FY16 ahead, estimates nudged up
A busy year for Coats Group (LON:COA) concluded with progress on earnings and pensions. There is more to be done on both but with pension distractions substantially resolved and good cash credentials there are more strategic options available to management. The valuation has begun to normalise now and the return to dividend payment contributes to this.
Ahead of estimates and dividend payments resumed
Reported FY16 normalised PBT (we exclude pension net finance costs) for the continuing businesses came to c U$5m above our estimate (at U$140.7m with EPS on the same basis of 5.8c). This outcome was attributable broadly equally to higher divisional EBIT (despite small revenue shortfalls) and lower than anticipated pension admin costs. Margins in both divisions were up slightly versus our model; Industrial did ease back compared to the first six months, but H216 was up year-on-year, while Crafts picked up markedly after the flagged H1 issues. The previously flagged resolution of a substantial portion of the UK DB pension scheme is helpful to the investment case, as is a return to the dividend list, a year earlier than we had anticipated.
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