UK-based Coats Group plc, which recently acquired OrthoLite, reported that company revenue in the four-month period from July 1 through October 31 declined by 1 percent, with declines of 2 percent in its Apparel and 4 percent in its Footwear segments offsetting growth in its Performance Materials segment.
The company reported that OrthoLite continues to “perform well.”
Coats Group’s 1 percent decline marks a slight slowdown from the company’s first-half results, where it reported sales ran flat and gained 2 percent on a currency-neutral basis.
Coats stated in its update, “Market conditions in the period remained subdued, with continued caution in customer ordering patterns as a result of sustained macroeconomic and tariff uncertainty… We saw encouraging growth in target organic adjacencies as well as further outperformance in core markets. We have also successfully managed pricing pressures and flexed our cost base in the period.”
Operating profit in the fourth-month period was at a similar level to the same period last year, with margins consistent with the first half of 2025 and improving from the prior year, aligning with Coats Group’s medium-term margin target of 19 percent to 21 percent.
Cash generation has “remained strong,” Coats said.
Coats also stated that, as anticipated, “leverage increased due to the completion of the OrthoLite acquisition at the end of October.” The company expects year-end leverage to be c.2.2 times, consistent with its previous guidance, and for leverage to fall below 2 times by the end of 2026, given its expected sustained improvement in cash generation.
Divisional Performance
Apparel’s 2 percent decline was reflected in “challenging end markets. A focus on excellent service and operational agility enabled us to outperform and win share with major brands alongside good growth in the China domestic market.”
Coats Group’s apparel division maintained operating margins at c.20 percent during the period, reflecting pricing discipline and a favorable mix supported by its thread offerings.
Footwear revenue was 4 percent lower than the prior year period, stabilizing at similar run rates to Q2, which Coats said was “a reflection of cautious customer ordering patterns given the ongoing market uncertainty.” As the company had forecasted, the operating margin increased during the period, driven by operational initiatives implemented over the past year and an effective pricing strategy. As a result, operating profit was aligned with the same period last year.
Coats Group stated, prior to the completion of the Ortholite acquisition, that it “has continued to perform well, delivering strong revenue growth and maintaining high operating margins. We remain excited about the potential of this high-quality, margin accretive business, which will enable us to expand into the growing open cell insole segment of the footwear market.”
Performance Materials continued to deliver an improving performance, returning to growth in the period, with revenue increasing by 4 percent compared to the prior year. The gains were driven by accelerated growth in two target adjacencies, safety fabrics and energy tapes, alongside market share gains in automotive thread, which offset softness in Telecom end markets. Operating margins for the period were significantly ahead of those of the prior year, reflecting the benefits of operational improvements across the division.
As previously reported, Coats, on October 30, when it completed its Ortholite acquisition, streamlined its organizational structure into two divisions: Apparel and Footwear, reflecting the transformation of the company’s profile following its exit from the North American Yarns business and the acquisition of OrthoLite. Coats said in its latest update, “This change reduces internal complexity and aligns the divisions more closely with the underlying textile engineering and polymer science technologies. Coats’ external reporting will align to this new structure with effect from the next financial year, the year ending December 2026.”
Outlook
Coats said, “Given the resilient performance year to date, the Group’s full year outlook remains unchanged, with trading performance in line with market expectations. The acquisition of market-leading OrthoLite and the portfolio rationalization actions now taken have improved the quality of the Group. As a result, we are on track to continue outperforming the underlying market growth, supported by expansion into target adjacencies, and deliver strong cash generation and further margin progression in the medium term. Our confidence is underpinned by our unrivalled global footprint, proprietary technology and sustainability-led innovation.
Coats Group will release its full-year 2025 results on March 5, 2026.
Image courtesy Coats Group
