Archived article
Please note that tax, investment, pension and ISA rules can change and the information and any views contained in this article may now be inaccurate.
Sale of crafts arm will leave Coats as a higher margin business

AJ Bell is an easy to use, award-winning platform Open an account
We've accounts to suit every investing need, and free guides and special offers to help you get the most from them.
You can get a few handy suggestions, or even get our experts to do the hard work for you – by picking one of our simple investment ideas.
All the resources you need to choose your shares, from market data to the latest investment news and analysis.
Funds offer an easier way to build your portfolio – we’ve got everything you need to choose the right one.
Starting to save for a pension, approaching retirement, or after an explainer on pension jargon? We can help.
Please note that tax, investment, pension and ISA rules can change and the information and any views contained in this article may now be inaccurate.
Sometimes price isn’t everything when selling assets. That is certainly the case with threads expert Coats (COA) whose disposal of its North America Crafts business for a mere $37m (or 0.2 times revenue) may initially look a poor deal.
In reality selling the business for any price is strategically sound. It has been the only real problem area of the group and its sale to Spinrite leaves a more focused group firing on all cylinders.
Canaccord Genuity analyst Caspar Trenchard says the crafts business made 4% net margins versus 13.5% from Coats’ industrial threads operations.
By removing crafts from the equation, group net margins expand from 12.3% to 13.5% and EBITDA (earnings before interest, tax, depreciation and amortisation) margins expand from 14.3% to 16.5%.
‘Crafts was substantially diluting group returns,’ says Trenchard. ‘As a progressively higher margin business emerges investors can expect an expansion of the rating for the shares. Crafts has been a perennial distraction and its sale is, in our view, transformational.’
SHARES SAYS: We flagged the crafts arm was the weak part of the business in our original article on Coats. Removing this operation from the business effectively removes one of the key risks to the investment case. Keep buying
These articles are provided by Shares magazine which is published by AJ Bell Media, a part of AJ Bell. Shares is not written by AJ Bell.
Shares is provided for your general information and use and is not a personal recommendation to invest. It is not intended to be relied upon by you in making or not making any investment decisions. The investments referred to in these articles will not be suitable for all investors. If in doubt please seek appropriate independent financial advice.
Investors acting on the information in these articles do so at their own risk and AJ Bell Media and its staff do not accept liability for losses suffered by investors as a result of their investment decisions.
The value of your investments can go down as well as up and you may get back less than you originally invested. We don't offer advice, so it's important you understand the risks, if you're unsure please consult a suitably qualified financial adviser. Tax treatment depends on your individual circumstances and rules may change. Past performance is not a guide to future performance and some investments need to be held for the long term.
Our website uses cookies to give you a better browsing experience.
You can choose to accept all cookies, or control which we use by clicking 'Manage cookies'. To learn more, read our cookie policy.