Coats Group (LON:COA) reported what management described as a “resilient” performance in financial year 2025, highlighting two major portfolio actions, flat organic revenue in weaker end markets, and a step-change in cash generation. Chief executive David reported that FY2025 was his first full year in the role and said the group made “significant evolution” through the acquisition of OrthoLite and the divestment of the U.S. Yarns business, while continuing to gain market share in apparel and footwear.
FY2025 headline results and cash generation
Chief financial officer Hannah said the Americas Yarns business was treated as a discontinued operation and excluded from the numbers presented. Group revenue was $1.46 billion, flat on an organic constant exchange rate (CER) basis, which management said “comfortably” outperformed the group’s core apparel and footwear end markets, estimated to be down low- to mid-single digits for the year.
Free cash flow before dividends reached a record $160 million. David said this exceeded the company’s total free cash flow delivered over the previous 10 years combined, attributing the improvement to the end of U.K. pension contributions and the completion of large restructuring activities. Hannah added that FY2025 free cash flow also benefited from “timing benefits” linked to OrthoLite and lower exceptional cash outflows.
Year-end net debt excluding lease liabilities was $815 million, with pro forma leverage of 2.2x following the OrthoLite deal. Management expects leverage to fall below 2.0x by the end of 2026, supported by cash generation, and said deleveraging is a priority in 2026.
Divisional performance: Apparel, Footwear, and Performance Materials
In Apparel, revenue was $769 million, up 1% on an organic CER basis. Management said apparel market conditions softened after U.S. tariff changes in April and remained challenging, but the division gained share and outperformed core apparel thread markets estimated to be down around 3%. Favorable mix included growth in premium thread and recycled thread products, with “good growth” in China’s domestic market. Apparel EBIT increased 4% on a CER basis to $156 million, and margin rose 60 basis points to 20.2%.
Footwear revenue was $440 million, down 2% on an organic CER basis. Hannah said the division experienced growth until the end of April, followed by more cautious customer ordering and further inventory reduction late in the year amid an uncertain 2026 outlook. The company estimated footwear end markets were down around 4%–5% in FY2025, while Coats’ organic market share in footwear increased to around 30%. Footwear EBIT was $105 million, flat on an organic CER basis, and margin increased 40 basis points to 23.9%, supported by pricing and cost control as well as footprint consolidation and a shift in manufacturing toward Indonesia.
Performance Materials revenue was $256 million, flat on an organic CER basis, with a return to 2% growth in the second half. Industrial revenue fell 1%, with automotive thread share gains partly offset by softness elsewhere. Management pointed to strong performance in two “organic adjacency” areas: safety fabrics (up 40%) and composite tapes for the energy market (up 21%). Performance Materials EBIT rose 10% on an organic basis to $29 million, with margin increasing to 11.3% and Q4 exit rate margins at 11.8%.
Management also noted that exiting the non-core U.S. Yarns business in June 2025 improved portfolio quality, and Hannah said divisional margin increased 390 basis points when including Americas Yarns in the 2024 comparator. The company completed a small acquisition of VizLite in October 2025 to “accelerate” its safety fabrics strategy.
Portfolio actions and new two-division structure
David said the divestment of the U.S. Yarns business removed a slower-growth, lower-margin business and enhanced group margins by about 100 basis points, while freeing resources for investment elsewhere. In October 2025, Coats completed the acquisition of OrthoLite for an enterprise value of $770 million, which David described as accelerating the strategy to create a leading Tier 2 footwear components supplier by adding a “high growth and high margin” business.
As a result of the portfolio reshaping, the group has moved to a two-division structure:
- Apparel: predominantly textile engineering, with thread plus growth opportunities including safety fabrics and Coats Digital. The former Performance Materials personal protection and industrials businesses (about 80% of PM sales) move into Apparel.
- Footwear: predominantly polymer science, with a more diverse product portfolio and OrthoLite as its largest business. The former telecom and energy business (about 20% of PM sales) moves into Footwear.
Hannah said OrthoLite contributed $11 million of operating profit in the final two months of FY2025 and that its FY2025 full-year profit performance was in line with expectations, with above-market revenue growth and high cash generation.
Adjacencies, sustainability, and OrthoLite synergy plans
Management said “target organic adjacencies” contributed 1 percentage point to group growth in FY2025, in line with guidance. David put combined adjacency sales at $45 million in 2025 and described five focus areas: safety fabrics, energy tapes, Coats Digital, ProWeave woven uppers, and lifestyle structural components.
In Q&A, David said the company expects adjacencies to drive at least 1% of organic growth at the group level going forward, primarily through organic initiatives, and that margins can reach levels in line with the group’s medium-term targets as the businesses scale. Management also expanded its adjacency addressable market estimate from $1.3 billion to $2.0 billion by adding high visibility trims within safety fabrics.
On sustainability, David said sustainable thread portfolio sales grew 43% in FY2025. He also cited progress since 2022, including a 30% reduction in Scope 1 and 2 emissions (ahead of a 2026 target of 22%), achieving zero waste to landfill a year early, and women holding 33% of the top 150 leadership roles (ahead of a 30% target for 2026). In response to questions about EcoVerde, David said the 100% recycled thread brand reached about $550 million in sales, representing around half of all thread produced, and that the next step is moving from PET bottle recycling toward textile-to-textile recycling, with the first such products launched in 2025.
On OrthoLite, David said the business “substantially outperformed” the underlying footwear market and Coats’ existing footwear business in 2025, supported by increasing adoption of open-cell foam insoles and mix shift toward molded insoles. He acknowledged OrthoLite also saw a sequential impact from the market decline late in the year but said early 2026 showed sequential recovery. Management reiterated identified $20 million of joint cost synergies expected by 2028, with $5 million expected in 2026, driven by footprint optimization, procurement initiatives, operational excellence, and systems implementation.
Updated medium-term targets and 2026 outlook
Coats updated its medium-term framework following the portfolio changes. Management maintained a target of above 5% revenue CAGR through the cycle, with underlying market growth estimated at 3% and additional uplift from share gains and adjacencies. The company increased its group margin target range by 200 basis points to 21%–23%, citing OrthoLite’s margin accretion, expected synergies, and increased confidence after achieving a 19.8% margin in 2025.
The group also increased its cumulative free cash flow target over the next five years from $750 million to $1.0 billion, and refined its free cash flow definition to be “after exceptionals.” It maintained a target for strong double-digit EPS CAGR over the medium term, post M&A or buybacks, and reiterated a target net leverage range of 1x to 2x EBITDA.
For 2026, management said apparel and footwear markets remain uncertain but expects organic revenue growth with easier comparatives as the year progresses. The company also expects further adjusted EBIT margin expansion, helped by a full-year OrthoLite contribution and modest organic margin improvement, alongside another year of strong free cash flow generation. David added the group is monitoring potential impacts from conflict in the Middle East on demand and supply chains, but said it was too early to provide an update.
Reflecting FY2025 performance and management’s outlook, the company proposed a final dividend of $0.0228, taking the full-year dividend to $0.0328, up 5% year-on-year.
About Coats Group (LON:COA)
Coats is a world-leading Tier 2 manufacturer and trusted partner for the apparel and footwear industries. We deliver essential materials, components, and software solutions that help our customers grow, compete and win.
With over 250 years of industry expertise, we’re shaping the future of the apparel and footwear supply chain through insight-led innovation, impactful sustainability practices, and digital technologies that unlock better product quality, efficiency and performance.
Headquartered in the UK, Coats is a FTSE 250 company and a constituent of the FTSE4Good Index.
