Coats Group (COA) will round off its two-year ‘Connecting for Growth’ savings initiative at the end of this year, having delivered net savings of $25m (£20.6m) one year ahead of schedule and created $10m for investment in innovation, digital capability and talent.
The programme has brought effective discipline to the industrial thread manufacturer, prompting it to exit seven ‘tail markets’ and cease carrying out unprofitable work for customers, according to chief executive Rajiv Sharma. Coats’ first half was tempered by softening demand, largely in apparel and footwear, where revenues fell 3 per cent. Supply side issues concerning delays in raw materials procurement also impacted sales, but Mr Sharma said that this situation has now normalised, and a recurrence is unforeseen.
Coats completed the sale of its North America crafts business and its acquisition of Threadsol, a specialist in optimising fabric usage, in February. The group’s ratio of net debt to adjusted cash profits improved from a multiple of 1.2 at its last year end to 0.9. Coats has a target range of multiples of between 1 and 2, and chief financial officer Simon Boddie said that the company is examining opportunities to strengthen both apparel and footwear, and performance materials, with acquisitions.
House broker Peel Hunt forecasts full-year 2019 pre-tax profits and EPS of $183.2m and 7.4¢ respectively, rising to $198.3m and 8¢ in 2020.
| COATS (COA) | ||||
| ORD PRICE: | 79.2p | MARKET VALUE: | £ 1.38bn | |
| TOUCH: | 79.2-79.4p | 12-MONTH HIGH: | 92p | LOW: 69p |
| DIVIDEND YIELD: | 2.6% | PE RATIO: | 19 | |
| NET ASSET VALUE: | 20.7¢* | NET DEBT: | 64% | |
| Half-year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
| 2018 | 725 | 69.0 | 2.32 | 0.50 |
| 2019 | 705 | 85.4 | 3.41 | 0.55 |
| % change | -3 | +24 | +48 | +10 |
| Ex-div: | 24 Oct | |||
| Payment: | 15 Nov | |||
| £1=$1.21 *Includes intangible assets of $293m, or 20.3¢ a share | ||||
