REG - Coats Group PLC - Trading Statement

CoatsAnnouncement

22/11/2023 07:00

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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                                    -9%                   -8%                   -12%

                        -19%

 

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
 Investors   Victoria Huxster /  Coats Group plc  +44 (0)7880 471350 / +44 (0)7720 999764

             Julian Wais

 Media       Richard Mountain /  FTI Consulting   +44 (0)20 3727 1374

             Nick Hasell

 

 

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
(https://nam11.safelinks.protection.outlook.com/?url=http%3A%2F%2Fwww.coats.com%2F&data=05%7C01%7C%7C4397db941c4c4630be5b08dbe9af40ac%7C048ff72770274cd0b672f075b0bdb973%7C0%7C0%7C638360711130771602%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C3000%7C%7C%7C&sdata=dd2mhZFb1q5cP%2FFAAPiLiLKUfaCvmWJdoXp7K9o9SuI%3D&reserved=0)
.

 

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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