Coats Group: Positive Signals Of Progress
Edison | Jun 14, 2017 02:38AM ET
Following the latest quarterly review, Coats Group (LON:COA) is to enter the FTSE 250 Index with effect from 19 June. As well as signifying a strong share price performance over the last year, this concludes the company’s transition phase to a strong independent entity in our view. Valuation metrics are on a more conventional footing now and as the market’s understanding of the underlying business model increases we sense that it is starting to anticipate faster growth rates.
Moving into the next phase of development
FY16 can be seen as a watershed year for Coats, as it emerged from legacy pension structures, tidied up non-core exposures and further developed its portfolio of products and services while also delivering good profit growth. A new executive management team is also in place, bringing fresh impetus to an unchanged core strategy for the next phase of corporate development. Although we do not feel that group development was necessarily impinged by previous DB pension fund uncertainty, greater clarity following the pensions settlements is a positive and must, other things being equal, raise scope for more expansive investment should the opportunities arise. A resolution to the Staveley scheme position is still pending, though we do not expect this to change the current group picture materially.
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