After a robust overall trading update, we have modestly rebalanced our revenue and EBIT estimates in favour of Industrials, Apparel & Footwear with group profit projections unchanged overall. We believe that management is preparing to set out the group’s growth credentials and this may provide further support for a share price that has travelled well since the beginning of the year.
Maintained Industrials growth, with subtle mix shift
Coats’ (LON:COA)key Industrial segment continues to show revenue growth clearly ahead of GDP in its leading North American and western European end-markets in market conditions which are described as competitive. At +5% l-f-l progress for both, the 10 months to October is in line with the reported H1 period; mix has shifted slightly, in favour of Apparel & Footwear (+6%), with Performance Materials (PM) growth trimmed (now +4%). The latter effect is due to diverging subsector patterns with traditional markets (c 50% of PM) flat to slightly down and newer niches growing at double-digit rates. PM continues to focus on new segment development, targeting high single digit organic growth rates. FX translation (into US$) turned from being a marginal headwind to a neutral y-o-y position in recent months. Crafts division (-12%) is still being buffeted between tough markets and certain customer.
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