Convatec Upgrades Growth Target to 6-8% After Strong 2025 Results

Convatec’s 2025 headline numbers: growth, margins and cash

Convatec has delivered another solid year. Reported revenue rose 6.5% to $2,439m, or 5.0% at constant currency, with organic growth of 6.4% when you exclude InnovaMatrix (the US wound biologic facing reimbursement changes). Adjusted operating margin expanded by around 110 bps to 22.3%, and adjusted diluted EPS climbed 16.0% to 17.6 cents. Reported EPS dipped to 8.6 cents after a $72m non-cash impairment related to InnovaMatrix.

Cash generation stayed strong: free cash flow to equity was $362m (up 0.1%). Management put that to work with $185m of capex, a $300m buyback and a 13% dividend increase to 7.244 cents per share. Net debt ended at $1,330m, equivalent to 2.0x adjusted EBITDA, helped by new $500m 10-year notes at a 5.3% coupon and investment grade ratings with all three major agencies.

Jargon buster: organic growth strips out currency, acquisitions and disposals; adjusted EPS and margins exclude items management deems non-core; bps means basis points (100 bps = 1 percentage point).

Key figures at a glance

Metric	FY25	FY24	Change
Revenue	$2,439m	$2,289m	+6.5%
Organic growth (ex-InnovaMatrix)	6.4%	6.8%	–
Adjusted operating margin	22.3%	21.2%	+c.110 bps
Adjusted diluted EPS	17.6 cents	15.2 cents	+16.0%
Free cash flow to equity	$362m	$361m	+0.1%
Dividend per share	7.244 cents	6.416 cents	+13%
Share buyback	$300m	n/a	Completed
Net debt	$1,330m	$1,058m	2.0x adj. EBITDA

Category performance: Infusion leads, Ostomy and Continence steady, Wound Care mixed

Infusion Care: double-digit engine

Infusion Care revenue grew 15.1% reported and 12.5% organic to $473m. Diabetes sets grew high single-digit on adoption of automated insulin delivery systems, while non-diabetes therapies surged to c.15% of IC revenue (from c.10% in 2024), led by Neria Guard in Parkinson’s and immunology. The long-term AbbVie contract was significantly extended. Post year end, an FDA Warning Letter was issued to Unomedical (quality system reporting procedures) with no product safety concerns or operating restrictions. Management still guides high single-digit IC growth in 2026.

Continence Care: share gains and mix improvement

Continence Care rose 7.1% reported and 6.6% organic to $537m, driven by US volume growth and excellent customer service. Convatec-manufactured products increased to c.59% of revenues, lifting mix. GentleCath Air for Women is taking share, with further compact formats due in 2026-27.

Ostomy Care: pipeline delivering and new US access

Ostomy Care grew 6.6% reported and 4.5% organic to $676m. Esteem Body performed ahead of plan. Importantly, Convatec secured its first US ostomy GPO win in over five years with Captis Vizient in November 2025, and a further GPO win with Premier in February 2026. An upgraded Flexi-Seal Air launches in H1 2026.

Advanced Wound Care: excluding InnovaMatrix, growth is steady

AWC revenue was $753m, up 1.4% reported but down 0.4% organic due to InnovaMatrix. Excluding InnovaMatrix, organic growth was 4.1%, with standout momentum in ConvaFoam and continued progress in Aquacel Ag+ Extra. ConvaNiox, the nitric-oxide powered dressing, gained EU/UK approval with revenue expected to scale from 2027; Aquacel ConvaFiber (EU/US approved) launches H1 2026 and ConvaVac (single-use NPWT) in H2 2026.

Guidance for 2026: double-digit EPS growth and ≥23% margin

Management is sticking to another year of double-digit adjusted EPS growth. Organic revenue ex-InnovaMatrix is guided at 5-7% (unchanged), H2-weighted as launches build. InnovaMatrix revenue is expected to be c.$20m, a c.2% Group headwind in 2026 and c.3% in H1 2026 following the CMS pricing decision at $127.28 per sq cm.

• Adjusted operating margin: ≥23.0% in 2026, including c.20 bps of incremental tariffs (all in H1).
• Capex: $200-$230m with $135-$165m growth capex to meet rising demand across all categories.
• Adjusted net finance expense: $70-$75m; adjusted tax rate c.24%.
• If spot FX holds, a c.180 bps tailwind to revenue growth and c.30 bps headwind to adjusted margin.

Medium-term upgrade to 6-8% organic growth from 2027

This is the big strategic call-out. From 2027, Convatec now targets 6-8% annual organic revenue growth (up from 5-7%), powered by an unusually rich launch slate, step-up in growth capex, and improving commercial execution. Adjusted operating margin is targeted at mid-20s% (24-26%) by 2027, with sustainable double-digit adjusted EPS growth and a double-digit free cash flow to equity CAGR. Given the multi-year 460 bps adjusted margin uplift since 2021 and diversified category mix, the upgrade reads credible.

Reimbursement and regulatory watch-outs in the US

• Skin substitutes pricing: CMS set $127.28 per sq cm from 1 January 2026. InnovaMatrix revenue is expected to be c.$20m in 2026 (2025: $69m), a c.2% Group headwind. LCD withdrawals on 24 December 2025 support access, and Convatec is targeting volume share gains over time.
• Proposed Competitive Bidding (DMEPOS): CMS is seeking 8-10 national suppliers in Continence and Ostomy for 2028. Convatec anticipates a 1-2% reduction in Group sales in the year of implementation but believes it is well-placed given service quality and segment positions.
• FDA Warning Letter (3 Feb 2026): focused on reporting procedures at Unomedical; no product safety concerns and no restrictions on production or sales. Management is engaging proactively.

Investment take: why this update matters

What looks positive

• Quality of growth: 6.4% organic ex-InnovaMatrix with all four categories growing; Infusion and Continence are clear bright spots.
• Margin progression: adjusted operating margin up c.110 bps to 22.3% despite tariff and mix pressures. Pricing contributed c.30 bps to gross margin.
• Cash discipline plus reinvestment: $362m free cash flow to equity, 100.8% equity cash conversion, $185m capex and a $300m buyback alongside a 13% dividend increase.
• Access momentum: long-awaited US GPO wins in Ostomy should support patient starts and share.
• Pipeline depth: multiple launches in 2026-27 across Wound, Ostomy and Continence, and accelerating IC capacity expansion supported by long-term contracts.
• Clearer medium-term story: upgraded 6-8% organic growth target and mid-20s% margins by 2027 provide line of sight.

What to keep an eye on

• Reported vs adjusted gap: 2025 reported EPS fell to 8.6 cents due to a $72m impairment; amortisation of acquired intangibles was $134m. The market will focus on sustained cash-backed adjusted delivery.
• InnovaMatrix reset: 2026 is a reset year with c.2% revenue headwind; watch for execution on volume and evidence from RCTs due in 2026.
• US policy risk: DMEPOS competitive bidding from 2028 could trim 1-2% of Group sales in the implementation year.
• Gross margin mix: adjusted gross margin dipped 27 bps to 60.7% on mix and inflation; product mix and tariff costs remain moving parts.
• Working capital: a $40m outflow in 2025 tied to inventory builds and receivables; management targets growth below revenue in 2026.
• FDA Warning Letter: management says no impact on safety or supply, but resolution progress will be important.

Dates investors should note

• Ex-dividend: 16 April 2026; record date: 17 April 2026; payment: 28 May 2026 (final dividend 5.367 cents).
• Capital Markets Day: 9 April 2026.
• AGM and trading update (to 30 April): 21 May 2026.
• Half-year results: 4 August 2026.

Bottom line: steady execution, bolder ambition

Convatec is doing the right things in the right order: grow organically across categories, expand margins through simplification and pricing discipline, reinvest heavily where demand is strongest, and return surplus cash. The 2026 outlook acknowledges near-term InnovaMatrix pressure yet still points to ≥23% margins and double-digit adjusted EPS growth. The upgrade to 6-8% organic growth from 2027 is the statement of intent. For retail investors, this reads as a well-managed FTSE 100 medtech with a strengthening pipeline, rising operating leverage and a growing dividend, balanced by US reimbursement and regulatory execution risk.