Coats Group (COA) H2 2023 earnings summary

Executive summary

• Adjusted EBIT was $233m, unchanged YoY, despite lower volumes; adjusted EBIT margin rose 160bps to 16.7%, with the 17% margin target achieved in H2.

• Adjusted free cash flow increased to $131m from $114m; Apparel and Footwear each gained an estimated c.200bps of market share.

• Revenue from 100% recycled thread products rose 44% to $172m; Strategic Projects delivered $37m of FY23 savings and $57m cumulatively since 2022.

Financial highlights

• FY23 revenue was $1,394m, down 9% reported and 6% at constant exchange rates (CER); organic revenue declined 14%.

• Adjusted EBIT was $233m, flat reported and up 4% CER; adjusted EPS was 8.04 cents versus 8.02 cents.

• Profit from continuing operations was $101m versus $95m; attributable profit was $56m versus a $15m loss, and reported EPS was 5.18 cents versus 4.82 cents.

• Final dividend proposed at 1.99 cents per share, up 15% YoY.

Outlook and guidance

• 2024 revenue is expected to grow modestly, weighted to H2, as Apparel and Footwear recover gradually and Performance Materials tender activity increases.

• Confidence remains in achieving a 17% adjusted EBIT margin in 2024, supported by cost control and Strategic Projects.

• Incremental Strategic Projects EBIT savings target remains $70m by 2024; $57m was delivered cumulatively through FY23, with $35m–$40m expected cash costs.

• 2024 modelling assumes a 29% effective tax rate, $35m–$40m total finance costs, and capex of $30m–$40m.

• Modest raw material, freight and energy inflation and continued inflation elsewhere are expected to be offset by tactical pricing and productivity measures.