Convatec Group PLC (CTEC) Earnings Call Transcript & Summary

Okay. Good morning, everybody. Nice to see you. Welcome to Convatec's First Half of 2026 results announcements. The usual disclaimers apply. And today, we're going to follow the normal format, which is that I'll give a few words of introduction. Fiona will talk you through the performance, financial and outlook, and then I'll update on strategic progress before we'll be happy to take any questions that you've got. So let's start with a quick recap from the Capital Markets Day just back in April. These were the 3 things we suggested should be the key takeaways. We operate in large and growing markets with leading positions. We're focused on 4 chronic care categories, which leads to a high proportion of recurring revenue. Convatec is a strong and resilient business. We're delivering broad-based growth and we've got a track record of operational improvements, which increased profitability. And then the growth opportunity is substantial. We have new products launching across all of those 4 categories, which means that we will grow ahead of those growing markets. And there's more to come, as you'll hear today. Those structurally growing markets with the leading positions and the recurring revenue with our new products launching, that all drives the Convatec try wheel. And that's what leads to the sustainable level of growth at 6% to 8% for organic revenue and double digits for EPS every year starting from next year. And at an operating margin of mid-20s, the cash generation is strong, and that will enable us to invest organically in OpEx and CapEx to sustain the growth, to grow the dividend in line with earnings, and there will be further capital available to increase returns for shareholders. So that's what we said in April. And I'm pleased to say that from the first half of this year, we are on track. We said that faster sales growth would start in 2027 and that 2026 would be second half weighted, and that is still how we see it. In the first half of 2026, revenue growth was good. It was right on track. But in the second half, it will be faster for good reasons, and we'll get into that. In the first half, operationally and strategically, our delivery was strong. Our new products are launching and winning market share. We are investing across all our 4 categories in increasing demand -- and increasing capacity, excuse me, to meet the rising demand and that's especially in Infusion Care. We made good progress on our simplification and productivity initiatives, and that's what improves cost efficiency and drives operating margin improvement. And we're confirming today that we still expect to reach at least 23% in FY '26. And that will lead to double-digit EPS growth, the third year in a row of double-digit EPS growth with strong cash conversion, enough for the increase in growth CapEx that we're deploying this year and to increase the dividend, and we're announcing today a share buyback of $200 million, all of that within our target leverage ratio of 2x EBITDA. And then we're also confirming today that we are on track to deliver our medium-term targets, which was set out in the Accelerated strategy. So H2 then. Accelerating. The sales will grow faster in H2, principally because of Infusion Care. And there, we have high visibility of customer orders. They are uneven, but not unpredictable and demand is strong. And we also have new products launching in wound care and in Ostomy Care, that's ConvaFoam and Esteem Body, respectively. And so the growth will build slowly through the year. And in Continence Care, we expect the growth from H1 to continue into H2, supported by the expansion of GCF for women and the international growth. So we're on track to deliver our FY '26 organic revenue guidance. And today, we're narrowing the range, which means that for the second half of the year growth will be between 6% and 8%. And then for 2027, we are on track to reach mid-20s in operating margin, and for the faster growth rates of 6% to 8% in sales and double-digit EPS for each year thereafter. We'll get into all of that. But for now, let me hand you over to Fiona. I'll come back shortly.

Good morning, everybody. So I will present a summary of our first half performance, plus the outlook for the full year before handing back to Jonny for the strategic review. We are pleased to report another good financial performance, and we are on track for our full year targets. Organic revenue growth, excluding InnovaMatrix, which I'll talk about shortly, was 5%, in line with expectations. Operating margin was 21.2%, down 10 basis points year-on-year, but up 50 basis points at constant currency. EPS growth was 6%, and we are on track for another year of double-digit EPS growth. Free cash flow to equity was lower than last year due to timing effects of working capital and CapEx. We still expect around 100% cash conversion for the year. Our interim dividend grew by 15% as we move towards 1/3 interim, 2/3 final dividend pattern. We are still targeting a full year payout ratio of 35% to 45% of adjusted net profit. And in addition, this morning, we announced a $200 million share buyback program to be completed between now and the year-end. Revenue growth was again broad-based across all 4 categories as this chart demonstrates, with all 4 categories contributing materially to sales growth. On the right, you can see the impact of the significant market uncertainty in skin substitutes. InnovaMatrix sales decreased $37 million year-on-year to $2.5 million in the first half, which represented just over 3% headwind to group revenue growth, and we now estimate full year '26 revenue of between $5 million and $10 million, representing a full year headwind to group revenues of about 2.5% and an H2 headwind of about 2%. As a result of these challenging conditions, we have reduced expectations for the year to between $5 million to $10 million revenue. And as a result, we've taken a noncash impairment of $69 million. This means that InnovaMatrix will not have any material negative impact on our results beyond 2026. Now let's look at sales by category, starting with Advanced Wound Care, where sales were up 3.4% excluding InnovaMatrix. Overall, markets were a little bit slower than in 2025 and compared with our 4 months trading update, May and June was slightly softer. This was due to some phasing of orders in Aquacel, which we expect to pick up in the second half. Advanced Wound Care growth is expected to build in the second half supported by further cumbersome growth. In Ostomy Care, organic growth was 4.3%, matching H2 '25. The highlight was the performance of Esteem Body, our 1-piece soft convex pouch, which grew ahead of expectations and is now annualizing at around $60 million of revenue and continuing to win share. Growth was supported by our updated Esenta accessories range, which is now 20% of Ostomy Care revenue. Flexi-Seal, which represented about 10% of Ostomy Care was down 4% with fewer intensive care unit procedures due to a less severe flu season than prior year. We expect Ostomy Care growth to build in the second half, led by Esteem Body scale-up and new patient starts and we're starting to see the early flow of new patients from our recent GPO wins. In Continence Care, organic growth of 5.9% was driven by further volume increases in the U.S.A. backed by outstanding customer service and our broadening product portfolio. We saw faster growth in Convatec product, which is now over 60% of our sales, given our improved portfolio of products, and faster growth of hydrophilic product, which again was over 60% of revenue. This included excellent growth in GentleCath Air for Women, which has more than doubled year-on-year and added 1 percentage point to Continence Care growth. We again grew strongly outside the U.S.A. from a low base and non-U.S. growth contributed over 1 percentage point to the category growth rate. And then Infusion Care, where organic growth was 7.4%. There was continued strong demand in diabetes across both long-standing and newer customers as the penetration of automated insulin delivery over multiple daily injections is increasing. Outside Diabetes growth was again excellent, high double digits, led by infusion sets for AbbVie's Parkinson's disease treatment. Other therapies represented over 15% of our Infusion Care revenue, up from about 10% in 2024 with scope to grow further as a share of the category. We have a strong position in Infusion Care with increasing diversity across customers and products. We expect growth to accelerate in the second half based on visible customer orders with double-digit growth in the second half, driving high single-digit growth for full year '26. Moving on to profitability. Operating margin decreased by 10 basis points, but increased by 50 basis points in constant currency. Operations, productivity and price and mix infusion improvements more than offset inflation. The drop in InnovaMatrix caused 140 basis points drag to operating margin in the first half. Simplification and productivity initiatives continue to deliver with commercial and G&A efficiency, adding a further 130 basis points. Overall, in the first half, OpEx decreased by 70 basis points as a percentage of revenue to 38.2%. Currency represented a 60 basis points headwind, which is expected to moderate to 40 basis points for the full year based on current spot prices. This slide shows the bridge to higher margin in H2 as part of our at least 23% margin guidance. This will be driven by 4 areas. Our H2 revenue is materially higher than H1 as it has been in previous years. This is driven by customer buying activity and 4 additional trading days in the second half versus the first half, which was the same in 2025. Given the operating expenses are broadly spread throughout the year, this drives an H2 margin versus H1 at over 200 basis points. We also have Infusion Care phasing. In the full year 2026, Infusion Care sales are weighted towards the second half. This has a positive operational leverage and margin mix effect and explains a further 50 basis points. Combined, these factors drive around about 260 basis points margin uplift versus the first half. For InnovaMatrix, the operating margin drag is lower in the second half '26. This drives about 40 basis points uplift versus H1. Lastly, in the second half, there will be further benefits of operational productivity initiatives started in H2 '25 and H1 '26, including automation, strategic sourcing, and debottlenecking. And this is coupled with specific organizational simplification. These initiatives offset inflation and are expected to deliver about 80 basis points margin uplift versus H1. This slide shows our margin history plus the bridge to our midterm guide of mid-20s margin. We are on track to deliver this in 2027 driven by a continuation of our productivity initiatives, leverage from 6% to 8% revenue growth and further OpEx efficiencies. This is achievable with inflation at prevailing price levels. Turning to EPS. We are on track for another year of double-digit EPS growth. EPS grew 6% in the first half and will accelerate in the second half as we benefit from lower interest rates following our recent refinancing and a lower number of shares in issue following our $300 million buyback in the second half 2025. On cash, consistent with normal seasonality, net debt increased in the first half. Our CapEx program is advancing well and was first half weighted. I shall come back to this shortly. Working capital was higher than the prior year, predominantly due to timing, slightly higher inventory, timing and mix of trade receivables and payables and some timing of other accruals that build timing and mix of trade receivables and payables and some timing of other accruals that build through the year. We expect working capital flow to reverse in the second half as it does each year. And as such, we continue to expect around about 100% free cash flow to equity conversion in full year '26. Leverage was 2.3x at the half year. As you can see on the right-hand side of this chart, it is usual for leverage to be higher at the half year. Last year was an exception. We expect to be at about 2x leverage at the year-end, inclusive of the $200 million share buyback announced earlier today. As you know, we are currently investing significantly to expand capacity to meet rising market demand. This slide gives some color on the movement year-on-year and the areas that we are investing in. We have been busy in the first half with CapEx H1 weighted. Our full year guidance is unchanged. The largest component of the $90 million growth CapEx was for Infusion Care, where we are adding significant capacity in many cases, backed by long-term contracts. Some new Infusion Care capacity will come on stream later this year with significantly more in 2027 and beyond. Elsewhere, we are investing to support launches in Advanced Wound Care, Ostomy Care and Continence Care, and we expect this growth CapEx to be accretive to group returns. Operational CapEx was also H1 weighted, including some IT projects which have now completed. We continue to expect operational CapEx to be about 2.5% of revenue for the year. We are confirming our guidance for full year '26, and here's a summary to help you model. On operating margin, we continue to expect to reach at least 23%, inclusive of InnovaMatrix headwinds of about 80 basis points for the full year, and FX headwinds of about 40 basis points. I would also like to draw your attention to the fact that the legacy Bristol-Myers Squibb amortization charge ended last month in July, and that was over $95 million annually. And so going forward, that will significantly reduce the difference between our reported and our adjusted financials. In conclusion, we saw a further good financial performance in the first half, and we are on track to hit our targets. We are investing to underpin faster future growth and returning capital to our shareholders. Thank you. I'll hand back to Jonny.

Thank you very much. So I'll now say a few words about how we're getting on implementing the strategy. And just as a recap, we are very focused in 4 chronic care categories. And each one of those is growing because the population is increasing, the population is aging. And the prevalence of the diseases, which cause the conditions we support is increasing. Because of the chronic nature of these conditions, it leads to a very high level of recurring revenue, and that's a solid and durable foundation for long-term growth. Now in each of those categories, we are going to grow faster than the market by implementing our Accelerate strategy. Customer growth will be focused, identifying and satisfying unmet needs. We'll be investing in R&D to innovate and continue to launch more products. More on that later in a moment. We'll be fairly focused on execution, cross-functional collaboration, seamless delivery across the organization to support the faster growth. And all of this will be underpinned by a strong culture in the organization, purpose-led performance driven. You can see on the right of this chart, the growth rates for each of the categories, same as we announced at the Capital Markets Day, they combine to deliver the faster growth rate at group level of 6% to 8% per annum on an ongoing basis. Now we have been busy in the first half. Wave 1 products are scaling up. Wave 2 products are progressing well through their launch processes and building on lessons from Wave 1, we are going at a faster cadence. We're investing in all 4 categories. Organic investments in both OpEx and CapEx are top cash allocation priority. And that is, as I say, building CapEx -- building capacity to support faster growth. We're strengthening the quality in everything we do with an emphasis on right first time. This is cross-functional seamless delivery to support the faster growth. And we're making good progress on remediating the FDA's observations regarding our quality management system. We're scaling technology. We're scaling enterprise AI. We're embedding agentic AI and Copilot across commercial, supply chain, operations, financial which leads to faster decision-making and measurable productivity improvements. Simplifying the operating model, outside of North America and Europe, we've been delayering, which allows for faster decision-making and reduced OpEx. And we will also be opening our fourth Convatec business services center later this year in India in Hyderabad, which will focus on technology and innovation. And then we're strengthening the leadership team. Again, this is with a focus on cross-functional collaboration and delivery of our faster growth. So these are our Wave 1 products, and they're scaling successfully and adding over half of the organic growth in the first half. Launched between 2022 and 2025, they provide strong evidence that our innovation model is working and that we can successfully bring new products to market and scalable. All of these products are in the market and scaling up except for InnovaMatrix. Now Fiona spoke a bit about InnovaMatrix just now. The first half was very challenging. The diabetic foot market -- ulcer market, in particular, in the physician's office is basically frozen at the moment. Important point is that this technology works for patients. The feedback and the evidence we've got is strong. And we expect sales will start to increase slowly in the second half and that 2026 will be the low point with further growth from '27, but from a very small base. And going forward, this is going to be just one of our 16 new products contributing to the 6% to 8% growth at group level. It won't be reported separately, and it will no longer be a distraction. And from this -- for the rest of the list, products such as MioAdvance Extended Wear, ConvaFoam infusion set for diabetes and for Parkinson's therapies, GentleCath Air and Esteem Body are scaling well and are gaining market share. So here are the Wave 2 launches, and they're progressing well. We're securing regulatory approvals, building manufacturing, generating clinical evidence, establishing reimbursement pathways and ensuring commercial readiness. Products are advancing in line with our plans. We've got a little key here in the middle of the chart to these balls to show the approximate status of each of the launches. ConvaNiox, ConvaFiber and ConvaVAD are in limited market release and customer evaluation. Cure Aqua, GCA Pocket and Set are scheduled for launch later this year. Infusion sets such as Tanabe Pharma and Supernus Parkinson's treatments are ready to go, pending some customer approvals. And Natura Body is on schedule for launch next year. The Flexi-Seal Air has been delayed into next year, originally targeted this year, but that's to accommodate for some refinements in design following customer evaluation. Look, I hope you get a sense from these 2 slides that there is a lot going up. This is more than Convatec has ever tried to launch previously, and it's going really well. Now I wanted to share a bit more on 2 of the products in Wave 2, starting with ConvaNiox. Here, we're creating an entirely new category in wound care through a multimodal dressing designed to address multiple barriers to healing simultaneously. The initial focus is diabetic foot ulcers where the unmet need is substantial. Around 16.5 million patients are diagnosed each year with many wounds failing to heal and leading to significant costs for the health care systems of the order of $10 billion. We have strong clinical evidence that ConvaNiox works better than the standard of care. The first RCT demonstrated 60% more ulcers healed within 12 weeks, and 3x faster wound area reduction. We're continuing to build more evidence with a large U.S. RCT study recruiting ahead of schedule and results due in 2027. We're also seeing early encouraging signs of adoption, supported by regulatory approvals, reimbursement progress and positive clinician feedback. Most recently in the U.K., we were added to the drug tariff list at a price of GBP 40 per dressing, which is a very strong proof point of superior performance. Importantly, we see ConvaNiox as a platform opportunity, not a single product with potential to expand into other wound types, including venous leg ulcers, surgical wound complications, and even into other categories. ConvaNiox will be a strong contributor to growth, not in 2026 or 2027, but we expect it to start to ramp from 2028. And as we've previously said, this has the potential to become our biggest brand. The second area I wanted to say a bit more on is infusion sets for Parkinson's disease. This is an excellent example of diversifying our Infusion Care category beyond diabetes. Subcutaneous treatment for Parkinson's is a relatively new therapy, but it is a growing market with very low penetration today and a long runway for growth. In the markets in which we operate, there are 4 million people with Parkinson's. And regrettably, about 1 million of those have advanced Parkinson's requiring continuous treatment. Around -- today, around 95% of those advanced Parkinson's patients are still treated with oral medication and only 5% are using pumps. All old therapies lead to greater fluctuation in dopamine on and off periods and can lead to significant patient discomfort. Pumps provide better treatment. Breakthroughs like AbbVie's Violet, where we are the exclusive supplier of infusion sets are dramatically improving patient outcomes by automating the [indiscernible] delivery. Now since 2023, pump adoption has grown over 25% CAGR, and we expect it to increase significantly over time. We're now supporting additional therapies, including Tanabe Pharma' and Supernus' new treatment. And this creates a really attractive growth opportunity. Parkinson's therapies will be a strong underpin of our double-digit growth in Infusion Care going forward. Now as we said at the Capital Markets Day in April, we described our product innovation in 3 waves of new products just for ease of reference. Prior to Wave 1, there were clear gaps in our product portfolio. And the Wave 1 launches between 2022 and 2025, substantially strengthened our competitive position. And those products are now scaling up and delivering growth. Wave 2 are the products which are starting to launch now in 2026 and in 2027. And building on lessons from Wave 1, they are targeting faster-growing segments and being delivered quicker. Wave 1 and Wave 2 together underpin the acceleration of growth to 6% to 8% for the next plan period. And then we've got Wave 3, which at the moment is in earlier development stage and will deliver growth in later years. The good news is that these innovations are across all 4 categories and continuing the theme of broad-based growth. We'll say a bit less about Wave 3 at the moment for obvious reasons, but it does represent our next horizon of value creation. The strategy is to maximize our internal manufacturing capabilities to leverage the proprietary science across all 4 categories and to back it up with clinical validation. It reflects a deliberate move towards higher growth, stronger differentiation and attractive new segments, all of which will represent better economics. You can see in the center box on this slide, the ideas that we have to build on our existing capabilities and to deliver new and better solutions for users. Predominantly organic, built on platforms that we have already invested in, but we remain open to external innovation by way of partnership or deals if they would accelerate our road map or help us access new technologies. So this is all very exciting and ensures the sustainability of our growth model for years to come. Now back to 2026. I hope you've heard the message that we are on track for another year of strong growth and margin progression. This will be the fifth consecutive year of sales growth within our current target range of 5% to 7%, excluding InnovaMatrix. It will be the fifth year of operating margin expansion, and it will be the third year of double-digit growth in earnings per share. Now as we implement the Accelerate strategy, there is more to come. PAUSE we will step up our sales growth rate to 6% to 8% from the second half of this year and thereafter, led by double-digit growth in Infusion Care. We'll reach around 25% operating margin in the second half of this year. And then we will continue in the mid-20s thereafter. We are very focused on execution, on doing the basics better, on simplification and productivity, embedding technology and AI tools across the organization so that we execute more effectively to accelerate growth. So let me close with 3 messages. It was a good financial performance in the first half and strong delivery operationally and strategically. Acceleration is going to begin from the second half of this year. We have good visibility on that, and we are confirming today guidance for sales, margin, EPS and cash for 2026 and for the medium-term targets that we announced previously. And in addition, we're announcing a $200 million share buyback. And third, product innovation is going well. We're building capacity, which underpins the sustainable growth of 6% to 8% from 2027. And that will compound to lead to ongoing double-digit EPS growth and strong cash flow for shareholders. Thank you very much. We'll now be happy to take your questions. David, will you coordinate.

Kane Slutzkin, Deutsche. Just wanted to know, Jonny, can just touch a bit more on the wound business relative to where you were at the 4 months, and you now -- I think it seems something about May and June was quite soft. Just wondering sort of how should we be viewing that? We've obviously seen a few competitors in recent months with a bit of noise and profit warning. So how -- how should we think about that sort of European piece? And I guess, it's not as pivotal, I guess you've kind of always called it out as growth is elsewhere. But just how should we think about it coming down from sort of mid-single digit, 4%, it's now sort of 3%? Yes, just any thoughts on that?

Sure. Look, the markets in Wound Care have been a bit softer in 2026 than they were in 2025, about a point around the globe, if you look at SmartTrack. We are not -- we're not expecting our Wound Care business to be particularly softer for the rest of the year. In fact, our target growth rate for this year is mid-single digits, and we still expect to achieve that. May and June was a bit softer than the first 4 months, but we're not calling out any particular reason for that. And what will build our growth in the second half is ConvaFoam launching stronger. It's one of the areas where we're building more capacity. We expect ConvaFoam to be contributing more and more as the year goes by, and we would still expect to get to mid-single digits for the year.

Just on Infusion Care capacity. I mean you've spoken -- I think sort of in the 4 months update, demand is sort of outerstripping supply. You also got the order phasing, which gives you good visibility. I'm just wondering what are the sort of execution risk or supply chain risk around that additional capacity that -- how sort of you nailed the double-digit second half or even post '26? Just what could go wrong there?

Yes. The new capacity really -- there's a bit of it starting to arrive in the second half of 2026, but not much. Most of it is from 2027 onwards. We're not reliant on that additional capacity to deliver double-digit growth in the second half of 2026. For that period, we've got visibility over the orders. We've got the capacity to deliver it. There is less uncertainty, obviously in the nearer term. From 2027 onwards, look, we -- our projects are going well. They're on target, they're on budget. We're very focused on it. And execution remains, of course, the biggest risk. It has been for years, but it's going well is what I can say. And we are determined to land that new capacity in time to meet the rising demand.

Great. Sorry, just to sneak one last one in. I just noticed yesterday that just in light of seeing [indiscernible] on your -- up on your sheet, I see they've merged with [ Indivior ] yesterday. I'm just wondering, have you thought about how that may open up any new doors, if any sort of additional drug device collaboration?

I would say it's a bit early for that. So we haven't really thought about that yet. We are focused on delivering for both Tanabe Pharma and Supernus. That is a great opportunity that we are the infusion care supplier to all 3 of the new Parkinson's treatments. So as pump therapy, the penetration of pump therapy in that area increases, I guess, we'll grow with it. Very excited about that.

Hassan Al-Wakeel from Barclays. I have a couple, please. So firstly, on OpEx dynamics. You reduced G&A year-over-year again and look to front-loaded R&D in the first half. I appreciate you talked a lot today about the confidence you have on the top line with Infusion Care visibility, but can you expand on some of the OpEx buffer that you have and some of the productivity improvements done to the second half but also the ramp in profitability? And then secondly, if you can walk us through what you're seeing in the skin submarket within InnovaMatrix and your confidence in current guidance still seems to be a big step-up in the second half and how you're thinking about the pushes and pulls into 2027?

Well, I'll take the first one on OpEx. So you're right. We do continue to successfully deliver our simplification and productivity initiatives. They're both within operations productivity, where we continue to automate our manufacturing facilities, reduce bottlenecks, and we have focused on strategic sourcing there. With regards to G&A, we continue to improve our G&A. As Jonny mentioned, we have just announced our fourth CBS center, which will be focused on technology and innovation. And we have done some delayering as well within the organization. So our second half OpEx will be lower than our first half OpEx in 2026. And our second half OpEx will be lower than second half 2025.

And on skin substitutes, look, the first half was very disappointing. What we are expecting is for the market to evolve to a new equilibrium. At this lower price that CMS has set, we can still make decent money. But we think many of the other operators who used to be in this segment, in particular, the human tissue operators will be very challenged from a profitability perspective. What we're expecting to see is some of the bad actors and also some of the human tissue operators exiting the market and the volumes of applications of skin substitutes to reestablish itself. And our product works really well, as I mentioned in my remarks. So we would expect volumes to grow. That was the basis of our initial guidance for 2026, and that has not happened yet. It is happening slower than we thought it would. Two factors I think I'd point to. First is that some of the kind of human tissue operators are existing the new price levels, and there are still legal cases going through challenging CMS' actions. Now we don't think that will be successful, but it is certainly causing a delay. And then secondly, CMS are going through some intensive audit activity at the moment to try and, I guess, route out any inappropriate behavior in the segment. What that's causing is for physicians generally to be conducting very low activity. So that's why H1 has been disappointing. We do think that will pass. We're not sure when. Our sales have started to pick up in the end in kind of May and June, they were higher than they were early in the year. It's slow. We do think we'll sell more in the second half than in the first, but we're not relying on it. We're managing our variable costs very tightly. And I think as I said, the guidance on InnovaMatrix doesn't impact the guidance on everything else. It's now very small. As I say, we do believe in the product going forward, but it will be so small that it really won't matter.

That's very helpful. If I could just follow up on the OpEx dynamics, particularly next year and the buffer that you have there. Jonny, I think when we spoke a month or 2 back, you talked about current spot rates for COGS effectively pointing to a 6% inflation next year. Where do you see that today? And how could that impact your plans for 24% margins this year?

Since we last spoke, and obviously, this is a moving target. The rates are moving up and down all the time. Since we spoke actually, they've got a little bit better. But we haven't chosen to change the guidance. Our prevailing price levels, which is roughly what they are now, we continue to see inflation would be roughly double next year, and we still think we can hit our 24% operating margin at that level. Now we'll give more detailed guidance about 2027 when we get closer to the time. But as we see it today, we're still on track for that margin progression.

[indiscernible] Morgan Stanley. I had 2 also, please. First, on Niox. That GBP 40 price point, you talked about, how does that compare to what you expected? And what do you expect the gross margin profile to be at that price? And then on Infusion Care, digging a bit more into the non-diabetes segment? How are your conversations going with the operators, the non-Parkinson's partners?

Well, I might be a bit elusive on these 2. Look, GBP 40, we're very pleased with. We see it, as I said, as a very strong demonstration of superior performance. That's a price point which is clearly higher, significantly higher than the alternative dressings that we sell and the other people sell. We don't get into gross margin by product, and I won't start that today either. But at such a nice price point, it's a profitable product, and we're looking forward to it growing significantly. On Infusion Care of the therapies. This is really part of our Wave 3. So the double-digit growth which underpins our 6% to 8% growth for the group can be delivered through diabetes -- growth in diabetes therapies and Parkinson's therapies. We are talking about other therapies, as you're referring to, things like immunoglobin deficiency, [indiscernible] chemotherapy. And for those purposes, we are developing an infusion sets that can cope with higher volumes and more viscous solutions. But they come -- they aren't necessary for the 6% to 8% growth, and they will be supporting growth thereafter. Still early days, in other words.

Sebastien Jantet from Panmure Liberum. So a couple of questions, if I may, actually, and 1 sub question. So I see just want to talk quickly. You talked about revenue visibility in the second half? Or what does that actually mean? Does that mean the firm orders that kind [indiscernible] back out is it mean the indications of interest, so on and so forth?

It means purchase orders.

Right. So it's locked in, completely locked in?

Well, I mean customers can -- [indiscernible] take their mind, but they don't. We've gone through this pattern for many years recently. And we had the job of persuading people in 2024. It was going to be second half weighted and it was. In 2025, the job was the opposite. It was higher growth in the first half, and we had to say to people, please don't get carried away, it could be lower in the second and it was. And here in 2026, look, we've got the purchase orders. So we're confident it will be a higher growth rate. It will be double-digit growth rate in Infusion Care in the second half.

And then just on the non-diabetes Parkinson's part of the Infusion Care business. I'm just wondering to what extent you've been able to negotiate more value-based pricing for our infusion sets there rather than kind of -- I mean I guess what I'm asking is are the margins better than the diabetes part of the business?

It's value-based pricing that we pursue with our customers. And these Parkinson's therapies are of high value to the health care system. And so I think it's fair to assume that the margin is good for us as well as for the supplier of the treatments, so yes.