17 May 2023

Coats Group plc

Trading update

Trading in line with full year expectations

Coats Group plc ('Coats', the 'Company' or the 'Group'), the world's leading industrial thread and global footwear component manufacturer, today announces a trading update for the period 1 January 2023 to 30 April 2023 ('the period').

·      Market conditions and Group trading in the period were in line with our expectations

·      Constant currency revenue decline of 7%, with organic CER revenues down 20%, against a very strong prior year comparator

·      Operating profit margins were resilient, supported by strategic projects and tight cost control

·      Full year expectations unchanged

All following references are on an CER basis unless specified.

The organic revenue decline of 20% in the period, against a very strong prior year comparator, reflects the continuation of the widespread industry destocking in Apparel and Footwear, together with previously disclosed customer contract in-sourcing in Performance Materials. This was in part offset by the annualised contribution from the prior year acquisitions in Footwear, with overall revenue declining by 7%.

As expected, Apparel revenues declined by 22% in the period reflecting a continuation of trends seen in Q4 2022, with destocking by customers adjusting to more subdued consumer demand and excess inventory levels.

Footwear revenue decreased by 23% organically, with similar destocking drivers to those seen in the Apparel markets. Reported divisional revenue increased by 58% year-on-year in the period, including the first time contribution from the acquisitions of Texon and Rhenoflex. The integration of both businesses is progressing to plan, with the realisation of synergy and efficiency benefits increasing, in line with expectations.

Revenue in Performance Materials reduced by 13% in the period. This was largely the result of the customer insourcing of a significant PPE contract in H2 2022.

Our strategic projects remain on-track and are delivering significant operational and financial benefits. These actions, alongside dynamic pricing, have supported operating margins at the beginning of 2023 and will continue to do so. Cash generation continues to be positive and a focus for the Group.

Outlook

With trading in the period in line with expectations we continue to anticipate full year 2023 performance consistent with the Board's expectations, with a second-half weighting, underpinned by the contribution from acquisitions, associated synergies and strategic projects.

With a significantly strengthened commercial and operational platform, the Group remains very well-positioned in its markets, as the global partner of choice for winning brands and with a clear leadership position in innovation and sustainability. Consequently, we remain excited about the growth and margin opportunities across the Group over the medium term, with improved cash generation providing an additional catalyst to our strategic ambitions.

The Group will release its interim results on 1 August 2023.

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 2022 was $1.6 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 spirit of evolution to constantly stay ahead of changing market needs, Coats has operations across some 50 countries with a workforce of 17,000, serving its customers worldwide. Coats connects talent, textiles, and technology, to make a better and more sustainable world. Worldwide, there are three 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 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. To find out more about Coats visit www.coats.com.