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ConvaTec cuts guidance

The shares fell by more than a fifth after a dismal third-quarter trading update from the medical equipment supplier
October 17, 2017

Shareholders scarpered from ConvaTec (CTEC) after the medical equipment manufacturer cut its guidance for the year to December. Rising competition restricted demand for new products, while lengthy delivery delays resulted in the loss of some older orders in the third quarter. Annual like-for-like revenue growth is therefore now expected at just 1-2 per cent. 

IC TIP: Sell at 207p

The problems could yet worsen if ConvaTec fails to repair the supply issues in its wound care and ostomy businesses. The group’s attempts to move its manufacturing lines from the US to the Dominican Republic have fallen behind schedule, not only causing problems in the top line, but also reversing recent gains made to margins. Profits and earnings are therefore also expected to take a hit in the current financial year.