Coats Group posts 'solid' performance in year to date

Industrial thread and consumer textile crafts business Coats Group updated the market on its trading for the period 1 January to 30 April on Wednesday, as investors prepared for its annual general meeting later in the day.

The London-listed company said group sales for the period grew 5% year-on-year, with 3% organic growth, driven by stronger-than-anticipated performance in the industrial division - up 7%.

Its board said that was achieved by continued solid growth of the core apparel and footwear business - up 4% - despite continued mixed demand from clothing retailers and manufacturers.

In addition, performance materials grew 19%, reflecting continued strong growth in Asia and the EMEA regions, an improvement in the US consumer durables markets - which, as anticipated, returned to growth in the period - and the contribution of Gotex, acquired in June 2016.

Organic growth for the division was 4%, driven by both apparel and footwear at 3%, and performance materials at 9%.

Crafts sales declined 5%, largely due to the business disruption caused by the tornado strike at the main crafts distribution centre in Albany, Georgia in the US on 22 January.

“The estimated adverse sales impact from the Albany tornado is $10m, however the impact of lost profits and incremental costs of re-establishing operations in Albany are expected to be covered in full by the group's insurance cover,” Coats’ board said in a statement.

“Following the softness seen in late 2015 and throughout the majority of 2016, the US handknitting market has started to improve, with a return to point of sale growth at key retail customers in recent months.”

The 4% growth in group sales on a reported basis, which was lower than the 5% CER growth, reflected the stronger US dollar, primarily against the Turkish lira, Mexican peso and Egyptian pound, compared to the same period in 2016, the board explained.

Coats said it had a strong start to the year, and therefore now expected to deliver 2017 full year results ahead of management's previous expectations.

“This is expected to be achieved through our initiatives to deliver market share gains and productivity improvements, whilst maintaining a focus on tight cost control.”