Continued growth, 18% EBIT margin, full year upgrades

Strategic Highlights

• Continued outperformance against the industry – further market share gains in Apparel and Footwear
• Performance Materials Americas footprint transition nearing completion, expected to support future margin progression after challenging market continued in first half
• Strategic projects overall savings updated to $75 million – some further footprint optimisation (c.$5 million savings) now identified
• Total integration synergies from Texon and Rhenoflex on track to deliver $22 million savings, ahead of pre-acquisition expectations
• Reinforced position as global market leader in 100% recycled thread products – revenue grew 141% to $159 million in the period – on track for in excess of $300 million in 2024 (2023: $172 million)
• Science based targets initiative (SBTi) validated Coats’ near and long-term science-based emissions reduction targets, including verification of the Group net-zero target for 2050
• Outstanding Engagement Score of 85% in ‘Your Voice Matters Survey’, 11 points above average external benchmark

Financial Highlights

• Reported revenue up 7%, with recovery from destocking cycle now well underway
• CER revenue up 8% on a further improving trend (January – April 2024 up 7%):
  • Weak prior year comparator which was impacted by industry destocking
  • Apparel customer inventory and buying patterns returned to more normalised levels, despite macro concerns (up 14%)
  • Footwear recovery slightly behind Apparel as destocking commenced later, but now back to robust growth (up 7%)
  • Performance Materials continues to be impacted by US customer phasing and operational challenges (3% lower), but on an improving trend – returning to year-on-year growth in Q2
• Group adjusted EBIT margin of 18% in the period, ahead of previously announced 2024 margin target of 17%
• Strong adjusted free cash flow of $59 million
• Net debt (excluding lease liabilities) at $381 million with leverage³ further reduced to 1.4x, comfortably within 1-2x target range and providing significant capacity to support the Group’s capital allocation strategy
• Proposed interim dividend of 0.93 cents, +15%, reflecting the Board’s confidence in growth strategy and future performance

Outlook

The Group continues to make good progress and has delivered a first half out-turn above our expectations. As such the Board now expects a full year performance modestly above current market expectations⁷, as these trends continue. Whilst a level of uncertainty in our markets remains, our outlook is underpinned by ongoing evidence of the recovery in Apparel and Footwear, a slower, but improving recent trend in Performance Materials, and the continued benefits from our strategic projects and margin delivery.

Over the medium term, we remain confident in the Group’s ability to deliver strong profit growth and cash generation, owing to our scale, global footprint, innovation, strong digital platform and technical support capabilities, alongside continued investment in sustainability and innovation.

Commenting on the results Rajiv Sharma, Group Chief Executive, said:

“It has been a privilege to lead Coats over the last eight years. I am extremely proud of my team and together we have delivered a material improvement in the quality of the Group and its prospects through transitioning the portfolio, a relentless focus on operational improvement, investing in sustainability and targeting better cash generation. As I handover it will be exciting to watch the new heights the company achieves. For the remainder of 2024, we see generally encouraging trends supporting a year with a more equal weighting than in the prior year.”

1. 1. Adjusted measures are non-statutory measures (Alternative Performance Measures). These are reconciled to the nearest corresponding statutory measure in note 13. Constant Exchange Rate (CER) metrics are 2023 results restated at 2024 exchange rates.
2. 2. Reported metrics refer to values contained in the IFRS column of the primary financial statements in either the current or comparative period.
3. 3. Leverage calculated on a frozen GAAP basis and therefore excludes the impact of IFRS 16 on both adjusted EBITDA and net debt. See note 13b for details.
4. 4. Restated to reflect the results of the EMEA Zips business, divested in 2023, as a discontinued operation.
5. 5. From continuing operations.
6. 6. EBIT (Earnings before interest and tax) relates to Operating Profit as shown on the face of the P/L.
7. 7. The current company compiled analyst consensus expectation for FY24 is for adjusted operating profit of $261.1m with a range of $256.3m-$266.5m.

Conference Call

Coats Management presented its half year results in a webcast at 10.00 BST today (Thursday, 1 August 2024). The webcast replay was made available on this page.

About Coats Group plc

Coats is a world leader in thread manufacturing and structural components for apparel and footwear, as well as an innovative pioneer in performance materials. These critical solutions are used to create a wide range of products, including ones that provide safety and protection for people, data and the environment. Headquartered in the UK, Coats is a FTSE250 company and a FTSE4Good Index constituent. Revenue in 2023 was $1.4 billion.

Trusted by the world’s leading companies to deliver crucial, innovative, and sustainable solutions, Coats provides value-adding products including apparel, accessory and footwear threads, structural footwear components, fabrics, yarns and software applications. Customer partners include companies from the apparel, footwear, automotive, telecoms, personal protection, and outdoor goods industries.

With a proud heritage dating back more than 250 years and spirit of evolution to constantly stay ahead of changing market needs, Coats has operations across some 50 countries with a permanent workforce of more than 15,000, serving its customers worldwide.

Coats connects talent, textiles, and technology, to make a better and more sustainable world. Worldwide, there are four dedicated Coats Innovation Hubs, where experts collaborate with partners to create the materials and products of tomorrow. It participates in the UN Global Compact and is committed to validated Science Based sustainability targets for 2030 and beyond, with an aspiration of achieving net-zero by 2050. Coats is also committed to achieving its goals in Diversity, Equity & Inclusion, workplace health & safety, employee & community wellbeing, and supplier social performance.

Cautionary Statement

Certain statements in this interim report are forward-looking. Although the Group believes that the expectations reflected in these forward-looking statements are reasonable, we can give no assurance that these expectations will prove to have been correct. Because these statements contain risks and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

The information contained within this announcement is deemed by the Company to constitute inside information stipulated under the Market Abuse Regulation (EU) No. 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018. Upon the publication of this announcement via the Regulatory Information Service, this inside information is now considered to be in the public domain. For the purposes of Article 2 of Commission Implementing Regulation (EU) 2016/1055, the person responsible for arranging for the release of this announcement on behalf of Coats Group plc is Jackie Callaway, Chief Financial Officer.

ENDS