Shares in sewing thread maker Coats Group PLC (LON:COA) jumped as it raised its 2018 profit forecast, boosted by the acquisition of US-based yarns business Patrick Yarn Mill.
The company said 2018 adjusted operating profits are expected to be “slightly ahead” of previous estimates as it reported growth in the year ended December 31, 2017.
Shares rose 9.5% to 81.80p in morning trade.
“We expect 2018 adjusted operating profits to benefit from the incremental full year contribution from the Patrick Yarn Mill acquisition, and the anticipated first year benefits from the Connecting for Growth programme,” said chief executive Rajiv Sharma.
Coats bought Patrick Yarn Mill, which specialises in cut-resistant and flame retardant yarns, in December 2017 for US$21mln.
It has also been carrying out its two-year ‘Connecting for Growth’ transformation programme, which aims to simplify operations and digitise the business in response to the shift towards online retail.
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The group expects the programme to deliver operating cost savings of US$15mln by 2020.
Full year profits and revenues rise
For 2017, Coats reported adjusted operating profit of US$174mln, a 10% increase on a reported basis or 9% rise on an organic basis.
Revenue rose to US$1.5bn from US$1.4bn, representing organic growth of 3% or a 4% increase on a reported basis.
“Momentum in industrial continued throughout the year in key apparel and footwear markets, where we continued to take share, and we saw double-digit growth in hi-tech end-uses in performance materials,” Sharma said.
“This was partly offset by North America crafts where market conditions remained weak.
“In an environment of rising input costs, we were able to grow our operating margins, through realising price increases, productivity and procurement gains, as well as tight control of our cost base.”
Coats raises dividend
Coats hiked its full year dividend by 15% to 1.44 cents following the strong 2017 performance.
The company moved to a net debt position of US$241mln from net cash of US$78mln in 2016 due to deficit recovery payments made into three UK defined benefit schemes in the first half following a settlement with trustees.
Following the settlement, the pension deficit fell to US$163mln at the end of 2017 from US$627mln at the end of 2016.