Coats Group (COA) H1 2024 earnings summary

Executive summary

• Revenue grew 7% to $741m, with 8% constant currency growth, led by 14% growth in Apparel and 7% in Footwear, while Performance Materials declined 3% but showed sequential improvement.

• Adjusted EBIT margin reached 18%, up 250bps year-on-year, surpassing the 2024 target of 17%.

• Strategic project savings target increased to $75m by 2025, with $64m delivered to date and annualised acquisition synergies expected to reach $22m.

• Interim dividend raised 15% to $0.0093 per share, reflecting robust operating performance and confidence in growth.

• Clear global leadership in 100% recycled thread products, with revenue up 141% to $159m in H1.

Financial highlights

• Group revenue: $741m (+7% reported, +8% CER); Apparel $376m (+14% CER), Footwear $198m (+7% CER), Performance Materials $167m (–3% CER).

• Adjusted EBIT: $133m (+26%); margin: 18% (up 250bps); adjusted EPS: 4.5c (+27%).

• Adjusted free cash flow: $59m (+15%); net debt: $381m; leverage: 1.4x, within target range.

• U.K. pension scheme fully funded, ceasing £2m/month payments and providing a $30m annual free cash flow tailwind.

• Interim dividend per share increased to 0.93 cents from 0.81 cents year-on-year.

Outlook and guidance

• Full-year results expected modestly above current market expectations, with ongoing recovery in Apparel and Footwear and improving trends in Performance Materials.

• Gradual, quarter-on-quarter sales recovery expected through H2 2024 and into H1 2025, with volumes projected to surpass 2019 levels next year.

• Performance Materials margin recovery to 13%-14% depends on US/Mexico volume normalization, likely by late 2025.

• Effective tax rate for FY24 expected at 29%; finance costs guided at $32-37m.

• Anticipated 1-2% FX headwind on revenues and EBIT for FY24.