Convatec shares plummet after profits warning and CEO resignation

Price falls 27% following third quarter update.

Article updated: 15 October 2018 10:00am Author: Ian Forrest

  • Change in policy and ensuing ordering patterns expected to result in $18-23m loss for FTSE 250 medical company
  • Challenging markets in advanced wound care division also continuing to act as drag leading to drop in full year expectations
  • We recommend Convatec as a ‘hold’ for higher risk investors

Medical products group Convatec today issued a profits warning and announced that its chief executive would be stepping down with immediate effect.

In a third quarter update, the company said a change in inventory policy and expected ordering patterns by the largest customer of its infusion devices business would result in a reduction in revenue of $18-23m. This, along with challenging markets in its advanced wound care division, would mean that full year revenue growth would be flat to 1.0% compared to the 2.5% to 3.0% guidance given previously. In turn, that had led to a drop in the expectations for the full-year profit margin. On top of this, the company announced that CEO Paul Moraviec would be leaving, citing retirement, to be replaced on an interim basis by non-executive director Rick Anderson.

This is a lot of unexpected news for the market today and, unsurprisingly, the shares have responded with a sharp 27% fall. While three of the company’s four divisions saw revenue growth in the third quarter, the fact that the company is now looking for a new CEO and faces other challenges means that investors should expect the shares to remain volatile for some time to come. As such we have moved our recommendation to a ‘hold’ for investors willing to accept a higher level of risk.


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Ian Forrest

Investment Research Analyst

Ian’s background in investments, financial journalism and research has seen him advising private investors on equities and helping to manage portfolios. His qualifications include the Certificate in Financial Planning and the Chartered Institute for Securities & Investment’s Investment Advice Diploma.