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Convatec · CTEC · LSE

Convatec sells chronic-care wound, ostomy, continence, and infusion consumables in 100+ countries, earning repeat revenue from daily-use products.

210p
Price
$4.75B
Market cap
$2.44B
FY2025 revenue
100+
Countries served
Listed in October 2016 at 225p; peaked at 344p in June 2017, bottomed at 119p in February 2019, and now trades near 210p.
2 · The tension

The stock turns on the cash denominator, not the chronic-care story.

  • The market sees acceleration. FY2025 organic growth excluding InnovaMatrix was 6.4%, adjusted operating margin reached 22.3%, and management guides FY2026 to 5-7% ex-InnovaMatrix organic growth with margin of at least 23%.
  • The owner-earnings test is harsher. FY2025 free cash flow to equity was $362M under the new definition, but $219M under the prior definition; conversion was 101% on the headline metric and 61% on the old one.
  • Working capital decides the rerating. Receivables grew 25.1% against 6.6% revenue growth, while payables supplied $62M of cash against $96M of receivables and inventory outflows.
Convatec does not need to prove demand exists. It needs to prove growth converts into comparable cash after capex and collections.
3 · Money picture

The operating turnaround has numbers behind it.

$2.44B
FY2025 revenue +6.6% YoY
22.3%
Adjusted op margin +460 bps vs 2021
$285M
FCF after all capex 11.7% of revenue
2.6x
Net debt / EBITDA 2.0x adjusted

The mechanics are repeat use and manufacturing leverage: more than 90% of revenue is recurring, no category is above one-third of sales, and adjusted operating expense fell to 38.4% of revenue. The 2025 $300M buyback raised sensitivity to misses; FY2026 must show 5-7% ex-InnovaMatrix growth and at least 23% margin while cash stays above the all-capex test.

4 · Product risk

Small product issues are now trust issues.

  • InnovaMatrix reset fast. Revenue fell from $99M in FY2024 to $69M in FY2025 and is expected near $20M in FY2026 after the CMS $127.28 per sq cm rate; Convatec took a $72M impairment and left $40M of carrying value.
  • Unomedical sits in the growth engine. Infusion Care grew 12.5% organically in FY2025; the FDA Warning Letter covered reporting procedures and quality-management protocols, with no product-safety or distribution restriction found in the evidence.
  • Launch economics need proof. The 2027 6-8% growth target leans on eight planned 2026-2027 launches, evidence generation, and market access; the US ostomy GPO wins in November 2025 and February 2026 have not yet been quantified.
InnovaMatrix is only a small revenue line now; the larger issue is whether reimbursement and quality can puncture the launch narrative.
5 · Tape and dates

The tape says investors want proof before paying up.

  • The chart is already stressed. At 210p on 1 May 2026, the stock was down 19.8% over one year, 0.2% above the 52-week low, 10.4% below the 200-day average, and the latest 50/200 event was a death cross on 27 August 2025.
  • The multiple is no distress gift. EV / EBITDA is 14.5x versus a 14.8x five-year mean and 15.8x listed-history mean; the base case at the current multiple leaves little upside.
  • Two dates matter. The 21 May 2026 trading update and AGM test guide language; the 4 August 2026 H1 result tests ex-InnovaMatrix growth, the path to 23% margin, $200M-$230M capex, and cash conversion.
A close above 246p says sponsorship is returning; a close below 209.8p says the market is not waiting for formal guide failure.
6 · Bull and Bear

Lean constructive — operating momentum wins, cash proof limits the bet.

  • For. More than 90% of revenue is recurring, FY2025 ex-InnovaMatrix organic growth was 6.4%, and adjusted operating margin rose from 17.7% in 2021 to 22.3% in 2025.
  • For. The multi-year cash record argues against a fabricated earnings story: FY2023-FY2025 operating cash flow was $1.23B versus $496M of net income, and FCF after acquisitions was $630M.
  • Against. FY2025 cash presentation is the unresolved issue: new-definition FCFE was $362M versus $219M under the prior definition, with receivables and payables doing too much work.
  • Against. The first full year under Jonny Mason and Fiona Ryder arrives with an InnovaMatrix reset, Unomedical remediation, and a 2025 pay-policy vote that drew only 67.0% support.
My view: lean long, wait for confirmation. The condition that upgrades the stance is FY2026 old-definition conversion above 90% with the 5-7% ex-InnovaMatrix growth guide intact.

Watchlist to re-rate: Track the 21 May 2026 guide bridge, the 4 August 2026 H1 cash reconciliation and margin path, and whether InnovaMatrix holds near $20M while Unomedical avoids restrictions.