Coats Group plc

Okay. Good morning, everybody. I'm delighted to welcome you to today's presentation covering our financial year 2025. Let's move to the first slide. This is today's agenda. First, I'm going to take you through the highlights of the year. Hannah will then present our financial performance. And after that, I will give a strategic update, including our new divisional structure, our growth drivers, and our updated medium-term targets. After the summary and outlook, we take your questions. So let's start with the highlights of the year. 2025 has been my first full year as chief executive of the group, and it has been a year of significant evolution for the business, with two significant M&A transactions, resilient trading in a challenging market, and great progress in our growth initiatives. As a result, today we announce renewed and more ambitious medium-term targets. In 2025, we have acquired Ortholite and divested our U.S. yarns business. We have demonstrated once more our ability to gain market share, reflecting the benefits of differentiators that our competitors cannot match. And our new target, organic adjacencies, have added one percentage point to growth at group level. Finally, we have delivered a record level of free cash flow of 160 million. For reference, this is more than the free cash flow that we have delivered in the past 10 years combined, and it reflects the new and improved cash generation profile of the group, following the end of UK pension contributions and the end of large restructuring activities. With that, I will hand over to Hannah to take you through our financial performance.

Thank you, David, and good morning, everyone. Now, before I start, it's worth noting that the Americas Yarns business has been treated as a discontinued operation and is therefore excluded from the numbers presented here. I'm pleased to report that the group has delivered a resilient performance in 2025, set against a backdrop of macroeconomic and tariff uncertainty from the second quarter onwards. Revenue was £1.46 billion flat on an organic constant exchange rate basis comfortably outperforming our core apparel and footwear end markets which we estimate were down low to mid single digit for the full year. EBIT was £290 million in line with expectations and up 3% on an organic CER basis. Pleasingly, group operating margin increased by 80 basis points to 19.8%. And in the second half, we matched our strong first half performance organically, despite challenging markets showcasing the resilience of the group. Earnings per share was in line with expectations at 9.3 cents, with higher EBIT offset by higher pension-related interest charges and the timing of the share placing in July 2025. The group generated 160 million of free cash flow pre-dividends, reflecting the powerful dynamics of high margins and low capital intensity and timing benefits from the Ortholite acquisition. In line with our guidance, year-end leverage increased to 2.2 times following the Ortholite acquisition, and we expect leverage to fall below two times by the end of 2026, underpinned by the cash-generative characteristics of the enlarged group. So turning to our margin performance. The group delivered strong margin expansion in 2025 with EBIT margin increasing by 80 basis points to 19.8%. As you can see from the chart on this slide, the margin improvement reflects pricing discipline as we successfully managed pricing pressures during the year and mixed benefits with a focus on premium and sustainable product lines. In addition, our teams continue to focus on driving productivity, including procurement savings and operational improvement actions. Margins also benefited from strategic project savings, including the footwear division manufacturing site consolidation and the move of operations to Indonesia. In line with expectations, Ortholite contributed to 11 million of operating profits in the last two months of the year. If we now turn to the divisional performance, starting with the apparel division. At £769 million, revenue was at 1% on a CER basis. This was a strong performance in a year that started with market growth momentum, but softened following the US tariff changes in April, with market conditions remaining challenging through the rest of the year. The division continued to gain market share, outperforming the core apparel threads markets, which we estimate were down around 3% in the year. This was achieved through a focus on delivery and service, and supported by our flexible global manufacturing capabilities. The division benefited from favourable mix, with year-on-year growth in premium thread sales and recycled thread products. In addition, there was good growth in the China domestic market, which requires high levels of operational agility to meet demanding customer lead times. EBIT increased by 4% on a CER basis to 156 million, and EBIT margin increased by 60 basis points to 20.2%. The margin expansion reflects the benefits of the favourable product mix and pricing discipline alongside prudent cost control and an ongoing focus on productivity gains. If we turn to footwear, at £440 million, revenue was 2% lower than 2025 on an organic CER basis. This reflected a period of growth until the end of April, followed by customers taking a cautious approach to ordering and, in the last few months of the year, we saw brands managing down inventory further in response to the uncertain 2026 outlook. As such, we estimate our core footwear end markets were down around 4-5% for the full year. Despite this challenging backdrop, the division outperformed with estimated organic market share growing to around 30%. The division also successfully maintained pricing despite downward pressures. EBIT was 105 million, flat on an organic CER basis compared to the prior year. The division delivered a strong EBIT margin of 23.9%, an increase of 40 basis points, reflecting pricing strategy and prudent cost control measures, alongside operational actions taken in the past year, including footprint consolidation in Europe and a rebalancing of the division's manufacturing towards Indonesia. The acquisition of Ortholite was completed at the end of October 2025 and two months trading are included in the 2025 divisional results. The 2025 full year profit performance for Ortholite was in line with our expectations with above market revenue growth and high levels of cash generation. Turning to performance materials. Now, this is the last time that we will talk about performance materials in this format, given the move to the two divisional structure. However, we are pleased with the improvements made in 2025. Revenue in the year was £256 million, flat on an organic CER basis, reflecting a return to growth in the second half of the year of 2%. Industrial revenue was 1% lower than prior year, with share gains in automotive thread partly offsetting softness in other industrial end markets. The division also saw strong demand in two organic adjacency target areas. Safety fabrics, which delivered 40% revenue growth in the year, and composite tapes for the energy market, which grew 21% in the full year after a particularly strong performance in the second half. As expected, EBIT was £29 million, an increase of 10% on an organic basis, with margin increasing to 11.3%. The organic margin improvement reflects the benefits of operational actions and the stronger second-half trading, with Q4 exit rate margins at 11.8%, approaching the bottom end of the medium-term targets set out in March 2025. In the second quarter, we exited from the non-core U.S. yarns business, improving the quality of the portfolio, with the divisional margin increasing 390 basis points, including America's yarns results in the 2024 comparator. In addition, the small acquisition of Vislite was completed in October 2025, accelerating our safety fabrics growth strategy. If we turn to the income statement, there are certain areas worth highlighting. At 2 million, exceptional items significantly reduced from 2024 with previous strategic projects now complete. Acquisition related items included 27 million for the amortization of acquisition intangibles and 20 million for acquisition transaction costs, mainly relating to the authorised acquisition. Finance costs were £41 million, higher year on year due to the impact of the 2024 UK pension buy-in payment, and including £3 million of exceptional charges associated with acquisition loan financing. At 29%, the full-year effective tax rate remains well controlled and in line with expectations. As a result, 2025 adjusted earnings per share was £0.093. The higher EBIT was offset by higher finance costs given the 2024 pension buy-in and the increased number of shares and issuance following the successful capital raise that took place in July 2025 to part-fund the Auckland Light acquisition. And finally, given the full year performance and our confidence in the group outlook, we're pleased to propose a final dividend of 2.28 cents, resulting in a full year dividend of 3.28 cents, up 5% year on year. If we now turn to look at cash flow and leverage. The group delivered strong cash performance in 2025, generating 160 million of free cash flow. This reflects the low capital intensity of the group, a lower level of exceptional cash flows and the positive contribution from Ortholite. As you can see from the chart, the working capital inflow in the year was £13 million, reflecting disciplined working capital management and a timing benefit from Ortholite. Working capital as a percentage of sales was 11% in 2025. In 2026 we expect this ratio to return to a more typical level of around 12%. Capital expenditure was 32 million as we maintained a disciplined approach to investing in growth opportunities. We expect capital expenditure to increase to the 40 to 45 million range, including the author-like business, as we continue to allocate cash in support of our organic growth strategy. The exceptionals cash flow of 24 million included cash outflows related to strategic projects, which are now complete, and were significantly lower than 2024, which included a 128 million of cash outflow associated with the UK pension scheme. Acquisition-related cash flows of £793 million mainly relate to the completion of author-like transaction at the end of October 2025. And as a result, net debt excluding lease liabilities was £815 million at the end of the year, representing a pro forma leverage of 2.2 times, in line with our previous guidance. And given the cash generative characteristics of the enlarged group, we continue to expect leverage to fall below two times by the end of 2026. And finally, moving on to modelling guidance for 2026 and beyond. Now, I won't run through all the details on this slide. However, the main focus is to provide you with more colour around the building blocks for the group cash flow in 2026 and the medium term. I've already touched on some of the guidance areas, including working capital and capital expenditure. In terms of the other areas to draw your attention to, it's worth calling out that we expect the effective tax rate to reduce slightly over the medium term, given the benefits of the authorised acquisition. In terms of authorised cost synergies and integration costs, we're maintaining the guidance we provided at the time of the acquisition announcement, and we will provide you with progress updates as the integration progresses. In addition, in the appendices to this deck, we set out some indicative 2025 numbers under the new two divisional structure to assist you with your modelling going forward. So, in summary, we've delivered a resilient performance in 2025 with strong cash generation, which sets us up well for 2026. I will now pass back to David to provide a strategic update. Thank you.

Thank you, Hannah. As I said earlier, I cannot understate the strategic progress that we've made during the year, with substantial improvements and positive momentum. The reshaping of our portfolio has included the divestment of our US yarns business in June 2025, following the closure of the Toluca Mexico facility in December 2024. These actions have removed slower growth and lower margin business from the portfolio, Notably, this action has enhanced group margins by 100 basis points, and it has enabled us to focus our investment on other businesses in the portfolio. In October, we completed the acquisition of Ortholite for an enterprise value of $770 million, which has accelerated our strategy to create a leading tier two supplier in footwear components by adding an exciting high growth and high margin business to our portfolio. Orpholite brings with it compelling revenue and cost synergy opportunities. I will share more on Orpholite later. These significant changes have facilitated the streamlining of the group into two divisions, apparel and footwear, enabling us to reduce internal complexity and better align our underlying technologies. We have continued to take share. We delivered flat organic revenue during 2025, a year in which we estimate our markets declined by a low to mid single-digit percentage. This proves again the resilience of our business model and our ability to grow faster than the market in all conditions. Our target adjacencies have delivered quickly, contributing one percentage point to group revenue growth overall in line with our guidance. Especially pleasing this year was the growth from our safety fabrics, which I will come back to later, and energy tapes. We expect our revenue in these target adjacencies to continue to scale up over time as we expand the customer base and introduce new products. We have consolidated our divisional structure into two divisions. The former performance materials businesses of personal protection and industrials, which accounted for 80% of PM sales, have been incorporated under apparel. And the telecom and energy business, 20% of PM sales under footwear. We now have two divisions with technology cohesion, scale, and strong operating margins. The apparel division is predominantly focused on textile engineering, with thread as the main product category, and two exciting growth opportunities in safety fabrics and coats digital. The footwear division is predominantly focused on polymer science, with a more diverse product portfolio and Orfolite as its largest business. This change provides increased focus and operational simplicity. Coach has a number of levers to generate organic growth in excess of 5% per annum on average through the cycle. We estimate that our underlying markets can grow on average 3% through the cycle. We will continue to outpace our markets by 100 to 200 basis points as the industry consolidates around fewer, stronger players. We have consistently gained share over the past few years, and in 2025, we have done it again in a difficult market context. Last year, we launched the initiative to grow in target organic adjacencies, and this strategy has already delivered 1% of group growth in 2025, which will continue as we scale up. So together, this is how we will deliver more than 5% growth, 200 basis points ahead of the underlying market, on average through the cycle over the medium term. Additionally, our strong cash generation provides us, as we deliver, with optionality to enter attractive inorganic adjacent markets, as we did with Ortholite. We continue to monitor companies with differentiated positions, a sustainability focus, cross-selling, and cross-synergy opportunities. This slide summarizes our key differentiators on one page. These differentiators are the drivers of our share gains. The apparel and footwear supply chains are very fragmented, but they are consolidating to cope with increase in product complexity, the increase in sustainability requirements, and the changes in sourcing countries. COATS is in an enviable position to gain market share because we have the scale and capabilities to support our customers when it matters to them. At the bottom of this chart, you will see that the strength of our customer relationships is underpinned by our people and our culture of customer centricity. We have built deep trust with our customers through a track record of delivery over the years in any market conditions. Service is king for our customers, and this translates into the operational and commercial excellence focus at Coats. Customers value our high product quality and our ability to deliver it consistently from all our manufacturing sites, including accurate color matching, which is a key differentiator. And our investments in operational agility are paying off as orders are becoming more fragmented. Our service is also reflected in the way that our commercial and technical teams support our brand customers and manufacturers every day around the world to make the right product choices and improve their manufacturing productivity. At the top of the house, you can see our three key growth enablers. Our scale and financial strength allow us to invest more than other companies in sustainability in both products and operations, innovative new solutions, and digital systems that make customer interactions more efficient and enhance supply chain transparency. This is how we win in the marketplace. Sustainability is at the heart of both codes and ortho-life strategies. Our sustainable trade portfolio grew 43% in 2025 and contributed to our share gains in the year. But we also drive sustainability in how we run our operations. In 2022, we set ambitious 2026 targets and we are well advanced in many areas. Since 2022, we have achieved a 30% reduction in our scope one and two emissions ahead of our 2026 target of 22%. We have also achieved zero waste to landfill a year early. And we now occupy 33% of our top 150 leadership roles ahead of our 30% target for 2026. a significant improvement as we continue to ensure equality for all employees. Ortholite shares the same sustainability DNA with a similar focus on increasing recycled material content, developing breakthrough innovations like Circle, or making operations more sustainable. Our target organic adjacencies represent an addressable market of approximately $2 billion, growing at more than 5% per annum. We have increased the size of this addressable market from 1.3 billion to 2 billion since last year because we have added a new product category, high visibility trims within safety fabrics. All these initiatives represent opportunities to offer new differentiated product categories to our existing customers, building on our expertise in textile engineering and polymer science. In Safety Fabrics, we're bringing innovative protective materials to workers in hazardous jobs, combining premium protection with comfort and lightweight. In Energy, we're expanding our range of highly engineered tape products that protect critical on and offshore pipeline applications. In Coach Digital, we provide to our apparel customers software products that optimize their production planning and costs. In footwear, our woven upper technology, ProWeave, delivers increased performance and more design freedom with lighter weight. In lifestyle, we're extending our structural components offering from luxury to premium handbag customers. These five adjacencies combined accounted for 45 million sales in 2025, with great momentum going into 2026. Let me give you more color on our safety fabrics initiative, which grew strongly in 2025. Safety regulation continues to tighten globally and customers are demanding products that are not only protective, but also comfortable to wear. We already sell thread for safety applications and we are now using those existing customer relationships to offer highly engineered fabrics and high visibility trims. leveraging our core know-how in textile engineering and polymer science, and our cost-competitive supply chain in Asia. In the second half of 2025, we brought to market our latest innovation in protective clothing, FlamePro Arc, which offers superior protection against electric arc hazards. What sets this technology apart? is that protection comes together with extreme lightweight and comfort, allowing workers the enhanced mobility and comfort needed to perform their roles. We also have a portfolio of high visibility trims, which can be paired with our safety fabrics, bringing life-saving identification characteristics in all types of ambient light, including no light. In the second half of 2025, we acquired this light, a small company with a lot of potential, whose glow-in-the-dark technology is already enhancing our portfolio. We combine it with our existing retro-reflective and fluorescent trims to create three layers of visibility in environments with reduced or no light. This technology has been specified for UK firefighters and has significant potential for growth in other parts of the world and other applications. The acquisition of Orfolite is an excellent example of our strategy of making inorganic investments into adjacent markets. This high quality business improves the quality of the group in terms of growth and profitability potential. Orfolite is highly complementary to our existing footwear business, creating a leading tier two supplier of footwear components. In 2025, Orfolite delivered full year profit in line with our expectations, so a good start. The complementary nature of these footwear businesses gives us the opportunity to create additional value from the acquisition in two significant ways. Firstly, we have identified 20 million of joint cost synergies, which we expect to deliver by 2028 through savings in joint footprint optimization with significant overlap in operational footprint, and from strategic procurement initiatives, operational excellence, and systems implementation. In 2026, we expect to deliver $5 million of these savings. In addition, there is significant overlap in our respective customer portfolios, route to market and leadership in sustainability. These commonalities present opportunities to accelerate growth through cross-selling, as well as the development of joint innovation initiatives. This builds on our recent track record from the multi-year integration of Detection and Renoflex footwear acquisitions in 2022. Innovation is at the core of Ortholite. The adoption of open cell phone technology will continue to increase in the core footwear market, as well as positive mix given the shift towards molded insoles. But new Ortholite products will also create additional opportunities in three adjacencies not served by Ortholite until now, expanding our addressable market in insoles. In 2026, we plan to launch the first insoles made of open cell phone technology with electrostatic discharge protection, targeted at safety issues. Ortholite's technology will provide both comfort and protection in one insole. A leading European brand is currently testing the product with positive results. Within the core premium footwear market, we are also entering two new product categories. Using the Circle technology, we have developed our first supercritical foam insoles, a solution that addresses requests from brands for a lower-density, high-rebound insole. These are aimed at the trail and road running markets and are also currently being tested by two leading brands. In parallel, we continue to assess the commercial potential and go-to-market strategy for the circle technology in mid-soles, which we expect to complete in the first half. The third adjacency is very exciting as it perfectly shows how we can leverage the combined technology capabilities of codes and ortholite to make technological breakthroughs. We have integrated in one product the comfort of ortholite insoles with the performance of coached carbon plates, and we are aiming to launch this product starting in the aftermarket. This is just the beginning of the collaboration between our innovation teams, and we are excited at the many opportunities this may create. With the significant changes to the portfolio in 2025, we have looked again at our medium term targets to ensure they remain appropriate. Based on this exercise, we have upgraded and simplified parts of our medium term framework. We have maintained our above 5% revenue CAGR target through the cycle, expecting that the portfolio quality we have now will support a more consistent delivery ahead of the market. Our growth will be a combination of market growth of 3% and our ability to continue to deliver growth ahead of the market through market share gains and target organic adjacencies. With the acquisition of the margin accretive ortholite business and the associated synergies and with increased confidence in our business potential following the 2025 margin performance of 19.8%, we have increased our group margin target range by 200 basis points to 21 to 23%. Reflecting the contribution of Ortholite, we have also increased our cumulative free cash flow target over the next five years from 750 million to 1 billion. This major step up reflects the highly cash generative nature of the group, including Ortholite. We have also improved the quality of our measure of free cash flow, which is now defined as after-exceptionals. This underlines how determined we are as a management team to drive cash generation for the benefit of shareholders. Finally, we have maintained our target of a strong double-digit EPS CAGR post-M&A or share buybacks over a medium-term timeframe. Our capital allocation strategy remains consistent. Our target debt leverage range is one to two times EBITDA. We intend to allocate capital to support our organic growth, continue to deliver a progressive dividend, and pursue disciplined M&A or share buybacks. With circa $1 billion of free cash flow generation over the next five years, we're excited about our future prospects, and committed to delivering EPS growth in excess of 10%. So to conclude, 2025 was a year of strong strategic progress with a resilient operating performance and where we grew our markets. While we expect our apparel and footwear markets to remain uncertain in 2026, we anticipate delivering organic revenue growth with easier comparatives as we move through the year. Our growth will be underpinned by our ability to outgrow the market. That said, we're mindful of the potential impact on demand and supply chains as a result of the conflict in the Middle East, which we are assessing. However, it is too early to provide an update. If conditions do prove more challenging, then the example of the past few years highlights our ability to adapt and the resilience of the group's trading. Importantly, we also expect Ortholite to significantly outperform the underlying footwear market as its technology differentiation enables it to win new customers and share. We expect to deliver further adjusted EBIT margin expansion in the year from a full year Ortholite contribution as well as from the modest organic margin improvement. Consistent with our enhanced ability to generate cash, we will have another year of strong free cash flow generation. We go into 2026 with upgraded medium-term targets, reflecting our enhanced portfolio of businesses and optimism about the future of the business. Thank you very much for listening. We're happy to take your questions now.

Charles Hall from Peel Hunt. David, could you just talk a little bit more about the adjacencies, that $2 billion total addressable market? What do you see as a realistic share of that, say, on a five-year view? How much of that would be organic? How much of that would be M&A? And how do you see the margin profile of the sales in that area?

Thank you, Charles, for the question. So we're pretty excited about the opportunity of growing into that 2 billion market. Obviously, our starting revenue last year was 45 million, with a good growth from the year before. But we see this driving at least 1% of organic growth at the group level going forward. This is based on just organic moves. I mean, most of those efforts are organic, they are obviously built into our framework. And we believe that those adjacencies can deliver margin rates in line with our group medium term targets. So obviously there's going to be a scaling up effect over the, you know, maybe the first few years, but we see the margin potential there to reach that group level ambition. So look, overall, probably the And we always look at, you know, also check M&A opportunities and obviously we're exploring these spaces but most of our focus is on organic work right now.

Got it. And then on the tariff situation, obviously we're about a year in now to tariffs. Has everything settled down in terms of supply chains and do you see any changes as a result of the sort of recent tariff changes?

I think the direction of travel is quite clear. It was already kind of clear, you know, at the middle of last year. And it's fairly settled right now. So, we don't think there's going to be a huge change in terms of where things are going relative to where they stand now. Obviously, we are monitoring the situation in the Middle East, but that's going to create probably more disruption in the near term. That disruption will require operational agility, which is one of our strengths. So, we're ready to handle that, as we've done in the past few years. And there might be a little bit of, again, shift of volumes temporarily, maybe away from the Middle East, as well going back maybe into other locations. strategically in terms of overall market direction we think is quite settled and the near term will just require agility which we are ready for.

Mark Fielding for RBC. I've got three questions but I'm going to ask the first two together and then I'll come to the other one because they sort of link. Can we talk a little bit more about Ortholite's performance so far? I mean obviously you said it was performing ahead of the market but I mean, the implication of your sort of 5% decline in footwear in the second half is the market's down high single digits. I'm just a bit more clarity on whether Ortholite is stable, growing, or still actually down a bit with the market, just better than that market, and how we think about that evolving this year. And the reason that ties to my second one was, I mean, quite sensibly, your medium-term targets, you've sort of dropped the divisional part. But historically, you were targeting 3% to 4% growth in apparel and 7% to 8% in footwear. So do we still think about that as the sort of medium-term split, or is there any changes because you slightly rejigged the divisions, et cetera?

Yeah, so I'll start with Ortholite. Ortholite substantially outperformed the market, the underlying footwear market, and also outperformed our own footwear business last year. And if you recall, that's because they have a couple of growth levers that we don't have in the rest of our business. One is technology penetration. Open cell foam insoles are increasing in adoption within the footwear market. And the other driver is their shift from flat insoles to molded insoles, which raises their average selling price. So these two drivers are helping them deliver substantial growth ahead of the underlying market. Having said this, they also saw a sequential impact from the market decline that happened in the back end of the year. As Hannah mentioned, we saw some of these stocking in the footwear market in the last couple of months of the year. Ortholite felt the same trend. But we see, as we are now obviously in Q1, we start to see kind of a sequential, some level of sequential recovery from what happened at the end of Q4. And we expect Ortholite to deliver, you know, strong growth ahead of market this year as well. Maybe to your second question, over the medium term, we still expect footwear to be a higher growth division than apparel. We think the fundamentals in there support, you know, a higher underlying market. Plus, with the addition of ForeFlight, we think that that's going to act as another incremental, I would say, accelerator to our performance within that market. So, we see that medium term still the trend.

And then just my third question, the high visibility trims business, just so I understand that a little better. I'm assuming the market structure is relatively similar to other areas in that you sell to a garment manufacturer who then includes it in the garments. And then I suppose I'm just checking, what does it mean that you are specified for UK firefighters? Does that mean they all have to have it or it's just something that could be used?

Yeah, so the high visibility trims is a product that makes a lot of sense for us and actually for those who haven't noticed Chris is wearing one of our products. So typically you have, in that particular product, that's our fabric. So it's a protective fabric. It has our thread and it has the high visibility trims. So that shows how you can go for that particular application with very complementary offerings. And by the way, as I said in my remarks, It just builds on our capabilities in textile engineering and polymer science, so it's at the core of what we know how to do. With regards to the question on this light in particular, it's now specified on all UK firefighter applications. So that's a technology, a phosphorescent technology that glows in the dark. So in a pitch dark room or when there's heavy smoke and you can't see anything, this technology will glow by itself without the need for any light input. So it's a very interesting IP, that's what attracted, what made it very attractive to us. There's about, even though it's specified as a technology, there's only about 30% of UK firefighters that have already started tendering it, because the other specification for the other 70% is more recent, but we expect that other 70% to start tendering this technology relatively soon and then kind of ramp up progressively over the next five years. So we're excited about that. We're also excited about the opportunity of this glow-in-the-dark technology to expand into other firefight applications globally outside of the UK. And as well as we see that as a technology that can be applied to other end markets, even in the core, footwear and apparel. So we look at it as an IP acquisition. It's a relatively small company now, but we think very complementary and differentiated, and it helps us scale up in a direction that makes a lot of sense to us.

Thank you. Hi, David Farrell from Jefferies. I've got a couple of questions. I'll take them one at a time. 2026 is the World Cup year in North America. If I remember back to the 2022 Capital Markets Day, there was some excitement about kind of pro-weave. Is there anything in your forecast for higher sales as a relation to the Soccer World Cup? And if so, would that come in 2026 or at the back end of 2025?

So I think there's kind of a couple of questions that I take it as one in general on the Olympics and then the other one is more about ProWave in particular. So on the Olympics, look, we have not planned for a bump or, you know, a significant one-off benefit in our sales from the Olympics. So it's not something that we're accounting for. And there's a lot of discussion out there on how much. of a bump these type of events generate in reality. Yeah, with regards to ProWeave, it's one of the adjacencies obviously that we're doing. It's a relatively niche technology that basically... applies only to kind of relatively high-end applications. We are already deployed across almost 10 different shoes. So it's already being sold on 10 different shoe models for different brands. But we continue to drive with the help of Ortholite. Actually, that's one of the cross-selling areas we're working together to increase penetration in some of the major brands. But it will always be, I mean, we know that is a little bit limited for its kind of high-end characteristics. I think I mentioned last year the interest of Progweave goes a little bit beyond in terms of, you know, longer term, how we see the upper space as an interesting space. And we see this as kind of the entry point with a very kind of high-end type of technology.

One for Hannah. If I look at the capital allocation slide, there's nothing in there for net debt reduction. Obviously, you're coming at that from going into 26 for the next five years at 2.2 times leverage. Should actually some of that capital allocation be thought about or is the reduction in leverage coming just from EBITDA?

No, absolutely. Our focus on 26 is on reducing the net debt. We see it in terms of capital allocation actually as an output of allocating capital to support organic growth. It's sort of a natural outcome, which is why it's not explicitly referenced on the slide. But absolutely, our priority is on deleveraging. And we've talked about the cash generation of the group. You've seen that evidence in 2025. And with Ortholite as well, that sort of clearly enhances the cash generation. So short answer is yes.

And final question, kind of echo Verdi. I guess over the last few years, the kind of higher selling point of that has been a real benefit driving Aperol organic revenue growth above the market. How much is left to go from that as a tailwind as you look out over the next kind of five years? And can I just talk about kind of new customer bases versus kind of replacement of existing customers?

Yeah, so our 100% recycled thread product, EcoVerde, the EcoVerde brand, I think has been a phenomenal success for the group. I mean, literally five years ago, there was no sales, and last year it was $550 million, which is about half of all the thread that we make. So it's been an impressive ramp up that has required substantial effort to develop a new supply chain, adapt our manufacturing processes, re-qualify all our color recipes. So we see that as something that is very difficult to replicate. Now, from here, where do we go? We are at about 52% now in terms of penetration. We think it can keep going still. But obviously, as you increase for 60% or beyond 60%, you're going to the very, very price sensitive pieces of the market. So we see that as a substantial differentiator difficult to replicate with some room to grow. But in terms of sustainability, what we're doing now is we are continuing to drive recycled penetration, so kind of continue to push that, but it will moderate in terms of growth rate. you won't see the 50% kind of ranges that we've seen this year. And at the same time, we've launched a big initiative on supplier decarbonization, which will complement our efforts to get to our scope three targets. So now when we go to brands, we have both the big push we have on recycled and on top of that, supplier decarbonization is another big kind of driver for their sustainability, to achieve their sustainability goals.

Thank you.

Morning, James Bayliss from Berenberg 2, if I may. On footwear customers, you noted they were managing down their inventory levels in the last few months of 2025. Can you just give us a sense of where that trend is for the first few months of 2026? Do you feel that levels are steady and in the right place now, absent any further shocks or Middle Eastern ramifications? And then my second question, on market share, your ambition seems to be to continue to grow for 1% to 2% per year over the medium term, but you're coming from quite a high base already. Are there any regulatory considerations in local markets or any territories where growth will be naturally more limited than others that we should be aware of?

Yeah, so I'll start with the latter question. So on market share, the... Yeah, we're close to 30%, right, on both divisions. We still see this as, you know, a number that continues to increase and will continue to increase. The reason is, I mean, it may look like a big number, but when you look at manufacturer by manufacturer, In general, they like to concentrate their buy on fewer, stronger players. And it's not unusual to have manufacturers, so tier ones, that buy 60%, 70% from us. So at a manufacturer level, they don't have an issue. They actually typically want to have kind of a core supplier that is at that high level. And brands also are trying to consolidate the number of tier ones. So we think those two trends, the fact that the tier ones are not necessarily trying to kind of limit, you know, the share they give to their largest supplier. And the fact that brands are trying to reduce the number of tier ones, I think, continue to play in our favor going forward. And sorry, remind me the first question was on, oh yeah, the sequential for footwear. So I mentioned a little bit earlier, We saw the last two months were a little bit tough. We obviously focused on delivering our profit and cash commitments, which we did. But we saw a substantial slowdown in the last two months of the year in foodware in particular. But we've seen a sequential improvement in Q1. So it's not back to where it should be, but we've seen a sequential improvement that makes us think that that kind of this talking that was done towards the back end of the year was already completed.

Thanks. Quick question, Andrew from Peel Hunt. I wondered if within that sort of market data information that you provided, whether there was anything more detail you could bring out of that, because I could see that Sorry, I've lost the train of thought. I'll move on to the next one. So the other one was around competition on sustainability. Obviously, five years ago at EcoVerde, it was quite sort of a greenfield area for you. Just wondered what the competition is currently within that area. I'll come back to the other one as I've remembered it.

So on sustainable threats, we see ourselves as by far the leading provider. As I mentioned before, it's actually not easy to transition to recycle polyester. It's a completely different supply chain. You need to develop, you know, suppliers that basically recycle the PET bottles, so plastic bottles. And the quality requirements are very sensitive to our manufacturing process. So you need to kind of make sure that you define very clear requirements. Otherwise, your productivity goes down quite substantially. And on top of that, you need to redo all your color recipes for all the, I mean, on average, on a given year, we deliver 200,000 different shades of color. um and doing that is a gigantic piece of work we we have systems that allow us to do that very very efficiently but we find it like a very substantial uh differentiator when you combine all those things for people to replicate to the scale that we that we've done and obviously with scale comes also negotiate negotiation ability in terms of pricing and everything so Overall, we think we've built something that is very substantial in terms of scale and difficulty to replicate, and we don't see any competitor anywhere near that.

Great. Thank you. I'll try again with the other one. So I was just wondering about whether that was a broad-based sort of market decline, or was it sort of within more sort of specific niches that either hindered you more than the market or was actually helpful sort of for your relative performance? I guess the granular detail of that market's movement, if you like.

Yeah, so at the back end of the year, the bigger drop was in footwear. Footwear is always more volatile if you go over time, just because of the average price of one of these athletic shoes is typically higher than a typical apparel garment. And for a second reason, there's fewer larger brands, so it's more concentrated around a few big brands like Nike, Adidas, etc., So typically you see a little bit of more kind of volatility when they decide to either destock or restock. So that's something we've seen in the past. We haven't seen it in a particular OEM or a particular part of the market is being quite broad-based, but that's also because we are, in footwear in particular, we have a higher percentage of exposure to those brands relative to apparel.

I'm just going to say, I think if you look at apparel and the markets decline there, we really play to our strengths in apparel in terms of our global footprint, our agility. And actually, when we look at the trends within the market share gains, a lot of those came after the tariff announcements because of our ability to react to the shifts and the agility. So it's really played to our strengths. So I think it's what I'd say about the apparel piece.

That's great. Thank you very much.

Just a couple of follow-ups on those questions. I mean, firstly, in terms of the recycled thread, I mean, there was conversation in the past about future sort of natural biodegradable threads, et cetera. I'm just curious how you think about the next generation in that. And then also possibly links, but, you know, more immediate in terms of, In Hannah's presentation, you talked about the price-mix benefit, and then in parallel, you talked specifically about mix, whereas it was price strategy and footwear. Maybe a bit more elaboration on that, and just a reminder, I mean, it is my impression that although EcoVerde is slightly higher revenue, it's not higher margin, so it's not a mix benefit, but I'm just double-checking that.

So I'll let Hannah comment on the second one. With regards to the next step in terms of recycled product, the big focus is going from PET bottle recycling to textile recycling, what is called textile to textile. So instead of just taking plastic bottles and recycling them into polyester, you would recycle garments and starting with waste from manufacturing processes. There's a lot of waste generated by the tier ones in the manufacturing process. So we're very actively working in that space. This year we've launched our first textile to textile recycled products. Today it's a more expensive technology than the PET bottle recycling. But like we did a few years ago, as we led in the industry PET bottle recycling We are now leading as well in textile to textile. It's now in the market, so we're selling. It's still small volumes because it's higher priced. But we're doing a lot of work through our sustainability innovation center in India with all the supply chain that is developing the capabilities and the scale to make this happen. So we also have innovation in that same hub around other type of products, like you're saying biodegradable or, you know, natural origin and not oil-based at all. But those we see them as more at this stage probably there will be a further step away. So I would say the next step will be going more to textile to textile. And there's quite a lot of, I would say, interest from the brands. The leading brands in sustainability, they're already starting to at least look at that textile-to-textile as the next step.

And I think your question was about apparel mix and what's driving that. So it's actually a combination of both premium products, but with premium products, they are more likely to demand recycled product offerings. So it's a combination of the two, which is where apparel have benefited. So the correlation with the margins of a recycled thread, because they're going into premium products, they are typically higher margin, if that makes sense.

Thank you.

Any other question? Okay. So if there's no other question, well, you see basically we deliver strong 2025 and we enter 2026 with good momentum. Thank you very much for joining us today. We wrap up the call here.

Thank you.