Coats Group plc

Hello everyone and thank you for joining COATS 2026 half-year results. My name is Claire and I'll be coordinating your call today. During the presentation, you can register a question by pressing star followed by 1 on your telephone keypad. If you change your mind, please press star followed by 2 on your telephone keypad. I would now like to hand over to David Paha, Chief Executive Officer, to begin. Please go ahead.

Good morning everybody. I'm delighted to welcome you to today's presentation covering our first half results. I have with me today our Group CFO, Hannah Nichols. Let's move to the first slide. We'll start with the first half business highlights. Hannah will then share our financial results, and following this, I will give an update on our strategic progress and address the outlook. After the presentation, we will take questions. Let's look at the highlights for each one. We have delivered 1% organic revenue growth in the period where markets declined by mid-single digit, demonstrating again that we can consistently outperform our end markets. We have maintained a strong group margin of just below 20%, even after making significant investments in technology and growth initiatives. I am particularly pleased with the substantial share gains in apparel, which prove the strength of our value proposition and differentiators. Our footwear division is picking up momentum and we saw good organic growth improvements in Q2. We continue to execute on our strategy to become the leading multi-product tier 2 partner of our footwear customers with an enviable technology portfolio and global scale. Finally, we remain very excited with the scale and capabilities that Ortholite has added to the group and our confidence in the value creation from this acquisition has increased. We are on track to deliver the planned cost synergies and our work post acquisition has identified $40 million of annual sales synergies which were not included in our acquisition case. With that, I will hand over to Hannah to take you through our financial performance.

Good morning, everyone. Before I start, it's worth noting that we are now reporting under the new two divisional structure as previously announced. The group has delivered another period of market outperformance in the first half, set against a challenging macroeconomic backdrop with continued tariff uncertainty and the stop-start Middle East conflict since the end of February. Revenue was 837 million, up 1% on an organic constant exchange rate basis, outperforming our apparel and footwear end markets, which were impacted by customers managing inventory levels tightly in response to the uncertain macro outlook. EBIT was 166 million, 2% lower on an organic basis, reflecting planned strategic investments made in growth and technology initiatives. EBIT margin was maintained at 19.8% including a 40 basis point margin accretion benefit from Ortholite. From February we promptly enacted our tried and tested operational and commercial playbook in response to the Middle East conflict. This has enabled us to successfully manage the associated inflationary cost pressures, contain our costs and agree price adjustments with our customers while supporting them with agility. Earnings per share was in line with expectations at 4.4 cents, 6% lower than the same period last year, with higher EBIT offset by higher interest charges and the timing of the share placing in July 2025. The Group continues to be cash generative and delivered 30 million of free cash flow pre-dividends in the first half, reflecting our normal seasonality. As expected, net debt ended the period at 842 million, with leverage of 2.3 times and we remain fully on track to deliver leverage to 2 times or below by the end of the year. If we now turn to the divisional performance starting with the apparel division. At £486 million revenue was up 1% on an organic CER basis. This was a very strong performance, with the division continuing to gain significant market share across the portfolio, outperforming the apparel threat markets, which we estimate were down mid-single digit, impacted by customer caution, leading to low inventory levels. In particular, we delivered strong growth in the China domestic market, where agility is important, and in automotive threats, with a number of new customer wins. This was achieved through a focus on delivery and service and supported by our global manufacturing and technology capabilities. In addition, our position as the clear market leader in the supply of 100% recycled thread products has continued to drive growth. The division delivered an EBIT margin of 18.9%, 50 basis points lower than H1 2025. The lower margin reflects targeted investment in technology and growth initiatives, including our COATS digital business. This result was achieved through excellent procurement and cost management against the backdrop of significant cost volatility as a result of the Middle East conflict. Our customer pricing continues to be disciplined, with price increases implemented during the period. We now turn to footwear. Footwear revenue was flat on an organic basis, increasing on a reported basis to £351 million as a result of the acquisition of Ortholite at the end of October 2025. The step up in growth in the second quarter was driven by an acceleration in growth initiatives alongside softer prior period comparators. The division gained market share in both footwear thread and structural components against the market which we estimate was down mid single digit. In addition, we saw continued strong growth in composite energy tapes, one of our target adjacencies, with increased customer traction and new products coming to market. Ortholite revenue was below H1 2025 level on a pro forma basis due to strong prior period comparators, the challenging market backdrop and some temporary capacity challenges in Indonesia, which we have taken action to address and are confident will be successful. Secured new platform wins and product launches combined with customer price increases support a return to growth in the second half EBIT decreased by 2% on an organic basis to 74 million with EBIT margin increasing by 30 basis points to 21.1% The margin increase is attributable to a 70 basis points for creation benefit from Ortholite and operational efficiency and cost actions partly offset by investment in people and capabilities to support medium-term accelerated growth. We now turn to the income statements, with certain areas worth highlighting. Exceptional items totaled £3 million, comprising £7 million to support the delivery of authorised acquisition synergies and divisional structure change, partly offset by net income for property sales relating to prior year strategic projects. Acquisition-related items of $28 million related solely to acquisition intangibles, the increase attributable to the acquisition of ortholites. Finance costs were $32 million, $14 million higher than the same period last year, mainly due to the incremental interest costs associated with the purchase of ortholites. And at 29%, the half-year effective tax rate remained well-controlled and in line with expectations. and we continue to expect the ETR to reduce a little over the next three years. As a result, earnings per share was 4.4 cents, 6% lower than the same period last year. The increased H1 2026 EBIT was offset by higher interest charges related to acquisition funding and the increased number of shares and issuance following the capital raise that took place in July 2025 to part fund the Autolite acquisition. And finally, given the robust half-year performance and our confidence in the full-year and medium-term outlook, we are pleased to announce an interim dividend of $1.05 at 5% compared to H1 2025. If we now turn to look at cash flow and leverage. As expected, the Group delivered a good cash performance in the first half, with an overall free cash flow prior to shareholder distributions an M&A of $30 million, including a positive net contribution from Ortholite. As you can see from the chart, the working capital outflow was $35 million, reflecting expected seasonality, and during the period working capital was carefully managed with a particular focus on tight inventory management without compromising service levels during a period of market uncertainty and inflationary pressures. Capital expenditure was $16 million as we maintained a disciplined approach to investing in growth opportunities. As expected, interest paid was higher than the same period last year, mainly due to higher interest costs associated with the author-like acquisition. Under $43 million of tax outflows included a $6 million one-off settlement payment relating to the successful negotiation of an advanced pricing agreement. Net debt was $842 million representing a pro forma leverage of 2.3 times in line with our expectations. Given the cash generative characteristics and the expected working capital unwind in the second half, we remain fully on track to deliver leverage of two times or below by the end of 2026. Our balance sheet remains in a strong position During the period, we successfully refinanced our 300 million bridge and our 150 million term facilities at competitive rates. Both were put in place last year to fund the authorised acquisition. And finally, moving on to modelling guidance. Now, as a reminder, the main focus of this guidance is to provide you with the key building blocks for the group cash flow in 2026 and the medium term. The full year and medium term guidance remains unchanged and can be found in the appendix of this presentation. On this slide, I provided some additional colour around 2026 and in particular the H1 to H2 profit in Cashbridge. As you can see from the chart on the left, we have a high level of confidence in delivering an improvement in EBIT in the second half. This assumes modest end market declines. and is based on our ability to deliver ongoing share gains and clear visibility on new product and program launches. We've already taken pricing actions, which will benefit the second half, offsetting raw material inflation with supply now largely secured. In addition, we've taken incremental cost actions, which we expect will deliver around $15 million of benefit in the second half, including synergies from ortholites. As a result, we expect to deliver profit in line with market expectations and good year-on-year earnings growth. In terms of cash, alongside an increase in EBITDA, we expect to see working capital significantly unwind in the second half, in line with typical seasonality and our continued focus on efficient working capital management. with working capital as a percentage of sales running at around 12% for the full year in line with historic levels. Our guidance for FY2026 capital expenditure remains unchanged at 40 to 45 million plus 5 million relating to the ortholite capacity expansion in our coat sites which will start production in Q1 next year. In terms of ortholite cost synergies and integration costs We are maintaining the guidance that we provided at the time of the acquisition announcement and David will cover a wider update on progress shortly. So, in summary, we've delivered a resilient performance in the first half and have confidence in our ability to deliver a strong cash and profit performance in 2026 in line with market expectations. I'll now pass back to David to provide a strategic update.