TIDMCOA
RNS Number : 2028U
Coats Group PLC
22 November 2023
22 November 2023
Coats Group plc
Trading Update
Strengthening margins and cash; signs of gradual market
recovery; trading in line with expectations
Coats Group plc ('Coats', the 'Company' or the 'Group'), the
world's leading industrial thread and global footwear component
manufacturer, today announces a trading update for the period 1
July to 31 October 2023 (the 'period').
H1 2023 1(st) July to 31(st) October
2023 vs same period in 2022(3)
Organic(1,3)
CER Reported CER(1) Organic(1) CER
------------ ---------- ------- ---------------
Apparel -20% -7% -5% -5%
------------ ---------- ------- ---------------
Footwear -23% 0% 0% -18%
------------ ---------- ------- ---------------
Performance Materials -14% -21% -20% -20%
------------ ---------- ------- ---------------
Group -19% -9% -8% -12%
------------ ---------- ------- ---------------
All following references are at CER unless specified.
The Group traded as expected during the four month period. Group
organic revenue is on an improving trend at 12% lower year-on-year
(compared to H1 2023 down 19%), including early signs of the
anticipated gradual recovery in Apparel, where organic revenue was
5% lower. Reflecting the timing lag of destocking having started
later, Footwear organic revenue was 18% lower year-on-year in the
period.
Performance Materials continues to be impacted by the previously
disclosed customer insourcing of production, as well as customer
phasing issues in some US end markets. As a result, organic revenue
in Performance Materials was 20% lower.
The Group has continued to deliver significant benefits from its
strategic projects which, together with agile and effective
pricing, and the delivery of synergies from last year's footwear
acquisitions, have resulted in adjusted operating margins
strengthening further in the period. This increases our confidence
of achieving our 2024 goal of c.17%.
As previously indicated, we have seen modest translational
foreign exchange headwinds across the majority of our major
currencies against the US dollar YTD, which we expect to
accommodate within existing guidance. However, accounting
requirements related to significant rate fluctuations from the
Turkish Lira mean that the Group is likely to incur a specific
incremental translation impact to full year adjusted operating
profit, which at current exchange rates we estimate would be c.$5
million (see note 2).
Cash generation remained strong through the period, supporting
the Group's robust balance sheet. As at 31 October 2023, leverage
was 1.5 times, comfortably within the target range of 1-2
times.
Great Place to Work
On 16 November 2023, Coats was named one of the 2023 World's
Best Workplaces by Great Place to Work (GPTW), being one of only 25
companies chosen globally. GPTW selects companies based on their
dedication to creating exceptional workplace cultures, prioritising
people, fostering a culture of trust and empowering colleagues
worldwide to achieve their full potential.
Outlook
With early signs of a gradual recovery in Apparel, and our
adjusted operating margin continuing to strengthen, we expect our
full year performance to be in line with the Board's expectations.
This is before any specific impact from Turkish Lira translation as
described above.
We remain focused on delivering the significant operational and
financial benefits of our strategic projects, acquisition synergies
and delivering our other ongoing self-help actions . As a result,
we remain confident of achieving our 2024 operating profit margin
goal of c.17%. Over the medium term, our scale and global
footprint, strong digital platform and technical support
capabilities, alongside continued investment in innovation,
sustainability and operational efficiency, will enable us to grow
ahead of our market with strong profitability and cash
generation.
The Group will release its Full Year 2023 results on 7 March
2024.
Enquiries
Victoria Huxster +44 (0)7880 471350
/ Coats Group / +44 (0)7720
Investors Julian Wais plc 999764
Richard Mountain
/ +44 (0)20 3727
Media Nick Hasell FTI Consulting 1374
1. Constant exchange rate (CER) figures are 2022 results
restated at 2023 exchange rates. Organic CER figures are results on
a CER basis and includes like-for-like contributions from Texon
(post acquisition date of July 2022) and Rhenoflex (post
acquisition date of August 2022).
2. Since mid-2022 hyperinflation accounting methodology has been
required to be applied in our Turkey market. This requires the
translation of local currency results for a reporting period at the
spot rate at the end of the period (vs average rate for
non-hyperinflation accounting countries). As a result, and given
significant depreciation of the Turkish Lira, reported results for
our Turkey business in USD can be volatile and so no guidance has
been able to be given YTD on the impact of this. The Turkish Lira
has depreciated by over 50% during 2023. Based on latest exchange
rates (31 Oct), and assuming no further significant Turkish Lira
volatility for the rest of the year, we expect a $5 million
incremental adjusted operating profit headwind due to this impact
vs previous FX guidance (which excluded Turkey).
3. Following the completion of the European Zips sale on 31
August 2023, reported, CER and organic CER numbers exclude European
Zips sales from both 2023 and 2022.
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. Revenues in 2022 were $1.6bn. Trusted by the
world's leading companies to deliver vital, innovative, and
sustainable solutions, Coats provides value-adding products,
including apparel, accessory and footwear threads, structural
components for footwear and accessories , 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 a spirit of evolution to constantly stay ahead
of changing market needs, Coats has operations across some 50
countries with a workforce of over 18,000, 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 and Sustainability 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 Science-Based sustainability targets for 2030 and beyond, with a
goal of achieving net-zero by 2050. Coats is also committed to
achieving its goals in Diversity, Equity and inclusion, workplace
health and safety, employee and community wellbeing, and supplier
social performance. To find out more about Coats, visit
www.coats.com .
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.
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END
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