Reported figures at industrial thread manufacturer Coats (COA) were hit by several exceptional items, including a $5.7m (£4.1m) charge linked to an ongoing investigation into the group's sizeable pension deficit and the $14.1m spent reorganising the business following the sale of EMEA Crafts. Strip out these items, unfavourable currency movements and a $6.4m pollution provision, and operating profit grew 19 per cent in the reported period.
Driving that success was the apparel and footwear subdivision. This operation, which specialises in zips and trims, posted double-digit sales growth in frontier markets such as Bangladesh, Colombia, Mexico and Vietnam as customers flocked to use the group's newly launched ecommerce platform.
Having gone live at the beginning of 2015, the digital service already straddles 25 countries and accounts for more than half of thread orders. Good volume growth, coupled with the depressed oil price driving down costs of key materials, triggered a 20 per cent rise in like-for-like operating profits in the industrial segment.
Profit also grew in the smaller crafts division as cheaper input prices and a focus on reducing costs offset falling sales. Management blamed lower revenues on tough comparators and a milder autumn and winter in the US curbing demand for hand knitting.
Broker Peel Hunt reacted to these results by upgrading its adjusted operating profit and EPS forecasts by 8 per cent and 11 per cent, respectively. It now expects adjusted EPS of 5.2¢ in 2016.
| COATS GROUP (COA) | ||||
|---|---|---|---|---|
| ORD PRICE: | 28.5p | MARKET VALUE: | £401m | |
| TOUCH: | 28-29p | 12-MONTH HIGH: | 30p | LOW: 21p |
| DIVIDEND YIELD: | NIL | PE RATIO: | 19 | |
| NET ASSET VALUE: | 24¢* | NET DEBT: | 74% | |
| Year to 31 Dec | Turnover ($bn) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2011 | 1.06 | 35.0 | 0.1 | nil |
| 2012 | 1.04 | -93.1 | -7.8 | nil |
| 2013 | 1.09 | 14.0 | -1.6 | nil |
| 2014 | 1.56 | 96.9 | 3.0 | nil |
| 2015 | 1.49 | 86.6 | 2.1 | nil |
| % change | -5 | -11 | -30 | - |
Ex-div: Payment: *Includes intangible assets of $261m or 19¢ a share. £1=$1.39 | ||||
