Coats Group returns to revenue growth

Industrial thread and footwear component manufacturer Coats Group reported a return to revenue growth for the period from 1 January to 30 April on Wednesday.

The AIM-traded firm’s trading update, announced ahead of its annual general meeting, indicated performance in line with expectations alongside solid financial health.

Group revenue increased 7% at constant exchange rates (CER) and 4% on a reported basis compared to the same period in 2023.

That growth was driven primarily by a strong performance in the apparel segment, which saw a 14% rise in revenue at CER as customer inventories and buying patterns normalised.

The footwear segment also returned to growth, with a 6% increase in revenue at both CER and reported levels, as demand from major brand customers improved following inventory normalisation.

Performance materials revenue declined 5% at CER and 9% on a reported basis, in line with expectations.

The division continued to face challenges from US customer phasing issues, but the trend was improving compared to a 17% decline in the 2023 financial year.

Coats said its leadership in 100% recycled thread products had strengthened, with strong growth during the period.

The company’s commitment to sustainability was further validated by the Science Based Targets initiative (SBTi), which verified Coats' near and long-term emissions reduction targets, including its net-zero target for 2050.

Strategic projects at Coats were meanwhile delivering significant operational and financial benefits, with the company on track to achieve $70m in savings by the end of 2024.

Those efforts, along with stringent cost control measures, ensured that the group's adjusted EBIT margin aligned with the 2024 goal of around 17%.

Cash generation remained robust through the period, reinforcing Coats' solid financial position and its capacity to invest in future growth and sustainability initiatives.

“The group continues to make good progress and the Board's full year expectations are unchanged,” the company’s board said in its statement.

“This is underpinned by evidence of the expected recovery in apparel and footwear, an improving recent trend in performance materials, and the continued benefits from our strategic projects albeit a level of uncertainty in our markets remains.

“Over the medium term, we remain confident in the group's ability to deliver strong profit growth and cash generation, owing to our scale, global footprint, innovation, strong digital platform and technical support capabilities, alongside continued investment in sustainability and innovation.”

Coats Group said it would release its interim results on 1 August.

At 0852 BST, shares in Coats Group were up 1.91% at 87.95p.

Reporting by Josh White for Sharecast.com.