a change in the fair value of the contingent consideration.
\nManagement has identified that reasonably possible changes in certain key assumptions and forecasts may cause the
\ncalculated fair value of the contingent consideration to vary materially within the next financial year. The maximum
\nundiscounted contingent consideration payable under the Merger Agreement was $325.0 million, of which $50.0 million
\nwas paid during the year following successful attainment of the two short-term milestones. The estimated discounted fair
\nvalue of the remaining contingent consideration payable as at 31 December 2022 was $130.8 million.
\nManagement has determined that the reasonable potential range of discounted outcomes within the next financial year is
\nbetween $85.2 million and $230.8 million, compared to a maximum remaining undiscounted contingent consideration of
\n$275.0 million.
\nThe timing and amount of future contingent elements of consideration is therefore considered a key source of estimation
\nuncertainty. Refer to Note 26 \u2013 Acquisitions for more information.
\n1.5 Accounting standards
\nNew standards, interpretations and amendments applied for the first time
\nOn 1 January 2022, the Group adopted the following amendments which are mandatorily effective for the period beginning
\n1 January 2022:
\n\u2022
Onerous Contracts \u2013 Cost of Fulfilling a Contract (Amendments to IAS 37);
\n\u2022
Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16);
\n\u2022
Annual Improvements to IFRS Standards 2018-2020 (Amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41);
and
\n\u2022
References to Conceptional Framework (Amendments to IFRS 3).
\nThe adoption during the year of the amendments and interpretations has not had a material impact on the Consolidated
\nFinancial Statements.
\nApart from these changes, the accounting policies set out in the Notes have been applied consistently to both years
\npresented in these Consolidated Financial Statements.
\nNew standards, interpretations and amendments not yet effective
\nThere are a number of standards, amendments to standards and interpretations which have been issued by the IASB that are
\neffective in future accounting periods that the Group has decided not to adopt early.
\nThe following amendments are effective for the period beginning 1 January 2023:
\n\u2022
Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2);
\n\u2022
Definition of Accounting Estimates (Amendments to IAS 8);
and
\n\u2022
Deferred Tax Related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12).
\nThe following amendments are effective for the period beginning 1 January 2024:
\n\u2022
IFRS 16 Leases (Amendment \u2013 Liability in a Sale and Leaseback);
\n\u2022
IAS 1 Presentation of Financial Statements (Amendment \u2013 Classification of Liabilities as Current or Non-current);
and
\n\u2022
IAS 1 Presentation of Financial Statements (Amendment \u2013 Non-current liabilities with Covenants)
\nThe Group is currently assessing the impact of these new accounting standards and amendments and does not believe these
\nwill have a material impact on the Group.
\nOther interpretations and amendments
\nIn addition to these issued standards, there are a number of other interpretations, amendments and annual improvement
\nproject recommendations that have been issued but not yet effective that have not yet been adopted by the Group because
\napplication is not yet mandatory, or they are not relevant for the Group.
\n\u2022
IFRS 17 \u2013 Insurance contracts (effective from 1 January 2023)
is ultimately intended to replace IFRS 4. It sets out the
\nrequirements that a company should apply in reporting information about insurance contracts it issues and reinsurance
\ncontracts it holds. The Group believes that the adoption of IFRS 17 will not have a significant impact on the Consolidated
\nFinancial Statements.
\nNotes to the Consolidated Financial Statements
continued
\nConvatec Group Plc Annual Report and Accounts 2022
174
\nFinancial statements
RESULTS OF OPERATIONS
\nThis section includes disclosures explaining the Group\u2019s performance for the year, including segmental information,
\noperating costs, other expenses, taxation and earnings per share.
\n2. REVENUE AND SEGMENTAL INFORMATION
\n2.1 Revenue recognition
\nThe Group sells a broad range of products to a wide range of customers, including healthcare providers, patients and
\nmanufacturers. This note provides further information about how the Group generates revenue and when it is recognised
\nin the Consolidated Income Statement.
\nAccounting policy
\nRevenue recognition
\nThe Group measures revenue for goods sold based on the consideration specified in a contract with a customer, net of
\ndiscounts, chargeback allowances and sales-related taxes. Revenue is recognised when control over a product or service is
\ntransferred to a customer, distributor or wholesaler, which is generally when goods have been delivered, as most products
\nare insured by the Group until delivery. Due to the short-term nature of the receivables from sale of goods, the Group
\nmeasures them at the original transaction price without discounting. The transaction price is the amount the Group
\nexpects to receive at that date.
\nNature of goods and services
\nAdvanced Wound Care, Ostomy Care, Continence and Critical Care products are sold to pharmacies, hospitals and other
\nacute and post-acute healthcare service providers directly or through distributors and wholesalers. Products are also sold
\ndirectly to end customers (patients) through the Group's home services entities and a small number of clinical and retail
\noutlets. Infusion Care primarily serves business-to-business customers, consisting principally of the leading insulin pump
\nmanufacturers. A small proportion of its revenue is derived from business-to-business urology product sales.
\nIn 2022 and 2021, no single customer generated more than 10% of the Group's revenue.
\nNature, timing of satisfaction of performance obligations
\nPrincipally, the Group's contracts with customers contain a single performance obligation, that is the delivery of products
\nto customers. Revenue is typically recognised when the customer receives the product but is subject to the shipping terms
\nin each individual contract. Where non-standard shipping arrangements exist, revenue is recognised when control of the
\ngoods has transferred. Allowances for returns, where the contract specifies these terms, are made at the point of sale.
\nFor sales to distributors, revenue is recognised when title is transferred to the distributor and the distributor has assumed
\ncontrol, the timing of which depends on the contractual terms with each distributor. Chargeback allowances or
\ncontractual deductions relating to end-customer agreements, which may differ from distributor contracts, are made at
\nthe point of title transfer to the distributor. In certain European countries, rebates are provided to governments and are
\noften mandated by laws or government regulations. These rebates are estimated based on government regulations and
\nunbudgeted spending, laws and terms of individual rebate agreements, and are recorded as a deduction from revenue
\nat the time the related revenue is recorded. The estimates are adjusted periodically to reflect actual experience.
\nWhen distributors buy products from the Group at a contract price and sell these products to end-customers at a price
\nagreed with the Group that is lower than the distributors\u2019 list price, a chargeback may arise and a claim may be submitted
\nto the Group by the distributor. The provision for chargebacks is based on expected sell-through levels by the Group\u2019s
\ndistributors to contracted customers, as well as estimated distributor inventory levels. Retrospective claims are reviewed
\nagainst estimations to ensure provisions are regularly updated.
\nVolume discounts
\nThe Group offers certain prospective volume discounts to customers who achieve a specified volume amount or value
\nof purchases in any given year. Volume discounts that meet the definition of a material right are recognised as a separate
\nperformance obligation. Material rights are the option to purchase additional products at a discount which would not have
\nbeen given had the contract not been entered into and are incremental to the range of discounts typically given for those
\ngoods to that class of customer.
\nThe stand-alone selling price of these volume discounts is based on the discount that the customer would obtain when
\nexercising the option, adjusted for any discount the customer could receive without exercising the option and the
\nlikelihood that the option will be exercised. The revenue allocated to volume discounts is short term in nature and
\nrecognised proportionally to the pattern of options exercised by the customer or when the option expires.
\n175
Convatec Group Plc Annual Report and Accounts 2022
\nAdditional information
Governance
Strategic report
Overview
Financial statements
2. REVENUE AND SEGMENTAL INFORMATION (CONTINUED)
\nContract costs
\nIncremental costs in respect of obtaining a contract with a customer principally relate to commissions paid by the Group
\nto its sales representatives. Such costs are capitalised as an asset to the extent that they directly relate to a specific contract,
\nare used to generate or enhance resources used in satisfying performance obligations and are expected to be recovered.
\nThe amortisation period for commissions can differ according to the contract term. Renewals of milestones in the contract
\nare taken into account when determining the amortisation period. For each contract that has sales commissions paid, the
\nGroup has determined an appropriate amortisation period that is consistent with the transfer of control to the customer.
\nThese capitalised costs amounted to $5.4 million (2021: $5.6 million) at 31 December 2022 and the amount of related
\namortisation expense for the year ended 31 December 2022 was $4.3 million (2021: $3.6 million). There was no impairment
\nloss in respect of the costs capitalised.
\nContract balances
\nThe Group recognises contract liabilities that are primarily in respect of advance consideration received from customers
\nprior to transfer of the related products and material rights offered to customers for options to purchase additional
\ngoods. The contract liability balance at 31 December 2022 was $1.3 million (2021: $4.9 million).
\n2.2 Segment information
\nThe Board considers the Group\u2019s business to be a single segment entity engaged in the development, manufacture and
\nsale of medical products, services and technologies. R&D, manufacturing and central support functions are managed
\nglobally for the Group, supporting all categories of sales. Revenues are managed both on a category and regional basis.
\nThis note presents the performance and activities of the Group as a single segment.
\nPages 22 to 29 of the Strategic report provide further detail of category revenue.
\nThe Group's CEO, who is the Group's Chief Operating Decision Maker, evaluates the Group's global product portfolios on a
\nrevenue basis and evaluates profitability and associated investment on an enterprise-wide basis due to shared infrastructures
\nand support functions between the categories and geographies. Financial information in respect of revenues provided to the
\nCEO for decision-making purposes is made on both a category and geographic basis. Resources are allocated on a Group-wide
\nbasis, with a focus on key categories and the key markets. The allocations are based on the relative merits of the individual
\nproposals across the Group.
\nRevenue by category
\nThe Group generates revenue across four major product
\ncategories. The following chart sets out the Group's
\nrevenue for the year ended 31 December by category:
\nRevenue by category ($m)
\nGeographic markets
\nThe following chart sets out the Group's revenue by
\ngeographic market in which third-party customers
\nare located:
\nRevenue by geography ($m)
\n2021
\n522.1
620.7
\nAdvanced
\nWound Care
\nAdvanced
\nWound Care
\nOstomy Care
\nOstomy Care
\nContinence &
\nCritical Care
\nContinence &
\nCritical Care
\nInfusion Care
\nInfusion Care
\n546.3
383.4
\n2022
2,072.5
\n546.5
592.3
542.9
356.6
\n2,038.3
\n688.6
\nEurope
North America
RoW
\n(1)
\nEurope
North America
RoW
\n(1)
\n1,090.3
293.6
\n2022
2,072.5
\n741.6
1,022.1
274.6
\n2,038.3
\n2021
\n1.
Rest of World (RoW) comprises all countries in Asia-Pacific,
\nLatin America (including Mexico and the Caribbean), South America,
\nthe Middle East (including Turkey) and Africa.
\nFrom 2023 onwards, Flexi-Seal
\nTM
\n(2022 revenue: $65.8 million), our faecal management system, will move from Continence &
\nCritical Care to Ostomy Care. The remaining industrial sales, predominantly continence-related supplies for B2B customers
\n(2022 revenue: $16.7 million) will move from Infusion Care into Continence Care. Going forward the Continence & Critical Care
\ncategory will be renamed Continence Care.
\nNotes to the Consolidated Financial Statements
continued
\nConvatec Group Plc Annual Report and Accounts 2022
176
\nFinancial statements
Geographic regions
\nThe following table sets out the Group's revenue on the basis of where the legal entity generating the revenue resides,
\nincluding countries representing over 10% of Group revenue and the UK, where the Group is domiciled:
\n2022
\n$m
\n2021
\n$m
\nGeographic regions
\nUS
749.8
704.1
\nUK
131.5
147.2
\nDenmark
371.7
346.8
\nOther
\n1
\n819.5
840.2
\n2,072.5
2,038.3
\n1.
Other consists primarily of other countries in Europe, Asia-Pacific, Latin America and Canada.
\nThe following table sets out the Group's long-lived assets by country in which the legal entity resides:
\n2022
\n$m
\n2021
\n$m
\nLong-lived assets
\n1
\nUS
1,349.6
1,141.9
\nUK
695.7
777.8
\nDenmark
266.0
272.6
\nOther
318.0
316.5
\nTotal long-lived assets
2,629.3
2,508.8
\n1.
Long-lived assets consist of property, plant and equipment, right-of-use assets, intangible assets and goodwill.
\n3. OPERATING COSTS
\nThe Group incurs operating costs associated with the day-to-day operation of the business. These operating costs are
\ndeducted from revenue to calculate operating profit.
\n3.1 Operating profit
\nOperating profit is stated after deducting from revenue:
\nNotes
\n2022
\n$m
\n2021
\n$m
\nDepreciation:
\nProperty, plant and equipment
8
39.7
40.6
\nRight-of-use assets
24
22.1
22.8
\nAmortisation of intangible assets
9
147.4
147.2
\nImpairment/write-off of intangible assets
9
6.3
2.9
\nImpairment/write-off of property, plant and equipment
8
9.2
3.0
\nLoss on terminated leases
24
0.1
\u2013
\nAmounts in respect of inventories included in cost of sales
818.3
766.7
\nWrite-down of inventories
\n1
\n22.6
6.4
\nLease expenses
\n2
\n24
3.9
2.8
\nStaff costs:
\nWages and salaries
532.7
533.4
\nShare-based payment expense
19
16.7
16.4
\nSocial security costs
67.5
64.2
\nDefined contribution plans post-employment costs
21.2
21.0
\nDefined benefit plans pension costs
15
1.7
3.6
\nRecruitment and other employment-related fees
8.7
11.5
\nTotal staff costs
648.5
650.1
\n1.
The write-down of inventories to their realisable value is included in cost of sales.
\n2.
Lease expenses comprises the costs in respect of low-value leases and short-term leases. Refer to accounting policy in Note 24 \u2013 Leases.
\n177
Convatec Group Plc Annual Report and Accounts 2022
\nAdditional information
Governance
Strategic report
Overview
Financial statements
3. OPERATING COSTS (CONTINUED)
\nThe remuneration of the Executive Directors, which is set out on pages 139 to 151, has been audited and is included within staff
\ncosts and forms part of these Consolidated Financial Statements.
\n3.2 Employee numbers
\nThe average number of the Group's employees
\nby function:
\nEmployees by function
\nThe average number of the Group's employees
\nby location:
\nEmployees by location
\n2021
\n3,258
5,749
\nOperations
Sales and
\nmarketing
\nGeneral and
\nadministrative
\nR&D
\nOperations
Sales and
\nmarketing
\nGeneral and
\nadministrative
\nR&D
\n861
529
\n2022
10,397
\n3,104
5,587
863
471
\n10,025
\n6,214
\nEurope
North
\nAmerica
\nRoW
\nEurope
North
\nAmerica
\nRoW
\n1,405
2,778
\n2022
10,397
\n5,985
1,310
2,730
\n10,025
\n2021
\nThe total number of employees as at 31 December 2022 was 10,028 (2021: 10,134).
\n3.3 Auditor's remuneration
\nThe total remuneration of the Group's auditor, Deloitte LLP, for services provided to the Group during the year ended
\n31 December, is analysed below:
\n2022
\n$m
\n2021
\n$m
\nFees for audit services
\nGroup
1.5
1.2
\nSubsidiaries
3.0
3.2
\nTotal fees for audit services
4.5
4.4
\nFees for non-audit services
\nAudit-related assurance services
0.2
0.2
\nOther assurance services
0.1
0.2
\nTotal auditor remuneration
4.8
4.8
\nA description of the work performed by the Audit and Risk Committee to safeguard auditor independence when non-audit
\nservices are provided is set out in the Audit and Risk Committee report on pages 126 to 138.
\nNotes to the Consolidated Financial Statements
continued
\nConvatec Group Plc Annual Report and Accounts 2022
178
\nFinancial statements
4. OTHER OPERATING EXPENSES
\nOther operating expenses were as follows:
\n2022
\n$m
\n2021
\n$m
\nExit and divestiture-related activities
12.4
\u2013
\nImpairment of other intangible assets
1.4
\u2013
\n13.8
\u2013
\nAs a result of the exit from hospital care and industrial sales-related activities and disposal of a foreign subsidiary,
\nimpairments of $8.1 million to property, plant and equipment and $4.3 million to intangible assets have been recognised
\nduring the period. See Note 27 \u2013 Divestitures for further details. The impairment of other intangible assets relates to a legacy
\nacquisition-related customer relationship asset which was impaired as part of the rationalisation of activities in the portfolio.
\n5. NON-OPERATING (EXPENSE)/INCOME, NET
\nNon-operating (expense)/income, net was as follows:
\nNotes
\n2022
\n$m
\n2021
\n$m
\nNet foreign exchange (loss)/gain
\n1
\n(13.5)
4.3
\nRealisation of cumulative translation adjustments
27
(12.2)
\u2013
\nGain/(loss) on foreign exchange forward contracts
23
15.8
(9.7)
\nLoss on foreign exchange cash flow hedges
23
(16.5)
(3.9)
\nChange in contingent consideration
\n2
\n26
(29.5)
\u2013
\n(Loss)/gain on divestiture
27
(2.0)
0.5
\nOther non-operating income
0.2
\u2013
\nNon-operating expense, net
\n3
\n(57.7)
(8.8)
\n1.
The foreign exchange losses in 2022 primarily relate to the foreign exchange impact on intercompany transactions, including loans transacted in non-functional
\ncurrencies. The Group uses foreign exchange forward contracts to manage these exposures in accordance with the Group's foreign exchange risk management policy.
\n2.
The $29.5 million expense relates to the change in fair value of the contingent consideration for the Cure Medical ($5.8 million) and Triad Life Sciences ($23.7 million)
\nacquisitions as described in Note 26 \u2013 Acquisitions.
\n3.
Of the total net non-operating expense, $1.7 million (2021: $4.3 million) relates to mark-to-market derivatives, the cash flow impact of which have been shown within
\nthe changes in working capital section of the Consolidated Statement of Cash Flows.
\n179
Convatec Group Plc Annual Report and Accounts 2022
\nAdditional information
Governance
Strategic report
Overview
Financial statements
6. INCOME TAXES
\nThe note below sets out the current and deferred tax charges, which together comprise the total tax expense in the
\nConsolidated Income Statement. The deferred tax section of the note also provides information on expected future tax
\ncharges or benefits and sets out the deferred tax assets and liabilities held across the Group.
\nAccounting policy
\nThe tax expense represents the sum of current and deferred tax.
\nCurrent tax
\nCurrent tax is the expected tax payable or receivable on the taxable profit or loss for the year, using tax rates enacted or
\nsubstantively enacted at the reporting date, and any adjustment to tax payable in respect of prior years. Taxable profit
\ndiffers from profit before income taxes because taxable profit excludes items that are either never taxable or tax
\ndeductible or items that are taxable or tax deductible in a different period.
\nDeferred tax
\nDeferred tax is recognised using the balance sheet liability method for temporary differences between the carrying
\namounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred
\ntax is not recognised for temporary differences:
\n\u2022
on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects
\nneither accounting nor taxable profit or loss;
\n\u2022
arising on the initial recognition of goodwill;
\n\u2022
on investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse
\nin the foreseeable future.
\nDeferred tax assets and liabilities are measured at the tax rates that are expected to apply to temporary differences when
\nthe asset is realised or the liability is settled, based on the laws that have been enacted or substantively enacted by the
\nreporting date.
\nDeferred tax assets are recognised for unused tax losses, tax credits and deductible temporary differences, to the extent
\nthat it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets
\nare reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit
\nwill be realised.
\nDeferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and
\nthey relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they
\nintend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.
\nCurrent tax and deferred tax for the year
\nCurrent tax and deferred tax are recognised in the Consolidated Income Statement, except when they relate to items that
\nare recognised in other comprehensive income or directly in equity, in which case, the current tax and deferred tax are also
\nrecognised in other comprehensive income or directly in equity, respectively. Where current tax or deferred tax arises from
\nthe initial accounting for a business combination, the tax effect is included in the accounting for the business combination.
\nTax provisions
\nThe Group is subject to income taxes in numerous tax jurisdictions. Judgement is sometimes required in determining the
\nworldwide provision for income taxes. There may be transactions for which the ultimate tax determination is uncertain and
\nmay be challenged by the tax authorities. The Group recognises liabilities for anticipated or actual tax audit issues based
\non estimates of whether additional taxes will be due. Where an outflow of funds to a tax authority is considered probable
\nand the Group can make a reliable estimate of the outcome of the issue, management calculates the provision for the best
\nestimate of the liability. In assessing its uncertain tax provisions, management takes into account the specific facts of each
\nissue, the likelihood of settlement and the input of professional advice where required. The Group assumes that where a
\ntax authority has a right to examine amounts reported to it, they will do so and will have full knowledge of all relevant
\ninformation. Where the ultimate liability as a result of an issue varies from the amounts provided, such differences could
\nimpact the current and deferred tax assets and liabilities in the period in which the dispute is concluded.
\nNotes to the Consolidated Financial Statements
continued
\nConvatec Group Plc Annual Report and Accounts 2022
180
\nFinancial statements
6.1 Taxation
\nThe Group's income tax expense is the sum of the total current and deferred tax expense.
\n2022
\n$m
\n2021
\n$m
\nCurrent tax
\nUK corporation tax
\u2013
0.8
\nOverseas taxation
46.8
46.8
\nAdjustment to prior years
(2.0)
(4.3)
\nTotal current tax expense
44.8
43.3
\nDeferred tax
\nOrigination and reversal of temporary differences
(3.7)
(6.5)
\nChange in tax rates
(3.2)
4.4
\nAdjustment to prior years
1.2
(0.7)
\nBenefit from previously unrecognised tax losses
(20.1)
(6.8)
\nTotal deferred tax benefit
(25.8)
(9.6)
\nIncome tax expense
19.0
33.7
\nIn 2022, the deferred tax movement included a benefit of $20.1 million in respect of the recognition of previously
\nunrecognised tax losses in the US following the acquisition of Triad Life Sciences.
\nIn 2021, the change in tax rates mainly relates to the revaluation of the net deferred tax liability in the UK following the
\nenactment of Finance Act 2021, which increases the UK corporation tax rate from 19.0% to 25.0% from 1 April 2023.
\nThe Group\u2019s deferred tax benefit in the year ended 31 December 2021 was mainly influenced by the deferred tax benefit of
\n$6.8 million for the recognition of deferred tax assets following the acquisition of Cure Medical LLC (Cure Medical) in respect
\nof previously unrecognised tax losses in the US.
\n6.2 Reconciliation of effective tax rate
\nThe effective tax rate for the year ended 31 December 2022 was 23.2%, as compared with 22.3% for the year ended
\n31 December 2021.
\nTax reconciliation to UK statutory rate
\nThe table below reconciles the Group\u2019s profit before income taxes at the UK statutory rate to the Group's total income
\ntax expense:
\n2022
\n$m
\n2021
\n$m
\nProfit before income taxes
81.9
151.3
\nProfit before income taxes multiplied by rate of corporation tax in the UK
\nof 19.0% (2021: 19.0%)
15.6
28.7
\nDifference between UK and overseas tax rates
\n1
\n3.0
4.0
\nDeferred tax impact for increase in UK tax rate
\u2013
4.8
\nNon-deductible/non-taxable items
14.4
1.3
\nMovement in unrecognised tax losses and other assets
1.0
(0.1)
\nRecognition of previously unrecognised US deferred tax assets
(20.1)
(6.8)
\nMovement in provision for uncertain tax positions
2.5
(0.3)
\nOther
\n2
\n2.6
2.1
\nIncome tax expense and effective tax rate
19.0
23.2%
33.7
22.3%
\n1.
This includes changes in tax rates based on substantively enacted legislation across various tax jurisdictions as of 31 December.
\n2.
Includes tax on amortisation of finite-lived intangibles and taxes on unremitted earnings.
\nThe Group\u2019s income tax expense includes a $20.1 million tax benefit due to the recognition of deferred tax assets following
\nthe acquisition of Triad Life Sciences in respect of previously unrecognised tax losses in the US and the $9.5 million effect of
\nnon-deductible contingent consideration on the acquisition of both Triad Life Sciences and Cure Medical. Refer to Note 26 \u2013
\nAcquisitions for the acquisition accounting of Triad Life Sciences.
\n181
Convatec Group Plc Annual Report and Accounts 2022
\nAdditional information
Governance
Strategic report
Overview
Financial statements
6. INCOME TAXES (CONTINUED)
\nThe Group has worldwide operations and therefore is subject to several factors that may affect future tax charges, principally
\nthe levels and mix of profitability in different tax jurisdictions, transfer pricing regulations, tax rates imposed and tax regime
\nreforms. The calculation of the Group\u2019s tax expense involves a degree of estimation and judgements in respect of certain
\nitems for which the tax treatment cannot be finally determined until resolution has been reached with the relevant tax
\nauthority, specifically in relation to open tax and transfer pricing matters. Due to the high volume of intercompany
\ntransactions, the Group\u2019s evolving business model and the increasing complexity in interaction between multiple tax
\nlaws and regulations, transfer pricing requires judgement in determining the appropriate allocation of profits between
\njurisdictions. The Group assessed the impact of ongoing changes to the Group\u2019s operating model, the supporting
\ndocumentation for the tax and transfer pricing positions, existing tax authority challenges, and the likelihood of new
\nchallenges by tax authorities. In line with the requirements of IFRIC 23,
Uncertainty over Income Tax Treatments
, the Group
\nhas provided for uncertain tax positions in respect of transfer pricing positions and withholding tax liabilities. The net
\nincrease in provisions during 2022 was driven by the reassessment of estimates, and settlement and expiry of open tax issues
\nin various jurisdictions. Where open issues exist, the ultimate liability for such matters may vary from the amounts provided
\nand is dependent upon the outcome of discussions with the relevant tax authorities or, where applicable, appeal
\nproceedings. Accordingly, settlement and expiry of open tax issues could have a significant impact on future tax expenses.
\nThe Group is monitoring tax reforms driven by the OECD\u2019s project to address the tax challenges arising from the digitalisation
\nof the economy, including Global Anti-Base Erosion Model Rules (Pillar Two). The Group has analysed the tax impact of the
\nproject to the Group based on OECD model rules issued on 20 December 2021 and draft legislations available in jurisdictions
\nin which the Group operates in, and expect the tax impact to be not material in the foreseeable future. The Group will
\nreassess the tax impact once new legislation becomes available. This has no impact on the Group\u2019s result for 2022.
\n6.3 Deferred tax
\nThe components of deferred tax assets and liabilities at 31 December are as follows:
\n2022
\n$m
\n2021
\n$m
\nDeferred tax assets
26.6
28.9
\nDeferred tax liabilities
(83.2)
(87.2)
\n(56.6)
(58.3)
\n6.4 Movement in deferred tax assets and liabilities
\nDeferred tax is measured on the basis of the tax rates enacted or substantively enacted at the reporting date. The movements
\nin the deferred tax assets and liabilities were as follows:
\nInventory
\n$m
\nTax losses
\n$m
\nPP&E
\n$m
\nIntangibles
\n$m
\nInterest
\n$m
\nOther
\n$m
\nTotal
\n$m
\nAt 1 January 2021
14.2
55.3
1.2
(175.3)
21.4
23.2
(60.0)
\nRecognised in Income
\nStatement
(5.8)
34.4
(12.5)
1.1
(4.0)
(3.6)
9.6
\nRecognised in other
\ncomprehensive income
\u2013
\u2013
\u2013
\u2013
(0.9)
0.1
(0.8)
\nAcquisitions
(0.2)
\u2013
(0.1)
(9.1)
\u2013
\u2013
(9.4)
\nOther
\u2013
\u2013
\u2013
\u2013
\u2013
0.5
0.5
\nForeign exchange
0.2
(0.2)
0.4
0.9
\u2013
0.5
1.8
\nAt 31 December 2021
8.4
89.5
(11.0)
(
182.4
)
16.5
20.7
(
58.3
)
\nRecognised in Income
\nStatement
(1.4)
(5.5)
5.9
(
1.7
)
8.5
20.0
25.8
\nRecognised in other
\ncomprehensive income
\u2013
\u2013
\u2013
\u2013
2.4
\u2013
2.4
\nAcquisitions
\n1
\n(2.4)
6.3
\u2013
(36.2
)
\u2013
\u2013
(32.3
)
\nOther
\u2013
\u2013
\u2013
\u2013
-
1.1
1.1
\nForeign exchange
(1.3)
(0.2)
1.6
2.7
1.0
0.9
4.7
\nAt 31 December 2022
3.3
90.1
(3.5)
(217.6
)
28.4
42.7
(56.6
)
\n1.
Refer to Note 26 \u2013 Acquisitions for the acquisition accounting of Triad Life Sciences.
\nNet deferred tax liabilities provided in relation to intangible assets are predominantly in respect of temporary differences
\narising on assets and liabilities acquired as part of business combinations. The net movement in deferred tax liability in
\nrespect of intangible assets in 2022 mainly relates to the acquisition of Triad Life Sciences. An amount relating to deductible
\ntax amortisation of intangible assets of $15.4 million that are not expected to reverse against taxable income in the future
\n(2021: $15.9 million) is not recognised.
\nNotes to the Consolidated Financial Statements
continued
\nConvatec Group Plc Annual Report and Accounts 2022
182
\nFinancial statements
The Group has a history of US tax losses and has recognised a deferred tax asset on US tax losses at 31 December 2022
\nonly to the extent that there are suitable offsetting taxable temporary differences. In 2022, there was an increase in suitable
\noffsetting taxable temporary differences in the US resulting in an additional amount of tax losses in the US being recognised
\nas a deferred tax asset. In particular, upon acquisition of Triad Life Sciences, a net deferred tax liability of $32.3 million was
\nrecognised on acquisition (principally in relation to intangible assets \u2013 refer to Note 26 \u2013 Acquisitions for further details). Some
\nof this can be offset by the Group\u2019s US tax losses and, therefore, the deferred tax recognition criteria were met, resulting in a
\ntax benefit of $20.1 million being recognised. Following the Triad Life Sciences acquisition, all Federal tax losses in the US were
\nrecognised as deferred tax assets. Deferred tax assets on temporary differences of $0.3 million, state tax losses of $2.3 million
\nand foreign tax credits of $3.9 million remain unrecognised in the US based on forecasts of future taxable profit where the
\nunderlying assumptions are consistent with the impairment and going concern forecasts.
\nDeferred tax on inventory predominantly relates to a deferred tax asset recognised on intra-Group profits arising on
\nintercompany inventory that are eliminated in the Consolidated Financial Statements. As intra-Group profits are not eliminated
\nfrom the individual entities\u2019 tax returns, a temporary difference arises that will reverse when the inventory is sold externally.
\nOther net temporary differences include accrued expenses, employee costs, and pensions, for which a tax deduction is only
\navailable on a paid basis, research and development expenses, unremitted earnings and share-based payments.
\nTo the extent that dividends remitted from overseas subsidiaries and branches are expected to result in additional taxes,
\nappropriate amounts have been provided for. Deferred tax is not provided on temporary differences of $351.8 million in the
\nyear to 31 December 2022 (2021: $369.1 million) arising on unremitted earnings as management has the ability to control any
\nfuture reversal and does not consider such a reversal in the foreseeable future to be probable.
\n6.5 Unrecognised tax losses carried forward
\nDeferred tax assets are only recognised where it is probable that future taxable profits will be available to utilise the tax
\nlosses. The following table shows the unrecognised tax losses carried forward, including anticipated period of expiration:
\nTrading and capital losses expiring:
\n2022
\nLosses
\n$m
\n2021
\nLosses
\n$m
\nWithin 5 years
10.0
15.3
\nBetween 5 to 10 years
12.7
88.3
\nMore than 10 years
30.7
75.0
\nUnlimited
958.0
661.6
\nTotal
1,011.4
840.2
\nThe Group also has unrecognised tax credits, in respect of non-US tax payments of $3.9 million (2021: $4.0 million) in the US,
\nwhich are due to expire within five years.
\nThe unrecognised tax losses of $1,011.4 million reflects judgements and estimates considered in the provision for uncertain tax
\npositions, in line with the requirements of IFRIC 23,
Uncertainty over Income Tax Treatments
. The Group has Luxembourg tax
\nlosses of $941.9 million (2021: $638.4 million) which are not recognised and will not expire. The movement in Luxembourg tax
\nlosses not recognised is mainly attributable to foreign exchange differences and the reassessment during the year of
\nutilisation of losses in a prior year following an internal corporate reorganisation.
\n7. EARNINGS PER SHARE
\nBasic earnings per share is calculated based on the Group\u2019s net profit for the year attributable to shareholders divided by
\nthe weighted average number of ordinary shares in issue during the year. The weighted average number of shares is net of
\nshares purchased by the Group and held as own shares.
\nDiluted earnings per share take into account the dilutive effect of all outstanding share options priced below the market
\nprice in arriving at the number of shares used in its calculation.
\n2022
2021
\nNet profit attributable to the shareholders of the Group ($m)
62.9
117.6
\nBasic weighted average ordinary shares in issue (number)
2,023,839,657
2,008,923,797
\nDilutive impact of share awards (number)
16,407,811
17,416,548
\nDiluted weighted average ordinary shares in issue (number)
2,040,247,468
2,026,340,345
\nBasic earnings per share (cents per share)
3.1\u00a2 per share
5.9\u00a2 per share
\nDiluted earnings per share (cents per share)
3.1\u00a2 per share
5.8\u00a2 per share
\nThe calculation of diluted earnings per share excludes 404,241 (2021: 1,878,714) share options that were non-dilutive for the
\nyear because the exercise price exceeded the average market price of the Group's ordinary shares during the year.
\n183
Convatec Group Plc Annual Report and Accounts 2022
\nAdditional information
Governance
Strategic report
Overview
Financial statements
OPERATING ASSETS AND LIABILITIES
\nThis section set outs the assets and liabilities that the Group holds in order to operate the business on a day-to-day basis,
\nincluding long-term assets which generate future revenues and profits for the Group.
\nLiabilities relating to the Group\u2019s financing activities are addressed in \u201cCapital structure and financial costs\u201d.
\n8. PROPERTY, PLANT AND EQUIPMENT
\nThe Group invests in buildings, equipment and manufacturing machinery to operate the business and to generate revenue
\nand profits. Assets are depreciated over their estimated useful economic life reflecting the reduction in value of the asset due,
\nin particular, to wear and tear.
\nAccounting policy
\nProperty, plant and equipment (PP&E) are stated at cost less accumulated depreciation and impairment losses. Cost
\nincludes expenditures that are directly attributable to the acquisition of an asset including subsequent additions and
\nimprovements when it is probable that future economic benefit associated with the item will flow to the Group and the
\ncost can be reliably measured.
\nDepreciation is provided on a straight-line basis from the point an asset becomes available for use. Depreciation is
\ncalculated to reduce the asset\u2019s cost to its residual value over the asset\u2019s estimated useful economic life. Assets are
\ndepreciated as follows:
\nAsset category
Useful life
\nLand
not depreciated
\nLand improvements
15 to 40 years
\nLeasehold improvements
shorter of useful life or lease tenure
\nBuildings
15 to 50 years
\nMachinery, equipment and fixtures
3 to 20 years
\nThe gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sale
\nproceeds, less any selling expenses, and the carrying amount of the asset. This difference is recognised in the Consolidated
\nIncome Statement.
\nAssets under construction reflects the cost of construction or improvement of items of PP&E that are not yet available for
\nuse. Finance costs incurred in the construction of assets that take more than one year to complete are capitalised using
\nthe Group\u2019s weighted average borrowing cost during the period in which the asset is under construction. Capitalisation of
\nfinance costs ceases when the asset becomes available for use.
\nConsideration of useful economic lives
\nThe assets\u2019 residual values, depreciation methods and useful economic lives are reviewed annually and adjusted if appropriate.
\nImpairment of assets
\nThe carrying values of PP&E are reviewed for indicators of impairment annually or when events or changes in
\ncircumstances indicate the carrying value may be impaired. If any such indication exists, the recoverable amount of the
\nasset is estimated, being the higher of an asset\u2019s fair value less costs to sell and the net present value of its expected pre-
\ntax future cash flows (value in use).
\nWhen an asset\u2019s recoverable amount falls below its carrying value, an impairment is charged to the Consolidated
\nIncome Statement.
\nNotes to the Consolidated Financial Statements
continued
\nConvatec Group Plc Annual Report and Accounts 2022
184
\nFinancial statements
The movement in the carrying value of each major category of PP&E is as follows:
\nLand & land
\nimprovements
\n$m
\nBuilding, building
\nequipment and
\nleasehold
\nimprovements
\n$m
\nMachinery,
\nequipment and
\nfixtures
\n$m
\nAssets under
\nconstruction
\n$m
\nTotal
\n$m
\nCost
\n1 January 2021
15.8
129.4
483.4
77.2
705.8
\nAdditions
\u2013
1.5
3.6
65.7
70.8
\nDisposals
\n1
\n\u2013
(4.0)
(12.0)
(0.3)
(16.3)
\nTransfers
\u2013
6.0
34.3
(40.3)
\u2013
\nForeign exchange
(0.5)
(3.0)
(18.6)
(3.8)
(25.9)
\n31 December 2021
15.3
129.9
490.7
98.5
734.4
\nAdditions
\u2013
1.8
8.2
90.0
100.0
\nArising from acquisitions (Note 26)
\u2013
0.5
0.3
\u2013
0.8
\nDisposals
\n1
\n\u2013
(4.0)
(17.5)
(1.8)
(23.3)
\nTransfers
\u2013
13.7
24.7
(38.4)
\u2013
\nForeign exchange
(1.1)
(6.7)
(25.2)
(4.6)
(37.6)
\n31 December 2022
14.2
135.2
481.2
143.7
774.3
\nAccumulated depreciation
\n1 January 2021
0.9
50.5
302.2
\u2013
353.6
\nDepreciation
0.1
6.1
34.4
\u2013
40.6
\nDisposals
\u2013
(3.3)
(11.0)
\u2013
(14.3)
\nImpairment
\u2013
1.0
\u2013
\u2013
1.0
\nForeign exchange
\u2013
(1.2)
(12.0)
\u2013
(13.2)
\n31 December 2021
1.0
53.1
313.6
\u2013
367.7
\nDepreciation
\u2013
6.8
32.9
\u2013
39.7
\nArising from acquisitions (Note 26)
\u2013
0.2
0.1
\u2013
0.3
\nDisposals
\u2013
(4.0)
(17.5)
\u2013
(21.5)
\nImpairment
\u2013
1.9
5.5
\u2013
7.4
\nForeign exchange
\u2013
(2.7)
(17.0)
\u2013
(19.7)
\n31 December 2022
1.0
55.3
317.6
\u2013
373.9
\nNet carrying amount
\n31 December 2021
14.3
76.8
177.1
98.5
366.7
\n31 December 2022
13.2
79.9
163.6
143.7
400.4
\n1.
Included within disposals costs were asset write-offs of $1.8 million (2021: $2.0 million).
\n185
Convatec Group Plc Annual Report and Accounts 2022
\nAdditional information
Governance
Strategic report
Overview
Financial statements
9. INTANGIBLE ASSETS AND GOODWILL
\nThe split of intangible assets and goodwill is as follows:
\nNotes
\n2022
\n$m
\n2021
\n$m
\nIntangible assets
9.1
924.9
902.2
\nGoodwill
9.2
1,224.6
1,156.3
\nIntangible assets and goodwill
2,149.5
2,058.5
\n9.1 Intangible assets
\nThe Group\u2019s intangible assets are those that have been recognised at fair value as part of business combinations, investment
\nin product development and software purchased to support business operations. These are assets that are not physical in
\nnature but can be sold separately or arise from legal rights.
\nAccounting policy
\nRecognition
\nMeasurement on initial recognition of intangible assets is determined at cost for assets acquired by the Group and at fair
\nvalue at the date of acquisition if acquired in business combinations. Following initial recognition of the intangible asset,
\nthe asset is carried at cost less any subsequent accumulated amortisation and accumulated impairment losses.
\nPurchased computer software and certain costs of information technology are capitalised as intangible assets. Software
\nthat is integral to purchased computer hardware is capitalised as PP&E.
\nR&D
\nR&D expenses are comprised of all activities involving investigative, technical and regulatory processes related to
\nobtaining appropriate approvals to market our products. It also includes new product development aimed at developing
\nmore sustainable product portfolios for the longer term, as mentioned within the Responsible Business review section
\n(refer to page 51). Costs include payroll, clinical manufacturing and pre-launch clinical trial costs, manufacturing
\ndevelopment and scale-up costs, product development, regulatory costs including costs incurred to comply with
\nlegislative changes, contract services and other external contractors\u2019 costs, research licence fees, depreciation and
\namortisation of laboratory facilities, and laboratory supplies.
\nResearch costs are expensed as incurred. Development costs are capitalised only if the expenditure can be measured
\nreliably, the product or process is technically and commercially feasible, future economic benefits are probable and the
\nGroup intends to and has sufficient resources to complete development and use or sell the asset. Subsequent to initial
\nrecognition, development costs are measured at cost less accumulated amortisation and any accumulated impairment
\nlosses. Upgrades and enhancements are capitalised to the extent they will result in added functionality and probable
\nfuture economic benefits.
\nAmortisation
\nIntangible assets with an indefinite life are not amortised. Amortisation of intangible assets with a finite life is calculated
\nusing the straight-line method based on the following estimated useful lives:
\nAsset category
Useful life
\nProduct-related
3 to 20 years
\nCapitalised software
3 to 10 years
\nCustomer relationships and non-compete agreements
2 to 20 years
\nTrade names \u2013 finite
2 to 10 years
\nTrade names \u2013 indefinite
indefinite
\nDevelopment costs
5 years
\nAssets under construction reflects the cost of development or improvement of intangible assets that are not yet available
\nfor use.
\nImpairment of assets
\nIntangible assets with finite life are reviewed for indicators of impairment at each reporting period or when events or
\nchanges in circumstances indicate the carrying value may be impaired. If any such indication exists, the recoverable
\namount of the asset is estimated, being the higher of an asset\u2019s fair value less costs to sell and the net present value of its
\nexpected pre-tax future cash flows (value in use).
\nWhen an asset\u2019s recoverable amount falls below its carrying value, an impairment is charged to the Consolidated
\nIncome Statement.
\nRefer to Note 9.3 \u2013 CGU impairment review for consideration of impairment of indefinite-lived intangible assets.
\nNotes to the Consolidated Financial Statements
continued
\nConvatec Group Plc Annual Report and Accounts 2022
186
\nFinancial statements
The movement in the carrying value of each major category of intangible assets is as follows:
\nProduct-
\nrelated
\n$m
\nCapitalised
\nsoftware
\n1
\n$m
\nCustomer
\nrelationships
\nand non-
\ncompete
\nagreements
\n$m
\nTrade names
\n$m
\nDevelopment
\ncost
\n$m
\nAssets under
\nconstruction
\n$m
\nTotal
\n$m
\nCost
\n1 January 2021
2,101.2
128.6
305.5
260.2
12.5
8.2
2,816.2
\nAdditions
\u2013
2.2
\u2013
\u2013
\u2013
20.6
22.8
\nArising from acquisitions
\n2
\n4.9
\u2013
33.2
4.6
\u2013
\u2013
42.7
\nWrite-offs
(7.1)
(21.6)
(0.7)
\u2013
\u2013
(0.4)
(29.8)
\nTransfers
\u2013
13.3
\u2013
\u2013
\u2013
(13.3)
\u2013
\nForeign exchange
(12.9)
(0.3)
(7.0)
(1.1)
(0.9)
(0.3)
(22.5)
\n31 December 2021
2,086.1
122.2
331.0
263.7
11.6
14.8
2,829.4
\nAdditions
10.0
0.6
\u2013
\u2013
\u2013
34.0
44.6
\nArising from acquisitions
\n2
\n154.8
\u2013
\u2013
\u2013
\u2013
\u2013
154.8
\nWrite-offs
(50.7)
(1.8)
(0.3)
\u2013
\u2013
(0.6)
(53.4)
\nTransfers
\u2013
11.8
\u2013
\u2013
\u2013
(11.8)
\u2013
\nForeign exchange
(79.7)
(2.4)
(6.3)
(0.9)
(0.6)
(0.9)
(90.8)
\n31 December 2022
2,120.5
130.4
324.4
262.8
11.0
35.5
2,884.6
\nAccumulated amortisation
\n1 January 2021
1,530.9
90.4
185.8
7.7
9.0
\u2013
1,823.8
\nAmortisation
107.1
12.3
24.5
1.9
1.4
\u2013
147.2
\nWrite-offs
(7.1)
(21.6)
(0.7)
\u2013
\u2013
\u2013
(29.4)
\nImpairment
\u2013
2.5
\u2013
\u2013
\u2013
\u2013
2.5
\nForeign exchange
(10.1)
(0.1)
(6.1)
0.1
(0.7)
\u2013
(16.9)
\n31 December 2021
1,620.8
83.5
203.5
9.7
9.7
\u2013
1,927.2
\nAmortisation
108.6
12.0
24.3
1.4
1.1
\u2013
147.4
\nWrite-offs
(50.7)
(1.8)
(0.3)
\u2013
\u2013
\u2013
(52.8)
\nImpairment
4.3
\u2013
1.4
\u2013
\u2013
\u2013
5.7
\nForeign exchange
(61.0)
(0.9)
(5.4)
\u2013
(0.5)
\u2013
(67.8)
\n31 December 2022
1,622.0
92.8
223.5
11.1
10.3
\u2013
1,959.7
\nNet carrying amount
\n31 December 2021
465.3
38.7
127.5
254.0
1.9
14.8
902.2
\n31 December 2022
498.5
37.6
100.9
251.7
0.7
35.5
924.9
\n1.
Capitalised software is in respect of purchased and internally generated software.
\n2.
Acquisitions comprise assets in relation to the Triad Life Sciences acquisition. See Note 26 \u2013 Acquisitions. In the year ended 31 December 2021, acquisitions comprise
\nof Cure Medical and Patient Care Medical.
\n187
Convatec Group Plc Annual Report and Accounts 2022
\nAdditional information
Governance
Strategic report
Overview
Financial statements
9. INTANGIBLE ASSETS AND GOODWILL (CONTINUED)
\nAmortisation expenses in respect of finite-lived intangible assets for the year ended 31 December were as follows:
\n2022
\n$m
\n2021
\n$m
\nCost of sales
113.1
110.7
\nSelling and distribution expenses
3.2
2.0
\nGeneral and administrative expenses
29.1
32.5
\nResearch and development expenses
2.0
2.0
\nTotal amortisation expense
147.4
147.2
\nThe carrying amount of trade names with indefinite life at 31 December 2022 was $248.9 million (2021: $249.8 million). Each of
\nthese trade names are considered to have an indefinite life, given the strength and durability of the current trade name and
\nthe level of marketing support. The trade names are in relatively similar stable and profitable market sectors, with similar risk
\nprofiles, and their size, diversification and market shares mean that the risk of market-related factors causing a reduction in
\nthe lives of the trade names is considered to be relatively low. The Group is not aware of any material legal, regulatory,
\ncontractual, competitive, economic or other factor which could limit their useful lives.
\nIndividual intangible assets with a carrying amount in excess of 10% of the total intangible asset carrying amount were as follows:
\n2022
\n$m
\n2021
\n$m Remaining life
\nTrade names
\nConvatec trade name
234.6
234.6
Indefinite
\nProduct-related
\nInnovaMatrix
\n\u00ae
\n145.6
\u2013
13.3 years
\nAquacel
\n\u00ae
\nincluding Hydrofibre
\n\u00ae
\n120.2
172.2
3.6 years
\nStoma care
113.6
145.2
3.6 years
\n9.2 Goodwill
\nThe Group recognises goodwill resulting from business combinations where there are future economic benefits from
\nassets which cannot be individually separated and recognised. Goodwill represents the amount paid in excess of the fair
\nvalue of the net assets of the acquired business.
\nAccounting policy
\nRefer to Note 1 \u2013 Basis of preparation for the Group accounting policy in relation to the initial valuation and recognition of
\ngoodwill arising from acquisitions.
\nGoodwill is not subject to amortisation but is tested for impairment annually or when events or changes in circumstances
\nindicate the carrying value may be impaired. Refer to Note 9.3 \u2013 CGU impairment review for consideration of impairment
\nof goodwill.
\nGoodwill is denominated in the functional currency of the acquired entity and revalued to the closing exchange rate at
\neach reporting period date.
\nThe changes in the carrying value of goodwill as at 31 December were as follows:
\nTotal
\n$m
\n1 January 2021
1,097.2
\nDivestitures
(0.9)
\nArising from acquisitions
79.0
\nForeign exchange
(19.0)
\n31 December 2021
1,156.3
\nArising from acquisitions (Note 26)
129.9
\nForeign exchange
(61.6)
\n31 December 2022
1,224.6
\nNotes to the Consolidated Financial Statements
continued
\nConvatec Group Plc Annual Report and Accounts 2022
188
\nFinancial statements
9.3 Cash generating unit (CGU) impairment review
\nAn impairment assessment is required to be performed annually for goodwill and indefinite-lived intangibles or when
\nevents or changes in circumstances indicate the carrying value may be impaired. An impairment is a reduction in the
\nrecoverable amount of an asset compared to the carrying value of the asset. Recoverable amount is the higher of value
\nin use and fair value less costs to sell.
\nThis note provides details of the annual impairment assessment that has been performed.
\nAccounting policy
\nFor impairment testing, assets are grouped together into the smallest group of assets that generate cash inflows from
\ncontinuing use that are largely independent of the cash inflows of other assets or CGUs. Additionally, goodwill arising from
\na business combination is allocated to a CGU or groups of CGUs that are expected to benefit from the synergies of the
\ncombination. An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount.
\nThe recoverable amounts of the CGUs are determined based on value in use calculations, which reflect the estimated
\nfuture cash flows of each CGU discounted by an estimated weighted average cost of capital that represents the rate of
\nreturn an outside investor would expect to earn. This discount rate is based on the weighted average cost of capital for
\ncomparable public companies and is adjusted for risks specific to the CGU including differences in risk due to its size,
\ngeographic concentration and trading history.
\nFuture cash flows are determined using the latest available Board-approved forecasts and strategic plans. These forecasts
\nand strategic plans are based on specific assumptions for each CGU during the five-year planning period with respect to
\nrevenue, results of operations, working capital, capital investments and other general assumptions for the projected
\nperiod. The forecast assumptions that derive the future cash flows are based on the historical results of each CGU
\ncombined with external market information and defined strategic initiatives.
\nIf identified, impairment losses are recognised in the Consolidated Income Statement. They are allocated first to reduce
\nthe carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the remaining
\nassets in the CGU, on a pro-rated basis.
\nAn impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the
\nextent that the asset\u2019s carrying amount does not exceed the carrying amount that would have been determined, net of
\ndepreciation or amortisation, if no impairment loss had been recognised. The Group has not recognised any reversal of
\nprevious impairments in either 2022 or 2021.
\nThe Group continues to operate under the same operating model as prior year and determined that there has not been
\nany triggers for a change in CGU groups. There has been no change in the reporting to the CODM during the year ended
\n31 December 2022, with profitability continuing to be assessed on a consolidated basis, and management\u2019s focus is
\npredominantly category and key market focus. Goodwill is deemed to be monitored on a category basis, and the Group\u2019s
\nCGU groups continue to be; (i) Advanced Wound Care; (ii) Ostomy Care; (iii) Continence & Critical Care, and (iv) Infusion Care.
\nGoodwill and intangible assets with indefinite life (trade names) are allocated to the Group's CGU groups as at 31 December
\nas follows:
\nGoodwill
Indefinite-lived intangible assets
\n2022
\n$m
\n2021
\n$m
\n2022
\n$m
\n2021
\n$m
\nCGU groups
\nAdvanced Wound Care
490.0
386.9
104.8
104.8
\nOstomy Care
116.5
121.7
91.2
91.2
\nContinence & Critical Care
535.6
558.0
41.2
41.4
\nInfusion Care
82.5
89.7
11.7
12.4
\nTotal
1,224.6
1,156.3
248.9
249.8
\nDetermining the estimated recoverable amount of a CGU group is judgemental in nature. The key input used in the estimation
\nof value in use as at 31 December 2022 is the Group\u2019s five-year Board approved strategic plan, with key assumptions including
\nforecast sales growth rates, terminal value growth rate and discount rates. Forecast sales growth rates are based on past
\nexperience adjusted for macroeconomic activity, sector market growth forecasts, competitor activity and strategic decisions
\nmade in respect of each CGU group.
\n189
Convatec Group Plc Annual Report and Accounts 2022
\nAdditional information
Governance
Strategic report
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Financial statements
9. INTANGIBLE ASSETS AND GOODWILL (CONTINUED)
\nThe terminal value growth rate and discount rates used were as follows:
\nDiscount rate (pre-tax)
\n1
\n2022
\n%
\n2021
\n%
\nCGU groups
\nAdvanced Wound Care
13.5
10.5
\nOstomy Care
12.5
10.0
\nContinence & Critical Care
11.5
9.5
\nInfusion Care
12.5
9.5
\nTerminal value growth rate
\n2
\n2.0
2.0
\n1.
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
\ndifferences in risk due to its size, geographic concentration and trading history.
\n2.
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, taking
\ninto account global gross domestic product growth, general long-term inflation and population expectations.
\nGlobal equity markets have become more volatile in 2022, driven by rising inflation levels, the war between Russia and
\nUkraine and the energy crisis. Consequently, discount rates have seen an increase in the year, driven by rises in the markets\u2019
\nrisk-free rates.
\nNo impairments have been recognised in respect of the Group\u2019s current CGU groups for the years ended 31 December 2022
\nand 2021.
\nTaking into consideration the Board approved 2023 budget and longer-term strategic plan as foundations, sensitivity analysis
\nwas performed considering changes in key assumptions including discount rates and terminal value growth rate, and
\nconsideration of risk-based severe but plausible downside scenarios consistent with those identified as part of the Viability
\nassessment (refer to page 99 for full details of scenarios). As part of the assessment, an external benchmarking assessment
\nwas also carried out on the forecast sales growth rates.
\nUnder all severe but plausible scenarios, headroom remained on all CGU groups, demonstrating that the impairment of
\ngoodwill and indefinite-lived intangible assets is not a key source of estimation uncertainty and any possible impairment
\nwould not result in a material adjustment in the next financial year.
\n10. INVESTMENT IN FINANCIAL ASSETS
\nAccounting policy
\nThe Group has made an irrevocable election to designate its equity investment in BlueWind Medical at fair value through
\nother comprehensive income (FVOCI). It has been initially recorded at fair value plus transaction costs and will be
\nremeasured at subsequent reporting dates to fair value.
\nUnrealised gains and losses are recognised in other comprehensive income.
\nOn disposal of the equity investment, any gains and losses that have been deferred in other comprehensive income are
\ntransferred directly to retained earnings.
\nDividends on equity investments are recognised in the income statement when the Group\u2019s right to receive payment is
\nestablished, it is probable the economic benefits will flow to the entity and the amount can be measured reliably.
\nOn 9 May 2022, the Group invested $30.0 million in preference shares of BlueWind Medical Limited (BlueWind Medical).
\nBlueWind Medical is developing an implantable tibial neuromodulation device, for the treatment of urge incontinence and
\nurinary urgency. This represents an investment into an innovative technology in the large and growing overactive bladder
\nmarket, related to the Continence space.
\nIn line with IFRS 9
Financial Instruments
, the investment met the definition of an equity instrument and the Group has made
\nan irrevocable election on initial recognition to measure the investment at FVOCI. The Group considers this investment to be
\nstrategic in nature and it is not held for trading.
\nIn line with IFRS 13
Fair value measurement
, this investment has been classified as Level 3 in the fair value hierarchy as its
\nmeasurement is derived from significant unobservable inputs. As at the date of the transaction, the equity investment was
\nrecorded at its cost of investment which approximates to fair value plus transaction costs of $0.7 million.
\nAs at 31 December 2022, the fair value of the investment has been remeasured and remained at $30.7 million. No dividends
\nwere recognised during the year.
\nNotes to the Consolidated Financial Statements
continued
\nConvatec Group Plc Annual Report and Accounts 2022
190
\nFinancial statements
11. INVENTORIES
\nInventories are the materials used in manufacturing, products manufactured or purchased to be sold by the Group in the
\nordinary course of business. Inventories include finished goods, goods which are in the process of being manufactured
\n(work in progress) and raw and packaging materials awaiting use in production.
\nAccounting policy
\nInventories are valued at the lower of cost or net realisable value with the cost determined using an average cost method.
\nThe cost of finished goods and work in progress comprises raw materials, direct labour, other direct costs and indirect
\nproduction overheads. Production overheads comprises indirect material and labour costs, maintenance and depreciation
\nof the machinery and production buildings used in the manufacturing process, as well as costs of production
\nadministration and management.
\nNet realisable value is defined as anticipated selling price or anticipated revenue less cost to completion. Estimates of net
\nrealisable value are based on the average selling prices at the end of the reporting period, net of applicable direct selling
\nexpenses. Subsequent events related to the fluctuation of prices and costs are also considered, if relevant. If net realisable
\nvalues are below inventory costs, a provision corresponding to this difference is recognised.
\nProvisions are also made for obsolescence of inventories that; (i) do not meet the Group's specifications; (ii) have exceeded
\ntheir expiration date; or (iii) are considered slow-moving. The Group evaluates the carrying value of inventories on a regular
\nbasis, taking into account such factors as historical and anticipated future sales compared with quantities on hand, the
\nprice the Group expects to obtain for products in their respective markets compared with historical cost and the
\nremaining shelf life of goods on hand.
\nThe components of inventories at 31 December were as follows:
\n2022
\n$m
\n2021
\n$m
\nRaw and packaging materials
79.6
71.9
\nWork in progress
41.6
37.9
\nFinished goods
215.7
199.0
\nInventories
336.9
308.8
\nInventories are stated net of provision for obsolescence of $25.5 million (2021: $21.3 million). Adjustments to write-down
\ninventory to its net realisable value are provided in Note 3.1 \u2013 Operating profit.
\n12. TRADE AND OTHER RECEIVABLES
\nTrade receivables consist of amounts billed and currently due from customers. Gross trade receivables are presented
\nbefore allowances for expected credit losses, sales discounts and chargeback allowances. Credit risk with respect to trade
\nreceivables is generally diversified due to the large dispersion and type of customers across many different geographies.
\nOther receivables include amounts due from third parties not related to revenue and prepaid expenses.
\nAccounting policy
\nCredit is extended to customers based on the evaluation of the customer\u2019s financial condition. Creditworthiness of
\ncustomers is evaluated on a regular basis. Exposure to credit risk is managed through credit approvals, credit limits and
\nmonitoring procedures. The Group considers a default event to be one where the customer does not have sufficient funds
\nto make their required payments and/or is in the process of being liquidated.
\nAn allowance is maintained for expected lifetime credit losses that result from the failure or inability of customers to make
\nrequired payments. It is not necessary for a credit event to have occurred before credit losses are recognised. Instead, the
\nGroup accounts for expected lifetime credit losses and changes in those expected lifetime credit losses. In determining
\nthe allowance, consideration includes the probability of recoverability based on past experience and general economic
\nfactors, incorporating forward-looking information and adjustments for customers who represent a lower risk of default,
\nwhich includes public or private medical insurance customers and customers guaranteed by local government. The
\namount of expected credit losses, if any, is required to be updated at each reporting date.
\nCertain trade and other receivables may be fully reserved when specific collection issues are known to exist, such as pending
\nbankruptcy. The Group writes off uncollectable receivables at the time it is determined the receivable is no longer collectable.
\nTrade and other receivables are not collateralised or factored and the Group does not charge interest on past due
\namounts. Refer to Note 2.1 \u2013 Revenue recognition for details on the accounting policy in respect of chargeback allowances.
\n191
Convatec Group Plc Annual Report and Accounts 2022
\nAdditional information
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Strategic report
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Financial statements
12. TRADE AND OTHER RECEIVABLES (CONTINUED)
\nTrade and other receivables at 31 December were as follows:
\n2022
\n$m
\n2021
\n$m
\nIncluded within current assets:
\nTrade receivables
344.7
296.9
\nLess: allowances for expected credit losses
(22.0)
(14.6)
\nLess: sales discounts and chargebacks
(37.6)
(31.7)
\nOther receivables
\n1
\n54.2
50.9
\nPrepayments
24.7
22.0
\nTrade and other receivables
364.0
323.5
\n1.
The balance of restricted cash with a maturity of less than one year as at 31 December 2022 is $18.2 million and is presented separately on the face of the Consolidated
\nStatement of Financial Position. The prior year balance of $0.4 million is presented within other receivables and has not been reclassified due to its immateriality.
\nThe aged analysis of trade receivables at 31 December was as follows:
\n2022
\n$m
\n2021
\n$m
\nCurrent
255.0
235.2
\nPast due 1 to 30 days
33.6
15.5
\nPast due 31 to 90 days
22.5
17.3
\nPast due 91 to 180 days
7.9
0.7
\nPast due by more than 180 days
25.7
28.2
\n344.7
296.9
\nThe unimpaired amounts at 31 December that are past due were aged as follows:
\n2022
\n$m
\n2021
\n$m
\nPast due 1 to 30 days
32.1
14.2
\nPast due 31 to 90 days
20.6
16.5
\nPast due 91 to 180 days
4.7
\u2013
\nPast due by more than 180 days
10.3
16.4
\n67.7
47.1
\nThe Group believes that the unimpaired amounts that are past due are still collectible in full, based on historic payment
\nbehaviour and extensive analysis of customer credit risk.
\nMovements in the allowance for expected credit losses for the years ended 31 December were as follows:
\n2022
\n$m
\n2021
\n$m
\nAt 1 January
(14.6)
(12.6)
\nCharges
(6.6)
(8.2)
\nUtilisation of provision
1.1
5.6
\nForeign exchange
(1.9)
0.6
\nAt 31 December
(22.0)
(14.6)
\nOther non-current receivables
\nOther non-current receivables of $8.6 million (2021: $11.9 million) are principally in respect of deposits held with lessors,
\nprepaid expenses and other receivables.
\nNotes to the Consolidated Financial Statements
continued
\nConvatec Group Plc Annual Report and Accounts 2022
192
\nFinancial statements
13. TRADE AND OTHER PAYABLES
\nTrade payables consist of amounts owed to third-party suppliers and represent a contractual obligation to deliver cash in
\nthe future.
\nOther payables include taxes and social security, accruals and liabilities for other employee-related benefits.
\nAccounting policy
\nTrade payables are recognised at the value of the invoice received from the supplier and are not interest bearing. The
\ncarrying amount of trade and other payables is considered to approximate fair value, due to their short-term maturities.
\nThe components of trade and other payables at 31 December were as follows:
\n2022
\n$m
\n2021
\n$m
\nIncluded within current liabilities:
\nTrade payables
112.2
116.7
\nTaxes and social security
26.0
29.0
\nOther employee-related liabilities
92.3
92.3
\nAccruals and other payables
116.1
104.5
\nTrade and other payables
346.6
342.5
\n2022
\n$m
\n2021
\n$m
\nIncluded within non-current liabilities:
\nDefined benefit obligations (Note 15)
11.0
19.7
\nOther employee-related liabilities
7.7
7.4
\nAccruals and other payables
14.0
20.5
\nOther non-current liabilities
32.7
47.6
\n14. PROVISIONS
\nA provision is an obligation recognised when there is uncertainty over the timing or amount that will be paid. Provisions
\nheld by the Group are primarily in respect of restructuring, decommissioning, dilapidations, legal liabilities and contingent
\nconsideration relating to acquisitions.
\nAccounting policy
\nA provision is recognised when there is a present legal or constructive obligation as a result of a past event, it is probable
\nthat the Group will be required to settle the obligation and that obligation can be measured reliably. Restructuring
\nprovisions are only recognised when a constructive obligation exists, which requires both a detailed formal plan and
\na valid expectation being raised in those affected by starting to implement that plan or announcing the main features.
\nProvisions are measured at the best estimate of the expenditure required to settle the obligation and are discounted to
\npresent value if the effect is material. Provisions are reviewed on a regular basis and adjusted to reflect management\u2019s best
\ncurrent estimates. Due to the judgemental nature of these items, future settlements may differ from amounts recognised.
\nWhen the timing of a settlement is uncertain or expected to be more than 12 months from the reporting date, amounts are
\nclassified as non-current.
\n193
Convatec Group Plc Annual Report and Accounts 2022
\nAdditional information
Governance
Strategic report
Overview
Financial statements
14. PROVISIONS (CONTINUED)
\nThe movements in provisions are as follows:
\nDecommissioning
\nand dilapidations
\n$m
\nRestructuring
\n$m
\nLegal
\n$m
\nContingent
\nconsideration
\n$m
\nTotal
\n$m
\n1 January 2022
1.2
5.0
0.5
\u2013
6.7
\nContingent consideration
\nfrom acquisitions
\u2013
\u2013
\u2013
141.8
141.8
\nCharged to income statement
1.7
15.7
(0.3)
29.5
46.6
\nUtilised
\u2013
(10.4)
\u2013
(50.0)
(60.4)
\nDiscount unwinding
\u2013
\u2013
\u2013
15.6
15.6
\nReclassification from trade and
\nother payables
\n1
\n\u2013
\u2013
\u2013
3.1
3.1
\nForeign exchange
(0.1)
\u2013
\u2013
\u2013
(0.1)
\n31 December 2022
2.8
10.3
0.2
140.0
153.3
\nCurrent
\u2013
10.3
\u2013
89.9
100.2
\nNon-current
\n2
\n2.8
\u2013
0.2
50.1
53.1
\n1.
During the year ended 31 December 2022, $3.1 million was reclassified from trade and other payables in relation to the Cure Medical acquisition to better reflect
\nthe estimation uncertainty of the contingent consideration.
\n2.
The expected timings of the payment of the contingent consideration are disclosed in Note 26 \u2013 Acquisitions. The timing for other non-current provisions is undefined.
\nDecommissioning and dilapidation provisions
\nDecommissioning provisions represent the estimated costs of dismantling and removing PP&E and restoring the site on which
\nit was located. Dilapidation provisions are in respect of contractual obligations, on the expiry of a lease, to return leased
\nproperties in the condition which is specified in the individual leases.
\nRestructuring provisions
\nRestructuring provisions are mainly related to the exit from the low-margin hospital care and industrial sales portfolio.
\nFurther details are in Note 27 \u2013 Divestitures. All restructuring provisions are supported by detailed plans and a valid
\nexpectation has been raised in those affected as required by the Group\u2019s accounting policy.
\nLegal provision
\nLegal provision of $0.2 million is in respect of an ongoing case. Legal issues are often subject to uncertainties over the timing
\nand the final amounts of any settlement.
\nContingent consideration
\nContingent consideration arising from business combinations is fair valued on acquisition and at each reporting period.
\nAs at 31 December 2022, the discounted fair value of the contingent consideration payable in respect of the Cure Medical
\nacquisition was $9.2 million (2021: $3.1 million), with an increase of $5.8 million arising as a result of good performance to date,
\ntogether with the latest financial forecasts, and the unwind of discount of $0.3 million during the year. This has been charged
\nto the Consolidated Income Statement.
\nAs at 31 December 2022, the discounted fair value of the contingent consideration payable in respect of the Triad Life Sciences
\nacquisition was $130.8 million, with the movements since the acquisition date fair value of $141.8 million being a combination of
\nan increase of $23.7 million arising from management\u2019s view that the latest available financials are expected to exceed original
\nexpectations and the unwind of discount of $15.3 million during the year, partly offset by the payments of $50.0 million to the
\nsellers following successful attainment of the two short-term milestones per the Merger Agreement.
\nFurther detail is provided in Note 26 \u2013 Acquisitions.
\nNotes to the Consolidated Financial Statements
continued
\nConvatec Group Plc Annual Report and Accounts 2022
194
\nFinancial statements
15. POST-EMPLOYMENT BENEFITS
\nThe Group has over 10,000 employees globally and operates a number of defined benefit and defined contribution
\npension plans for its employees. Each individual plan is subject to the applicable laws and regulations of the country
\ninwhich the plan operates.
\nDefined contribution arrangements are where the Group pays fixed payments as they fall due into a separate fund on
\nbehalf of employees participating in the plan and has no further legal or constructive obligations. The cost of Group
\ncontributions to defined contribution arrangements during the year is provided in Note 3 \u2013 Operating costs.
\nA defined benefit plan is a pension or other post-employment benefit plan under which the Group has an obligation to
\nprovide agreed benefits to current and former employees. The Group bears the risk that its obligation may increase or that
\nthe value of the assets in the pension fund may decline. The benefit payable in the future by the Group is discounted to the
\npresent value and the fair value of plan assets is deducted to measure the defined benefit pension position.
\nThe Group has defined benefit plans in a number of European countries. The most significant plans are: Switzerland,
\nwhich has a state-mandated plan that remains open to all Swiss employees; and Germany, which has one unfunded plan,
\nthat remains open to German employees but is now closed to new entrants, and a funded plan that was put in place from
\nApril 2019. The value of the funded plan in Germany is negligible to the Group. The Group's other defined benefit plans are
\nlocated in Austria, France and Italy (referred to as \u201cOther\u201d in the tables below). The Group\u2019s UK defined benefit plan was
\nbought out by Aviva in December 2021 and the Group has no further liability for the benefits accrued under that plan.
\nFor plans in Switzerland, Germany and Austria, asset funds for each country are being accumulated to meet the accruing
\nliabilities. The assets of each of these funds are either held under trusts or managed by insurance companies and are
\nentirely separate from the Group\u2019s assets.
\nAccounting policy
\nDefined contribution pension plans
\nPayments to defined contribution pension plans are recognised as an expense when employees have rendered service
\nentitling them to the contributions. Payments made to state-managed retirement benefit plans are treated as payments
\nto defined contribution pension plans where the Group\u2019s obligations under the plans are equivalent to those arising in a
\ndefined contribution pension plan.
\nDefined benefit pension plans
\nThe Group records an asset or liability related to its defined benefit pension plans as the difference between the fair
\nvalue of the plan assets and the present value of the plan liabilities. The obligations of the plans are calculated using the
\nProjected Unit Credit Method, with actuarial valuations being performed by an independent actuary at the end of each
\nreporting period. The valuation requires estimates and judgements to be made to calculate the Group\u2019s liabilities, and
\nresults in actuarial gains and losses being recorded.
\nActuarial gains and losses, movements in the return on plan assets (excluding interest) and the impact of the asset ceiling
\n(if applicable) are recognised immediately in the Consolidated Statement of Financial Position with a charge or credit to
\nthe Consolidated Statement of Comprehensive Income. Remeasurements recorded in the Consolidated Statement of
\nComprehensive Income are not subsequently reclassified to the Consolidated Income Statement.
\nPast service cost is recognised in the Consolidated Income Statement in the period of plan amendment, where relevant.
\nNet interest is calculated by applying a discount rate to the net defined benefit liability or asset.
\nThe assets of the plans are held at fair value, which is equal to market value, and are held in separate trustee-administered
\nfunds or similar structures in the countries concerned. Surplus assets within the plan are only recognised to the extent
\nthat they are recoverable in accordance with IFRIC Interpretation 14,
IAS 19 \u2013 The Limit on a Defined Benefit Asset, Minimum
\nFunding Requirements and their Interaction
(IFRIC 14).
\n195
Convatec Group Plc Annual Report and Accounts 2022
\nAdditional information
Governance
Strategic report
Overview
Financial statements
15. POST-EMPLOYMENT BENEFITS (CONTINUED)
\nRisks
\nThe defined benefit plans typically expose the Group to risks. The most significant risks impacting the Group as a result of
\nthese plans are as follows:
\nInvestment risk
The present value of the defined benefit plan liability is calculated using a discount rate determined
\nby reference to high-quality corporate bond yields; if the return on plan assets is below this rate, it will
\ncreate a plan deficit. Currently the Group's plans invest primarily in debt instruments.
\nInterest risk
A decrease in the interest rate will increase the plan liability, but this will be partially offset by an
\nincrease in the return on the plan\u2019s fixed rate debt instruments.
\nLongevity risk
The present value of the defined benefit plan liability is calculated by reference to the best estimate
\nof the mortality of plan participants both during and after their employment. An increase in the life
\nexpectancy of the plan participants will increase the plan\u2019s liability.
\nSalary risk
The present value of the defined benefit plan liability is calculated by reference to the future salaries of
\nplan participants. As such, an increase in the salary of the plan participants will increase the plan\u2019s liability.
\nAmounts recorded in the Consolidated Financial Statements
\nConsolidated Income Statement
\nThe aggregate expense for all post-employment defined benefit plans recognised in the Consolidated Income Statement for
\nthe year ended 31 December was as follows:
\n2022
\n$m
\n2021
\n$m
\nDefined benefit plans:
\nCurrent service cost
1.7
2.2
\nPast service cost
(0.2)
\u2013
\nInterest income on plan assets
(0.2)
\u2013
\nInterest expense on defined benefit obligations
0.4
0.2
\nUK pension settlement cost
\n1
\n\u2013
1.2
\nTotal expense (Note 3)
1.7
3.6
\n1.
The UK defined benefit pension scheme was bought out during the year ended 31 December 2021, with a loss on settlement of $1.2 million recognised in the
\nConsolidated Income Statement.
\nConsolidated Statement of Comprehensive Income
\nAggregate actuarial gains and losses for all defined benefit plans recognised in the Consolidated Statement of
\nComprehensive Income for the year ended 31 December were as follows:
\n2022
\n$m
\n2021
\n$m
\nRemeasurement effect recognised in other comprehensive income:
\nActuarial gain on liabilities due to experience
1.3
1.6
\nActuarial gain/(loss) arising from changes in financial assumptions
8.9
(0.8)
\nActuarial gain arising from changes in demographic assumptions
\u2013
0.8
\nActuarial (loss)/gain on plan assets
(1.7)
1.6
\nRemeasurement gain recognised in other comprehensive income
8.5
3.2
\nDeferred tax on remeasurement gain recognised in other comprehensive income
(0.1)
0.1
\nChange in pension asset restriction
\u2013
1.3
\nTotal amount recognised in other comprehensive income
8.4
4.6
\nNotes to the Consolidated Financial Statements
continued
\nConvatec Group Plc Annual Report and Accounts 2022
196
\nFinancial statements
Consolidated Statement of Financial Position
\nThe amount recognised for each defined benefit arrangement in the Consolidated Statement of Financial Position at
\n31 December was as follows:
\nGermany
Switzerland
Other
Total
\n2022
\n$m
\n2021
\n$m
\n2022
\n$m
\n2021
\n$m
\n2022
\n$m
\n2021
\n$m
\n2022
\n$m
\n2021
\n$m
\nFair value of schemes\u2019 assets
\u2013
\u2013
10.4
13.3
0.7
0.8
11.1
14.1
\nPresent value of funded
\nschemes\u2019 liabilities
\u2013
\u2013
(
12.3
)
(17.2)
(0.7)
(1.4)
(13.0)
(18.6)
\nDeficit in the funded schemes
\u2013
\u2013
(
1.9
)
(3.9)
\u2013
(0.6)
(1.9)
(4.5)
\nPresent value of unfunded
\nschemes\u2019 liabilities
(7.4)
(12.6)
\u2013
\u2013
(1.7)
(2.6)
(9.1)
(15.2)
\nNet pension liability
(7.4)
(12.6)
(
1.9
)
(3.9)
(1.7)
(3.2)
(11.0)
(19.7)
\nRecognised within Consolidated Statement of Financial Position:
\nDefined benefit obligations (Note 13)
(11.0)
(19.7)
\nThe weighted average duration of the Group's defined benefit obligations at the end of the year is 17 years (2021: 21 years).
\nFair value of assets and present value of the liabilities of the plan
\nThe amount included in the Consolidated Statement of Financial Position arising from its obligations in respect of its defined
\nbenefit plans was as follows:
\nAssets
\n$m
\nLiabilities
\n$m
\nTotal
\n$m
\nAt 1 January 2021
30.3
(49.8)
(19.5)
\nCurrent service cost
\u2013
(2.1)
(2.1)
\nInterest income/(expense)
0.1
(0.3)
(0.2)
\nRemeasurement gain
0.1
1.2
1.3
\nContributions by employer
0.7
\u2013
0.7
\nContributions by members
0.6
(0.6)
\u2013
\nBenefits paid
(2.7)
3.0
0.3
\nExperience gain
\u2013
1.9
1.9
\nPension settlement
(14.4)
11.0
(3.4)
\nForeign exchange
(0.6)
1.9
1.3
\nAt 31 December 2021
14.1
(33.8)
(19.7)
\nCurrent service cost
\u2013
(1.7)
(1.7)
\nPast service cost
\u2013
0.2
0.2
\nInterest income/(expense)
0.2
(0.4)
(0.2)
\nRemeasurement gain/(loss)
(1.7)
6.5
4.8
\nContributions by employer
0.6
\u2013
0.6
\nContributions by members
0.5
(0.5)
\u2013
\nBenefits paid
(2.4)
2.7
0.3
\nExperience gain
\u2013
3.9
3.9
\nForeign exchange
(0.2)
1.0
0.8
\nAt 31 December 2022
11.1
(22.1)
(11.0)
\nPlan assets
\nThe fair value of defined benefit plan assets at 31 December, which has been determined in accordance with IFRS 13
, Fair
\nValue Measurements
, is analysed below. All assets have a quoted market price and are categorised as a Level 1 measurement
\nin the fair value hierarchy.
\nGermany
Switzerland
Other
Total
\n2022
\n$m
\n2021
\n$m
\n2022
\n$m
\n2021
\n$m
\n2022
\n$m
\n2021
\n$m
\n2022
\n$m
\n2021
\n$m
\nEquity instruments
\u2013
\u2013
3.4
4.0
\u2013
3.4
4.0
\nDebt instruments
\u2013
\u2013
4.1
4.8
\u2013
4.1
4.8
\nProperty
\u2013
\u2013
1.6
2.0
\u2013
1.6
2.0
\nQualifying insurance policies
\u2013
\u2013
\u2013
0.7
0.8
0.7
0.8
\nOther
\u2013
\u2013
1.3
2.5
\u2013
1.3
2.5
\nPlan assets
\u2013
\u2013
10.4
13.3
0.7
0.8
11.1
14.1
\n197
Convatec Group Plc Annual Report and Accounts 2022
\nAdditional information
Governance
Strategic report
Overview
Financial statements
15. POST-EMPLOYMENT BENEFITS (CONTINUED)
\nActuarial assumptions
\nThe Group makes certain key assumptions in order to value the plan obligations, and the approach to how these are set was
\nas follows:
\nApproach taken
\nDiscount rate
Calculated by reference to the yields on high-quality corporate bonds which match expected
\ncash flows in each territory in which a defined benefit plan is present.
\nInflation
Calculated using the difference on yields between fixed and index-linked government bonds.
\nFuture salary increases
Based on historical expectations and known future increases, including expected inflation rates.
\nMortality
Based on mortality tables derived from assessments performed by national governments and
\nbased upon recommendations by plan actuaries.
\nThe principal actuarial assumptions for each defined benefit arrangement used at 31 December were as follows:
\nGermany
Switzerland
Other
\n2022
2021
2022
2021
2022
2021
\nDiscount rate
3.56%
1.03%
1.90%
0.30%
3.47% to 4.05%
0.29% to 1.22%
\nRate of price inflation
N/A
N/A
1.00%
0.50%
2.20% to 3.00%
1.20% to 2.00%
\nFuture salary increases
3.00%
2.00%
1.75%
1.75%
0.00% to 3.00%
0.00% to 3.00%
\nDiscount rates have increased in the year, driven by macroeconomic factors such as rising inflation levels, the war between
\nRussia and Ukraine and the energy crisis.
\nThe current mortality assumptions underlying the values of the obligations in the defined benefit plans were as follows:
\nGermany
Switzerland
Other
\n2022
2021
2022
2021
2022
2021
\nLife expectancy at age 65
\nMale
18.6 years
17.5 years
22.8 years
22.7 years
23.9 years
20.5 years
\nFemale
22.0 years
20.9 years
24.6 years
24.5 years
27.9 years
24.0 years
\nLife expectancy at age 65
\nin 20 years' time
\nMale
21.4 years
20.2 years
25.1 years
25.0 years
24.9 years
21.7 years
\nFemale
24.3 years
23.1 years
26.6 years
26.5 years
28.9 years
25.1 years
\nSensitivity analysis
\nThe effect of movements in the key actuarial assumptions in respect of the Germany and Switzerland plans at 31 December 2022
\nwould be an (increase)/decrease to the defined benefit asset/liabilities as follows:
\nGermany
Switzerland
\nIncrease 0.5%
Decrease 0.5%
Increase 0.5%
Decrease 0.5%
\nDiscount rate
0.7
(0.7)
1.1
(0.8)
\nInflation
N/A
N/A
(0.2)
0.6
\nFuture salary increases
N/A
N/A
(0.1)
0.4
\n1 year increase
1 year decrease
1 year increase
1 year decrease
\nLife expectancy
(0.1)
0.2
(0.1)
0.3
\nFuture funding
\nPayments expected to be made by the Group to its defined benefit pension plans in the year ended 31 December 2023 are
\nas follows:
\nGermany
\n$m
\nSwitzerland
\n$m
\nOther
\n$m
\nTotal
\n$m
\nExpected payments
0.1
0.7
\u2013
0.8
\nNotes to the Consolidated Financial Statements
continued
\nConvatec Group Plc Annual Report and Accounts 2022
198
\nFinancial statements
CAPITAL STRUCTURE AND FINANCIAL COSTS
\nThe Group ensures that all entities within the Group have sufficient funding to deliver the Group\u2019s strategy while
\nmaximising the return to shareholders through the debt and equity balance. The capital structure of the Group consists
\nof net debt (which includes borrowings less cash and cash equivalents and excluding lease liabilities) and equity of the
\nGroup, comprising issued capital, reserves and earnings as disclosed in the Consolidated Statement of Changes in Equity.
\n16. CAPITAL STRUCTURE AND NET DEBT
\nThe capital structure of the Group at 31 December was as follows:
\n2022
\n$m
\n2021
\n$m
\nBorrowings (Note 21)
1,211.9
1,344.6
\nLess: Cash and cash equivalents (Note 22)
(143.8)
(463.4)
\nNet debt (excluding lease liabilities)
1,068.1
881.2
\nEquity
1,609.7
1,694.8
\nTotal capital
2,677.8
2,576.0
\nThe Group's capital structure is managed to provide ongoing returns to shareholders and service debt obligations, whilst
\nmaintaining maximum operational flexibility. Refer to pages 30 to 38 in the Financial review for discussion of the Group's
\nsources and uses of cash.
\n17. SHARE CAPITAL AND RESERVES
\nShare capital
\nCalled up share capital is the total number of shares in issue at their par value. The rights attaching to the ordinary shares
\nare uniform in all respects. They form a single class for all purposes, including with respect to voting and for all dividends
\nand other distributions thereafter declared, made or paid on the ordinary share capital of the Group. Incremental costs
\ndirectly attributable to the issue of new ordinary shares are shown in equity as a deduction from the proceeds, net of tax.
\nRepurchased shares are classified as own shares and are disclosed in the own shares reserve.
\nShare premium
\nThe share premium represents amounts received in excess of the nominal value of the ordinary shares.
\nOwn shares
\nOwn shares are ordinary shares in the Group purchased and held by an Employee Benefit Trust to satisfy obligations under
\nthe Group's employee share ownership programmes.
\nWhen any Group company purchases the Company\u2019s equity share capital (own shares), the consideration paid, including
\nany directly attributable incremental costs (net of tax), is deducted from equity until the shares are cancelled, reissued
\nor disposed of. Where such shares are subsequently sold or reissued, any consideration received, net of any directly
\nattributable costs and the related tax effects, is recognised in equity and the resulting surplus or deficit on the transaction
\nis presented within share premium.
\nMerger reserve
\nIn 2016, the Consolidated Financial Statements were prepared under merger accounting principles. Under these principles,
\nno acquirer was required to be identified and all entities were included at their pre-combination carrying amounts. This
\naccounting treatment led to differences on consolidation between issued share capital and the book value of the
\nunderlying net assets. This difference is included within equity as a merger reserve.
\nCumulative translation reserve
\nThe foreign currency translation reserve is used to record exchange differences arising from the translation of the financial
\nstatements of foreign subsidiaries.
\nOther reserves
\nOther reserves comprises the cumulative changes in the effective portion of cash flow hedges, cost of hedging,
\nremeasurement of defined benefit plans and the share-based payment reserve.
\n199
Convatec Group Plc Annual Report and Accounts 2022
\nAdditional information
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Strategic report
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Financial statements
17. SHARE CAPITAL AND RESERVES (CONTINUED)
\nShare capital
\nShares were allotted during the year in respect of the Group's scrip dividend offering. The movements in ordinary shares of
\n10 pence each were as follows:
\nIssued and fully paid or credited as fully paid
\nOrdinary shares
\nnumber
\nShare capital
\n$m
\nShare premium
\n$m
\n1 January 2021
2,004,347,138
245.5
115.3
\nIssue of new shares for Scrip Scheme \u2013 2020 final dividend
9,475,532
1.3
24.8
\nIssue of new shares for Scrip Scheme \u2013 2021 interim dividend
750,265
0.2
2.2
\n10,225,797
1.5
27.0
\n31 December 2021
2,014,572,935
247.0
142.3
\nIssue of new shares for Employee Benefit Trust
20,000,000
2.6
\u2013
\nIssue of new shares for Scrip Scheme \u2013 2021 final dividend
7,192,010
0.9
18.0
\nIssue of new shares for Scrip Scheme \u2013 2022 interim dividend
2,107,103
0.2
5.4
\n29,299,113
3.7
23.4
\n31 December 2022
2,043,872,048
250.7
165.7
\nAt 31 December 2022, 10,975,451 shares (2021: 742,756 shares) were held in the Employee Benefit Trust. The market value of
\nown shares at 31 December 2022 was $30.8 million (2021: $1.9 million).
\nOther reserves
\nOther reserves include the share-based payment reserve of $155.0 million (2021: $135.3 million) and remeasurement of defined
\nbenefit obligations of $4.8 million (2021: $3.6 million loss), a transfer between reserves of $0.5 million (2021: nil) and the
\neffective portion of cash flow hedges of $4.9 million (2021: $5.2 million loss). A reconciliation of movements in all reserves
\nis provided in the Consolidated Statement of Changes in Equity.
\nDistributable reserves
\nRetained and realised distributable reserves equates to the retained surplus of Convatec Group Plc as set out in the
\nCompany Financial Statements on page 218. At 31 December 2022, the retained surplus of the Company was $1,562.9 million
\n(2021: $1,590.3 million). The capacity of the Company to make dividend payments is primarily determined by the availability
\nof these retained and realised distributable reserves and the Group's cash resources including available borrowing facilities.
\nCumulative translation reserve
\nDuring the year to 31 December 2022, the Group disposed of a subsidiary as part of the exit from all hospital care and related
\nindustrial sales activities. The cumulative amount of exchange differences relating to this foreign operation of $12.2 million,
\nrecognised in other comprehensive income, has been reclassified from equity to the Consolidated Income Statement, within
\nnon-operating expense (Note 5).
\n18. DIVIDENDS
\nThe Group ensures that adequate realised distributable reserves are available in the Company in order to meet proposed
\nshareholder dividends, and the purchase of shares for employee share scheme incentives. The Company principally
\nderives distributable reserves from dividends received from subsidiary companies.
\nIn determining the level of dividend for the year, the Board considers the following factors and risks that may influence
\nthe proposed dividend:
\n\u2022
The underlying performance of the business;
\n\u2022
The Board\u2019s confidence in the Group\u2019s future growth prospects;
\n\u2022
Availability of realised distributable reserves;
\n\u2022
Available cash resources and commitments;
\n\u2022
Strategic opportunities and investments, in line with the Group\u2019s strategic plan; and
\n\u2022
Principal risks of the Group (as disclosed on pages 92 to 97).
\nThe Board paid the 2021 final dividend in May 2022 and the 2022 interim dividend in October 2022. The Board has taken
\ninto consideration balancing the return to shareholders with investment in the business. The decision to increase the
\ndividend for 2022 by 3.0% reflects the Board\u2019s confidence in the future performance of the Group and the underlying
\nfinancial strength, distributable reserves position and cash generation of the Group. Detail of the Group\u2019s considerations
\nand rationale for its policy in respect of the dividend distribution is given in the Directors\u2019 report on page 162.
\nAccounting policy
\nDividends paid are included in the Group Consolidated Financial Statements at the earlier of payment of the dividends or,
\nin respect of the Company\u2019s final dividend for the year, on approval by shareholders.
\nThe Company operates a scrip dividend scheme, allowing shareholders to elect to receive their dividend in the form of new fully
\npaid ordinary shares. For any particular dividend, the Directors may decide whether or not to make the scrip offer available.
\nNotes to the Consolidated Financial Statements
continued
\nConvatec Group Plc Annual Report and Accounts 2022
200
\nFinancial statements
Dividends paid and proposed were as follows:
\nPence
\nper share
\nCents
\nper share
\nTotal
\n$m
\nSettled in cash
\n$m
\nSettled via scrip
\n$m
\nNo of scrip shares
\nissued
\nFinal dividend 2020
2.845
3.983
79.7
53.6
26.1
9,475,532
\nInterim dividend 2021
1.229
1.717
34.6
32.2
2.4
750,265
\nPaid in 2021
4.074
5.700
114.3
85.8
28.5
10,225,797
\nFinal dividend 2021
3.161
4.154
77.8
58.9
18.9
7,192,010
\nInterim dividend 2022
1.410
1.717
34.8
29.2
5.6
2,107,103
\nPaid in 2022
4.571
5.871
112.6
88.1
24.5
9,299,113
\nFinal dividend 2022 proposed
3.657
4.330
88.5
\nThe final dividend proposed for 2022, to be distributed on 25 May 2023 to shareholders on the register at the close of
\nbusiness on 11 April 2023, is based upon the issued and fully paid share capital as at 31 December 2022 and is subject to
\nshareholder approval at the Annual General Meeting on 18 May 2023. The dividend will be declared in US dollars and will
\nbe paid in Sterling at the chosen exchange rate of $1.184/\u00a31.00 determined on 8 March 2023.
\nThe Company operates a scrip dividend scheme allowing shareholders to elect to receive their dividends in the form of
\nnew fully paid ordinary shares. For any particular dividend, the Directors may decide whether or not to make the scrip offer
\navailable. A scrip dividend alternative will be offered allowing shareholders to elect by 3 May 2023 to receive their dividend
\nin the form of new ordinary shares.
\nThe interim and final dividends for 2022 give a total dividend for the year of 6.047 cents per share, an increase of 3.0% over the
\nprior year (2021: 5.871 cents per share).
\n19. SHARE-BASED PAYMENTS
\nThe Group operates a number of plans used to award shares to Executive Directors and other senior employees as part
\nof their remuneration package. A charge is recognised over the vesting period in the Consolidated Income Statement to
\nrecord the cost of these, based on the fair value of the award at the grant date.
\nThe Group\u2019s share-based payment schemes in place are as follows:
\nLong Term Incentive Plan (LTIP)
\nProvides Performance Share Plan (PSP) awards subject to Group performance and market conditions and Restricted Stock
\nUnits (RSU) subject only to remaining employed up to the vesting date. Details on share-based payments in relation to
\nExecutive Directors is set out on page 146.
\nDeferred Bonus Plan (DBP)
\nProvides for the grant of share awards to defer a portion of the participant\u2019s bonus as determined by the Remuneration
\nCommittee. The awards vest subject only to remaining employed up to the vesting date.
\nShare Plan (SP)
\nProvides for the grant of discretionary share awards. Awards granted in 2022 will vest to employees still employed on the
\nvesting date.
\nEmployee Plans
\nThe Group also operates Employee Plans which provide eligible employees the opportunity to save up to \u00a3500 per month
\n(or local currency equivalent) with an option to acquire shares using these savings at a 15% discount to the market price at
\ndate of grant. The Employee Plans are available to employees under the following schemes:
\n\u2022
Save-As-You-Earn (SAYE)
\u2013 Available to all employees in the UK employed by participating Group companies.
\n\u2022
Employee Stock Purchase Plan (ESPP)
\u2013 Available to all employees in the US.
\n\u2022
International Share Save Plan
\u2013 Available to all employees in certain countries in the rest of the world.
\nAccounting policy
\nEquity-settled share-based payment awards are measured at the fair value of the award on the grant date, excluding the
\neffect of non-market-based vesting conditions. The fair value of the awards at the date of the grant is expensed to the
\nConsolidated Income Statement over the vesting period on a straight-line basis.
\nAppropriate adjustments are made to reflect expected and actual forfeitures during the vesting period due to
\nuncertainties in satisfying service conditions or non-market performance conditions. The corresponding credit is to other
\nreserves in the Consolidated Statement of Financial Position.
\n201
Convatec Group Plc Annual Report and Accounts 2022
\nAdditional information
Governance
Strategic report
Overview
Financial statements
19. SHARE-BASED PAYMENTS (CONTINUED)
\nShare-based payment expenses recognised in the Consolidated Income Statement as follows:
\n2022
\n$m
\n2021
\n$m
\nLTIP
10.8
11.6
\nSP
3.0
2.1
\nDBP
1.6
1.4
\nEmployee Plans
1.3
1.3
\n16.7
16.4
\nDuring the year to 31 December 2022, $16.6 million (2021: $16.4 million) of share-based payment was equity-settled and $0.1 million
\n(2021: nil) was cash-settled. All amounts that were equity-settled were recognised in Other reserves, with the amounts that were
\ncash-settled recognised through other liabilities.
\nAwards outstanding
\nThe movements in the number of share and share option awards and the weighted average exercise price of share options are
\ndetailed below:
\n2022
2021
\nNumber of
\nshares/
\noptions
\n000's
\nWeighted
\naverage exercise
\nprice of options
\n\u00a3 per share
\nNumber of
\nshares/
\noptions
\n000's
\nWeighted
\naverage exercise
\nprice
\n\u00a3 per share
\nOutstanding at 1 January
33,707
0.43
30,472
0.51
\nGranted
14,225
0.32
13,190
0.33
\nForfeited
(7,728)
0.48
(8,265)
0.53
\nExercised
(9,404)
0.54
(1,690)
0.46
\nOutstanding at 31 December
30,800
0.33
33,707
0.43
\nExercisable at 31 December
993
1.33
826
1.80
\nWeighted average fair value of awards granted (\u00a3 per share)
\u2013
1.18
\u2013
1.18
\nThe average share price during 2022 was \u00a32.11 (2021: \u00a32.15). The share price of the Company at 31 December 2022 was \u00a32.33.
\nThe range of exercise prices and the weighted average remaining contractual life of options outstanding at 31 December were
\nas follows:
\nRange of prices
\n2022
\nNumber of
\nshares/
\noptions
\n000's
\n2021
\nNumber of
\nshares/
\noptions
\n000's
\nNil
24,990
24,198
\n1.21
788
5,338
\n1.74
2,511
\u2013
\n1.76
1,108
1,344
\n1.84
18
755
\n2.08
1,385
2,072
\n30,800
33,707
\nWeighted average remaining contractual life of options outstanding
2.2 years
1.9 years
\nNotes to the Consolidated Financial Statements
continued
\nConvatec Group Plc Annual Report and Accounts 2022
202
\nFinancial statements
Valuation assumptions
\nAll share awards granted are valued directly by reference to the share price at date of grant except:
\n\u2022
PSP shares awarded under the LTIP plans are subject to both market-based measures and non-market-based measures.
\nValues under the market-based element are based on relative Total Shareholder Return (TSR) performance conditions and
\nare valued using a Monte Carlo simulation.
\n\u2022
Options granted under the Employee Plans are valued using the Black-Scholes model.
\nThe principal assumptions used in these valuations were:
\n2022
2021
\nLTIP
\nSAYE &
\nInternational
\nShare Save Plan
ESPP
LTIP
\nSAYE &
\nInternational
\nShare Save Plan
ESPP
\nShare price at date of grant
\u00a31.79
\u00a32.13
\u00a31.99
\u00a31.92
\u00a32.44
\u00a32.44
\nExercise price
nil
\u00a31.74
\u00a31.74
nil
\u00a32.08
\u00a32.08
\nExpected life
3.0 years
3.6 years
2.0 years
3.0 years
3.6 years
2.0 years
\nExpected volatility
\n1
\n28.7%
28.7%
28.7%
40.6%
40.6%
40.6%
\nRisk-free rate
1.3%
1.3%
1.3%
0.1%
0.1%
0.1%
\nDividend yield
2.5%
2.5%
2.5%
2.1%
2.1%
2.1%
\nFair value
\u00a31.03
\u00a30.36
\u00a30.33
\u00a31.00
\u00a30.54
\u00a30.48
\n1.
The expected volatility was determined by calculating the observed historical volatility of share prices of peer group companies (including the Company) over the
\nexpected life of the share award.
\n20. FINANCIAL RISK MANAGEMENT
\nThe Group\u2019s treasury policy seeks to minimise the Group's principal financial risks. No trading or speculative transactions in
\nfinancial instruments are undertaken. This note presents information about the Group\u2019s exposure to financial risks and the
\nGroup\u2019s objectives, policies and processes for measuring and managing risks.
\nFinancial risk management objectives
\nBased on the global operations of the Group, management consider the key financial risks to be liquidity, foreign exchange,
\ninterest rate and counterparty credit. The management of counterparty credit risk is discussed in Note 12 \u2013 Trade and
\nother receivables.
\nLiquidity risk
\nLiquidity risk is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due. The Group
\nmanages and minimises liquidity risk by using global cash management solutions and actively monitoring both actual and
\nprojected cash outflows to ensure that it will have sufficient liquidity to meet its liabilities when due and have headroom to
\nprovide against unforeseen obligations. As at 31 December 2022, the Group held cash and cash equivalents of $143.8 million
\n(2021: $463.4 million), of which 74.5% was held centrally.
\nOn 15 November 2022, the Group refinanced its existing bank facilities with $1.2 billion of committed bank lending, comprising a
\nmulticurrency revolving credit facility of $950.0 million and a term loan of $250.0 million, both with a maturity in November 2027.
\nThe Group\u2019s $500.0 million senior unsecured notes remain in place, with maturity in October 2029. As at 31 December 2022,
\n$472.8 million of the multicurrency revolving credit facility remained undrawn.
\nMedium and long-term borrowing requirements are met through committed bank facilities and capital market funding as
\ndetailed in Note 21 \u2013 Borrowings. Short-term borrowing requirements, if necessary, may be met from drawings under the
\nmulticurrency facility.
\nLonger term, the Group has assessed its liquidity forecast as part of the viability assessment and its ability to continue
\ntrading as a going concern. For further detail on the Group's assessment of liquidity risk, refer to the Viability statement
\non pages 98 and 99.
\nForeign exchange risk
\nAs a result of the global nature of operations, the Group is exposed to market risk arising from changes in foreign currency
\nexchange rates.
\nWhere possible, the Group manages foreign exchange risk by matching same currency revenues and expenses. It will also
\ndenominate debt in certain currencies and use foreign exchange forward contracts and swap contracts to further minimise
\ntransactional foreign exchange risk, with certain currency contracts designated as cash flow hedges; refer to Note 23 \u2013
\nFinancial instruments for details. As a result, the impacts of the fluctuations in the market values of assets and liabilities
\nand the settlement of foreign currency transactions are reduced.
\n203
Convatec Group Plc Annual Report and Accounts 2022
\nAdditional information
Governance
Strategic report
Overview
Financial statements
20. FINANCIAL RISK MANAGEMENT (CONTINUED)
\nThe following table summarises the exchange rates used for the translation of currencies into US dollars that have the most
\nsignificant impact on the Group results:
\nCurrency
\nAverage rate/
\nClosing rate
2022
2021
\nUSD/EUR
Average
1.05
1.18
\nClosing
1.07
1.14
\nUSD/GBP
Average
1.24
1.38
\nClosing
1.20
1.35
\nUSD/DKK
Average
0.14
0.16
\nClosing
0.14
0.15
\nDuring 2022, revenue was mostly USD denominated (52%). Other significant currencies were EUR (20%), GBP (6%) and DKK
\n(2%). The balance comprises a basket of other currencies which, on an individual basis, were each less than 2% of revenue.
\nSensitivity analysis on foreign exchange risk
\nThe sensitivity analysis below assumes a 10% strengthening of the US dollar against the principal currencies to highlight the
\nsensitivity of profit before income taxes and total equity to translation foreign exchange risk as at 31 December, with all other
\nvariables held constant.
\nCurrency
Sensitivity
\n2022
\n$m
\n2021
\n$m
\nIncrease/(decrease) in profit before income taxes
\nUSD/GBP
+10%
4.0
0.1
\nUSD/EUR
+10%
(12.8)
(40.6)
\nUSD/DKK
+10%
(10.4)
(20.5)
\nDecrease/(increase) in total equity
\nUSD/GBP
+10%
(81.6)
(93.0)
\nUSD/EUR
+10%
(8.1)
6.5
\nUSD/DKK
+10%
(24.3)
(31.4)
\nInterest rate risk
\nThe Group\u2019s principal exposure to interest rate risk is in relation to interest expense on borrowings made under the Group's
\ncredit facilities which attract interest at floating rates plus a fixed margin as well as any cash or investments that result in
\ninterest income at floating rates. Floating rate instruments expose the Group to interest rate cash flow and expense risk.
\nThe Group manages this exposure on a net basis within Board-approved policy parameters, including the use of interest
\nrate swaps designated as cash flow hedges to maintain an appropriate mix between fixed and floating rate borrowings.
\nAs at 31 December 2022, the Group\u2019s borrowings were denominated in USD and Euros. Prior to refinancing in November 2022,
\ncredit facilities exposed the Group to USD LIBOR and EURIBOR reference rates. In line with IBOR reform, the facilities executed
\nin November 2022 referenced USD SOFR and EURIBOR. The Group\u2019s interest rate swaps of $275.0 million as at 31 December 2022,
\nwhich matured in January 2023 were referenced to USD LIBOR. As at the year end, the Group had also entered into forward
\nstarting interest rate swaps of $180.0 million, which are effective from January 2023, and these are referred to the SOFR
\nbenchmark (see Note 23 \u2013 Financial Instruments).
\nIBOR Reform
\nNon-derivative financial liabilities
\nIn November 2022, the Group refinanced its bank borrowings and as a result extinguished its existing non-derivative financial
\nliabilities linked to US LIBOR. The Group\u2019s new facilities are at floating rate and reflect IBOR reform. Whilst one of the Group\u2019s
\nfacilities is multicurrency, most borrowings are expected to be denominated in USD and EUR with the reference rates of SOFR
\nand EURIBOR, respectively.
\nIn July 2019, the Belgian Financial Services and Markets authority granted authorisation with respect to EURIBOR under
\nEuropean Union Benchmarks Regulation. This allows market participants to continue to use EURIBOR. The Group expects
\nEURIBOR will continue as the EUR benchmark for the foreseeable future.
\nDerivatives
\nAs of 31 December 2022, the Group held interest rate swaps for the purpose of risk management that are designated in cash
\nflow hedge relationships. The floating legs of these swaps are linked to both US LIBOR and SOFR. The Group\u2019s derivatives are
\ngoverned by contracts based on the master agreement of the International Swaps and Derivatives Association (ISDA).
\nAll interest rate swaps linked to US LIBOR had a maturity of January 2023. Interest rate swaps traded after November 2022
\nhave a floating rate linked to SOFR, aligned with the Group\u2019s facilities. See Note 23 \u2013 Financial Instruments.
\nNotes to the Consolidated Financial Statements
continued
\nConvatec Group Plc Annual Report and Accounts 2022
204
\nFinancial statements
Hedge accounting
\nAt the date of refinancing, the Group\u2019s existing bank borrowings were extinguished and replaced with drawings under the
\nnew facilities. Existing cash flow hedges were maintained as the underlying interest rate risk still existed and the hedging
\nrelationships continued to fulfil the requirements of IFRS 9.
\nSwaps with floating legs linked to SOFR have also been designated as cash flow hedges and will provide interest rate risk
\nmanagement beyond January 2023.
\nSensitivity analysis on interest rate risk
\nBased on the composition and the terms of the Group's borrowings as at 31 December 2022, and including the 0% interest
\nrate floor and after the effect of the interest rate swaps and cash, if interest rates were to increase or decrease by 100 basis
\npoints, the interest expense on borrowings would increase by $4.0 million (2021: $0.1 million) or decrease by $4.0 million
\n(2021: $2.3 million increase) assuming that all other variables remain constant and excluding any effect of tax. In 2021, the
\nimpact of the interest rate decrease is limited due to the 0% interest floor on the borrowings.
\n21. BORROWINGS
\nThe Group\u2019s sources of borrowing for funding and liquidity purposes derive from senior notes and credit facilities,
\nincluding a committed revolving credit facility.
\nIn November 2022, the Group refinanced its bank facilities with $1.2 billion committed for a five-year term. The Group\u2019s
\n2029 unsecured senior notes of $500.0 million remain in place.
\nAccounting policy
\nBorrowings are recognised at fair value less directly attributable costs on the date that they are entered into and
\nsubsequently measured at amortised cost using the effective interest rate method. Borrowing costs directly attributable
\nto the facility are capitalised and amortised over the period of the loan.
\nThe effective interest rate method is a method of calculating the amortised cost of a financial liability and allocating the
\ninterest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future
\ncash payments through the expected life of the financial liability, or, where appropriate, a shorter period, to the net
\ncarrying amount on initial recognition.
\nBorrowings are classified as non-current when the repayment date is more than 12 months from the period-end date or
\nwhere they are drawn on a facility with more than 12 months to expiry.
\nThe Group derecognises borrowings when its contractual obligations are discharged, terminated or expired.
\nFair value measurement
\nBorrowings are classified as Level 1 or Level 2 in the fair value hierarchy in accordance with IFRS 13, Fair Value Measurements,
\nbased upon the degree to which the fair value movements are observable.
\nThe Group's borrowings as at 31 December were as follows:
\nCurrency
\nYear of
\nmaturity
\n2022
\nFace value
\n$m
\n2021
\nFace value
\n$m
\nRevolving Credit Facility
\n1
\nUSD/Euro
2027
477.2
\u2013
\nTerm Loan
USD
2027
250.0
\u2013
\nSenior Notes
USD
2029
500.0
500.0
\nRevolving Credit Facility
Multicurrency
2024
\u2013
\u2013
\nTerm Loan Facility A
\n2
\nUSD/Euro
2024
\u2013
461.2
\nTerm Loan Facility B
\n3
\nUSD/Euro
2024
\u2013
396.7
\nInterest-bearing borrowings
1,227.2
1,357.9
\nFinancing fees
\n4
\n(15.3)
(13.3)
\nTotal carrying value of borrowings
1,211.9
1,344.6
\nCurrent portion of borrowings
\u2013
144.8
\nNon-current portion of borrowings
1,211.9
1,199.8
\n1.
Included within the Revolving Credit Facility was \u20ac145.0 million ($155.2 million) at 31 December 2022 (2021: nil), representing 32.5% of RCF debt denominated in Euros
\nand 67.5% denominated in US dollars.
\n2.
Included within Term Loan Facility A as at 31 December 2021 was \u20ac78.4 million ($89.2 million) representing 19% of the loan denominated in Euros and 81%
\ndenominated in US dollars.
\n3.
Included within Term Loan Facility B as at 31 December 2021 was \u20ac67.5 million ($76.7 million), representing 19% of the loan denominated in Euros and 81%
\ndenominated in US dollars.
\n4.
Financing fees of $15.3 million (2021: $13.3 million) related to the remaining unamortised fees incurred on the credit facilities of $8.4 million (2021: $5.4 million) and on
\nthe senior notes of $6.9 million (2021: $7.9 million).
\n205
Convatec Group Plc Annual Report and Accounts 2022
\nAdditional information
Governance
Strategic report
Overview
Financial statements
21. BORROWINGS (CONTINUED)
\nCredit facilities
\nThe credit facilities held by the Group are committed and available for the refinancing of certain existing financial
\nindebtedness and general corporate purposes. On 15 November 2022, the Group refinanced its credit facilities. The original
\nfacilities, maturing in October 2024 and, consisting of two five-year multicurrency term loans totalling $1.5 billion and an
\nundrawn $200.0 million multicurrency revolving credit facility, were settled and extinguished respectively on refinancing.
\nDuring the year and until the refinancing activity, $27.5 million (2021: $88.4 million) was repaid in accordance with the
\nrepayment schedule for the original facilities.
\nThe new credit facility for $1.2 billion comprises of a $250.0 million term loan and a $950.0 million multicurrency revolving
\ncredit facility, both committed for a five-year term. As at 31 December 2022, the term loan was fully drawn and $477.2 million
\nof the revolving credit facility was drawn, with $472.8 million undrawn.
\nTransaction costs directly attributable to the refinancing have been capitalised and are amortised over the term of the facility
\nusing the effective interest rate method. Unamortised deferred financing fees of $2.7 million associated with the previous credit
\nagreement have been written off to the Consolidated Income Statement in 2022 (refer to Note 25 \u2013 Finance income and expense).
\nThe principal financial covenants are based on a permitted net debt to covenant-adjusted EBITDA
\n1
\nratio and interest cover
\ntest as defined in the credit facilities agreement. Testing is required on a semi-annual basis, at June and December, based on
\nthe last 12 months\u2019 financial performance. At 31 December 2022, the permitted net debt to covenant-adjusted EBITDA
\n1
\nratio
\nwas a maximum of 3.50 times and the interest cover a minimum of 3.50 times, terms as defined by the credit facilities
\nagreement. In accordance with the credit facilities agreement, the net debt to covenant-adjusted EBITDA
\n1
\nratio can increase
\ntoa maximum 4.00 times for permitted acquisitions or investments.
\nSenior notes
\nUnsecured senior notes of $500.0 million were issued on 7 October 2021 with a maturity date of 15 October 2029 at a coupon
\nrate of 3.875% per annum, payable semi-annually and, except for certain options redemption conditions, is not redeemable
\nat the issuer\u2019s option prior to 7 October 2024. The Group\u2019s refinancing activity did not affect the senior notes.
\nThe senior notes are subject to a financial covenant which is an interest cover test (minimum of 2 times) as defined in the
\nindenture. Testing is required annually based on the last 12 calendar months\u2019 financial performance.
\nFinancial covenants
\nThe Group was in compliance with all financial and non-financial covenants at 31 December 2022, with significant available
\nheadroom on the financial covenants (in excess of $588.0 million debt headroom on net debt to covenant-adjusted EBITDA
\n1
\n).
\nExcluding the impact of interest rate swaps, the weighted average interest rate on borrowings for the year ended
\n31 December 2022 was 3.4% (2021: 2.0%). The increase in the weighted average interest rate was due to rising underlying
\nreference base rates on debt with floating rates and a full year of interest on the senior notes issued in 2021.
\nBorrowings not measured at fair value
\nThe senior notes are listed and their fair value at 31 December 2022 of $430.8 million (2021: $507.7 million) has been obtained
\nfrom quoted market data and therefore categorised as a Level 1 measurement in the fair value hierarchy under IFRS 13,
Fair
\nValue Measurements
. For the Group\u2019s other borrowings, the fair value is based on discounted cash flows using a current
\nborrowing rate and is categorised as a Level 2 measurement. At 31 December 2022, the estimated fair value of the Group's
\nother borrowings was $762.4 million (2021: $847.3 million).
\n1.
Covenant-adjusted EBITDA is calculated based on terms as defined in the credit facilities agreement. This is different to adjusted EBITDA, which is an alternative
\nperformance measure (APM) as disclosed on pages 224 to 228.
\nNotes to the Consolidated Financial Statements
continued
\nConvatec Group Plc Annual Report and Accounts 2022
206
\nFinancial statements
Maturity of financial liabilitiesS
\nThe contractual undiscounted future cash flows, including contractual interest payments, related to the Group's financial
\nliabilities were as follows:
\nContractual cash flows
\nWithin 1
\nyear
\nor on
\ndemand
\n$m
\n1 to 2
\nyears
\n$m
\n2 to 3
\nyears
\n$m
\n3 to 4
\nyears
\n$m
\n4 to 5
\nyears
\n$m
\nMore than
\n5 years
\n$m
\nTotal
\n$m
\nCarrying
\namount
\n$m
\nAt 31 December 2022
\nBorrowings
57.5
55.2
50.8
50.2
777.8
538.8
1,530.3
1,211.9
\nLease liabilities (Note 24)
22.7
17.8
13.1
9.8
7.9
94.2
165.5
88.3
\nTrade and other payables (Note 13)
346.6
\u2013
\u2013
\u2013
\u2013
\u2013
346.6
346.6
\nDerivative financial instruments (Note 23)
\nDerivative financial instruments payable
1,919.8
6.3
1.2
\u2013
\u2013
\u2013
1,927.3
32.5
\nDerivative financial instruments receivable
1,912.5
6.9
1.0
\u2013
\u2013
\u2013
1,920.4
26.6
\nAt 31 December 2021
\nBorrowings
184.7
182.0
591.2
19.4
19.4
558.1
1,554.8
1,344.6
\nLease liabilities (Note 24)
22.6
19.4
14.7
10.9
8.3
28.4
104.3
90.5
\nTrade and other payables (Note 13)
342.5
\u2013
\u2013
\u2013
\u2013
\u2013
342.5
342.5
\nDerivative financial instruments (Note 23)
\nDerivative financial instruments payable
1,723.4
2.9
\u2013
\u2013
\u2013
\u2013
1,726.3
14.6
\nDerivative financial instruments receivable
1,726.3
\u2013
\u2013
\u2013
\u2013
\u2013
1,726.3
15.1
\nReconciliation of movement in borrowings
\n2022
\n$m
\n2021
\n$m
\nBorrowings at 1 January
1,344.6
1,456.4
\nRepayment of borrowings
\n1
\n(842.5)
(583.9)
\nProceeds of new borrowings, net of financing fees
\n2
\n714.2
491.8
\nForeign exchange
(11.0)
(26.5)
\nNon-cash movements
\n3
\n6.6
6.8
\nBorrowings at 31 December
1,211.9
1,344.6
\n1.
In the year ended 31 December 2022, repayment of borrowings included the scheduled repayment instalment on Term Loan Facility A of $27.5 million (2021: $88.4 million)
\nand the full repayment of all term loans facilities of $815.0 million as part of the refinancing activity.
\n2.
On 15 November 2022, the Group entered into new revolving credit facilities and term loan facility. The transaction costs in respect of the refinancing activities were
\n$8.6 million. For the year ended 31 December 2021, 180 Medical, Inc. a wholly owned subsidiary of the Group, issued 8-year, non-call for 3 years unsecured senior notes
\nof $500.0 million in accordance with Rule 144A and Regulation S [under the Securities Act]. Transaction costs in respect of the issuance were $8.2 million.
\n3.
Non-cash movements were in respect of the amortisation of deferred financing fees associated with the borrowings and the $2.7 million write-off of the remaining
\nunamortised deferred financing fees following early termination of the Group\u2019s previous credit facilities.
\n207
Convatec Group Plc Annual Report and Accounts 2022
\nAdditional information
Governance
Strategic report
Overview
Financial statements
22. CASH, CASH EQUIVALENTS AND RESTRICTED CASH
\nCash held at bank is used for the Group's day-to-day operations. The Group utilises bank deposits or money market funds
\nwhich have a maturity of three months or less as liquid investments that enable short-term liquidity requirements to be met.
\nAccounting policy
\nCash and cash equivalents comprise cash in hand and current balances with banks and similar institutions. All liquid
\ninvestments, including term deposits and money market funds, have original maturities of three months or less, are
\nsubject to insignificant risk of changes in value and are repayable within one business day with no significant loss of
\ninterest, resulting in classification as cash equivalents.
\nCash at bank earns interest at rates based on daily bank deposit rates. Term deposits and money market funds earn
\ninterest at the respective short-term deposit rate.
\nCash and cash equivalents at 31 December 2022 included $19.2 million (2021: $37.5 million) of cash held in territories where
\nthere are restrictions related to timely repatriation. The amounts meet the definition of cash and cash equivalents but are
\nnot deemed to be readily available for general use by the wider Group.
\nConsolidated Statement of Cash Flows
\nUnder certain circumstances, the Group utilises bank overdrafts to manage temporary fluctuations in cash positions.
\nThe bank overdrafts are repayable on demand, used as part of the Group\u2019s overall cash management strategy and form
\npart of cash and cash equivalents for the purpose of the Consolidated Statement of Cash Flows. The Group had no bank
\noverdrafts as at 31 December 2022 or 31 December 2021.
\nThe Group reports cash flows from operating activities using the indirect method in accordance with IAS 7,
Statement of
\nCash Flows
. The Group has elected to classify net interest paid (including interest on lease liabilities) as cash flows from
\noperating activities. Short-term lease payments and payments for leases of low-value assets are included in cash flows
\nfrom operating activities.
\nChanges in working capital assets and liabilities as reported in cash flows from operating activities reflect the changes in the
\nConsolidated Statement of Financial Position between the current and previous financial year end, including adjustments for
\namounts relating to acquisitions and disposals (when necessary), as well as currency translation adjustments.
\nCash payments for the principal portion of lease liabilities is included within cash flows from financing activities.
\nAcquisition of property, plant and equipment, and intangible assets reflects additions to the related assets, including
\nadjustments for changes in capital accruals. Acquisition of intangible assets relates to capitalised software, development
\nand product-related licences. Refer to Note 9 \u2013 Intangible assets and goodwill for further details.
\nThe adjustment for non-operating expense, net in the Consolidated Statement of Cash Flows, excludes the gains and
\nlosses realised on cash-settled derivative financial instruments. Refer to Note 5 \u2013 Non-operating (expense)/income, net.
\nRestricted cash
\nIn certain instances, there are requirements to set aside cash to support payment guarantees and obligations, including
\nthe payment of value-added taxes, custom duties on imports, tender programmes and lease arrangements. Such amounts
\nare classified by the Group as restricted cash, which do not form part of cash and cash equivalents. Cash paid into escrow,
\narising from a business combination, is also classified as restricted cash.
\n2022
\n$m
\n2021
\n$m
\nCash at bank and in hand
42.6
69.5
\nMoney market funds and bank deposits
101.2
393.9
\nCash and cash equivalents
143.8
463.4
\n2022
\n$m
\n2021
\n$m
\nRestricted cash \u2013 current
\n1
\n18.2
0.4
\nRestricted cash \u2013 non-current
7.3
13.6
\nTotal restricted cash
25.5
14.0
\n1.
In the prior year, restricted cash with a maturity of less than one year of $0.4 million is included in Trade and other receivables.
\nCurrent restricted cash of $18.2 million (2021: $0.4 million) relates to cash held in escrow in respect of the Cure Medical,
\nPatient Care Medical and Triad Life Sciences acquisitions.
\nIncluded in non-current restricted cash of $7.3 million (2021: $13.6 million) is $4.0 million (2021: $9.7 million) relating to cash
\nheld in escrow in respect of the above acquisitions. The remaining balance of $3.3 million (2021: $3.9 million) relates to
\namounts held in respect of guarantees and the Group\u2019s Share Save scheme for employees. None of these amounts are
\naccessible on demand.
\nNotes to the Consolidated Financial Statements
continued
\nConvatec Group Plc Annual Report and Accounts 2022
208
\nFinancial statements
23. FINANCIAL INSTRUMENTS
\nA derivative financial instrument is a contract that derives its value from the performance of an underlying variable, such as
\nforeign exchange rates or interest rates. The Group uses derivative financial instruments to manage foreign exchange and
\ninterest rate risk arising from its operations and financing. Derivative financial instruments used by the Group are foreign
\nexchange forwards and interest rate swaps.
\nThe Group utilises interest rate swap agreements, designated as cash flow hedges, to manage its exposure to variability in
\nexpected future cash outflows attributable to the changes in interest rates on the Group\u2019s committed borrowing facilities.
\nAccounting policy
\nDerivative financial instruments are initially recognised at fair value on the derivative contract date and are remeasured
\nat their fair value at subsequent reporting dates. Derivative financial instruments are classified at fair value through profit
\nor loss (FVTPL) unless they are designated and qualify as an effective cash flow hedge. The fair value of forward foreign
\nexchange contracts is determined by using the difference between the contract exchange rate and the quoted forward
\nexchange rate from third parties at the reporting date.
\nHedge accounting
\nThe Group has elected to apply the IFRS 9,
Financial Instruments
hedge accounting requirements. Changes in the fair
\nvalues of derivatives designated as cash flow hedges are recognised in other comprehensive income to the extent the
\nhedges are effective. The fair value is the estimated amount that the Group would receive or pay to terminate the forward
\nor swap at the reporting date, taking into account current market rates, the Group\u2019s current creditworthiness, as well as
\nthat of the financial instrument counterparties.
\nThe cumulative gain or loss is then reclassified to the Consolidated Income Statement in the same period when the
\nrelevant hedged transaction is realised. Any ineffectiveness on hedging instruments is recognised in the Consolidated
\nIncome Statement as they arise. Hedge accounting is discontinued when the hedging instrument expires or is sold,
\nterminated or exercised, or no longer qualifies for hedge accounting. The discontinuation is accounted for prospectively.
\nAny gain or loss recognised in other comprehensive income and accumulated in the cash flow hedge reserve at that time
\nremains in equity and is reclassified to profit or loss when the forecast transaction occurs. When a forecast transaction is
\nno longer expected to occur, the gain or loss accumulated in the cash flow hedge reserve is immediately reclassified to
\nprofit or loss. Gains and losses arising from forward points and foreign currency basis spreads are excluded from
\ndesignation and are treated as a cost of hedging, deferred initially in other equity reserves and released into profit or loss
\nover the life of the hedging relationship.
\nThe Group held USD interest rate swaps of $275.0 million, with exposure to USD LIBOR as a reference rate and maturing
\nin January 2023. New USD interest rate swaps of $180.0 million were entered during 2022 with an effective date of
\n23 January 2023, with exposure to USD SOFR as a reference rate and maturing at various points in the next two years.
\nThese have been designated as cash flow hedges through other comprehensive income. In assessing hedge effectiveness
\non a prospective basis for this relationship, the Group has assumed that the USD LIBOR-related interest cash flows on the
\nswap are not altered by IBOR reform and the hedge continues to be highly effective. Furthermore, hedge accounting did
\nnot need to be discontinued during the period of IBOR-related uncertainty as the Group had taken the relief available in
\nPhase 1 to separately identify the risk component at the initial hedge designation and not on an ongoing basis.
\nAt the date of refinancing, the Group\u2019s existing bank borrowings were extinguished and replaced with drawings under the
\nnew facilities. Existing cash flow hedges were maintained as the underlying interest rate risk still existed and the hedging
\nrelationships continued to fulfil the requirements of IFRS 9. Swaps with floating legs linked to SOFR have also been
\ndesignated as cash flow hedges and will provide interest rate risk management beyond January 2023.
\nRight to offset
\nFinancial assets and liabilities are offset and the net amount presented in the Consolidated Statement of Financial Position
\nwhen, and only when, the Group has a legal right to offset the amounts and intends either to settle them on a net basis or
\nto realise the asset and settle the liability simultaneously.
\nFair value measurement
\nFinancial instruments are classified as Level 1, Level 2 or Level 3 in the fair value hierarchy in accordance with IFRS 13,
\nFair Value Measurements
, based upon the degree to which the fair value movements are observable. Level 1 fair value
\nmeasures are defined as those with quoted (unadjusted) market prices in active markets for identical assets or liabilities.
\nLevel 2 fair value measurements are defined as those derived from inputs other than quoted prices that are observable
\nfor the asset or liability, either directly (prices from third parties) or indirectly (derived from third-party prices). Level 3 fair
\nvalue measurements are defined as those derived from significant unobservable inputs.
\nThe only instrument classified as Level 1 are the senior notes, given the availability of quoted market price (Note 21 \u2013 Borrowings).
\nThe Group\u2019s derivative financial instruments, discussed below, are classified as Level 2, and the Group\u2019s equity investment in
\npreference shares is classified as Level 3 (Note 10 \u2013 Investment in financial assets).
\n209
Convatec Group Plc Annual Report and Accounts 2022
\nAdditional information
Governance
Strategic report
Overview
Financial statements
23. FINANCIAL INSTRUMENTS (CONTINUED)
\nThe Group holds interest rate swap agreements to fix a proportion of variable interest on US dollar-denominated debt,
\nin accordance with the Group's risk management policy. The interest rate swaps are designated as hedging instruments
\nin a cash flow hedging relationship.
\nIn accordance with Group policy, the Group uses forward foreign exchange contracts, designated as cash flow hedges, to hedge
\ncertain forecast third-party foreign currency transactions. When a commitment is entered into, a layered approach is taken when
\nhedging the currency exposure, ensuring that no more than 100% of the transaction exposure is covered. The currencies hedged
\nby forward foreign exchange contracts are US dollars, Swiss francs, Pound sterling, Danish krone and Japanese yen.
\nThe Group further utilises foreign exchange contracts and swaps classified as FVTPL to manage short-term foreign
\nexchange exposure.
\nCash flow hedges
\nThe fair values are based on market values of equivalent instruments at 31 December. The following table presents the
\nGroup's outstanding interest rate swaps, which were designated as cash flow hedges at 31 December:
\n2022
2021
\nEffective date
Maturity date
\nNotional
\namount
\n$m
\nFair value
\n1
\nassets/
\n(liabilities)
\n$m
\nNotional
\namount
\n$m
\nFair value
\n1
\nassets/
\n(liabilities)
\n$m
\n3 Month LIBOR Float to
\nFixed Interest Rate Swap
24 Jan 2020
24 Jan 2023
275.0
2.0
275.0
(2.9)
\n6 Month term SOFR Float to
\nFixed Interest Rate Swap
23 Jan 2023
23 Jan 2024
90.0
0.2
\u2013
\u2013
\n6 Month term SOFR Float to
\nFixed Interest Rate Swap
23 Jan 2023
23 July 2024
40.0
\u2013
\u2013
\u2013
\n6 Month term SOFR Float to
\nFixed Interest Rate Swap
23 Jan 2023
23 Jan 2025
50.0
(0.3)
\u2013
\u2013
\n1.
The fair values of the interest rate swaps were disclosed in non-current derivative financial liabilities in the Consolidated Statement of Financial Position. There was
\nno ineffectiveness recognised in the Consolidated Income Statement.
\nForeign exchange forward contracts
\nThe following table presents the Group's outstanding foreign exchange forward contracts valued at FVTPL and foreign
\ncurrency forward contracts designated as cash flow hedges, disclosed in current derivative financial assets and liabilities,
\nat 31 December:
\n2022
2021
\nTerm
\nNotional
\namount
\n$m
\nFair value
\nasset/
\n(liabilities)
\n$m
\nNotional
\namount
\n$m
\nFair value
\nassets/
\n(liabilities)
\n$m
\nForeign exchange contracts
\u2264 3 months
996.6
21.3
864.6
14.5
\nForeign currency forward exchange contracts designated as
\ncash flow hedges
\u2264 12 months
72.7
3.1
40.8
0.6
\nDerivative financial assets
1,069.3
24.4
905.4
15.1
\nForeign exchange contracts
\u2264 3 months
703.7
(30.2)
695.9
(6.5)
\nForeign currency forward exchange contracts designated as
\ncash flow hedges
\u2264 12 months
132.8
(2.3)
130.2
(5.2)
\nDerivative financial liabilities
836.5
(32.5)
826.1
(11.7)
\nDuring the year ended 31 December 2022, the Group realised a net gain of $15.8 million (2021: $9.7 million loss) on foreign exchange
\nforward contracts designated as FVTPL in non-operating expenses, net, (Note 5) in the Consolidated Income Statement.
\nImpact of hedging on other comprehensive income
\nThe following table presents the impact of hedging on other comprehensive income:
\n2022
\n$m
\n2021
\n$m
\nRecognised in other comprehensive income:
\nEffective portion of changes in fair value of cash flow hedges:
\nInterest rate swaps
3.3
(1.0)
\nForeign currency forward exchange contracts designated as cash flow hedges
(11.0)
(4.1)
\nChanges in fair value of cash flow hedges reclassified to the Consolidated Income Statement
16.5
5.7
\nCost of hedging
(1.1)
(0.4)
\nTotal
7.7
0.2
\nNotes to the Consolidated Financial Statements
continued
\nConvatec Group Plc Annual Report and Accounts 2022
210
\nFinancial statements
24. LEASES
\nThe Group principally leases real estate and vehicles. Leases are recognised as a right-of-use asset with a corresponding
\nliability recorded at the date at which the leased asset is available for use by the Group.
\nAccounting policy
\nThe lease liability is measured at the present value of future lease payments discounted using the rate implicit in the lease.
\nIf this rate is not readily determinable, the Group uses its incremental borrowing rate. Generally, the Group uses its
\nincremental borrowing rate as the discount rate.
\nOptions such as lease extensions or terminations on lease contracts are considered on a case-by-case basis by regular
\nmanagement assessment.
\nEach lease payment is allocated between amounts paid for principal and interest. The interest cost is charged to the
\nConsolidated Income Statement over the lease term to produce a constant periodic rate of interest on the remaining
\nbalance of the liability for each period. The right-of-use asset is depreciated on a straight-line basis over the lease term.
\nPayments associated with short-term leases and low-value leases are recognised on a straight-line basis as an expense
\nin the Consolidated Income Statement. Short-term leases are leases with a lease term of 12 months or less and low-value
\nleases comprise of leases with an underlying asset value of less than $5,000. Expenses recognised for these short-term
\nand low-value leases for the year ended 31 December 2022 were $3.9 million (2021: $2.8 million).
\nThe movements in right-of-use assets were as follows:
\nReal estate
\nand other
\n$m
\nVehicles
\n$m
\nTotal
\n$m
\nAs at 1 January 2021
70.3
15.5
85.8
\nLease additions
17.1
7.8
24.9
\nAcquisitions
0.7
\u2013
0.7
\nLeases terminated
(0.4)
(1.1)
(1.5)
\nDepreciation of right-of-use assets
(14.5)
(8.3)
(22.8)
\nForeign exchange
(2.9)
(0.6)
(3.5)
\nAs at 31 December 2021
70.3
13.3
83.6
\nLease additions
12.3
8.4
20.7
\nAcquisitions (Note 26)
2.2
\u2013
2.2
\nLeases terminated
(1.4)
0.1
(1.3)
\nDepreciation of right-of-use assets
(14.7)
(7.4)
(22.1)
\nForeign exchange
(3.1)
(0.6)
(3.7)
\nAs at 31 December 2022
65.6
13.8
79.4
\nMovements in lease liabilities were as follows:
\n2022
\n$m
\n2021
\n$m
\nLease liabilities as at 1 January
90.5
92.1
\nLease additions
21.0
24.9
\nAcquisitions
2.9
0.7
\nPayment of lease liabilities
(20.7)
(22.0)
\nLeases terminated
(1.2)
(1.5)
\nInterest expense on lease liabilities (Note 25)
3.3
3.8
\nInterest paid on lease liabilities
(3.3)
(3.8)
\nForeign exchange
(4.2)
(3.7)
\nLease liabilities as at 31 December
88.3
90.5
\nTotal cash outflow of lease liabilities including interest for the year ended 31 December 2022 was $24.0 million (2021: $25.8 million).
\nInterest paid during the year was $3.3 million (2021: $3.8 million).
\nLease liabilities by category at 31 December were as follows:
\n2022
2021
\nReal estate
\nand other
\n$m
\nVehicles
\n$m
\nTotal
\n$m
\nReal estate
\nand other
\n$m
\nVehicles
\n$m
\nTotal
\n$m
\nCurrent
13.8
6.5
20.3
13.2
6.5
19.7
\nNon-current
60.6
7.4
68.0
64.0
6.8
70.8
\nTotal
74.4
13.9
88.3
77.2
13.3
90.5
\n211
Convatec Group Plc Annual Report and Accounts 2022
\nAdditional information
Governance
Strategic report
Overview
Financial statements
24. LEASES (CONTINUED)
\nThe maturity of lease liabilities at 31 December was as follows:
\n2022
2021
\nReal estate
\nand other
\n$m
\nVehicles
\n$m
\nTotal
\n$m
\nReal estate
\nand other
\n$m
\nVehicles
\n$m
\nTotal
\n$m
\nWithin 1 year
13.8
6.5
20.3
13.2
6.5
19.7
\n1 to 2 years
12.3
4.2
16.5
12.7
4.1
16.8
\n2 to 3 years
9.5
2.3
11.8
10.7
2.0
12.7
\n3 to 4 years
8.1
0.7
8.8
8.5
0.6
9.1
\n4 to 5 years
7.2
0.1
7.3
6.8
0.1
6.9
\n5 to 10 years
23.5
0.1
23.6
24.2
\u2013
24.2
\nMore than 10 years
\u2013
\u2013
\u2013
1.1
\u2013
1.1
\nTotal
74.4
13.9
88.3
77.2
13.3
90.5
\nThe undiscounted contractual cash flows in relation to the maturity of leases liabilities have been disclosed in Note 21 \u2013 Borrowings.
\n25. FINANCE INCOME AND EXPENSE
\nFinance expenses arise from interest on the Group\u2019s borrowings and lease liabilities. Finance income arises from interest
\nearned on investment of surplus cash.
\nAccounting policy
\nFinance expenses, including the transaction costs for borrowings and any discount or premium on issue, are recognised
\nin the Consolidated Income Statement using the effective interest rate method.
\nWhen existing debt is derecognised in the financial statements any transaction costs not amortised are recognised
\nimmediately in the Consolidated Income Statement.
\nUpon derecognition of financial liabilities, any unamortised financing fees are recognised immediately in the Consolidated
\nIncome Statement.
\nInterest related to qualifying assets under construction included within PP&E is capitalised (refer to Note 8 \u2013 Property,
\nplant and equipment).
\nRefer to Note 24 \u2013 Leases for accounting policy on interest expense on lease liabilities.
\nInterest arising from interest rate swaps is recorded as either interest income or expense over the term of the agreement.
\nHedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or no longer
\nqualifies for hedge accounting. The discontinuation is accounted for prospectively. Any gain or loss recognised in other
\ncomprehensive income and accumulated in the cash flow hedge reserve at that time remains in equity and is reclassified
\nto profit or loss when the forecast transaction occurs. When a forecast transaction is no longer expected to occur, the gain
\nor loss accumulated in the cash flow hedge reserve is reclassified immediately to profit or loss.
\nFinance costs, net for the year ended 31 December were as follows:
\n2022
\n$m
\n2021
\n$m
\nFinance income
\nInterest income on cash and cash equivalents
5.5
0.8
\nTotal finance income
5.5
0.8
\nFinance expense
\nInterest expense on borrowings
(46.4)
(29.2)
\nOther financing-related fees
\n1
\n(8.2)
(8.1)
\nInterest expense on interest rate derivatives
(1.4)
(3.8)
\nInterest expense on lease liabilities
(3.3)
(3.8)
\nCapitalised interest
\n2
\n2.0
0.6
\nUnwinding of discount
\n3
\n(15.6)
\u2013
\nOther finance costs
(0.3)
\u2013
\nTotal finance expense
(73.2)
(44.3)
\nFinance costs, net
(67.7)
(43.5)
\n1.
Other financing-related fees include the amortisation of deferred financing fees associated with the multicurrency revolving credit facilities, term loan facilities
\nand senior notes. This also includes $2.7 million of deferred financing fees related to the early termination of the Group\u2019s previous credit agreement.
\n2.
Capitalised interest was calculated using the Group\u2019s weighted average interest rate over the year of 3.4% (2021: 2.0%).
\n3.
The unwinding of discount is in respect of the contingent consideration payable in relation to the Triad Life Sciences and Cure Medical acquisitions.
\nRefer to Note 26 \u2013 Acquisitions.
\nNotes to the Consolidated Financial Statements
continued
\nConvatec Group Plc Annual Report and Accounts 2022
212
\nFinancial statements
26. ACQUISITIONS
\nDuring the year to 31 December 2022, the Group completed the acquisition of Triad Life Sciences Inc, a US-based medical
\ndevice company.
\nThis note provides details of the transaction and the acquisition accounting that has been recorded to reflect the fair value
\nof assets acquired and liabilities assumed as well as the intangible assets and goodwill recognised upon acquisition. This
\nnote also provides details of any fair value changes identified post-acquisition in respect of previous acquisitions that the
\nGroup has completed.
\nAccounting policy
\nAcquisitions of subsidiaries and businesses are accounted for using the acquisition method of accounting. Consideration
\ntransferred in respect of an acquisition is measured at the fair value of the assets acquired, equity instruments issued and
\nliabilities incurred or assumed on the date of the acquisition. Identified assets acquired and liabilities assumed are
\nmeasured at their respective acquisition-date fair values.
\nThe excess of the fair value of the consideration given over the fair value of the identifiable net assets acquired is recorded
\nas goodwill. If the fair value of the identifiable net assets acquired is greater than the fair value of the consideration given,
\nthe excess is recognised immediately in the Consolidated Income Statement as a bargain purchase gain. Acquisition-
\nrelated costs are expensed as incurred.
\nThe operating results of the acquired business are reflected in the Group\u2019s Consolidated Financial Statements from the
\ndate of acquisition.
\nTriad Life Sciences Inc (Triad Life Sciences)
\nDescription of the transaction
\nOn 14 March 2022, the Group completed its acquisition of 100% of the share capital of Triad Life Sciences Inc. The acquisition
\nof Triad Life Sciences strengthens the Group\u2019s Advanced Wound Care position in the US, securing access to a complementary
\nand innovative technology platform that enhances advanced wound management and patient outcomes.
\nIn addition to the initial consideration of $125.3 million, the sellers may earn contingent consideration up to a maximum of
\n$325.0 million, in the form of (i) two additional payments of $25.0 million each relating to short-term milestones; and (ii) two
\nearnout payments conditional on performance during year 1 and year 2 post completion, with the maximum earnout for these
\ntwo payments totalling $275.0 million based on stretching financial performance over the period.
\nThe discounted fair value of the contingent consideration at the date of acquisition was $141.8 million, of which $25.0 million
\nwas paid in April 2022 and a further $25.0 million paid in October 2022 following attainment of the first and second short-
\nterm milestones. The earnout payments are due to be paid within three years of the acquisition date, subject to achieving
\nthe specified targets.
\nFollowing completion of the initial acquisition accounting, any changes in the fair value of the contingent consideration
\nat each reporting date will be recorded in the Consolidated Income Statement in accordance with the Group\u2019s accounting
\npolicies. This is explained further on in this note.
\n213
Convatec Group Plc Annual Report and Accounts 2022
\nAdditional information
Governance
Strategic report
Overview
Financial statements
26. ACQUISITIONS (CONTINUED)
\nAssets acquired and liabilities assumed
\nThe transaction meets the definition of a business combination and has been accounted for under the acquisition method of
\naccounting. The following table summarises the provisional fair values of the assets acquired and liabilities assumed as of the
\nacquisition date:
\nTriad Life
\nSciences
\nProvisional
\n$m
\nNon-current assets
\nProperty, plant & equipment
0.5
\nRight-of-use assets
2.2
\nIntangible assets \u2013 Product-related
154.8
\nCurrent assets
\nTrade and other receivables
4.7
\nInventories
10.8
\nCash and cash equivalents
15.9
\nTotal assets acquired
188.9
\nNon-current liabilities
\nLease liabilities
(
2.7
)
\nDeferred tax liabilities
(
32.3
)
\nCurrent liabilities
\nTrade and other payables
(
2.6
)
\nLease liabilities
(
0.2
)
\nTotal liabilities assumed
(
37.8
)
\nNet assets acquired
151.1
\nGoodwill
129.9
\nTotal
281.0
\nInitial cash consideration
125.3
\nDeferred purchase consideration paid into escrow
\n1
\n13.8
\nWorking capital adjustment
\n2
\n0.1
\nContingent consideration
141.8
\nTotal consideration
281.0
\nAnalysis of cash outflow in the Consolidated Statement of Cash Flows
\nProvisional
\n$m
\nInitial cash consideration
125.3
\nDeferred purchase consideration paid into escrow
\n1
\n13.8
\nCash and cash equivalents acquired
(
15.9
)
\nWorking capital adjustment
\n2
\n0.1
\nNet cash outflow from acquisitions, net of cash acquired
123.3
\n1.
$13.8 million was paid on closing into escrow as security and indemnity by the seller for its obligations under the Merger Agreement. $1.3 million was released in
\nDecember 2022 to the sellers following agreement of the closing statement. It is expected that the remaining balance will be released within the next 12 months
\nsubject to the terms of the Merger Agreement.
\n2.
This is the Group\u2019s calculation of the working capital adjustment and forms part of the initial consideration. The final amount was determined in accordance with the
\nterms of the Merger Agreement and this was finalised and paid by the reporting date.
\nThe fair values of the assets acquired and liabilities assumed are provisional at 31 December 2022. The Group will finalise these
\namounts as it obtains the information necessary to complete the measurement process. Any changes resulting from facts
\nand circumstances that existed as of the acquisition date may result in retrospective adjustments to the provisional amounts
\nrecognised at the acquisition date. The Group will finalise these amounts no later than one year from the acquisition date.
\nAs part of the acquisition accounting, a $10.2 million fair value adjustment was applied to the carrying value of inventory held
\nat the acquisition date. The fair value adjustment relates to work-in-progress and finished goods and was calculated as the
\nestimated selling price less costs to complete and sell the inventory, associated margins on these activities, and holding
\ncosts. As at 31 December 2022, $8.7 million has been expensed to cost of goods sold in the Consolidated Income Statement
\nas these have been sold. The remaining fair value uplift of $1.5 million is expected to be released over the next 6 to 12 months,
\nin line with forecast revenues.
\nThe fair value of trade and other receivables amounts to $4.7 million, with a gross contractual amount of $7.0 million. At the
\nacquisition date, the Group\u2019s best estimate of the contractual cash flows expected not to be collected amounts to $2.3 million.
\nThe goodwill recorded, which is not deductible for tax purposes, represents the cost savings, operating synergies and future
\ngrowth opportunities expected to result from combining the operations of Triad Life Sciences with those of the Group.
\nThe Triad Life Sciences acquisition is included in the Advanced Wound Care CGU group.
\nNotes to the Consolidated Financial Statements
continued
\nConvatec Group Plc Annual Report and Accounts 2022
214
\nFinancial statements
Fair value of contingent consideration at reporting date
\nThe two short-term milestones were achieved and paid during the year ended 31 December 2022. As at 31 December 2022,
\nmanagement reviewed the fair value of the remaining contingent consideration since the acquisition date, based on the most
\nrecent Board-approved strategic plan and forecast information. Consequently, the discounted fair value of the remaining
\ncontingent consideration was increased by $23.7 million since the amount recognised at 30 June 2022, and was recognised
\nin non-operating expenses in the Consolidated Income Statement (see Note 5 \u2013 Non-operating (expense)/income, net).
\nThe amount of discount unwind recognised in the Consolidated Income Statement during 2022 was $15.3 million and shown
\nwithin finance expenses (see Note 25 \u2013 Finance income and expense). The discounted fair value of the remaining contingent
\nconsideration as at 31 December 2022 was $130.8 million. Refer to Note 14 \u2013 Provisions for the movement in the contingent
\nconsideration during the year.
\nManagement have determined that the potential range of discounted outcomes within the next financial year is between
\n$85.2 million and $230.8 million, from a maximum undiscounted contingent consideration of $275.0 million.
\nAcquisition-related costs
\nThe Group incurred $2.4 million of acquisition-related costs directly related to the Triad Life Sciences acquisition in the year
\nended 31 December 2022, primarily in respect of legal and advisers\u2019 fees. The acquisition-related costs have been recognised
\nin general and administrative expenses in the Consolidated Income Statement.
\nRevenue and profit
\nThe revenue of Triad Life Sciences for the period from the acquisition date to 31 December 2022 was $34.8 million and net profit
\nfor the period was $5.8 million, before recognising acquisition-related intangible asset amortisation charge of $9.2 million and
\nthe inventory fair value uplift release of $8.7 million. If the acquisition had been completed on 1 January 2022, reported Group
\nrevenue would have been $4.4 million higher and Group profit for the year would have been $0.9 million lower, before
\nrecognising acquisition-related intangible asset amortisation charges of $2.0 million.
\nCure Medical LLC (Cure Medical)
\nOn 15 March 2021, the Group acquired 100% of the share capital of Cure Medical.
\nDuring 2022, management reviewed the expectation of the contingent consideration based on the most recent Board-approved
\nstrategic plan and forecast information. The Cure Medical business has outperformed its performance targets to date and
\nforecast financial performance was expected to exceed the original expectations. Consequently, the discounted fair value
\nof the contingent consideration has been revised from $3.1 million to $8.9 million during the year and the remeasurement
\ncharge of $5.8 million has been recognised in non-operating expenses in the Consolidated Income Statement (see Note 5 \u2013
\nNon-operating (expense)/income, net). The amount of discount unwind recognised in the Consolidated Income Statement
\nduring 2022 was $0.3 million and shown within finance expenses (see Note 25 \u2013 Finance income and expense). The discounted
\nfair value of the contingent consideration as at 31 December 2022 was $9.2 million. Refer to Note 14 \u2013 Provisions for the movement
\nin the contingent consideration during the year.
\nThis is due to be paid within three years of the acquisition date, subject to the terms of the Share Purchase Agreement.
\n27. DIVESTITURES
\nDuring the year ended 31 December 2022, the Group withdrew from its hospital care activities and related industrial sales.
\nAccounting policy
\nA divestiture or disposal occurs when the Group ceases to control a subsidiary, business or trade and assets associated
\nwith a specific product line or class of business. Consideration received in respect of a divestiture is measured at fair value,
\nand all associated assets and liabilities are derecognised at the date control is transferred. The difference between the
\ncarrying value of the net assets divested and the fair value of consideration received is recorded as a gain or loss on
\ndivestiture in the Consolidated Income Statement.
\nForeign exchange translation gains or losses relating to subsidiaries that the Group has divested, and that have previously
\nbeen recorded in other comprehensive income or expense, are also recognised as part of the gain or loss on divestiture.
\nThe operating results of the divested subsidiary, business or product line cease to be included in the Group's Consolidated
\nFinancial Statements from the date of divestiture.
\n215
Convatec Group Plc Annual Report and Accounts 2022
\nAdditional information
Governance
Strategic report
Overview
Financial statements
27. DIVESTITURES (CONTINUED)
\nExit from hospital care and industrial sales activities
\nOn 12 May 2022, following a strategic review, it was announced that the Group would be withdrawing from its hospital care
\nactivities and related industrial sales during 2022. This does not represent a separate major line of business or component
\nof the Group.
\nAs a result of the exit from the hospital care and industrial sales activities, the Group recognised impairment losses in the year
\nended 31 December 2022 in relation to the following:
\n\u2022
$8.1 million was recognised, within other operating expenses, as an impairment to property, plant and equipment, primarily
\nin relation to manufacturing equipment in Belarus and Slovakia.
\n\u2022
$4.3 million was recognised, within other operating expenses, as an impairment to product-related intangible assets.
\n\u2022
$13.4 million was recognised, within cost of sales, in relation to the write-off of inventories and provision for those which are
\nnot expected to be sold.
\nIn addition, the Group recognised $7.3 million of severance costs, of which $1.2 million remains as a provision as at
\n31 December 2022, and also recognised a $6.9 million provision in relation to contract exit costs. Management will review
\nthis at each reporting period. The Group incurred $6.7 million of divestiture-related costs in relation to legal fees and closing
\ndown of manufacturing site costs. The majority of the exit and closure activities have been completed at the end of the year,
\nwith minimal costs expected in 2023.
\nAs part of the exit from all hospital care and related industrial sales activities, a subsidiary was sold during the year.
\nThe cumulative amount of exchange losses of $12.2 million recognised in Other Comprehensive Income relating to those
\noperations, and a loss on disposal of $2.0 million, have been recognised in the Consolidated Income Statement as non-
\noperating expenses. All costs associated with the exit have been classified as an adjusting item in accordance with our
\nAlternative Performance Measures policy.
\n28. COMMITMENTS AND CONTINGENCIES
\nCommitments represent the Group\u2019s future capital expenditure which is not recognised as a liability in the Consolidated
\nFinancial Statements but represents a non-cancellable commitment.
\nA contingent liability is a possible liability that is not sufficiently certain to qualify for recognition as a provision because
\nthe amount cannot be measured reliably or because settlement is not considered probable.
\nCapital commitments
\nAt 31 December 2022, the Group had non-cancellable commitments for the purchase of property, plant and equipment,
\ncapitalised software and development of $39.3 million (2021: $32.1 million).
\nContingent liabilities
\nThere were no contingent liabilities recognised as at 31 December 2022 and 31 December 2021.
\n29. RELATED PARTY TRANSACTIONS
\nThe Directors have not identified any related parties to the Group, other than the key management personnel. The Group
\nconsiders key management personnel as defined in IAS 24,
Related Party Disclosures
to be the members of CELT as set out
\non pages 112 to 113 and the Non-Executive Directors as set out on page 111.
\nKey management personnel compensation
\nKey management personnel compensation for the year ended 31 December was as follows:
\n2022
\n$m
\n2021
\n$m
\nShort-term employee benefits
16.4
14.4
\nShare-based payment expense
9.2
9.0
\nPost-employment benefits
0.8
0.7
\nTermination benefits
0.4
\u2013
\nTotal
26.8
24.1
\nFurther details of short-term employee benefits, share-based payment expense and post-employment benefits for the
\nExecutive Directors are shown on page 144. Details of the Non-Executive Directors' fees, included in the table above, are
\nprovided on page 147.
\nThe Group has not been a party to any other material transaction, or proposed transactions, in which any member of the key
\nmanagement personnel had or was to have a direct or indirect material interest.
\nNotes to the Consolidated Financial Statements
continued
\nConvatec Group Plc Annual Report and Accounts 2022
216
\nFinancial statements
30. SUBSEQUENT EVENTS
\nThe Group has evaluated subsequent events through to 8 March 2023, the date the Consolidated Financial Statements were
\napproved by the Board of Directors.
\nOn 1 March 2023, the Board proposed the final dividend in respect of 2022 subject to shareholder approval at the Annual
\nGeneral Meeting on 18 May 2023, to be distributed on 25 May 2023. See Note 18 \u2013 Dividends to the Consolidated Financial
\nStatements for further details.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfNotesAndOtherExplanatoryInformationExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f24335": {
"value": "1. BASIS OF PREPARATION This section describes the Group\u2019s significant accounting policies that relate to the Consolidated Financial Statements
\nand explains critical accounting judgements and estimates that management has identified as having a potentially
\nmaterial impact to the Group. Specific accounting policies relating to the Notes to the Consolidated Financial Statements
\nare described within that note.
\n1.1 General information
\nConvatec Group Plc (the Company) is a public limited company incorporated in the United Kingdom under the Companies
\nAct of 2006. The Company's registered office is 3 Forbury Place, 23 Forbury Road, Reading RG1 3JH, United Kingdom.
\nThe Consolidated Financial Statements have been prepared in accordance with United Kingdom adopted international
\naccounting standards and International Financial Reporting Standards (IFRS) as issued by the International Accounting
\nStandards Board (IASB).
\nThe Consolidated Financial Statements are presented in US dollars (USD), reflecting the profile of the Company and its
\nsubsidiaries (collectively, the Group) revenue and operating profit, which are primarily generated in US dollars and US dollar-
\nlinked currencies. All values are rounded to $0.1 million except where otherwise indicated.
\nPages 2 and 3 in the Strategic report provide further detail of the Group's principal activities and nature of its operations.
\n1.2 Significant accounting policies
\nThe following significant accounting policies apply to the Consolidated Financial Statements as a whole:
\nBasis of accounting and presentation
\nThe consolidated financial information has been prepared on a historical cost basis, except for certain financial instruments
\nwhere fair value has been applied. Historical cost is generally based on the fair value of the consideration given in exchange
\nfor goods and services.
\nBasis of consolidation
\nThe Consolidated Financial Statements include the results of the Company and all its subsidiary undertakings. Subsidiaries
\nare entities controlled by the Group. Control exists when the Group: (i) has power over the investee; (ii) is exposed, or has
\nrights, to variable returns from its involvement in the investee; and (iii) has the ability to use its power to affect its returns.
\nThe Group reassesses whether or not it controls an entity if facts and circumstances indicate that there are changes to one
\nor more of the three elements of control listed above.
\nThe consolidated financial information of the Company's subsidiaries is included within the Group's Consolidated Financial
\nStatements from the date that control commences until the date that control ceases and is prepared for the same year-end
\ndate using consistent accounting policies.
\nGoing concern
\nAs discussed in the Financial review on pages 30 to 38, the overall financial performance of the business remains strong with a
\nrobust liquidity position.
\nAs at 31 December 2022, the Group held cash and cash equivalents of $143.8 million (31 December 2021: $463.4 million), and
\nborrowings of $1,211.9 million (31 December 2021: $1,344.6 million). During the year, the Group refinanced its bank facilities with
\n$1.2 billion committed for five years at the appropriate reference rate plus margins of 1.75% and 2.00% for the multicurrency
\nrevolving credit facility and the term loan facility respectively. The new credit facility of $1.2 billion comprises a $250.0 million
\nterm loan and a $950.0 million multicurrency revolving facility. The borrowings as at 31 December 2022 comprised senior
\nnotes of $500.0 million, term loan of $250.0 million, and multicurrency revolving credit facilities of $477.2 million, net of
\nunamortised financing fees of $15.3 million. The senior notes are repayable in 2029 and the term loan and multicurrency
\nrevolving credit facilities are repayable in 2027. $472.8 million of the multicurrency revolving credit facilities remained
\nundrawn as at 31 December 2022, which together with cash and cash equivalents of $143.8 million, provided the Group with
\ntotal liquidity of $616.6 million as at that date (2021: $663.4 million). The principal financial covenants remained unchanged
\nand as at 31 December 2022, the Group was in compliance with its financial covenants.
\nIn preparing their assessment of going concern, the Directors have considered available cash resources, financial performance
\nand forecast performance, including strategy delivery, together with the Group\u2019s financial covenant compliance requirements
\nand principal risks and uncertainties. The Directors have used cash flow forecasts derived from actual performance in 2022,
\nthe Board approved 2023 budget and longer-term strategic plan as foundations. The forecasts reflected the full potential
\nfunding requirements in relation to the remaining estimated contingent consideration payable in relation to the Triad Life
\nSciences and Cure Medical acquisitions, and the impact of exiting hospital care and industrial sales activities. The Directors
\nhave considered a going concern period to 31 December 2024, which is at least 21 months from the date of approval of the
\nConsolidated Financial Statements.
\nNotes to the Consolidated Financial Statements
\nConvatec Group Plc Annual Report and Accounts 2022
172
\nFinancial statements
In accordance with FRC guidance, management applied severe but plausible downside scenarios linked to the Group\u2019s
\nprincipal and emerging risks, including supply chain disruption, cyber security disruption, significant regulatory breaches,
\nfinancial market distress and geopolitical events and sanctions to a key global market. Further details of the specific
\nscenarios are provided in the Viability statement on page 99. The Board has reviewed these scenarios as part of the going
\nconcern assessment and has concluded that these scenarios are in line with the Group\u2019s principal and emerging risks and
\ncontinue to reflect the financial risk of severe but plausible downside events and circumstances during the going concern
\nperiod. Under each scenario, the Group is forecast to retain significant liquidity and covenant headroom throughout the
\ngoing concern period.
\nThe Group has carried out reverse stress test against the forecast base case to determine the performance levels that would
\nresult in a breach of covenants. For a breach of covenants to occur in the next 12 months, before mitigation, the Group would
\nneed to experience a sustained revenue reduction of more than 10% across all categories and markets. This was considered to
\nbe implausible given the Group\u2019s strong global market position and diversified portfolio of products and the mitigations
\navailable to the Board and management, which include minimising capital expenditure to critical requirements and reducing
\nlevels of discretionary spend.
\nAccordingly, at the time of approving these Consolidated Financial Statements, the Directors have a reasonable expectation
\nthat the Group and the Company will have adequate liquid resources to meet their respective liabilities as they become due
\nand will be able to sustain its business model, strategy and operations and remain solvent for a period of at least 12 months
\nfrom 8 March 2023.
\nForeign currency translation and transactions
\nAssets and liabilities of subsidiaries whose functional currency is not US dollars are translated into US dollars at the rate of
\nexchange at the period end. Income and expenses are translated into US dollars at the average rates of exchange prevailing
\nduring the year. Foreign currency gains and losses resulting from the translation of subsidiaries into US dollars are recognised
\nin the Consolidated Statement of Comprehensive Income. Exchange differences arising from the translation of the net
\ninvestment in foreign operations are taken to the cumulative translation reserve within equity. They are recycled and
\nrecognised in the Consolidated Income Statement upon disposal of the operation.
\nIn preparing the financial statements of the individual companies, transactions in currencies other than the entity\u2019s functional
\ncurrency (foreign currencies) are recognised at the rates of exchange prevailing on the dates of the transactions. At each
\nreporting date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates
\nprevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated
\nat the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of
\nhistorical cost in a foreign currency are not retranslated. Any gain or loss arising from subsequent exchange rate movements
\nis included as an exchange gain or loss in the Consolidated Income Statement.
\n1.3 Climate change
\nThe Directors recognise the risk of climate change on the business and acknowledge that the Group must take appropriate
\naction to mitigate and, where feasible, prevent further climate change impact. Accordingly, climate related risks are considered
\nwithin the \u201cEnvironment and Communities\u201d principal risks and are discussed in greater detail in the \u201cPrincipal risks\u201d section
\nwithin the Annual Report and Accounts.
\nWhilst the valuation of our assets and liabilities has not been materially impacted as at 31 December 2022, the Group will
\ncontinue to monitor possible implications of climate related risks that could arise in future years on both future cash flows
\nand the valuation of the Group\u2019s assets and liabilities, as Government policies and the Group\u2019s own strategy and transition
\nplans evolve. Further detail is provided within the \u201cResponsible business review \u2013 communities\u201d and \u201cTCFD disclosure\u201d
\nsections of the Annual Report and Accounts on pages 66 to 87.
\n1.4 Critical accounting judgements and key sources of estimation uncertainty
\nThe preparation of financial statements, in conformity with adopted IFRS, requires management to make judgements,
\nestimates and assumptions that affect the application of accounting policies and the reported value of assets and liabilities,
\nincome and expense. Actual results may differ from these estimates or judgements of likely outcome. Management regularly
\nreviews, and revises as necessary, the accounting judgements that significantly impact the amounts recognised in the
\nConsolidated Financial Statements and the sources of estimation uncertainty that are considered to be \u201ckey estimates\u201d
\ndue to their potential to give rise to material adjustments in the Group\u2019s Consolidated Financial Statements within the next
\nfinancial year.
\nConsiderations for the identification of critical accounting judgements and key estimates
\nA detailed assessment was performed by management of the potential impact on each balance sheet caption and associated
\naccounting estimates and judgements at each reporting date during the year. In preparing the Consolidated Financial
\nStatements, no critical accounting judgements have been identified. A key estimate has been identified in relation to the
\nvaluation of the contingent consideration related to the acquisition of Triad Life Sciences Inc (Triad Life Sciences).
\nAs detailed further in the Group\u2019s Audit and Risk Committee report on pages 126 to 138, the Committee has reviewed,
\ndiscussed, and challenged management on identification and, where appropriate, the determination of its critical accounting
\njudgements and key estimates.
\n173
Convatec Group Plc Annual Report and Accounts 2022
\nAdditional information
Governance
Strategic report
Overview
Financial statements
1. BASIS OF PREPARATION (CONTINUED)
\nValuation of the contingent consideration in relation to the acquisition of Triad Life Sciences
\nThe contingent consideration is based on both specified post-acquisition financial and non-financial performance targets
\nas defined by the Merger Agreement. The contingent consideration is fair valued at the date of acquisition with key inputs
\nincluding a weighted probability of different scenarios and revenue projections based on internal forecasts, discounted using
\nan appropriate discount rate that reflects the relative risk of the investment as well as the time value of money.
\nActual revenue results may differ from estimates, leading to a change in the fair value of the contingent consideration.
\nManagement has identified that reasonably possible changes in certain key assumptions and forecasts may cause the
\ncalculated fair value of the contingent consideration to vary materially within the next financial year. The maximum
\nundiscounted contingent consideration payable under the Merger Agreement was $325.0 million, of which $50.0 million
\nwas paid during the year following successful attainment of the two short-term milestones. The estimated discounted fair
\nvalue of the remaining contingent consideration payable as at 31 December 2022 was $130.8 million.
\nManagement has determined that the reasonable potential range of discounted outcomes within the next financial year is
\nbetween $85.2 million and $230.8 million, compared to a maximum remaining undiscounted contingent consideration of
\n$275.0 million.
\nThe timing and amount of future contingent elements of consideration is therefore considered a key source of estimation
\nuncertainty. Refer to Note 26 \u2013 Acquisitions for more information.
\n1.5 Accounting standards
\nNew standards, interpretations and amendments applied for the first time
\nOn 1 January 2022, the Group adopted the following amendments which are mandatorily effective for the period beginning
\n1 January 2022:
\n\u2022
Onerous Contracts \u2013 Cost of Fulfilling a Contract (Amendments to IAS 37);
\n\u2022
Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16);
\n\u2022
Annual Improvements to IFRS Standards 2018-2020 (Amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41);
and
\n\u2022
References to Conceptional Framework (Amendments to IFRS 3).
\nThe adoption during the year of the amendments and interpretations has not had a material impact on the Consolidated
\nFinancial Statements.
\nApart from these changes, the accounting policies set out in the Notes have been applied consistently to both years
\npresented in these Consolidated Financial Statements.
\nNew standards, interpretations and amendments not yet effective
\nThere are a number of standards, amendments to standards and interpretations which have been issued by the IASB that are
\neffective in future accounting periods that the Group has decided not to adopt early.
\nThe following amendments are effective for the period beginning 1 January 2023:
\n\u2022
Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2);
\n\u2022
Definition of Accounting Estimates (Amendments to IAS 8);
and
\n\u2022
Deferred Tax Related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12).
\nThe following amendments are effective for the period beginning 1 January 2024:
\n\u2022
IFRS 16 Leases (Amendment \u2013 Liability in a Sale and Leaseback);
\n\u2022
IAS 1 Presentation of Financial Statements (Amendment \u2013 Classification of Liabilities as Current or Non-current);
and
\n\u2022
IAS 1 Presentation of Financial Statements (Amendment \u2013 Non-current liabilities with Covenants)
\nThe Group is currently assessing the impact of these new accounting standards and amendments and does not believe these
\nwill have a material impact on the Group.
\nOther interpretations and amendments
\nIn addition to these issued standards, there are a number of other interpretations, amendments and annual improvement
\nproject recommendations that have been issued but not yet effective that have not yet been adopted by the Group because
\napplication is not yet mandatory, or they are not relevant for the Group.
\n\u2022
IFRS 17 \u2013 Insurance contracts (effective from 1 January 2023)
is ultimately intended to replace IFRS 4. It sets out the
\nrequirements that a company should apply in reporting information about insurance contracts it issues and reinsurance
\ncontracts it holds. The Group believes that the adoption of IFRS 17 will not have a significant impact on the Consolidated
\nFinancial Statements. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f24343": {
"value": "1.1 General information Convatec Group Plc (the Company) is a public limited company incorporated in the United Kingdom under the Companies
\nAct of 2006. The Company's registered office is 3 Forbury Place, 23 Forbury Road, Reading RG1 3JH, United Kingdom.
\nThe Consolidated Financial Statements have been prepared in accordance with United Kingdom adopted international
\naccounting standards and International Financial Reporting Standards (IFRS) as issued by the International Accounting
\nStandards Board (IASB).
\nThe Consolidated Financial Statements are presented in US dollars (USD), reflecting the profile of the Company and its
\nsubsidiaries (collectively, the Group) revenue and operating profit, which are primarily generated in US dollars and US dollar-
\nlinked currencies. All values are rounded to $0.1 million except where otherwise indicated.
\nPages 2 and 3 in the Strategic report provide further detail of the Group's principal activities and nature of its operations.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f24346": {
"value": "Convatec Group Plc",
"dimensions": {
"concept": "ifrs-full:NameOfUltimateParentOfGroup",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f24347": {
"value": "Convatec Group Plc",
"dimensions": {
"concept": "ifrs-full:NameOfParentEntity",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f24348": {
"value": "Convatec Group Plc",
"dimensions": {
"concept": "ifrs-full:NameOfReportingEntityOrOtherMeansOfIdentification",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f24349": {
"value": "public limited company",
"dimensions": {
"concept": "ifrs-full:LegalFormOfEntity",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f24350": {
"value": "United Kingdom",
"dimensions": {
"concept": "ifrs-full:DomicileOfEntity",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f24351": {
"value": "United Kingdom",
"dimensions": {
"concept": "ifrs-full:PrincipalPlaceOfBusiness",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f24353": {
"value": "3 Forbury Place, 23 Forbury Road, Reading RG1 3JH, United Kingdom.",
"dimensions": {
"concept": "ifrs-full:AddressOfRegisteredOfficeOfEntity",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f24355": {
"value": "United Kingdom",
"dimensions": {
"concept": "ifrs-full:CountryOfIncorporation",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f24363": {
"value": "1.2 Significant accounting policies
\nThe following significant accounting policies apply to the Consolidated Financial Statements as a whole:
\nBasis of accounting and presentation
\nThe consolidated financial information has been prepared on a historical cost basis, except for certain financial instruments
\nwhere fair value has been applied. Historical cost is generally based on the fair value of the consideration given in exchange
\nfor goods and services.
\nBasis of consolidation
\nThe Consolidated Financial Statements include the results of the Company and all its subsidiary undertakings. Subsidiaries
\nare entities controlled by the Group. Control exists when the Group: (i) has power over the investee; (ii) is exposed, or has
\nrights, to variable returns from its involvement in the investee; and (iii) has the ability to use its power to affect its returns.
\nThe Group reassesses whether or not it controls an entity if facts and circumstances indicate that there are changes to one
\nor more of the three elements of control listed above.
\nThe consolidated financial information of the Company's subsidiaries is included within the Group's Consolidated Financial
\nStatements from the date that control commences until the date that control ceases and is prepared for the same year-end
\ndate using consistent accounting policies.
\nGoing concern
\nAs discussed in the Financial review on pages 30 to 38, the overall financial performance of the business remains strong with a
\nrobust liquidity position.
\nAs at 31 December 2022, the Group held cash and cash equivalents of $143.8 million (31 December 2021: $463.4 million), and
\nborrowings of $1,211.9 million (31 December 2021: $1,344.6 million). During the year, the Group refinanced its bank facilities with
\n$1.2 billion committed for five years at the appropriate reference rate plus margins of 1.75% and 2.00% for the multicurrency
\nrevolving credit facility and the term loan facility respectively. The new credit facility of $1.2 billion comprises a $250.0 million
\nterm loan and a $950.0 million multicurrency revolving facility. The borrowings as at 31 December 2022 comprised senior
\nnotes of $500.0 million, term loan of $250.0 million, and multicurrency revolving credit facilities of $477.2 million, net of
\nunamortised financing fees of $15.3 million. The senior notes are repayable in 2029 and the term loan and multicurrency
\nrevolving credit facilities are repayable in 2027. $472.8 million of the multicurrency revolving credit facilities remained
\nundrawn as at 31 December 2022, which together with cash and cash equivalents of $143.8 million, provided the Group with
\ntotal liquidity of $616.6 million as at that date (2021: $663.4 million). The principal financial covenants remained unchanged
\nand as at 31 December 2022, the Group was in compliance with its financial covenants.
\nIn preparing their assessment of going concern, the Directors have considered available cash resources, financial performance
\nand forecast performance, including strategy delivery, together with the Group\u2019s financial covenant compliance requirements
\nand principal risks and uncertainties. The Directors have used cash flow forecasts derived from actual performance in 2022,
\nthe Board approved 2023 budget and longer-term strategic plan as foundations. The forecasts reflected the full potential
\nfunding requirements in relation to the remaining estimated contingent consideration payable in relation to the Triad Life
\nSciences and Cure Medical acquisitions, and the impact of exiting hospital care and industrial sales activities. The Directors
\nhave considered a going concern period to 31 December 2024, which is at least 21 months from the date of approval of the
\nConsolidated Financial Statements.
In accordance with FRC guidance, management applied severe but plausible downside scenarios linked to the Group\u2019s
\nprincipal and emerging risks, including supply chain disruption, cyber security disruption, significant regulatory breaches,
\nfinancial market distress and geopolitical events and sanctions to a key global market. Further details of the specific
\nscenarios are provided in the Viability statement on page 99. The Board has reviewed these scenarios as part of the going
\nconcern assessment and has concluded that these scenarios are in line with the Group\u2019s principal and emerging risks and
\ncontinue to reflect the financial risk of severe but plausible downside events and circumstances during the going concern
\nperiod. Under each scenario, the Group is forecast to retain significant liquidity and covenant headroom throughout the
\ngoing concern period.
\nThe Group has carried out reverse stress test against the forecast base case to determine the performance levels that would
\nresult in a breach of covenants. For a breach of covenants to occur in the next 12 months, before mitigation, the Group would
\nneed to experience a sustained revenue reduction of more than 10% across all categories and markets. This was considered to
\nbe implausible given the Group\u2019s strong global market position and diversified portfolio of products and the mitigations
\navailable to the Board and management, which include minimising capital expenditure to critical requirements and reducing
\nlevels of discretionary spend.
\nAccordingly, at the time of approving these Consolidated Financial Statements, the Directors have a reasonable expectation
\nthat the Group and the Company will have adequate liquid resources to meet their respective liabilities as they become due
\nand will be able to sustain its business model, strategy and operations and remain solvent for a period of at least 12 months
\nfrom 8 March 2023.
\nForeign currency translation and transactions
\nAssets and liabilities of subsidiaries whose functional currency is not US dollars are translated into US dollars at the rate of
\nexchange at the period end. Income and expenses are translated into US dollars at the average rates of exchange prevailing
\nduring the year. Foreign currency gains and losses resulting from the translation of subsidiaries into US dollars are recognised
\nin the Consolidated Statement of Comprehensive Income. Exchange differences arising from the translation of the net
\ninvestment in foreign operations are taken to the cumulative translation reserve within equity. They are recycled and
\nrecognised in the Consolidated Income Statement upon disposal of the operation.
\nIn preparing the financial statements of the individual companies, transactions in currencies other than the entity\u2019s functional
\ncurrency (foreign currencies) are recognised at the rates of exchange prevailing on the dates of the transactions. At each
\nreporting date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates
\nprevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated
\nat the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of
\nhistorical cost in a foreign currency are not retranslated. Any gain or loss arising from subsequent exchange rate movements
\nis included as an exchange gain or loss in the Consolidated Income Statement.
Revenue recognition The Group measures revenue for goods sold based on the consideration specified in a contract with a customer, net of
\ndiscounts, chargeback allowances and sales-related taxes. Revenue is recognised when control over a product or service is
\ntransferred to a customer, distributor or wholesaler, which is generally when goods have been delivered, as most products
\nare insured by the Group until delivery. Due to the short-term nature of the receivables from sale of goods, the Group
\nmeasures them at the original transaction price without discounting. The transaction price is the amount the Group
\nexpects to receive at that date.
\nNature of goods and services
\nAdvanced Wound Care, Ostomy Care, Continence and Critical Care products are sold to pharmacies, hospitals and other
\nacute and post-acute healthcare service providers directly or through distributors and wholesalers. Products are also sold
\ndirectly to end customers (patients) through the Group's home services entities and a small number of clinical and retail
\noutlets. Infusion Care primarily serves business-to-business customers, consisting principally of the leading insulin pump
\nmanufacturers. A small proportion of its revenue is derived from business-to-business urology product sales.
\nIn 2022 and 2021, no single customer generated more than 10% of the Group's revenue.
\nNature, timing of satisfaction of performance obligations
\nPrincipally, the Group's contracts with customers contain a single performance obligation, that is the delivery of products
\nto customers. Revenue is typically recognised when the customer receives the product but is subject to the shipping terms
\nin each individual contract. Where non-standard shipping arrangements exist, revenue is recognised when control of the
\ngoods has transferred. Allowances for returns, where the contract specifies these terms, are made at the point of sale.
\nFor sales to distributors, revenue is recognised when title is transferred to the distributor and the distributor has assumed
\ncontrol, the timing of which depends on the contractual terms with each distributor. Chargeback allowances or
\ncontractual deductions relating to end-customer agreements, which may differ from distributor contracts, are made at
\nthe point of title transfer to the distributor. In certain European countries, rebates are provided to governments and are
\noften mandated by laws or government regulations. These rebates are estimated based on government regulations and
\nunbudgeted spending, laws and terms of individual rebate agreements, and are recorded as a deduction from revenue
\nat the time the related revenue is recorded. The estimates are adjusted periodically to reflect actual experience.
\nWhen distributors buy products from the Group at a contract price and sell these products to end-customers at a price
\nagreed with the Group that is lower than the distributors\u2019 list price, a chargeback may arise and a claim may be submitted
\nto the Group by the distributor. The provision for chargebacks is based on expected sell-through levels by the Group\u2019s
\ndistributors to contracted customers, as well as estimated distributor inventory levels. Retrospective claims are reviewed
\nagainst estimations to ensure provisions are regularly updated.
\nVolume discounts
\nThe Group offers certain prospective volume discounts to customers who achieve a specified volume amount or value
\nof purchases in any given year. Volume discounts that meet the definition of a material right are recognised as a separate
\nperformance obligation. Material rights are the option to purchase additional products at a discount which would not have
\nbeen given had the contract not been entered into and are incremental to the range of discounts typically given for those
\ngoods to that class of customer.
\nThe stand-alone selling price of these volume discounts is based on the discount that the customer would obtain when
\nexercising the option, adjusted for any discount the customer could receive without exercising the option and the
\nlikelihood that the option will be exercised. The revenue allocated to volume discounts is short term in nature and
\nrecognised proportionally to the pattern of options exercised by the customer or when the option expires.
Contract costs
\nIncremental costs in respect of obtaining a contract with a customer principally relate to commissions paid by the Group
\nto its sales representatives. Such costs are capitalised as an asset to the extent that they directly relate to a specific contract,
\nare used to generate or enhance resources used in satisfying performance obligations and are expected to be recovered.
\nThe amortisation period for commissions can differ according to the contract term. Renewals of milestones in the contract
\nare taken into account when determining the amortisation period. For each contract that has sales commissions paid, the
\nGroup has determined an appropriate amortisation period that is consistent with the transfer of control to the customer.
\nThese capitalised costs amounted to $5.4 million (2021: $5.6 million) at 31 December 2022 and the amount of related
\namortisation expense for the year ended 31 December 2022 was $4.3 million (2021: $3.6 million). There was no impairment
\nloss in respect of the costs capitalised.
\nContract balances
\nThe Group recognises contract liabilities that are primarily in respect of advance consideration received from customers
\nprior to transfer of the related products and material rights offered to customers for options to purchase additional
\ngoods. The contract liability balance at 31 December 2022 was $1.3 million (2021: $4.9 million).
The tax expense represents the sum of current and deferred tax.
\nCurrent tax
\nCurrent tax is the expected tax payable or receivable on the taxable profit or loss for the year, using tax rates enacted or
\nsubstantively enacted at the reporting date, and any adjustment to tax payable in respect of prior years. Taxable profit
\ndiffers from profit before income taxes because taxable profit excludes items that are either never taxable or tax
\ndeductible or items that are taxable or tax deductible in a different period.
\nDeferred tax
\nDeferred tax is recognised using the balance sheet liability method for temporary differences between the carrying
\namounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred
\ntax is not recognised for temporary differences:
\n\u2022
on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects
\nneither accounting nor taxable profit or loss;
\n\u2022
arising on the initial recognition of goodwill;
\n\u2022
on investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse
\nin the foreseeable future.
\nDeferred tax assets and liabilities are measured at the tax rates that are expected to apply to temporary differences when
\nthe asset is realised or the liability is settled, based on the laws that have been enacted or substantively enacted by the
\nreporting date.
\nDeferred tax assets are recognised for unused tax losses, tax credits and deductible temporary differences, to the extent
\nthat it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets
\nare reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit
\nwill be realised.
\nDeferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and
\nthey relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they
\nintend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.
\nCurrent tax and deferred tax for the year
\nCurrent tax and deferred tax are recognised in the Consolidated Income Statement, except when they relate to items that
\nare recognised in other comprehensive income or directly in equity, in which case, the current tax and deferred tax are also
\nrecognised in other comprehensive income or directly in equity, respectively. Where current tax or deferred tax arises from
\nthe initial accounting for a business combination, the tax effect is included in the accounting for the business combination.
\nTax provisions
\nThe Group is subject to income taxes in numerous tax jurisdictions. Judgement is sometimes required in determining the
\nworldwide provision for income taxes. There may be transactions for which the ultimate tax determination is uncertain and
\nmay be challenged by the tax authorities. The Group recognises liabilities for anticipated or actual tax audit issues based
\non estimates of whether additional taxes will be due. Where an outflow of funds to a tax authority is considered probable
\nand the Group can make a reliable estimate of the outcome of the issue, management calculates the provision for the best
\nestimate of the liability. In assessing its uncertain tax provisions, management takes into account the specific facts of each
\nissue, the likelihood of settlement and the input of professional advice where required. The Group assumes that where a
\ntax authority has a right to examine amounts reported to it, they will do so and will have full knowledge of all relevant
\ninformation. Where the ultimate liability as a result of an issue varies from the amounts provided, such differences could
\nimpact the current and deferred tax assets and liabilities in the period in which the dispute is concluded.
Property, plant and equipment (PP&E) are stated at cost less accumulated depreciation and impairment losses. Cost
\nincludes expenditures that are directly attributable to the acquisition of an asset including subsequent additions and
\nimprovements when it is probable that future economic benefit associated with the item will flow to the Group and the
\ncost can be reliably measured.
\nDepreciation is provided on a straight-line basis from the point an asset becomes available for use. Depreciation is
\ncalculated to reduce the asset\u2019s cost to its residual value over the asset\u2019s estimated useful economic life. Assets are
\ndepreciated as follows:
\nAsset category
Useful life
\nLand
not depreciated
\nLand improvements
15 to 40 years
\nLeasehold improvements
shorter of useful life or lease tenure
\nBuildings
15 to 50 years
\nMachinery, equipment and fixtures
3 to 20 years
\nThe gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sale
\nproceeds, less any selling expenses, and the carrying amount of the asset. This difference is recognised in the Consolidated
\nIncome Statement.
\nAssets under construction reflects the cost of construction or improvement of items of PP&E that are not yet available for
\nuse. Finance costs incurred in the construction of assets that take more than one year to complete are capitalised using
\nthe Group\u2019s weighted average borrowing cost during the period in which the asset is under construction. Capitalisation of
\nfinance costs ceases when the asset becomes available for use.
\nConsideration of useful economic lives
\nThe assets\u2019 residual values, depreciation methods and useful economic lives are reviewed annually and adjusted if appropriate.
\nImpairment of assets
\nThe carrying values of PP&E are reviewed for indicators of impairment annually or when events or changes in
\ncircumstances indicate the carrying value may be impaired. If any such indication exists, the recoverable amount of the
\nasset is estimated, being the higher of an asset\u2019s fair value less costs to sell and the net present value of its expected pre-
\ntax future cash flows (value in use).
\nWhen an asset\u2019s recoverable amount falls below its carrying value, an impairment is charged to the Consolidated
\nIncome Statement.
Recognition
\nMeasurement on initial recognition of intangible assets is determined at cost for assets acquired by the Group and at fair
\nvalue at the date of acquisition if acquired in business combinations. Following initial recognition of the intangible asset,
\nthe asset is carried at cost less any subsequent accumulated amortisation and accumulated impairment losses.
\nPurchased computer software and certain costs of information technology are capitalised as intangible assets. Software
\nthat is integral to purchased computer hardware is capitalised as PP&E.
\nR&D
\nR&D expenses are comprised of all activities involving investigative, technical and regulatory processes related to
\nobtaining appropriate approvals to market our products. It also includes new product development aimed at developing
\nmore sustainable product portfolios for the longer term, as mentioned within the Responsible Business review section
\n(refer to page 51). Costs include payroll, clinical manufacturing and pre-launch clinical trial costs, manufacturing
\ndevelopment and scale-up costs, product development, regulatory costs including costs incurred to comply with
\nlegislative changes, contract services and other external contractors\u2019 costs, research licence fees, depreciation and
\namortisation of laboratory facilities, and laboratory supplies.
\nResearch costs are expensed as incurred. Development costs are capitalised only if the expenditure can be measured
\nreliably, the product or process is technically and commercially feasible, future economic benefits are probable and the
\nGroup intends to and has sufficient resources to complete development and use or sell the asset. Subsequent to initial
\nrecognition, development costs are measured at cost less accumulated amortisation and any accumulated impairment
\nlosses. Upgrades and enhancements are capitalised to the extent they will result in added functionality and probable
\nfuture economic benefits.
\nAmortisation
\nIntangible assets with an indefinite life are not amortised. Amortisation of intangible assets with a finite life is calculated
\nusing the straight-line method based on the following estimated useful lives:
\nAsset category
Useful life
\nProduct-related
3 to 20 years
\nCapitalised software
3 to 10 years
\nCustomer relationships and non-compete agreements
2 to 20 years
\nTrade names \u2013 finite
2 to 10 years
\nTrade names \u2013 indefinite
indefinite
\nDevelopment costs
5 years
\nAssets under construction reflects the cost of development or improvement of intangible assets that are not yet available
\nfor use.
\nImpairment of assets
\nIntangible assets with finite life are reviewed for indicators of impairment at each reporting period or when events or
\nchanges in circumstances indicate the carrying value may be impaired. If any such indication exists, the recoverable
\namount of the asset is estimated, being the higher of an asset\u2019s fair value less costs to sell and the net present value of its
\nexpected pre-tax future cash flows (value in use).
\nWhen an asset\u2019s recoverable amount falls below its carrying value, an impairment is charged to the Consolidated
\nIncome Statement.
\nRefer to Note 9.3 \u2013 CGU impairment review for consideration of impairment of indefinite-lived intangible assets.
Refer to Note 1 \u2013 Basis of preparation for the Group accounting policy in relation to the initial valuation and recognition of
\ngoodwill arising from acquisitions.
\nGoodwill is not subject to amortisation but is tested for impairment annually or when events or changes in circumstances
\nindicate the carrying value may be impaired. Refer to Note 9.3 \u2013 CGU impairment review for consideration of impairment
\nof goodwill.
\nGoodwill is denominated in the functional currency of the acquired entity and revalued to the closing exchange rate at
\neach reporting period date.
For impairment testing, assets are grouped together into the smallest group of assets that generate cash inflows from
\ncontinuing use that are largely independent of the cash inflows of other assets or CGUs. Additionally, goodwill arising from
\na business combination is allocated to a CGU or groups of CGUs that are expected to benefit from the synergies of the
\ncombination. An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount.
\nThe recoverable amounts of the CGUs are determined based on value in use calculations, which reflect the estimated
\nfuture cash flows of each CGU discounted by an estimated weighted average cost of capital that represents the rate of
\nreturn an outside investor would expect to earn. This discount rate is based on the weighted average cost of capital for
\ncomparable public companies and is adjusted for risks specific to the CGU including differences in risk due to its size,
\ngeographic concentration and trading history.
\nFuture cash flows are determined using the latest available Board-approved forecasts and strategic plans. These forecasts
\nand strategic plans are based on specific assumptions for each CGU during the five-year planning period with respect to
\nrevenue, results of operations, working capital, capital investments and other general assumptions for the projected
\nperiod. The forecast assumptions that derive the future cash flows are based on the historical results of each CGU
\ncombined with external market information and defined strategic initiatives.
\nIf identified, impairment losses are recognised in the Consolidated Income Statement. They are allocated first to reduce
\nthe carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the remaining
\nassets in the CGU, on a pro-rated basis.
\nAn impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the
\nextent that the asset\u2019s carrying amount does not exceed the carrying amount that would have been determined, net of
\ndepreciation or amortisation, if no impairment loss had been recognised. The Group has not recognised any reversal of
\nprevious impairments in either 2022 or 2021.
The Group has made an irrevocable election to designate its equity investment in BlueWind Medical at fair value through
\nother comprehensive income (FVOCI). It has been initially recorded at fair value plus transaction costs and will be
\nremeasured at subsequent reporting dates to fair value.
\nUnrealised gains and losses are recognised in other comprehensive income.
\nOn disposal of the equity investment, any gains and losses that have been deferred in other comprehensive income are
\ntransferred directly to retained earnings.
\nDividends on equity investments are recognised in the income statement when the Group\u2019s right to receive payment is
\nestablished, it is probable the economic benefits will flow to the entity and the amount can be measured reliably.
Inventories are valued at the lower of cost or net realisable value with the cost determined using an average cost method.
\nThe cost of finished goods and work in progress comprises raw materials, direct labour, other direct costs and indirect
\nproduction overheads. Production overheads comprises indirect material and labour costs, maintenance and depreciation
\nof the machinery and production buildings used in the manufacturing process, as well as costs of production
\nadministration and management.
\nNet realisable value is defined as anticipated selling price or anticipated revenue less cost to completion. Estimates of net
\nrealisable value are based on the average selling prices at the end of the reporting period, net of applicable direct selling
\nexpenses. Subsequent events related to the fluctuation of prices and costs are also considered, if relevant. If net realisable
\nvalues are below inventory costs, a provision corresponding to this difference is recognised.
\nProvisions are also made for obsolescence of inventories that; (i) do not meet the Group's specifications; (ii) have exceeded
\ntheir expiration date; or (iii) are considered slow-moving. The Group evaluates the carrying value of inventories on a regular
\nbasis, taking into account such factors as historical and anticipated future sales compared with quantities on hand, the
\nprice the Group expects to obtain for products in their respective markets compared with historical cost and the
\nremaining shelf life of goods on hand.
Credit is extended to customers based on the evaluation of the customer\u2019s financial condition. Creditworthiness of
\ncustomers is evaluated on a regular basis. Exposure to credit risk is managed through credit approvals, credit limits and
\nmonitoring procedures. The Group considers a default event to be one where the customer does not have sufficient funds
\nto make their required payments and/or is in the process of being liquidated.
\nAn allowance is maintained for expected lifetime credit losses that result from the failure or inability of customers to make
\nrequired payments. It is not necessary for a credit event to have occurred before credit losses are recognised. Instead, the
\nGroup accounts for expected lifetime credit losses and changes in those expected lifetime credit losses. In determining
\nthe allowance, consideration includes the probability of recoverability based on past experience and general economic
\nfactors, incorporating forward-looking information and adjustments for customers who represent a lower risk of default,
\nwhich includes public or private medical insurance customers and customers guaranteed by local government. The
\namount of expected credit losses, if any, is required to be updated at each reporting date.
\nCertain trade and other receivables may be fully reserved when specific collection issues are known to exist, such as pending
\nbankruptcy. The Group writes off uncollectable receivables at the time it is determined the receivable is no longer collectable.
\nTrade and other receivables are not collateralised or factored and the Group does not charge interest on past due
\namounts. Refer to Note 2.1 \u2013 Revenue recognition for details on the accounting policy in respect of chargeback allowances.
Trade payables are recognised at the value of the invoice received from the supplier and are not interest bearing. The
\ncarrying amount of trade and other payables is considered to approximate fair value, due to their short-term maturities.
A provision is recognised when there is a present legal or constructive obligation as a result of a past event, it is probable
\nthat the Group will be required to settle the obligation and that obligation can be measured reliably. Restructuring
\nprovisions are only recognised when a constructive obligation exists, which requires both a detailed formal plan and
\na valid expectation being raised in those affected by starting to implement that plan or announcing the main features.
\nProvisions are measured at the best estimate of the expenditure required to settle the obligation and are discounted to
\npresent value if the effect is material. Provisions are reviewed on a regular basis and adjusted to reflect management\u2019s best
\ncurrent estimates. Due to the judgemental nature of these items, future settlements may differ from amounts recognised.
\nWhen the timing of a settlement is uncertain or expected to be more than 12 months from the reporting date, amounts are
\nclassified as non-current.
Defined contribution pension plans
\nPayments to defined contribution pension plans are recognised as an expense when employees have rendered service
\nentitling them to the contributions. Payments made to state-managed retirement benefit plans are treated as payments
\nto defined contribution pension plans where the Group\u2019s obligations under the plans are equivalent to those arising in a
\ndefined contribution pension plan.
\nDefined benefit pension plans
\nThe Group records an asset or liability related to its defined benefit pension plans as the difference between the fair
\nvalue of the plan assets and the present value of the plan liabilities. The obligations of the plans are calculated using the
\nProjected Unit Credit Method, with actuarial valuations being performed by an independent actuary at the end of each
\nreporting period. The valuation requires estimates and judgements to be made to calculate the Group\u2019s liabilities, and
\nresults in actuarial gains and losses being recorded.
\nActuarial gains and losses, movements in the return on plan assets (excluding interest) and the impact of the asset ceiling
\n(if applicable) are recognised immediately in the Consolidated Statement of Financial Position with a charge or credit to
\nthe Consolidated Statement of Comprehensive Income. Remeasurements recorded in the Consolidated Statement of
\nComprehensive Income are not subsequently reclassified to the Consolidated Income Statement.
\nPast service cost is recognised in the Consolidated Income Statement in the period of plan amendment, where relevant.
\nNet interest is calculated by applying a discount rate to the net defined benefit liability or asset.
\nThe assets of the plans are held at fair value, which is equal to market value, and are held in separate trustee-administered
\nfunds or similar structures in the countries concerned. Surplus assets within the plan are only recognised to the extent
\nthat they are recoverable in accordance with IFRIC Interpretation 14,
IAS 19 \u2013 The Limit on a Defined Benefit Asset, Minimum
\nFunding Requirements and their Interaction
(IFRIC 14).
Dividends paid are included in the Group Consolidated Financial Statements at the earlier of payment of the dividends or,
\nin respect of the Company\u2019s final dividend for the year, on approval by shareholders.
\nThe Company operates a scrip dividend scheme, allowing shareholders to elect to receive their dividend in the form of new fully
\npaid ordinary shares. For any particular dividend, the Directors may decide whether or not to make the scrip offer available.
Equity-settled share-based payment awards are measured at the fair value of the award on the grant date, excluding the
\neffect of non-market-based vesting conditions. The fair value of the awards at the date of the grant is expensed to the
\nConsolidated Income Statement over the vesting period on a straight-line basis.
\nAppropriate adjustments are made to reflect expected and actual forfeitures during the vesting period due to
\nuncertainties in satisfying service conditions or non-market performance conditions. The corresponding credit is to other
\nreserves in the Consolidated Statement of Financial Position.
Borrowings are recognised at fair value less directly attributable costs on the date that they are entered into and
\nsubsequently measured at amortised cost using the effective interest rate method. Borrowing costs directly attributable
\nto the facility are capitalised and amortised over the period of the loan.
\nThe effective interest rate method is a method of calculating the amortised cost of a financial liability and allocating the
\ninterest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future
\ncash payments through the expected life of the financial liability, or, where appropriate, a shorter period, to the net
\ncarrying amount on initial recognition.
\nBorrowings are classified as non-current when the repayment date is more than 12 months from the period-end date or
\nwhere they are drawn on a facility with more than 12 months to expiry.
\nThe Group derecognises borrowings when its contractual obligations are discharged, terminated or expired.
\nFair value measurement
\nBorrowings are classified as Level 1 or Level 2 in the fair value hierarchy in accordance with IFRS 13, Fair Value Measurements,
\nbased upon the degree to which the fair value movements are observable.
Cash and cash equivalents comprise cash in hand and current balances with banks and similar institutions. All liquid
\ninvestments, including term deposits and money market funds, have original maturities of three months or less, are
\nsubject to insignificant risk of changes in value and are repayable within one business day with no significant loss of
\ninterest, resulting in classification as cash equivalents.
\nCash at bank earns interest at rates based on daily bank deposit rates. Term deposits and money market funds earn
\ninterest at the respective short-term deposit rate.
\nCash and cash equivalents at 31 December 2022 included $19.2 million (2021: $37.5 million) of cash held in territories where
\nthere are restrictions related to timely repatriation. The amounts meet the definition of cash and cash equivalents but are
\nnot deemed to be readily available for general use by the wider Group.
\nConsolidated Statement of Cash Flows
\nUnder certain circumstances, the Group utilises bank overdrafts to manage temporary fluctuations in cash positions.
\nThe bank overdrafts are repayable on demand, used as part of the Group\u2019s overall cash management strategy and form
\npart of cash and cash equivalents for the purpose of the Consolidated Statement of Cash Flows. The Group had no bank
\noverdrafts as at 31 December 2022 or 31 December 2021.
\nThe Group reports cash flows from operating activities using the indirect method in accordance with IAS 7,
Statement of
\nCash Flows
. The Group has elected to classify net interest paid (including interest on lease liabilities) as cash flows from
\noperating activities. Short-term lease payments and payments for leases of low-value assets are included in cash flows
\nfrom operating activities.
\nChanges in working capital assets and liabilities as reported in cash flows from operating activities reflect the changes in the
\nConsolidated Statement of Financial Position between the current and previous financial year end, including adjustments for
\namounts relating to acquisitions and disposals (when necessary), as well as currency translation adjustments.
\nCash payments for the principal portion of lease liabilities is included within cash flows from financing activities.
\nAcquisition of property, plant and equipment, and intangible assets reflects additions to the related assets, including
\nadjustments for changes in capital accruals. Acquisition of intangible assets relates to capitalised software, development
\nand product-related licences. Refer to Note 9 \u2013 Intangible assets and goodwill for further details.
\nThe adjustment for non-operating expense, net in the Consolidated Statement of Cash Flows, excludes the gains and
\nlosses realised on cash-settled derivative financial instruments. Refer to Note 5 \u2013 Non-operating (expense)/income, net.
\nRestricted cash
\nIn certain instances, there are requirements to set aside cash to support payment guarantees and obligations, including
\nthe payment of value-added taxes, custom duties on imports, tender programmes and lease arrangements. Such amounts
\nare classified by the Group as restricted cash, which do not form part of cash and cash equivalents. Cash paid into escrow,
\narising from a business combination, is also classified as restricted cash.
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
\nor loss (FVTPL) unless they are designated and qualify as an effective cash flow hedge. The fair value of forward foreign
\nexchange contracts is determined by using the difference between the contract exchange rate and the quoted forward
\nexchange rate from third parties at the reporting date.
\nHedge accounting
\nThe Group has elected to apply the IFRS 9,
Financial Instruments
hedge accounting requirements. Changes in the fair
\nvalues of derivatives designated as cash flow hedges are recognised in other comprehensive income to the extent the
\nhedges are effective. The fair value is the estimated amount that the Group would receive or pay to terminate the forward
\nor swap at the reporting date, taking into account current market rates, the Group\u2019s current creditworthiness, as well as
\nthat of the financial instrument counterparties.
\nThe cumulative gain or loss is then reclassified to the Consolidated Income Statement in the same period when the
\nrelevant hedged transaction is realised. Any ineffectiveness on hedging instruments is recognised in the Consolidated
\nIncome Statement as they arise. Hedge accounting is discontinued when the hedging instrument expires or is sold,
\nterminated or exercised, or no longer qualifies for hedge accounting. The discontinuation is accounted for prospectively.
\nAny gain or loss recognised in other comprehensive income and accumulated in the cash flow hedge reserve at that time
\nremains in equity and is reclassified to profit or loss when the forecast transaction occurs. When a forecast transaction is
\nno longer expected to occur, the gain or loss accumulated in the cash flow hedge reserve is immediately reclassified to
\nprofit or loss. Gains and losses arising from forward points and foreign currency basis spreads are excluded from
\ndesignation and are treated as a cost of hedging, deferred initially in other equity reserves and released into profit or loss
\nover the life of the hedging relationship.
\nThe Group held USD interest rate swaps of $275.0 million, with exposure to USD LIBOR as a reference rate and maturing
\nin January 2023. New USD interest rate swaps of $180.0 million were entered during 2022 with an effective date of
\n23 January 2023, with exposure to USD SOFR as a reference rate and maturing at various points in the next two years.
\nThese have been designated as cash flow hedges through other comprehensive income. In assessing hedge effectiveness
\non a prospective basis for this relationship, the Group has assumed that the USD LIBOR-related interest cash flows on the
\nswap are not altered by IBOR reform and the hedge continues to be highly effective. Furthermore, hedge accounting did
\nnot need to be discontinued during the period of IBOR-related uncertainty as the Group had taken the relief available in
\nPhase 1 to separately identify the risk component at the initial hedge designation and not on an ongoing basis.
\nAt the date of refinancing, the Group\u2019s existing bank borrowings were extinguished and replaced with drawings under the
\nnew facilities. Existing cash flow hedges were maintained as the underlying interest rate risk still existed and the hedging
\nrelationships continued to fulfil the requirements of IFRS 9. Swaps with floating legs linked to SOFR have also been
\ndesignated as cash flow hedges and will provide interest rate risk management beyond January 2023.
\nRight to offset
\nFinancial assets and liabilities are offset and the net amount presented in the Consolidated Statement of Financial Position
\nwhen, and only when, the Group has a legal right to offset the amounts and intends either to settle them on a net basis or
\nto realise the asset and settle the liability simultaneously.
\nFair value measurement
\nFinancial instruments are classified as Level 1, Level 2 or Level 3 in the fair value hierarchy in accordance with IFRS 13,
\nFair Value Measurements
, based upon the degree to which the fair value movements are observable. Level 1 fair value
\nmeasures are defined as those with quoted (unadjusted) market prices in active markets for identical assets or liabilities.
\nLevel 2 fair value measurements are defined as those derived from inputs other than quoted prices that are observable
\nfor the asset or liability, either directly (prices from third parties) or indirectly (derived from third-party prices). Level 3 fair
\nvalue measurements are defined as those derived from significant unobservable inputs.
\nThe only instrument classified as Level 1 are the senior notes, given the availability of quoted market price (Note 21 \u2013 Borrowings).
\nThe Group\u2019s derivative financial instruments, discussed below, are classified as Level 2, and the Group\u2019s equity investment in
\npreference shares is classified as Level 3 (Note 10 \u2013 Investment in financial assets).
The lease liability is measured at the present value of future lease payments discounted using the rate implicit in the lease.
\nIf this rate is not readily determinable, the Group uses its incremental borrowing rate. Generally, the Group uses its
\nincremental borrowing rate as the discount rate.
\nOptions such as lease extensions or terminations on lease contracts are considered on a case-by-case basis by regular
\nmanagement assessment.
\nEach lease payment is allocated between amounts paid for principal and interest. The interest cost is charged to the
\nConsolidated Income Statement over the lease term to produce a constant periodic rate of interest on the remaining
\nbalance of the liability for each period. The right-of-use asset is depreciated on a straight-line basis over the lease term.
\nPayments associated with short-term leases and low-value leases are recognised on a straight-line basis as an expense
\nin the Consolidated Income Statement. Short-term leases are leases with a lease term of 12 months or less and low-value
\nleases comprise of leases with an underlying asset value of less than $5,000. Expenses recognised for these short-term
\nand low-value leases for the year ended 31 December 2022 were $3.9 million (2021: $2.8 million).
Finance expenses, including the transaction costs for borrowings and any discount or premium on issue, are recognised
\nin the Consolidated Income Statement using the effective interest rate method.
\nWhen existing debt is derecognised in the financial statements any transaction costs not amortised are recognised
\nimmediately in the Consolidated Income Statement.
\nUpon derecognition of financial liabilities, any unamortised financing fees are recognised immediately in the Consolidated
\nIncome Statement.
\nInterest related to qualifying assets under construction included within PP&E is capitalised (refer to Note 8 \u2013 Property,
\nplant and equipment).
\nRefer to Note 24 \u2013 Leases for accounting policy on interest expense on lease liabilities.
\nInterest arising from interest rate swaps is recorded as either interest income or expense over the term of the agreement.
\nHedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or no longer
\nqualifies for hedge accounting. The discontinuation is accounted for prospectively. Any gain or loss recognised in other
\ncomprehensive income and accumulated in the cash flow hedge reserve at that time remains in equity and is reclassified
\nto profit or loss when the forecast transaction occurs. When a forecast transaction is no longer expected to occur, the gain
\nor loss accumulated in the cash flow hedge reserve is reclassified immediately to profit or loss.
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
\nliabilities incurred or assumed on the date of the acquisition. Identified assets acquired and liabilities assumed are
\nmeasured at their respective acquisition-date fair values.
\nThe excess of the fair value of the consideration given over the fair value of the identifiable net assets acquired is recorded
\nas goodwill. If the fair value of the identifiable net assets acquired is greater than the fair value of the consideration given,
\nthe excess is recognised immediately in the Consolidated Income Statement as a bargain purchase gain. Acquisition-
\nrelated costs are expensed as incurred.
\nThe operating results of the acquired business are reflected in the Group\u2019s Consolidated Financial Statements from the
\ndate of acquisition.
",
"dimensions": {
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"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
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"f24367": {
"value": "Basis of accounting and presentation The consolidated financial information has been prepared on a historical cost basis, except for certain financial instruments
\nwhere fair value has been applied. Historical cost is generally based on the fair value of the consideration given in exchange
\nfor goods and services.",
"dimensions": {
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},
"f24374": {
"value": "Basis of consolidation The Consolidated Financial Statements include the results of the Company and all its subsidiary undertakings. Subsidiaries
\nare entities controlled by the Group. Control exists when the Group: (i) has power over the investee; (ii) is exposed, or has
\nrights, to variable returns from its involvement in the investee; and (iii) has the ability to use its power to affect its returns.
\nThe Group reassesses whether or not it controls an entity if facts and circumstances indicate that there are changes to one
\nor more of the three elements of control listed above.
\nThe consolidated financial information of the Company's subsidiaries is included within the Group's Consolidated Financial
\nStatements from the date that control commences until the date that control ceases and is prepared for the same year-end
\ndate using consistent accounting policies.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfBasisOfConsolidationExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f24386": {
"value": "Going concern As discussed in the Financial review on pages 30 to 38, the overall financial performance of the business remains strong with a
\nrobust liquidity position.
\nAs at 31 December 2022, the Group held cash and cash equivalents of $143.8 million (31 December 2021: $463.4 million), and
\nborrowings of $1,211.9 million (31 December 2021: $1,344.6 million). During the year, the Group refinanced its bank facilities with
\n$1.2 billion committed for five years at the appropriate reference rate plus margins of 1.75% and 2.00% for the multicurrency
\nrevolving credit facility and the term loan facility respectively. The new credit facility of $1.2 billion comprises a $250.0 million
\nterm loan and a $950.0 million multicurrency revolving facility. The borrowings as at 31 December 2022 comprised senior
\nnotes of $500.0 million, term loan of $250.0 million, and multicurrency revolving credit facilities of $477.2 million, net of
\nunamortised financing fees of $15.3 million. The senior notes are repayable in 2029 and the term loan and multicurrency
\nrevolving credit facilities are repayable in 2027. $472.8 million of the multicurrency revolving credit facilities remained
\nundrawn as at 31 December 2022, which together with cash and cash equivalents of $143.8 million, provided the Group with
\ntotal liquidity of $616.6 million as at that date (2021: $663.4 million). The principal financial covenants remained unchanged
\nand as at 31 December 2022, the Group was in compliance with its financial covenants.
\nIn preparing their assessment of going concern, the Directors have considered available cash resources, financial performance
\nand forecast performance, including strategy delivery, together with the Group\u2019s financial covenant compliance requirements
\nand principal risks and uncertainties. The Directors have used cash flow forecasts derived from actual performance in 2022,
\nthe Board approved 2023 budget and longer-term strategic plan as foundations. The forecasts reflected the full potential
\nfunding requirements in relation to the remaining estimated contingent consideration payable in relation to the Triad Life
\nSciences and Cure Medical acquisitions, and the impact of exiting hospital care and industrial sales activities. The Directors
\nhave considered a going concern period to 31 December 2024, which is at least 21 months from the date of approval of the
\nConsolidated Financial Statements.
Notes to the Consolidated Financial Statements
\nConvatec Group Plc Annual Report and Accounts 2022
172
\nFinancial statements
In accordance with FRC guidance, management applied severe but plausible downside scenarios linked to the Group\u2019s
\nprincipal and emerging risks, including supply chain disruption, cyber security disruption, significant regulatory breaches,
\nfinancial market distress and geopolitical events and sanctions to a key global market. Further details of the specific
\nscenarios are provided in the Viability statement on page 99. The Board has reviewed these scenarios as part of the going
\nconcern assessment and has concluded that these scenarios are in line with the Group\u2019s principal and emerging risks and
\ncontinue to reflect the financial risk of severe but plausible downside events and circumstances during the going concern
\nperiod. Under each scenario, the Group is forecast to retain significant liquidity and covenant headroom throughout the
\ngoing concern period.
\nThe Group has carried out reverse stress test against the forecast base case to determine the performance levels that would
\nresult in a breach of covenants. For a breach of covenants to occur in the next 12 months, before mitigation, the Group would
\nneed to experience a sustained revenue reduction of more than 10% across all categories and markets. This was considered to
\nbe implausible given the Group\u2019s strong global market position and diversified portfolio of products and the mitigations
\navailable to the Board and management, which include minimising capital expenditure to critical requirements and reducing
\nlevels of discretionary spend.
\nAccordingly, at the time of approving these Consolidated Financial Statements, the Directors have a reasonable expectation
\nthat the Group and the Company will have adequate liquid resources to meet their respective liabilities as they become due
\nand will be able to sustain its business model, strategy and operations and remain solvent for a period of at least 12 months
\nfrom 8 March 2023.",
"dimensions": {
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"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f24391": {
"value": "2022-12-31",
"dimensions": {
"concept": "ifrs-full:DateOfEndOfReportingPeriod2013",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f24449": {
"value": "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
\nexchange at the period end. Income and expenses are translated into US dollars at the average rates of exchange prevailing
\nduring the year. Foreign currency gains and losses resulting from the translation of subsidiaries into US dollars are recognised
\nin the Consolidated Statement of Comprehensive Income. Exchange differences arising from the translation of the net
\ninvestment in foreign operations are taken to the cumulative translation reserve within equity. They are recycled and
\nrecognised in the Consolidated Income Statement upon disposal of the operation.
\nIn preparing the financial statements of the individual companies, transactions in currencies other than the entity\u2019s functional
\ncurrency (foreign currencies) are recognised at the rates of exchange prevailing on the dates of the transactions. At each
\nreporting date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates
\nprevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated
\nat the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of
\nhistorical cost in a foreign currency are not retranslated. Any gain or loss arising from subsequent exchange rate movements
\nis included as an exchange gain or loss in the Consolidated Income Statement.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForFunctionalCurrencyExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f24450": {
"value": "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
\nexchange at the period end. Income and expenses are translated into US dollars at the average rates of exchange prevailing
\nduring the year. Foreign currency gains and losses resulting from the translation of subsidiaries into US dollars are recognised
\nin the Consolidated Statement of Comprehensive Income. Exchange differences arising from the translation of the net
\ninvestment in foreign operations are taken to the cumulative translation reserve within equity. They are recycled and
\nrecognised in the Consolidated Income Statement upon disposal of the operation.
\nIn preparing the financial statements of the individual companies, transactions in currencies other than the entity\u2019s functional
\ncurrency (foreign currencies) are recognised at the rates of exchange prevailing on the dates of the transactions. At each
\nreporting date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates
\nprevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated
\nat the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of
\nhistorical cost in a foreign currency are not retranslated. Any gain or loss arising from subsequent exchange rate movements
\nis included as an exchange gain or loss in the Consolidated Income Statement.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForForeignCurrencyTranslationExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f24479": {
"value": "1.4 Critical accounting judgements and key sources of estimation uncertainty The preparation of financial statements, in conformity with adopted IFRS, requires management to make judgements,
\nestimates and assumptions that affect the application of accounting policies and the reported value of assets and liabilities,
\nincome and expense. Actual results may differ from these estimates or judgements of likely outcome. Management regularly
\nreviews, and revises as necessary, the accounting judgements that significantly impact the amounts recognised in the
\nConsolidated Financial Statements and the sources of estimation uncertainty that are considered to be \u201ckey estimates\u201d
\ndue to their potential to give rise to material adjustments in the Group\u2019s Consolidated Financial Statements within the next
\nfinancial year.
\nConsiderations for the identification of critical accounting judgements and key estimates
\nA detailed assessment was performed by management of the potential impact on each balance sheet caption and associated
\naccounting estimates and judgements at each reporting date during the year. In preparing the Consolidated Financial
\nStatements, no critical accounting judgements have been identified. A key estimate has been identified in relation to the
\nvaluation of the contingent consideration related to the acquisition of Triad Life Sciences Inc (Triad Life Sciences).
\nAs detailed further in the Group\u2019s Audit and Risk Committee report on pages 126 to 138, the Committee has reviewed,
\ndiscussed, and challenged management on identification and, where appropriate, the determination of its critical accounting
\njudgements and key estimates.
\n173
Convatec Group Plc Annual Report and Accounts 2022
\nAdditional information
Governance
Strategic report
Overview
Financial statements
1. BASIS OF PREPARATION (CONTINUED)
\nValuation of the contingent consideration in relation to the acquisition of Triad Life Sciences
\nThe contingent consideration is based on both specified post-acquisition financial and non-financial performance targets
\nas defined by the Merger Agreement. The contingent consideration is fair valued at the date of acquisition with key inputs
\nincluding a weighted probability of different scenarios and revenue projections based on internal forecasts, discounted using
\nan appropriate discount rate that reflects the relative risk of the investment as well as the time value of money.
\nActual revenue results may differ from estimates, leading to a change in the fair value of the contingent consideration.
\nManagement has identified that reasonably possible changes in certain key assumptions and forecasts may cause the
\ncalculated fair value of the contingent consideration to vary materially within the next financial year. The maximum
\nundiscounted contingent consideration payable under the Merger Agreement was $325.0 million, of which $50.0 million
\nwas paid during the year following successful attainment of the two short-term milestones. The estimated discounted fair
\nvalue of the remaining contingent consideration payable as at 31 December 2022 was $130.8 million.
\nManagement has determined that the reasonable potential range of discounted outcomes within the next financial year is
\nbetween $85.2 million and $230.8 million, compared to a maximum remaining undiscounted contingent consideration of
\n$275.0 million.
\nThe timing and amount of future contingent elements of consideration is therefore considered a key source of estimation
\nuncertainty. Refer to Note 26 \u2013 Acquisitions for more information.",
"dimensions": {
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}
},
"f24601": {
"value": "2. REVENUE AND SEGMENTAL INFORMATION 2.1 Revenue recognition
\nThe Group sells a broad range of products to a wide range of customers, including healthcare providers, patients and
\nmanufacturers. This note provides further information about how the Group generates revenue and when it is recognised
\nin the Consolidated Income Statement.
\nAccounting policy
\nRevenue recognition
\nThe Group measures revenue for goods sold based on the consideration specified in a contract with a customer, net of
\ndiscounts, chargeback allowances and sales-related taxes. Revenue is recognised when control over a product or service is
\ntransferred to a customer, distributor or wholesaler, which is generally when goods have been delivered, as most products
\nare insured by the Group until delivery. Due to the short-term nature of the receivables from sale of goods, the Group
\nmeasures them at the original transaction price without discounting. The transaction price is the amount the Group
\nexpects to receive at that date.
\nNature of goods and services
\nAdvanced Wound Care, Ostomy Care, Continence and Critical Care products are sold to pharmacies, hospitals and other
\nacute and post-acute healthcare service providers directly or through distributors and wholesalers. Products are also sold
\ndirectly to end customers (patients) through the Group's home services entities and a small number of clinical and retail
\noutlets. Infusion Care primarily serves business-to-business customers, consisting principally of the leading insulin pump
\nmanufacturers. A small proportion of its revenue is derived from business-to-business urology product sales.
\nIn 2022 and 2021, no single customer generated more than 10% of the Group's revenue.
\nNature, timing of satisfaction of performance obligations
\nPrincipally, the Group's contracts with customers contain a single performance obligation, that is the delivery of products
\nto customers. Revenue is typically recognised when the customer receives the product but is subject to the shipping terms
\nin each individual contract. Where non-standard shipping arrangements exist, revenue is recognised when control of the
\ngoods has transferred. Allowances for returns, where the contract specifies these terms, are made at the point of sale.
\nFor sales to distributors, revenue is recognised when title is transferred to the distributor and the distributor has assumed
\ncontrol, the timing of which depends on the contractual terms with each distributor. Chargeback allowances or
\ncontractual deductions relating to end-customer agreements, which may differ from distributor contracts, are made at
\nthe point of title transfer to the distributor. In certain European countries, rebates are provided to governments and are
\noften mandated by laws or government regulations. These rebates are estimated based on government regulations and
\nunbudgeted spending, laws and terms of individual rebate agreements, and are recorded as a deduction from revenue
\nat the time the related revenue is recorded. The estimates are adjusted periodically to reflect actual experience.
\nWhen distributors buy products from the Group at a contract price and sell these products to end-customers at a price
\nagreed with the Group that is lower than the distributors\u2019 list price, a chargeback may arise and a claim may be submitted
\nto the Group by the distributor. The provision for chargebacks is based on expected sell-through levels by the Group\u2019s
\ndistributors to contracted customers, as well as estimated distributor inventory levels. Retrospective claims are reviewed
\nagainst estimations to ensure provisions are regularly updated.
\nVolume discounts
\nThe Group offers certain prospective volume discounts to customers who achieve a specified volume amount or value
\nof purchases in any given year. Volume discounts that meet the definition of a material right are recognised as a separate
\nperformance obligation. Material rights are the option to purchase additional products at a discount which would not have
\nbeen given had the contract not been entered into and are incremental to the range of discounts typically given for those
\ngoods to that class of customer.
\nThe stand-alone selling price of these volume discounts is based on the discount that the customer would obtain when
\nexercising the option, adjusted for any discount the customer could receive without exercising the option and the
\nlikelihood that the option will be exercised. The revenue allocated to volume discounts is short term in nature and
\nrecognised proportionally to the pattern of options exercised by the customer or when the option expires.
\n175
Convatec Group Plc Annual Report and Accounts 2022
\nAdditional information
Governance
Strategic report
Overview
Financial statements
2. REVENUE AND SEGMENTAL INFORMATION (CONTINUED)
\nContract costs
\nIncremental costs in respect of obtaining a contract with a customer principally relate to commissions paid by the Group
\nto its sales representatives. Such costs are capitalised as an asset to the extent that they directly relate to a specific contract,
\nare used to generate or enhance resources used in satisfying performance obligations and are expected to be recovered.
\nThe amortisation period for commissions can differ according to the contract term. Renewals of milestones in the contract
\nare taken into account when determining the amortisation period. For each contract that has sales commissions paid, the
\nGroup has determined an appropriate amortisation period that is consistent with the transfer of control to the customer.
\nThese capitalised costs amounted to $5.4 million (2021: $5.6 million) at 31 December 2022 and the amount of related
\namortisation expense for the year ended 31 December 2022 was $4.3 million (2021: $3.6 million). There was no impairment
\nloss in respect of the costs capitalised.
\nContract balances
\nThe Group recognises contract liabilities that are primarily in respect of advance consideration received from customers
\nprior to transfer of the related products and material rights offered to customers for options to purchase additional
\ngoods. The contract liability balance at 31 December 2022 was $1.3 million (2021: $4.9 million).
\n2.2 Segment information
\nThe Board considers the Group\u2019s business to be a single segment entity engaged in the development, manufacture and
\nsale of medical products, services and technologies. R&D, manufacturing and central support functions are managed
\nglobally for the Group, supporting all categories of sales. Revenues are managed both on a category and regional basis.
\nThis note presents the performance and activities of the Group as a single segment.
\nPages 22 to 29 of the Strategic report provide further detail of category revenue.
\nThe Group's CEO, who is the Group's Chief Operating Decision Maker, evaluates the Group's global product portfolios on a
\nrevenue basis and evaluates profitability and associated investment on an enterprise-wide basis due to shared infrastructures
\nand support functions between the categories and geographies. Financial information in respect of revenues provided to the
\nCEO for decision-making purposes is made on both a category and geographic basis. Resources are allocated on a Group-wide
\nbasis, with a focus on key categories and the key markets. The allocations are based on the relative merits of the individual
\nproposals across the Group.
\nRevenue by category
\nThe Group generates revenue across four major product
\ncategories. The following chart sets out the Group's
\nrevenue for the year ended 31 December by category:
\nRevenue by category ($m)
\nGeographic markets
\nThe following chart sets out the Group's revenue by
\ngeographic market in which third-party customers
\nare located:
\nRevenue by geography ($m)
\n2021
\n522.1
620.7
\nAdvanced
\nWound Care
\nAdvanced
\nWound Care
\nOstomy Care
\nOstomy Care
\nContinence &
\nCritical Care
\nContinence &
\nCritical Care
\nInfusion Care
\nInfusion Care
\n546.3
383.4
\n2022
2,072.5
\n546.5
592.3
542.9
356.6
\n2,038.3
\n688.6
\nEurope
North America
RoW
\n(1)
\nEurope
North America
RoW
\n(1)
\n1,090.3
293.6
\n2022
2,072.5
\n741.6
1,022.1
274.6
\n2,038.3
\n2021
\n1.
Rest of World (RoW) comprises all countries in Asia-Pacific,
\nLatin America (including Mexico and the Caribbean), South America,
\nthe Middle East (including Turkey) and Africa.
\nFrom 2023 onwards, Flexi-Seal
\nTM
\n(2022 revenue: $65.8 million), our faecal management system, will move from Continence &
\nCritical Care to Ostomy Care. The remaining industrial sales, predominantly continence-related supplies for B2B customers
\n(2022 revenue: $16.7 million) will move from Infusion Care into Continence Care. Going forward the Continence & Critical Care
\ncategory will be renamed Continence Care.
\nNotes to the Consolidated Financial Statements
continued
\nConvatec Group Plc Annual Report and Accounts 2022
176
\nFinancial statements
Geographic regions
\nThe following table sets out the Group's revenue on the basis of where the legal entity generating the revenue resides,
\nincluding countries representing over 10% of Group revenue and the UK, where the Group is domiciled:
\n2022
\n$m
\n2021
\n$m
\nGeographic regions
\nUS
749.8
704.1
\nUK
131.5
147.2
\nDenmark
371.7
346.8
\nOther
\n1
\n819.5
840.2
\n2,072.5
2,038.3
\n1.
Other consists primarily of other countries in Europe, Asia-Pacific, Latin America and Canada.
\nThe following table sets out the Group's long-lived assets by country in which the legal entity resides:
\n2022
\n$m
\n2021
\n$m
\nLong-lived assets
\n1
\nUS
1,349.6
1,141.9
\nUK
695.7
777.8
\nDenmark
266.0
272.6
\nOther
318.0
316.5
\nTotal long-lived assets
2,629.3
2,508.8
\n1.
Long-lived assets consist of property, plant and equipment, right-of-use assets, intangible assets and goodwill.",
"dimensions": {
"concept": "ctec:DisclosureOfRevenueAndSegmentalInformationTextBlock",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f24602": {
"value": "2. REVENUE AND SEGMENTAL INFORMATION 2.1 Revenue recognition
\nThe Group sells a broad range of products to a wide range of customers, including healthcare providers, patients and
\nmanufacturers. This note provides further information about how the Group generates revenue and when it is recognised
\nin the Consolidated Income Statement.
\nAccounting policy
\nRevenue recognition
\nThe Group measures revenue for goods sold based on the consideration specified in a contract with a customer, net of
\ndiscounts, chargeback allowances and sales-related taxes. Revenue is recognised when control over a product or service is
\ntransferred to a customer, distributor or wholesaler, which is generally when goods have been delivered, as most products
\nare insured by the Group until delivery. Due to the short-term nature of the receivables from sale of goods, the Group
\nmeasures them at the original transaction price without discounting. The transaction price is the amount the Group
\nexpects to receive at that date.
\nNature of goods and services
\nAdvanced Wound Care, Ostomy Care, Continence and Critical Care products are sold to pharmacies, hospitals and other
\nacute and post-acute healthcare service providers directly or through distributors and wholesalers. Products are also sold
\ndirectly to end customers (patients) through the Group's home services entities and a small number of clinical and retail
\noutlets. Infusion Care primarily serves business-to-business customers, consisting principally of the leading insulin pump
\nmanufacturers. A small proportion of its revenue is derived from business-to-business urology product sales.
\nIn 2022 and 2021, no single customer generated more than 10% of the Group's revenue.
\nNature, timing of satisfaction of performance obligations
\nPrincipally, the Group's contracts with customers contain a single performance obligation, that is the delivery of products
\nto customers. Revenue is typically recognised when the customer receives the product but is subject to the shipping terms
\nin each individual contract. Where non-standard shipping arrangements exist, revenue is recognised when control of the
\ngoods has transferred. Allowances for returns, where the contract specifies these terms, are made at the point of sale.
\nFor sales to distributors, revenue is recognised when title is transferred to the distributor and the distributor has assumed
\ncontrol, the timing of which depends on the contractual terms with each distributor. Chargeback allowances or
\ncontractual deductions relating to end-customer agreements, which may differ from distributor contracts, are made at
\nthe point of title transfer to the distributor. In certain European countries, rebates are provided to governments and are
\noften mandated by laws or government regulations. These rebates are estimated based on government regulations and
\nunbudgeted spending, laws and terms of individual rebate agreements, and are recorded as a deduction from revenue
\nat the time the related revenue is recorded. The estimates are adjusted periodically to reflect actual experience.
\nWhen distributors buy products from the Group at a contract price and sell these products to end-customers at a price
\nagreed with the Group that is lower than the distributors\u2019 list price, a chargeback may arise and a claim may be submitted
\nto the Group by the distributor. The provision for chargebacks is based on expected sell-through levels by the Group\u2019s
\ndistributors to contracted customers, as well as estimated distributor inventory levels. Retrospective claims are reviewed
\nagainst estimations to ensure provisions are regularly updated.
\nVolume discounts
\nThe Group offers certain prospective volume discounts to customers who achieve a specified volume amount or value
\nof purchases in any given year. Volume discounts that meet the definition of a material right are recognised as a separate
\nperformance obligation. Material rights are the option to purchase additional products at a discount which would not have
\nbeen given had the contract not been entered into and are incremental to the range of discounts typically given for those
\ngoods to that class of customer.
\nThe stand-alone selling price of these volume discounts is based on the discount that the customer would obtain when
\nexercising the option, adjusted for any discount the customer could receive without exercising the option and the
\nlikelihood that the option will be exercised. The revenue allocated to volume discounts is short term in nature and
\nrecognised proportionally to the pattern of options exercised by the customer or when the option expires.
\n175
Convatec Group Plc Annual Report and Accounts 2022
\nAdditional information
Governance
Strategic report
Overview
Financial statements
2. REVENUE AND SEGMENTAL INFORMATION (CONTINUED)
\nContract costs
\nIncremental costs in respect of obtaining a contract with a customer principally relate to commissions paid by the Group
\nto its sales representatives. Such costs are capitalised as an asset to the extent that they directly relate to a specific contract,
\nare used to generate or enhance resources used in satisfying performance obligations and are expected to be recovered.
\nThe amortisation period for commissions can differ according to the contract term. Renewals of milestones in the contract
\nare taken into account when determining the amortisation period. For each contract that has sales commissions paid, the
\nGroup has determined an appropriate amortisation period that is consistent with the transfer of control to the customer.
\nThese capitalised costs amounted to $5.4 million (2021: $5.6 million) at 31 December 2022 and the amount of related
\namortisation expense for the year ended 31 December 2022 was $4.3 million (2021: $3.6 million). There was no impairment
\nloss in respect of the costs capitalised.
\nContract balances
\nThe Group recognises contract liabilities that are primarily in respect of advance consideration received from customers
\nprior to transfer of the related products and material rights offered to customers for options to purchase additional
\ngoods. The contract liability balance at 31 December 2022 was $1.3 million (2021: $4.9 million).
\n2.2 Segment information
\nThe Board considers the Group\u2019s business to be a single segment entity engaged in the development, manufacture and
\nsale of medical products, services and technologies. R&D, manufacturing and central support functions are managed
\nglobally for the Group, supporting all categories of sales. Revenues are managed both on a category and regional basis.
\nThis note presents the performance and activities of the Group as a single segment.
\nPages 22 to 29 of the Strategic report provide further detail of category revenue.
\nThe Group's CEO, who is the Group's Chief Operating Decision Maker, evaluates the Group's global product portfolios on a
\nrevenue basis and evaluates profitability and associated investment on an enterprise-wide basis due to shared infrastructures
\nand support functions between the categories and geographies. Financial information in respect of revenues provided to the
\nCEO for decision-making purposes is made on both a category and geographic basis. Resources are allocated on a Group-wide
\nbasis, with a focus on key categories and the key markets. The allocations are based on the relative merits of the individual
\nproposals across the Group.
\nRevenue by category
\nThe Group generates revenue across four major product
\ncategories. The following chart sets out the Group's
\nrevenue for the year ended 31 December by category:
\nRevenue by category ($m)
\nGeographic markets
\nThe following chart sets out the Group's revenue by
\ngeographic market in which third-party customers
\nare located:
\nRevenue by geography ($m)
\n2021
\n522.1
620.7
\nAdvanced
\nWound Care
\nAdvanced
\nWound Care
\nOstomy Care
\nOstomy Care
\nContinence &
\nCritical Care
\nContinence &
\nCritical Care
\nInfusion Care
\nInfusion Care
\n546.3
383.4
\n2022
2,072.5
\n546.5
592.3
542.9
356.6
\n2,038.3
\n688.6
\nEurope
North America
RoW
\n(1)
\nEurope
North America
RoW
\n(1)
\n1,090.3
293.6
\n2022
2,072.5
\n741.6
1,022.1
274.6
\n2,038.3
\n2021
\n1.
Rest of World (RoW) comprises all countries in Asia-Pacific,
\nLatin America (including Mexico and the Caribbean), South America,
\nthe Middle East (including Turkey) and Africa.
\nFrom 2023 onwards, Flexi-Seal
\nTM
\n(2022 revenue: $65.8 million), our faecal management system, will move from Continence &
\nCritical Care to Ostomy Care. The remaining industrial sales, predominantly continence-related supplies for B2B customers
\n(2022 revenue: $16.7 million) will move from Infusion Care into Continence Care. Going forward the Continence & Critical Care
\ncategory will be renamed Continence Care.
\nNotes to the Consolidated Financial Statements
continued
\nConvatec Group Plc Annual Report and Accounts 2022
176
\nFinancial statements
Geographic regions
\nThe following table sets out the Group's revenue on the basis of where the legal entity generating the revenue resides,
\nincluding countries representing over 10% of Group revenue and the UK, where the Group is domiciled:
\n2022
\n$m
\n2021
\n$m
\nGeographic regions
\nUS
749.8
704.1
\nUK
131.5
147.2
\nDenmark
371.7
346.8
\nOther
\n1
\n819.5
840.2
\n2,072.5
2,038.3
\n1.
Other consists primarily of other countries in Europe, Asia-Pacific, Latin America and Canada.
\nThe following table sets out the Group's long-lived assets by country in which the legal entity resides:
\n2022
\n$m
\n2021
\n$m
\nLong-lived assets
\n1
\nUS
1,349.6
1,141.9
\nUK
695.7
777.8
\nDenmark
266.0
272.6
\nOther
318.0
316.5
\nTotal long-lived assets
2,629.3
2,508.8
\n1.
Long-lived assets consist of property, plant and equipment, right-of-use assets, intangible assets and goodwill.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfRevenueExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f24610": {
"value": "Accounting policy Revenue recognition
\nThe Group measures revenue for goods sold based on the consideration specified in a contract with a customer, net of
\ndiscounts, chargeback allowances and sales-related taxes. Revenue is recognised when control over a product or service is
\ntransferred to a customer, distributor or wholesaler, which is generally when goods have been delivered, as most products
\nare insured by the Group until delivery. Due to the short-term nature of the receivables from sale of goods, the Group
\nmeasures them at the original transaction price without discounting. The transaction price is the amount the Group
\nexpects to receive at that date.
\nNature of goods and services
\nAdvanced Wound Care, Ostomy Care, Continence and Critical Care products are sold to pharmacies, hospitals and other
\nacute and post-acute healthcare service providers directly or through distributors and wholesalers. Products are also sold
\ndirectly to end customers (patients) through the Group's home services entities and a small number of clinical and retail
\noutlets. Infusion Care primarily serves business-to-business customers, consisting principally of the leading insulin pump
\nmanufacturers. A small proportion of its revenue is derived from business-to-business urology product sales.
\nIn 2022 and 2021, no single customer generated more than 10% of the Group's revenue.
\nNature, timing of satisfaction of performance obligations
\nPrincipally, the Group's contracts with customers contain a single performance obligation, that is the delivery of products
\nto customers. Revenue is typically recognised when the customer receives the product but is subject to the shipping terms
\nin each individual contract. Where non-standard shipping arrangements exist, revenue is recognised when control of the
\ngoods has transferred. Allowances for returns, where the contract specifies these terms, are made at the point of sale.
\nFor sales to distributors, revenue is recognised when title is transferred to the distributor and the distributor has assumed
\ncontrol, the timing of which depends on the contractual terms with each distributor. Chargeback allowances or
\ncontractual deductions relating to end-customer agreements, which may differ from distributor contracts, are made at
\nthe point of title transfer to the distributor. In certain European countries, rebates are provided to governments and are
\noften mandated by laws or government regulations. These rebates are estimated based on government regulations and
\nunbudgeted spending, laws and terms of individual rebate agreements, and are recorded as a deduction from revenue
\nat the time the related revenue is recorded. The estimates are adjusted periodically to reflect actual experience.
\nWhen distributors buy products from the Group at a contract price and sell these products to end-customers at a price
\nagreed with the Group that is lower than the distributors\u2019 list price, a chargeback may arise and a claim may be submitted
\nto the Group by the distributor. The provision for chargebacks is based on expected sell-through levels by the Group\u2019s
\ndistributors to contracted customers, as well as estimated distributor inventory levels. Retrospective claims are reviewed
\nagainst estimations to ensure provisions are regularly updated.
\nVolume discounts
\nThe Group offers certain prospective volume discounts to customers who achieve a specified volume amount or value
\nof purchases in any given year. Volume discounts that meet the definition of a material right are recognised as a separate
\nperformance obligation. Material rights are the option to purchase additional products at a discount which would not have
\nbeen given had the contract not been entered into and are incremental to the range of discounts typically given for those
\ngoods to that class of customer.
\nThe stand-alone selling price of these volume discounts is based on the discount that the customer would obtain when
\nexercising the option, adjusted for any discount the customer could receive without exercising the option and the
\nlikelihood that the option will be exercised. The revenue allocated to volume discounts is short term in nature and
\nrecognised proportionally to the pattern of options exercised by the customer or when the option expires.
\n175
Convatec Group Plc Annual Report and Accounts 2022
\nAdditional information
Governance
Strategic report
Overview
Financial statements
2. REVENUE AND SEGMENTAL INFORMATION (CONTINUED)
\nContract costs
\nIncremental costs in respect of obtaining a contract with a customer principally relate to commissions paid by the Group
\nto its sales representatives. Such costs are capitalised as an asset to the extent that they directly relate to a specific contract,
\nare used to generate or enhance resources used in satisfying performance obligations and are expected to be recovered.
\nThe amortisation period for commissions can differ according to the contract term. Renewals of milestones in the contract
\nare taken into account when determining the amortisation period. For each contract that has sales commissions paid, the
\nGroup has determined an appropriate amortisation period that is consistent with the transfer of control to the customer.
\nThese capitalised costs amounted to $5.4 million (2021: $5.6 million) at 31 December 2022 and the amount of related
\namortisation expense for the year ended 31 December 2022 was $4.3 million (2021: $3.6 million). There was no impairment
\nloss in respect of the costs capitalised.
\nContract balances
\nThe Group recognises contract liabilities that are primarily in respect of advance consideration received from customers
\nprior to transfer of the related products and material rights offered to customers for options to purchase additional
\ngoods. The contract liability balance at 31 December 2022 was $1.3 million (2021: $4.9 million).",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForRecognitionOfRevenue",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f24613": {
"value": "Revenue recognition The Group measures revenue for goods sold based on the consideration specified in a contract with a customer, net of
\ndiscounts, chargeback allowances and sales-related taxes. Revenue is recognised when control over a product or service is
\ntransferred to a customer, distributor or wholesaler, which is generally when goods have been delivered, as most products
\nare insured by the Group until delivery. Due to the short-term nature of the receivables from sale of goods, the Group
\nmeasures them at the original transaction price without discounting. The transaction price is the amount the Group
\nexpects to receive at that date.
\nNature of goods and services
\nAdvanced Wound Care, Ostomy Care, Continence and Critical Care products are sold to pharmacies, hospitals and other
\nacute and post-acute healthcare service providers directly or through distributors and wholesalers. Products are also sold
\ndirectly to end customers (patients) through the Group's home services entities and a small number of clinical and retail
\noutlets. Infusion Care primarily serves business-to-business customers, consisting principally of the leading insulin pump
\nmanufacturers. A small proportion of its revenue is derived from business-to-business urology product sales.
\nIn 2022 and 2021, no single customer generated more than 10% of the Group's revenue.
\nNature, timing of satisfaction of performance obligations
\nPrincipally, the Group's contracts with customers contain a single performance obligation, that is the delivery of products
\nto customers. Revenue is typically recognised when the customer receives the product but is subject to the shipping terms
\nin each individual contract. Where non-standard shipping arrangements exist, revenue is recognised when control of the
\ngoods has transferred. Allowances for returns, where the contract specifies these terms, are made at the point of sale.
\nFor sales to distributors, revenue is recognised when title is transferred to the distributor and the distributor has assumed
\ncontrol, the timing of which depends on the contractual terms with each distributor. Chargeback allowances or
\ncontractual deductions relating to end-customer agreements, which may differ from distributor contracts, are made at
\nthe point of title transfer to the distributor. In certain European countries, rebates are provided to governments and are
\noften mandated by laws or government regulations. These rebates are estimated based on government regulations and
\nunbudgeted spending, laws and terms of individual rebate agreements, and are recorded as a deduction from revenue
\nat the time the related revenue is recorded. The estimates are adjusted periodically to reflect actual experience.
\nWhen distributors buy products from the Group at a contract price and sell these products to end-customers at a price
\nagreed with the Group that is lower than the distributors\u2019 list price, a chargeback may arise and a claim may be submitted
\nto the Group by the distributor. The provision for chargebacks is based on expected sell-through levels by the Group\u2019s
\ndistributors to contracted customers, as well as estimated distributor inventory levels. Retrospective claims are reviewed
\nagainst estimations to ensure provisions are regularly updated.
\nVolume discounts
\nThe Group offers certain prospective volume discounts to customers who achieve a specified volume amount or value
\nof purchases in any given year. Volume discounts that meet the definition of a material right are recognised as a separate
\nperformance obligation. Material rights are the option to purchase additional products at a discount which would not have
\nbeen given had the contract not been entered into and are incremental to the range of discounts typically given for those
\ngoods to that class of customer.
\nThe stand-alone selling price of these volume discounts is based on the discount that the customer would obtain when
\nexercising the option, adjusted for any discount the customer could receive without exercising the option and the
\nlikelihood that the option will be exercised. The revenue allocated to volume discounts is short term in nature and
\nrecognised proportionally to the pattern of options exercised by the customer or when the option expires.
\n175
Convatec Group Plc Annual Report and Accounts 2022
\nAdditional information
Governance
Strategic report
Overview
Financial statements
2. REVENUE AND SEGMENTAL INFORMATION (CONTINUED)
\nContract costs
\nIncremental costs in respect of obtaining a contract with a customer principally relate to commissions paid by the Group
\nto its sales representatives. Such costs are capitalised as an asset to the extent that they directly relate to a specific contract,
\nare used to generate or enhance resources used in satisfying performance obligations and are expected to be recovered.
\nThe amortisation period for commissions can differ according to the contract term. Renewals of milestones in the contract
\nare taken into account when determining the amortisation period. For each contract that has sales commissions paid, the
\nGroup has determined an appropriate amortisation period that is consistent with the transfer of control to the customer.
\nThese capitalised costs amounted to $5.4 million (2021: $5.6 million) at 31 December 2022 and the amount of related
\namortisation expense for the year ended 31 December 2022 was $4.3 million (2021: $3.6 million). There was no impairment
\nloss in respect of the costs capitalised.
\nContract balances
\nThe Group recognises contract liabilities that are primarily in respect of advance consideration received from customers
\nprior to transfer of the related products and material rights offered to customers for options to purchase additional
\ngoods. The contract liability balance at 31 December 2022 was $1.3 million (2021: $4.9 million).",
"dimensions": {
"concept": "ctec:DescriptionOfAccountingPolicyForRevenueAndSegmentalInformationPolicyTextBlock",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f24702": {
"value": "2.2 Segment information The Board considers the Group\u2019s business to be a single segment entity engaged in the development, manufacture and
\nsale of medical products, services and technologies. R&D, manufacturing and central support functions are managed
\nglobally for the Group, supporting all categories of sales. Revenues are managed both on a category and regional basis.
\nThis note presents the performance and activities of the Group as a single segment.
\nPages 22 to 29 of the Strategic report provide further detail of category revenue.
\nThe Group's CEO, who is the Group's Chief Operating Decision Maker, evaluates the Group's global product portfolios on a
\nrevenue basis and evaluates profitability and associated investment on an enterprise-wide basis due to shared infrastructures
\nand support functions between the categories and geographies. Financial information in respect of revenues provided to the
\nCEO for decision-making purposes is made on both a category and geographic basis. Resources are allocated on a Group-wide
\nbasis, with a focus on key categories and the key markets. The allocations are based on the relative merits of the individual
\nproposals across the Group.
\nRevenue by category
\nThe Group generates revenue across four major product
\ncategories. The following chart sets out the Group's
\nrevenue for the year ended 31 December by category:
\nRevenue by category ($m)
\nGeographic markets
\nThe following chart sets out the Group's revenue by
\ngeographic market in which third-party customers
\nare located:
\nRevenue by geography ($m)
\n2021
\n522.1
620.7
\nAdvanced
\nWound Care
\nAdvanced
\nWound Care
\nOstomy Care
\nOstomy Care
\nContinence &
\nCritical Care
\nContinence &
\nCritical Care
\nInfusion Care
\nInfusion Care
\n546.3
383.4
\n2022
2,072.5
\n546.5
592.3
542.9
356.6
\n2,038.3
\n688.6
\nEurope
North America
RoW
\n(1)
\nEurope
North America
RoW
\n(1)
\n1,090.3
293.6
\n2022
2,072.5
\n741.6
1,022.1
274.6
\n2,038.3
\n2021
\n1.
Rest of World (RoW) comprises all countries in Asia-Pacific,
\nLatin America (including Mexico and the Caribbean), South America,
\nthe Middle East (including Turkey) and Africa.
\nFrom 2023 onwards, Flexi-Seal
\nTM
\n(2022 revenue: $65.8 million), our faecal management system, will move from Continence &
\nCritical Care to Ostomy Care. The remaining industrial sales, predominantly continence-related supplies for B2B customers
\n(2022 revenue: $16.7 million) will move from Infusion Care into Continence Care. Going forward the Continence & Critical Care
\ncategory will be renamed Continence Care.
\nNotes to the Consolidated Financial Statements
continued
\nConvatec Group Plc Annual Report and Accounts 2022
176
\nFinancial statements
Geographic regions
\nThe following table sets out the Group's revenue on the basis of where the legal entity generating the revenue resides,
\nincluding countries representing over 10% of Group revenue and the UK, where the Group is domiciled:
\n2022
\n$m
\n2021
\n$m
\nGeographic regions
\nUS
749.8
704.1
\nUK
131.5
147.2
\nDenmark
371.7
346.8
\nOther
\n1
\n819.5
840.2
\n2,072.5
2,038.3
\n1.
Other consists primarily of other countries in Europe, Asia-Pacific, Latin America and Canada.
\nThe following table sets out the Group's long-lived assets by country in which the legal entity resides:
\n2022
\n$m
\n2021
\n$m
\nLong-lived assets
\n1
\nUS
1,349.6
1,141.9
\nUK
695.7
777.8
\nDenmark
266.0
272.6
\nOther
318.0
316.5
\nTotal long-lived assets
2,629.3
2,508.8
\n1.
Long-lived assets consist of property, plant and equipment, right-of-use assets, intangible assets and goodwill. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfEntitysReportableSegmentsExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f24850": {
"value": "3. OPERATING COSTS The Group incurs operating costs associated with the day-to-day operation of the business. These operating costs are
\ndeducted from revenue to calculate operating profit.
\n3.1 Operating profit
\nOperating profit is stated after deducting from revenue:
\nNotes
\n2022
\n$m
\n2021
\n$m
\nDepreciation:
\nProperty, plant and equipment
8
39.7
40.6
\nRight-of-use assets
24
22.1
22.8
\nAmortisation of intangible assets
9
147.4
147.2
\nImpairment/write-off of intangible assets
9
6.3
2.9
\nImpairment/write-off of property, plant and equipment
8
9.2
3.0
\nLoss on terminated leases
24
0.1
\u2013
\nAmounts in respect of inventories included in cost of sales
818.3
766.7
\nWrite-down of inventories
\n1
\n22.6
6.4
\nLease expenses
\n2
\n24
3.9
2.8
\nStaff costs:
\nWages and salaries
532.7
533.4
\nShare-based payment expense
19
16.7
16.4
\nSocial security costs
67.5
64.2
\nDefined contribution plans post-employment costs
21.2
21.0
\nDefined benefit plans pension costs
15
1.7
3.6
\nRecruitment and other employment-related fees
8.7
11.5
\nTotal staff costs
648.5
650.1
\n1.
The write-down of inventories to their realisable value is included in cost of sales.
\n2.
Lease expenses comprises the costs in respect of low-value leases and short-term leases. Refer to accounting policy in Note 24 \u2013 Leases.
\n177
Convatec Group Plc Annual Report and Accounts 2022
\nAdditional information
Governance
Strategic report
Overview
Financial statements
3. OPERATING COSTS (CONTINUED)
\nThe remuneration of the Executive Directors, which is set out on pages 139 to 151, has been audited and is included within staff
\ncosts and forms part of these Consolidated Financial Statements.
\n3.2 Employee numbers
\nThe average number of the Group's employees
\nby function:
\nEmployees by function
\nThe average number of the Group's employees
\nby location:
\nEmployees by location
\n2021
\n3,258
5,749
\nOperations
Sales and
\nmarketing
\nGeneral and
\nadministrative
\nR&D
\nOperations
Sales and
\nmarketing
\nGeneral and
\nadministrative
\nR&D
\n861
529
\n2022
10,397
\n3,104
5,587
863
471
\n10,025
\n6,214
\nEurope
North
\nAmerica
\nRoW
\nEurope
North
\nAmerica
\nRoW
\n1,405
2,778
\n2022
10,397
\n5,985
1,310
2,730
\n10,025
\n2021
\nThe total number of employees as at 31 December 2022 was 10,028 (2021: 10,134).
\n3.3 Auditor's remuneration
\nThe total remuneration of the Group's auditor, Deloitte LLP, for services provided to the Group during the year ended
\n31 December, is analysed below:
\n2022
\n$m
\n2021
\n$m
\nFees for audit services
\nGroup
1.5
1.2
\nSubsidiaries
3.0
3.2
\nTotal fees for audit services
4.5
4.4
\nFees for non-audit services
\nAudit-related assurance services
0.2
0.2
\nOther assurance services
0.1
0.2
\nTotal auditor remuneration
4.8
4.8
\nA description of the work performed by the Audit and Risk Committee to safeguard auditor independence when non-audit
\nservices are provided is set out in the Audit and Risk Committee report on pages 126 to 138.
\nNotes to the Consolidated Financial Statements
continued
\nConvatec Group Plc Annual Report and Accounts 2022
178
\nFinancial statements
4. OTHER OPERATING EXPENSES
\nOther operating expenses were as follows:
\n2022
\n$m
\n2021
\n$m
\nExit and divestiture-related activities
12.4
\u2013
\nImpairment of other intangible assets
1.4
\u2013
\n13.8
\u2013
\nAs a result of the exit from hospital care and industrial sales-related activities and disposal of a foreign subsidiary,
\nimpairments of $8.1 million to property, plant and equipment and $4.3 million to intangible assets have been recognised
\nduring the period. See Note 27 \u2013 Divestitures for further details. The impairment of other intangible assets relates to a legacy
\nacquisition-related customer relationship asset which was impaired as part of the rationalisation of activities in the portfolio.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfOtherOperatingExpenseExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f24855": {
"value": "3.1 Operating profit Operating profit is stated after deducting from revenue:
\nNotes
\n2022
\n$m
\n2021
\n$m
\nDepreciation:
\nProperty, plant and equipment
8
39.7
40.6
\nRight-of-use assets
24
22.1
22.8
\nAmortisation of intangible assets
9
147.4
147.2
\nImpairment/write-off of intangible assets
9
6.3
2.9
\nImpairment/write-off of property, plant and equipment
8
9.2
3.0
\nLoss on terminated leases
24
0.1
\u2013
\nAmounts in respect of inventories included in cost of sales
818.3
766.7
\nWrite-down of inventories
\n1
\n22.6
6.4
\nLease expenses
\n2
\n24
3.9
2.8
\nStaff costs:
\nWages and salaries
532.7
533.4
\nShare-based payment expense
19
16.7
16.4
\nSocial security costs
67.5
64.2
\nDefined contribution plans post-employment costs
21.2
21.0
\nDefined benefit plans pension costs
15
1.7
3.6
\nRecruitment and other employment-related fees
8.7
11.5
\nTotal staff costs
648.5
650.1
\n1.
The write-down of inventories to their realisable value is included in cost of sales.
\n2.
Lease expenses comprises the costs in respect of low-value leases and short-term leases. Refer to accounting policy in Note 24 \u2013 Leases. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfProfitLossFromOperatingActivitiesExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f24951": {
"value": "3.2 Employee numbers The average number of the Group's employees
\nby function:
\nEmployees by function
\nThe average number of the Group's employees
\nby location:
\nEmployees by location
\n2021
\n3,258
5,749
\nOperations
Sales and
\nmarketing
\nGeneral and
\nadministrative
\nR&D
\nOperations
Sales and
\nmarketing
\nGeneral and
\nadministrative
\nR&D
\n861
529
\n2022
10,397
\n3,104
5,587
863
471
\n10,025
\n6,214
\nEurope
North
\nAmerica
\nRoW
\nEurope
North
\nAmerica
\nRoW
\n1,405
2,778
\n2022
10,397
\n5,985
1,310
2,730
\n10,025
\n2021
\nThe total number of employees as at 31 December 2022 was 10,028 (2021: 10,134).",
"dimensions": {
"concept": "ifrs-full:DisclosureOfInformationAboutEmployeesExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f25004": {
"value": "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
\n31 December, is analysed below:
\n2022
\n$m
\n2021
\n$m
\nFees for audit services
\nGroup
1.5
1.2
\nSubsidiaries
3.0
3.2
\nTotal fees for audit services
4.5
4.4
\nFees for non-audit services
\nAudit-related assurance services
0.2
0.2
\nOther assurance services
0.1
0.2
\nTotal auditor remuneration
4.8
4.8
\nA description of the work performed by the Audit and Risk Committee to safeguard auditor independence when non-audit
\nservices are provided is set out in the Audit and Risk Committee report on pages 126 to 138.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfAuditorsRemunerationExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f25052": {
"value": "4. OTHER OPERATING EXPENSES Other operating expenses were as follows:
\n2022
\n$m
\n2021
\n$m
\nExit and divestiture-related activities
12.4
\u2013
\nImpairment of other intangible assets
1.4
\u2013
\n13.8
\u2013
\nAs a result of the exit from hospital care and industrial sales-related activities and disposal of a foreign subsidiary,
\nimpairments of $8.1 million to property, plant and equipment and $4.3 million to intangible assets have been recognised
\nduring the period. See Note 27 \u2013 Divestitures for further details. The impairment of other intangible assets relates to a legacy
acquisition-related customer relationship asset which was impaired as part of the rationalisation of activities in the portfolio.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfOtherOperatingIncomeExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f25053": {
"value": "4. OTHER OPERATING EXPENSES Other operating expenses were as follows:
\n2022
\n$m
\n2021
\n$m
\nExit and divestiture-related activities
12.4
\u2013
\nImpairment of other intangible assets
1.4
\u2013
\n13.8
\u2013
\nAs a result of the exit from hospital care and industrial sales-related activities and disposal of a foreign subsidiary,
\nimpairments of $8.1 million to property, plant and equipment and $4.3 million to intangible assets have been recognised
\nduring the period. See Note 27 \u2013 Divestitures for further details. The impairment of other intangible assets relates to a legacy
acquisition-related customer relationship asset which was impaired as part of the rationalisation of activities in the portfolio. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfOtherOperatingIncomeExpenseExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f25077": {
"value": "5. NON-OPERATING (EXPENSE)/INCOME, NET Non-operating (expense)/income, net was as follows:
\nNotes
\n2022
\n$m
\n2021
\n$m
\nNet foreign exchange (loss)/gain
\n1
\n(13.5)
4.3
\nRealisation of cumulative translation adjustments
27
(12.2)
\u2013
\nGain/(loss) on foreign exchange forward contracts
23
15.8
(9.7)
\nLoss on foreign exchange cash flow hedges
23
(16.5)
(3.9)
\nChange in contingent consideration
\n2
\n26
(29.5)
\u2013
\n(Loss)/gain on divestiture
27
(2.0)
0.5
\nOther non-operating income
0.2
\u2013
\nNon-operating expense, net
\n3
\n(57.7)
(8.8)
\n1.
The foreign exchange losses in 2022 primarily relate to the foreign exchange impact on intercompany transactions, including loans transacted in non-functional
\ncurrencies. The Group uses foreign exchange forward contracts to manage these exposures in accordance with the Group's foreign exchange risk management policy.
\n2.
The $29.5 million expense relates to the change in fair value of the contingent consideration for the Cure Medical ($5.8 million) and Triad Life Sciences ($23.7 million)
\nacquisitions as described in Note 26 \u2013 Acquisitions.
\n3.
Of the total net non-operating expense, $1.7 million (2021: $4.3 million) relates to mark-to-market derivatives, the cash flow impact of which have been shown within
\nthe changes in working capital section of the Consolidated Statement of Cash Flows. ",
"dimensions": {
"concept": "ctec:DisclosureOfNonOperatingExpenseIncomeNetTextBlock",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f25144": {
"value": "6. INCOME TAXES The note below sets out the current and deferred tax charges, which together comprise the total tax expense in the
\nConsolidated Income Statement. The deferred tax section of the note also provides information on expected future tax
\ncharges or benefits and sets out the deferred tax assets and liabilities held across the Group.
\nAccounting policy
\nThe tax expense represents the sum of current and deferred tax.
\nCurrent tax
\nCurrent tax is the expected tax payable or receivable on the taxable profit or loss for the year, using tax rates enacted or
\nsubstantively enacted at the reporting date, and any adjustment to tax payable in respect of prior years. Taxable profit
\ndiffers from profit before income taxes because taxable profit excludes items that are either never taxable or tax
\ndeductible or items that are taxable or tax deductible in a different period.
\nDeferred tax
\nDeferred tax is recognised using the balance sheet liability method for temporary differences between the carrying
\namounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred
\ntax is not recognised for temporary differences:
\n\u2022
on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects
\nneither accounting nor taxable profit or loss;
\n\u2022
arising on the initial recognition of goodwill;
\n\u2022
on investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse
\nin the foreseeable future.
\nDeferred tax assets and liabilities are measured at the tax rates that are expected to apply to temporary differences when
\nthe asset is realised or the liability is settled, based on the laws that have been enacted or substantively enacted by the
\nreporting date.
\nDeferred tax assets are recognised for unused tax losses, tax credits and deductible temporary differences, to the extent
\nthat it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets
\nare reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit
\nwill be realised.
\nDeferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and
\nthey relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they
\nintend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.
\nCurrent tax and deferred tax for the year
\nCurrent tax and deferred tax are recognised in the Consolidated Income Statement, except when they relate to items that
\nare recognised in other comprehensive income or directly in equity, in which case, the current tax and deferred tax are also
\nrecognised in other comprehensive income or directly in equity, respectively. Where current tax or deferred tax arises from
\nthe initial accounting for a business combination, the tax effect is included in the accounting for the business combination.
\nTax provisions
\nThe Group is subject to income taxes in numerous tax jurisdictions. Judgement is sometimes required in determining the
\nworldwide provision for income taxes. There may be transactions for which the ultimate tax determination is uncertain and
\nmay be challenged by the tax authorities. The Group recognises liabilities for anticipated or actual tax audit issues based
\non estimates of whether additional taxes will be due. Where an outflow of funds to a tax authority is considered probable
\nand the Group can make a reliable estimate of the outcome of the issue, management calculates the provision for the best
\nestimate of the liability. In assessing its uncertain tax provisions, management takes into account the specific facts of each
\nissue, the likelihood of settlement and the input of professional advice where required. The Group assumes that where a
\ntax authority has a right to examine amounts reported to it, they will do so and will have full knowledge of all relevant
\ninformation. Where the ultimate liability as a result of an issue varies from the amounts provided, such differences could
\nimpact the current and deferred tax assets and liabilities in the period in which the dispute is concluded.
\nNotes to the Consolidated Financial Statements
continued
\nConvatec Group Plc Annual Report and Accounts 2022
180
\nFinancial statements
6.1 Taxation
\nThe Group's income tax expense is the sum of the total current and deferred tax expense.
\n2022
\n$m
\n2021
\n$m
\nCurrent tax
\nUK corporation tax
\u2013
0.8
\nOverseas taxation
46.8
46.8
\nAdjustment to prior years
(2.0)
(4.3)
\nTotal current tax expense
44.8
43.3
\nDeferred tax
\nOrigination and reversal of temporary differences
(3.7)
(6.5)
\nChange in tax rates
(3.2)
4.4
\nAdjustment to prior years
1.2
(0.7)
\nBenefit from previously unrecognised tax losses
(20.1)
(6.8)
\nTotal deferred tax benefit
(25.8)
(9.6)
\nIncome tax expense
19.0
33.7
\nIn 2022, the deferred tax movement included a benefit of $20.1 million in respect of the recognition of previously
\nunrecognised tax losses in the US following the acquisition of Triad Life Sciences.
\nIn 2021, the change in tax rates mainly relates to the revaluation of the net deferred tax liability in the UK following the
\nenactment of Finance Act 2021, which increases the UK corporation tax rate from 19.0% to 25.0% from 1 April 2023.
\nThe Group\u2019s deferred tax benefit in the year ended 31 December 2021 was mainly influenced by the deferred tax benefit of
\n$6.8 million for the recognition of deferred tax assets following the acquisition of Cure Medical LLC (Cure Medical) in respect
\nof previously unrecognised tax losses in the US.
\n6.2 Reconciliation of effective tax rate
\nThe effective tax rate for the year ended 31 December 2022 was 23.2%, as compared with 22.3% for the year ended
\n31 December 2021.
\nTax reconciliation to UK statutory rate
\nThe table below reconciles the Group\u2019s profit before income taxes at the UK statutory rate to the Group's total income
\ntax expense:
\n2022
\n$m
\n2021
\n$m
\nProfit before income taxes
81.9
151.3
\nProfit before income taxes multiplied by rate of corporation tax in the UK
\nof 19.0% (2021: 19.0%)
15.6
28.7
\nDifference between UK and overseas tax rates
\n1
\n3.0
4.0
\nDeferred tax impact for increase in UK tax rate
\u2013
4.8
\nNon-deductible/non-taxable items
14.4
1.3
\nMovement in unrecognised tax losses and other assets
1.0
(0.1)
\nRecognition of previously unrecognised US deferred tax assets
(20.1)
(6.8)
\nMovement in provision for uncertain tax positions
2.5
(0.3)
\nOther
\n2
\n2.6
2.1
\nIncome tax expense and effective tax rate
19.0
23.2%
33.7
22.3%
\n1.
This includes changes in tax rates based on substantively enacted legislation across various tax jurisdictions as of 31 December.
\n2.
Includes tax on amortisation of finite-lived intangibles and taxes on unremitted earnings.
\nThe Group\u2019s income tax expense includes a $20.1 million tax benefit due to the recognition of deferred tax assets following
\nthe acquisition of Triad Life Sciences in respect of previously unrecognised tax losses in the US and the $9.5 million effect of
\nnon-deductible contingent consideration on the acquisition of both Triad Life Sciences and Cure Medical. Refer to Note 26 \u2013
\nAcquisitions for the acquisition accounting of Triad Life Sciences.
\n181
Convatec Group Plc Annual Report and Accounts 2022
\nAdditional information
Governance
Strategic report
Overview
Financial statements
6. INCOME TAXES (CONTINUED)
\nThe Group has worldwide operations and therefore is subject to several factors that may affect future tax charges, principally
\nthe levels and mix of profitability in different tax jurisdictions, transfer pricing regulations, tax rates imposed and tax regime
\nreforms. The calculation of the Group\u2019s tax expense involves a degree of estimation and judgements in respect of certain
\nitems for which the tax treatment cannot be finally determined until resolution has been reached with the relevant tax
\nauthority, specifically in relation to open tax and transfer pricing matters. Due to the high volume of intercompany
\ntransactions, the Group\u2019s evolving business model and the increasing complexity in interaction between multiple tax
\nlaws and regulations, transfer pricing requires judgement in determining the appropriate allocation of profits between
\njurisdictions. The Group assessed the impact of ongoing changes to the Group\u2019s operating model, the supporting
\ndocumentation for the tax and transfer pricing positions, existing tax authority challenges, and the likelihood of new
\nchallenges by tax authorities. In line with the requirements of IFRIC 23,
Uncertainty over Income Tax Treatments
, the Group
\nhas provided for uncertain tax positions in respect of transfer pricing positions and withholding tax liabilities. The net
\nincrease in provisions during 2022 was driven by the reassessment of estimates, and settlement and expiry of open tax issues
\nin various jurisdictions. Where open issues exist, the ultimate liability for such matters may vary from the amounts provided
\nand is dependent upon the outcome of discussions with the relevant tax authorities or, where applicable, appeal
\nproceedings. Accordingly, settlement and expiry of open tax issues could have a significant impact on future tax expenses.
\nThe Group is monitoring tax reforms driven by the OECD\u2019s project to address the tax challenges arising from the digitalisation
\nof the economy, including Global Anti-Base Erosion Model Rules (Pillar Two). The Group has analysed the tax impact of the
\nproject to the Group based on OECD model rules issued on 20 December 2021 and draft legislations available in jurisdictions
\nin which the Group operates in, and expect the tax impact to be not material in the foreseeable future. The Group will
\nreassess the tax impact once new legislation becomes available. This has no impact on the Group\u2019s result for 2022.
\n6.3 Deferred tax
\nThe components of deferred tax assets and liabilities at 31 December are as follows:
\n2022
\n$m
\n2021
\n$m
\nDeferred tax assets
26.6
28.9
\nDeferred tax liabilities
(83.2)
(87.2)
\n(56.6)
(58.3)
\n6.4 Movement in deferred tax assets and liabilities
\nDeferred tax is measured on the basis of the tax rates enacted or substantively enacted at the reporting date. The movements
\nin the deferred tax assets and liabilities were as follows:
\nInventory
\n$m
\nTax losses
\n$m
\nPP&E
\n$m
\nIntangibles
\n$m
\nInterest
\n$m
\nOther
\n$m
\nTotal
\n$m
\nAt 1 January 2021
14.2
55.3
1.2
(175.3)
21.4
23.2
(60.0)
\nRecognised in Income
\nStatement
(5.8)
34.4
(12.5)
1.1
(4.0)
(3.6)
9.6
\nRecognised in other
\ncomprehensive income
\u2013
\u2013
\u2013
\u2013
(0.9)
0.1
(0.8)
\nAcquisitions
(0.2)
\u2013
(0.1)
(9.1)
\u2013
\u2013
(9.4)
\nOther
\u2013
\u2013
\u2013
\u2013
\u2013
0.5
0.5
\nForeign exchange
0.2
(0.2)
0.4
0.9
\u2013
0.5
1.8
\nAt 31 December 2021
8.4
89.5
(11.0)
(
182.4
)
16.5
20.7
(
58.3
)
\nRecognised in Income
\nStatement
(1.4)
(5.5)
5.9
(
1.7
)
8.5
20.0
25.8
\nRecognised in other
\ncomprehensive income
\u2013
\u2013
\u2013
\u2013
2.4
\u2013
2.4
\nAcquisitions
\n1
\n(2.4)
6.3
\u2013
(36.2
)
\u2013
\u2013
(32.3
)
\nOther
\u2013
\u2013
\u2013
\u2013
-
1.1
1.1
\nForeign exchange
(1.3)
(0.2)
1.6
2.7
1.0
0.9
4.7
\nAt 31 December 2022
3.3
90.1
(3.5)
(217.6
)
28.4
42.7
(56.6
)
\n1.
Refer to Note 26 \u2013 Acquisitions for the acquisition accounting of Triad Life Sciences.
\nNet deferred tax liabilities provided in relation to intangible assets are predominantly in respect of temporary differences
\narising on assets and liabilities acquired as part of business combinations. The net movement in deferred tax liability in
\nrespect of intangible assets in 2022 mainly relates to the acquisition of Triad Life Sciences. An amount relating to deductible
\ntax amortisation of intangible assets of $15.4 million that are not expected to reverse against taxable income in the future
\n(2021: $15.9 million) is not recognised.
\nNotes to the Consolidated Financial Statements
continued
\nConvatec Group Plc Annual Report and Accounts 2022
182
\nFinancial statements
The Group has a history of US tax losses and has recognised a deferred tax asset on US tax losses at 31 December 2022
\nonly to the extent that there are suitable offsetting taxable temporary differences. In 2022, there was an increase in suitable
\noffsetting taxable temporary differences in the US resulting in an additional amount of tax losses in the US being recognised
\nas a deferred tax asset. In particular, upon acquisition of Triad Life Sciences, a net deferred tax liability of $32.3 million was
\nrecognised on acquisition (principally in relation to intangible assets \u2013 refer to Note 26 \u2013 Acquisitions for further details). Some
\nof this can be offset by the Group\u2019s US tax losses and, therefore, the deferred tax recognition criteria were met, resulting in a
\ntax benefit of $20.1 million being recognised. Following the Triad Life Sciences acquisition, all Federal tax losses in the US were
\nrecognised as deferred tax assets. Deferred tax assets on temporary differences of $0.3 million, state tax losses of $2.3 million
\nand foreign tax credits of $3.9 million remain unrecognised in the US based on forecasts of future taxable profit where the
\nunderlying assumptions are consistent with the impairment and going concern forecasts.
\nDeferred tax on inventory predominantly relates to a deferred tax asset recognised on intra-Group profits arising on
\nintercompany inventory that are eliminated in the Consolidated Financial Statements. As intra-Group profits are not eliminated
\nfrom the individual entities\u2019 tax returns, a temporary difference arises that will reverse when the inventory is sold externally.
\nOther net temporary differences include accrued expenses, employee costs, and pensions, for which a tax deduction is only
\navailable on a paid basis, research and development expenses, unremitted earnings and share-based payments.
\nTo the extent that dividends remitted from overseas subsidiaries and branches are expected to result in additional taxes,
\nappropriate amounts have been provided for. Deferred tax is not provided on temporary differences of $351.8 million in the
\nyear to 31 December 2022 (2021: $369.1 million) arising on unremitted earnings as management has the ability to control any
\nfuture reversal and does not consider such a reversal in the foreseeable future to be probable.
\n6.5 Unrecognised tax losses carried forward
\nDeferred tax assets are only recognised where it is probable that future taxable profits will be available to utilise the tax
\nlosses. The following table shows the unrecognised tax losses carried forward, including anticipated period of expiration:
\nTrading and capital losses expiring:
\n2022
\nLosses
\n$m
\n2021
\nLosses
\n$m
\nWithin 5 years
10.0
15.3
\nBetween 5 to 10 years
12.7
88.3
\nMore than 10 years
30.7
75.0
\nUnlimited
958.0
661.6
\nTotal
1,011.4
840.2
\nThe Group also has unrecognised tax credits, in respect of non-US tax payments of $3.9 million (2021: $4.0 million) in the US,
\nwhich are due to expire within five years.
\nThe unrecognised tax losses of $1,011.4 million reflects judgements and estimates considered in the provision for uncertain tax
\npositions, in line with the requirements of IFRIC 23,
Uncertainty over Income Tax Treatments
. The Group has Luxembourg tax
\nlosses of $941.9 million (2021: $638.4 million) which are not recognised and will not expire. The movement in Luxembourg tax
\nlosses not recognised is mainly attributable to foreign exchange differences and the reassessment during the year of
\nutilisation of losses in a prior year following an internal corporate reorganisation. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfIncomeTaxExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f25150": {
"value": "Accounting policy The tax expense represents the sum of current and deferred tax.
\nCurrent tax
\nCurrent tax is the expected tax payable or receivable on the taxable profit or loss for the year, using tax rates enacted or
\nsubstantively enacted at the reporting date, and any adjustment to tax payable in respect of prior years. Taxable profit
\ndiffers from profit before income taxes because taxable profit excludes items that are either never taxable or tax
\ndeductible or items that are taxable or tax deductible in a different period.
\nDeferred tax
\nDeferred tax is recognised using the balance sheet liability method for temporary differences between the carrying
\namounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred
\ntax is not recognised for temporary differences:
\n\u2022
on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects
\nneither accounting nor taxable profit or loss;
\n\u2022
arising on the initial recognition of goodwill;
\n\u2022
on investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse
\nin the foreseeable future.
\nDeferred tax assets and liabilities are measured at the tax rates that are expected to apply to temporary differences when
\nthe asset is realised or the liability is settled, based on the laws that have been enacted or substantively enacted by the
\nreporting date.
\nDeferred tax assets are recognised for unused tax losses, tax credits and deductible temporary differences, to the extent
\nthat it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets
\nare reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit
\nwill be realised.
\nDeferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and
\nthey relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they
\nintend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.
\nCurrent tax and deferred tax for the year
\nCurrent tax and deferred tax are recognised in the Consolidated Income Statement, except when they relate to items that
\nare recognised in other comprehensive income or directly in equity, in which case, the current tax and deferred tax are also
\nrecognised in other comprehensive income or directly in equity, respectively. Where current tax or deferred tax arises from
\nthe initial accounting for a business combination, the tax effect is included in the accounting for the business combination.
\nTax provisions
\nThe Group is subject to income taxes in numerous tax jurisdictions. Judgement is sometimes required in determining the
\nworldwide provision for income taxes. There may be transactions for which the ultimate tax determination is uncertain and
\nmay be challenged by the tax authorities. The Group recognises liabilities for anticipated or actual tax audit issues based
\non estimates of whether additional taxes will be due. Where an outflow of funds to a tax authority is considered probable
\nand the Group can make a reliable estimate of the outcome of the issue, management calculates the provision for the best
\nestimate of the liability. In assessing its uncertain tax provisions, management takes into account the specific facts of each
\nissue, the likelihood of settlement and the input of professional advice where required. The Group assumes that where a
\ntax authority has a right to examine amounts reported to it, they will do so and will have full knowledge of all relevant
\ninformation. Where the ultimate liability as a result of an issue varies from the amounts provided, such differences could
\nimpact the current and deferred tax assets and liabilities in the period in which the dispute is concluded.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForIncomeTaxExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f25160": {
"value": "Deferred tax Deferred tax is recognised using the balance sheet liability method for temporary differences between the carrying
\namounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred
\ntax is not recognised for temporary differences:
\n\u2022
on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects
\nneither accounting nor taxable profit or loss;
\n\u2022
arising on the initial recognition of goodwill;
\n\u2022
on investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse
\nin the foreseeable future.
\nDeferred tax assets and liabilities are measured at the tax rates that are expected to apply to temporary differences when
\nthe asset is realised or the liability is settled, based on the laws that have been enacted or substantively enacted by the
\nreporting date.
\nDeferred tax assets are recognised for unused tax losses, tax credits and deductible temporary differences, to the extent
\nthat it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets
\nare reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit
\nwill be realised.
\nDeferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and
\nthey relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they
\nintend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.
\nCurrent tax and deferred tax for the year
\nCurrent tax and deferred tax are recognised in the Consolidated Income Statement, except when they relate to items that
\nare recognised in other comprehensive income or directly in equity, in which case, the current tax and deferred tax are also
\nrecognised in other comprehensive income or directly in equity, respectively. Where current tax or deferred tax arises from
\nthe initial accounting for a business combination, the tax effect is included in the accounting for the business combination.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForDeferredIncomeTaxExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f25357": {
"value": "6.3 Deferred tax The components of deferred tax assets and liabilities at 31 December are as follows:
\n2022
\n$m
\n2021
\n$m
\nDeferred tax assets
26.6
28.9
\nDeferred tax liabilities
(83.2)
(87.2)
\n(56.6)
(58.3)
\n6.4 Movement in deferred tax assets and liabilities
\nDeferred tax is measured on the basis of the tax rates enacted or substantively enacted at the reporting date. The movements
\nin the deferred tax assets and liabilities were as follows:
\nInventory
\n$m
\nTax losses
\n$m
\nPP&E
\n$m
\nIntangibles
\n$m
\nInterest
\n$m
\nOther
\n$m
\nTotal
\n$m
\nAt 1 January 2021
14.2
55.3
1.2
(175.3)
21.4
23.2
(60.0)
\nRecognised in Income
\nStatement
(5.8)
34.4
(12.5)
1.1
(4.0)
(3.6)
9.6
\nRecognised in other
\ncomprehensive income
\u2013
\u2013
\u2013
\u2013
(0.9)
0.1
(0.8)
\nAcquisitions
(0.2)
\u2013
(0.1)
(9.1)
\u2013
\u2013
(9.4)
\nOther
\u2013
\u2013
\u2013
\u2013
\u2013
0.5
0.5
\nForeign exchange
0.2
(0.2)
0.4
0.9
\u2013
0.5
1.8
\nAt 31 December 2021
8.4
89.5
(11.0)
(
182.4
)
16.5
20.7
(
58.3
)
\nRecognised in Income
\nStatement
(1.4)
(5.5)
5.9
(
1.7
)
8.5
20.0
25.8
\nRecognised in other
\ncomprehensive income
\u2013
\u2013
\u2013
\u2013
2.4
\u2013
2.4
\nAcquisitions
\n1
\n(2.4)
6.3
\u2013
(36.2
)
\u2013
\u2013
(32.3
)
\nOther
\u2013
\u2013
\u2013
\u2013
-
1.1
1.1
\nForeign exchange
(1.3)
(0.2)
1.6
2.7
1.0
0.9
4.7
\nAt 31 December 2022
3.3
90.1
(3.5)
(217.6
)
28.4
42.7
(56.6
)
\n1.
Refer to Note 26 \u2013 Acquisitions for the acquisition accounting of Triad Life Sciences.
\nNet deferred tax liabilities provided in relation to intangible assets are predominantly in respect of temporary differences
\narising on assets and liabilities acquired as part of business combinations. The net movement in deferred tax liability in
\nrespect of intangible assets in 2022 mainly relates to the acquisition of Triad Life Sciences. An amount relating to deductible
\ntax amortisation of intangible assets of $15.4 million that are not expected to reverse against taxable income in the future
\n(2021: $15.9 million) is not recognised.
\nNotes to the Consolidated Financial Statements
continued
\nConvatec Group Plc Annual Report and Accounts 2022
182
\nFinancial statements
The Group has a history of US tax losses and has recognised a deferred tax asset on US tax losses at 31 December 2022
\nonly to the extent that there are suitable offsetting taxable temporary differences. In 2022, there was an increase in suitable
\noffsetting taxable temporary differences in the US resulting in an additional amount of tax losses in the US being recognised
\nas a deferred tax asset. In particular, upon acquisition of Triad Life Sciences, a net deferred tax liability of $32.3 million was
\nrecognised on acquisition (principally in relation to intangible assets \u2013 refer to Note 26 \u2013 Acquisitions for further details). Some
\nof this can be offset by the Group\u2019s US tax losses and, therefore, the deferred tax recognition criteria were met, resulting in a
\ntax benefit of $20.1 million being recognised. Following the Triad Life Sciences acquisition, all Federal tax losses in the US were
\nrecognised as deferred tax assets. Deferred tax assets on temporary differences of $0.3 million, state tax losses of $2.3 million
\nand foreign tax credits of $3.9 million remain unrecognised in the US based on forecasts of future taxable profit where the
\nunderlying assumptions are consistent with the impairment and going concern forecasts.
\nDeferred tax on inventory predominantly relates to a deferred tax asset recognised on intra-Group profits arising on
\nintercompany inventory that are eliminated in the Consolidated Financial Statements. As intra-Group profits are not eliminated
\nfrom the individual entities\u2019 tax returns, a temporary difference arises that will reverse when the inventory is sold externally.
\nOther net temporary differences include accrued expenses, employee costs, and pensions, for which a tax deduction is only
\navailable on a paid basis, research and development expenses, unremitted earnings and share-based payments.
\nTo the extent that dividends remitted from overseas subsidiaries and branches are expected to result in additional taxes,
\nappropriate amounts have been provided for. Deferred tax is not provided on temporary differences of $351.8 million in the
\nyear to 31 December 2022 (2021: $369.1 million) arising on unremitted earnings as management has the ability to control any
\nfuture reversal and does not consider such a reversal in the foreseeable future to be probable. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfDeferredTaxesExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f25589": {
"value": "7. EARNINGS PER SHARE Basic earnings per share is calculated based on the Group\u2019s net profit for the year attributable to shareholders divided by
\nthe weighted average number of ordinary shares in issue during the year. The weighted average number of shares is net of
\nshares purchased by the Group and held as own shares.
\nDiluted earnings per share take into account the dilutive effect of all outstanding share options priced below the market
\nprice in arriving at the number of shares used in its calculation.
\n2022
2021
\nNet profit attributable to the shareholders of the Group ($m)
62.9
117.6
\nBasic weighted average ordinary shares in issue (number)
2,023,839,657
2,008,923,797
\nDilutive impact of share awards (number)
16,407,811
17,416,548
\nDiluted weighted average ordinary shares in issue (number)
2,040,247,468
2,026,340,345
\nBasic earnings per share (cents per share)
3.1\u00a2 per share
5.9\u00a2 per share
\nDiluted earnings per share (cents per share)
3.1\u00a2 per share
5.8\u00a2 per share
\nThe calculation of diluted earnings per share excludes 404,241 (2021: 1,878,714) share options that were non-dilutive for the
\nyear because the exercise price exceeded the average market price of the Group's ordinary shares during the year. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfEarningsPerShareExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f25640": {
"value": "8. PROPERTY, PLANT AND EQUIPMENT The Group invests in buildings, equipment and manufacturing machinery to operate the business and to generate revenue
\nand profits. Assets are depreciated over their estimated useful economic life reflecting the reduction in value of the asset due,
\nin particular, to wear and tear.
\nAccounting policy
\nProperty, plant and equipment (PP&E) are stated at cost less accumulated depreciation and impairment losses. Cost
\nincludes expenditures that are directly attributable to the acquisition of an asset including subsequent additions and
\nimprovements when it is probable that future economic benefit associated with the item will flow to the Group and the
\ncost can be reliably measured.
\nDepreciation is provided on a straight-line basis from the point an asset becomes available for use. Depreciation is
\ncalculated to reduce the asset\u2019s cost to its residual value over the asset\u2019s estimated useful economic life. Assets are
\ndepreciated as follows:
\nAsset category
Useful life
\nLand
not depreciated
\nLand improvements
15 to 40 years
\nLeasehold improvements
shorter of useful life or lease tenure
\nBuildings
15 to 50 years
\nMachinery, equipment and fixtures
3 to 20 years
\nThe gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sale
\nproceeds, less any selling expenses, and the carrying amount of the asset. This difference is recognised in the Consolidated
\nIncome Statement.
\nAssets under construction reflects the cost of construction or improvement of items of PP&E that are not yet available for
\nuse. Finance costs incurred in the construction of assets that take more than one year to complete are capitalised using
\nthe Group\u2019s weighted average borrowing cost during the period in which the asset is under construction. Capitalisation of
\nfinance costs ceases when the asset becomes available for use.
\nConsideration of useful economic lives
\nThe assets\u2019 residual values, depreciation methods and useful economic lives are reviewed annually and adjusted if appropriate.
\nImpairment of assets
\nThe carrying values of PP&E are reviewed for indicators of impairment annually or when events or changes in
\ncircumstances indicate the carrying value may be impaired. If any such indication exists, the recoverable amount of the
\nasset is estimated, being the higher of an asset\u2019s fair value less costs to sell and the net present value of its expected pre-
\ntax future cash flows (value in use).
\nWhen an asset\u2019s recoverable amount falls below its carrying value, an impairment is charged to the Consolidated
\nIncome Statement.
\nNotes to the Consolidated Financial Statements
continued
\nConvatec Group Plc Annual Report and Accounts 2022
184
\nFinancial statements
The movement in the carrying value of each major category of PP&E is as follows:
\nLand & land
\nimprovements
\n$m
\nBuilding, building
\nequipment and
\nleasehold
\nimprovements
\n$m
\nMachinery,
\nequipment and
\nfixtures
\n$m
\nAssets under
\nconstruction
\n$m
\nTotal
\n$m
\nCost
\n1 January 2021
15.8
129.4
483.4
77.2
705.8
\nAdditions
\u2013
1.5
3.6
65.7
70.8
\nDisposals
\n1
\n\u2013
(4.0)
(12.0)
(0.3)
(16.3)
\nTransfers
\u2013
6.0
34.3
(40.3)
\u2013
\nForeign exchange
(0.5)
(3.0)
(18.6)
(3.8)
(25.9)
\n31 December 2021
15.3
129.9
490.7
98.5
734.4
\nAdditions
\u2013
1.8
8.2
90.0
100.0
\nArising from acquisitions (Note 26)
\u2013
0.5
0.3
\u2013
0.8
\nDisposals
\n1
\n\u2013
(4.0)
(17.5)
(1.8)
(23.3)
\nTransfers
\u2013
13.7
24.7
(38.4)
\u2013
\nForeign exchange
(1.1)
(6.7)
(25.2)
(4.6)
(37.6)
\n31 December 2022
14.2
135.2
481.2
143.7
774.3
\nAccumulated depreciation
\n1 January 2021
0.9
50.5
302.2
\u2013
353.6
\nDepreciation
0.1
6.1
34.4
\u2013
40.6
\nDisposals
\u2013
(3.3)
(11.0)
\u2013
(14.3)
\nImpairment
\u2013
1.0
\u2013
\u2013
1.0
\nForeign exchange
\u2013
(1.2)
(12.0)
\u2013
(13.2)
\n31 December 2021
1.0
53.1
313.6
\u2013
367.7
\nDepreciation
\u2013
6.8
32.9
\u2013
39.7
\nArising from acquisitions (Note 26)
\u2013
0.2
0.1
\u2013
0.3
\nDisposals
\u2013
(4.0)
(17.5)
\u2013
(21.5)
\nImpairment
\u2013
1.9
5.5
\u2013
7.4
\nForeign exchange
\u2013
(2.7)
(17.0)
\u2013
(19.7)
\n31 December 2022
1.0
55.3
317.6
\u2013
373.9
\nNet carrying amount
\n31 December 2021
14.3
76.8
177.1
98.5
366.7
\n31 December 2022
13.2
79.9
163.6
143.7
400.4
\n1.
Included within disposals costs were asset write-offs of $1.8 million (2021: $2.0 million). ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfPropertyPlantAndEquipmentExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f25646": {
"value": "Accounting policy Property, plant and equipment (PP&E) are stated at cost less accumulated depreciation and impairment losses. Cost
\nincludes expenditures that are directly attributable to the acquisition of an asset including subsequent additions and
\nimprovements when it is probable that future economic benefit associated with the item will flow to the Group and the
\ncost can be reliably measured.
\nDepreciation is provided on a straight-line basis from the point an asset becomes available for use. Depreciation is
\ncalculated to reduce the asset\u2019s cost to its residual value over the asset\u2019s estimated useful economic life. Assets are
\ndepreciated as follows:
\nAsset category
Useful life
\nLand
not depreciated
\nLand improvements
15 to 40 years
\nLeasehold improvements
shorter of useful life or lease tenure
\nBuildings
15 to 50 years
\nMachinery, equipment and fixtures
3 to 20 years
\nThe gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sale
\nproceeds, less any selling expenses, and the carrying amount of the asset. This difference is recognised in the Consolidated
\nIncome Statement.
\nAssets under construction reflects the cost of construction or improvement of items of PP&E that are not yet available for
\nuse. Finance costs incurred in the construction of assets that take more than one year to complete are capitalised using
\nthe Group\u2019s weighted average borrowing cost during the period in which the asset is under construction. Capitalisation of
\nfinance costs ceases when the asset becomes available for use.
\nConsideration of useful economic lives
\nThe assets\u2019 residual values, depreciation methods and useful economic lives are reviewed annually and adjusted if appropriate.
\nImpairment of assets
\nThe carrying values of PP&E are reviewed for indicators of impairment annually or when events or changes in
\ncircumstances indicate the carrying value may be impaired. If any such indication exists, the recoverable amount of the
\nasset is estimated, being the higher of an asset\u2019s fair value less costs to sell and the net present value of its expected pre-
\ntax future cash flows (value in use).
\nWhen an asset\u2019s recoverable amount falls below its carrying value, an impairment is charged to the Consolidated
\nIncome Statement.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForPropertyPlantAndEquipmentExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f25649": {
"value": "Property, plant and equipment (PP&E) are stated at cost less accumulated depreciation and impairment losses. Cost
\nincludes expenditures that are directly attributable to the acquisition of an asset including subsequent additions and
\nimprovements when it is probable that future economic benefit associated with the item will flow to the Group and the
\ncost can be reliably measured.
\nDepreciation is provided on a straight-line basis from the point an asset becomes available for use. Depreciation is
\ncalculated to reduce the asset\u2019s cost to its residual value over the asset\u2019s estimated useful economic life. Assets are
\ndepreciated as follows:
\nAsset category
Useful life
\nLand
not depreciated
\nLand improvements
15 to 40 years
\nLeasehold improvements
shorter of useful life or lease tenure
\nBuildings
15 to 50 years
\nMachinery, equipment and fixtures
3 to 20 years
Amortisation
\nIntangible assets with an indefinite life are not amortised. Amortisation of intangible assets with a finite life is calculated
\nusing the straight-line method based on the following estimated useful lives:
\nAsset category
Useful life
\nProduct-related
3 to 20 years
\nCapitalised software
3 to 10 years
\nCustomer relationships and non-compete agreements
2 to 20 years
\nTrade names \u2013 finite
2 to 10 years
\nTrade names \u2013 indefinite
indefinite
\nDevelopment costs
5 years
\nAssets under construction reflects the cost of development or improvement of intangible assets that are not yet available
\nfor use.
",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForDepreciationExpenseExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f25702": {
"value": "The movement in the carrying value of each major category of PP&E is as follows:
\nLand & land
\nimprovements
\n$m
\nBuilding, building
\nequipment and
\nleasehold
\nimprovements
\n$m
\nMachinery,
\nequipment and
\nfixtures
\n$m
\nAssets under
\nconstruction
\n$m
\nTotal
\n$m
\nCost
\n1 January 2021
15.8
129.4
483.4
77.2
705.8
\nAdditions
\u2013
1.5
3.6
65.7
70.8
\nDisposals
\n1
\n\u2013
(4.0)
(12.0)
(0.3)
(16.3)
\nTransfers
\u2013
6.0
34.3
(40.3)
\u2013
\nForeign exchange
(0.5)
(3.0)
(18.6)
(3.8)
(25.9)
\n31 December 2021
15.3
129.9
490.7
98.5
734.4
\nAdditions
\u2013
1.8
8.2
90.0
100.0
\nArising from acquisitions (Note 26)
\u2013
0.5
0.3
\u2013
0.8
\nDisposals
\n1
\n\u2013
(4.0)
(17.5)
(1.8)
(23.3)
\nTransfers
\u2013
13.7
24.7
(38.4)
\u2013
\nForeign exchange
(1.1)
(6.7)
(25.2)
(4.6)
(37.6)
\n31 December 2022
14.2
135.2
481.2
143.7
774.3
\nAccumulated depreciation
\n1 January 2021
0.9
50.5
302.2
\u2013
353.6
\nDepreciation
0.1
6.1
34.4
\u2013
40.6
\nDisposals
\u2013
(3.3)
(11.0)
\u2013
(14.3)
\nImpairment
\u2013
1.0
\u2013
\u2013
1.0
\nForeign exchange
\u2013
(1.2)
(12.0)
\u2013
(13.2)
\n31 December 2021
1.0
53.1
313.6
\u2013
367.7
\nDepreciation
\u2013
6.8
32.9
\u2013
39.7
\nArising from acquisitions (Note 26)
\u2013
0.2
0.1
\u2013
0.3
\nDisposals
\u2013
(4.0)
(17.5)
\u2013
(21.5)
\nImpairment
\u2013
1.9
5.5
\u2013
7.4
\nForeign exchange
\u2013
(2.7)
(17.0)
\u2013
(19.7)
\n31 December 2022
1.0
55.3
317.6
\u2013
373.9
\nNet carrying amount
\n31 December 2021
14.3
76.8
177.1
98.5
366.7
\n31 December 2022
13.2
79.9
163.6
143.7
400.4
The movement in the carrying value of each major category of intangible assets is as follows:
\nProduct-
\nrelated
\n$m
\nCapitalised
\nsoftware
\n1
\n$m
\nCustomer
\nrelationships
\nand non-
\ncompete
\nagreements
\n$m
\nTrade names
\n$m
\nDevelopment
\ncost
\n$m
\nAssets under
\nconstruction
\n$m
\nTotal
\n$m
\nCost
\n1 January 2021
2,101.2
128.6
305.5
260.2
12.5
8.2
2,816.2
\nAdditions
\u2013
2.2
\u2013
\u2013
\u2013
20.6
22.8
\nArising from acquisitions
\n2
\n4.9
\u2013
33.2
4.6
\u2013
\u2013
42.7
\nWrite-offs
(7.1)
(21.6)
(0.7)
\u2013
\u2013
(0.4)
(29.8)
\nTransfers
\u2013
13.3
\u2013
\u2013
\u2013
(13.3)
\u2013
\nForeign exchange
(12.9)
(0.3)
(7.0)
(1.1)
(0.9)
(0.3)
(22.5)
\n31 December 2021
2,086.1
122.2
331.0
263.7
11.6
14.8
2,829.4
\nAdditions
10.0
0.6
\u2013
\u2013
\u2013
34.0
44.6
\nArising from acquisitions
\n2
\n154.8
\u2013
\u2013
\u2013
\u2013
\u2013
154.8
\nWrite-offs
(50.7)
(1.8)
(0.3)
\u2013
\u2013
(0.6)
(53.4)
\nTransfers
\u2013
11.8
\u2013
\u2013
\u2013
(11.8)
\u2013
\nForeign exchange
(79.7)
(2.4)
(6.3)
(0.9)
(0.6)
(0.9)
(90.8)
\n31 December 2022
2,120.5
130.4
324.4
262.8
11.0
35.5
2,884.6
\nAccumulated amortisation
\n1 January 2021
1,530.9
90.4
185.8
7.7
9.0
\u2013
1,823.8
\nAmortisation
107.1
12.3
24.5
1.9
1.4
\u2013
147.2
\nWrite-offs
(7.1)
(21.6)
(0.7)
\u2013
\u2013
\u2013
(29.4)
\nImpairment
\u2013
2.5
\u2013
\u2013
\u2013
\u2013
2.5
\nForeign exchange
(10.1)
(0.1)
(6.1)
0.1
(0.7)
\u2013
(16.9)
\n31 December 2021
1,620.8
83.5
203.5
9.7
9.7
\u2013
1,927.2
\nAmortisation
108.6
12.0
24.3
1.4
1.1
\u2013
147.4
\nWrite-offs
(50.7)
(1.8)
(0.3)
\u2013
\u2013
\u2013
(52.8)
\nImpairment
4.3
\u2013
1.4
\u2013
\u2013
\u2013
5.7
\nForeign exchange
(61.0)
(0.9)
(5.4)
\u2013
(0.5)
\u2013
(67.8)
\n31 December 2022
1,622.0
92.8
223.5
11.1
10.3
\u2013
1,959.7
\nNet carrying amount
\n31 December 2021
465.3
38.7
127.5
254.0
1.9
14.8
902.2
\n31 December 2022
498.5
37.6
100.9
251.7
0.7
35.5
924.9
",
"dimensions": {
"concept": "ifrs-full:DisclosureOfDepreciationAndAmortisationExpenseExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f25902": {
"value": "9. INTANGIBLE ASSETS AND GOODWILL The split of intangible assets and goodwill is as follows:
\nNotes
\n2022
\n$m
\n2021
\n$m
\nIntangible assets
9.1
924.9
902.2
\nGoodwill
9.2
1,224.6
1,156.3
\nIntangible assets and goodwill
2,149.5
2,058.5
\n9.1 Intangible assets
\nThe Group\u2019s intangible assets are those that have been recognised at fair value as part of business combinations, investment
\nin product development and software purchased to support business operations. These are assets that are not physical in
\nnature but can be sold separately or arise from legal rights.
\nAccounting policy
\nRecognition
\nMeasurement on initial recognition of intangible assets is determined at cost for assets acquired by the Group and at fair
\nvalue at the date of acquisition if acquired in business combinations. Following initial recognition of the intangible asset,
\nthe asset is carried at cost less any subsequent accumulated amortisation and accumulated impairment losses.
\nPurchased computer software and certain costs of information technology are capitalised as intangible assets. Software
\nthat is integral to purchased computer hardware is capitalised as PP&E.
\nR&D
\nR&D expenses are comprised of all activities involving investigative, technical and regulatory processes related to
\nobtaining appropriate approvals to market our products. It also includes new product development aimed at developing
\nmore sustainable product portfolios for the longer term, as mentioned within the Responsible Business review section
\n(refer to page 51). Costs include payroll, clinical manufacturing and pre-launch clinical trial costs, manufacturing
\ndevelopment and scale-up costs, product development, regulatory costs including costs incurred to comply with
\nlegislative changes, contract services and other external contractors\u2019 costs, research licence fees, depreciation and
\namortisation of laboratory facilities, and laboratory supplies.
\nResearch costs are expensed as incurred. Development costs are capitalised only if the expenditure can be measured
\nreliably, the product or process is technically and commercially feasible, future economic benefits are probable and the
\nGroup intends to and has sufficient resources to complete development and use or sell the asset. Subsequent to initial
\nrecognition, development costs are measured at cost less accumulated amortisation and any accumulated impairment
\nlosses. Upgrades and enhancements are capitalised to the extent they will result in added functionality and probable
\nfuture economic benefits.
\nAmortisation
\nIntangible assets with an indefinite life are not amortised. Amortisation of intangible assets with a finite life is calculated
\nusing the straight-line method based on the following estimated useful lives:
\nAsset category
Useful life
\nProduct-related
3 to 20 years
\nCapitalised software
3 to 10 years
\nCustomer relationships and non-compete agreements
2 to 20 years
\nTrade names \u2013 finite
2 to 10 years
\nTrade names \u2013 indefinite
indefinite
\nDevelopment costs
5 years
\nAssets under construction reflects the cost of development or improvement of intangible assets that are not yet available
\nfor use.
\nImpairment of assets
\nIntangible assets with finite life are reviewed for indicators of impairment at each reporting period or when events or
\nchanges in circumstances indicate the carrying value may be impaired. If any such indication exists, the recoverable
\namount of the asset is estimated, being the higher of an asset\u2019s fair value less costs to sell and the net present value of its
\nexpected pre-tax future cash flows (value in use).
\nWhen an asset\u2019s recoverable amount falls below its carrying value, an impairment is charged to the Consolidated
\nIncome Statement.
\nRefer to Note 9.3 \u2013 CGU impairment review for consideration of impairment of indefinite-lived intangible assets.
\nNotes to the Consolidated Financial Statements
continued
\nConvatec Group Plc Annual Report and Accounts 2022
186
\nFinancial statements
The movement in the carrying value of each major category of intangible assets is as follows:
\nProduct-
\nrelated
\n$m
\nCapitalised
\nsoftware
\n1
\n$m
\nCustomer
\nrelationships
\nand non-
\ncompete
\nagreements
\n$m
\nTrade names
\n$m
\nDevelopment
\ncost
\n$m
\nAssets under
\nconstruction
\n$m
\nTotal
\n$m
\nCost
\n1 January 2021
2,101.2
128.6
305.5
260.2
12.5
8.2
2,816.2
\nAdditions
\u2013
2.2
\u2013
\u2013
\u2013
20.6
22.8
\nArising from acquisitions
\n2
\n4.9
\u2013
33.2
4.6
\u2013
\u2013
42.7
\nWrite-offs
(7.1)
(21.6)
(0.7)
\u2013
\u2013
(0.4)
(29.8)
\nTransfers
\u2013
13.3
\u2013
\u2013
\u2013
(13.3)
\u2013
\nForeign exchange
(12.9)
(0.3)
(7.0)
(1.1)
(0.9)
(0.3)
(22.5)
\n31 December 2021
2,086.1
122.2
331.0
263.7
11.6
14.8
2,829.4
\nAdditions
10.0
0.6
\u2013
\u2013
\u2013
34.0
44.6
\nArising from acquisitions
\n2
\n154.8
\u2013
\u2013
\u2013
\u2013
\u2013
154.8
\nWrite-offs
(50.7)
(1.8)
(0.3)
\u2013
\u2013
(0.6)
(53.4)
\nTransfers
\u2013
11.8
\u2013
\u2013
\u2013
(11.8)
\u2013
\nForeign exchange
(79.7)
(2.4)
(6.3)
(0.9)
(0.6)
(0.9)
(90.8)
\n31 December 2022
2,120.5
130.4
324.4
262.8
11.0
35.5
2,884.6
\nAccumulated amortisation
\n1 January 2021
1,530.9
90.4
185.8
7.7
9.0
\u2013
1,823.8
\nAmortisation
107.1
12.3
24.5
1.9
1.4
\u2013
147.2
\nWrite-offs
(7.1)
(21.6)
(0.7)
\u2013
\u2013
\u2013
(29.4)
\nImpairment
\u2013
2.5
\u2013
\u2013
\u2013
\u2013
2.5
\nForeign exchange
(10.1)
(0.1)
(6.1)
0.1
(0.7)
\u2013
(16.9)
\n31 December 2021
1,620.8
83.5
203.5
9.7
9.7
\u2013
1,927.2
\nAmortisation
108.6
12.0
24.3
1.4
1.1
\u2013
147.4
\nWrite-offs
(50.7)
(1.8)
(0.3)
\u2013
\u2013
\u2013
(52.8)
\nImpairment
4.3
\u2013
1.4
\u2013
\u2013
\u2013
5.7
\nForeign exchange
(61.0)
(0.9)
(5.4)
\u2013
(0.5)
\u2013
(67.8)
\n31 December 2022
1,622.0
92.8
223.5
11.1
10.3
\u2013
1,959.7
\nNet carrying amount
\n31 December 2021
465.3
38.7
127.5
254.0
1.9
14.8
902.2
\n31 December 2022
498.5
37.6
100.9
251.7
0.7
35.5
924.9
\n1.
Capitalised software is in respect of purchased and internally generated software.
\n2.
Acquisitions comprise assets in relation to the Triad Life Sciences acquisition. See Note 26 \u2013 Acquisitions. In the year ended 31 December 2021, acquisitions comprise
\nof Cure Medical and Patient Care Medical.
\n187
Convatec Group Plc Annual Report and Accounts 2022
\nAdditional information
Governance
Strategic report
Overview
Financial statements
9. INTANGIBLE ASSETS AND GOODWILL (CONTINUED)
\nAmortisation expenses in respect of finite-lived intangible assets for the year ended 31 December were as follows:
\n2022
\n$m
\n2021
\n$m
\nCost of sales
113.1
110.7
\nSelling and distribution expenses
3.2
2.0
\nGeneral and administrative expenses
29.1
32.5
\nResearch and development expenses
2.0
2.0
\nTotal amortisation expense
147.4
147.2
\nThe carrying amount of trade names with indefinite life at 31 December 2022 was $248.9 million (2021: $249.8 million). Each of
\nthese trade names are considered to have an indefinite life, given the strength and durability of the current trade name and
\nthe level of marketing support. The trade names are in relatively similar stable and profitable market sectors, with similar risk
\nprofiles, and their size, diversification and market shares mean that the risk of market-related factors causing a reduction in
\nthe lives of the trade names is considered to be relatively low. The Group is not aware of any material legal, regulatory,
\ncontractual, competitive, economic or other factor which could limit their useful lives.
\nIndividual intangible assets with a carrying amount in excess of 10% of the total intangible asset carrying amount were as follows:
\n2022
\n$m
\n2021
\n$m Remaining life
\nTrade names
\nConvatec trade name
234.6
234.6
Indefinite
\nProduct-related
\nInnovaMatrix
\n\u00ae
\n145.6
\u2013
13.3 years
\nAquacel
\n\u00ae
\nincluding Hydrofibre
\n\u00ae
\n120.2
172.2
3.6 years
\nStoma care
113.6
145.2
3.6 years
\n9.2 Goodwill
\nThe Group recognises goodwill resulting from business combinations where there are future economic benefits from
\nassets which cannot be individually separated and recognised. Goodwill represents the amount paid in excess of the fair
\nvalue of the net assets of the acquired business.
\nAccounting policy
\nRefer to Note 1 \u2013 Basis of preparation for the Group accounting policy in relation to the initial valuation and recognition of
\ngoodwill arising from acquisitions.
\nGoodwill is not subject to amortisation but is tested for impairment annually or when events or changes in circumstances
\nindicate the carrying value may be impaired. Refer to Note 9.3 \u2013 CGU impairment review for consideration of impairment
\nof goodwill.
\nGoodwill is denominated in the functional currency of the acquired entity and revalued to the closing exchange rate at
\neach reporting period date.
\nThe changes in the carrying value of goodwill as at 31 December were as follows:
\nTotal
\n$m
\n1 January 2021
1,097.2
\nDivestitures
(0.9)
\nArising from acquisitions
79.0
\nForeign exchange
(19.0)
\n31 December 2021
1,156.3
\nArising from acquisitions (Note 26)
129.9
\nForeign exchange
(61.6)
\n31 December 2022
1,224.6
\nNotes to the Consolidated Financial Statements
continued
\nConvatec Group Plc Annual Report and Accounts 2022
188
\nFinancial statements
9.3 Cash generating unit (CGU) impairment review
\nAn impairment assessment is required to be performed annually for goodwill and indefinite-lived intangibles or when
\nevents or changes in circumstances indicate the carrying value may be impaired. An impairment is a reduction in the
\nrecoverable amount of an asset compared to the carrying value of the asset. Recoverable amount is the higher of value
\nin use and fair value less costs to sell.
\nThis note provides details of the annual impairment assessment that has been performed.
\nAccounting policy
\nFor impairment testing, assets are grouped together into the smallest group of assets that generate cash inflows from
\ncontinuing use that are largely independent of the cash inflows of other assets or CGUs. Additionally, goodwill arising from
\na business combination is allocated to a CGU or groups of CGUs that are expected to benefit from the synergies of the
\ncombination. An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount.
\nThe recoverable amounts of the CGUs are determined based on value in use calculations, which reflect the estimated
\nfuture cash flows of each CGU discounted by an estimated weighted average cost of capital that represents the rate of
\nreturn an outside investor would expect to earn. This discount rate is based on the weighted average cost of capital for
\ncomparable public companies and is adjusted for risks specific to the CGU including differences in risk due to its size,
\ngeographic concentration and trading history.
\nFuture cash flows are determined using the latest available Board-approved forecasts and strategic plans. These forecasts
\nand strategic plans are based on specific assumptions for each CGU during the five-year planning period with respect to
\nrevenue, results of operations, working capital, capital investments and other general assumptions for the projected
\nperiod. The forecast assumptions that derive the future cash flows are based on the historical results of each CGU
\ncombined with external market information and defined strategic initiatives.
\nIf identified, impairment losses are recognised in the Consolidated Income Statement. They are allocated first to reduce
\nthe carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the remaining
\nassets in the CGU, on a pro-rated basis.
\nAn impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the
\nextent that the asset\u2019s carrying amount does not exceed the carrying amount that would have been determined, net of
\ndepreciation or amortisation, if no impairment loss had been recognised. The Group has not recognised any reversal of
\nprevious impairments in either 2022 or 2021.
\nThe Group continues to operate under the same operating model as prior year and determined that there has not been
\nany triggers for a change in CGU groups. There has been no change in the reporting to the CODM during the year ended
\n31 December 2022, with profitability continuing to be assessed on a consolidated basis, and management\u2019s focus is
\npredominantly category and key market focus. Goodwill is deemed to be monitored on a category basis, and the Group\u2019s
\nCGU groups continue to be; (i) Advanced Wound Care; (ii) Ostomy Care; (iii) Continence & Critical Care, and (iv) Infusion Care.
\nGoodwill and intangible assets with indefinite life (trade names) are allocated to the Group's CGU groups as at 31 December
\nas follows:
\nGoodwill
Indefinite-lived intangible assets
\n2022
\n$m
\n2021
\n$m
\n2022
\n$m
\n2021
\n$m
\nCGU groups
\nAdvanced Wound Care
490.0
386.9
104.8
104.8
\nOstomy Care
116.5
121.7
91.2
91.2
\nContinence & Critical Care
535.6
558.0
41.2
41.4
\nInfusion Care
82.5
89.7
11.7
12.4
\nTotal
1,224.6
1,156.3
248.9
249.8
\nDetermining the estimated recoverable amount of a CGU group is judgemental in nature. The key input used in the estimation
\nof value in use as at 31 December 2022 is the Group\u2019s five-year Board approved strategic plan, with key assumptions including
\nforecast sales growth rates, terminal value growth rate and discount rates. Forecast sales growth rates are based on past
\nexperience adjusted for macroeconomic activity, sector market growth forecasts, competitor activity and strategic decisions
\nmade in respect of each CGU group.
\n189
Convatec Group Plc Annual Report and Accounts 2022
\nAdditional information
Governance
Strategic report
Overview
Financial statements
9. INTANGIBLE ASSETS AND GOODWILL (CONTINUED)
\nThe terminal value growth rate and discount rates used were as follows:
\nDiscount rate (pre-tax)
\n1
\n2022
\n%
\n2021
\n%
\nCGU groups
\nAdvanced Wound Care
13.5
10.5
\nOstomy Care
12.5
10.0
\nContinence & Critical Care
11.5
9.5
\nInfusion Care
12.5
9.5
\nTerminal value growth rate
\n2
\n2.0
2.0
\n1.
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
\ndifferences in risk due to its size, geographic concentration and trading history.
\n2.
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, taking
\ninto account global gross domestic product growth, general long-term inflation and population expectations.
\nGlobal equity markets have become more volatile in 2022, driven by rising inflation levels, the war between Russia and
\nUkraine and the energy crisis. Consequently, discount rates have seen an increase in the year, driven by rises in the markets\u2019
\nrisk-free rates.
\nNo impairments have been recognised in respect of the Group\u2019s current CGU groups for the years ended 31 December 2022
\nand 2021.
\nTaking into consideration the Board approved 2023 budget and longer-term strategic plan as foundations, sensitivity analysis
\nwas performed considering changes in key assumptions including discount rates and terminal value growth rate, and
\nconsideration of risk-based severe but plausible downside scenarios consistent with those identified as part of the Viability
\nassessment (refer to page 99 for full details of scenarios). As part of the assessment, an external benchmarking assessment
\nwas also carried out on the forecast sales growth rates.
\nUnder all severe but plausible scenarios, headroom remained on all CGU groups, demonstrating that the impairment of
\ngoodwill and indefinite-lived intangible assets is not a key source of estimation uncertainty and any possible impairment
\nwould not result in a material adjustment in the next financial year. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfIntangibleAssetsAndGoodwillExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f25922": {
"value": "9.1 Intangible assets The Group\u2019s intangible assets are those that have been recognised at fair value as part of business combinations, investment
\nin product development and software purchased to support business operations. These are assets that are not physical in
\nnature but can be sold separately or arise from legal rights.
\nAccounting policy
\nRecognition
\nMeasurement on initial recognition of intangible assets is determined at cost for assets acquired by the Group and at fair
\nvalue at the date of acquisition if acquired in business combinations. Following initial recognition of the intangible asset,
\nthe asset is carried at cost less any subsequent accumulated amortisation and accumulated impairment losses.
\nPurchased computer software and certain costs of information technology are capitalised as intangible assets. Software
\nthat is integral to purchased computer hardware is capitalised as PP&E.
\nR&D
\nR&D expenses are comprised of all activities involving investigative, technical and regulatory processes related to
\nobtaining appropriate approvals to market our products. It also includes new product development aimed at developing
\nmore sustainable product portfolios for the longer term, as mentioned within the Responsible Business review section
\n(refer to page 51). Costs include payroll, clinical manufacturing and pre-launch clinical trial costs, manufacturing
\ndevelopment and scale-up costs, product development, regulatory costs including costs incurred to comply with
\nlegislative changes, contract services and other external contractors\u2019 costs, research licence fees, depreciation and
\namortisation of laboratory facilities, and laboratory supplies.
\nResearch costs are expensed as incurred. Development costs are capitalised only if the expenditure can be measured
\nreliably, the product or process is technically and commercially feasible, future economic benefits are probable and the
\nGroup intends to and has sufficient resources to complete development and use or sell the asset. Subsequent to initial
\nrecognition, development costs are measured at cost less accumulated amortisation and any accumulated impairment
\nlosses. Upgrades and enhancements are capitalised to the extent they will result in added functionality and probable
\nfuture economic benefits.
\nAmortisation
\nIntangible assets with an indefinite life are not amortised. Amortisation of intangible assets with a finite life is calculated
\nusing the straight-line method based on the following estimated useful lives:
\nAsset category
Useful life
\nProduct-related
3 to 20 years
\nCapitalised software
3 to 10 years
\nCustomer relationships and non-compete agreements
2 to 20 years
\nTrade names \u2013 finite
2 to 10 years
\nTrade names \u2013 indefinite
indefinite
\nDevelopment costs
5 years
\nAssets under construction reflects the cost of development or improvement of intangible assets that are not yet available
\nfor use.
\nImpairment of assets
\nIntangible assets with finite life are reviewed for indicators of impairment at each reporting period or when events or
\nchanges in circumstances indicate the carrying value may be impaired. If any such indication exists, the recoverable
\namount of the asset is estimated, being the higher of an asset\u2019s fair value less costs to sell and the net present value of its
\nexpected pre-tax future cash flows (value in use).
\nWhen an asset\u2019s recoverable amount falls below its carrying value, an impairment is charged to the Consolidated
\nIncome Statement.
\nRefer to Note 9.3 \u2013 CGU impairment review for consideration of impairment of indefinite-lived intangible assets.
\nNotes to the Consolidated Financial Statements
continued
\nConvatec Group Plc Annual Report and Accounts 2022
186
\nFinancial statements
The movement in the carrying value of each major category of intangible assets is as follows:
\nProduct-
\nrelated
\n$m
\nCapitalised
\nsoftware
\n1
\n$m
\nCustomer
\nrelationships
\nand non-
\ncompete
\nagreements
\n$m
\nTrade names
\n$m
\nDevelopment
\ncost
\n$m
\nAssets under
\nconstruction
\n$m
\nTotal
\n$m
\nCost
\n1 January 2021
2,101.2
128.6
305.5
260.2
12.5
8.2
2,816.2
\nAdditions
\u2013
2.2
\u2013
\u2013
\u2013
20.6
22.8
\nArising from acquisitions
\n2
\n4.9
\u2013
33.2
4.6
\u2013
\u2013
42.7
\nWrite-offs
(7.1)
(21.6)
(0.7)
\u2013
\u2013
(0.4)
(29.8)
\nTransfers
\u2013
13.3
\u2013
\u2013
\u2013
(13.3)
\u2013
\nForeign exchange
(12.9)
(0.3)
(7.0)
(1.1)
(0.9)
(0.3)
(22.5)
\n31 December 2021
2,086.1
122.2
331.0
263.7
11.6
14.8
2,829.4
\nAdditions
10.0
0.6
\u2013
\u2013
\u2013
34.0
44.6
\nArising from acquisitions
\n2
\n154.8
\u2013
\u2013
\u2013
\u2013
\u2013
154.8
\nWrite-offs
(50.7)
(1.8)
(0.3)
\u2013
\u2013
(0.6)
(53.4)
\nTransfers
\u2013
11.8
\u2013
\u2013
\u2013
(11.8)
\u2013
\nForeign exchange
(79.7)
(2.4)
(6.3)
(0.9)
(0.6)
(0.9)
(90.8)
\n31 December 2022
2,120.5
130.4
324.4
262.8
11.0
35.5
2,884.6
\nAccumulated amortisation
\n1 January 2021
1,530.9
90.4
185.8
7.7
9.0
\u2013
1,823.8
\nAmortisation
107.1
12.3
24.5
1.9
1.4
\u2013
147.2
\nWrite-offs
(7.1)
(21.6)
(0.7)
\u2013
\u2013
\u2013
(29.4)
\nImpairment
\u2013
2.5
\u2013
\u2013
\u2013
\u2013
2.5
\nForeign exchange
(10.1)
(0.1)
(6.1)
0.1
(0.7)
\u2013
(16.9)
\n31 December 2021
1,620.8
83.5
203.5
9.7
9.7
\u2013
1,927.2
\nAmortisation
108.6
12.0
24.3
1.4
1.1
\u2013
147.4
\nWrite-offs
(50.7)
(1.8)
(0.3)
\u2013
\u2013
\u2013
(52.8)
\nImpairment
4.3
\u2013
1.4
\u2013
\u2013
\u2013
5.7
\nForeign exchange
(61.0)
(0.9)
(5.4)
\u2013
(0.5)
\u2013
(67.8)
\n31 December 2022
1,622.0
92.8
223.5
11.1
10.3
\u2013
1,959.7
\nNet carrying amount
\n31 December 2021
465.3
38.7
127.5
254.0
1.9
14.8
902.2
\n31 December 2022
498.5
37.6
100.9
251.7
0.7
35.5
924.9
\n1.
Capitalised software is in respect of purchased and internally generated software.
\n2.
Acquisitions comprise assets in relation to the Triad Life Sciences acquisition. See Note 26 \u2013 Acquisitions. In the year ended 31 December 2021, acquisitions comprise
\nof Cure Medical and Patient Care Medical.
\n187
Convatec Group Plc Annual Report and Accounts 2022
\nAdditional information
Governance
Strategic report
Overview
Financial statements
9. INTANGIBLE ASSETS AND GOODWILL (CONTINUED)
\nAmortisation expenses in respect of finite-lived intangible assets for the year ended 31 December were as follows:
\n2022
\n$m
\n2021
\n$m
\nCost of sales
113.1
110.7
\nSelling and distribution expenses
3.2
2.0
\nGeneral and administrative expenses
29.1
32.5
\nResearch and development expenses
2.0
2.0
\nTotal amortisation expense
147.4
147.2
\nThe carrying amount of trade names with indefinite life at 31 December 2022 was $248.9 million (2021: $249.8 million). Each of
\nthese trade names are considered to have an indefinite life, given the strength and durability of the current trade name and
\nthe level of marketing support. The trade names are in relatively similar stable and profitable market sectors, with similar risk
\nprofiles, and their size, diversification and market shares mean that the risk of market-related factors causing a reduction in
\nthe lives of the trade names is considered to be relatively low. The Group is not aware of any material legal, regulatory,
\ncontractual, competitive, economic or other factor which could limit their useful lives.
\nIndividual intangible assets with a carrying amount in excess of 10% of the total intangible asset carrying amount were as follows:
\n2022
\n$m
\n2021
\n$m Remaining life
\nTrade names
\nConvatec trade name
234.6
234.6
Indefinite
\nProduct-related
\nInnovaMatrix
\n\u00ae
\n145.6
\u2013
13.3 years
\nAquacel
\n\u00ae
\nincluding Hydrofibre
\n\u00ae
\n120.2
172.2
3.6 years
\nStoma care
113.6
145.2
3.6 years ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfIntangibleAssetsExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f25927": {
"value": "Accounting policy
\nRecognition
\nMeasurement on initial recognition of intangible assets is determined at cost for assets acquired by the Group and at fair
\nvalue at the date of acquisition if acquired in business combinations. Following initial recognition of the intangible asset,
\nthe asset is carried at cost less any subsequent accumulated amortisation and accumulated impairment losses.
\nPurchased computer software and certain costs of information technology are capitalised as intangible assets. Software
\nthat is integral to purchased computer hardware is capitalised as PP&E.
\nR&D
\nR&D expenses are comprised of all activities involving investigative, technical and regulatory processes related to
\nobtaining appropriate approvals to market our products. It also includes new product development aimed at developing
\nmore sustainable product portfolios for the longer term, as mentioned within the Responsible Business review section
\n(refer to page 51). Costs include payroll, clinical manufacturing and pre-launch clinical trial costs, manufacturing
\ndevelopment and scale-up costs, product development, regulatory costs including costs incurred to comply with
\nlegislative changes, contract services and other external contractors\u2019 costs, research licence fees, depreciation and
\namortisation of laboratory facilities, and laboratory supplies.
\nResearch costs are expensed as incurred. Development costs are capitalised only if the expenditure can be measured
\nreliably, the product or process is technically and commercially feasible, future economic benefits are probable and the
\nGroup intends to and has sufficient resources to complete development and use or sell the asset. Subsequent to initial
\nrecognition, development costs are measured at cost less accumulated amortisation and any accumulated impairment
\nlosses. Upgrades and enhancements are capitalised to the extent they will result in added functionality and probable
\nfuture economic benefits.
\nAmortisation
\nIntangible assets with an indefinite life are not amortised. Amortisation of intangible assets with a finite life is calculated
\nusing the straight-line method based on the following estimated useful lives:
\nAsset category
Useful life
\nProduct-related
3 to 20 years
\nCapitalised software
3 to 10 years
\nCustomer relationships and non-compete agreements
2 to 20 years
\nTrade names \u2013 finite
2 to 10 years
\nTrade names \u2013 indefinite
indefinite
\nDevelopment costs
5 years
\nAssets under construction reflects the cost of development or improvement of intangible assets that are not yet available
\nfor use.
\nImpairment of assets
\nIntangible assets with finite life are reviewed for indicators of impairment at each reporting period or when events or
\nchanges in circumstances indicate the carrying value may be impaired. If any such indication exists, the recoverable
\namount of the asset is estimated, being the higher of an asset\u2019s fair value less costs to sell and the net present value of its
\nexpected pre-tax future cash flows (value in use).
\nWhen an asset\u2019s recoverable amount falls below its carrying value, an impairment is charged to the Consolidated
\nIncome Statement.
\nRefer to Note 9.3 \u2013 CGU impairment review for consideration of impairment of indefinite-lived intangible assets.
Accounting policy
\nRefer to Note 1 \u2013 Basis of preparation for the Group accounting policy in relation to the initial valuation and recognition of
\ngoodwill arising from acquisitions.
\nGoodwill is not subject to amortisation but is tested for impairment annually or when events or changes in circumstances
\nindicate the carrying value may be impaired. Refer to Note 9.3 \u2013 CGU impairment review for consideration of impairment
\nof goodwill.
\nGoodwill is denominated in the functional currency of the acquired entity and revalued to the closing exchange rate at
\neach reporting period date.
",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForIntangibleAssetsAndGoodwillExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f25937": {
"value": "R&D R&D expenses are comprised of all activities involving investigative, technical and regulatory processes related to
\nobtaining appropriate approvals to market our products. It also includes new product development aimed at developing
\nmore sustainable product portfolios for the longer term, as mentioned within the Responsible Business review section
\n(refer to page 51). Costs include payroll, clinical manufacturing and pre-launch clinical trial costs, manufacturing
\ndevelopment and scale-up costs, product development, regulatory costs including costs incurred to comply with
\nlegislative changes, contract services and other external contractors\u2019 costs, research licence fees, depreciation and
\namortisation of laboratory facilities, and laboratory supplies.
\nResearch costs are expensed as incurred. Development costs are capitalised only if the expenditure can be measured
\nreliably, the product or process is technically and commercially feasible, future economic benefits are probable and the
\nGroup intends to and has sufficient resources to complete development and use or sell the asset. Subsequent to initial
\nrecognition, development costs are measured at cost less accumulated amortisation and any accumulated impairment
\nlosses. Upgrades and enhancements are capitalised to the extent they will result in added functionality and probable
\nfuture economic benefits.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForResearchAndDevelopmentExpenseExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f26318": {
"value": "9.2 Goodwill The Group recognises goodwill resulting from business combinations where there are future economic benefits from
\nassets which cannot be individually separated and recognised. Goodwill represents the amount paid in excess of the fair
\nvalue of the net assets of the acquired business.
\nAccounting policy
\nRefer to Note 1 \u2013 Basis of preparation for the Group accounting policy in relation to the initial valuation and recognition of
\ngoodwill arising from acquisitions.
\nGoodwill is not subject to amortisation but is tested for impairment annually or when events or changes in circumstances
\nindicate the carrying value may be impaired. Refer to Note 9.3 \u2013 CGU impairment review for consideration of impairment
\nof goodwill.
\nGoodwill is denominated in the functional currency of the acquired entity and revalued to the closing exchange rate at
\neach reporting period date.
\nThe changes in the carrying value of goodwill as at 31 December were as follows:
\nTotal
\n$m
\n1 January 2021
1,097.2
\nDivestitures
(0.9)
\nArising from acquisitions
79.0
\nForeign exchange
(19.0)
\n31 December 2021
1,156.3
\nArising from acquisitions (Note 26)
129.9
\nForeign exchange
(61.6)
\n31 December 2022
1,224.6 ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfGoodwillExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f26325": {
"value": "Accounting policy Refer to Note 1 \u2013 Basis of preparation for the Group accounting policy in relation to the initial valuation and recognition of
\ngoodwill arising from acquisitions.
\nGoodwill is not subject to amortisation but is tested for impairment annually or when events or changes in circumstances
\nindicate the carrying value may be impaired. Refer to Note 9.3 \u2013 CGU impairment review for consideration of impairment
\nof goodwill.
\nGoodwill is denominated in the functional currency of the acquired entity and revalued to the closing exchange rate at
\neach reporting period date.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForGoodwillExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f26373": {
"value": "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
\nevents or changes in circumstances indicate the carrying value may be impaired. An impairment is a reduction in the
\nrecoverable amount of an asset compared to the carrying value of the asset. Recoverable amount is the higher of value
\nin use and fair value less costs to sell.
\nThis note provides details of the annual impairment assessment that has been performed.
\nAccounting policy
\nFor impairment testing, assets are grouped together into the smallest group of assets that generate cash inflows from
\ncontinuing use that are largely independent of the cash inflows of other assets or CGUs. Additionally, goodwill arising from
\na business combination is allocated to a CGU or groups of CGUs that are expected to benefit from the synergies of the
\ncombination. An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount.
\nThe recoverable amounts of the CGUs are determined based on value in use calculations, which reflect the estimated
\nfuture cash flows of each CGU discounted by an estimated weighted average cost of capital that represents the rate of
\nreturn an outside investor would expect to earn. This discount rate is based on the weighted average cost of capital for
\ncomparable public companies and is adjusted for risks specific to the CGU including differences in risk due to its size,
\ngeographic concentration and trading history.
\nFuture cash flows are determined using the latest available Board-approved forecasts and strategic plans. These forecasts
\nand strategic plans are based on specific assumptions for each CGU during the five-year planning period with respect to
\nrevenue, results of operations, working capital, capital investments and other general assumptions for the projected
\nperiod. The forecast assumptions that derive the future cash flows are based on the historical results of each CGU
\ncombined with external market information and defined strategic initiatives.
\nIf identified, impairment losses are recognised in the Consolidated Income Statement. They are allocated first to reduce
\nthe carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the remaining
\nassets in the CGU, on a pro-rated basis.
\nAn impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the
\nextent that the asset\u2019s carrying amount does not exceed the carrying amount that would have been determined, net of
\ndepreciation or amortisation, if no impairment loss had been recognised. The Group has not recognised any reversal of
\nprevious impairments in either 2022 or 2021.
\nThe Group continues to operate under the same operating model as prior year and determined that there has not been
\nany triggers for a change in CGU groups. There has been no change in the reporting to the CODM during the year ended
\n31 December 2022, with profitability continuing to be assessed on a consolidated basis, and management\u2019s focus is
\npredominantly category and key market focus. Goodwill is deemed to be monitored on a category basis, and the Group\u2019s
\nCGU groups continue to be; (i) Advanced Wound Care; (ii) Ostomy Care; (iii) Continence & Critical Care, and (iv) Infusion Care.
\nGoodwill and intangible assets with indefinite life (trade names) are allocated to the Group's CGU groups as at 31 December
\nas follows:
\nGoodwill
Indefinite-lived intangible assets
\n2022
\n$m
\n2021
\n$m
\n2022
\n$m
\n2021
\n$m
\nCGU groups
\nAdvanced Wound Care
490.0
386.9
104.8
104.8
\nOstomy Care
116.5
121.7
91.2
91.2
\nContinence & Critical Care
535.6
558.0
41.2
41.4
\nInfusion Care
82.5
89.7
11.7
12.4
\nTotal
1,224.6
1,156.3
248.9
249.8
\nDetermining the estimated recoverable amount of a CGU group is judgemental in nature. The key input used in the estimation
\nof value in use as at 31 December 2022 is the Group\u2019s five-year Board approved strategic plan, with key assumptions including
\nforecast sales growth rates, terminal value growth rate and discount rates. Forecast sales growth rates are based on past
\nexperience adjusted for macroeconomic activity, sector market growth forecasts, competitor activity and strategic decisions
\nmade in respect of each CGU group.
\n189
Convatec Group Plc Annual Report and Accounts 2022
\nAdditional information
Governance
Strategic report
Overview
Financial statements
9. INTANGIBLE ASSETS AND GOODWILL (CONTINUED)
\nThe terminal value growth rate and discount rates used were as follows:
\nDiscount rate (pre-tax)
\n1
\n2022
\n%
\n2021
\n%
\nCGU groups
\nAdvanced Wound Care
13.5
10.5
\nOstomy Care
12.5
10.0
\nContinence & Critical Care
11.5
9.5
\nInfusion Care
12.5
9.5
\nTerminal value growth rate
\n2
\n2.0
2.0
\n1.
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
\ndifferences in risk due to its size, geographic concentration and trading history.
\n2.
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, taking
\ninto account global gross domestic product growth, general long-term inflation and population expectations.
\nGlobal equity markets have become more volatile in 2022, driven by rising inflation levels, the war between Russia and
\nUkraine and the energy crisis. Consequently, discount rates have seen an increase in the year, driven by rises in the markets\u2019
\nrisk-free rates.
\nNo impairments have been recognised in respect of the Group\u2019s current CGU groups for the years ended 31 December 2022
\nand 2021.
\nTaking into consideration the Board approved 2023 budget and longer-term strategic plan as foundations, sensitivity analysis
\nwas performed considering changes in key assumptions including discount rates and terminal value growth rate, and
\nconsideration of risk-based severe but plausible downside scenarios consistent with those identified as part of the Viability
\nassessment (refer to page 99 for full details of scenarios). As part of the assessment, an external benchmarking assessment
\nwas also carried out on the forecast sales growth rates.
\nUnder all severe but plausible scenarios, headroom remained on all CGU groups, demonstrating that the impairment of
\ngoodwill and indefinite-lived intangible assets is not a key source of estimation uncertainty and any possible impairment
\nwould not result in a material adjustment in the next financial year.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfInformationForEachMaterialImpairmentLossRecognisedOrReversedForIndividualAssetOrCashgeneratingUnitExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f26381": {
"value": "Accounting policy For impairment testing, assets are grouped together into the smallest group of assets that generate cash inflows from
\ncontinuing use that are largely independent of the cash inflows of other assets or CGUs. Additionally, goodwill arising from
\na business combination is allocated to a CGU or groups of CGUs that are expected to benefit from the synergies of the
\ncombination. An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount.
\nThe recoverable amounts of the CGUs are determined based on value in use calculations, which reflect the estimated
\nfuture cash flows of each CGU discounted by an estimated weighted average cost of capital that represents the rate of
\nreturn an outside investor would expect to earn. This discount rate is based on the weighted average cost of capital for
\ncomparable public companies and is adjusted for risks specific to the CGU including differences in risk due to its size,
\ngeographic concentration and trading history.
\nFuture cash flows are determined using the latest available Board-approved forecasts and strategic plans. These forecasts
\nand strategic plans are based on specific assumptions for each CGU during the five-year planning period with respect to
\nrevenue, results of operations, working capital, capital investments and other general assumptions for the projected
\nperiod. The forecast assumptions that derive the future cash flows are based on the historical results of each CGU
\ncombined with external market information and defined strategic initiatives.
\nIf identified, impairment losses are recognised in the Consolidated Income Statement. They are allocated first to reduce
\nthe carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the remaining
\nassets in the CGU, on a pro-rated basis.
\nAn impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the
\nextent that the asset\u2019s carrying amount does not exceed the carrying amount that would have been determined, net of
\ndepreciation or amortisation, if no impairment loss had been recognised. The Group has not recognised any reversal of
\nprevious impairments in either 2022 or 2021.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForImpairmentOfAssetsExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f26521": {
"value": "10. INVESTMENT IN FINANCIAL ASSETS Accounting policy
\nThe Group has made an irrevocable election to designate its equity investment in BlueWind Medical at fair value through
\nother comprehensive income (FVOCI). It has been initially recorded at fair value plus transaction costs and will be
\nremeasured at subsequent reporting dates to fair value.
\nUnrealised gains and losses are recognised in other comprehensive income.
\nOn disposal of the equity investment, any gains and losses that have been deferred in other comprehensive income are
\ntransferred directly to retained earnings.
\nDividends on equity investments are recognised in the income statement when the Group\u2019s right to receive payment is
\nestablished, it is probable the economic benefits will flow to the entity and the amount can be measured reliably.
\nOn 9 May 2022, the Group invested $30.0 million in preference shares of BlueWind Medical Limited (BlueWind Medical).
\nBlueWind Medical is developing an implantable tibial neuromodulation device, for the treatment of urge incontinence and
\nurinary urgency. This represents an investment into an innovative technology in the large and growing overactive bladder
\nmarket, related to the Continence space.
\nIn line with IFRS 9
Financial Instruments
, the investment met the definition of an equity instrument and the Group has made
\nan irrevocable election on initial recognition to measure the investment at FVOCI. The Group considers this investment to be
\nstrategic in nature and it is not held for trading.
\nIn line with IFRS 13
Fair value measurement
, this investment has been classified as Level 3 in the fair value hierarchy as its
\nmeasurement is derived from significant unobservable inputs. As at the date of the transaction, the equity investment was
\nrecorded at its cost of investment which approximates to fair value plus transaction costs of $0.7 million.
\nAs at 31 December 2022, the fair value of the investment has been remeasured and remained at $30.7 million. No dividends
\nwere recognised during the year.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfInvestmentsAccountedForUsingEquityMethodExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f26565": {
"value": "11. INVENTORIES Inventories are the materials used in manufacturing, products manufactured or purchased to be sold by the Group in the
\nordinary course of business. Inventories include finished goods, goods which are in the process of being manufactured
\n(work in progress) and raw and packaging materials awaiting use in production.
\nAccounting policy
\nInventories are valued at the lower of cost or net realisable value with the cost determined using an average cost method.
\nThe cost of finished goods and work in progress comprises raw materials, direct labour, other direct costs and indirect
\nproduction overheads. Production overheads comprises indirect material and labour costs, maintenance and depreciation
\nof the machinery and production buildings used in the manufacturing process, as well as costs of production
\nadministration and management.
\nNet realisable value is defined as anticipated selling price or anticipated revenue less cost to completion. Estimates of net
\nrealisable value are based on the average selling prices at the end of the reporting period, net of applicable direct selling
\nexpenses. Subsequent events related to the fluctuation of prices and costs are also considered, if relevant. If net realisable
\nvalues are below inventory costs, a provision corresponding to this difference is recognised.
\nProvisions are also made for obsolescence of inventories that; (i) do not meet the Group's specifications; (ii) have exceeded
\ntheir expiration date; or (iii) are considered slow-moving. The Group evaluates the carrying value of inventories on a regular
\nbasis, taking into account such factors as historical and anticipated future sales compared with quantities on hand, the
\nprice the Group expects to obtain for products in their respective markets compared with historical cost and the
\nremaining shelf life of goods on hand.
\nThe components of inventories at 31 December were as follows:
\n2022
\n$m
\n2021
\n$m
\nRaw and packaging materials
79.6
71.9
\nWork in progress
41.6
37.9
\nFinished goods
215.7
199.0
\nInventories
336.9
308.8
\nInventories are stated net of provision for obsolescence of $25.5 million (2021: $21.3 million). Adjustments to write-down
\ninventory to its net realisable value are provided in Note 3.1 \u2013 Operating profit. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfInventoriesExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f26571": {
"value": "Accounting policy Inventories are valued at the lower of cost or net realisable value with the cost determined using an average cost method.
\nThe cost of finished goods and work in progress comprises raw materials, direct labour, other direct costs and indirect
\nproduction overheads. Production overheads comprises indirect material and labour costs, maintenance and depreciation
\nof the machinery and production buildings used in the manufacturing process, as well as costs of production
\nadministration and management.
\nNet realisable value is defined as anticipated selling price or anticipated revenue less cost to completion. Estimates of net
\nrealisable value are based on the average selling prices at the end of the reporting period, net of applicable direct selling
\nexpenses. Subsequent events related to the fluctuation of prices and costs are also considered, if relevant. If net realisable
\nvalues are below inventory costs, a provision corresponding to this difference is recognised.
\nProvisions are also made for obsolescence of inventories that; (i) do not meet the Group's specifications; (ii) have exceeded
\ntheir expiration date; or (iii) are considered slow-moving. The Group evaluates the carrying value of inventories on a regular
\nbasis, taking into account such factors as historical and anticipated future sales compared with quantities on hand, the
\nprice the Group expects to obtain for products in their respective markets compared with historical cost and the
\nremaining shelf life of goods on hand.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForMeasuringInventories",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f26610": {
"value": "12. TRADE AND OTHER RECEIVABLES Trade receivables consist of amounts billed and currently due from customers. Gross trade receivables are presented
\nbefore allowances for expected credit losses, sales discounts and chargeback allowances. Credit risk with respect to trade
\nreceivables is generally diversified due to the large dispersion and type of customers across many different geographies.
\nOther receivables include amounts due from third parties not related to revenue and prepaid expenses.
\nAccounting policy
\nCredit is extended to customers based on the evaluation of the customer\u2019s financial condition. Creditworthiness of
\ncustomers is evaluated on a regular basis. Exposure to credit risk is managed through credit approvals, credit limits and
\nmonitoring procedures. The Group considers a default event to be one where the customer does not have sufficient funds
\nto make their required payments and/or is in the process of being liquidated.
\nAn allowance is maintained for expected lifetime credit losses that result from the failure or inability of customers to make
\nrequired payments. It is not necessary for a credit event to have occurred before credit losses are recognised. Instead, the
\nGroup accounts for expected lifetime credit losses and changes in those expected lifetime credit losses. In determining
\nthe allowance, consideration includes the probability of recoverability based on past experience and general economic
\nfactors, incorporating forward-looking information and adjustments for customers who represent a lower risk of default,
\nwhich includes public or private medical insurance customers and customers guaranteed by local government. The
\namount of expected credit losses, if any, is required to be updated at each reporting date.
\nCertain trade and other receivables may be fully reserved when specific collection issues are known to exist, such as pending
\nbankruptcy. The Group writes off uncollectable receivables at the time it is determined the receivable is no longer collectable.
\nTrade and other receivables are not collateralised or factored and the Group does not charge interest on past due
\namounts. Refer to Note 2.1 \u2013 Revenue recognition for details on the accounting policy in respect of chargeback allowances.
\n191
Convatec Group Plc Annual Report and Accounts 2022
\nAdditional information
Governance
Strategic report
Overview
Financial statements
12. TRADE AND OTHER RECEIVABLES (CONTINUED)
\nTrade and other receivables at 31 December were as follows:
\n2022
\n$m
\n2021
\n$m
\nIncluded within current assets:
\nTrade receivables
344.7
296.9
\nLess: allowances for expected credit losses
(22.0)
(14.6)
\nLess: sales discounts and chargebacks
(37.6)
(31.7)
\nOther receivables
\n1
\n54.2
50.9
\nPrepayments
24.7
22.0
\nTrade and other receivables
364.0
323.5
\n1.
The balance of restricted cash with a maturity of less than one year as at 31 December 2022 is $18.2 million and is presented separately on the face of the Consolidated
\nStatement of Financial Position. The prior year balance of $0.4 million is presented within other receivables and has not been reclassified due to its immateriality.
\nThe aged analysis of trade receivables at 31 December was as follows:
\n2022
\n$m
\n2021
\n$m
\nCurrent
255.0
235.2
\nPast due 1 to 30 days
33.6
15.5
\nPast due 31 to 90 days
22.5
17.3
\nPast due 91 to 180 days
7.9
0.7
\nPast due by more than 180 days
25.7
28.2
\n344.7
296.9
\nThe unimpaired amounts at 31 December that are past due were aged as follows:
\n2022
\n$m
\n2021
\n$m
\nPast due 1 to 30 days
32.1
14.2
\nPast due 31 to 90 days
20.6
16.5
\nPast due 91 to 180 days
4.7
\u2013
\nPast due by more than 180 days
10.3
16.4
\n67.7
47.1
\nThe Group believes that the unimpaired amounts that are past due are still collectible in full, based on historic payment
\nbehaviour and extensive analysis of customer credit risk.
\nMovements in the allowance for expected credit losses for the years ended 31 December were as follows:
\n2022
\n$m
\n2021
\n$m
\nAt 1 January
(14.6)
(12.6)
\nCharges
(6.6)
(8.2)
\nUtilisation of provision
1.1
5.6
\nForeign exchange
(1.9)
0.6
\nAt 31 December
(22.0)
(14.6)
\nOther non-current receivables
\nOther non-current receivables of $8.6 million (2021: $11.9 million) are principally in respect of deposits held with lessors,
\nprepaid expenses and other receivables. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfTradeAndOtherReceivablesExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f26617": {
"value": "Accounting policy Credit is extended to customers based on the evaluation of the customer\u2019s financial condition. Creditworthiness of
\ncustomers is evaluated on a regular basis. Exposure to credit risk is managed through credit approvals, credit limits and
\nmonitoring procedures. The Group considers a default event to be one where the customer does not have sufficient funds
\nto make their required payments and/or is in the process of being liquidated.
\nAn allowance is maintained for expected lifetime credit losses that result from the failure or inability of customers to make
\nrequired payments. It is not necessary for a credit event to have occurred before credit losses are recognised. Instead, the
\nGroup accounts for expected lifetime credit losses and changes in those expected lifetime credit losses. In determining
\nthe allowance, consideration includes the probability of recoverability based on past experience and general economic
\nfactors, incorporating forward-looking information and adjustments for customers who represent a lower risk of default,
\nwhich includes public or private medical insurance customers and customers guaranteed by local government. The
\namount of expected credit losses, if any, is required to be updated at each reporting date.
\nCertain trade and other receivables may be fully reserved when specific collection issues are known to exist, such as pending
\nbankruptcy. The Group writes off uncollectable receivables at the time it is determined the receivable is no longer collectable.
\nTrade and other receivables are not collateralised or factored and the Group does not charge interest on past due
\namounts. Refer to Note 2.1 \u2013 Revenue recognition for details on the accounting policy in respect of chargeback allowances.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForTradeAndOtherReceivablesExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f26656": {
"value": "Trade and other receivables at 31 December were as follows: 2022
\n$m
\n2021
\n$m
\nIncluded within current assets:
\nTrade receivables
344.7
296.9
\nLess: allowances for expected credit losses
(22.0)
(14.6)
\nLess: sales discounts and chargebacks
(37.6)
(31.7)
\nOther receivables
\n1
\n54.2
50.9
\nPrepayments
24.7
22.0
\nTrade and other receivables
364.0
323.5
\n1.
The balance of restricted cash with a maturity of less than one year as at 31 December 2022 is $18.2 million and is presented separately on the face of the Consolidated
\nStatement of Financial Position. The prior year balance of $0.4 million is presented within other receivables and has not been reclassified due to its immateriality.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfOtherCurrentAssetsExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f26730": {
"value": "Movements in the allowance for expected credit losses for the years ended 31 December were as follows: 2022
\n$m
\n2021
\n$m
\nAt 1 January
(14.6)
(12.6)
\nCharges
(6.6)
(8.2)
\nUtilisation of provision
1.1
5.6
\nForeign exchange
(1.9)
0.6
\nAt 31 December
(22.0)
(14.6) ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfAllowanceForCreditLossesExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f26771": {
"value": "13. TRADE AND OTHER PAYABLES Trade payables consist of amounts owed to third-party suppliers and represent a contractual obligation to deliver cash in
\nthe future.
\nOther payables include taxes and social security, accruals and liabilities for other employee-related benefits.
\nAccounting policy
\nTrade payables are recognised at the value of the invoice received from the supplier and are not interest bearing. The
\ncarrying amount of trade and other payables is considered to approximate fair value, due to their short-term maturities.
\nThe components of trade and other payables at 31 December were as follows:
\n2022
\n$m
\n2021
\n$m
\nIncluded within current liabilities:
\nTrade payables
112.2
116.7
\nTaxes and social security
26.0
29.0
\nOther employee-related liabilities
92.3
92.3
\nAccruals and other payables
116.1
104.5
\nTrade and other payables
346.6
342.5
\n2022
\n$m
\n2021
\n$m
\nIncluded within non-current liabilities:
\nDefined benefit obligations (Note 15)
11.0
19.7
\nOther employee-related liabilities
7.7
7.4
\nAccruals and other payables
14.0
20.5
\nOther non-current liabilities
32.7
47.6",
"dimensions": {
"concept": "ifrs-full:DisclosureOfTradeAndOtherPayablesExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f26777": {
"value": "Accounting policy Trade payables are recognised at the value of the invoice received from the supplier and are not interest bearing. The
\ncarrying amount of trade and other payables is considered to approximate fair value, due to their short-term maturities.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForTradeAndOtherPayablesExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f26823": {
"value": "14. PROVISIONS A provision is an obligation recognised when there is uncertainty over the timing or amount that will be paid. Provisions
\nheld by the Group are primarily in respect of restructuring, decommissioning, dilapidations, legal liabilities and contingent
\nconsideration relating to acquisitions.
\nAccounting policy
\nA provision is recognised when there is a present legal or constructive obligation as a result of a past event, it is probable
\nthat the Group will be required to settle the obligation and that obligation can be measured reliably. Restructuring
\nprovisions are only recognised when a constructive obligation exists, which requires both a detailed formal plan and
\na valid expectation being raised in those affected by starting to implement that plan or announcing the main features.
\nProvisions are measured at the best estimate of the expenditure required to settle the obligation and are discounted to
\npresent value if the effect is material. Provisions are reviewed on a regular basis and adjusted to reflect management\u2019s best
\ncurrent estimates. Due to the judgemental nature of these items, future settlements may differ from amounts recognised.
\nWhen the timing of a settlement is uncertain or expected to be more than 12 months from the reporting date, amounts are
\nclassified as non-current.
\n193
Convatec Group Plc Annual Report and Accounts 2022
\nAdditional information
Governance
Strategic report
Overview
Financial statements
14. PROVISIONS (CONTINUED)
\nThe movements in provisions are as follows:
\nDecommissioning
\nand dilapidations
\n$m
\nRestructuring
\n$m
\nLegal
\n$m
\nContingent
\nconsideration
\n$m
\nTotal
\n$m
\n1 January 2022
1.2
5.0
0.5
\u2013
6.7
\nContingent consideration
\nfrom acquisitions
\u2013
\u2013
\u2013
141.8
141.8
\nCharged to income statement
1.7
15.7
(0.3)
29.5
46.6
\nUtilised
\u2013
(10.4)
\u2013
(50.0)
(60.4)
\nDiscount unwinding
\u2013
\u2013
\u2013
15.6
15.6
\nReclassification from trade and
\nother payables
\n1
\n\u2013
\u2013
\u2013
3.1
3.1
\nForeign exchange
(0.1)
\u2013
\u2013
\u2013
(0.1)
\n31 December 2022
2.8
10.3
0.2
140.0
153.3
\nCurrent
\u2013
10.3
\u2013
89.9
100.2
\nNon-current
\n2
\n2.8
\u2013
0.2
50.1
53.1
\n1.
During the year ended 31 December 2022, $3.1 million was reclassified from trade and other payables in relation to the Cure Medical acquisition to better reflect
\nthe estimation uncertainty of the contingent consideration.
\n2.
The expected timings of the payment of the contingent consideration are disclosed in Note 26 \u2013 Acquisitions. The timing for other non-current provisions is undefined.
\nDecommissioning and dilapidation provisions
\nDecommissioning provisions represent the estimated costs of dismantling and removing PP&E and restoring the site on which
\nit was located. Dilapidation provisions are in respect of contractual obligations, on the expiry of a lease, to return leased
\nproperties in the condition which is specified in the individual leases.
\nRestructuring provisions
\nRestructuring provisions are mainly related to the exit from the low-margin hospital care and industrial sales portfolio.
\nFurther details are in Note 27 \u2013 Divestitures. All restructuring provisions are supported by detailed plans and a valid
\nexpectation has been raised in those affected as required by the Group\u2019s accounting policy.
\nLegal provision
\nLegal provision of $0.2 million is in respect of an ongoing case. Legal issues are often subject to uncertainties over the timing
\nand the final amounts of any settlement.
\nContingent consideration
\nContingent consideration arising from business combinations is fair valued on acquisition and at each reporting period.
\nAs at 31 December 2022, the discounted fair value of the contingent consideration payable in respect of the Cure Medical
\nacquisition was $9.2 million (2021: $3.1 million), with an increase of $5.8 million arising as a result of good performance to date,
\ntogether with the latest financial forecasts, and the unwind of discount of $0.3 million during the year. This has been charged
\nto the Consolidated Income Statement.
\nAs at 31 December 2022, the discounted fair value of the contingent consideration payable in respect of the Triad Life Sciences
\nacquisition was $130.8 million, with the movements since the acquisition date fair value of $141.8 million being a combination of
\nan increase of $23.7 million arising from management\u2019s view that the latest available financials are expected to exceed original
\nexpectations and the unwind of discount of $15.3 million during the year, partly offset by the payments of $50.0 million to the
\nsellers following successful attainment of the two short-term milestones per the Merger Agreement.
\nFurther detail is provided in Note 26 \u2013 Acquisitions.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfProvisionsExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f26829": {
"value": "Accounting policy A provision is recognised when there is a present legal or constructive obligation as a result of a past event, it is probable
\nthat the Group will be required to settle the obligation and that obligation can be measured reliably. Restructuring
\nprovisions are only recognised when a constructive obligation exists, which requires both a detailed formal plan and
\na valid expectation being raised in those affected by starting to implement that plan or announcing the main features.
\nProvisions are measured at the best estimate of the expenditure required to settle the obligation and are discounted to
\npresent value if the effect is material. Provisions are reviewed on a regular basis and adjusted to reflect management\u2019s best
\ncurrent estimates. Due to the judgemental nature of these items, future settlements may differ from amounts recognised.
\nWhen the timing of a settlement is uncertain or expected to be more than 12 months from the reporting date, amounts are
\nclassified as non-current.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForProvisionsExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f26944": {
"value": "Decommissioning and dilapidation provisions Decommissioning provisions represent the estimated costs of dismantling and removing PP&E and restoring the site on which
\nit was located. Dilapidation provisions are in respect of contractual obligations, on the expiry of a lease, to return leased
\nproperties in the condition which is specified in the individual leases.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForDecommissioningRestorationAndRehabilitationProvisionsExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f26985": {
"value": "15. POST-EMPLOYMENT BENEFITS The Group has over 10,000 employees globally and operates a number of defined benefit and defined contribution
\npension plans for its employees. Each individual plan is subject to the applicable laws and regulations of the country
\ninwhich the plan operates.
\nDefined contribution arrangements are where the Group pays fixed payments as they fall due into a separate fund on
\nbehalf of employees participating in the plan and has no further legal or constructive obligations. The cost of Group
\ncontributions to defined contribution arrangements during the year is provided in Note 3 \u2013 Operating costs.
\nA defined benefit plan is a pension or other post-employment benefit plan under which the Group has an obligation to
\nprovide agreed benefits to current and former employees. The Group bears the risk that its obligation may increase or that
\nthe value of the assets in the pension fund may decline. The benefit payable in the future by the Group is discounted to the
\npresent value and the fair value of plan assets is deducted to measure the defined benefit pension position.
\nThe Group has defined benefit plans in a number of European countries. The most significant plans are: Switzerland,
\nwhich has a state-mandated plan that remains open to all Swiss employees; and Germany, which has one unfunded plan,
\nthat remains open to German employees but is now closed to new entrants, and a funded plan that was put in place from
\nApril 2019. The value of the funded plan in Germany is negligible to the Group. The Group's other defined benefit plans are
\nlocated in Austria, France and Italy (referred to as \u201cOther\u201d in the tables below). The Group\u2019s UK defined benefit plan was
\nbought out by Aviva in December 2021 and the Group has no further liability for the benefits accrued under that plan.
\nFor plans in Switzerland, Germany and Austria, asset funds for each country are being accumulated to meet the accruing
\nliabilities. The assets of each of these funds are either held under trusts or managed by insurance companies and are
\nentirely separate from the Group\u2019s assets.
\nAccounting policy
\nDefined contribution pension plans
\nPayments to defined contribution pension plans are recognised as an expense when employees have rendered service
\nentitling them to the contributions. Payments made to state-managed retirement benefit plans are treated as payments
\nto defined contribution pension plans where the Group\u2019s obligations under the plans are equivalent to those arising in a
\ndefined contribution pension plan.
\nDefined benefit pension plans
\nThe Group records an asset or liability related to its defined benefit pension plans as the difference between the fair
\nvalue of the plan assets and the present value of the plan liabilities. The obligations of the plans are calculated using the
\nProjected Unit Credit Method, with actuarial valuations being performed by an independent actuary at the end of each
\nreporting period. The valuation requires estimates and judgements to be made to calculate the Group\u2019s liabilities, and
\nresults in actuarial gains and losses being recorded.
\nActuarial gains and losses, movements in the return on plan assets (excluding interest) and the impact of the asset ceiling
\n(if applicable) are recognised immediately in the Consolidated Statement of Financial Position with a charge or credit to
\nthe Consolidated Statement of Comprehensive Income. Remeasurements recorded in the Consolidated Statement of
\nComprehensive Income are not subsequently reclassified to the Consolidated Income Statement.
\nPast service cost is recognised in the Consolidated Income Statement in the period of plan amendment, where relevant.
\nNet interest is calculated by applying a discount rate to the net defined benefit liability or asset.
\nThe assets of the plans are held at fair value, which is equal to market value, and are held in separate trustee-administered
\nfunds or similar structures in the countries concerned. Surplus assets within the plan are only recognised to the extent
\nthat they are recoverable in accordance with IFRIC Interpretation 14,
IAS 19 \u2013 The Limit on a Defined Benefit Asset, Minimum
\nFunding Requirements and their Interaction
(IFRIC 14).
\n195
Convatec Group Plc Annual Report and Accounts 2022
\nAdditional information
Governance
Strategic report
Overview
Financial statements
15. POST-EMPLOYMENT BENEFITS (CONTINUED)
\nRisks
\nThe defined benefit plans typically expose the Group to risks. The most significant risks impacting the Group as a result of
\nthese plans are as follows:
\nInvestment risk
The present value of the defined benefit plan liability is calculated using a discount rate determined
\nby reference to high-quality corporate bond yields; if the return on plan assets is below this rate, it will
\ncreate a plan deficit. Currently the Group's plans invest primarily in debt instruments.
\nInterest risk
A decrease in the interest rate will increase the plan liability, but this will be partially offset by an
\nincrease in the return on the plan\u2019s fixed rate debt instruments.
\nLongevity risk
The present value of the defined benefit plan liability is calculated by reference to the best estimate
\nof the mortality of plan participants both during and after their employment. An increase in the life
\nexpectancy of the plan participants will increase the plan\u2019s liability.
\nSalary risk
The present value of the defined benefit plan liability is calculated by reference to the future salaries of
\nplan participants. As such, an increase in the salary of the plan participants will increase the plan\u2019s liability.
\nAmounts recorded in the Consolidated Financial Statements
\nConsolidated Income Statement
\nThe aggregate expense for all post-employment defined benefit plans recognised in the Consolidated Income Statement for
\nthe year ended 31 December was as follows:
\n2022
\n$m
\n2021
\n$m
\nDefined benefit plans:
\nCurrent service cost
1.7
2.2
\nPast service cost
(0.2)
\u2013
\nInterest income on plan assets
(0.2)
\u2013
\nInterest expense on defined benefit obligations
0.4
0.2
\nUK pension settlement cost
\n1
\n\u2013
1.2
\nTotal expense (Note 3)
1.7
3.6
\n1.
The UK defined benefit pension scheme was bought out during the year ended 31 December 2021, with a loss on settlement of $1.2 million recognised in the
\nConsolidated Income Statement.
\nConsolidated Statement of Comprehensive Income
\nAggregate actuarial gains and losses for all defined benefit plans recognised in the Consolidated Statement of
\nComprehensive Income for the year ended 31 December were as follows:
\n2022
\n$m
\n2021
\n$m
\nRemeasurement effect recognised in other comprehensive income:
\nActuarial gain on liabilities due to experience
1.3
1.6
\nActuarial gain/(loss) arising from changes in financial assumptions
8.9
(0.8)
\nActuarial gain arising from changes in demographic assumptions
\u2013
0.8
\nActuarial (loss)/gain on plan assets
(1.7)
1.6
\nRemeasurement gain recognised in other comprehensive income
8.5
3.2
\nDeferred tax on remeasurement gain recognised in other comprehensive income
(0.1)
0.1
\nChange in pension asset restriction
\u2013
1.3
\nTotal amount recognised in other comprehensive income
8.4
4.6
\nNotes to the Consolidated Financial Statements
continued
\nConvatec Group Plc Annual Report and Accounts 2022
196
\nFinancial statements
Consolidated Statement of Financial Position
\nThe amount recognised for each defined benefit arrangement in the Consolidated Statement of Financial Position at
\n31 December was as follows:
\nGermany
Switzerland
Other
Total
\n2022
\n$m
\n2021
\n$m
\n2022
\n$m
\n2021
\n$m
\n2022
\n$m
\n2021
\n$m
\n2022
\n$m
\n2021
\n$m
\nFair value of schemes\u2019 assets
\u2013
\u2013
10.4
13.3
0.7
0.8
11.1
14.1
\nPresent value of funded
\nschemes\u2019 liabilities
\u2013
\u2013
(
12.3
)
(17.2)
(0.7)
(1.4)
(13.0)
(18.6)
\nDeficit in the funded schemes
\u2013
\u2013
(
1.9
)
(3.9)
\u2013
(0.6)
(1.9)
(4.5)
\nPresent value of unfunded
\nschemes\u2019 liabilities
(7.4)
(12.6)
\u2013
\u2013
(1.7)
(2.6)
(9.1)
(15.2)
\nNet pension liability
(7.4)
(12.6)
(
1.9
)
(3.9)
(1.7)
(3.2)
(11.0)
(19.7)
\nRecognised within Consolidated Statement of Financial Position:
\nDefined benefit obligations (Note 13)
(11.0)
(19.7)
\nThe weighted average duration of the Group's defined benefit obligations at the end of the year is 17 years (2021: 21 years).
\nFair value of assets and present value of the liabilities of the plan
\nThe amount included in the Consolidated Statement of Financial Position arising from its obligations in respect of its defined
\nbenefit plans was as follows:
\nAssets
\n$m
\nLiabilities
\n$m
\nTotal
\n$m
\nAt 1 January 2021
30.3
(49.8)
(19.5)
\nCurrent service cost
\u2013
(2.1)
(2.1)
\nInterest income/(expense)
0.1
(0.3)
(0.2)
\nRemeasurement gain
0.1
1.2
1.3
\nContributions by employer
0.7
\u2013
0.7
\nContributions by members
0.6
(0.6)
\u2013
\nBenefits paid
(2.7)
3.0
0.3
\nExperience gain
\u2013
1.9
1.9
\nPension settlement
(14.4)
11.0
(3.4)
\nForeign exchange
(0.6)
1.9
1.3
\nAt 31 December 2021
14.1
(33.8)
(19.7)
\nCurrent service cost
\u2013
(1.7)
(1.7)
\nPast service cost
\u2013
0.2
0.2
\nInterest income/(expense)
0.2
(0.4)
(0.2)
\nRemeasurement gain/(loss)
(1.7)
6.5
4.8
\nContributions by employer
0.6
\u2013
0.6
\nContributions by members
0.5
(0.5)
\u2013
\nBenefits paid
(2.4)
2.7
0.3
\nExperience gain
\u2013
3.9
3.9
\nForeign exchange
(0.2)
1.0
0.8
\nAt 31 December 2022
11.1
(22.1)
(11.0)
\nPlan assets
\nThe fair value of defined benefit plan assets at 31 December, which has been determined in accordance with IFRS 13
, Fair
\nValue Measurements
, is analysed below. All assets have a quoted market price and are categorised as a Level 1 measurement
\nin the fair value hierarchy.
\nGermany
Switzerland
Other
Total
\n2022
\n$m
\n2021
\n$m
\n2022
\n$m
\n2021
\n$m
\n2022
\n$m
\n2021
\n$m
\n2022
\n$m
\n2021
\n$m
\nEquity instruments
\u2013
\u2013
3.4
4.0
\u2013
3.4
4.0
\nDebt instruments
\u2013
\u2013
4.1
4.8
\u2013
4.1
4.8
\nProperty
\u2013
\u2013
1.6
2.0
\u2013
1.6
2.0
\nQualifying insurance policies
\u2013
\u2013
\u2013
0.7
0.8
0.7
0.8
\nOther
\u2013
\u2013
1.3
2.5
\u2013
1.3
2.5
\nPlan assets
\u2013
\u2013
10.4
13.3
0.7
0.8
11.1
14.1
\n197
Convatec Group Plc Annual Report and Accounts 2022
\nAdditional information
Governance
Strategic report
Overview
Financial statements
15. POST-EMPLOYMENT BENEFITS (CONTINUED)
\nActuarial assumptions
\nThe Group makes certain key assumptions in order to value the plan obligations, and the approach to how these are set was
\nas follows:
\nApproach taken
\nDiscount rate
Calculated by reference to the yields on high-quality corporate bonds which match expected
\ncash flows in each territory in which a defined benefit plan is present.
\nInflation
Calculated using the difference on yields between fixed and index-linked government bonds.
\nFuture salary increases
Based on historical expectations and known future increases, including expected inflation rates.
\nMortality
Based on mortality tables derived from assessments performed by national governments and
\nbased upon recommendations by plan actuaries.
\nThe principal actuarial assumptions for each defined benefit arrangement used at 31 December were as follows:
\nGermany
Switzerland
Other
\n2022
2021
2022
2021
2022
2021
\nDiscount rate
3.56%
1.03%
1.90%
0.30%
3.47% to 4.05%
0.29% to 1.22%
\nRate of price inflation
N/A
N/A
1.00%
0.50%
2.20% to 3.00%
1.20% to 2.00%
\nFuture salary increases
3.00%
2.00%
1.75%
1.75%
0.00% to 3.00%
0.00% to 3.00%
\nDiscount rates have increased in the year, driven by macroeconomic factors such as rising inflation levels, the war between
\nRussia and Ukraine and the energy crisis.
\nThe current mortality assumptions underlying the values of the obligations in the defined benefit plans were as follows:
\nGermany
Switzerland
Other
\n2022
2021
2022
2021
2022
2021
\nLife expectancy at age 65
\nMale
18.6 years
17.5 years
22.8 years
22.7 years
23.9 years
20.5 years
\nFemale
22.0 years
20.9 years
24.6 years
24.5 years
27.9 years
24.0 years
\nLife expectancy at age 65
\nin 20 years' time
\nMale
21.4 years
20.2 years
25.1 years
25.0 years
24.9 years
21.7 years
\nFemale
24.3 years
23.1 years
26.6 years
26.5 years
28.9 years
25.1 years
\nSensitivity analysis
\nThe effect of movements in the key actuarial assumptions in respect of the Germany and Switzerland plans at 31 December 2022
\nwould be an (increase)/decrease to the defined benefit asset/liabilities as follows:
\nGermany
Switzerland
\nIncrease 0.5%
Decrease 0.5%
Increase 0.5%
Decrease 0.5%
\nDiscount rate
0.7
(0.7)
1.1
(0.8)
\nInflation
N/A
N/A
(0.2)
0.6
\nFuture salary increases
N/A
N/A
(0.1)
0.4
\n1 year increase
1 year decrease
1 year increase
1 year decrease
\nLife expectancy
(0.1)
0.2
(0.1)
0.3
\nFuture funding
\nPayments expected to be made by the Group to its defined benefit pension plans in the year ended 31 December 2023 are
\nas follows:
\nGermany
\n$m
\nSwitzerland
\n$m
\nOther
\n$m
\nTotal
\n$m
\nExpected payments
0.1
0.7
\u2013
0.8 ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfEmployeeBenefitsExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f27007": {
"value": "Accounting policy Defined contribution pension plans
\nPayments to defined contribution pension plans are recognised as an expense when employees have rendered service
\nentitling them to the contributions. Payments made to state-managed retirement benefit plans are treated as payments
\nto defined contribution pension plans where the Group\u2019s obligations under the plans are equivalent to those arising in a
\ndefined contribution pension plan.
\nDefined benefit pension plans
\nThe Group records an asset or liability related to its defined benefit pension plans as the difference between the fair
\nvalue of the plan assets and the present value of the plan liabilities. The obligations of the plans are calculated using the
\nProjected Unit Credit Method, with actuarial valuations being performed by an independent actuary at the end of each
\nreporting period. The valuation requires estimates and judgements to be made to calculate the Group\u2019s liabilities, and
\nresults in actuarial gains and losses being recorded.
\nActuarial gains and losses, movements in the return on plan assets (excluding interest) and the impact of the asset ceiling
\n(if applicable) are recognised immediately in the Consolidated Statement of Financial Position with a charge or credit to
\nthe Consolidated Statement of Comprehensive Income. Remeasurements recorded in the Consolidated Statement of
\nComprehensive Income are not subsequently reclassified to the Consolidated Income Statement.
\nPast service cost is recognised in the Consolidated Income Statement in the period of plan amendment, where relevant.
\nNet interest is calculated by applying a discount rate to the net defined benefit liability or asset.
\nThe assets of the plans are held at fair value, which is equal to market value, and are held in separate trustee-administered
\nfunds or similar structures in the countries concerned. Surplus assets within the plan are only recognised to the extent
\nthat they are recoverable in accordance with IFRIC Interpretation 14,
IAS 19 \u2013 The Limit on a Defined Benefit Asset, Minimum
\nFunding Requirements and their Interaction
(IFRIC 14).",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f27575": {
"value": "16. CAPITAL STRUCTURE AND NET DEBT The capital structure of the Group at 31 December was as follows:
\n2022
\n$m
\n2021
\n$m
\nBorrowings (Note 21)
1,211.9
1,344.6
\nLess: Cash and cash equivalents (Note 22)
(143.8)
(463.4)
\nNet debt (excluding lease liabilities)
1,068.1
881.2
\nEquity
1,609.7
1,694.8
\nTotal capital
2,677.8
2,576.0
\nThe Group's capital structure is managed to provide ongoing returns to shareholders and service debt obligations, whilst
\nmaintaining maximum operational flexibility. Refer to pages 30 to 38 in the Financial review for discussion of the Group's
\nsources and uses of cash.",
"dimensions": {
"concept": "ctec:DisclosureOfCapitalStructureAndNetDebtTextBlock",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f27602": {
"value": "17. SHARE CAPITAL AND RESERVES Share capital
\nCalled up share capital is the total number of shares in issue at their par value. The rights attaching to the ordinary shares
\nare uniform in all respects. They form a single class for all purposes, including with respect to voting and for all dividends
\nand other distributions thereafter declared, made or paid on the ordinary share capital of the Group. Incremental costs
\ndirectly attributable to the issue of new ordinary shares are shown in equity as a deduction from the proceeds, net of tax.
\nRepurchased shares are classified as own shares and are disclosed in the own shares reserve.
\nShare premium
\nThe share premium represents amounts received in excess of the nominal value of the ordinary shares.
\nOwn shares
\nOwn shares are ordinary shares in the Group purchased and held by an Employee Benefit Trust to satisfy obligations under
\nthe Group's employee share ownership programmes.
\nWhen any Group company purchases the Company\u2019s equity share capital (own shares), the consideration paid, including
\nany directly attributable incremental costs (net of tax), is deducted from equity until the shares are cancelled, reissued
\nor disposed of. Where such shares are subsequently sold or reissued, any consideration received, net of any directly
\nattributable costs and the related tax effects, is recognised in equity and the resulting surplus or deficit on the transaction
\nis presented within share premium.
\nMerger reserve
\nIn 2016, the Consolidated Financial Statements were prepared under merger accounting principles. Under these principles,
\nno acquirer was required to be identified and all entities were included at their pre-combination carrying amounts. This
\naccounting treatment led to differences on consolidation between issued share capital and the book value of the
\nunderlying net assets. This difference is included within equity as a merger reserve.
\nCumulative translation reserve
\nThe foreign currency translation reserve is used to record exchange differences arising from the translation of the financial
\nstatements of foreign subsidiaries.
\nOther reserves
\nOther reserves comprises the cumulative changes in the effective portion of cash flow hedges, cost of hedging,
\nremeasurement of defined benefit plans and the share-based payment reserve.
\n199
Convatec Group Plc Annual Report and Accounts 2022
\nAdditional information
Governance
Strategic report
Overview
Financial statements
17. SHARE CAPITAL AND RESERVES (CONTINUED)
\nShare capital
\nShares were allotted during the year in respect of the Group's scrip dividend offering. The movements in ordinary shares of
\n10 pence each were as follows:
\nIssued and fully paid or credited as fully paid
\nOrdinary shares
\nnumber
\nShare capital
\n$m
\nShare premium
\n$m
\n1 January 2021
2,004,347,138
245.5
115.3
\nIssue of new shares for Scrip Scheme \u2013 2020 final dividend
9,475,532
1.3
24.8
\nIssue of new shares for Scrip Scheme \u2013 2021 interim dividend
750,265
0.2
2.2
\n10,225,797
1.5
27.0
\n31 December 2021
2,014,572,935
247.0
142.3
\nIssue of new shares for Employee Benefit Trust
20,000,000
2.6
\u2013
\nIssue of new shares for Scrip Scheme \u2013 2021 final dividend
7,192,010
0.9
18.0
\nIssue of new shares for Scrip Scheme \u2013 2022 interim dividend
2,107,103
0.2
5.4
\n29,299,113
3.7
23.4
\n31 December 2022
2,043,872,048
250.7
165.7
\nAt 31 December 2022, 10,975,451 shares (2021: 742,756 shares) were held in the Employee Benefit Trust. The market value of
\nown shares at 31 December 2022 was $30.8 million (2021: $1.9 million).
\nOther reserves
\nOther reserves include the share-based payment reserve of $155.0 million (2021: $135.3 million) and remeasurement of defined
\nbenefit obligations of $4.8 million (2021: $3.6 million loss), a transfer between reserves of $0.5 million (2021: nil) and the
\neffective portion of cash flow hedges of $4.9 million (2021: $5.2 million loss). A reconciliation of movements in all reserves
\nis provided in the Consolidated Statement of Changes in Equity.
\nDistributable reserves
\nRetained and realised distributable reserves equates to the retained surplus of Convatec Group Plc as set out in the
\nCompany Financial Statements on page 218. At 31 December 2022, the retained surplus of the Company was $1,562.9 million
\n(2021: $1,590.3 million). The capacity of the Company to make dividend payments is primarily determined by the availability
\nof these retained and realised distributable reserves and the Group's cash resources including available borrowing facilities.
\nCumulative translation reserve
\nDuring the year to 31 December 2022, the Group disposed of a subsidiary as part of the exit from all hospital care and related
\nindustrial sales activities. The cumulative amount of exchange differences relating to this foreign operation of $12.2 million,
\nrecognised in other comprehensive income, has been reclassified from equity to the Consolidated Income Statement, within
\nnon-operating expense (Note 5).",
"dimensions": {
"concept": "ifrs-full:DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f27604": {
"value": "Share capital
\nCalled up share capital is the total number of shares in issue at their par value. The rights attaching to the ordinary shares
\nare uniform in all respects. They form a single class for all purposes, including with respect to voting and for all dividends
\nand other distributions thereafter declared, made or paid on the ordinary share capital of the Group. Incremental costs
\ndirectly attributable to the issue of new ordinary shares are shown in equity as a deduction from the proceeds, net of tax.
\nRepurchased shares are classified as own shares and are disclosed in the own shares reserve.
Share capital
\nShares were allotted during the year in respect of the Group's scrip dividend offering. The movements in ordinary shares of
\n10 pence each were as follows:
\nIssued and fully paid or credited as fully paid
\nOrdinary shares
\nnumber
\nShare capital
\n$m
\nShare premium
\n$m
\n1 January 2021
2,004,347,138
245.5
115.3
\nIssue of new shares for Scrip Scheme \u2013 2020 final dividend
9,475,532
1.3
24.8
\nIssue of new shares for Scrip Scheme \u2013 2021 interim dividend
750,265
0.2
2.2
\n10,225,797
1.5
27.0
\n31 December 2021
2,014,572,935
247.0
142.3
\nIssue of new shares for Employee Benefit Trust
20,000,000
2.6
\u2013
\nIssue of new shares for Scrip Scheme \u2013 2021 final dividend
7,192,010
0.9
18.0
\nIssue of new shares for Scrip Scheme \u2013 2022 interim dividend
2,107,103
0.2
5.4
\n29,299,113
3.7
23.4
\n31 December 2022
2,043,872,048
250.7
165.7
\nAt 31 December 2022, 10,975,451 shares (2021: 742,756 shares) were held in the Employee Benefit Trust. The market value of
\nown shares at 31 December 2022 was $30.8 million (2021: $1.9 million).
",
"dimensions": {
"concept": "ifrs-full:DisclosureOfIssuedCapitalExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f27614": {
"value": "Own shares Own shares are ordinary shares in the Group purchased and held by an Employee Benefit Trust to satisfy obligations under
\nthe Group's employee share ownership programmes.
\nWhen any Group company purchases the Company\u2019s equity share capital (own shares), the consideration paid, including
\nany directly attributable incremental costs (net of tax), is deducted from equity until the shares are cancelled, reissued
\nor disposed of. Where such shares are subsequently sold or reissued, any consideration received, net of any directly
\nattributable costs and the related tax effects, is recognised in equity and the resulting surplus or deficit on the transaction
\nis presented within share premium. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfTreasurySharesExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f27624": {
"value": "Merger reserve
\nIn 2016, the Consolidated Financial Statements were prepared under merger accounting principles. Under these principles,
\nno acquirer was required to be identified and all entities were included at their pre-combination carrying amounts. This
\naccounting treatment led to differences on consolidation between issued share capital and the book value of the
\nunderlying net assets. This difference is included within equity as a merger reserve.
\nCumulative translation reserve
\nThe foreign currency translation reserve is used to record exchange differences arising from the translation of the financial
\nstatements of foreign subsidiaries.
\nOther reserves
\nOther reserves comprises the cumulative changes in the effective portion of cash flow hedges, cost of hedging,
\nremeasurement of defined benefit plans and the share-based payment reserve.
Other reserves
\nOther reserves include the share-based payment reserve of $155.0 million (2021: $135.3 million) and remeasurement of defined
\nbenefit obligations of $4.8 million (2021: $3.6 million loss), a transfer between reserves of $0.5 million (2021: nil) and the
\neffective portion of cash flow hedges of $4.9 million (2021: $5.2 million loss). A reconciliation of movements in all reserves
\nis provided in the Consolidated Statement of Changes in Equity.
\nDistributable reserves
\nRetained and realised distributable reserves equates to the retained surplus of Convatec Group Plc as set out in the
\nCompany Financial Statements on page 218. At 31 December 2022, the retained surplus of the Company was $1,562.9 million
\n(2021: $1,590.3 million). The capacity of the Company to make dividend payments is primarily determined by the availability
\nof these retained and realised distributable reserves and the Group's cash resources including available borrowing facilities.
\nCumulative translation reserve
\nDuring the year to 31 December 2022, the Group disposed of a subsidiary as part of the exit from all hospital care and related
\nindustrial sales activities. The cumulative amount of exchange differences relating to this foreign operation of $12.2 million,
\nrecognised in other comprehensive income, has been reclassified from equity to the Consolidated Income Statement, within
\nnon-operating expense (Note 5).
",
"dimensions": {
"concept": "ifrs-full:DisclosureOfReservesAndOtherEquityInterestExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f27725": {
"value": "18. DIVIDENDS The Group ensures that adequate realised distributable reserves are available in the Company in order to meet proposed
\nshareholder dividends, and the purchase of shares for employee share scheme incentives. The Company principally
\nderives distributable reserves from dividends received from subsidiary companies.
\nIn determining the level of dividend for the year, the Board considers the following factors and risks that may influence
\nthe proposed dividend:
\n\u2022
The underlying performance of the business;
\n\u2022
The Board\u2019s confidence in the Group\u2019s future growth prospects;
\n\u2022
Availability of realised distributable reserves;
\n\u2022
Available cash resources and commitments;
\n\u2022
Strategic opportunities and investments, in line with the Group\u2019s strategic plan; and
\n\u2022
Principal risks of the Group (as disclosed on pages 92 to 97).
\nThe Board paid the 2021 final dividend in May 2022 and the 2022 interim dividend in October 2022. The Board has taken
\ninto consideration balancing the return to shareholders with investment in the business. The decision to increase the
\ndividend for 2022 by 3.0% reflects the Board\u2019s confidence in the future performance of the Group and the underlying
\nfinancial strength, distributable reserves position and cash generation of the Group. Detail of the Group\u2019s considerations
\nand rationale for its policy in respect of the dividend distribution is given in the Directors\u2019 report on page 162.
\nAccounting policy
\nDividends paid are included in the Group Consolidated Financial Statements at the earlier of payment of the dividends or,
\nin respect of the Company\u2019s final dividend for the year, on approval by shareholders.
\nThe Company operates a scrip dividend scheme, allowing shareholders to elect to receive their dividend in the form of new fully
\npaid ordinary shares. For any particular dividend, the Directors may decide whether or not to make the scrip offer available.
\nNotes to the Consolidated Financial Statements
continued
\nConvatec Group Plc Annual Report and Accounts 2022
200
\nFinancial statements
Dividends paid and proposed were as follows:
\nPence
\nper share
\nCents
\nper share
\nTotal
\n$m
\nSettled in cash
\n$m
\nSettled via scrip
\n$m
\nNo of scrip shares
\nissued
\nFinal dividend 2020
2.845
3.983
79.7
53.6
26.1
9,475,532
\nInterim dividend 2021
1.229
1.717
34.6
32.2
2.4
750,265
\nPaid in 2021
4.074
5.700
114.3
85.8
28.5
10,225,797
\nFinal dividend 2021
3.161
4.154
77.8
58.9
18.9
7,192,010
\nInterim dividend 2022
1.410
1.717
34.8
29.2
5.6
2,107,103
\nPaid in 2022
4.571
5.871
112.6
88.1
24.5
9,299,113
\nFinal dividend 2022 proposed
3.657
4.330
88.5
\nThe final dividend proposed for 2022, to be distributed on 25 May 2023 to shareholders on the register at the close of
\nbusiness on 11 April 2023, is based upon the issued and fully paid share capital as at 31 December 2022 and is subject to
\nshareholder approval at the Annual General Meeting on 18 May 2023. The dividend will be declared in US dollars and will
\nbe paid in Sterling at the chosen exchange rate of $1.184/\u00a31.00 determined on 8 March 2023.
\nThe Company operates a scrip dividend scheme allowing shareholders to elect to receive their dividends in the form of
\nnew fully paid ordinary shares. For any particular dividend, the Directors may decide whether or not to make the scrip offer
\navailable. A scrip dividend alternative will be offered allowing shareholders to elect by 3 May 2023 to receive their dividend
\nin the form of new ordinary shares.
\nThe interim and final dividends for 2022 give a total dividend for the year of 6.047 cents per share, an increase of 3.0% over the
\nprior year (2021: 5.871 cents per share).",
"dimensions": {
"concept": "ifrs-full:DisclosureOfDividendsExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f27750": {
"value": "Accounting policy Dividends paid are included in the Group Consolidated Financial Statements at the earlier of payment of the dividends or,
\nin respect of the Company\u2019s final dividend for the year, on approval by shareholders.
\nThe Company operates a scrip dividend scheme, allowing shareholders to elect to receive their dividend in the form of new fully
\npaid ordinary shares. For any particular dividend, the Directors may decide whether or not to make the scrip offer available.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForDividendsExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f27845": {
"value": "19. SHARE-BASED PAYMENTS The Group operates a number of plans used to award shares to Executive Directors and other senior employees as part
\nof their remuneration package. A charge is recognised over the vesting period in the Consolidated Income Statement to
\nrecord the cost of these, based on the fair value of the award at the grant date.
\nThe Group\u2019s share-based payment schemes in place are as follows:
\nLong Term Incentive Plan (LTIP)
\nProvides Performance Share Plan (PSP) awards subject to Group performance and market conditions and Restricted Stock
\nUnits (RSU) subject only to remaining employed up to the vesting date. Details on share-based payments in relation to
\nExecutive Directors is set out on page 146.
\nDeferred Bonus Plan (DBP)
\nProvides for the grant of share awards to defer a portion of the participant\u2019s bonus as determined by the Remuneration
\nCommittee. The awards vest subject only to remaining employed up to the vesting date.
\nShare Plan (SP)
\nProvides for the grant of discretionary share awards. Awards granted in 2022 will vest to employees still employed on the
\nvesting date.
\nEmployee Plans
\nThe Group also operates Employee Plans which provide eligible employees the opportunity to save up to \u00a3500 per month
\n(or local currency equivalent) with an option to acquire shares using these savings at a 15% discount to the market price at
\ndate of grant. The Employee Plans are available to employees under the following schemes:
\n\u2022
Save-As-You-Earn (SAYE)
\u2013 Available to all employees in the UK employed by participating Group companies.
\n\u2022
Employee Stock Purchase Plan (ESPP)
\u2013 Available to all employees in the US.
\n\u2022
International Share Save Plan
\u2013 Available to all employees in certain countries in the rest of the world.
\nAccounting policy
\nEquity-settled share-based payment awards are measured at the fair value of the award on the grant date, excluding the
\neffect of non-market-based vesting conditions. The fair value of the awards at the date of the grant is expensed to the
\nConsolidated Income Statement over the vesting period on a straight-line basis.
\nAppropriate adjustments are made to reflect expected and actual forfeitures during the vesting period due to
\nuncertainties in satisfying service conditions or non-market performance conditions. The corresponding credit is to other
\nreserves in the Consolidated Statement of Financial Position.
\n201
Convatec Group Plc Annual Report and Accounts 2022
\nAdditional information
Governance
Strategic report
Overview
Financial statements
19. SHARE-BASED PAYMENTS (CONTINUED)
\nShare-based payment expenses recognised in the Consolidated Income Statement as follows:
\n2022
\n$m
\n2021
\n$m
\nLTIP
10.8
11.6
\nSP
3.0
2.1
\nDBP
1.6
1.4
\nEmployee Plans
1.3
1.3
\n16.7
16.4
\nDuring the year to 31 December 2022, $16.6 million (2021: $16.4 million) of share-based payment was equity-settled and $0.1 million
\n(2021: nil) was cash-settled. All amounts that were equity-settled were recognised in Other reserves, with the amounts that were
\ncash-settled recognised through other liabilities.
\nAwards outstanding
\nThe movements in the number of share and share option awards and the weighted average exercise price of share options are
\ndetailed below:
\n2022
2021
\nNumber of
\nshares/
\noptions
\n000's
\nWeighted
\naverage exercise
\nprice of options
\n\u00a3 per share
\nNumber of
\nshares/
\noptions
\n000's
\nWeighted
\naverage exercise
\nprice
\n\u00a3 per share
\nOutstanding at 1 January
33,707
0.43
30,472
0.51
\nGranted
14,225
0.32
13,190
0.33
\nForfeited
(7,728)
0.48
(8,265)
0.53
\nExercised
(9,404)
0.54
(1,690)
0.46
\nOutstanding at 31 December
30,800
0.33
33,707
0.43
\nExercisable at 31 December
993
1.33
826
1.80
\nWeighted average fair value of awards granted (\u00a3 per share)
\u2013
1.18
\u2013
1.18
\nThe average share price during 2022 was \u00a32.11 (2021: \u00a32.15). The share price of the Company at 31 December 2022 was \u00a32.33.
\nThe range of exercise prices and the weighted average remaining contractual life of options outstanding at 31 December were
\nas follows:
\nRange of prices
\n2022
\nNumber of
\nshares/
\noptions
\n000's
\n2021
\nNumber of
\nshares/
\noptions
\n000's
\nNil
24,990
24,198
\n1.21
788
5,338
\n1.74
2,511
\u2013
\n1.76
1,108
1,344
\n1.84
18
755
\n2.08
1,385
2,072
\n30,800
33,707
\nWeighted average remaining contractual life of options outstanding
2.2 years
1.9 years
\nNotes to the Consolidated Financial Statements
continued
\nConvatec Group Plc Annual Report and Accounts 2022
202
\nFinancial statements
Valuation assumptions
\nAll share awards granted are valued directly by reference to the share price at date of grant except:
\n\u2022
PSP shares awarded under the LTIP plans are subject to both market-based measures and non-market-based measures.
\nValues under the market-based element are based on relative Total Shareholder Return (TSR) performance conditions and
\nare valued using a Monte Carlo simulation.
\n\u2022
Options granted under the Employee Plans are valued using the Black-Scholes model.
\nThe principal assumptions used in these valuations were:
\n2022
2021
\nLTIP
\nSAYE &
\nInternational
\nShare Save Plan
ESPP
LTIP
\nSAYE &
\nInternational
\nShare Save Plan
ESPP
\nShare price at date of grant
\u00a31.79
\u00a32.13
\u00a31.99
\u00a31.92
\u00a32.44
\u00a32.44
\nExercise price
nil
\u00a31.74
\u00a31.74
nil
\u00a32.08
\u00a32.08
\nExpected life
3.0 years
3.6 years
2.0 years
3.0 years
3.6 years
2.0 years
\nExpected volatility
\n1
\n28.7%
28.7%
28.7%
40.6%
40.6%
40.6%
\nRisk-free rate
1.3%
1.3%
1.3%
0.1%
0.1%
0.1%
\nDividend yield
2.5%
2.5%
2.5%
2.1%
2.1%
2.1%
\nFair value
\u00a31.03
\u00a30.36
\u00a30.33
\u00a31.00
\u00a30.54
\u00a30.48
\n1.
The expected volatility was determined by calculating the observed historical volatility of share prices of peer group companies (including the Company) over the
\nexpected life of the share award. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfSharebasedPaymentArrangementsExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f27875": {
"value": "Accounting policy Equity-settled share-based payment awards are measured at the fair value of the award on the grant date, excluding the
\neffect of non-market-based vesting conditions. The fair value of the awards at the date of the grant is expensed to the
\nConsolidated Income Statement over the vesting period on a straight-line basis.
\nAppropriate adjustments are made to reflect expected and actual forfeitures during the vesting period due to
\nuncertainties in satisfying service conditions or non-market performance conditions. The corresponding credit is to other
\nreserves in the Consolidated Statement of Financial Position.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForSharebasedPaymentTransactionsExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f28111": {
"value": "20. FINANCIAL RISK MANAGEMENT The Group\u2019s treasury policy seeks to minimise the Group's principal financial risks. No trading or speculative transactions in
\nfinancial instruments are undertaken. This note presents information about the Group\u2019s exposure to financial risks and the
\nGroup\u2019s objectives, policies and processes for measuring and managing risks.
\nFinancial risk management objectives
\nBased on the global operations of the Group, management consider the key financial risks to be liquidity, foreign exchange,
\ninterest rate and counterparty credit. The management of counterparty credit risk is discussed in Note 12 \u2013 Trade and
\nother receivables.
\nLiquidity risk
\nLiquidity risk is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due. The Group
\nmanages and minimises liquidity risk by using global cash management solutions and actively monitoring both actual and
\nprojected cash outflows to ensure that it will have sufficient liquidity to meet its liabilities when due and have headroom to
\nprovide against unforeseen obligations. As at 31 December 2022, the Group held cash and cash equivalents of $143.8 million
\n(2021: $463.4 million), of which 74.5% was held centrally.
\nOn 15 November 2022, the Group refinanced its existing bank facilities with $1.2 billion of committed bank lending, comprising a
\nmulticurrency revolving credit facility of $950.0 million and a term loan of $250.0 million, both with a maturity in November 2027.
\nThe Group\u2019s $500.0 million senior unsecured notes remain in place, with maturity in October 2029. As at 31 December 2022,
\n$472.8 million of the multicurrency revolving credit facility remained undrawn.
\nMedium and long-term borrowing requirements are met through committed bank facilities and capital market funding as
\ndetailed in Note 21 \u2013 Borrowings. Short-term borrowing requirements, if necessary, may be met from drawings under the
\nmulticurrency facility.
\nLonger term, the Group has assessed its liquidity forecast as part of the viability assessment and its ability to continue
\ntrading as a going concern. For further detail on the Group's assessment of liquidity risk, refer to the Viability statement
\non pages 98 and 99.
\nForeign exchange risk
\nAs a result of the global nature of operations, the Group is exposed to market risk arising from changes in foreign currency
\nexchange rates.
\nWhere possible, the Group manages foreign exchange risk by matching same currency revenues and expenses. It will also
\ndenominate debt in certain currencies and use foreign exchange forward contracts and swap contracts to further minimise
\ntransactional foreign exchange risk, with certain currency contracts designated as cash flow hedges; refer to Note 23 \u2013
\nFinancial instruments for details. As a result, the impacts of the fluctuations in the market values of assets and liabilities
\nand the settlement of foreign currency transactions are reduced.
\n203
Convatec Group Plc Annual Report and Accounts 2022
\nAdditional information
Governance
Strategic report
Overview
Financial statements
20. FINANCIAL RISK MANAGEMENT (CONTINUED)
\nThe following table summarises the exchange rates used for the translation of currencies into US dollars that have the most
\nsignificant impact on the Group results:
\nCurrency
\nAverage rate/
\nClosing rate
2022
2021
\nUSD/EUR
Average
1.05
1.18
\nClosing
1.07
1.14
\nUSD/GBP
Average
1.24
1.38
\nClosing
1.20
1.35
\nUSD/DKK
Average
0.14
0.16
\nClosing
0.14
0.15
\nDuring 2022, revenue was mostly USD denominated (52%). Other significant currencies were EUR (20%), GBP (6%) and DKK
\n(2%). The balance comprises a basket of other currencies which, on an individual basis, were each less than 2% of revenue.
\nSensitivity analysis on foreign exchange risk
\nThe sensitivity analysis below assumes a 10% strengthening of the US dollar against the principal currencies to highlight the
\nsensitivity of profit before income taxes and total equity to translation foreign exchange risk as at 31 December, with all other
\nvariables held constant.
\nCurrency
Sensitivity
\n2022
\n$m
\n2021
\n$m
\nIncrease/(decrease) in profit before income taxes
\nUSD/GBP
+10%
4.0
0.1
\nUSD/EUR
+10%
(12.8)
(40.6)
\nUSD/DKK
+10%
(10.4)
(20.5)
\nDecrease/(increase) in total equity
\nUSD/GBP
+10%
(81.6)
(93.0)
\nUSD/EUR
+10%
(8.1)
6.5
\nUSD/DKK
+10%
(24.3)
(31.4)
\nInterest rate risk
\nThe Group\u2019s principal exposure to interest rate risk is in relation to interest expense on borrowings made under the Group's
\ncredit facilities which attract interest at floating rates plus a fixed margin as well as any cash or investments that result in
\ninterest income at floating rates. Floating rate instruments expose the Group to interest rate cash flow and expense risk.
\nThe Group manages this exposure on a net basis within Board-approved policy parameters, including the use of interest
\nrate swaps designated as cash flow hedges to maintain an appropriate mix between fixed and floating rate borrowings.
\nAs at 31 December 2022, the Group\u2019s borrowings were denominated in USD and Euros. Prior to refinancing in November 2022,
\ncredit facilities exposed the Group to USD LIBOR and EURIBOR reference rates. In line with IBOR reform, the facilities executed
\nin November 2022 referenced USD SOFR and EURIBOR. The Group\u2019s interest rate swaps of $275.0 million as at 31 December 2022,
\nwhich matured in January 2023 were referenced to USD LIBOR. As at the year end, the Group had also entered into forward
\nstarting interest rate swaps of $180.0 million, which are effective from January 2023, and these are referred to the SOFR
\nbenchmark (see Note 23 \u2013 Financial Instruments).
\nIBOR Reform
\nNon-derivative financial liabilities
\nIn November 2022, the Group refinanced its bank borrowings and as a result extinguished its existing non-derivative financial
\nliabilities linked to US LIBOR. The Group\u2019s new facilities are at floating rate and reflect IBOR reform. Whilst one of the Group\u2019s
\nfacilities is multicurrency, most borrowings are expected to be denominated in USD and EUR with the reference rates of SOFR
\nand EURIBOR, respectively.
\nIn July 2019, the Belgian Financial Services and Markets authority granted authorisation with respect to EURIBOR under
\nEuropean Union Benchmarks Regulation. This allows market participants to continue to use EURIBOR. The Group expects
\nEURIBOR will continue as the EUR benchmark for the foreseeable future.
\nDerivatives
\nAs of 31 December 2022, the Group held interest rate swaps for the purpose of risk management that are designated in cash
\nflow hedge relationships. The floating legs of these swaps are linked to both US LIBOR and SOFR. The Group\u2019s derivatives are
\ngoverned by contracts based on the master agreement of the International Swaps and Derivatives Association (ISDA).
\nAll interest rate swaps linked to US LIBOR had a maturity of January 2023. Interest rate swaps traded after November 2022
\nhave a floating rate linked to SOFR, aligned with the Group\u2019s facilities. See Note 23 \u2013 Financial Instruments.
\nNotes to the Consolidated Financial Statements
continued
\nConvatec Group Plc Annual Report and Accounts 2022
204
\nFinancial statements
Hedge accounting
\nAt the date of refinancing, the Group\u2019s existing bank borrowings were extinguished and replaced with drawings under the
\nnew facilities. Existing cash flow hedges were maintained as the underlying interest rate risk still existed and the hedging
\nrelationships continued to fulfil the requirements of IFRS 9.
\nSwaps with floating legs linked to SOFR have also been designated as cash flow hedges and will provide interest rate risk
\nmanagement beyond January 2023.
\nSensitivity analysis on interest rate risk
\nBased on the composition and the terms of the Group's borrowings as at 31 December 2022, and including the 0% interest
\nrate floor and after the effect of the interest rate swaps and cash, if interest rates were to increase or decrease by 100 basis
\npoints, the interest expense on borrowings would increase by $4.0 million (2021: $0.1 million) or decrease by $4.0 million
\n(2021: $2.3 million increase) assuming that all other variables remain constant and excluding any effect of tax. In 2021, the
\nimpact of the interest rate decrease is limited due to the 0% interest floor on the borrowings. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfFinancialRiskManagementExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f28121": {
"value": "Liquidity risk Liquidity risk is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due. The Group
\nmanages and minimises liquidity risk by using global cash management solutions and actively monitoring both actual and
\nprojected cash outflows to ensure that it will have sufficient liquidity to meet its liabilities when due and have headroom to
\nprovide against unforeseen obligations. As at 31 December 2022, the Group held cash and cash equivalents of $143.8 million
\n(2021: $463.4 million), of which 74.5% was held centrally.
\nOn 15 November 2022, the Group refinanced its existing bank facilities with $1.2 billion of committed bank lending, comprising a
\nmulticurrency revolving credit facility of $950.0 million and a term loan of $250.0 million, both with a maturity in November 2027.
\nThe Group\u2019s $500.0 million senior unsecured notes remain in place, with maturity in October 2029. As at 31 December 2022,
\n$472.8 million of the multicurrency revolving credit facility remained undrawn.
\nMedium and long-term borrowing requirements are met through committed bank facilities and capital market funding as
\ndetailed in Note 21 \u2013 Borrowings. Short-term borrowing requirements, if necessary, may be met from drawings under the
\nmulticurrency facility.
\nLonger term, the Group has assessed its liquidity forecast as part of the viability assessment and its ability to continue
\ntrading as a going concern. For further detail on the Group's assessment of liquidity risk, refer to the Viability statement
\non pages 98 and 99.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfLiquidityRiskExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f28140": {
"value": "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
\nexchange rates.
\nWhere possible, the Group manages foreign exchange risk by matching same currency revenues and expenses. It will also
\ndenominate debt in certain currencies and use foreign exchange forward contracts and swap contracts to further minimise
\ntransactional foreign exchange risk, with certain currency contracts designated as cash flow hedges; refer to Note 23 \u2013
\nFinancial instruments for details. As a result, the impacts of the fluctuations in the market values of assets and liabilities
\nand the settlement of foreign currency transactions are reduced.
\n203
Convatec Group Plc Annual Report and Accounts 2022
\nAdditional information
Governance
Strategic report
Overview
Financial statements
20. FINANCIAL RISK MANAGEMENT (CONTINUED)
\nThe following table summarises the exchange rates used for the translation of currencies into US dollars that have the most
\nsignificant impact on the Group results:
\nCurrency
\nAverage rate/
\nClosing rate
2022
2021
\nUSD/EUR
Average
1.05
1.18
\nClosing
1.07
1.14
\nUSD/GBP
Average
1.24
1.38
\nClosing
1.20
1.35
\nUSD/DKK
Average
0.14
0.16
\nClosing
0.14
0.15
\nDuring 2022, revenue was mostly USD denominated (52%). Other significant currencies were EUR (20%), GBP (6%) and DKK
\n(2%). The balance comprises a basket of other currencies which, on an individual basis, were each less than 2% of revenue.
\nSensitivity analysis on foreign exchange risk
\nThe sensitivity analysis below assumes a 10% strengthening of the US dollar against the principal currencies to highlight the
\nsensitivity of profit before income taxes and total equity to translation foreign exchange risk as at 31 December, with all other
\nvariables held constant.
\nCurrency
Sensitivity
\n2022
\n$m
\n2021
\n$m
\nIncrease/(decrease) in profit before income taxes
\nUSD/GBP
+10%
4.0
0.1
\nUSD/EUR
+10%
(12.8)
(40.6)
\nUSD/DKK
+10%
(10.4)
(20.5)
\nDecrease/(increase) in total equity
\nUSD/GBP
+10%
(81.6)
(93.0)
\nUSD/EUR
+10%
(8.1)
6.5
\nUSD/DKK
+10%
(24.3)
(31.4) ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfEffectOfChangesInForeignExchangeRatesExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f28294": {
"value": "21. BORROWINGS The Group\u2019s sources of borrowing for funding and liquidity purposes derive from senior notes and credit facilities,
\nincluding a committed revolving credit facility.
\nIn November 2022, the Group refinanced its bank facilities with $1.2 billion committed for a five-year term. The Group\u2019s
\n2029 unsecured senior notes of $500.0 million remain in place.
\nAccounting policy
\nBorrowings are recognised at fair value less directly attributable costs on the date that they are entered into and
\nsubsequently measured at amortised cost using the effective interest rate method. Borrowing costs directly attributable
\nto the facility are capitalised and amortised over the period of the loan.
\nThe effective interest rate method is a method of calculating the amortised cost of a financial liability and allocating the
\ninterest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future
\ncash payments through the expected life of the financial liability, or, where appropriate, a shorter period, to the net
\ncarrying amount on initial recognition.
\nBorrowings are classified as non-current when the repayment date is more than 12 months from the period-end date or
\nwhere they are drawn on a facility with more than 12 months to expiry.
\nThe Group derecognises borrowings when its contractual obligations are discharged, terminated or expired.
\nFair value measurement
\nBorrowings are classified as Level 1 or Level 2 in the fair value hierarchy in accordance with IFRS 13, Fair Value Measurements,
\nbased upon the degree to which the fair value movements are observable.
\nThe Group's borrowings as at 31 December were as follows:
\nCurrency
\nYear of
\nmaturity
\n2022
\nFace value
\n$m
\n2021
\nFace value
\n$m
\nRevolving Credit Facility
\n1
\nUSD/Euro
2027
477.2
\u2013
\nTerm Loan
USD
2027
250.0
\u2013
\nSenior Notes
USD
2029
500.0
500.0
\nRevolving Credit Facility
Multicurrency
2024
\u2013
\u2013
\nTerm Loan Facility A
\n2
\nUSD/Euro
2024
\u2013
461.2
\nTerm Loan Facility B
\n3
\nUSD/Euro
2024
\u2013
396.7
\nInterest-bearing borrowings
1,227.2
1,357.9
\nFinancing fees
\n4
\n(15.3)
(13.3)
\nTotal carrying value of borrowings
1,211.9
1,344.6
\nCurrent portion of borrowings
\u2013
144.8
\nNon-current portion of borrowings
1,211.9
1,199.8
\n1.
Included within the Revolving Credit Facility was \u20ac145.0 million ($155.2 million) at 31 December 2022 (2021: nil), representing 32.5% of RCF debt denominated in Euros
\nand 67.5% denominated in US dollars.
\n2.
Included within Term Loan Facility A as at 31 December 2021 was \u20ac78.4 million ($89.2 million) representing 19% of the loan denominated in Euros and 81%
\ndenominated in US dollars.
\n3.
Included within Term Loan Facility B as at 31 December 2021 was \u20ac67.5 million ($76.7 million), representing 19% of the loan denominated in Euros and 81%
\ndenominated in US dollars.
\n4.
Financing fees of $15.3 million (2021: $13.3 million) related to the remaining unamortised fees incurred on the credit facilities of $8.4 million (2021: $5.4 million) and on
\nthe senior notes of $6.9 million (2021: $7.9 million).
\n205
Convatec Group Plc Annual Report and Accounts 2022
\nAdditional information
Governance
Strategic report
Overview
Financial statements
21. BORROWINGS (CONTINUED)
\nCredit facilities
\nThe credit facilities held by the Group are committed and available for the refinancing of certain existing financial
\nindebtedness and general corporate purposes. On 15 November 2022, the Group refinanced its credit facilities. The original
\nfacilities, maturing in October 2024 and, consisting of two five-year multicurrency term loans totalling $1.5 billion and an
\nundrawn $200.0 million multicurrency revolving credit facility, were settled and extinguished respectively on refinancing.
\nDuring the year and until the refinancing activity, $27.5 million (2021: $88.4 million) was repaid in accordance with the
\nrepayment schedule for the original facilities.
\nThe new credit facility for $1.2 billion comprises of a $250.0 million term loan and a $950.0 million multicurrency revolving
\ncredit facility, both committed for a five-year term. As at 31 December 2022, the term loan was fully drawn and $477.2 million
\nof the revolving credit facility was drawn, with $472.8 million undrawn.
\nTransaction costs directly attributable to the refinancing have been capitalised and are amortised over the term of the facility
\nusing the effective interest rate method. Unamortised deferred financing fees of $2.7 million associated with the previous credit
\nagreement have been written off to the Consolidated Income Statement in 2022 (refer to Note 25 \u2013 Finance income and expense).
\nThe principal financial covenants are based on a permitted net debt to covenant-adjusted EBITDA
\n1
\nratio and interest cover
\ntest as defined in the credit facilities agreement. Testing is required on a semi-annual basis, at June and December, based on
\nthe last 12 months\u2019 financial performance. At 31 December 2022, the permitted net debt to covenant-adjusted EBITDA
\n1
\nratio
\nwas a maximum of 3.50 times and the interest cover a minimum of 3.50 times, terms as defined by the credit facilities
\nagreement. In accordance with the credit facilities agreement, the net debt to covenant-adjusted EBITDA
\n1
\nratio can increase
\ntoa maximum 4.00 times for permitted acquisitions or investments.
\nSenior notes
\nUnsecured senior notes of $500.0 million were issued on 7 October 2021 with a maturity date of 15 October 2029 at a coupon
\nrate of 3.875% per annum, payable semi-annually and, except for certain options redemption conditions, is not redeemable
\nat the issuer\u2019s option prior to 7 October 2024. The Group\u2019s refinancing activity did not affect the senior notes.
\nThe senior notes are subject to a financial covenant which is an interest cover test (minimum of 2 times) as defined in the
\nindenture. Testing is required annually based on the last 12 calendar months\u2019 financial performance.
\nFinancial covenants
\nThe Group was in compliance with all financial and non-financial covenants at 31 December 2022, with significant available
\nheadroom on the financial covenants (in excess of $588.0 million debt headroom on net debt to covenant-adjusted EBITDA
\n1
\n).
\nExcluding the impact of interest rate swaps, the weighted average interest rate on borrowings for the year ended
\n31 December 2022 was 3.4% (2021: 2.0%). The increase in the weighted average interest rate was due to rising underlying
\nreference base rates on debt with floating rates and a full year of interest on the senior notes issued in 2021.
\nBorrowings not measured at fair value
\nThe senior notes are listed and their fair value at 31 December 2022 of $430.8 million (2021: $507.7 million) has been obtained
\nfrom quoted market data and therefore categorised as a Level 1 measurement in the fair value hierarchy under IFRS 13,
Fair
\nValue Measurements
. For the Group\u2019s other borrowings, the fair value is based on discounted cash flows using a current
\nborrowing rate and is categorised as a Level 2 measurement. At 31 December 2022, the estimated fair value of the Group's
\nother borrowings was $762.4 million (2021: $847.3 million).
\n1.
Covenant-adjusted EBITDA is calculated based on terms as defined in the credit facilities agreement. This is different to adjusted EBITDA, which is an alternative
\nperformance measure (APM) as disclosed on pages 224 to 228.
\nNotes to the Consolidated Financial Statements
continued
\nConvatec Group Plc Annual Report and Accounts 2022
206
\nFinancial statements
Maturity of financial liabilitiesS
\nThe contractual undiscounted future cash flows, including contractual interest payments, related to the Group's financial
\nliabilities were as follows:
\nContractual cash flows
\nWithin 1
\nyear
\nor on
\ndemand
\n$m
\n1 to 2
\nyears
\n$m
\n2 to 3
\nyears
\n$m
\n3 to 4
\nyears
\n$m
\n4 to 5
\nyears
\n$m
\nMore than
\n5 years
\n$m
\nTotal
\n$m
\nCarrying
\namount
\n$m
\nAt 31 December 2022
\nBorrowings
57.5
55.2
50.8
50.2
777.8
538.8
1,530.3
1,211.9
\nLease liabilities (Note 24)
22.7
17.8
13.1
9.8
7.9
94.2
165.5
88.3
\nTrade and other payables (Note 13)
346.6
\u2013
\u2013
\u2013
\u2013
\u2013
346.6
346.6
\nDerivative financial instruments (Note 23)
\nDerivative financial instruments payable
1,919.8
6.3
1.2
\u2013
\u2013
\u2013
1,927.3
32.5
\nDerivative financial instruments receivable
1,912.5
6.9
1.0
\u2013
\u2013
\u2013
1,920.4
26.6
\nAt 31 December 2021
\nBorrowings
184.7
182.0
591.2
19.4
19.4
558.1
1,554.8
1,344.6
\nLease liabilities (Note 24)
22.6
19.4
14.7
10.9
8.3
28.4
104.3
90.5
\nTrade and other payables (Note 13)
342.5
\u2013
\u2013
\u2013
\u2013
\u2013
342.5
342.5
\nDerivative financial instruments (Note 23)
\nDerivative financial instruments payable
1,723.4
2.9
\u2013
\u2013
\u2013
\u2013
1,726.3
14.6
\nDerivative financial instruments receivable
1,726.3
\u2013
\u2013
\u2013
\u2013
\u2013
1,726.3
15.1
\nReconciliation of movement in borrowings
\n2022
\n$m
\n2021
\n$m
\nBorrowings at 1 January
1,344.6
1,456.4
\nRepayment of borrowings
\n1
\n(842.5)
(583.9)
\nProceeds of new borrowings, net of financing fees
\n2
\n714.2
491.8
\nForeign exchange
(11.0)
(26.5)
\nNon-cash movements
\n3
\n6.6
6.8
\nBorrowings at 31 December
1,211.9
1,344.6
\n1.
In the year ended 31 December 2022, repayment of borrowings included the scheduled repayment instalment on Term Loan Facility A of $27.5 million (2021: $88.4 million)
\nand the full repayment of all term loans facilities of $815.0 million as part of the refinancing activity.
\n2.
On 15 November 2022, the Group entered into new revolving credit facilities and term loan facility. The transaction costs in respect of the refinancing activities were
\n$8.6 million. For the year ended 31 December 2021, 180 Medical, Inc. a wholly owned subsidiary of the Group, issued 8-year, non-call for 3 years unsecured senior notes
\nof $500.0 million in accordance with Rule 144A and Regulation S [under the Securities Act]. Transaction costs in respect of the issuance were $8.2 million.
\n3.
Non-cash movements were in respect of the amortisation of deferred financing fees associated with the borrowings and the $2.7 million write-off of the remaining
\nunamortised deferred financing fees following early termination of the Group\u2019s previous credit facilities. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfBorrowingsExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f28295": {
"value": "21. BORROWINGS The Group\u2019s sources of borrowing for funding and liquidity purposes derive from senior notes and credit facilities,
\nincluding a committed revolving credit facility.
\nIn November 2022, the Group refinanced its bank facilities with $1.2 billion committed for a five-year term. The Group\u2019s
\n2029 unsecured senior notes of $500.0 million remain in place.
\nAccounting policy
\nBorrowings are recognised at fair value less directly attributable costs on the date that they are entered into and
\nsubsequently measured at amortised cost using the effective interest rate method. Borrowing costs directly attributable
\nto the facility are capitalised and amortised over the period of the loan.
\nThe effective interest rate method is a method of calculating the amortised cost of a financial liability and allocating the
\ninterest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future
\ncash payments through the expected life of the financial liability, or, where appropriate, a shorter period, to the net
\ncarrying amount on initial recognition.
\nBorrowings are classified as non-current when the repayment date is more than 12 months from the period-end date or
\nwhere they are drawn on a facility with more than 12 months to expiry.
\nThe Group derecognises borrowings when its contractual obligations are discharged, terminated or expired.
\nFair value measurement
\nBorrowings are classified as Level 1 or Level 2 in the fair value hierarchy in accordance with IFRS 13, Fair Value Measurements,
\nbased upon the degree to which the fair value movements are observable.
\nThe Group's borrowings as at 31 December were as follows:
\nCurrency
\nYear of
\nmaturity
\n2022
\nFace value
\n$m
\n2021
\nFace value
\n$m
\nRevolving Credit Facility
\n1
\nUSD/Euro
2027
477.2
\u2013
\nTerm Loan
USD
2027
250.0
\u2013
\nSenior Notes
USD
2029
500.0
500.0
\nRevolving Credit Facility
Multicurrency
2024
\u2013
\u2013
\nTerm Loan Facility A
\n2
\nUSD/Euro
2024
\u2013
461.2
\nTerm Loan Facility B
\n3
\nUSD/Euro
2024
\u2013
396.7
\nInterest-bearing borrowings
1,227.2
1,357.9
\nFinancing fees
\n4
\n(15.3)
(13.3)
\nTotal carrying value of borrowings
1,211.9
1,344.6
\nCurrent portion of borrowings
\u2013
144.8
\nNon-current portion of borrowings
1,211.9
1,199.8
\n1.
Included within the Revolving Credit Facility was \u20ac145.0 million ($155.2 million) at 31 December 2022 (2021: nil), representing 32.5% of RCF debt denominated in Euros
\nand 67.5% denominated in US dollars.
\n2.
Included within Term Loan Facility A as at 31 December 2021 was \u20ac78.4 million ($89.2 million) representing 19% of the loan denominated in Euros and 81%
\ndenominated in US dollars.
\n3.
Included within Term Loan Facility B as at 31 December 2021 was \u20ac67.5 million ($76.7 million), representing 19% of the loan denominated in Euros and 81%
\ndenominated in US dollars.
\n4.
Financing fees of $15.3 million (2021: $13.3 million) related to the remaining unamortised fees incurred on the credit facilities of $8.4 million (2021: $5.4 million) and on
\nthe senior notes of $6.9 million (2021: $7.9 million).
\n205
Convatec Group Plc Annual Report and Accounts 2022
\nAdditional information
Governance
Strategic report
Overview
Financial statements
21. BORROWINGS (CONTINUED)
\nCredit facilities
\nThe credit facilities held by the Group are committed and available for the refinancing of certain existing financial
\nindebtedness and general corporate purposes. On 15 November 2022, the Group refinanced its credit facilities. The original
\nfacilities, maturing in October 2024 and, consisting of two five-year multicurrency term loans totalling $1.5 billion and an
\nundrawn $200.0 million multicurrency revolving credit facility, were settled and extinguished respectively on refinancing.
\nDuring the year and until the refinancing activity, $27.5 million (2021: $88.4 million) was repaid in accordance with the
\nrepayment schedule for the original facilities.
\nThe new credit facility for $1.2 billion comprises of a $250.0 million term loan and a $950.0 million multicurrency revolving
\ncredit facility, both committed for a five-year term. As at 31 December 2022, the term loan was fully drawn and $477.2 million
\nof the revolving credit facility was drawn, with $472.8 million undrawn.
\nTransaction costs directly attributable to the refinancing have been capitalised and are amortised over the term of the facility
\nusing the effective interest rate method. Unamortised deferred financing fees of $2.7 million associated with the previous credit
\nagreement have been written off to the Consolidated Income Statement in 2022 (refer to Note 25 \u2013 Finance income and expense).
\nThe principal financial covenants are based on a permitted net debt to covenant-adjusted EBITDA
\n1
\nratio and interest cover
\ntest as defined in the credit facilities agreement. Testing is required on a semi-annual basis, at June and December, based on
\nthe last 12 months\u2019 financial performance. At 31 December 2022, the permitted net debt to covenant-adjusted EBITDA
\n1
\nratio
\nwas a maximum of 3.50 times and the interest cover a minimum of 3.50 times, terms as defined by the credit facilities
\nagreement. In accordance with the credit facilities agreement, the net debt to covenant-adjusted EBITDA
\n1
\nratio can increase
\ntoa maximum 4.00 times for permitted acquisitions or investments.
\nSenior notes
\nUnsecured senior notes of $500.0 million were issued on 7 October 2021 with a maturity date of 15 October 2029 at a coupon
\nrate of 3.875% per annum, payable semi-annually and, except for certain options redemption conditions, is not redeemable
\nat the issuer\u2019s option prior to 7 October 2024. The Group\u2019s refinancing activity did not affect the senior notes.
\nThe senior notes are subject to a financial covenant which is an interest cover test (minimum of 2 times) as defined in the
\nindenture. Testing is required annually based on the last 12 calendar months\u2019 financial performance.
\nFinancial covenants
\nThe Group was in compliance with all financial and non-financial covenants at 31 December 2022, with significant available
\nheadroom on the financial covenants (in excess of $588.0 million debt headroom on net debt to covenant-adjusted EBITDA
\n1
\n).
\nExcluding the impact of interest rate swaps, the weighted average interest rate on borrowings for the year ended
\n31 December 2022 was 3.4% (2021: 2.0%). The increase in the weighted average interest rate was due to rising underlying
\nreference base rates on debt with floating rates and a full year of interest on the senior notes issued in 2021.
\nBorrowings not measured at fair value
\nThe senior notes are listed and their fair value at 31 December 2022 of $430.8 million (2021: $507.7 million) has been obtained
\nfrom quoted market data and therefore categorised as a Level 1 measurement in the fair value hierarchy under IFRS 13,
Fair
\nValue Measurements
. For the Group\u2019s other borrowings, the fair value is based on discounted cash flows using a current
\nborrowing rate and is categorised as a Level 2 measurement. At 31 December 2022, the estimated fair value of the Group's
\nother borrowings was $762.4 million (2021: $847.3 million).
\n1.
Covenant-adjusted EBITDA is calculated based on terms as defined in the credit facilities agreement. This is different to adjusted EBITDA, which is an alternative
\nperformance measure (APM) as disclosed on pages 224 to 228.
\nNotes to the Consolidated Financial Statements
continued
\nConvatec Group Plc Annual Report and Accounts 2022
206
\nFinancial statements
Maturity of financial liabilitiesS
\nThe contractual undiscounted future cash flows, including contractual interest payments, related to the Group's financial
\nliabilities were as follows:
\nContractual cash flows
\nWithin 1
\nyear
\nor on
\ndemand
\n$m
\n1 to 2
\nyears
\n$m
\n2 to 3
\nyears
\n$m
\n3 to 4
\nyears
\n$m
\n4 to 5
\nyears
\n$m
\nMore than
\n5 years
\n$m
\nTotal
\n$m
\nCarrying
\namount
\n$m
\nAt 31 December 2022
\nBorrowings
57.5
55.2
50.8
50.2
777.8
538.8
1,530.3
1,211.9
\nLease liabilities (Note 24)
22.7
17.8
13.1
9.8
7.9
94.2
165.5
88.3
\nTrade and other payables (Note 13)
346.6
\u2013
\u2013
\u2013
\u2013
\u2013
346.6
346.6
\nDerivative financial instruments (Note 23)
\nDerivative financial instruments payable
1,919.8
6.3
1.2
\u2013
\u2013
\u2013
1,927.3
32.5
\nDerivative financial instruments receivable
1,912.5
6.9
1.0
\u2013
\u2013
\u2013
1,920.4
26.6
\nAt 31 December 2021
\nBorrowings
184.7
182.0
591.2
19.4
19.4
558.1
1,554.8
1,344.6
\nLease liabilities (Note 24)
22.6
19.4
14.7
10.9
8.3
28.4
104.3
90.5
\nTrade and other payables (Note 13)
342.5
\u2013
\u2013
\u2013
\u2013
\u2013
342.5
342.5
\nDerivative financial instruments (Note 23)
\nDerivative financial instruments payable
1,723.4
2.9
\u2013
\u2013
\u2013
\u2013
1,726.3
14.6
\nDerivative financial instruments receivable
1,726.3
\u2013
\u2013
\u2013
\u2013
\u2013
1,726.3
15.1
\nReconciliation of movement in borrowings
\n2022
\n$m
\n2021
\n$m
\nBorrowings at 1 January
1,344.6
1,456.4
\nRepayment of borrowings
\n1
\n(842.5)
(583.9)
\nProceeds of new borrowings, net of financing fees
\n2
\n714.2
491.8
\nForeign exchange
(11.0)
(26.5)
\nNon-cash movements
\n3
\n6.6
6.8
\nBorrowings at 31 December
1,211.9
1,344.6
\n1.
In the year ended 31 December 2022, repayment of borrowings included the scheduled repayment instalment on Term Loan Facility A of $27.5 million (2021: $88.4 million)
\nand the full repayment of all term loans facilities of $815.0 million as part of the refinancing activity.
\n2.
On 15 November 2022, the Group entered into new revolving credit facilities and term loan facility. The transaction costs in respect of the refinancing activities were
\n$8.6 million. For the year ended 31 December 2021, 180 Medical, Inc. a wholly owned subsidiary of the Group, issued 8-year, non-call for 3 years unsecured senior notes
\nof $500.0 million in accordance with Rule 144A and Regulation S [under the Securities Act]. Transaction costs in respect of the issuance were $8.2 million.
\n3.
Non-cash movements were in respect of the amortisation of deferred financing fees associated with the borrowings and the $2.7 million write-off of the remaining
\nunamortised deferred financing fees following early termination of the Group\u2019s previous credit facilities.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfDebtSecuritiesExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f28305": {
"value": "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
\nto the facility are capitalised and amortised over the period of the loan.
\nThe effective interest rate method is a method of calculating the amortised cost of a financial liability and allocating the
\ninterest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future
\ncash payments through the expected life of the financial liability, or, where appropriate, a shorter period, to the net
\ncarrying amount on initial recognition.
\nBorrowings are classified as non-current when the repayment date is more than 12 months from the period-end date or
\nwhere they are drawn on a facility with more than 12 months to expiry.
\nThe Group derecognises borrowings when its contractual obligations are discharged, terminated or expired.
\nFair value measurement
\nBorrowings are classified as Level 1 or Level 2 in the fair value hierarchy in accordance with IFRS 13, Fair Value Measurements,
\nbased upon the degree to which the fair value movements are observable.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForBorrowingsExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f28658": {
"value": "22. CASH, CASH EQUIVALENTS AND RESTRICTED CASH Cash held at bank is used for the Group's day-to-day operations. The Group utilises bank deposits or money market funds
\nwhich have a maturity of three months or less as liquid investments that enable short-term liquidity requirements to be met.
\nAccounting policy
\nCash and cash equivalents comprise cash in hand and current balances with banks and similar institutions. All liquid
\ninvestments, including term deposits and money market funds, have original maturities of three months or less, are
\nsubject to insignificant risk of changes in value and are repayable within one business day with no significant loss of
\ninterest, resulting in classification as cash equivalents.
\nCash at bank earns interest at rates based on daily bank deposit rates. Term deposits and money market funds earn
\ninterest at the respective short-term deposit rate.
\nCash and cash equivalents at 31 December 2022 included $19.2 million (2021: $37.5 million) of cash held in territories where
\nthere are restrictions related to timely repatriation. The amounts meet the definition of cash and cash equivalents but are
\nnot deemed to be readily available for general use by the wider Group.
\nConsolidated Statement of Cash Flows
\nUnder certain circumstances, the Group utilises bank overdrafts to manage temporary fluctuations in cash positions.
\nThe bank overdrafts are repayable on demand, used as part of the Group\u2019s overall cash management strategy and form
\npart of cash and cash equivalents for the purpose of the Consolidated Statement of Cash Flows. The Group had no bank
\noverdrafts as at 31 December 2022 or 31 December 2021.
\nThe Group reports cash flows from operating activities using the indirect method in accordance with IAS 7,
Statement of
\nCash Flows
. The Group has elected to classify net interest paid (including interest on lease liabilities) as cash flows from
\noperating activities. Short-term lease payments and payments for leases of low-value assets are included in cash flows
\nfrom operating activities.
\nChanges in working capital assets and liabilities as reported in cash flows from operating activities reflect the changes in the
\nConsolidated Statement of Financial Position between the current and previous financial year end, including adjustments for
\namounts relating to acquisitions and disposals (when necessary), as well as currency translation adjustments.
\nCash payments for the principal portion of lease liabilities is included within cash flows from financing activities.
\nAcquisition of property, plant and equipment, and intangible assets reflects additions to the related assets, including
\nadjustments for changes in capital accruals. Acquisition of intangible assets relates to capitalised software, development
\nand product-related licences. Refer to Note 9 \u2013 Intangible assets and goodwill for further details.
\nThe adjustment for non-operating expense, net in the Consolidated Statement of Cash Flows, excludes the gains and
\nlosses realised on cash-settled derivative financial instruments. Refer to Note 5 \u2013 Non-operating (expense)/income, net.
\nRestricted cash
\nIn certain instances, there are requirements to set aside cash to support payment guarantees and obligations, including
\nthe payment of value-added taxes, custom duties on imports, tender programmes and lease arrangements. Such amounts
\nare classified by the Group as restricted cash, which do not form part of cash and cash equivalents. Cash paid into escrow,
\narising from a business combination, is also classified as restricted cash.
\n2022
\n$m
\n2021
\n$m
\nCash at bank and in hand
42.6
69.5
\nMoney market funds and bank deposits
101.2
393.9
\nCash and cash equivalents
143.8
463.4
\n2022
\n$m
\n2021
\n$m
\nRestricted cash \u2013 current
\n1
\n18.2
0.4
\nRestricted cash \u2013 non-current
7.3
13.6
\nTotal restricted cash
25.5
14.0
\n1.
In the prior year, restricted cash with a maturity of less than one year of $0.4 million is included in Trade and other receivables.
\nCurrent restricted cash of $18.2 million (2021: $0.4 million) relates to cash held in escrow in respect of the Cure Medical,
\nPatient Care Medical and Triad Life Sciences acquisitions.
\nIncluded in non-current restricted cash of $7.3 million (2021: $13.6 million) is $4.0 million (2021: $9.7 million) relating to cash
\nheld in escrow in respect of the above acquisitions. The remaining balance of $3.3 million (2021: $3.9 million) relates to
\namounts held in respect of guarantees and the Group\u2019s Share Save scheme for employees. None of these amounts are
\naccessible on demand.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfCashAndCashEquivalentsExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f28659": {
"value": "22. CASH, CASH EQUIVALENTS AND RESTRICTED CASH Cash held at bank is used for the Group's day-to-day operations. The Group utilises bank deposits or money market funds
\nwhich have a maturity of three months or less as liquid investments that enable short-term liquidity requirements to be met.
\nAccounting policy
\nCash and cash equivalents comprise cash in hand and current balances with banks and similar institutions. All liquid
\ninvestments, including term deposits and money market funds, have original maturities of three months or less, are
\nsubject to insignificant risk of changes in value and are repayable within one business day with no significant loss of
\ninterest, resulting in classification as cash equivalents.
\nCash at bank earns interest at rates based on daily bank deposit rates. Term deposits and money market funds earn
\ninterest at the respective short-term deposit rate.
\nCash and cash equivalents at 31 December 2022 included $19.2 million (2021: $37.5 million) of cash held in territories where
\nthere are restrictions related to timely repatriation. The amounts meet the definition of cash and cash equivalents but are
\nnot deemed to be readily available for general use by the wider Group.
\nConsolidated Statement of Cash Flows
\nUnder certain circumstances, the Group utilises bank overdrafts to manage temporary fluctuations in cash positions.
\nThe bank overdrafts are repayable on demand, used as part of the Group\u2019s overall cash management strategy and form
\npart of cash and cash equivalents for the purpose of the Consolidated Statement of Cash Flows. The Group had no bank
\noverdrafts as at 31 December 2022 or 31 December 2021.
\nThe Group reports cash flows from operating activities using the indirect method in accordance with IAS 7,
Statement of
\nCash Flows
. The Group has elected to classify net interest paid (including interest on lease liabilities) as cash flows from
\noperating activities. Short-term lease payments and payments for leases of low-value assets are included in cash flows
\nfrom operating activities.
\nChanges in working capital assets and liabilities as reported in cash flows from operating activities reflect the changes in the
\nConsolidated Statement of Financial Position between the current and previous financial year end, including adjustments for
\namounts relating to acquisitions and disposals (when necessary), as well as currency translation adjustments.
\nCash payments for the principal portion of lease liabilities is included within cash flows from financing activities.
\nAcquisition of property, plant and equipment, and intangible assets reflects additions to the related assets, including
\nadjustments for changes in capital accruals. Acquisition of intangible assets relates to capitalised software, development
\nand product-related licences. Refer to Note 9 \u2013 Intangible assets and goodwill for further details.
\nThe adjustment for non-operating expense, net in the Consolidated Statement of Cash Flows, excludes the gains and
\nlosses realised on cash-settled derivative financial instruments. Refer to Note 5 \u2013 Non-operating (expense)/income, net.
\nRestricted cash
\nIn certain instances, there are requirements to set aside cash to support payment guarantees and obligations, including
\nthe payment of value-added taxes, custom duties on imports, tender programmes and lease arrangements. Such amounts
\nare classified by the Group as restricted cash, which do not form part of cash and cash equivalents. Cash paid into escrow,
\narising from a business combination, is also classified as restricted cash.
\n2022
\n$m
\n2021
\n$m
\nCash at bank and in hand
42.6
69.5
\nMoney market funds and bank deposits
101.2
393.9
\nCash and cash equivalents
143.8
463.4
\n2022
\n$m
\n2021
\n$m
\nRestricted cash \u2013 current
\n1
\n18.2
0.4
\nRestricted cash \u2013 non-current
7.3
13.6
\nTotal restricted cash
25.5
14.0
\n1.
In the prior year, restricted cash with a maturity of less than one year of $0.4 million is included in Trade and other receivables.
\nCurrent restricted cash of $18.2 million (2021: $0.4 million) relates to cash held in escrow in respect of the Cure Medical,
\nPatient Care Medical and Triad Life Sciences acquisitions.
\nIncluded in non-current restricted cash of $7.3 million (2021: $13.6 million) is $4.0 million (2021: $9.7 million) relating to cash
\nheld in escrow in respect of the above acquisitions. The remaining balance of $3.3 million (2021: $3.9 million) relates to
\namounts held in respect of guarantees and the Group\u2019s Share Save scheme for employees. None of these amounts are
\naccessible on demand.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfRestrictedCashAndCashEquivalentsExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f28665": {
"value": "Accounting policy Cash and cash equivalents comprise cash in hand and current balances with banks and similar institutions. All liquid
\ninvestments, including term deposits and money market funds, have original maturities of three months or less, are
\nsubject to insignificant risk of changes in value and are repayable within one business day with no significant loss of
\ninterest, resulting in classification as cash equivalents.
\nCash at bank earns interest at rates based on daily bank deposit rates. Term deposits and money market funds earn
\ninterest at the respective short-term deposit rate.
\nCash and cash equivalents at 31 December 2022 included $19.2 million (2021: $37.5 million) of cash held in territories where
\nthere are restrictions related to timely repatriation. The amounts meet the definition of cash and cash equivalents but are
\nnot deemed to be readily available for general use by the wider Group.
\nConsolidated Statement of Cash Flows
\nUnder certain circumstances, the Group utilises bank overdrafts to manage temporary fluctuations in cash positions.
\nThe bank overdrafts are repayable on demand, used as part of the Group\u2019s overall cash management strategy and form
\npart of cash and cash equivalents for the purpose of the Consolidated Statement of Cash Flows. The Group had no bank
\noverdrafts as at 31 December 2022 or 31 December 2021.
\nThe Group reports cash flows from operating activities using the indirect method in accordance with IAS 7,
Statement of
\nCash Flows
. The Group has elected to classify net interest paid (including interest on lease liabilities) as cash flows from
\noperating activities. Short-term lease payments and payments for leases of low-value assets are included in cash flows
\nfrom operating activities.
\nChanges in working capital assets and liabilities as reported in cash flows from operating activities reflect the changes in the
\nConsolidated Statement of Financial Position between the current and previous financial year end, including adjustments for
\namounts relating to acquisitions and disposals (when necessary), as well as currency translation adjustments.
\nCash payments for the principal portion of lease liabilities is included within cash flows from financing activities.
\nAcquisition of property, plant and equipment, and intangible assets reflects additions to the related assets, including
\nadjustments for changes in capital accruals. Acquisition of intangible assets relates to capitalised software, development
\nand product-related licences. Refer to Note 9 \u2013 Intangible assets and goodwill for further details.
\nThe adjustment for non-operating expense, net in the Consolidated Statement of Cash Flows, excludes the gains and
\nlosses realised on cash-settled derivative financial instruments. Refer to Note 5 \u2013 Non-operating (expense)/income, net.
\nRestricted cash
\nIn certain instances, there are requirements to set aside cash to support payment guarantees and obligations, including
\nthe payment of value-added taxes, custom duties on imports, tender programmes and lease arrangements. Such amounts
\nare classified by the Group as restricted cash, which do not form part of cash and cash equivalents. Cash paid into escrow,
\narising from a business combination, is also classified as restricted cash.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyToDetermineComponentsOfCashAndCashEquivalents",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f28678": {
"value": "Consolidated Statement of Cash Flows Under certain circumstances, the Group utilises bank overdrafts to manage temporary fluctuations in cash positions.
\nThe bank overdrafts are repayable on demand, used as part of the Group\u2019s overall cash management strategy and form
\npart of cash and cash equivalents for the purpose of the Consolidated Statement of Cash Flows. The Group had no bank
\noverdrafts as at 31 December 2022 or 31 December 2021.
\nThe Group reports cash flows from operating activities using the indirect method in accordance with IAS 7,
Statement of
\nCash Flows
. The Group has elected to classify net interest paid (including interest on lease liabilities) as cash flows from
\noperating activities. Short-term lease payments and payments for leases of low-value assets are included in cash flows
\nfrom operating activities.
\nChanges in working capital assets and liabilities as reported in cash flows from operating activities reflect the changes in the
\nConsolidated Statement of Financial Position between the current and previous financial year end, including adjustments for
\namounts relating to acquisitions and disposals (when necessary), as well as currency translation adjustments.
\nCash payments for the principal portion of lease liabilities is included within cash flows from financing activities.
\nAcquisition of property, plant and equipment, and intangible assets reflects additions to the related assets, including
\nadjustments for changes in capital accruals. Acquisition of intangible assets relates to capitalised software, development
\nand product-related licences. Refer to Note 9 \u2013 Intangible assets and goodwill for further details.
\nThe adjustment for non-operating expense, net in the Consolidated Statement of Cash Flows, excludes the gains and
\nlosses realised on cash-settled derivative financial instruments. Refer to Note 5 \u2013 Non-operating (expense)/income, net.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForCashFlowsExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f28701": {
"value": "Restricted cash In certain instances, there are requirements to set aside cash to support payment guarantees and obligations, including
\nthe payment of value-added taxes, custom duties on imports, tender programmes and lease arrangements. Such amounts
\nare 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.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForRestrictedCashAndCashEquivalentsExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f28761": {
"value": "23. FINANCIAL INSTRUMENTS A derivative financial instrument is a contract that derives its value from the performance of an underlying variable, such as
\nforeign exchange rates or interest rates. The Group uses derivative financial instruments to manage foreign exchange and
\ninterest rate risk arising from its operations and financing. Derivative financial instruments used by the Group are foreign
\nexchange forwards and interest rate swaps.
\nThe Group utilises interest rate swap agreements, designated as cash flow hedges, to manage its exposure to variability in
\nexpected future cash outflows attributable to the changes in interest rates on the Group\u2019s committed borrowing facilities.
\nAccounting policy
\nDerivative financial instruments are initially recognised at fair value on the derivative contract date and are remeasured
\nat their fair value at subsequent reporting dates. Derivative financial instruments are classified at fair value through profit
\nor loss (FVTPL) unless they are designated and qualify as an effective cash flow hedge. The fair value of forward foreign
\nexchange contracts is determined by using the difference between the contract exchange rate and the quoted forward
\nexchange rate from third parties at the reporting date.
\nHedge accounting
\nThe Group has elected to apply the IFRS 9,
Financial Instruments
hedge accounting requirements. Changes in the fair
\nvalues of derivatives designated as cash flow hedges are recognised in other comprehensive income to the extent the
\nhedges are effective. The fair value is the estimated amount that the Group would receive or pay to terminate the forward
\nor swap at the reporting date, taking into account current market rates, the Group\u2019s current creditworthiness, as well as
\nthat of the financial instrument counterparties.
\nThe cumulative gain or loss is then reclassified to the Consolidated Income Statement in the same period when the
\nrelevant hedged transaction is realised. Any ineffectiveness on hedging instruments is recognised in the Consolidated
\nIncome Statement as they arise. Hedge accounting is discontinued when the hedging instrument expires or is sold,
\nterminated or exercised, or no longer qualifies for hedge accounting. The discontinuation is accounted for prospectively.
\nAny gain or loss recognised in other comprehensive income and accumulated in the cash flow hedge reserve at that time
\nremains in equity and is reclassified to profit or loss when the forecast transaction occurs. When a forecast transaction is
\nno longer expected to occur, the gain or loss accumulated in the cash flow hedge reserve is immediately reclassified to
\nprofit or loss. Gains and losses arising from forward points and foreign currency basis spreads are excluded from
\ndesignation and are treated as a cost of hedging, deferred initially in other equity reserves and released into profit or loss
\nover the life of the hedging relationship.
\nThe Group held USD interest rate swaps of $275.0 million, with exposure to USD LIBOR as a reference rate and maturing
\nin January 2023. New USD interest rate swaps of $180.0 million were entered during 2022 with an effective date of
\n23 January 2023, with exposure to USD SOFR as a reference rate and maturing at various points in the next two years.
\nThese have been designated as cash flow hedges through other comprehensive income. In assessing hedge effectiveness
\non a prospective basis for this relationship, the Group has assumed that the USD LIBOR-related interest cash flows on the
\nswap are not altered by IBOR reform and the hedge continues to be highly effective. Furthermore, hedge accounting did
\nnot need to be discontinued during the period of IBOR-related uncertainty as the Group had taken the relief available in
\nPhase 1 to separately identify the risk component at the initial hedge designation and not on an ongoing basis.
\nAt the date of refinancing, the Group\u2019s existing bank borrowings were extinguished and replaced with drawings under the
\nnew facilities. Existing cash flow hedges were maintained as the underlying interest rate risk still existed and the hedging
\nrelationships continued to fulfil the requirements of IFRS 9. Swaps with floating legs linked to SOFR have also been
\ndesignated as cash flow hedges and will provide interest rate risk management beyond January 2023.
\nRight to offset
\nFinancial assets and liabilities are offset and the net amount presented in the Consolidated Statement of Financial Position
\nwhen, and only when, the Group has a legal right to offset the amounts and intends either to settle them on a net basis or
\nto realise the asset and settle the liability simultaneously.
\nFair value measurement
\nFinancial instruments are classified as Level 1, Level 2 or Level 3 in the fair value hierarchy in accordance with IFRS 13,
\nFair Value Measurements
, based upon the degree to which the fair value movements are observable. Level 1 fair value
\nmeasures are defined as those with quoted (unadjusted) market prices in active markets for identical assets or liabilities.
\nLevel 2 fair value measurements are defined as those derived from inputs other than quoted prices that are observable
\nfor the asset or liability, either directly (prices from third parties) or indirectly (derived from third-party prices). Level 3 fair
\nvalue measurements are defined as those derived from significant unobservable inputs.
\nThe only instrument classified as Level 1 are the senior notes, given the availability of quoted market price (Note 21 \u2013 Borrowings).
\nThe Group\u2019s derivative financial instruments, discussed below, are classified as Level 2, and the Group\u2019s equity investment in
\npreference shares is classified as Level 3 (Note 10 \u2013 Investment in financial assets).
\n209
Convatec Group Plc Annual Report and Accounts 2022
\nAdditional information
Governance
Strategic report
Overview
Financial statements
23. FINANCIAL INSTRUMENTS (CONTINUED)
\nThe Group holds interest rate swap agreements to fix a proportion of variable interest on US dollar-denominated debt,
\nin accordance with the Group's risk management policy. The interest rate swaps are designated as hedging instruments
\nin a cash flow hedging relationship.
\nIn accordance with Group policy, the Group uses forward foreign exchange contracts, designated as cash flow hedges, to hedge
\ncertain forecast third-party foreign currency transactions. When a commitment is entered into, a layered approach is taken when
\nhedging the currency exposure, ensuring that no more than 100% of the transaction exposure is covered. The currencies hedged
\nby forward foreign exchange contracts are US dollars, Swiss francs, Pound sterling, Danish krone and Japanese yen.
\nThe Group further utilises foreign exchange contracts and swaps classified as FVTPL to manage short-term foreign
\nexchange exposure.
\nCash flow hedges
\nThe fair values are based on market values of equivalent instruments at 31 December. The following table presents the
\nGroup's outstanding interest rate swaps, which were designated as cash flow hedges at 31 December:
\n2022
2021
\nEffective date
Maturity date
\nNotional
\namount
\n$m
\nFair value
\n1
\nassets/
\n(liabilities)
\n$m
\nNotional
\namount
\n$m
\nFair value
\n1
\nassets/
\n(liabilities)
\n$m
\n3 Month LIBOR Float to
\nFixed Interest Rate Swap
24 Jan 2020
24 Jan 2023
275.0
2.0
275.0
(2.9)
\n6 Month term SOFR Float to
\nFixed Interest Rate Swap
23 Jan 2023
23 Jan 2024
90.0
0.2
\u2013
\u2013
\n6 Month term SOFR Float to
\nFixed Interest Rate Swap
23 Jan 2023
23 July 2024
40.0
\u2013
\u2013
\u2013
\n6 Month term SOFR Float to
\nFixed Interest Rate Swap
23 Jan 2023
23 Jan 2025
50.0
(0.3)
\u2013
\u2013
\n1.
The fair values of the interest rate swaps were disclosed in non-current derivative financial liabilities in the Consolidated Statement of Financial Position. There was
\nno ineffectiveness recognised in the Consolidated Income Statement.
\nForeign exchange forward contracts
\nThe following table presents the Group's outstanding foreign exchange forward contracts valued at FVTPL and foreign
\ncurrency forward contracts designated as cash flow hedges, disclosed in current derivative financial assets and liabilities,
\nat 31 December:
\n2022
2021
\nTerm
\nNotional
\namount
\n$m
\nFair value
\nasset/
\n(liabilities)
\n$m
\nNotional
\namount
\n$m
\nFair value
\nassets/
\n(liabilities)
\n$m
\nForeign exchange contracts
\u2264 3 months
996.6
21.3
864.6
14.5
\nForeign currency forward exchange contracts designated as
\ncash flow hedges
\u2264 12 months
72.7
3.1
40.8
0.6
\nDerivative financial assets
1,069.3
24.4
905.4
15.1
\nForeign exchange contracts
\u2264 3 months
703.7
(30.2)
695.9
(6.5)
\nForeign currency forward exchange contracts designated as
\ncash flow hedges
\u2264 12 months
132.8
(2.3)
130.2
(5.2)
\nDerivative financial liabilities
836.5
(32.5)
826.1
(11.7)
\nDuring the year ended 31 December 2022, the Group realised a net gain of $15.8 million (2021: $9.7 million loss) on foreign exchange
\nforward contracts designated as FVTPL in non-operating expenses, net, (Note 5) in the Consolidated Income Statement.
\nImpact of hedging on other comprehensive income
\nThe following table presents the impact of hedging on other comprehensive income:
\n2022
\n$m
\n2021
\n$m
\nRecognised in other comprehensive income:
\nEffective portion of changes in fair value of cash flow hedges:
\nInterest rate swaps
3.3
(1.0)
\nForeign currency forward exchange contracts designated as cash flow hedges
(11.0)
(4.1)
\nChanges in fair value of cash flow hedges reclassified to the Consolidated Income Statement
16.5
5.7
\nCost of hedging
(1.1)
(0.4)
\nTotal
7.7
0.2 ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfFinancialInstrumentsExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f28762": {
"value": "23. FINANCIAL INSTRUMENTS A derivative financial instrument is a contract that derives its value from the performance of an underlying variable, such as
\nforeign exchange rates or interest rates. The Group uses derivative financial instruments to manage foreign exchange and
\ninterest rate risk arising from its operations and financing. Derivative financial instruments used by the Group are foreign
\nexchange forwards and interest rate swaps.
\nThe Group utilises interest rate swap agreements, designated as cash flow hedges, to manage its exposure to variability in
\nexpected future cash outflows attributable to the changes in interest rates on the Group\u2019s committed borrowing facilities.
\nAccounting policy
\nDerivative financial instruments are initially recognised at fair value on the derivative contract date and are remeasured
\nat their fair value at subsequent reporting dates. Derivative financial instruments are classified at fair value through profit
\nor loss (FVTPL) unless they are designated and qualify as an effective cash flow hedge. The fair value of forward foreign
\nexchange contracts is determined by using the difference between the contract exchange rate and the quoted forward
\nexchange rate from third parties at the reporting date.
\nHedge accounting
\nThe Group has elected to apply the IFRS 9,
Financial Instruments
hedge accounting requirements. Changes in the fair
\nvalues of derivatives designated as cash flow hedges are recognised in other comprehensive income to the extent the
\nhedges are effective. The fair value is the estimated amount that the Group would receive or pay to terminate the forward
\nor swap at the reporting date, taking into account current market rates, the Group\u2019s current creditworthiness, as well as
\nthat of the financial instrument counterparties.
\nThe cumulative gain or loss is then reclassified to the Consolidated Income Statement in the same period when the
\nrelevant hedged transaction is realised. Any ineffectiveness on hedging instruments is recognised in the Consolidated
\nIncome Statement as they arise. Hedge accounting is discontinued when the hedging instrument expires or is sold,
\nterminated or exercised, or no longer qualifies for hedge accounting. The discontinuation is accounted for prospectively.
\nAny gain or loss recognised in other comprehensive income and accumulated in the cash flow hedge reserve at that time
\nremains in equity and is reclassified to profit or loss when the forecast transaction occurs. When a forecast transaction is
\nno longer expected to occur, the gain or loss accumulated in the cash flow hedge reserve is immediately reclassified to
\nprofit or loss. Gains and losses arising from forward points and foreign currency basis spreads are excluded from
\ndesignation and are treated as a cost of hedging, deferred initially in other equity reserves and released into profit or loss
\nover the life of the hedging relationship.
\nThe Group held USD interest rate swaps of $275.0 million, with exposure to USD LIBOR as a reference rate and maturing
\nin January 2023. New USD interest rate swaps of $180.0 million were entered during 2022 with an effective date of
\n23 January 2023, with exposure to USD SOFR as a reference rate and maturing at various points in the next two years.
\nThese have been designated as cash flow hedges through other comprehensive income. In assessing hedge effectiveness
\non a prospective basis for this relationship, the Group has assumed that the USD LIBOR-related interest cash flows on the
\nswap are not altered by IBOR reform and the hedge continues to be highly effective. Furthermore, hedge accounting did
\nnot need to be discontinued during the period of IBOR-related uncertainty as the Group had taken the relief available in
\nPhase 1 to separately identify the risk component at the initial hedge designation and not on an ongoing basis.
\nAt the date of refinancing, the Group\u2019s existing bank borrowings were extinguished and replaced with drawings under the
\nnew facilities. Existing cash flow hedges were maintained as the underlying interest rate risk still existed and the hedging
\nrelationships continued to fulfil the requirements of IFRS 9. Swaps with floating legs linked to SOFR have also been
\ndesignated as cash flow hedges and will provide interest rate risk management beyond January 2023.
\nRight to offset
\nFinancial assets and liabilities are offset and the net amount presented in the Consolidated Statement of Financial Position
\nwhen, and only when, the Group has a legal right to offset the amounts and intends either to settle them on a net basis or
\nto realise the asset and settle the liability simultaneously.
\nFair value measurement
\nFinancial instruments are classified as Level 1, Level 2 or Level 3 in the fair value hierarchy in accordance with IFRS 13,
\nFair Value Measurements
, based upon the degree to which the fair value movements are observable. Level 1 fair value
\nmeasures are defined as those with quoted (unadjusted) market prices in active markets for identical assets or liabilities.
\nLevel 2 fair value measurements are defined as those derived from inputs other than quoted prices that are observable
\nfor the asset or liability, either directly (prices from third parties) or indirectly (derived from third-party prices). Level 3 fair
\nvalue measurements are defined as those derived from significant unobservable inputs.
\nThe only instrument classified as Level 1 are the senior notes, given the availability of quoted market price (Note 21 \u2013 Borrowings).
\nThe Group\u2019s derivative financial instruments, discussed below, are classified as Level 2, and the Group\u2019s equity investment in
\npreference shares is classified as Level 3 (Note 10 \u2013 Investment in financial assets).
\n209
Convatec Group Plc Annual Report and Accounts 2022
\nAdditional information
Governance
Strategic report
Overview
Financial statements
23. FINANCIAL INSTRUMENTS (CONTINUED)
\nThe Group holds interest rate swap agreements to fix a proportion of variable interest on US dollar-denominated debt,
\nin accordance with the Group's risk management policy. The interest rate swaps are designated as hedging instruments
\nin a cash flow hedging relationship.
\nIn accordance with Group policy, the Group uses forward foreign exchange contracts, designated as cash flow hedges, to hedge
\ncertain forecast third-party foreign currency transactions. When a commitment is entered into, a layered approach is taken when
\nhedging the currency exposure, ensuring that no more than 100% of the transaction exposure is covered. The currencies hedged
\nby forward foreign exchange contracts are US dollars, Swiss francs, Pound sterling, Danish krone and Japanese yen.
\nThe Group further utilises foreign exchange contracts and swaps classified as FVTPL to manage short-term foreign
\nexchange exposure.
\nCash flow hedges
\nThe fair values are based on market values of equivalent instruments at 31 December. The following table presents the
\nGroup's outstanding interest rate swaps, which were designated as cash flow hedges at 31 December:
\n2022
2021
\nEffective date
Maturity date
\nNotional
\namount
\n$m
\nFair value
\n1
\nassets/
\n(liabilities)
\n$m
\nNotional
\namount
\n$m
\nFair value
\n1
\nassets/
\n(liabilities)
\n$m
\n3 Month LIBOR Float to
\nFixed Interest Rate Swap
24 Jan 2020
24 Jan 2023
275.0
2.0
275.0
(2.9)
\n6 Month term SOFR Float to
\nFixed Interest Rate Swap
23 Jan 2023
23 Jan 2024
90.0
0.2
\u2013
\u2013
\n6 Month term SOFR Float to
\nFixed Interest Rate Swap
23 Jan 2023
23 July 2024
40.0
\u2013
\u2013
\u2013
\n6 Month term SOFR Float to
\nFixed Interest Rate Swap
23 Jan 2023
23 Jan 2025
50.0
(0.3)
\u2013
\u2013
\n1.
The fair values of the interest rate swaps were disclosed in non-current derivative financial liabilities in the Consolidated Statement of Financial Position. There was
\nno ineffectiveness recognised in the Consolidated Income Statement.
\nForeign exchange forward contracts
\nThe following table presents the Group's outstanding foreign exchange forward contracts valued at FVTPL and foreign
\ncurrency forward contracts designated as cash flow hedges, disclosed in current derivative financial assets and liabilities,
\nat 31 December:
\n2022
2021
\nTerm
\nNotional
\namount
\n$m
\nFair value
\nasset/
\n(liabilities)
\n$m
\nNotional
\namount
\n$m
\nFair value
\nassets/
\n(liabilities)
\n$m
\nForeign exchange contracts
\u2264 3 months
996.6
21.3
864.6
14.5
\nForeign currency forward exchange contracts designated as
\ncash flow hedges
\u2264 12 months
72.7
3.1
40.8
0.6
\nDerivative financial assets
1,069.3
24.4
905.4
15.1
\nForeign exchange contracts
\u2264 3 months
703.7
(30.2)
695.9
(6.5)
\nForeign currency forward exchange contracts designated as
\ncash flow hedges
\u2264 12 months
132.8
(2.3)
130.2
(5.2)
\nDerivative financial liabilities
836.5
(32.5)
826.1
(11.7)
\nDuring the year ended 31 December 2022, the Group realised a net gain of $15.8 million (2021: $9.7 million loss) on foreign exchange
\nforward contracts designated as FVTPL in non-operating expenses, net, (Note 5) in the Consolidated Income Statement.
\nImpact of hedging on other comprehensive income
\nThe following table presents the impact of hedging on other comprehensive income:
\n2022
\n$m
\n2021
\n$m
\nRecognised in other comprehensive income:
\nEffective portion of changes in fair value of cash flow hedges:
\nInterest rate swaps
3.3
(1.0)
\nForeign currency forward exchange contracts designated as cash flow hedges
(11.0)
(4.1)
\nChanges in fair value of cash flow hedges reclassified to the Consolidated Income Statement
16.5
5.7
\nCost of hedging
(1.1)
(0.4)
\nTotal
7.7
0.2",
"dimensions": {
"concept": "ifrs-full:DisclosureOfDerivativeFinancialInstrumentsExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f28763": {
"value": "23. FINANCIAL INSTRUMENTS A derivative financial instrument is a contract that derives its value from the performance of an underlying variable, such as
\nforeign exchange rates or interest rates. The Group uses derivative financial instruments to manage foreign exchange and
\ninterest rate risk arising from its operations and financing. Derivative financial instruments used by the Group are foreign
\nexchange forwards and interest rate swaps.
\nThe Group utilises interest rate swap agreements, designated as cash flow hedges, to manage its exposure to variability in
\nexpected future cash outflows attributable to the changes in interest rates on the Group\u2019s committed borrowing facilities.
\nAccounting policy
\nDerivative financial instruments are initially recognised at fair value on the derivative contract date and are remeasured
\nat their fair value at subsequent reporting dates. Derivative financial instruments are classified at fair value through profit
\nor loss (FVTPL) unless they are designated and qualify as an effective cash flow hedge. The fair value of forward foreign
\nexchange contracts is determined by using the difference between the contract exchange rate and the quoted forward
\nexchange rate from third parties at the reporting date.
\nHedge accounting
\nThe Group has elected to apply the IFRS 9,
Financial Instruments
hedge accounting requirements. Changes in the fair
\nvalues of derivatives designated as cash flow hedges are recognised in other comprehensive income to the extent the
\nhedges are effective. The fair value is the estimated amount that the Group would receive or pay to terminate the forward
\nor swap at the reporting date, taking into account current market rates, the Group\u2019s current creditworthiness, as well as
\nthat of the financial instrument counterparties.
\nThe cumulative gain or loss is then reclassified to the Consolidated Income Statement in the same period when the
\nrelevant hedged transaction is realised. Any ineffectiveness on hedging instruments is recognised in the Consolidated
\nIncome Statement as they arise. Hedge accounting is discontinued when the hedging instrument expires or is sold,
\nterminated or exercised, or no longer qualifies for hedge accounting. The discontinuation is accounted for prospectively.
\nAny gain or loss recognised in other comprehensive income and accumulated in the cash flow hedge reserve at that time
\nremains in equity and is reclassified to profit or loss when the forecast transaction occurs. When a forecast transaction is
\nno longer expected to occur, the gain or loss accumulated in the cash flow hedge reserve is immediately reclassified to
\nprofit or loss. Gains and losses arising from forward points and foreign currency basis spreads are excluded from
\ndesignation and are treated as a cost of hedging, deferred initially in other equity reserves and released into profit or loss
\nover the life of the hedging relationship.
\nThe Group held USD interest rate swaps of $275.0 million, with exposure to USD LIBOR as a reference rate and maturing
\nin January 2023. New USD interest rate swaps of $180.0 million were entered during 2022 with an effective date of
\n23 January 2023, with exposure to USD SOFR as a reference rate and maturing at various points in the next two years.
\nThese have been designated as cash flow hedges through other comprehensive income. In assessing hedge effectiveness
\non a prospective basis for this relationship, the Group has assumed that the USD LIBOR-related interest cash flows on the
\nswap are not altered by IBOR reform and the hedge continues to be highly effective. Furthermore, hedge accounting did
\nnot need to be discontinued during the period of IBOR-related uncertainty as the Group had taken the relief available in
\nPhase 1 to separately identify the risk component at the initial hedge designation and not on an ongoing basis.
\nAt the date of refinancing, the Group\u2019s existing bank borrowings were extinguished and replaced with drawings under the
\nnew facilities. Existing cash flow hedges were maintained as the underlying interest rate risk still existed and the hedging
\nrelationships continued to fulfil the requirements of IFRS 9. Swaps with floating legs linked to SOFR have also been
\ndesignated as cash flow hedges and will provide interest rate risk management beyond January 2023.
\nRight to offset
\nFinancial assets and liabilities are offset and the net amount presented in the Consolidated Statement of Financial Position
\nwhen, and only when, the Group has a legal right to offset the amounts and intends either to settle them on a net basis or
\nto realise the asset and settle the liability simultaneously.
\nFair value measurement
\nFinancial instruments are classified as Level 1, Level 2 or Level 3 in the fair value hierarchy in accordance with IFRS 13,
\nFair Value Measurements
, based upon the degree to which the fair value movements are observable. Level 1 fair value
\nmeasures are defined as those with quoted (unadjusted) market prices in active markets for identical assets or liabilities.
\nLevel 2 fair value measurements are defined as those derived from inputs other than quoted prices that are observable
\nfor the asset or liability, either directly (prices from third parties) or indirectly (derived from third-party prices). Level 3 fair
\nvalue measurements are defined as those derived from significant unobservable inputs.
\nThe only instrument classified as Level 1 are the senior notes, given the availability of quoted market price (Note 21 \u2013 Borrowings).
\nThe Group\u2019s derivative financial instruments, discussed below, are classified as Level 2, and the Group\u2019s equity investment in
\npreference shares is classified as Level 3 (Note 10 \u2013 Investment in financial assets).
\n209
Convatec Group Plc Annual Report and Accounts 2022
\nAdditional information
Governance
Strategic report
Overview
Financial statements
23. FINANCIAL INSTRUMENTS (CONTINUED)
\nThe Group holds interest rate swap agreements to fix a proportion of variable interest on US dollar-denominated debt,
\nin accordance with the Group's risk management policy. The interest rate swaps are designated as hedging instruments
\nin a cash flow hedging relationship.
\nIn accordance with Group policy, the Group uses forward foreign exchange contracts, designated as cash flow hedges, to hedge
\ncertain forecast third-party foreign currency transactions. When a commitment is entered into, a layered approach is taken when
\nhedging the currency exposure, ensuring that no more than 100% of the transaction exposure is covered. The currencies hedged
\nby forward foreign exchange contracts are US dollars, Swiss francs, Pound sterling, Danish krone and Japanese yen.
\nThe Group further utilises foreign exchange contracts and swaps classified as FVTPL to manage short-term foreign
\nexchange exposure.
\nCash flow hedges
\nThe fair values are based on market values of equivalent instruments at 31 December. The following table presents the
\nGroup's outstanding interest rate swaps, which were designated as cash flow hedges at 31 December:
\n2022
2021
\nEffective date
Maturity date
\nNotional
\namount
\n$m
\nFair value
\n1
\nassets/
\n(liabilities)
\n$m
\nNotional
\namount
\n$m
\nFair value
\n1
\nassets/
\n(liabilities)
\n$m
\n3 Month LIBOR Float to
\nFixed Interest Rate Swap
24 Jan 2020
24 Jan 2023
275.0
2.0
275.0
(2.9)
\n6 Month term SOFR Float to
\nFixed Interest Rate Swap
23 Jan 2023
23 Jan 2024
90.0
0.2
\u2013
\u2013
\n6 Month term SOFR Float to
\nFixed Interest Rate Swap
23 Jan 2023
23 July 2024
40.0
\u2013
\u2013
\u2013
\n6 Month term SOFR Float to
\nFixed Interest Rate Swap
23 Jan 2023
23 Jan 2025
50.0
(0.3)
\u2013
\u2013
\n1.
The fair values of the interest rate swaps were disclosed in non-current derivative financial liabilities in the Consolidated Statement of Financial Position. There was
\nno ineffectiveness recognised in the Consolidated Income Statement.
\nForeign exchange forward contracts
\nThe following table presents the Group's outstanding foreign exchange forward contracts valued at FVTPL and foreign
\ncurrency forward contracts designated as cash flow hedges, disclosed in current derivative financial assets and liabilities,
\nat 31 December:
\n2022
2021
\nTerm
\nNotional
\namount
\n$m
\nFair value
\nasset/
\n(liabilities)
\n$m
\nNotional
\namount
\n$m
\nFair value
\nassets/
\n(liabilities)
\n$m
\nForeign exchange contracts
\u2264 3 months
996.6
21.3
864.6
14.5
\nForeign currency forward exchange contracts designated as
\ncash flow hedges
\u2264 12 months
72.7
3.1
40.8
0.6
\nDerivative financial assets
1,069.3
24.4
905.4
15.1
\nForeign exchange contracts
\u2264 3 months
703.7
(30.2)
695.9
(6.5)
\nForeign currency forward exchange contracts designated as
\ncash flow hedges
\u2264 12 months
132.8
(2.3)
130.2
(5.2)
\nDerivative financial liabilities
836.5
(32.5)
826.1
(11.7)
\nDuring the year ended 31 December 2022, the Group realised a net gain of $15.8 million (2021: $9.7 million loss) on foreign exchange
\nforward contracts designated as FVTPL in non-operating expenses, net, (Note 5) in the Consolidated Income Statement.
\nImpact of hedging on other comprehensive income
\nThe following table presents the impact of hedging on other comprehensive income:
\n2022
\n$m
\n2021
\n$m
\nRecognised in other comprehensive income:
\nEffective portion of changes in fair value of cash flow hedges:
\nInterest rate swaps
3.3
(1.0)
\nForeign currency forward exchange contracts designated as cash flow hedges
(11.0)
(4.1)
\nChanges in fair value of cash flow hedges reclassified to the Consolidated Income Statement
16.5
5.7
\nCost of hedging
(1.1)
(0.4)
\nTotal
7.7
0.2",
"dimensions": {
"concept": "ifrs-full:DisclosureOfFairValueOfFinancialInstrumentsExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f28774": {
"value": "Accounting policy Derivative financial instruments are initially recognised at fair value on the derivative contract date and are remeasured
\nat their fair value at subsequent reporting dates. Derivative financial instruments are classified at fair value through profit
\nor loss (FVTPL) unless they are designated and qualify as an effective cash flow hedge. The fair value of forward foreign
\nexchange contracts is determined by using the difference between the contract exchange rate and the quoted forward
\nexchange rate from third parties at the reporting date.
\nHedge accounting
\nThe Group has elected to apply the IFRS 9,
Financial Instruments
hedge accounting requirements. Changes in the fair
\nvalues of derivatives designated as cash flow hedges are recognised in other comprehensive income to the extent the
\nhedges are effective. The fair value is the estimated amount that the Group would receive or pay to terminate the forward
\nor swap at the reporting date, taking into account current market rates, the Group\u2019s current creditworthiness, as well as
\nthat of the financial instrument counterparties.
\nThe cumulative gain or loss is then reclassified to the Consolidated Income Statement in the same period when the
\nrelevant hedged transaction is realised. Any ineffectiveness on hedging instruments is recognised in the Consolidated
\nIncome Statement as they arise. Hedge accounting is discontinued when the hedging instrument expires or is sold,
\nterminated or exercised, or no longer qualifies for hedge accounting. The discontinuation is accounted for prospectively.
\nAny gain or loss recognised in other comprehensive income and accumulated in the cash flow hedge reserve at that time
\nremains in equity and is reclassified to profit or loss when the forecast transaction occurs. When a forecast transaction is
\nno longer expected to occur, the gain or loss accumulated in the cash flow hedge reserve is immediately reclassified to
\nprofit or loss. Gains and losses arising from forward points and foreign currency basis spreads are excluded from
\ndesignation and are treated as a cost of hedging, deferred initially in other equity reserves and released into profit or loss
\nover the life of the hedging relationship.
\nThe Group held USD interest rate swaps of $275.0 million, with exposure to USD LIBOR as a reference rate and maturing
\nin January 2023. New USD interest rate swaps of $180.0 million were entered during 2022 with an effective date of
\n23 January 2023, with exposure to USD SOFR as a reference rate and maturing at various points in the next two years.
\nThese have been designated as cash flow hedges through other comprehensive income. In assessing hedge effectiveness
\non a prospective basis for this relationship, the Group has assumed that the USD LIBOR-related interest cash flows on the
\nswap are not altered by IBOR reform and the hedge continues to be highly effective. Furthermore, hedge accounting did
\nnot need to be discontinued during the period of IBOR-related uncertainty as the Group had taken the relief available in
\nPhase 1 to separately identify the risk component at the initial hedge designation and not on an ongoing basis.
\nAt the date of refinancing, the Group\u2019s existing bank borrowings were extinguished and replaced with drawings under the
\nnew facilities. Existing cash flow hedges were maintained as the underlying interest rate risk still existed and the hedging
\nrelationships continued to fulfil the requirements of IFRS 9. Swaps with floating legs linked to SOFR have also been
\ndesignated as cash flow hedges and will provide interest rate risk management beyond January 2023.
\nRight to offset
\nFinancial assets and liabilities are offset and the net amount presented in the Consolidated Statement of Financial Position
\nwhen, and only when, the Group has a legal right to offset the amounts and intends either to settle them on a net basis or
\nto realise the asset and settle the liability simultaneously.
\nFair value measurement
\nFinancial instruments are classified as Level 1, Level 2 or Level 3 in the fair value hierarchy in accordance with IFRS 13,
\nFair Value Measurements
, based upon the degree to which the fair value movements are observable. Level 1 fair value
\nmeasures are defined as those with quoted (unadjusted) market prices in active markets for identical assets or liabilities.
\nLevel 2 fair value measurements are defined as those derived from inputs other than quoted prices that are observable
\nfor the asset or liability, either directly (prices from third parties) or indirectly (derived from third-party prices). Level 3 fair
\nvalue measurements are defined as those derived from significant unobservable inputs.
\nThe only instrument classified as Level 1 are the senior notes, given the availability of quoted market price (Note 21 \u2013 Borrowings).
\nThe Group\u2019s derivative financial instruments, discussed below, are classified as Level 2, and the Group\u2019s equity investment in
\npreference shares is classified as Level 3 (Note 10 \u2013 Investment in financial assets).",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f28777": {
"value": "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
\nor loss (FVTPL) unless they are designated and qualify as an effective cash flow hedge. The fair value of forward foreign
\nexchange contracts is determined by using the difference between the contract exchange rate and the quoted forward
\nexchange rate from third parties at the reporting date.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForDerivativeFinancialInstrumentsExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f28778": {
"value": "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
\nor loss (FVTPL) unless they are designated and qualify as an effective cash flow hedge. The fair value of forward foreign
\nexchange contracts is determined by using the difference between the contract exchange rate and the quoted forward
\nexchange rate from third parties at the reporting date.
\nHedge accounting
\nThe Group has elected to apply the IFRS 9,
Financial Instruments
hedge accounting requirements. Changes in the fair
\nvalues of derivatives designated as cash flow hedges are recognised in other comprehensive income to the extent the
\nhedges are effective. The fair value is the estimated amount that the Group would receive or pay to terminate the forward
\nor swap at the reporting date, taking into account current market rates, the Group\u2019s current creditworthiness, as well as
\nthat of the financial instrument counterparties.
\nThe cumulative gain or loss is then reclassified to the Consolidated Income Statement in the same period when the
\nrelevant hedged transaction is realised. Any ineffectiveness on hedging instruments is recognised in the Consolidated
\nIncome Statement as they arise. Hedge accounting is discontinued when the hedging instrument expires or is sold,
\nterminated or exercised, or no longer qualifies for hedge accounting. The discontinuation is accounted for prospectively.
\nAny gain or loss recognised in other comprehensive income and accumulated in the cash flow hedge reserve at that time
\nremains in equity and is reclassified to profit or loss when the forecast transaction occurs. When a forecast transaction is
\nno longer expected to occur, the gain or loss accumulated in the cash flow hedge reserve is immediately reclassified to
\nprofit or loss. Gains and losses arising from forward points and foreign currency basis spreads are excluded from
\ndesignation and are treated as a cost of hedging, deferred initially in other equity reserves and released into profit or loss
\nover the life of the hedging relationship.
\nThe Group held USD interest rate swaps of $275.0 million, with exposure to USD LIBOR as a reference rate and maturing
\nin January 2023. New USD interest rate swaps of $180.0 million were entered during 2022 with an effective date of
\n23 January 2023, with exposure to USD SOFR as a reference rate and maturing at various points in the next two years.
\nThese have been designated as cash flow hedges through other comprehensive income. In assessing hedge effectiveness
\non a prospective basis for this relationship, the Group has assumed that the USD LIBOR-related interest cash flows on the
\nswap are not altered by IBOR reform and the hedge continues to be highly effective. Furthermore, hedge accounting did
\nnot need to be discontinued during the period of IBOR-related uncertainty as the Group had taken the relief available in
\nPhase 1 to separately identify the risk component at the initial hedge designation and not on an ongoing basis.
\nAt the date of refinancing, the Group\u2019s existing bank borrowings were extinguished and replaced with drawings under the
\nnew facilities. Existing cash flow hedges were maintained as the underlying interest rate risk still existed and the hedging
\nrelationships continued to fulfil the requirements of IFRS 9. Swaps with floating legs linked to SOFR have also been
\ndesignated as cash flow hedges and will provide interest rate risk management beyond January 2023.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForDerivativeFinancialInstrumentsAndHedgingExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f28790": {
"value": "Hedge accounting The Group has elected to apply the IFRS 9,
Financial Instruments
hedge accounting requirements. Changes in the fair
\nvalues of derivatives designated as cash flow hedges are recognised in other comprehensive income to the extent the
\nhedges are effective. The fair value is the estimated amount that the Group would receive or pay to terminate the forward
\nor swap at the reporting date, taking into account current market rates, the Group\u2019s current creditworthiness, as well as
\nthat of the financial instrument counterparties.
\nThe cumulative gain or loss is then reclassified to the Consolidated Income Statement in the same period when the
\nrelevant hedged transaction is realised. Any ineffectiveness on hedging instruments is recognised in the Consolidated
\nIncome Statement as they arise. Hedge accounting is discontinued when the hedging instrument expires or is sold,
\nterminated or exercised, or no longer qualifies for hedge accounting. The discontinuation is accounted for prospectively.
\nAny gain or loss recognised in other comprehensive income and accumulated in the cash flow hedge reserve at that time
\nremains in equity and is reclassified to profit or loss when the forecast transaction occurs. When a forecast transaction is
\nno longer expected to occur, the gain or loss accumulated in the cash flow hedge reserve is immediately reclassified to
\nprofit or loss. Gains and losses arising from forward points and foreign currency basis spreads are excluded from
\ndesignation and are treated as a cost of hedging, deferred initially in other equity reserves and released into profit or loss
\nover the life of the hedging relationship.
\nThe Group held USD interest rate swaps of $275.0 million, with exposure to USD LIBOR as a reference rate and maturing
\nin January 2023. New USD interest rate swaps of $180.0 million were entered during 2022 with an effective date of
\n23 January 2023, with exposure to USD SOFR as a reference rate and maturing at various points in the next two years.
\nThese have been designated as cash flow hedges through other comprehensive income. In assessing hedge effectiveness
\non a prospective basis for this relationship, the Group has assumed that the USD LIBOR-related interest cash flows on the
\nswap are not altered by IBOR reform and the hedge continues to be highly effective. Furthermore, hedge accounting did
\nnot need to be discontinued during the period of IBOR-related uncertainty as the Group had taken the relief available in
\nPhase 1 to separately identify the risk component at the initial hedge designation and not on an ongoing basis.
\nAt the date of refinancing, the Group\u2019s existing bank borrowings were extinguished and replaced with drawings under the
\nnew facilities. Existing cash flow hedges were maintained as the underlying interest rate risk still existed and the hedging
\nrelationships continued to fulfil the requirements of IFRS 9. Swaps with floating legs linked to SOFR have also been
designated as cash flow hedges and will provide interest rate risk management beyond January 2023.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForHedgingExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f28824": {
"value": "Right to offset Financial assets and liabilities are offset and the net amount presented in the Consolidated Statement of Financial Position
\nwhen, and only when, the Group has a legal right to offset the amounts and intends either to settle them on a net basis or
\nto realise the asset and settle the liability simultaneously.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForOffsettingOfFinancialInstrumentsExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f28831": {
"value": "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,
\nFair Value Measurements
, based upon the degree to which the fair value movements are observable. Level 1 fair value
\nmeasures are defined as those with quoted (unadjusted) market prices in active markets for identical assets or liabilities.
\nLevel 2 fair value measurements are defined as those derived from inputs other than quoted prices that are observable
\nfor the asset or liability, either directly (prices from third parties) or indirectly (derived from third-party prices). Level 3 fair
\nvalue measurements are defined as those derived from significant unobservable inputs.
\nThe only instrument classified as Level 1 are the senior notes, given the availability of quoted market price (Note 21 \u2013 Borrowings).
\nThe Group\u2019s derivative financial instruments, discussed below, are classified as Level 2, and the Group\u2019s equity investment in
preference shares is classified as Level 3 (Note 10 \u2013 Investment in financial assets).",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForFairValueMeasurementExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f29035": {
"value": "24. LEASES The Group principally leases real estate and vehicles. Leases are recognised as a right-of-use asset with a corresponding
\nliability recorded at the date at which the leased asset is available for use by the Group.
\nAccounting policy
\nThe lease liability is measured at the present value of future lease payments discounted using the rate implicit in the lease.
\nIf this rate is not readily determinable, the Group uses its incremental borrowing rate. Generally, the Group uses its
\nincremental borrowing rate as the discount rate.
\nOptions such as lease extensions or terminations on lease contracts are considered on a case-by-case basis by regular
\nmanagement assessment.
\nEach lease payment is allocated between amounts paid for principal and interest. The interest cost is charged to the
\nConsolidated Income Statement over the lease term to produce a constant periodic rate of interest on the remaining
\nbalance of the liability for each period. The right-of-use asset is depreciated on a straight-line basis over the lease term.
\nPayments associated with short-term leases and low-value leases are recognised on a straight-line basis as an expense
\nin the Consolidated Income Statement. Short-term leases are leases with a lease term of 12 months or less and low-value
\nleases comprise of leases with an underlying asset value of less than $5,000. Expenses recognised for these short-term
\nand low-value leases for the year ended 31 December 2022 were $3.9 million (2021: $2.8 million).
\nThe movements in right-of-use assets were as follows:
\nReal estate
\nand other
\n$m
\nVehicles
\n$m
\nTotal
\n$m
\nAs at 1 January 2021
70.3
15.5
85.8
\nLease additions
17.1
7.8
24.9
\nAcquisitions
0.7
\u2013
0.7
\nLeases terminated
(0.4)
(1.1)
(1.5)
\nDepreciation of right-of-use assets
(14.5)
(8.3)
(22.8)
\nForeign exchange
(2.9)
(0.6)
(3.5)
\nAs at 31 December 2021
70.3
13.3
83.6
\nLease additions
12.3
8.4
20.7
\nAcquisitions (Note 26)
2.2
\u2013
2.2
\nLeases terminated
(1.4)
0.1
(1.3)
\nDepreciation of right-of-use assets
(14.7)
(7.4)
(22.1)
\nForeign exchange
(3.1)
(0.6)
(3.7)
\nAs at 31 December 2022
65.6
13.8
79.4
\nMovements in lease liabilities were as follows:
\n2022
\n$m
\n2021
\n$m
\nLease liabilities as at 1 January
90.5
92.1
\nLease additions
21.0
24.9
\nAcquisitions
2.9
0.7
\nPayment of lease liabilities
(20.7)
(22.0)
\nLeases terminated
(1.2)
(1.5)
\nInterest expense on lease liabilities (Note 25)
3.3
3.8
\nInterest paid on lease liabilities
(3.3)
(3.8)
\nForeign exchange
(4.2)
(3.7)
\nLease liabilities as at 31 December
88.3
90.5
\nTotal cash outflow of lease liabilities including interest for the year ended 31 December 2022 was $24.0 million (2021: $25.8 million).
\nInterest paid during the year was $3.3 million (2021: $3.8 million).
\nLease liabilities by category at 31 December were as follows:
\n2022
2021
\nReal estate
\nand other
\n$m
\nVehicles
\n$m
\nTotal
\n$m
\nReal estate
\nand other
\n$m
\nVehicles
\n$m
\nTotal
\n$m
\nCurrent
13.8
6.5
20.3
13.2
6.5
19.7
\nNon-current
60.6
7.4
68.0
64.0
6.8
70.8
\nTotal
74.4
13.9
88.3
77.2
13.3
90.5
\n211
Convatec Group Plc Annual Report and Accounts 2022
\nAdditional information
Governance
Strategic report
Overview
Financial statements
24. LEASES (CONTINUED)
\nThe maturity of lease liabilities at 31 December was as follows:
\n2022
2021
\nReal estate
\nand other
\n$m
\nVehicles
\n$m
\nTotal
\n$m
\nReal estate
\nand other
\n$m
\nVehicles
\n$m
\nTotal
\n$m
\nWithin 1 year
13.8
6.5
20.3
13.2
6.5
19.7
\n1 to 2 years
12.3
4.2
16.5
12.7
4.1
16.8
\n2 to 3 years
9.5
2.3
11.8
10.7
2.0
12.7
\n3 to 4 years
8.1
0.7
8.8
8.5
0.6
9.1
\n4 to 5 years
7.2
0.1
7.3
6.8
0.1
6.9
\n5 to 10 years
23.5
0.1
23.6
24.2
\u2013
24.2
\nMore than 10 years
\u2013
\u2013
\u2013
1.1
\u2013
1.1
\nTotal
74.4
13.9
88.3
77.2
13.3
90.5
\nThe undiscounted contractual cash flows in relation to the maturity of leases liabilities have been disclosed in Note 21 \u2013 Borrowings.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfLeasesExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f29040": {
"value": "Accounting policy The lease liability is measured at the present value of future lease payments discounted using the rate implicit in the lease.
\nIf this rate is not readily determinable, the Group uses its incremental borrowing rate. Generally, the Group uses its
\nincremental borrowing rate as the discount rate.
\nOptions such as lease extensions or terminations on lease contracts are considered on a case-by-case basis by regular
\nmanagement assessment.
\nEach lease payment is allocated between amounts paid for principal and interest. The interest cost is charged to the
\nConsolidated Income Statement over the lease term to produce a constant periodic rate of interest on the remaining
\nbalance of the liability for each period. The right-of-use asset is depreciated on a straight-line basis over the lease term.
\nPayments associated with short-term leases and low-value leases are recognised on a straight-line basis as an expense
\nin the Consolidated Income Statement. Short-term leases are leases with a lease term of 12 months or less and low-value
\nleases comprise of leases with an underlying asset value of less than $5,000. Expenses recognised for these short-term
\nand low-value leases for the year ended 31 December 2022 were $3.9 million (2021: $2.8 million).",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForLeasesExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f29283": {
"value": "25. FINANCE INCOME AND EXPENSE Finance expenses arise from interest on the Group\u2019s borrowings and lease liabilities. Finance income arises from interest
\nearned on investment of surplus cash.
\nAccounting policy
\nFinance expenses, including the transaction costs for borrowings and any discount or premium on issue, are recognised
\nin the Consolidated Income Statement using the effective interest rate method.
\nWhen existing debt is derecognised in the financial statements any transaction costs not amortised are recognised
\nimmediately in the Consolidated Income Statement.
\nUpon derecognition of financial liabilities, any unamortised financing fees are recognised immediately in the Consolidated
\nIncome Statement.
\nInterest related to qualifying assets under construction included within PP&E is capitalised (refer to Note 8 \u2013 Property,
\nplant and equipment).
\nRefer to Note 24 \u2013 Leases for accounting policy on interest expense on lease liabilities.
\nInterest arising from interest rate swaps is recorded as either interest income or expense over the term of the agreement.
\nHedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or no longer
\nqualifies for hedge accounting. The discontinuation is accounted for prospectively. Any gain or loss recognised in other
\ncomprehensive income and accumulated in the cash flow hedge reserve at that time remains in equity and is reclassified
\nto profit or loss when the forecast transaction occurs. When a forecast transaction is no longer expected to occur, the gain
\nor loss accumulated in the cash flow hedge reserve is reclassified immediately to profit or loss.
\nFinance costs, net for the year ended 31 December were as follows:
\n2022
\n$m
\n2021
\n$m
\nFinance income
\nInterest income on cash and cash equivalents
5.5
0.8
\nTotal finance income
5.5
0.8
\nFinance expense
\nInterest expense on borrowings
(46.4)
(29.2)
\nOther financing-related fees
\n1
\n(8.2)
(8.1)
\nInterest expense on interest rate derivatives
(1.4)
(3.8)
\nInterest expense on lease liabilities
(3.3)
(3.8)
\nCapitalised interest
\n2
\n2.0
0.6
\nUnwinding of discount
\n3
\n(15.6)
\u2013
\nOther finance costs
(0.3)
\u2013
\nTotal finance expense
(73.2)
(44.3)
\nFinance costs, net
(67.7)
(43.5)
\n1.
Other financing-related fees include the amortisation of deferred financing fees associated with the multicurrency revolving credit facilities, term loan facilities
\nand senior notes. This also includes $2.7 million of deferred financing fees related to the early termination of the Group\u2019s previous credit agreement.
\n2.
Capitalised interest was calculated using the Group\u2019s weighted average interest rate over the year of 3.4% (2021: 2.0%).
\n3.
The unwinding of discount is in respect of the contingent consideration payable in relation to the Triad Life Sciences and Cure Medical acquisitions.
\nRefer to Note 26 \u2013 Acquisitions.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfFinanceIncomeExpenseExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f29284": {
"value": "25. FINANCE INCOME AND EXPENSE Finance expenses arise from interest on the Group\u2019s borrowings and lease liabilities. Finance income arises from interest
\nearned on investment of surplus cash.
\nAccounting policy
\nFinance expenses, including the transaction costs for borrowings and any discount or premium on issue, are recognised
\nin the Consolidated Income Statement using the effective interest rate method.
\nWhen existing debt is derecognised in the financial statements any transaction costs not amortised are recognised
\nimmediately in the Consolidated Income Statement.
\nUpon derecognition of financial liabilities, any unamortised financing fees are recognised immediately in the Consolidated
\nIncome Statement.
\nInterest related to qualifying assets under construction included within PP&E is capitalised (refer to Note 8 \u2013 Property,
\nplant and equipment).
\nRefer to Note 24 \u2013 Leases for accounting policy on interest expense on lease liabilities.
\nInterest arising from interest rate swaps is recorded as either interest income or expense over the term of the agreement.
\nHedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or no longer
\nqualifies for hedge accounting. The discontinuation is accounted for prospectively. Any gain or loss recognised in other
\ncomprehensive income and accumulated in the cash flow hedge reserve at that time remains in equity and is reclassified
\nto profit or loss when the forecast transaction occurs. When a forecast transaction is no longer expected to occur, the gain
\nor loss accumulated in the cash flow hedge reserve is reclassified immediately to profit or loss.
\nFinance costs, net for the year ended 31 December were as follows:
\n2022
\n$m
\n2021
\n$m
\nFinance income
\nInterest income on cash and cash equivalents
5.5
0.8
\nTotal finance income
5.5
0.8
\nFinance expense
\nInterest expense on borrowings
(46.4)
(29.2)
\nOther financing-related fees
\n1
\n(8.2)
(8.1)
\nInterest expense on interest rate derivatives
(1.4)
(3.8)
\nInterest expense on lease liabilities
(3.3)
(3.8)
\nCapitalised interest
\n2
\n2.0
0.6
\nUnwinding of discount
\n3
\n(15.6)
\u2013
\nOther finance costs
(0.3)
\u2013
\nTotal finance expense
(73.2)
(44.3)
\nFinance costs, net
(67.7)
(43.5)
\n1.
Other financing-related fees include the amortisation of deferred financing fees associated with the multicurrency revolving credit facilities, term loan facilities
\nand senior notes. This also includes $2.7 million of deferred financing fees related to the early termination of the Group\u2019s previous credit agreement.
\n2.
Capitalised interest was calculated using the Group\u2019s weighted average interest rate over the year of 3.4% (2021: 2.0%).
\n3.
The unwinding of discount is in respect of the contingent consideration payable in relation to the Triad Life Sciences and Cure Medical acquisitions.
\nRefer to Note 26 \u2013 Acquisitions.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfFinanceIncomeExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f29285": {
"value": "25. FINANCE INCOME AND EXPENSE Finance expenses arise from interest on the Group\u2019s borrowings and lease liabilities. Finance income arises from interest
\nearned on investment of surplus cash.
\nAccounting policy
\nFinance expenses, including the transaction costs for borrowings and any discount or premium on issue, are recognised
\nin the Consolidated Income Statement using the effective interest rate method.
\nWhen existing debt is derecognised in the financial statements any transaction costs not amortised are recognised
\nimmediately in the Consolidated Income Statement.
\nUpon derecognition of financial liabilities, any unamortised financing fees are recognised immediately in the Consolidated
\nIncome Statement.
\nInterest related to qualifying assets under construction included within PP&E is capitalised (refer to Note 8 \u2013 Property,
\nplant and equipment).
\nRefer to Note 24 \u2013 Leases for accounting policy on interest expense on lease liabilities.
\nInterest arising from interest rate swaps is recorded as either interest income or expense over the term of the agreement.
\nHedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or no longer
\nqualifies for hedge accounting. The discontinuation is accounted for prospectively. Any gain or loss recognised in other
\ncomprehensive income and accumulated in the cash flow hedge reserve at that time remains in equity and is reclassified
\nto profit or loss when the forecast transaction occurs. When a forecast transaction is no longer expected to occur, the gain
\nor loss accumulated in the cash flow hedge reserve is reclassified immediately to profit or loss.
\nFinance costs, net for the year ended 31 December were as follows:
\n2022
\n$m
\n2021
\n$m
\nFinance income
\nInterest income on cash and cash equivalents
5.5
0.8
\nTotal finance income
5.5
0.8
\nFinance expense
\nInterest expense on borrowings
(46.4)
(29.2)
\nOther financing-related fees
\n1
\n(8.2)
(8.1)
\nInterest expense on interest rate derivatives
(1.4)
(3.8)
\nInterest expense on lease liabilities
(3.3)
(3.8)
\nCapitalised interest
\n2
\n2.0
0.6
\nUnwinding of discount
\n3
\n(15.6)
\u2013
\nOther finance costs
(0.3)
\u2013
\nTotal finance expense
(73.2)
(44.3)
\nFinance costs, net
(67.7)
(43.5)
\n1.
Other financing-related fees include the amortisation of deferred financing fees associated with the multicurrency revolving credit facilities, term loan facilities
\nand senior notes. This also includes $2.7 million of deferred financing fees related to the early termination of the Group\u2019s previous credit agreement.
\n2.
Capitalised interest was calculated using the Group\u2019s weighted average interest rate over the year of 3.4% (2021: 2.0%).
\n3.
The unwinding of discount is in respect of the contingent consideration payable in relation to the Triad Life Sciences and Cure Medical acquisitions.
\nRefer to Note 26 \u2013 Acquisitions.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfFinanceCostExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f29292": {
"value": "Accounting policy Finance expenses, including the transaction costs for borrowings and any discount or premium on issue, are recognised
\nin the Consolidated Income Statement using the effective interest rate method.
\nWhen existing debt is derecognised in the financial statements any transaction costs not amortised are recognised
\nimmediately in the Consolidated Income Statement.
\nUpon derecognition of financial liabilities, any unamortised financing fees are recognised immediately in the Consolidated
\nIncome Statement.
\nInterest related to qualifying assets under construction included within PP&E is capitalised (refer to Note 8 \u2013 Property,
\nplant and equipment).
\nRefer to Note 24 \u2013 Leases for accounting policy on interest expense on lease liabilities.
\nInterest arising from interest rate swaps is recorded as either interest income or expense over the term of the agreement.
\nHedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or no longer
\nqualifies for hedge accounting. The discontinuation is accounted for prospectively. Any gain or loss recognised in other
\ncomprehensive income and accumulated in the cash flow hedge reserve at that time remains in equity and is reclassified
\nto profit or loss when the forecast transaction occurs. When a forecast transaction is no longer expected to occur, the gain
\nor loss accumulated in the cash flow hedge reserve is reclassified immediately to profit or loss.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForFinanceCostsExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f29293": {
"value": "Accounting policy Finance expenses, including the transaction costs for borrowings and any discount or premium on issue, are recognised
\nin the Consolidated Income Statement using the effective interest rate method.
\nWhen existing debt is derecognised in the financial statements any transaction costs not amortised are recognised
\nimmediately in the Consolidated Income Statement.
\nUpon derecognition of financial liabilities, any unamortised financing fees are recognised immediately in the Consolidated
\nIncome Statement.
\nInterest related to qualifying assets under construction included within PP&E is capitalised (refer to Note 8 \u2013 Property,
\nplant and equipment).
\nRefer to Note 24 \u2013 Leases for accounting policy on interest expense on lease liabilities.
\nInterest arising from interest rate swaps is recorded as either interest income or expense over the term of the agreement.
\nHedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or no longer
\nqualifies for hedge accounting. The discontinuation is accounted for prospectively. Any gain or loss recognised in other
\ncomprehensive income and accumulated in the cash flow hedge reserve at that time remains in equity and is reclassified
\nto profit or loss when the forecast transaction occurs. When a forecast transaction is no longer expected to occur, the gain
\nor loss accumulated in the cash flow hedge reserve is reclassified immediately to profit or loss.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForFinanceIncomeAndCostsExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f29383": {
"value": "26. ACQUISITIONS During the year to 31 December 2022, the Group completed the acquisition of Triad Life Sciences Inc, a US-based medical
\ndevice company.
\nThis note provides details of the transaction and the acquisition accounting that has been recorded to reflect the fair value
\nof assets acquired and liabilities assumed as well as the intangible assets and goodwill recognised upon acquisition. This
\nnote also provides details of any fair value changes identified post-acquisition in respect of previous acquisitions that the
\nGroup has completed.
\nAccounting policy
\nAcquisitions of subsidiaries and businesses are accounted for using the acquisition method of accounting. Consideration
\ntransferred in respect of an acquisition is measured at the fair value of the assets acquired, equity instruments issued and
\nliabilities incurred or assumed on the date of the acquisition. Identified assets acquired and liabilities assumed are
\nmeasured at their respective acquisition-date fair values.
\nThe excess of the fair value of the consideration given over the fair value of the identifiable net assets acquired is recorded
\nas goodwill. If the fair value of the identifiable net assets acquired is greater than the fair value of the consideration given,
\nthe excess is recognised immediately in the Consolidated Income Statement as a bargain purchase gain. Acquisition-
\nrelated costs are expensed as incurred.
\nThe operating results of the acquired business are reflected in the Group\u2019s Consolidated Financial Statements from the
\ndate of acquisition.
\nTriad Life Sciences Inc (Triad Life Sciences)
\nDescription of the transaction
\nOn 14 March 2022, the Group completed its acquisition of 100% of the share capital of Triad Life Sciences Inc. The acquisition
\nof Triad Life Sciences strengthens the Group\u2019s Advanced Wound Care position in the US, securing access to a complementary
\nand innovative technology platform that enhances advanced wound management and patient outcomes.
\nIn addition to the initial consideration of $125.3 million, the sellers may earn contingent consideration up to a maximum of
\n$325.0 million, in the form of (i) two additional payments of $25.0 million each relating to short-term milestones; and (ii) two
\nearnout payments conditional on performance during year 1 and year 2 post completion, with the maximum earnout for these
\ntwo payments totalling $275.0 million based on stretching financial performance over the period.
\nThe discounted fair value of the contingent consideration at the date of acquisition was $141.8 million, of which $25.0 million
\nwas paid in April 2022 and a further $25.0 million paid in October 2022 following attainment of the first and second short-
\nterm milestones. The earnout payments are due to be paid within three years of the acquisition date, subject to achieving
\nthe specified targets.
\nFollowing completion of the initial acquisition accounting, any changes in the fair value of the contingent consideration
\nat each reporting date will be recorded in the Consolidated Income Statement in accordance with the Group\u2019s accounting
\npolicies. This is explained further on in this note.
\n213
Convatec Group Plc Annual Report and Accounts 2022
\nAdditional information
Governance
Strategic report
Overview
Financial statements
26. ACQUISITIONS (CONTINUED)
\nAssets acquired and liabilities assumed
\nThe transaction meets the definition of a business combination and has been accounted for under the acquisition method of
\naccounting. The following table summarises the provisional fair values of the assets acquired and liabilities assumed as of the
\nacquisition date:
\nTriad Life
\nSciences
\nProvisional
\n$m
\nNon-current assets
\nProperty, plant & equipment
0.5
\nRight-of-use assets
2.2
\nIntangible assets \u2013 Product-related
154.8
\nCurrent assets
\nTrade and other receivables
4.7
\nInventories
10.8
\nCash and cash equivalents
15.9
\nTotal assets acquired
188.9
\nNon-current liabilities
\nLease liabilities
(
2.7
)
\nDeferred tax liabilities
(
32.3
)
\nCurrent liabilities
\nTrade and other payables
(
2.6
)
\nLease liabilities
(
0.2
)
\nTotal liabilities assumed
(
37.8
)
\nNet assets acquired
151.1
\nGoodwill
129.9
\nTotal
281.0
\nInitial cash consideration
125.3
\nDeferred purchase consideration paid into escrow
\n1
\n13.8
\nWorking capital adjustment
\n2
\n0.1
\nContingent consideration
141.8
\nTotal consideration
281.0
\nAnalysis of cash outflow in the Consolidated Statement of Cash Flows
\nProvisional
\n$m
\nInitial cash consideration
125.3
\nDeferred purchase consideration paid into escrow
\n1
\n13.8
\nCash and cash equivalents acquired
(
15.9
)
\nWorking capital adjustment
\n2
\n0.1
\nNet cash outflow from acquisitions, net of cash acquired
123.3
\n1.
$13.8 million was paid on closing into escrow as security and indemnity by the seller for its obligations under the Merger Agreement. $1.3 million was released in
\nDecember 2022 to the sellers following agreement of the closing statement. It is expected that the remaining balance will be released within the next 12 months
\nsubject to the terms of the Merger Agreement.
\n2.
This is the Group\u2019s calculation of the working capital adjustment and forms part of the initial consideration. The final amount was determined in accordance with the
\nterms of the Merger Agreement and this was finalised and paid by the reporting date.
\nThe fair values of the assets acquired and liabilities assumed are provisional at 31 December 2022. The Group will finalise these
\namounts as it obtains the information necessary to complete the measurement process. Any changes resulting from facts
\nand circumstances that existed as of the acquisition date may result in retrospective adjustments to the provisional amounts
\nrecognised at the acquisition date. The Group will finalise these amounts no later than one year from the acquisition date.
\nAs part of the acquisition accounting, a $10.2 million fair value adjustment was applied to the carrying value of inventory held
\nat the acquisition date. The fair value adjustment relates to work-in-progress and finished goods and was calculated as the
\nestimated selling price less costs to complete and sell the inventory, associated margins on these activities, and holding
\ncosts. As at 31 December 2022, $8.7 million has been expensed to cost of goods sold in the Consolidated Income Statement
\nas these have been sold. The remaining fair value uplift of $1.5 million is expected to be released over the next 6 to 12 months,
\nin line with forecast revenues.
\nThe fair value of trade and other receivables amounts to $4.7 million, with a gross contractual amount of $7.0 million. At the
\nacquisition date, the Group\u2019s best estimate of the contractual cash flows expected not to be collected amounts to $2.3 million.
\nThe goodwill recorded, which is not deductible for tax purposes, represents the cost savings, operating synergies and future
\ngrowth opportunities expected to result from combining the operations of Triad Life Sciences with those of the Group.
\nThe Triad Life Sciences acquisition is included in the Advanced Wound Care CGU group.
\nNotes to the Consolidated Financial Statements
continued
\nConvatec Group Plc Annual Report and Accounts 2022
214
\nFinancial statements
Fair value of contingent consideration at reporting date
\nThe two short-term milestones were achieved and paid during the year ended 31 December 2022. As at 31 December 2022,
\nmanagement reviewed the fair value of the remaining contingent consideration since the acquisition date, based on the most
\nrecent Board-approved strategic plan and forecast information. Consequently, the discounted fair value of the remaining
\ncontingent consideration was increased by $23.7 million since the amount recognised at 30 June 2022, and was recognised
\nin non-operating expenses in the Consolidated Income Statement (see Note 5 \u2013 Non-operating (expense)/income, net).
\nThe amount of discount unwind recognised in the Consolidated Income Statement during 2022 was $15.3 million and shown
\nwithin finance expenses (see Note 25 \u2013 Finance income and expense). The discounted fair value of the remaining contingent
\nconsideration as at 31 December 2022 was $130.8 million. Refer to Note 14 \u2013 Provisions for the movement in the contingent
\nconsideration during the year.
\nManagement have determined that the potential range of discounted outcomes within the next financial year is between
\n$85.2 million and $230.8 million, from a maximum undiscounted contingent consideration of $275.0 million.
\nAcquisition-related costs
\nThe Group incurred $2.4 million of acquisition-related costs directly related to the Triad Life Sciences acquisition in the year
\nended 31 December 2022, primarily in respect of legal and advisers\u2019 fees. The acquisition-related costs have been recognised
\nin general and administrative expenses in the Consolidated Income Statement.
\nRevenue and profit
\nThe revenue of Triad Life Sciences for the period from the acquisition date to 31 December 2022 was $34.8 million and net profit
\nfor the period was $5.8 million, before recognising acquisition-related intangible asset amortisation charge of $9.2 million and
\nthe inventory fair value uplift release of $8.7 million. If the acquisition had been completed on 1 January 2022, reported Group
\nrevenue would have been $4.4 million higher and Group profit for the year would have been $0.9 million lower, before
\nrecognising acquisition-related intangible asset amortisation charges of $2.0 million.
\nCure Medical LLC (Cure Medical)
\nOn 15 March 2021, the Group acquired 100% of the share capital of Cure Medical.
\nDuring 2022, management reviewed the expectation of the contingent consideration based on the most recent Board-approved
\nstrategic plan and forecast information. The Cure Medical business has outperformed its performance targets to date and
\nforecast financial performance was expected to exceed the original expectations. Consequently, the discounted fair value
\nof the contingent consideration has been revised from $3.1 million to $8.9 million during the year and the remeasurement
\ncharge of $5.8 million has been recognised in non-operating expenses in the Consolidated Income Statement (see Note 5 \u2013
\nNon-operating (expense)/income, net). The amount of discount unwind recognised in the Consolidated Income Statement
\nduring 2022 was $0.3 million and shown within finance expenses (see Note 25 \u2013 Finance income and expense). The discounted
\nfair value of the contingent consideration as at 31 December 2022 was $9.2 million. Refer to Note 14 \u2013 Provisions for the movement
\nin the contingent consideration during the year.
\nThis is due to be paid within three years of the acquisition date, subject to the terms of the Share Purchase Agreement. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfBusinessCombinationsExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f29393": {
"value": "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
\nliabilities incurred or assumed on the date of the acquisition. Identified assets acquired and liabilities assumed are
\nmeasured at their respective acquisition-date fair values.
\nThe excess of the fair value of the consideration given over the fair value of the identifiable net assets acquired is recorded
\nas goodwill. If the fair value of the identifiable net assets acquired is greater than the fair value of the consideration given,
\nthe excess is recognised immediately in the Consolidated Income Statement as a bargain purchase gain. Acquisition-
\nrelated costs are expensed as incurred.
\nThe operating results of the acquired business are reflected in the Group\u2019s Consolidated Financial Statements from the
\ndate of acquisition.",
"dimensions": {
"concept": "ctec:DescriptionOfAccountingPolicyForAcquisitionsPolicyTextBlock",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f29597": {
"value": "27. DIVESTITURES During the year ended 31 December 2022, the Group withdrew from its hospital care activities and related industrial sales.
\nAccounting policy
\nA divestiture or disposal occurs when the Group ceases to control a subsidiary, business or trade and assets associated
\nwith a specific product line or class of business. Consideration received in respect of a divestiture is measured at fair value,
\nand all associated assets and liabilities are derecognised at the date control is transferred. The difference between the
\ncarrying value of the net assets divested and the fair value of consideration received is recorded as a gain or loss on
\ndivestiture in the Consolidated Income Statement.
\nForeign exchange translation gains or losses relating to subsidiaries that the Group has divested, and that have previously
\nbeen recorded in other comprehensive income or expense, are also recognised as part of the gain or loss on divestiture.
\nThe operating results of the divested subsidiary, business or product line cease to be included in the Group's Consolidated
\nFinancial Statements from the date of divestiture.
\n215
Convatec Group Plc Annual Report and Accounts 2022
\nAdditional information
Governance
Strategic report
Overview
Financial statements
27. DIVESTITURES (CONTINUED)
\nExit from hospital care and industrial sales activities
\nOn 12 May 2022, following a strategic review, it was announced that the Group would be withdrawing from its hospital care
\nactivities and related industrial sales during 2022. This does not represent a separate major line of business or component
\nof the Group.
\nAs a result of the exit from the hospital care and industrial sales activities, the Group recognised impairment losses in the year
\nended 31 December 2022 in relation to the following:
\n\u2022
$8.1 million was recognised, within other operating expenses, as an impairment to property, plant and equipment, primarily
\nin relation to manufacturing equipment in Belarus and Slovakia.
\n\u2022
$4.3 million was recognised, within other operating expenses, as an impairment to product-related intangible assets.
\n\u2022
$13.4 million was recognised, within cost of sales, in relation to the write-off of inventories and provision for those which are
\nnot expected to be sold.
\nIn addition, the Group recognised $7.3 million of severance costs, of which $1.2 million remains as a provision as at
\n31 December 2022, and also recognised a $6.9 million provision in relation to contract exit costs. Management will review
\nthis at each reporting period. The Group incurred $6.7 million of divestiture-related costs in relation to legal fees and closing
\ndown of manufacturing site costs. The majority of the exit and closure activities have been completed at the end of the year,
\nwith minimal costs expected in 2023.
\nAs part of the exit from all hospital care and related industrial sales activities, a subsidiary was sold during the year.
\nThe cumulative amount of exchange losses of $12.2 million recognised in Other Comprehensive Income relating to those
\noperations, and a loss on disposal of $2.0 million, have been recognised in the Consolidated Income Statement as non-
\noperating expenses. All costs associated with the exit have been classified as an adjusting item in accordance with our
\nAlternative Performance Measures policy.",
"dimensions": {
"concept": "ctec:DisclosureOfDivestituresExplanatoryTextBlock",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f29602": {
"value": "A divestiture or disposal occurs when the Group ceases to control a subsidiary, business or trade and assets associated with a specific product line or class of business. Consideration received in respect of a divestiture is measured at fair value,
\nand all associated assets and liabilities are derecognised at the date control is transferred. The difference between the
\ncarrying value of the net assets divested and the fair value of consideration received is recorded as a gain or loss on
\ndivestiture in the Consolidated Income Statement.
\nForeign exchange translation gains or losses relating to subsidiaries that the Group has divested, and that have previously
\nbeen recorded in other comprehensive income or expense, are also recognised as part of the gain or loss on divestiture.
\nThe operating results of the divested subsidiary, business or product line cease to be included in the Group's Consolidated
\nFinancial Statements from the date of divestiture.",
"dimensions": {
"concept": "ctec:DescriptionOfAccountingPolicyForDivestituresPolicyTextBlock",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f29658": {
"value": "28. COMMITMENTS AND CONTINGENCIES Commitments represent the Group\u2019s future capital expenditure which is not recognised as a liability in the Consolidated
\nFinancial Statements but represents a non-cancellable commitment.
\nA contingent liability is a possible liability that is not sufficiently certain to qualify for recognition as a provision because
\nthe amount cannot be measured reliably or because settlement is not considered probable.
\nCapital commitments
\nAt 31 December 2022, the Group had non-cancellable commitments for the purchase of property, plant and equipment,
\ncapitalised software and development of $39.3 million (2021: $32.1 million).
\nContingent liabilities
\nThere were no contingent liabilities recognised as at 31 December 2022 and 31 December 2021. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfCommitmentsAndContingentLiabilitiesExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f29665": {
"value": "Capital commitments At 31 December 2022, the Group had non-cancellable commitments for the purchase of property, plant and equipment,
\ncapitalised software and development of $39.3 million (2021: $32.1 million). ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfCommitmentsExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f29671": {
"value": "Contingent liabilities There were no contingent liabilities recognised as at 31 December 2022 and 31 December 2021.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfContingentLiabilitiesExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f29676": {
"value": "29. RELATED PARTY TRANSACTIONS The Directors have not identified any related parties to the Group, other than the key management personnel. The Group
\nconsiders key management personnel as defined in IAS 24,
Related Party Disclosures
to be the members of CELT as set out
\non pages 112 to 113 and the Non-Executive Directors as set out on page 111.
\nKey management personnel compensation
\nKey management personnel compensation for the year ended 31 December was as follows:
\n2022
\n$m
\n2021
\n$m
\nShort-term employee benefits
16.4
14.4
\nShare-based payment expense
9.2
9.0
\nPost-employment benefits
0.8
0.7
\nTermination benefits
0.4
\u2013
\nTotal
26.8
24.1
\nFurther details of short-term employee benefits, share-based payment expense and post-employment benefits for the
\nExecutive Directors are shown on page 144. Details of the Non-Executive Directors' fees, included in the table above, are
\nprovided on page 147.
\nThe Group has not been a party to any other material transaction, or proposed transactions, in which any member of the key
\nmanagement personnel had or was to have a direct or indirect material interest. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfRelatedPartyExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f29684": {
"value": "Key management personnel compensation Key management personnel compensation for the year ended 31 December was as follows:
\n2022
\n$m
\n2021
\n$m
\nShort-term employee benefits
16.4
14.4
\nShare-based payment expense
9.2
9.0
\nPost-employment benefits
0.8
0.7
\nTermination benefits
0.4
\u2013
\nTotal
26.8
24.1
\nFurther details of short-term employee benefits, share-based payment expense and post-employment benefits for the
\nExecutive Directors are shown on page 144. Details of the Non-Executive Directors' fees, included in the table above, are
\nprovided on page 147.
\nThe 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. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfInformationAboutKeyManagementPersonnelExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f29728": {
"value": "30. SUBSEQUENT EVENTS The Group has evaluated subsequent events through to 8 March 2023, the date the Consolidated Financial Statements were
\napproved by the Board of Directors.
\nOn 1 March 2023, the Board proposed the final dividend in respect of 2022 subject to shareholder approval at the Annual
\nGeneral Meeting on 18 May 2023, to be distributed on 25 May 2023. See Note 18 \u2013 Dividends to the Consolidated Financial
Statements for further details.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfEventsAfterReportingPeriodExplanatory",
"language": "en",
"entity": "scheme:213800LS272L4FIDOH92",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
}
}
}