Financial highlights
- Revenue growth of 1% on an CER basis in line with November trading update; 2% decline on a reported basis as a result of H1 foreign exchange translation headwinds.
- Apparel & Footwear CER revenue growth of 1.0%; core thread sales up 2.1% driven by on-going share gains;
- Performance Materials CER revenue growth of 1.4%; growth in Personal Protection, and Telecoms and Energy, offset by Transportation.
- Adjusted operating profit up 5% on a CER basis to $198 million; adjusted operating margin up 50bps to 14.3%.
- Adjusted EPS up 1% to 7.0 cents; 200bps reduction in underlying effective tax rate5 to 29%, offset by certain non-operational one-offs (e.g. initial impact of IFRS16 (leases) and higher year-on-year pension finance charge).
- Adjusted free cash flow of $107 million reflecting strong cash conversion; supporting 11% growth in dividend.
- Closing net debt (excl. IFRS 16) of $150 million; net debt (incl. IFRS 16) of $215 million (0.9x leverage).
- Reported operating profit of $191 million (up 30%) and basic EPS of 6.7 cents (up 73%); continued strategic progress and significantly lower net exceptional costs in the year.
Strategic highlights
- Connecting for Growth two-year transformation programme now concluded;
- Cost actions completed ahead of original expectations and faster than scheduled; final two-year net savings of $28 million; exceptional reorganisation charge $31 million;
- On-going focus now on driving reinvestments in innovation and digital; three innovation hubs now open; $16 million incremental sales from innovation in 2019. 2
- Sustainability: significant progress towards 2022 targets; dedicated ESG Investor Event hosted in London.
- Acquisition of Pharr High Performance Yarns, announced in November 2019, now completed; combination with existing Personal Protection business delivers significant scale and market leadership in attractive growth market.
- Balance Sheet in a strong position to drive ongoing operational growth initiatives, fund further value-added M&A in key strategic focus areas, and deliver shareholder returns.
Commenting on the Full Year Results Rajiv Sharma, Group Chief Executive, said:
‘I am pleased to report a year of continued growth in profits and cash, despite a market backdrop where we saw lower than normal growth in retail sales of Apparel and Footwear, and temporary softness in some of the industrial end-markets that we serve in Performance Materials. In Apparel and Footwear, this meant taking further market share by delivering high quality products with world class levels of speed, customer service and support. In Performance Materials, we delivered innovative thread and yarn-based solutions that solve our customers’ technical problems across a variety of industries.
‘During the year, we also made significant progress on our strategic priorities of M&A, Digital, Innovation and Sustainability. The acquisition of Pharr High Performance in North America makes Coats a market leader in Personal Protection yarns. ESG and Sustainability are key differentiators for Coats and a source of competitive advantage.
‘At an operational level we continue to grow margins through self-help programmes and cost management, whilst continuing to recover raw material cost increases. Cash delivery was once again strong which provides us with the funds to invest selectively in the most attractive organic and inorganic opportunities. Over the last two years the delivery of our Connecting for Growth transformation programme has resulted in less complexity, lower cost, more organisational agility and funds to invest in growth. The organisation is now fitter, faster, more agile and able to respond rapidly to fast-paced changes in the market.
‘We enter 2020 as a lean and agile organisation, having delivered significant positive strategic change through 2019. We are well placed to take advantage of the fast-paced and rapidly changing modern world, by capturing the many opportunities this presents to Coats as a truly global business.
‘Absent a material impact from Covid-19, Coats remains well placed to execute our strategy and deliver another year of growth in 2020.’