Highlights
- Revenue growth of 5% on a CER basis to $788 million (7% reported), with 2% organic growth and a 3% contribution from the acquisition of Patrick Yarn Mill.
- Continued strong revenue performance in Apparel and Footwear thread (up 4%), double-digit organic growth in hi-tech Performance Materials and an improving trend in NA Crafts.
- Adjusted operating profit up 12% on a CER basis to $100 million (reported $81 million, down 6%); adjusted operating margin up 70bps to 12.7%.
- Connecting for Growth programme has started well with benefits being realised faster than initially anticipated; $10 million net benefits now expected in 2018 (previously $5 million).
- Adjusted EPS up 19% to 3.6 cents (reported EPS of 2.4 cents, down 17%) as a result of higher operating profits, a further reduction in effective tax rate and a lower pension finance charge.
- Adjusted free cash flow for the last twelve months $85 million; down 22% on the same period to June 2017 due to planned increase in capital expenditure, however in line with full year 2017 ($87 million).
- Completed merger of the three UK Defined Benefit Pension Schemes into one single new scheme; the Coats UK Pension Scheme.
- The Board has declared an interim dividend of 0.50 cents per share, representing 14% growth (2017: 0.44 cents per share)
Commenting on Coats 2018 Half Year results Rajiv Sharma, Group Chief Executive, said:
‘Coats continued its good start to the year, with CER revenue growth of 5% and an adjusted operating profit growth of 12%, achieved by the strong performance of the Industrial Division. We have continued to outperform the market in Apparel and Footwear despite continued mixed demand from retailers by maintaining our customer-led approach to service, digital solutions and corporate social responsibility. We have leveraged our global footprint and customer base to expand our Performance Materials business. Innovation capability has been enhanced by the recent acquisition of Patrick Yarn Mill. In North America Crafts, we have seen an improving trend so far this year however market conditions remain tough.
Our customers require an increased emphasis on speed, quality, value, innovation and corporate responsibility. To accelerate our transition from industrial to digital, we launched the Connecting for Growth transformation programme in February, which will support our next phase of development. Due to the encouraging start made by this programme, where we are realising benefits faster than initially anticipated, I am pleased to report that the net benefits (after reinvestments) in 2018 are now expected to be $10 million (previously $5 million).
We look to build on a strong first half of the year by continuing to outperform the market, deliver productivity improvements, maintain tight control of our cost base, whilst investing in our growth opportunities. As a result of the faster delivery of the net benefits from the Connecting for Growth programme, we now anticipate delivering a full year performance slightly ahead of management’s previous expectations.’