Convatec Group (LSE:CTEC) reported organic revenue growth of 5.0% excluding InnovaMatrix for the six months to 30 June, down from 6.8% in the same period last year, as the chronic care products maker confirmed it remains on track to meet full-year guidance.
Adjusted operating profit rose 3.9% to $262m, though reported operating profit fell 36.1% to $115m after a $69m non-cash impairment tied to InnovaMatrix, the skin substitute product hit by US Medicare reimbursement changes announced in October. Reported diluted earnings per share fell to 2.7 cents from 5.1 cents, while adjusted diluted EPS rose 6.3% to 8.5 cents.
InnovaMatrix revenue collapsed more than 90% after Medicare Administrative Contractors cut the reimbursement rate for skin substitute products by over 85%. Convatec now expects InnovaMatrix revenue of just $5-10m for the full year, down from a prior estimate of c.$20m.
"We are on track for another year of margin expansion and double-digit EPS growth", said chief executive Jonny Mason, adding that growth should accelerate in the second half on new product launches.
Convatec narrowed full-year organic revenue growth guidance, excluding InnovaMatrix, to 5.5-6.5% from a prior 5-7% range, with second-half growth of 6-8% expected, led by Infusion Care. Adjusted operating margin guidance of at least 23.0% and double-digit EPS growth remain unchanged.
The board declared an interim dividend of 2.116 cents, up 15%, and announced a new $200m share buyback to complete by the end of 2026, following a $300m buyback last year.
Net debt stood at $1,534m at period end, with a net debt to adjusted EBITDA ratio of 2.3x, versus 1.9x a year earlier.
News Intelligence what this means for the company
Convatec confirmed full-year guidance and launched a $200m buyback despite InnovaMatrix revenue collapsing over 90% due to Medicare reimbursement cuts. The company narrowed organic revenue growth guidance (excluding InnovaMatrix) to 5.5–6.5% from 5–7%, but adjusted operating profit rose 3.9% and management expects margin expansion and double-digit EPS growth to continue, anchored on second-half acceleration from new product launches in Infusion Care.
The InnovaMatrix impairment ($69m non-cash) and revenue collapse ($5–10m full-year vs. prior ~$20m estimate) are material headwinds to reported earnings, but management's confidence in adjusted margin and EPS growth—paired with a $200m buyback on top of last year's $300m—signals conviction that core chronic care momentum can offset the loss. Net debt has risen to 2.3x adjusted EBITDA from 1.9x, a shift worth monitoring as capital returns accelerate.
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