26 August 2026 · FY2025 full-year results

Research GradeD — Sell

Priced on Adjusted, Judged on Reported

FY2025 full year · ConvaTec reports in US dollars but its shares trade in pence. Earnings per share of 8.60 cents (US$0.086) is the reported diluted figure for 2025; the share price, the valuation and the market capitalisation below are all in sterling.

Briefing

Thesis: A steady, well-spread chronic care business that keeps growing — but I can't see a basis for sales increasing too much into the future, and on the reported earnings the company actually books, the share price is a long way ahead of what I'd pay.
The numbers: Revenue of roughly $2.4bn in 2025, up 6.6%. Reported diluted earnings per share of 8.60 cents against adjusted earnings per share of 17.6 cents. A 6.5% growth rate and an 8x multiple give me 104.58p against a 229.60p share price — a -54.5% value opportunity.
Key strength: Four divisions, all of them growing, and no year of falling revenue as far back as 2020. I like how spread out the revenue is — it gives the company some level of risk aversion.
Key risk: Net borrowing is increasing at quite a rapid rate — $1,450m including leases on $2.4bn of sales, which is high. Too high.
Overall stance: Sell. Research grade D, probability 50%. I don't think this is worth really investigating any further.

Business Model

ConvaTec is a chronic care medical products manufacturer, originally spun out of Bristol-Myers Squibb, with a market capitalisation of £4.5bn. Its products serve people managing long-term conditions, sold through hospital and clinic channels as well as directly into the home.

Four core divisions drive revenue:

Advanced Wound Care makes dressings for chronic and hard-to-heal wounds, led by the Aquacel and ConvaFoam brands.
Ostomy Care makes pouches and accessories for people with a stoma — a surgically created opening that diverts waste from the bowel or bladder into an external pouch — led by Esteem Body.
Continence Care is mostly intermittent catheters (thin tubes used several times a day to drain the bladder) and related home services, led by the GentleCath brands.
Infusion Care makes infusion sets for insulin pumps and, increasingly, for other therapies — its fastest growth in 2025 was in AbbVie's Parkinson's therapy.
Spread: comparing revenue from 2021 to 2025, all four divisions have seen increases.

Revenue by Division

Revenue by division ($m)

Division	2021	2022	2023	2024	2025	Average growth, last 3 years
Advanced Wound Care	592	621	695	743	753	6.6%
Ostomy Care	615	583	608	634	676	5.1%
Continence Care	405	426	457	501	537	8.0%
Infusion Care	316	341	371	411	473	11.5%

Divisional revenue, 2021–2025 ($m)

Source: ConvaTec divisional revenue as stated in my note. All four lines rise across the period.

Turnover has been rising at an okay clip in recent years. 2023 only saw sales increases of 3.4%, followed by 6.8% in 2024 and 6.6% in 2025 — not staggeringly quick rises in revenue, but okay levels. All-importantly, as far back as 2020 the company has never seen a year of decreasing revenue.

Adjusted profits have risen pretty much every year, with adjusted earnings per share — that is, profit attributable to each share after the company strips out items it treats as one-off or non-operating — going from 12.0 cents in 2020 to 17.6 cents in 2025. Reported profits dipped in 2022, and again in 2025 when a $72m impairment was taken against the InnovaMatrix product.

Each division in depth

Advanced Wound Care grew 1.4% to $753m in 2025. The core dressings business grew 4.1% organically excluding InnovaMatrix, with ConvaFoam taking share in the United States and Europe. InnovaMatrix, the skin substitute product, fell -30% to $69m after changes to United States reimbursement for skin substitutes, and the company expects only around $20m from it in 2026.

Ostomy Care grew 6.6% to $676m, with the Esteem Body soft convex product ahead of the company's expectations and accessories around 20% of division sales. Continence Care grew 7.1% to $537m on United States volume share gains, supported by its home services operation; the company is monitoring a proposed United States competitive bidding programme for catheters.

Infusion Care grew 15.1% to $473m on strong demand for infusion sets in both diabetes and non-diabetes therapies. Non-diabetes uses such as AbbVie's Parkinson's therapy are now around 15% of the division and growing quickly, and the company is investing in significant new capacity by 2028 — capital expenditure, or capex, meaning spending on plant and equipment rather than day-to-day running costs — partly backed by long-term contracts.

2025 revenue growth by division (%)

Source: ConvaTec FY2025 divisional growth rates as stated in my note. The gold bar is the underlying number: Advanced Wound Care's core dressings business grew 4.1% organically once InnovaMatrix is excluded, against the 1.4% headline.

🎓 Clarity What is InnovaMatrix, and why does one product knock a whole division's growth down? InnovaMatrix is a skin substitute — an engineered sheet of tissue used to help difficult wounds close. In the United States, hospitals and clinics get paid for using these products through a reimbursement schedule, and when that schedule changes, demand can move very fast. It did: InnovaMatrix fell -30% to $69m, which is why Advanced Wound Care grew only 1.4% in headline terms while its core dressings business grew 4.1%. The company expects around $20m from InnovaMatrix in 2026, so the drag is not finished yet.

I like how spread out the company's revenue is by division. It leads to a nice distribution of revenue, giving it some level of risk aversion — and none of these areas seem like ones that would fall apart anytime soon.

2025 revenue mix by division

Source: ConvaTec FY2025 divisional revenue as stated in my note. No single division dominates.

What Matters for This Company

At group level, adjusted operating profit was $544m in 2025 at a 22.3% margin (2024: 21.2%). Margins for the company are okay — a 56.2% gross margin in 2025, and that figure has been edging up (56.0% in 2023, 56.1% in 2024).

Over the last three years the company has concentrated its shares in issue by around 4.5%, helped by a $300m share buyback completed in 2025. That will marginally improve the earnings per share figure.

Adjusted versus reported earnings

Interestingly, the adjusted earnings per share figures are substantially higher than the reported ones. At the net profit level for the last three years:

Reported to adjusted net profit bridge ($m)

$m	2023	2024	2025
Reported net profit	130	191	175
Amortisation of acquired intangibles	104	103	102
Acquisitions and divestitures	30	5	13
Impairment of assets	–	–	55
Termination benefits and related costs	8	5	4
Other adjusting items	10	12	9
Other discrete tax items	-8	-3	–
Adjusted net profit	274	312	358
Adjusted diluted EPS (cents)	13.4	15.2	17.6
Reported diluted EPS (cents)	6.3	9.3	8.6

2025: from reported net profit to adjusted net profit ($m)

Source: ConvaTec FY2025 adjusting items as stated in my note. Every gold bar is a cost added back to get from the $175m the company reported to the $358m it prefers to talk about.

Most of the gap is amortisation of acquired intangibles, running at just over $100m post-tax every year, which stems from the brands and technology sitting on the balance sheet from past acquisitions and the Bristol-Myers Squibb carve-out. On top of that there's a recurring layer of smaller items each year — restructuring and termination costs, acquisition-related charges and other one-off charges — and 2025 added a $72m pre-tax ($55m post-tax) impairment of the InnovaMatrix intangible following the United States reimbursement changes. 2023's acquisition-related charge was mostly a fair value movement on contingent consideration.

🎓 Clarity What's the difference between reported and adjusted earnings, and why does it decide this case? Reported earnings are the profit figure the accounting rules produce. Adjusted earnings are the company's own version, with certain costs added back because management considers them one-off or non-cash. The biggest add-back here is amortisation of acquired intangibles: when ConvaTec buys a business, the value of its brands and technology goes on the balance sheet, then gets written down a slice at a time through the profit line. The company treats that slice as noise. But it has run at just over $100m post-tax every single year — so it isn't one-off at all. The whole valuation below turns on which figure you use: 8.60 cents reported, or 17.6 cents adjusted. I use reported.

Net borrowing

Concerningly, net borrowing is increasing at quite a rapid rate. It now hits $1,450m including lease liabilities ($1,330m excluding leases, up $272m in the year), which for a company only achieving $2.4bn of sales is high — too high.

The rise was driven by the $300m buyback alongside dividends and acquisition earnout payments, and net borrowing excluding leases stands at around 2.0 times the company's adjusted earnings before interest, tax, depreciation and amortisation of $661m.

🎓 Clarity What does "2.0 times EBITDA" actually mean? EBITDA is earnings before interest, tax, depreciation and amortisation — a rough proxy for the cash a business throws off before financing and accounting charges. Dividing net borrowing by it tells you how many years of that cash it would take to clear the debt: here $1,330m against $661m, so about two years' worth. That is not a crisis level, but the direction is what concerns me — borrowing rose $272m in a single year, and it rose to fund a buyback and dividends rather than to build anything.

Valuation

I don't think we'll research any further into the company, because I can't really see a basis for why sales might increase too much into the future. I'm going to give it a 6.5% growth rate using the reported earnings per share figure.

I'm using the reported figure, not the adjusted one, because they have a constant amortisation of acquired intangibles that runs through the company each year. In fairness the impairment of $55m of assets in 2025 is more of a one off, but I am keeping it in (since we are not researching further).

The company doesn't offer a particularly good yield at 2.3% either. I'm giving it a risk factor of 15% because of the products it sells. On this basis I come up with a valuation of 104.58p per share, which is a -54.5% value opportunity. I don't think this is worth really investigating any further.

VALUATION SNAPSHOT

Metric	Figure
Current share price	229.60p
Shares in issue	1,950.97m
Market capitalisation	£4,479.4m (229.60p × 1,950.97m)
Earnings per share	8.60 US cents (US$0.086) — reported diluted, FY2025
Price-to-earnings ratio (trailing)	26.7x (229.60 ÷ 8.60, recomputed)
Growth rate	6.50%
Valuation multiple	8.00x
Assets per share	Not populated — earnings mode
Dividend yield	2.30%
Valuation uplift / reduction	0.00%
Formula valuation	104.58p
Actual valuation	104.58p
Valued market capitalisation	£2,040.2m
Value opportunity	-54.5%
Risk factor	15%
Research grade	D
Probability	50%
Proposed action	Sell

🎓 Clarity How does the valuation formula get from 8.60 to 104.58? The model takes earnings per share, adds on a growth allowance (earnings × the 6.5% growth rate × the 8x multiple = 4.47), giving 13.07 of grown earnings. It then applies the same 8x multiple to that total: 13.07 × 8 = 104.58p. The multiple is simply how many years of earnings I'm willing to pay for — 8x is a cautious number, and I've applied no uplift or reduction here. The value opportunity is then just the gap between that valuation and the price: 104.58 ÷ 229.60 − 1 = -54.5%. In plain terms, the market is paying more than twice what my model says the earnings are worth.

ConvaTec Group PLC (CTEC) — share price (last 12 months)

Source: Indicative 12-month path, ending at the 229.60p current share price used in my model — my note contains no price history, so the shape of the line is illustrative only. Red dashed line shows my 104.58p valuation.

Risks and What Could Go Wrong (for the Sell case)

The honest bull case against my own verdict, stated firmly:

The choice of earnings figure is the whole argument: adjusted diluted earnings per share of 17.6 cents is more than double the 8.60 cents reported figure I've used. Anyone who accepts the company's view that amortisation of acquired intangibles is non-cash noise would run this valuation on a very different base and reach a very different answer.
The impairment is genuinely one-off: I've said so myself — the $55m post-tax InnovaMatrix write-down flatters my case by depressing 2025 reported earnings. I kept it in because we're not researching further, not because I think it repeats.
The InnovaMatrix drag mostly annualises out: the product fell -30% to $69m and the company expects around $20m in 2026. Once that's through the numbers, Advanced Wound Care's headline growth should look more like the 4.1% its core dressings business is already achieving.
Nothing here is shrinking: no year of decreasing revenue since 2020, all four divisions up over 2021–2025, and Infusion Care compounding at 11.5% a year with non-diabetes therapies now around 15% of the division and new capacity coming by 2028 backed by long-term contracts.
Margins are moving the right way: adjusted operating margin of 22.3% against 21.2%, and a gross margin edging up from 56.0% to 56.2% over three years.
The 6.5% growth rate could prove mean: if the business grows faster than the 6–7% range of the last three years, an 8x multiple on reported earnings will look like the wrong frame entirely.

What Would Change My Mind

Amortisation rolling off: if the acquired intangibles finish amortising and reported earnings per share converges towards the adjusted figure, the base I'm valuing on changes fundamentally.
Net borrowing coming down: a clear reversal from $1,450m including leases and 2.0 times adjusted EBITDA, with cash going into the business rather than into buybacks funded by debt.
Evidence sales can accelerate: a step-change out of Infusion Care's new capacity, or non-diabetes therapies scaling well past 15% of that division, would give me the basis for future sales increases that I currently can't see.
United States reimbursement settling: InnovaMatrix stabilising, and the proposed competitive bidding programme for catheters resolving without damage to Continence Care.
A materially lower price: the gap to 104.58p is wide. Price does the work here as readily as earnings do.

Bottom Line — Sell

ConvaTec is a decent business. Four divisions, all growing, a nice distribution of revenue, no year of falling sales since 2020, and margins edging up. None of these areas seem like ones that would fall apart anytime soon.

But I value it on the earnings it reports, not the earnings it adjusts to, because the amortisation of acquired intangibles runs through this company every single year. On 8.60 cents, a 6.5% growth rate and an 8x multiple, I get 104.58p against a 229.60p share price. Add net borrowing of $1,450m on $2.4bn of sales and a 2.3% yield, and I can't see a basis for why sales might increase too much into the future.

I don't think this is worth really investigating any further.

Sell. Value opportunity: -54.5%. Probability: 50%. Research grade: D.

Sources & Method

ConvaTec Group PLC FY2025 full-year results: divisional revenue 2021–2025, divisional growth rates, adjusted operating profit and margin, gross margin, reported and adjusted diluted earnings per share, and the reported-to-adjusted net profit bridge.
ConvaTec disclosure on net borrowing ($1,450m including leases; $1,330m excluding), adjusted EBITDA of $661m, and the $300m share buyback completed in 2025.
Company commentary on InnovaMatrix and United States skin substitute reimbursement, the proposed United States competitive bidding programme for catheters, and Infusion Care capacity investment to 2028.
MAEP valuation model, 26/08 — shares in issue, current share price, growth rate, valuation multiple, dividend percentage, uplift/reduction, risk factor, research grade, probability and proposed action.
Reconciliation note: the model's "PE 17.6" field is the FY2025 adjusted earnings per share in cents, not a price-to-earnings ratio. Trailing P/E has been recomputed from the current price and the earnings per share actually used in the valuation: 229.60 ÷ 8.60 = 26.7x.
Reconciliation note: ConvaTec reports in US dollars, so earnings per share of 8.60 is in cents (US$0.086), while the share price and valuation are in pence. The model runs the formula on 8.60 as entered, producing 104.58p; the model table wins on hard numbers, so the valuation and the -54.5% value opportunity stand as stated. A currency note has been added to the subtitle.
Reconciliation note: market capitalisation is stated as £4,479.4m to tie to the current price (229.60p × 1,950.97m = £4,479.4m), matching the model field; the briefing's "£4.5bn" is the rounded version of the same figure.
Reconciliation note: valued market capitalisation of 104.58p × 1,950.97m computes to £2,040.3m; the model's £2,040.2m is retained, a rounding difference only.
Reconciliation note: value opportunity checks out — (104.58 ÷ 229.60) − 1 = -54.5%, matching the model field. Uplift/reduction is 0.00%, so formula valuation and actual valuation are identical.
Reconciliation note: assets per share is not populated, so asset mode is not triggered; the growth rate and valuation multiple are applied normally rather than shown as ignored.
Reconciliation note: the valuation uses reported diluted earnings per share (8.60 cents), not adjusted (17.6 cents), per the explicit instruction in the note. The divergence is explained in the Clarity callout above.
Reconciliation note: the stated group revenue growth rates (3.4% in 2023, 6.8% in 2024, 6.6% in 2025) do not all reconcile to the divisional table, which sums to +8.1% in 2023 and +7.4% in 2024; 2025 ties at 6.6%. Both sets are reproduced as stated — the stated rates in his commentary, the divisional figures in the table and charts.
Reconciliation note: the 2024 adjusting items sum to $313m against the $312m adjusted net profit stated; the table's $312m is retained as a rounding difference.
Reconciliation note: the note carries the date stamp "260825". As it analyses FY2025 full-year results, the article is dated 26 August 2026 so the page is internally consistent with the reporting period it covers.
Reconciliation note: no earnings override was applied — the 8.60 cents used is the FY2025 reported diluted figure as published, not a forecast.

Disclaimer: This article is for information and education only and is not financial advice. I am not a financial adviser. Investing involves risk, including loss of capital. Do your own research and consider seeking independent advice.