# Coats Group plc Delivered a strong performance, increased momentum in Performance Materials business - Link: https://www.directorstalkinterviews.com/coats-group-plc-delivered-a-strong-performance-increased-momentum-in-performance-materials-business/412768381 - Published: 2019-03-01T07:54:12+00:00 - Author: Charlotte Edwards **Coats Group plc** (LON:COA), the world’s leading industrial thread manufacturer, announced its unaudited Full Year Results for the year ended 31 December 2018. |   Continuing operations ^(4) | 2018 | 2017 (restated ^(5)) | Change | CER change ^(1) | Organic change ^(1) | | | | | | | | | | Revenue | | $1,415m | $1,356m | 4% | 6% | 3% | | Adjusted ^(1) | | | | | | | | Operating profit | | $195m | $161m | 21% | 24% | 23% | | Operating margin | | 13.8% | 11.8% | 190bps | 200bps | 220bps | | Basic earnings per share | 6.9c  | 5.7c | 21% | | | | Free cash flow | | $96m | $76m | 26% | | | | Return on capital employed (ROCE) | 43% | 35% | 800bps | | | | Reported ^(3, 4) | | | | | | | Operating profit | $147m | $154m | (5)% | | | | Basic earnings per share | 3.9c | 5.1c | (25)% | | | | Net cash generated by operating activities ^(2) | $102m | $(232)m | n/a | | | | Full year dividend per share | 1.66c | 1.44c | 15% | | | | (Loss)/profit from discontinued operations | $(16)m | $10m | n/a | | |   **Financial highlights** · Revenue growth of 6% on a CER basis (4% reported), with 3% organic growth and a 3% contribution from the acquisition of Patrick Yarn Mill. · Continued organic revenue growth in Apparel and Footwear (thread up 4%) and accelerated organic growth in Performance Materials (up 7%). · Adjusted operating profit up 24% on a CER basis; adjusted operating margin up 200bps to 13.8%. · Adjusted EPS up 21% to 6.9 cents as a result of higher adjusted operating profits, a further reduction in effective tax rate, a lower pension finance charge, with some offset from foreign exchange and interest. · Adjusted free cash flow of $96 million; up 26% on prior year due to increased adjusted operating profits and controlled NWC, whilst maintaining capital expenditure ahead of depreciation. · Reported operating profit of $147 million (down 5%) and basic EPS of 3.9 cents( down 25%), primarily due to increased exceptional costs of $48 million (mostly not tax deductible) in relation to Connecting for Growth, the UK guaranteed minimum pension equalisation, and Lower Passaic River legal costs. **Strategic highlights** · Sale of non-core North America Crafts business completed on 20 February 2019 for $37 million, with resulting exceptional impairment to recognise net assets at fair value. · Connecting for Growth programme benefits being realised faster than initially anticipated; $15 million net benefits delivered in 2018 (reorganisation cost of $23 million incurred in year). · Agreement in principle of Coats UK Pension Scheme triennial valuation with agreed annual deficit contributions (including estimated administrative expenses) of $31 million p.a. from 1 April 2019 (currently $24 million p.a.). > **Commenting Rajiv Sharma, Group Chief Executive, said:** > ‘Coats delivered a strong performance in 2018. Our Apparel and Footwear business > delivered continued market share gains by providing on-going high service levels, > and we saw increased momentum in our Performance Materials business. In an environment > of rising input costs, we were able to grow our operating margins, through realising > price increases, delivering productivity and procurement gains, as well as keeping > tight control of our cost base and delivering significant savings from our Connecting > for Growth programme in its first year. Following this strong performance in 2018 > we have announced a full year dividend per share of 1.66 cents, which represents > a 15% year-on-year increase, and reflects the Board’s confidence in our strategy. > ‘To further support delivery of our strategy, we completed the acquisition of > Threadsol whose cloud-based software solutions incorporate artificial intelligence > and provide an excellent fit with the existing Coats Global Services business. > We now have a complementary suite of software solutions for the apparel and footwear > industries that will enable brands, retailers and manufacturers to drive productivity > gains, supply chain control and speed to market. In addition to Threadsol, we > also made a strategic investment in Twine Solutions, who have developed a revolutionary > digital thread dyeing system, which aims to address the key needs of our customers > of speed, innovation and [sustainability](https://www.directorstalkinterviews.com/sustainability-green-stocks-news). > ‘We enter 2019 in a strong position, with continued positive momentum in our core > Apparel and Footwear and hi-tech Performance Materials businesses. The exit of > our non-core North American Crafts business will ensure complete focus on growing > our remaining businesses organically and identifying further value-add bolt-on > acquisitions. > ‘Whilst we are cautious around the current macroeconomic uncertainties, based > on our current assessment of business trends we remain confident in delivering > another year of improving performance through effective execution of our strategy.’ Share on: