Coats Group plc (LON:COA), the world’s leading industrial thread and footwear components manufacturer, has announced its unaudited results for the six months ended 30 June 2024.
| Continuing operations | H1 2024 | H1 2023 4 | |||
| Reported | CER | ||||
| Revenue | $741m | $695m | 7% | 8% | |
| Adjusted 1 | |||||
| EBIT 6 | $133m | $108m | 24% | 26% | |
| Basic earnings per share | 4.5c | 3.5c | |||
| Free cash flow | $59m | $51m | |||
| Net debt (excl. lease liabilities) | $381m | $399m | |||
| Reported 2 | |||||
| EBIT 6 | $118m | $92m | |||
| Basic earnings per share 5 | 3.8c | 2.8c | |||
| Net cash generated by operating activities | $74m | $53m | |||
| Interim dividend per share (cents) | 0.93c | 0.81c | |||
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%): | |
| o | Weak prior year comparator which was impacted by industry destocking | |
| o | Apparel customer inventory and buying patterns returned to more normalised levels, despite macro concerns (up 14%) | |
| o | Footwear recovery slightly behind Apparel as destocking commenced later, but now back to robust growth (up 7%) | |
| o | 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, Coats 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. | 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. | Reported metrics refer to values contained in the IFRS column of the primary financial statements in either the current or comparative period. |
| 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. | Restated to reflect the results of the EMEA Zips business, divested in 2023, as a discontinued operation. |
| 5 | From continuing operations. |
| 6. | EBIT (Earnings before interest and tax) relates to Operating Profit as shown on the face of the P/L. |
| 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 Group management will present its half year results in a webcast at 10.00 BST today (Thursday, 1 August 2024). The webcast can be accessed via https://coats.com/en/investors/investors-overview/. The webcast will also be made available in archive form on www.coats.com.
