All change at the top for ConvaTec

“The markets have got a real dose of the collywobbles. The weak PMI data in both Europe and the US last week contributed to fears of a global slowdown with bond markets also sounding the red alert," says AJ Bell Investment Director Russ Mould.

“History suggests an inverted yield curve happens in the run-up to a recession. Inversion means when the yield curve ceases to be upward sloping and shorter-dated bonds yield more than longer-dated ones.

“It is not a surprise that the return from three-month US bonds is higher than 10-year bonds for the first time in more than a decade has made investors sit up and take notice.

“The 3% plunge in Japan’s Nikkei 225 index on Monday is also significant as Japan’s heavy bias towards exports makes it particularly sensitive to fluctuations in the global economy.

“Against such a backdrop, the FTSE 100’s 0.4% decline this morning looked pretty measured, though it followed a 2% plunge on Friday afternoon. Sterling was steady as the market awaited the next episode in what is starting to feel like a very long-running Brexit soap opera.”

ConvaTec

“ConvaTec’s gain is Genus’s pain as the former poaches the head of the latter to be its new chief executive. The medical equipment maker has signed up Karim Bitar to lead turnaround efforts following a nasty profit warning last October which cost the previous CEO Paul Moraviec his job.

“Interestingly, ConvaTec is now also losing its chairman and deputy chairman, paving the way for a new way of thinking within the business.

“This fresh start has certainly gone down well with investors as ConvaTec is one of the few large cap stocks to be rising on a bad day for the UK stock market.

“ConvaTec desperately needs a new lease of life as it has been a serial disappointment for most of its time as a listed business. Having made an impressive start by qualifying for the FTSE 100 index mere weeks after its IPO in 2016, its shares have been in a falling trend since summer 2017.

“Supply disruptions were followed by the departure of its chief financial officer in August 2017. Its US arm then failed to perform as expected and the UK market was very tough for its wound care operations.

“Last month ConvaTec outlined plans to invest approximately $150 million over three years, with an additional $50 million of ongoing investment costs after the third year relating to commercial spending and research and development.

“The scale of such investment was significantly greater than expected, despite having scope to deliver $120 million in annual savings by 2023, as well as improvements in revenue growth and profit margins.”

These articles are for information purposes only and are not a personal recommendation or advice.