ConvaTec Group (LON:CTEC) executives told investors the company delivered “strong” 2025 results and expects another year of profit growth in 2026, while preparing to update its longer-term growth ambitions at a Capital Markets Day in early April.
Management said 2025 marked the fifth consecutive year of organic revenue growth within the company’s target range, supported by eight new product launches. The group also posted its fourth straight year of operating margin expansion and a second year of double-digit earnings-per-share growth, driven by higher operating profit, lower finance costs, and a reduced share count following a $300 million buyback.
2025 performance: growth across all four categories
Category performance discussed on the call included:
- Advanced Wound Care: Sales rose 4.1% excluding InnovaMatrix (flat including it). Ryder cited good growth in North America and Latin America, with improved performance in Europe during the second half. AQUACEL Ag+ Extra posted another solid year, and ConvaFoam was described as “gaining share.”
- Ostomy Care: Organic growth was 4.5%. Management highlighted stronger-than-expected performance from Esteem Body and growth from an updated Esenta accessories range. Executives also noted a first U.S. group purchasing organization (GPO) win in five years, followed by another win after year-end.
- Continence Care: Organic growth was 6.6%, driven by higher U.S. volumes and a growing mix of ConvaTec-branded products. Hydrophilic products were again more than 60% of the category’s revenue, and international markets contributed more than one percentage point to growth.
- Infusion Care: Organic growth was 12.5%. Ryder said demand in diabetes remained strong as automated insulin delivery penetration increased, while non-diabetes growth was led by infusion sets for AbbVie’s Parkinson’s disease therapy. Other therapies rose to 15% of infusion care revenue, up from about 10% in 2024.
InnovaMatrix headwind and impairment tied to CMS price reduction
Management repeatedly returned to InnovaMatrix, citing “significant market uncertainty” in skin substitutes. Ryder said InnovaMatrix sales declined by about $30 million year-over-year to $69 million, with a sharper slowdown in the second half.
Executives said that from Jan. 1, 2026, CMS introduced a price rate of $127 per square centimeter for InnovaMatrix, representing about an 80% reduction. Ryder said the change equates to a 2026 headwind of around 2% of group revenue, and the company recorded a non-cash impairment of $72 million (about 20% of acquisition consideration) tied to its updated forecasts. Management added it still believes InnovaMatrix is effective and expects it to return to growth in 2027.
In Q&A, leadership guided to about $20 million of InnovaMatrix sales in 2026 and said volumes remained “strong,” even building since the fourth quarter. CEO Johnny (introduced as “Johnny” on the call) said achieving the 2026 sales outlook assumes higher volumes later in the year, driven by expanded national sales coverage following a completed salesforce reorganization, growth into indications beyond venous leg ulcers and diabetic foot ulcers, and an expectation that some higher-cost competitors may exit if the new pricing holds.
Margins, cash flow, and capital allocation
Ryder said 2025 margin expansion reflected price and productivity benefits of 30 and 130 basis points, respectively, partly offset by about 3% inflation (a 110-basis-point headwind). General and administrative costs fell another 50 basis points to 6.8% of sales. She said the mix impact of strong infusion care growth and reduced InnovaMatrix contribution “broadly” offset between margin mix and operating expenses.
On cash, Ryder reported free cash flow to equity of $362 million and conversion of 101% under a new definition intended to better reflect free cash available for capital allocation. She noted that using the prior definition, free cash flow to equity was 61%. The company increased growth CapEx to $121 million—more than doubling year-over-year—citing high-return organic investment opportunities and demand.
Management also pointed to a 13% dividend increase, a $300 million share buyback completed in the second half, and net debt leverage landing at its stated target of two times EBITDA. Executives said bolt-on M&A remains a priority, but they will be disciplined and would return excess capital if attractive deals are not found.
2026 outlook and longer-term targets
Ryder reiterated the company’s guidance for 2026 organic growth of 5% to 7% excluding InnovaMatrix, with group revenue expected to be second-half weighted as product launches build. The company expects further operating margin progress to at least 23% in 2026 “irrespective of InnovaMatrix headwinds,” supported by continued simplification and productivity improvements across operations, commercial, and G&A.
Ryder said profit progression should be modest in the first half and stronger in the second half, and that the combination of sales growth, margin improvement, largely unchanged finance and tax costs, and the buyback-driven share count reduction should translate to another year of double-digit EPS growth. Cash conversion is targeted at around 100%, with operational CapEx around 2.5% of sales and growth CapEx rising to support expansion.
Management also said it is increasing its longer-term organic growth target to 6% to 8% per year from 2027, supported by pipeline strength and additional investment in capacity and R&D.
Operational execution, FDA letter, and reimbursement factors
Executives acknowledged execution “could have been even stronger” in 2025, citing “handoffs” between functions that led to “a few isolated back orders.” Management also addressed a recent FDA letter related to complaints handling and corrective and preventive actions, calling it “very disappointing” and a “top priority.” In response to questions about leakage complaints referenced by the FDA, executives said the issue was about the rigor of information follow-up rather than a confirmed product deficiency, and they said investigations had not found product deficiencies.
On reimbursement, leadership said the company plans with expected headwinds and has historically quantified them as roughly one point per year across categories, though the U.S. environment has been “more than normal” recently. Management also reiterated its prior assumption that if CMS competitive bidding (CBP) is implemented in ostomy and continence, the headwind would be between 1% and 2% of group revenue, and added that CMS has indicated CBP timing would be 2028, not 2027.
ConvaTec said it will provide more details on its evolving strategy and plans to support higher growth at its Capital Markets Day on April 9.
About ConvaTec Group (LON:CTEC)
ConvaTec Group PLC engages in the development, manufacturing, and sale of medical products, services, and technologies in Europe, North America, and internationally. The company offers advanced wound dressings and skin care products for the management of acute and chronic wounds resulting from various conditions, such as diabetes, and acute conditions resulting from traumatic injury and burns. It also provides ostomy care solutions, including devices, accessories, and services for people with a stoma resulting from colorectal cancer, inflammatory bowel disease, and bladder cancer.
