Convatec Group – after recent Interims FTSE-100 group’s shares on the upward move again

21.08.2025

In the last day or so the shares of the ConvaTec Group (LON:CTEC) have been one of the standout performers, climbing nearly 6% following the medical products company announcing a chunky share buyback programme of up to $300m.

ConvaTec operates in four chronic care categories, which have market growth rates varying between 4-8% p.a. 

It sells over 900m high-quality consumable products annually for a diverse range of chronic conditions and are among a small number of leaders in the categories in which we operate.

The group expects to consistently grow revenues faster than each market over the long term, driven by the strongest new product innovation pipeline in its history.

The FTSE-100 constituent, valued at close to £5bn, has seen its shares hit 249.69p before easing back to 244p, which is still up 6% over the last two days.

As the buyback programme gets underway, market expectations are for even further rises.

Recent Results

Three weeks ago, the group declared its Interim Results for the six months to end-June, showing a 6% increase in its revenues to $1,180m, while its operating profit was 21% better at $179m, raising its earnings 33.6% to 5.1c per share.

At that time former CEO Karim Bitar stated that:

"Convatec performed strongly in the first half and we are on track to deliver FY25 financial guidance.

Under our FISBE strategy, we saw further broad-based organic revenue growth across all chronic care categories, further operating margin expansion and double-digit growth in adjusted EPS.

Looking ahead, we are well-positioned to deliver our medium-term targets, including double-digit compound annual growth in EPS and free cash flow to equity.

This will be driven by our leading positions in structurally growing markets, strongest-ever innovation pipeline and clear focus on execution excellence by our dedicated team of over 10,000 colleagues worldwide."

The Business

ConvaTec has evolved into one of the world’s leading medical products and technology companies.

The group’s products provide a range of clinical and economic benefits including infection prevention, protection of at-risk skin, improved patient outcomes and reduced total cost of care.

The business markets and sells solutions and services in four categories: Advanced Wound Care, Ostomy Care, Continence Care and Infusion Care.

Advanced Wound Care – #3 globally

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

Ostomy Care – #3 globally

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

Continence Care – #1 in the US

Products and services for people with urinary continence issues related to spinal cord injury, neurological disease, prostate enlargement or other causes.

Chronic care markets are driven by global healthcare megatrends.

Infusion Care – #1 globally

Disposable infusion sets used with insulin pumps for diabetes or with continuous infusion treatments for conditions such as Parkinson’s Disease.

The group has over 10,000 people, selling products and services in almost 90 countries, with an extensive network of wholesalers and distributors.

Analyst Opinions

Analyst Kane Slutzkin, at Deutsche Bank, says the time is ripe to buy its shares especially as they already price in ‘a fair amount of bad news’.  

His ‘Buy’ recommendation has a Target Price of 315p.

“Our 315p discounted cashflow-derived target price implies a mid-teens multiple, which we believe is justified in the context of global medtech peers and would use periods of weakness to accumulate.”

Analyst Sam England, at Berenberg, has reiterated his ‘Buy’ recommendation but with a reduced Target Price of 330p (335p).

The analyst acknowledged that the shares have been ‘volatile’ this year, suffering a ‘material derating’ in recent weeks.  

“This has principally been driven by two proposed changes to US reimbursement in chronic care and skin substitutes.

While the company then released solid first half 2025 results on 29 July, this appears to have been overlooked, with the shares having given up most of the gains they made in the first half, and with them now up by just 5% year-to-date.” 

Despite the downside risk from reimbursement changes, England noted the core business is performing well and described the recent derating as being overdone.

In My View

Subsequent to my feature on the group, three weeks ago when they were 239p, the shares have been down to 225.60p and up to 249.69p, before settling at around 244p.

They touched 311.20p earlier in June, the question now is whether they will trade back up to that level within the next year.