On track for FY15 progress
Recent group trading has been broadly in line with H1, albeit with some variation within the detail. Our estimates are unchanged and will be reviewed again at the year end. P/E multiples remain in single-digits from FY16. We note Coats' (L:COA) intention to delist from ASX and NZX next year.
Some variations noted in H2 trading (4M to October)
In the four months to end October, group revenue was c +3% y-o-y in local currency versus c +4% seen in H1, with a firm US dollar having a slightly more adverse y-o-y impact in the period. Operationally, the rate of Apparel and Footwear progress looks to be slightly better, while Crafts saw flat l-f-l revenues in the latest trading period, improving from c -7% in H1. Speciality threads’ l-f-l revenue was also flat over the last four months but followed a strong H115 (+12.8% y-o-y). Weaker activity in the oil and gas and Chinese auto industries is cited as the reason for this (in Coats’ case affecting fire-resistant aramid garment thread and airbag/interior thread demand respectively). By implication, progress in other speciality categories has balanced out these soft spots and auto generally (ex- China) is understood to be performing well. At group level, management still expects to report operating profit progress for the full year. Our existing FY15 estimates (ie revenue -2.7% and EBIT +5.3%) may now be more towards the upper end of the achievable range but we leave them unchanged for now. We will review this and cash flow projections (see below) at the year end.
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