Strong delivery, exciting medium-term targets with compounding cash and earnings growth

Strategic Highlights

• Continued outperformance against the industry in Apparel and Footwear – further market share gains⁸ (+100bps Apparel and +200bps Footwear)
• Extended global market leadership position in 100% recycled thread products – revenue grew 144% to $405 million, a further significant acceleration in industry adoption
• Strategic projects actions now largely complete – $8 million incremental EBIT to be delivered in 2025 (taking total savings to $75 million)
• Performance Materials Americas manufacturing footprint right-sized in Q4 with the closure of the Toluca site to align to structural softness in North American Yarns – will drive immediate margin improvement
• UK pension de-risking – c.£1.3 billion buy-in delivered in September 2024; now 100% of benefits payable from the scheme insured following a cash payment of £100 million in September 2024; no further cash contributions required
• Once again, received Great Place to Work accolade with the latest survey achieving 94% participation and 90% engagement rate – Coats recognised as one of the top 25 manufacturing and production companies globally

Financial Highlights

• Revenue up 8% on a reported basis and 9% CER:
  • Normalised customer buying patterns versus 2023 which was impacted by industry destocking
  • Apparel and Footwear revenue growth of 13% and 10% respectively
  • Performance Materials (PM) impacted by weakness across all North America end markets; structural softness in North American Yarns
• Group adjusted EBIT margin of 18.0%, ahead of previously announced 2024 margin target of 17%, and despite in-year margin headwinds from PM division
• Adjusted earnings per share growth of 18% to 9.5 cents
• Strong adjusted free cash flow of $153 million – 101% cash conversion⁷
• Net debt (excluding lease liabilities) at $449 million with leverage³ reduced to 1.5x net debt: EBITDA (ahead of 1.6-1.7x guidance post pensions settlement), comfortably within 1-2x target range and providing significant capacity to support the Group’s capital allocation strategy
• Proposed final dividend of 2.19 cents, +10%, reflecting the Board’s confidence in growth strategy and future performance

New medium-term targets

• Updated medium-term targets reflect the next stage of delivery:
  • >5% average organic revenue growth
  • EBIT margins to grow to 19-21%
• Expect to generate >$750m adjusted FCF (after interest and tax and before dividend distribution) over next five years which will support an active capital allocation policy, focused on accelerating compound earnings growth:
  • Maintain strong financial position, with leverage at 1-2x
  • Managed investment to sustain organic growth
  • Retain our progressive dividend policy
  • Increasing opportunity to enhance value-creation through acquisitions
  • Additional returns to investors if leverage is expected to fall below 1x net debt:EBITDA for a sustained period
• EPS CAGR of >10% (from 2025 base line) post execution of M&A or share buybacks

Outlook for 2025

Based on current market conditions and normalised customer buying behaviour, we anticipate another year of financial and strategic progress in 2025, in line with market expectations.

This guidance reflects continued organic growth for Apparel and Footwear, in line with the medium- term growth targets for these divisions. Organic growth in Performance Materials is expected to be modest with no expected recovery in the America’s Yarns business and a gradual recovery in the Telecoms and Energy business. Margins in 2025 should benefit from further growth, improvement in Performance Materials and the final benefits from strategic projects, which will be balanced in part by some targeted reinvestment to drive long term growth initiatives.

Free cash generation is again expected to be strong in 2025, supporting the Group’s capital allocation strategy.

Commenting on the results David Paja, Group Chief Executive, said:

“We are pleased to have delivered another strong financial performance in 2024, despite wider macroeconomic uncertainties and I would like to thank all Coats employees for this achievement.

I joined Coats because it is a global market leader with significant potential for further profitable and cash generative growth. I have now visited almost all our sites worldwide and met employees, customers and shareholders, which has confirmed my views about the exciting opportunity ahead. Our unparalleled customer base, high-quality product portfolio and global footprint, make Coats a true market leader and are a great foundation to build upon. The focus for the next phase of strategic development will be to generate sustainable growth at compelling returns – supported by our financial strength.

Today we are updating our medium-term targets outlining higher performance in our three divisions which, together with our active capital allocation policy, will deliver an acceleration in earnings growth.

I am excited to lead Coats in delivering on these many opportunities for growth and creating further value for all our stakeholders.”

Notes:

1. 1. Adjusted measures are non-statutory measures (Alternative Performance Measures). These are reconciled to the nearest corresponding statutory measure in note 13. Constant Exchange Rate (CER) metrics are 2023 results restated at 2024 exchange rates.
2. 2. Reported metrics refer to values contained in the IFRS column of the primary financial statements in either the current or comparative period.
3. 3. Leverage calculated on a frozen GAAP basis and therefore excludes the impact of IFRS 16 on both adjusted EBITDA and net debt. See note 13b for details.
4. 4. From continuing operations.
5. 5. EBIT (Earnings before interest and tax) relates to Operating Profit as shown on the face of the P/L. Reconciliation between the Adjusted EBIT and Reported EBIT is disclosed in the Financial Review section on page 15.
6. 6. Excludes £100 million payment in relation to the pension settlement
7. 7. Cash conversion defined as adjusted free cash flow divided by normalised attributable profit before exceptional and acquisition items
8. 8. Coats’ estimates

Conference Call

Coats Management will present its full year results in a webcast at 9.00am GMT today (Thursday, 6 March, 2025). The webcast can be accessed via https://www.coats.com/en/investors/investors-overview/ or this Viewing “Coats Group plc – Full Year Results – 6 March 2025”. The webcast replay was made available on this page.

About Coats Group plc

Coats is a world leader in thread manufacturing and structural components for apparel and footwear, as well as an innovative pioneer in performance materials. These critical solutions are used to create a wide range of products, including ones that provide safety and protection for people, data and the environment. Headquartered in the UK, Coats is a FTSE250 company and a FTSE4Good Index constituent. Revenue in 2024 was $1.5 billion.

Trusted by the world’s leading companies to deliver crucial, innovative, and sustainable solutions, Coats provides value-adding products including apparel, accessory and footwear threads, structural footwear components, fabrics, yarns and software applications. Customer partners include companies from the apparel, footwear, automotive, telecoms, personal protection, and outdoor goods industries.

With a proud heritage dating back more than 250 years and a spirit of evolution to constantly stay ahead of changing market needs, Coats has operations across some 50 countries with a permanent workforce of more than 16,000, serving its customers worldwide.

Coats connects talent, textiles, and technology, to make a better and more sustainable world. Worldwide, there are four dedicated Coats Innovation Hubs, where experts collaborate with partners to create the materials and products of tomorrow. It participates in the UN Global Compact and is committed to validated Science Based sustainability targets for 2030 and beyond, with an aspiration of achieving net-zero by 2050. Coats is also committed to achieving its goals in Diversity, Equity & Inclusion, workplace health & safety, employee & community wellbeing, and supplier social performance.

Cautionary statement

Certain statements in this interim report are forward-looking. Although the Group believes that the expectations reflected in these forward-looking statements are reasonable, we can give no assurance that these expectations will prove to have been correct. Because these statements contain risks and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

ENDS