Coats (COA) capped off a respectable year of trading by unveiling a two-year growth programme tasked with transitioning it for the digital age. At a total cost of $30m (£21.4m), the industrial thread manufacturer’s 'Connecting for Growth' initiative has been designed to simplify the business, add value to customers and free up $25m of extra funds, $10m of which will be reinvested.
Management is hopeful that increased productivity will generate net savings of $5m in 2018. That observation, coupled with expectations that Patrick Yarn Mill, the US-based manufacturer of high-performance engineered yarns acquired in December 2017, will hit the ground running, prompted Coats to raise its adjusted operating profits guidance for the year ahead.
Investors also had plenty of other reasons to lift the shares 12 per cent on results day. Coats widened its adjusted operating margin by 70 basis points to 11.5 per cent in 2017, despite facing a tornado and competitive pressures in the US craft market, as well as rising input costs. The group overcame these challenges by charging its customers more and even gobbled up market share in the process. Management credited new product launches and better customer service for this success.
Peel Hunt expects adjusted profits of $176m and EPS of 7.5ȼ for 2018, up from $161.4m and 6.9 ȼ in 2017.
| COATS (COA) | ||||
| ORD PRICE: | 84p | MARKET VALUE: | £1.19bn | |
| TOUCH: | 84-85p | 12-MONTH HIGH: | 90p | LOW: 50p |
| DIVIDEND YIELD: | 1.2% | PE RATIO: | 20 | |
| NET ASSET VALUE: | 20ȼ* | NET DEBT: | 78% | |
| Year to 31 Dec | Turnover ($bn) | Pre-tax profit ($m) | Earnings per share (ȼ) | Dividend per share (ȼ) |
| 2013 | 1.09 | 14.0 | -1.6 | nil |
| 2014 | 1.56 | 96.9 | 3.0 | nil |
| 2015 | 1.47 | 80.3 | 1.8 | nil |
| 2016 | 1.46 | 123 | 4.6 | 1.25 |
| 2017 | 1.51 | 143 | 5.8 | 1.44 |
| % change | +4 | +17 | +26 | +15 |
| Ex-div: | 3 May | |||
| Payment: | 29 May | |||
| *Includes intangible assets of $294m, or 21ȼ a share. £1= $1.40 | ||||
