Coats Group Aktie

Okay. Good morning, everybody. I'm delighted to welcome you to today's presentation covering our financial year 2025. Let's move to the first slide. This is today's agenda.

First, I'm going to take you through the highlights of the year. Hannah will then present our financial performance. And after that, I will give a strategic update, including our new divisional structure, our growth drivers and our updated medium-term targets. After the summary and outlook, we'll take your questions.

So let's start with the highlights of the year. 2025 has been my first full year as Chief Executive of the group, and it has been a year of significant evolution for the business with 2 significant M&A transactions, resilient trading in a challenging market and great progress in our growth initiatives. As a result, today, we announced renewed and more ambitious medium-term targets.

In 2025, we have acquired OrthoLite and divested our U.S. Yarns business. We have demonstrated once more our ability to gain market share, reflecting the benefits of differentiators that our competitors cannot match. And our new target, organic adjacencies have added 1 percentage point to growth at group level.

Finally, we have delivered a record level of free cash flow of $160 million. For reference, this is more than the free cash flow that we have delivered in the past 10 years combined, and it reflects the new and improved cash generation profile of the group following the end of U.K. pension contributions and the end of large restructuring activities.

With that, I will hand over to Hannah to take you through our financial performance.

Thank you, David, and good morning, everyone. Now before I start, it's worth noting that the Americas Yarns business has been treated as a discontinued operation and is therefore excluded from the numbers presented here.

I'm pleased to report that the group has delivered a resilient performance in 2025 set against a backdrop of macroeconomic and tariff uncertainty from the second quarter onwards.

Revenue was $1.46 billion, flat on an organic constant exchange rate basis, comfortably outperforming our core apparel and footwear end markets, which we estimate were down low to mid-single digit for the full year. EBIT was $290 million, in line with expectations, and up 3% on an organic CER basis.

Pleasingly, group operating margin increased by 80 basis points to 19.8%. And in the second half, we matched our strong first half performance organically despite challenging markets, showcasing the resilience of the group.

Earnings per share was in line with expectations at $0.093 with higher EBIT offset by higher pension-related interest charges and the timing of the share placing in July 2025. The group generated $160 million of free cash flow pre-dividends, reflecting the powerful dynamics of high margins and low capital intensity and timing benefits from the OrthoLite acquisition.

In line with our guidance, year-end leverage increased to 2.2x following the OrthoLite acquisition, and we expect leverage to fall below 2x by the end of 2026, underpinned by the cash-generative characteristics of the enlarged group.

So turning to our margin performance. The group delivered strong margin expansion in 2025 with EBIT margin increasing by 80 basis points to 19.8%. As you can see from the chart on this slide, the margin improvement reflects pricing discipline as we successfully managed pricing pressures during the year and mix benefits with a focus on premium and sustainable product lines.

In addition, our teams continue to focus on driving productivity, including procurement savings and operational improvement actions. Margins also benefited from strategic project savings, including the footwear division manufacturing site consolidation and the move of operations to Indonesia. In line with expectations, OrthoLite contributed to $11 million of operating profit in the last 2 months of the year.

If we now turn to the divisional performance, starting with the Apparel division. At $769 million, revenue was up 1% on a CER basis. This was a strong performance in a year that started with market growth momentum but softened following the U.S. tariff changes in April with market conditions remaining challenging through the rest of the year.

The division continued to gain market share, outperforming the core apparel threads markets, which we estimate were down around 3% in the year. This was achieved through a focus on delivery and service and supported by our flexible global manufacturing capabilities.

The division benefited from favorable mix with year-on-year growth in premium thread sales and recycled thread products. In addition, there was good growth in the China domestic market, which requires high levels of operational agility to meet demanding customer lead times.

EBIT increased by 4% on a CER basis to $156 million and EBIT margin increased by 60 basis points to 20.2%. The margin expansion reflects the benefits of the favorable product mix and pricing discipline alongside prudent cost control and an ongoing focus on productivity gains.

If we turn to Footwear, at $440 million, revenue was 2% lower than 2025 on an organic CER basis. This reflected a period of growth until the end of April, followed by customers taking a cautious approach to ordering. And in the last few months of the year, we saw brands managing down inventory further in response to the uncertain 2026 outlook. As such, we estimate our core footwear end markets were down around 4% to 5% for the full year.

Despite this challenging backdrop, the division outperformed with estimated organic market share growing to around 30%. The division also successfully maintained pricing despite downward pressures.

EBIT was $105 million, flat on an organic CER basis compared to the prior year. The division delivered a strong EBIT margin of 23.9%, an increase of 40 basis points, reflecting pricing strategy and prudent cost control measures alongside operational actions taken in the past year, including footprint consolidation in Europe and the rebalancing of the division's manufacturing towards Indonesia.

The acquisition of OrthoLite was completed at the end of October 2025, and 2 months trading are included in the 2025 divisional results. The 2025 full year profit performance for OrthoLite was in line with our expectations with above-market revenue growth and high levels of cash generation.

Turning to Performance Materials. Now this is the last time that we will talk about Performance Materials in this format given the move to the 2 divisional structure. However, we are pleased with the improvements made in 2025.

Revenue in the year was $256 million, flat on an organic CER basis, reflecting a return to growth in the second half of the year of 2%. Industrial revenue was 1% lower than prior year, with share gains in automotive thread, partly offsetting softness in other industrial end markets.

The division also saw strong demand in 2 organic adjacency target areas: Safety Fabrics, which delivered 40% revenue growth in the year; and composite tapes for the energy market, which grew 21% in the full year after a particularly strong performance in the second half.

As expected, EBIT was $29 million, an increase of 10% on an organic basis, with margin increasing to 11.3%. The organic margin improvement reflects the benefits of operational actions and the stronger second half trading with Q4 exit rate margins at 11.8%, approaching the bottom end of the medium-term targets set out in March 2025.

In the second quarter, we exited from the noncore U.S. Yarns business, improving the quality of the portfolio with the divisional margin increasing 390 basis points, including Americas Yarns results in the 2024 comparator. In addition, the small acquisition of VizLite was completed in October 2025, accelerating our Safety Fabrics growth strategy.

If we turn to the income statement, there are certain areas worth highlighting. At $2 million, exceptional items significantly reduced from 2024 with previous strategic projects now complete. Acquisition-related items included $27 million for the amortization of acquisition intangibles and $20 million for acquisition transaction costs, mainly relating to the OrthoLite acquisition.

Finance costs were $41 million, higher year-on-year due to the impact of the 2024 U.K. pension buy-in payment and including $3 million of exceptional charges associated with acquisition loan financing. At 29%, the full year effective tax rate remains well controlled and in line with expectations.

As a result, 2025 adjusted earnings per share was $0.093. The higher EBIT was offset by higher finance costs given the 2024 pension buy-in and the increased number of shares in issuance following the successful capital raise that took place in July 2025 to part fund the OrthoLite acquisition.

And finally, given the full year performance and our confidence in the group outlook, we're pleased to propose a final dividend of $0.0228, resulting in a full year dividend of $0.0328, up 5% year-on-year.

If we now turn to look at cash flow and leverage. The group delivered strong cash performance in 2025, generating $160 million of free cash flow. This reflects the low capital intensity of the group, a lower level of exceptional cash flows and the positive contribution from OrthoLite.

As you can see from the chart, the working capital inflow in the year was $13 million, reflecting disciplined working capital management and a timing benefit from OrthoLite. Working capital as a percentage of sales was 11% in 2025. In 2026, we expect this ratio to return to a more typical level of around 12%.

Capital expenditure was $32 million as we maintained a disciplined approach to investing in growth opportunities. We expect capital expenditure to increase to the $40 million to $45 million range, including the OrthoLite business, as we continue to allocate cash in support of our organic growth strategy.

The exceptionals cash flow of $24 million included cash outflows related to strategic projects, which are now complete, and was significantly lower than 2024, which included $128 million of cash outflow associated with the U.K. pension scheme. Acquisition-related cash flows of $793 million, mainly relate to the completion of OrthoLite transaction at the end of October 2025.

And as a result, net debt, excluding lease liabilities, was $815 million at the end of the year, representing a pro forma leverage of 2.2x, in line with our previous guidance. And given the cash generative characteristics of the enlarged group, we continue to expect leverage to fall below 2x by the end of 2026.

And finally, moving on to modeling guidance for 2026 and beyond. Now I won't run through all the details on this slide. However, the main focus is to provide you with more color around the building blocks for the group cash flow in 2026 and the medium term.

I've already touched on some of the guidance areas, including working capital and capital expenditure. In terms of the other areas to draw your attention to, it's worth calling out that we expect the effective tax rate to reduce slightly over the medium term given the benefits of the OrthoLite acquisition.

In terms of OrthoLite cost synergies and integration costs, we're maintaining the guidance we provided at the time of the acquisition announcement, and we will provide you with progress updates as the integration progresses. In addition, in the appendices to this deck, we set out some indicative 2025 numbers under the new 2 divisional structure to assist you with your modeling going forward.

So in summary, we've delivered a resilient performance in 2025 with strong cash generation, which sets us up well for 2026. I will now pass back to David to provide a strategic update. Thank you.

Thank you, Hannah. As I said earlier, I cannot understate the strategic progress that we've made during the year with substantial improvements and positive momentum. The reshaping of our portfolio has included the divestment of our U.S. Yarns business in June 2025, following the closure of the Toluca, Mexico facility in December 2024.

These actions have removed slower growth and lower margin business from the portfolio. Notably, this action has enhanced group margins by 100 basis points, and it has enabled us to focus our investment on other businesses in the portfolio.

In October, we completed the acquisition of OrthoLite for an enterprise value of $770 million, which has accelerated our strategy to create a leading Tier 2 supplier in footwear components by adding an exciting, high-growth and high-margin business to our portfolio. OrthoLite brings with it compelling revenue and cost synergy opportunities. I will share more on OrthoLite later.

These significant changes have facilitated the streamlining of the group into 2 divisions, Apparel and Footwear, enabling us to reduce internal complexity and better align our underlying technologies. We have continued to take share.

We delivered flat organic revenue during 2025, a year in which we estimate our markets declined by a low to mid-single-digit percentage. This proves again the resilience of our business model and our ability to grow faster than the market in all conditions. Our target adjacencies have delivered quickly, contributing 1 percentage point to group revenue growth overall, in line with our guidance.

Especially pleasing this year was the growth from our Safety Fabrics, which I will come back to later, and energy tapes. We expect our revenue in these target adjacencies to continue to scale up over time as we expand the customer base and introduce new products.

We have consolidated our divisional structure into 2 divisions. The former Performance Materials businesses of Personal Protection and Industrials, which accounted for 80% of PM sales, have been incorporated under Apparel. And the Telecom & Energy business, 20% of PM sales, under Footwear. We now have 2 divisions with technology cohesion, scale and strong operating margins.

The Apparel division is predominantly focused on textile engineering with thread as the main product category and 2 exciting growth opportunities in Safety Fabrics and Coats Digital. The Footwear division is predominantly focused on polymer science with a more diverse product portfolio and OrthoLite as its largest business. This change provides increased focus and operational simplicity.

Coats has a number of levers to generate organic growth in excess of 5% per annum on average through the cycle. We estimate that our underlying markets can grow on average 3% through the cycle. We will continue to outpace our markets by 100 to 200 basis points as the industry consolidates around fewer, stronger players. We have consistently gained share over the past few years. And in 2025, we have done it again in a difficult market context.

Last year, we launched the initiative to grow in target organic adjacencies, and this strategy has already delivered 1% of group growth in 2025, which will continue as we scale up. Set together, this is how we will deliver more than 5% growth, 200 basis points ahead of the underlying market on average through the cycle over the medium term.

Additionally, our strong cash generation provides us as we deliver with optionality to enter attractive inorganic adjacent markets as we did with OrthoLite. We continue to monitor companies with differentiated positions, a sustainability focus, cross-selling and cost synergy opportunities.

This slide summarizes our key differentiators on one page. These differentiators are the drivers of our share gains. The Apparel and Footwear supply chains are very fragmented, but they are consolidating to cope with increase in product complexity, the increase in sustainability requirements and the changes in sourcing countries.

Coats is in an enviable position to gain market share because we have the scale and capabilities to support our customers where it matters to them. At the bottom of this chart, you will see that the strength of our customer relationships is underpinned by our people and our culture of customer centricity. We have built deep trust with our customers through a track record of delivery over the years in any market conditions.

Service is king for our customers, and this translates into the operational and commercial excellence focus at Coats. Customers value our high product quality and our ability to deliver it consistently from all our manufacturing sites, including accurate color matching, which is a key differentiator.

And our investments in operational agility are paying off as orders are becoming more fragmented. Our service is also reflected in the way that our commercial and technical teams support our brand customers and manufacturers every day around the world to make the right product choices and improve their manufacturing productivity.

At the top of the house, you can see our 3 key growth enablers. Our scale and financial strength allow us to invest more than other companies in sustainability in both products and operations, innovative new solutions and digital systems that make customer interactions more efficient and enhance supply chain transparency. This is how we win in the marketplace.

Sustainability is at the heart of both Coats' and OrthoLite's strategies. Our sustainable thread portfolio grew 43% in 2025 and contributed to our share gains in the year. But we also drive sustainability in how we run our operations.

In 2022, we set ambitious 2026 targets, and we are well advanced in many areas. Since 2022, we have achieved a 30% reduction in our Scope 1 and 2 emissions, ahead of our 2026 target of 22%. We have also achieved zero waste to landfill a year early. And women now occupy 33% of our top 150 leadership roles, ahead of our 30% target for 2026, a significant improvement as we continue to ensure equality for all employees.

OrthoLite shares the same sustainability DNA with a similar focus on increasing recycled material content, developing breakthrough innovations like Cirql or making operations more sustainable.

Our target organic adjacencies represent an addressable market of approximately $2 billion, growing at more than 5% per annum. We have increased the size of this addressable market from $1.3 billion to $2 billion since last year because we have added a new product category, high-visibility trims within Safety Fabrics.

All these initiatives represent opportunities to offer new differentiated product categories to our existing customers, building on our expertise in textile, engineering and polymer science.

In Safety Fabrics, we are bringing innovative protective materials to workers in hazardous jobs, combining premium protection with comfort and lightweight. In energy, we're expanding our range of highly engineered tape products that protects critical on and offshore pipeline applications.

In Coats Digital, we provide to our apparel customers software products that optimize their production planning and costs. In Footwear, our woven upper technology, ProWeave, delivers increased performance and more design freedom with lighter weight.

In lifestyle, we are extending our structural components offering from luxury to premium handbag customers. These 5 adjacencies, combined accounted for $45 million sales in 2025 with great momentum going into 2026.

Let me give you more color on our Safety Fabrics initiative, which grew strongly in 2025. Safety regulation continues to tighten globally, and customers are demanding products that are not only protective, but also comfortable to wear.

We already sell thread for safety applications, and we are now using those existing customer relationships to offer highly engineered fabrics and high visibility trims, leveraging our core know-how in textile engineering and polymer science and our cost-competitive supply chain in Asia.

In the second half of 2025, we brought to market our latest innovation in protective clothing, FlamePro ARC, which offers superior protection against electric arc hazards. What sets this technology apart is that protection comes together with extreme lightweight and comfort, allowing workers the enhanced mobility and comfort needed to perform their roles.

We also have a portfolio of high visibility trims, which can be paired with our safety fabrics, bringing life-saving identification characteristics in all types of ambient light, including no light.

In the second half of 2025, we acquired VizLite, a small company with a lot of potential, whose glow-in-the-dark technology is already enhancing our portfolio. We combine it with our existing retro-reflective, fluorescent trims to create 3 layers of visibility in environments with reduced or no light. This technology has been specified for U.K. firefighters and has significant potential for growth in other parts of the world and other applications.

The acquisition of OrthoLite is an excellent example of our strategy of making inorganic investments into adjacent markets. This high-quality business improves the quality of the group in terms of growth and profitability potential.

OrthoLite is highly complementary to our existing Footwear business, creating a leading Tier 2 supplier of footwear components. In 2025, OrthoLite delivered full year profit in line with our expectations. So a good start. The complementary nature of these footwear businesses gives us the opportunity to create additional value from the acquisition in 2 significant ways.

Firstly, we have identified $20 million of joint cost synergies, which we expect to deliver by 2028 through savings in joint footprint optimization with significant overlap in operational footprint and from strategic procurement initiatives, operational excellence and systems implementation. In 2026, we expect to deliver $5 million of these savings.

In addition, there is significant overlap in our respective customer portfolios, route to market and leadership in sustainability. These commonalities present opportunities to accelerate growth through cross-selling as well as the development of joint innovation initiatives. This builds on our recent track record from the multiyear integration of the Texon and Rhenoflex footwear acquisitions in 2022.

Innovation is at the core of OrthoLite. The adoption of open-cell foam technology will continue to increase in the core footwear market as well as positive mix given the shift towards molded insoles. But new OrthoLite products will also create additional opportunities in 3 adjacencies not served by OrthoLite until now, expanding our addressable market in insoles.

In 2026, we plan to launch the first insoles made of open-cell foam technology with electrostatic discharge protection targeted at safety shoes. OrthoLite's technology will provide both comfort and protection in one insole. A leading European brand is currently testing the product with positive results.

Within the core premium footwear market, we are also entering 2 new product categories. Using the Cirql technology, we have developed our first supercritical foam insoles, a solution that addresses requests from brands for a lower density, high rebound insole. These are aimed at the trail and road running markets and are also currently being tested by 2 leading brands. In parallel, we continue to assess the commercial potential and go-to-market strategy for the Cirql technology in midsoles, which we expect to complete in the first half.

The third adjacency is very exciting as it perfectly shows how we can leverage the combined technology capabilities of Coats and OrthoLite to make technological breakthroughs. We have integrated in one product the comfort of OrthoLite's insoles with the performance of Coats' carbon plates, and we are aiming to launch this product starting in the aftermarket. This is just the beginning of the collaboration between our innovation teams, and we are excited at the many opportunities this may create.

With the significant changes to the portfolio in 2025, we have looked again at our medium-term targets to ensure they remain appropriate. Based on this exercise, we have upgraded and simplified parts of our medium-term framework.

We have maintained our above 5% revenue CAGR target through the cycle, expecting that the portfolio quality we have now will support a more consistent delivery ahead of the market. Our growth will be a combination of market growth of 3%, and our ability to continue to deliver growth ahead of the market through market share gains and target organic adjacencies.

With the acquisition of the margin-accretive OrthoLite business and the associated synergies and with increased confidence in our business potential following the 2025 margin performance of 19.8%, we have increased our group margin target range by 200 basis points to 21% to 23%.

Reflecting the contribution of OrthoLite, we have also increased our cumulative free cash flow target over the next 5 years from $750 million to $1 billion. This major step-up reflects the highly cash-generative nature of the group, including OrthoLite.

We have also improved the quality of our measure of free cash flow, which is now defined as after exceptionals. This underlines how determined we are as a management team to drive cash generation for the benefit of shareholders. Finally, we have maintained our target of a strong double-digit EPS CAGR post M&A or share buybacks over a medium-term time frame.

Our capital allocation strategy remains consistent. Our target debt leverage range is 1 to 2x EBITDA. We intend to allocate capital to support our organic growth, continue to deliver a progressive dividend and pursue disciplined M&A or share buybacks. With circa $1 billion of free cash flow generation over the next 5 years, we're excited about our future prospects, and committed to delivering EPS growth in excess of 10%.

So to conclude, 2025 was a year of strong strategic progress with a resilient operating performance and where we outgrew our markets. While we expect our Apparel and Footwear markets to remain uncertain in 2026, we anticipate delivering organic revenue growth with easier comparatives as we move through the year. Our growth will be underpinned by our ability to outgrow the market.

That said, we are mindful of the potential impact on demand and supply chains as a result of the conflict in the Middle East, which we are assessing. However, it is too early to provide an update. If conditions do prove more challenging, then the example of the past few years highlights our ability to adapt and the resilience of the group's trading.

Importantly, we also expect OrthoLite to significantly outperform the underlying footwear market as its technology differentiation enables it to win new customers and share. We expect to deliver further adjusted EBIT margin expansion in the year from a full year OrthoLite contribution as well as from the modest organic margin improvement.

Consistent with our enhanced ability to generate cash, we will have another year of strong free cash flow generation. We go into 2026 with upgraded medium-term targets, reflecting our enhanced portfolio of businesses and optimism about the future of the business.

Thank you very much for listening. We're happy to take your questions now.

Charles Hall from Peel Hunt. David, could you just talk a little bit more about the adjacencies, that $2 billion total addressable market. What do you see as a realistic share of that, say, on a 5-year view? How much of that would be organic? How much of that would be M&A? And how do you see the margin profile of sales in that area?

Thank you, Charles, for the question. So we're pretty excited about the opportunity of growing into that $2 billion market. Obviously, our starting revenue last year was $45 million, with a good growth from the year before. But we see this driving at least 1% of organic growth at the group level going forward.

This is based on just organic moves. I mean most of those efforts are organic. They are obviously built into our framework. And we believe that those adjacencies can deliver margin rates in line with our group medium-term targets. So obviously, there's going to be a scaling-up effect over maybe the first few years, but we see the margin potential there to reach that group level ambition.

So look, overall, probably we always look at -- also check M&A opportunities. And obviously, we're exploring these spaces, but most of our focus is on organic work right now.

Got it. And then on the tariff situation. Obviously, we're in a year in now to tariffs. Has everything settled down in terms of supply chains? And do you see any changes as a result of the sort of recent tariff changes?

I think the direction of travel is quite clear. It was already kind of clear at the mid of last year. And it's fairly settled right now. So we don't think there's going to be a huge change in terms of where things are going relative to where they stand now.

Obviously, we are monitoring the situation in the Middle East, but that's going to create probably more disruption in the near term. That disruption will require operational agility, which is one of our strengths. So we're ready to handle that as we've done in the past few years.

And there might be a little bit of, again, shift of volumes temporarily maybe away from the Middle East as well, going back maybe into other locations. But strategically, in terms of overall market direction, we think it's quite settled and the near term, it will just require agility, which we are ready for.

Mark Fielding from RBC. I've got 3 questions, but I'm going to ask the first 2 together and then I'll come to the other one because they're sort of linked.

Firstly, can we talk a little bit more about OrthoLite's performance so far? I mean, obviously, you said it was performing ahead of the market. But I mean, the implication of your sort of 5% decline in Footwear in the second half as the market is down high single digits. So I'm just -- a bit more clarity on whether OrthoLite is stable, growing or still actually down a bit with the market, just better than that market and how we think about that evolving this year?

And the reason that ties to my second one was, I mean, quite sensibly, your medium-term targets, you've sort of dropped the divisional part. But historically, you were targeting 3% to 4% growth in Apparel and 7% to 8% in Footwear. So do we still think about that as the sort of medium-term split? Or is there any changes because you've slightly rejigged the divisions, et cetera?

Yes. So I'll start with OrthoLite. OrthoLite substantially outperformed the market, the underlying footwear market and also outperformed our own Footwear business last year. And if you recall, that's because they have a couple of growth levers that we don't have in the rest of our business.

One is technology penetration. Open-cell foam insoles are increasing in adoption within the footwear market. And the other driver is their shift from flat insoles to molded insoles, which raises their average selling price. So these 2 drivers are helping them deliver substantial growth ahead of the underlying market.

Having said this, they also saw a sequential impact from the market decline that happened in the back end of the year. As Hannah mentioned, we saw some destocking in the footwear market in the last couple of months of the year. OrthoLite felt the same trend. But we see, as we are now obviously in Q1, we start to see kind of a sequential -- some level of sequential recovery from what happened at the end of Q4. And we expect OrthoLite to deliver strong growth ahead of market this year as well.

Maybe to your second question, over the medium term, we still expect Footwear to be a higher growth division than Apparel. We think the fundamentals in there support a higher underlying market plus with the addition of OrthoLite, we think that, that's going to act as another incremental, I would say, accelerator to our performance within that market. So we see that medium term still the trend.

Okay. And then just my third question, the high visibility trims business, just so I understand that a little bit. I'm assuming the market structure is relatively similar to others as in that you sell to a garment manufacturer who then includes it in the garments. And then I suppose I'm just checking, what does it mean that you are specified for U.K. firefighters? Does that mean they all have to have it? Or it's just something that could be used?

Yes. So the high visibility trims is a product that makes a lot of sense for us. And actually, for those who haven't noticed, [ Chris ] is wearing one of our products. So typically, you have -- in that particular product, that's our fabric. So it's a protective fabric. It has our thread and it has the high visibility trims.

So that shows how you can go for that particular application with very complementary offerings. And by the way, as I said in my remarks, it just builds on our capabilities in textile engineering and polymer science. So it's at the core of what we know how to do.

With regards to the question on VizLite, in particular, it's now specified on all U.K. firefighter applications. So that's a technology, a fluorescent technology that glows in the dark. So in a pitch dark room or when there's heavy smoke and you can see anything, this technology will glow by itself without the need for any light input. So it's a very interesting IP. That's what attracted -- what made it very attractive to us.

There's about -- even though we specified it as a technology, there's only about 30% of U.K. firefighters that have already started tendering it because the other specification for the other 70% is more recent. But we expect that other 70% to start tendering this technology relatively soon and then kind of ramp up progressively over the next 5 years.

So we're excited about that. We're also excited about the opportunity of this glow-in-the-dark technology to expand into other firefighter applications globally outside of the U.K. And as well as we see that as a technology that can be applied to other end markets even in the core Footwear and Apparel businesses.

So we look at it as an IP acquisition. It's a relatively small company now, but we think very complementary and differentiated and it helps us scale up in a direction that makes a lot of sense to us.

David Farrell from Jefferies. I've got a couple of questions. I'll take them one at a time. 2026 is a World Cup year in North America. If I remember back to the 2022 Capital Markets Day, there was some excitement about kind of ProWeave. Is there anything in your forecast for higher sales as a relation to the Soccer World Cup? And if so, would that come in '26 or at the back end of '25?

So I think there's a couple of questions there. I'll take it as one in general on the Olympics and then the other one is more about ProWeave in particular.

So on the Olympics, look, we have not planned for a bump or a significant one-off benefit of -- in our sales from the Olympics. So it's not something that we are accounting for. And there's a lot of discussion out there on how much of a bump these type of events generate in reality.

Yes, with regards to ProWeave, it's one of the adjacencies obviously, that we're doing. It's a relatively niche technology that basically applies only to kind of relatively high-end applications. We already deployed it across almost 10 different shoes. So it's already being sold on 10 different shoe models for different brands.

But we continue to drive with the help of OrthoLite, actually, that's one of the cross-selling areas we're working together to increase penetration in some of the major brands. But it will always be -- I mean, we know that is a little bit limited for its kind of high-end characteristics.

I think I mentioned last year, the interest of ProWeave goes a little bit beyond in terms of longer term, how we see the upper space as an interesting space. And we see this as kind of the entry point with a very kind of high-end type of technology.

One for Hannah. If I look at the capital allocation slide, there's nothing in there for net debt reduction. Obviously, you're coming at that from going into '26 for the next 5 years at 2.2x leverage. Should actually some of that capital allocation be thought about? Or is the reduction in the leverage coming just from the EBITDA?

No, absolutely. Our focus is, on '26 is on reducing the net debt. We see it in terms of capital allocation actually as an output of allocating capital to support organic growth. It's sort of a natural outcome, which is why it's not explicitly referenced on the slide.

But absolutely, our priority is on deleveraging. And we've talked about the cash generation of the group. You've seen that evidence in 2025. And with OrthoLite as well, that sort of clearly enhances the cash generation. So short answer is yes.

And final question, kind of EcoVerde. I guess over the last few years, the kind of higher selling point of that has been a real benefit of driving Apparel organic revenue growth above the market. How much is left to go from that as a tailwind as you look out over the next kind of 5 years? And can you just talk about kind of new customer bases versus kind of a replacement of existing customers?

Yes. So our 100% recycled thread product, EcoVerde, the EcoVerde brand is I think has been a phenomenal success for the group. I mean, literally 5 years ago, there was no sales. And last year, it was $550 million, which is about half of all the thread that we make.

So it's been an impressive ramp-up that has required a substantial effort to develop a new supply chain, adapt our manufacturing processes, requalify all our color recipes. So we see that as something that is very difficult to replicate.

Now from here, where do we go? We are at about 52% now with -- in terms of penetration. We think it can go -- it can keep going still. But obviously, as you increase towards 60% or beyond 60%, you're going to the very, very price sensitive pieces of the market. So we see that as a substantial differentiator, difficult to replicate with some room to grow.

But in terms of sustainability, what we're doing now is we are continuing to drive recycled penetration, so kind of continue to push that, but it will moderate in terms of growth rate. You won't see the 50% kind of ranges that we've seen this year.

And at the same time, we've launched a big initiative on supplier decarbonization, which will complement our efforts to get to our Scope 3 targets. So now when we go to brands, we have both the big push we have on recycled. And on top of that, supplier decarbonization as another big kind of driver for their sustainability -- to achieve their sustainability goals.

James Bayliss from Berenberg. Two, if I may. On Footwear customers, you noted they were managing down their inventory levels in the last few months of 2025. Can you just give us a sense of where that trend is for the first few months of 2026? Do you feel that levels are steady and in the right place now, absent any further shocks or Middle Eastern ramifications?

And then my second question on market share. Your ambition seems to be to continue to grow for 1% to 2% per year over the medium term, but you're coming from quite a high base already. Are there any regulatory considerations in local markets or any territories where growth will be naturally more limited than others that we should be aware of?

Yes. So I'll start with the latter question. So on market share, yes, we're at close to 30%, right, on both divisions. We still see this as a number that continues to increase and going to continue to increase.

The reason is, I mean, it may look like a big number, but when you look at manufacturer by manufacturer, in general, they like to concentrate thereby on fewer, stronger players, and it's not unusual to have manufacturers, so Tier 1s that buy 60%, 70% from us.

So at a manufacturer level, they don't have an issue. They actually typically want to have kind of a core supplier that is at that high level, and brands also are trying to consolidate the number of Tier 1s.

So we think those 2 trends, the fact that the Tier 1s are not necessarily trying to kind of limit the share they give to their largest supplier, and the fact that brands are trying to reduce the number of Tier 1s, I think, continue to play in our favor going forward.

And sorry, remind me the first question was on -- yes, the sequential for Footwear. So I mentioned a little bit earlier, we saw the last 2 months were a little bit tough. We're obviously focused on delivering our profit and cash commitments, which we did.

But we saw a substantial slowdown in the last 2 months of the year in Footwear in particular. But we've seen a sequential improvement in Q1. So it's not back to where it should be, but we've seen a sequential improvement that makes us think that, that kind of destocking that was done towards the back end of the year was already completed.

Quick question. Andrew from Peel Hunt. I wondered if within that sort of market data information that you provided, whether there was anything, more detail you could bring out of that because I could see that -- sorry, I've lost the train of thought. I'll move on to the next one.

So the other one is around competition on sustainability. Obviously, 5 years ago, EcoVerde, it was quite sort of a greenfield area for you. Just wondering where -- what the competition is currently within that area? I'll come back to the other one as I remember it.

So on sustainable threads, we see ourselves as by far the leading provider. As I mentioned before, it's actually not easy to transition to recycled polyester. It's a completely different supply chain. You need to develop suppliers that basically recycled PET bottles, so plastic bottles. And the quality requirements are very sensitive to our manufacturing process.

So you need to kind of make sure that you define very clear requirements. Otherwise, your productivity goes down quite substantially. And on top of that, you need to redo all your color recipes for all the -- I mean, on average, on a given year, we delivered 200,000 different sets of color.

And doing that is a gigantic piece of work. We have systems that allow us to do that very, very efficiently. But we find it like a very substantial differentiator when you combine all those things for people to replicate to the scale that we've done.

And obviously, with scale comes also negotiation ability in terms of pricing and everything. So overall, we think we've built something that is very substantial in terms of scale and difficulty to replicate, and we don't see any competitor anywhere near that.

Great. I'll try again with the other one. So I was just wondering about whether that was a broad-based sort of market decline? Or was it sort of within more sort of specific niches that either hindered you more than the market or was actually helpful sort of your relative -- I guess, the granular detail of that market movement, if you like?

Yes. The bigger -- so at the back end of the year, the bigger drop was in Footwear. Footwear is always more volatile. If you go over time just because of the average price of one of these athletic shoes is typically higher than a typical apparel garment.

And for the second reason, there's fewer larger brands. So it's more concentrated around a few big brands like Nike, adidas, et cetera. So typically, you see a little bit of more kind of volatility when they decide to either destock or restock. So that's something we've seen in the past.

We don't -- we haven't seen it in a particular OEM or a particular part of the market is being quite broad-based, but that's also because we are -- in Footwear, in particular, we have a higher percentage of exposure to those brands relative to Apparel.

I was just going to say, I think if you look at Apparel and the markets decline there, we really play to our strengths in Apparel in terms of our global footprint, our agility. And actually, when we look at our sort of the trends within the market share gains, a lot of those came after the tariff announcements because of our ability to react to the shifts and the agility. So it's really played to our strength, I think, is what I'd say about the Apparel piece.

Sorry, Mark Fielding again. Just a couple of follow-ups on those questions. I mean, firstly, in terms of the recycled thread, I mean, there was conversation in the past about future sort of natural biodegradable threads, et cetera. I'm just curious how you think about the next generation in that?

And then also possibly linked but more immediate. In terms of in Hannah's presentation, you talked about the price mix benefit. And then in Apparel, you talked specifically about mix, whereas it was price strategy in Footwear. Maybe a bit more elaboration on that. And just a reminder, I mean, is my impression that EcoVerde is slightly higher revenues, not higher margins? So it's not a mix benefit, but I'm just double checking that.

So I'll let Hannah comment on the second one. With regards to the next step in terms of recycled product, the big focus is going from PET bottle recycling to textile recycling, what is called textile to textile. So instead of just taking plastic bottles and recycling them into polyester, you would recycle garments.

And starting with waste from manufacturing processes, there's a lot of waste generated by the Tier 1s in the manufacturing process. So we're very actively working in that space. This year, we've launched our first textile to textile recycled products.

Today, it's a more expensive technology than the PET bottle recycling. But like we did a few years ago, as we led in the industry PET bottle recycling, we are now leading as well in textile to textile, it's now in the market. So we're selling -- it's still small volumes because it's higher priced.

But we're doing a lot of work through our sustainability innovation center in India with all the supply chain that is developing the capabilities and the scale to make this happen. So we also have innovation in that same hub around all the type of products like you're saying, biodegradable or natural origin, not oil-based at all.

But those, we see them as more at this stage probably those would be a further step away. So I would say the next step will be going more to textile to textile. And there's quite a lot of, I would say, interest from the brands. The leading brands in sustainability, they are already starting to at least look at that textile to textile as the next step.

And I think your question was about Apparel mix and what's driving that. So it's actually a combination of both premium products, but with premium products, they are more likely demand recycled product offerings. So it's a combination of the 2, which is where Apparel have benefited. So the correlation with the margins of recycled thread because they're going into premium products that they are typically higher margin, if that makes sense.

Okay. So if there's no other question, well, you see, basically, we delivered strong 2025, and we entered '26 with good momentum. Thank you very much for joining us today. We wrap up the call here.

Thank you.

Good morning, everyone. Welcome to today's Completion of OrthoLite Acquisition and Announcement of New Group Structure Call. My name is Seb, and I'll be the operator for your call today. [Operator Instructions]

I will now hand over to David Paja, CEO, to begin the call. Please go ahead.

Thank you. Good morning, all. We are delighted to be here today to cover two important topics: first, the completion of OrthoLite and a reminder of the acquisition rationale; and second, our new division structure. We have also provided a brief confirmatory trading update, and we'll provide a fuller update when we have October's numbers on the 7th of November, which is consistent with prior years.

We are delighted to announce that we have completed the acquisition of OrthoLite after receiving regulatory approval from the U.S. and Vietnam. The timing is consistent with our expectations. This was an exceptional opportunity. There wasn't an alternative asset of this scale, quality and strategic fit available in the footwear universe. This creates a market-leading Tier 2 supplier of critical footwear components. And we won't rush with the integration, we will focus on preserving OrthoLite's growth, which is very exciting. We're expecting to achieve annualized joint cost synergies of $20 million by 2028.

Through this acquisition, we are combining the Global #1 in footwear threads and Global #1 in structural components, with the Global #1 in open-cell foam insoles. We serve the same customers, the same segments, and we have similar business models. So there is significant opportunity to improve customer penetration. OrthoLite has very high brand intimacy, whereas Coats historically has stronger relationships with Tier 1 customers. This makes us stronger.

The co-branding relationships that OrthoLite has shows how deeply entrenched they are with customers. They have 310 co-branding agreements. OrthoLite has 36% market share. And as we've explained before, open-cell technology is growing faster as part of the insole market in general, and we expect penetration to increase further through the end of the decade.

The market is very fragmented, and customers value scale and agility to meet their requirements, especially in such uncertain macroeconomic conditions. As with Coats, OrthoLite has the global manufacturing base to adapt to tariffs. 92% of their products are manufactured between China, Indonesia and Vietnam, which is very similar to Coats' footwear footprint in those localities. Consolidation of those -- of these footprints will be the biggest source of synergy.

We're also changing the group's divisional structure, streamlining it into two divisions: Apparel and Footwear. This reflects the transformation of the group's profile following the exit from the North America Yarns business earlier this year and the acquisition of OrthoLite now. This change reduces internal complexity and aligns the divisions more closely with the underlying technologies. The Apparel division led by Adrian Elliott, expands to include the Performance Threads and Personal Protection businesses, which accounted for roughly 80% of the old Performance Materials division. And it is worth remembering that performance threads are produced in the same sites as apparel threads.

The enhanced Footwear division will be led by Pasquale Abruzzese, which includes the old Footwear division, OrthoLite and our Telecom & Energy business, the other part of the old Performance Materials division. This change is possible now because of the significant operational improvements made in Performance Materials over the last 12 months. The division has returned to growth in H2 and has delivered a step-up in profit margin with more to come and a clear plan to execute.

Before we turn to Q&A, a short but reassuring update on trading. We can confirm that trading through the third quarter for both Coats and OrthoLite was in line with the expectations that we set out in July. We will release our usual trading update for the 4 months of H2 on Friday, 7th of November. We will now turn to Q&A. Please be mindful that we are limited in what we can say on trading at this stage. We will provide more detail, as we said, next week.

[Operator Instructions] So far, we have this question from Kevin Fogarty. Since the announcement of the OrthoLite deal in July, how have your thoughts on the potential -- value creation potential of the deal been influenced by what you know now rather than what you knew in July?

Thanks, Kevin. Great question. I would say that in general, we've reaffirmed our views on the potential of the combination, both in terms of cost and sales synergies. We've gained access to additional information to the management teams. We started the detailed planning process in terms of execution of cost synergies. And we also, I would say, worked much more closely on sales synergies opportunities that we have pre-identified, but now we're kind of moving ahead. So I would say on both fronts, more reassured.

And we have a couple of follow-ups also from Kevin. Can you comment on how OrthoLite has performed relative to Coats footwear during the period since July this year? And secondly, are there synergies that we should be thinking about that should result from the reorganization announced today? And will this reset the medium-term EBIT margin and growth targets for Footwear and Apparel?

Thanks, Kevin, for the question. So in terms of the OrthoLite trading, as we said in the statement, the trading in the last quarter has been in line with what we were expecting, bearing in mind that OrthoLite's growth rates are sort of above our core footwear divisional growth rates. And then in terms of the question around the divisional change and the financial targets, the real crisp around the divisional change is around sort of simplification of the business, but also alignment of technologies. And that in itself is not going to sort of prompt a change in the financial framework. But with the acquisition of OrthoLite, as we said in the statement, in terms of the growth rate of OrthoLite, the higher margins of OrthoLite and the cash generation there, that will lead to an update of our financial framework, and we'll tell you more about that in March.

[Operator Instructions] Thank you for your participation. We currently have no further questions on the call, and I will hand back for any closing comments.

Okay. So closing comments, thank you for joining today. This is a very exciting day for Coats. So we're really looking forward to what's next and to execute on our plan and our medium-term targets. Thank you.

Thank you. This concludes today's conference call, and you may now disconnect your lines.

Good morning, everybody, and welcome to our 2025 interim results. I'm here today together with our group CFO, Hannah Nichols, and some members of my wider team. I'm really delighted to have announced such an exciting acquisition today as well as solid results despite some market uncertainty.

Next slide, please. I'm going to summarize the first half performance before taking you through the deal to acquire OrthoLite the global leader in insoles. After that, Hannah will present our financial performance, then I will give an update on outlook before taking your questions.

Next slide, please. We have delivered a strong first half, although we saw a deceleration of orders since April, driven by the uncertainty about U.S. consumer confidence. In this context, we have continued to gain share in apparel and footwear, and we have delivered a record profit margin of 19.8%, attaining our medium-term target in advance. The exit from the North America Yarns business has contributed to the lift in the group margin rate, but we have also delivered strong margin progression in apparel and performance materials. Our growth initiatives continue to deliver. Sales of recycled thread were up 73% year-on-year and revenue from adjacencies was up 30% year-on-year. As we promised, we've also seen a step-up in free cash flow generation from $39 million to $54 million.

Next slide, please. Over the past few years, we have developed a clear M&A strategy with a focus on footwear because of its attractive growth and profit potential. We analyzed all the components in the shoe and identified those areas with the most potential. This led to our acquisitions in structural components, Texon and Rhenoflex and the identification of insoles and uppers as the next areas of interest. We've been tracking the most attractive targets for the past 18 months and built relationships with sellers and management and the OrthoLite was always at the top of the targets on our list.

Next slide, please. OrthoLite pioneered the open-cell foam technology for insoles, which has a market size today of $700 million. This technology provides superior levels of comfort, performance and sustainability targeted at athleisure and sports shoes. The penetration of this technology has been steadily growing and currently stands at 23% with further progression ahead. OrthoLite is the clear market leader with 36% share, which has translated into levels of growth and profitability accretive to Coats as a group.

Next slide, please. This is an exceptional opportunity to expand our footwear division and create a super Tier 2 supplier of critical components. This acquisition will materially enhance our growth profile and there is a strong strategic fit between both companies because we serve the same customers, we manufacture in the same countries, and we have similar go-to-market strategies. The transaction will also improve the overall quality of our portfolio, as you can see from the OrthoLite numbers below. OrthoLite is clearly a premium business with high growth, 8% CAGR since 2019, high margin, 26% EBIT and high cash flow generation over 90%. Its market share of 36% proves the strength of their position. The acquisition creates value for shareholders because it makes Coats better in terms of growth, profit and free cash flow generation. We also have a good M&A track record and experienced teams to deliver on both sides.

Next slide, please. This slide explains more in detail the strategic fit. We are combining 2 global leaders with complementary businesses. Our relationship with brands are strong independently and will further strengthen with this deal, which will generate cross-selling opportunities. We share the same focus on product quality, sustainability and innovation. The combination will certainly accelerate innovation in polymer technology as we join capabilities. We have also identified substantial cost synergy opportunities of $20 million. This transaction will be accretive to Coats margins from day 1.

Next slide, please. Step by step, we are building a super Tier 2 in footwear, a one-stop shop supplier to serve the global brands. The tier 2 supply chain is very fragmented and brands encourage consolidation to drive better strategic alignment. OrthoLite and Coats will have combined sales in footwear of $700 million, and leading positions in 3 product categories: thread, structural components and insoles. Beyond these components, we are organically entering the upper space with our ProWeave technology and OrthoLite has developed a disruptive, sustainable technology to enter the midsole space called Cirql. This is a technology that we still need to understand better, but can provide further upside.

Next slide, please. Coats and OrthoLite are complementary businesses. We serve the same customers, manufacture in same countries, and we have an aligned strategy and vision. We have a shared DNA focused on leading with innovation and sustainability and providing the best service from our global footprint. This combination brings together 2 highly trusted companies in the footwear industry, combining strength and scale.

I will turn over to Hannah now to take you through the financial rationale of the acquisition.

Thank you. So if we turn to Slide 10, I want to talk about value creation. So we see significant opportunities for value creation, both through joint cost synergies and enhanced growth opportunities. We've identified $20 million of annualized joint cost synergies across 3 key areas. Firstly, we see benefit through footprint optimization using our combined expertise to drive operational excellence and automation. Secondly, strategic procurement with a focus on direct and indirect costs. And thirdly, we see opportunity for cost optimization across our support functions, supported by a phased ERP implementation. The program is fueled to ensure a focus on commercial delivery and top line growth and will be phased, including ERP migration. We expect to fully realize these synergies by the end of 2028 with phasing weighted towards year 2 and 3 of the program.

And alongside this, as you can see on the right-hand side of the slide, we see potential for growth synergies not included in the business case. And David has touched on some of these earlier. So innovation, as we bring together our expertise in polymer technology, cross-sell and upsell opportunities and the Cirql midsole opportunity. We have experienced management teams on both sides who are excited about the opportunity to drive the integration, and there is good alignment on where we can find synergies between the 2 organizations.

So if we turn to Slide 11, the financial rationale for the transaction is very compelling with attractive returns along side accelerated delivery of the group financial goals. Firstly, our valuation at 10x last 12 months EBITDA, the transaction multiple compares favorably to other deals in the sector, with historic transactions being in the 11 to 12x range. The valuation also compares favorably to the 2022 Texon, Rhenoflex deal, which we bought at a similar blended 10x multiple. However, it is important to note that OrthoLite the larger, higher-margin business in a faster-growing market. The acquisition is EPS accretive to Coats from year 1 and importantly, it has the potential for high single-digit returns in the medium term.

In addition, given the high quality of the business, the margin -- the deal is margin accretive to the group after an estimated 200 basis points post synergies. OrthoLite has similar levels of strong cash generation to our current business, and we have a clear path to deleveraging following the acquisition with net debt to EBITDA falling under 2x by the end of 2026. And importantly, we've been very disciplined around both the valuation and also consideration of alternative uses of capital. We've assessed the transaction returns against the share buyback, and we consider the longer-term returns potential from this transaction of synergies and growth are delivered to be materially more attractive even when taking into account the additional time and potential risk involved.

We introduced our refreshed financial framework in March this year, and you can see from the right-hand side of the slide that this transaction is strongly aligned and will help us accelerate our delivery against these goals. And once we have completed the acquisition, we will review our medium-term targets to ensure they fairly reflect our ambitions for the group.

So we turn to the following slide. In terms of our confidence of being able to deliver against our plan, we have a proven track record on M&A. We're supported by a very experienced team, some through their previous involvement in the Texon and Rhenoflex acquisitions, which delivered value beyond original estimations. And alongside this, the acquisition will be overseen and supported by David, Pasquale, our COO; and myself, all of whom have M&A experience. And finally, it's worth drawing out that much of the logic behind the Texon and Rhenoflex acquisition also applies to OrthoLite. It furthers Coats' position as a global leader in footwear. We have a clear line of sight to synergy delivery and a pipeline of sustainability-focused innovative solutions.

So now I'm going to move on to the key financial highlights from the interim results. So if you can turn to Slide 14. Before I start, it's worth noting that the results exclude the North American Yarns business, which has been treated as a discontinued operation and therefore, excluded from the numbers presented here. I'm pleased to report that the group has delivered a good set of results for the first half. Revenue was $705 million, up 2% at constant currency. This result reflected good growth in the first 4 months with revenue up by 4% to the end of April, followed by softening in orders for the final 2 months of the period due to the general market uncertainty and customer cautiousness arising from the announcement of the increased U.S. trade tariffs. EBIT was $140 million, up 7% at constant currency, reflecting the benefit of mix, price and cost control. And pleasingly, adjusted EBIT margin increased by 100 basis points to 19.8%, and it has already reached our medium-term target range of 19% to 21%. And this good operating performance translated into 4% EPS growth. We've also seen a strong step-up in free cash flow pre-dividends at $54 million, resulting in net debt at $430 million with leverage of 1.4x at the end of the half.

So if we now turn to the following slide where I'll provide a little bit more color on the divisional performance. So first of all, apparel. Revenue was $381 million, up 3% on a constant currency basis. This reflected good growth momentum at the start of the year, followed by a slowdown in orders from the end of April with uncertainty around U.S. tariffs resulting in more cautious buying patterns from brands. During the period, we were able to hold pricing and achieve a favorable portfolio mix despite pressures arising from increased U.S. tariffs. And we also continue to drive procurement efficiencies and to maintain tight cost control. As a result, adjusted EBIT increased by 11% on a constant currency basis to $78 million with margin increasing by 140 basis points to 20.5%. Based on the current market conditions, which remain somewhat uncertain, we expect Q3 trading to be broadly in line with Q2 and with some recovery anticipated in the fourth quarter based on historic patterns of demand correction.

In footwear, revenue increased 1% to $199 million on a constant currency basis. Similar to apparel, footwear saw good momentum in the first 4 months with 5% revenue growth, but a slowdown in May and June, given U.S. tariff uncertainty. The division continued to deliver positive price and mix benefits with growth in thread and footwear structural components, partially offset by lower market demand for lifestyle structural components. The division delivered $48 million of EBIT and maintained a strong margin of 24.1%. The margin performance reflects strong commercial delivery and the benefits arising from integration synergies and footprint consolidation alongside prudent cost control. Similar to apparel, given the uncertainty arising from U.S. tariffs, we expect Q3 trading for the division to be broadly in line with the second quarter with some recovery anticipated in the fourth quarter.

In Performance Materials, revenue declined 2% to $125 million on a constant currency basis. This reflects previously reported ongoing issues in some U.S. markets including destocking in some telecommunication customers. Encouragingly, we entered the second half with a strong order book for energy, and we expect the division to return to growth during the second half of the year. Adjusted EBIT was up 4% on a constant currency basis at $14 million and EBIT margin increased to 11.1%, a marked step up from the second half of 2024. This reflects operational improvements across the division. We've also taken steps to improve the quality of the portfolio with the exit from the noncore U.S. yarns market in Q2 and the closure of the Toluca facility in Mexico in December 2024 to align our operational footprint to market demand. We expect further margin progression in the second half driven by growth initiatives and further operational improvement projects.

So if we turn to the following slide on income statement, there are a few areas worth highlighting. Exceptional and acquisition-related items of $11 million included $1 million of residual costs related to strategic projects, which are now largely complete and $10 million relating to the amortization of acquisition intangibles. Net finance costs were $18 million, slightly higher year-on-year as a result of the U.K. pension buy-in payments and partially offset by continued good cash management through the period. At 29%, the first half effective tax rate remains well controlled, and we expect the rate to stay at this level for the full year. And we had adjusted EPS of $0.047 driven by the improved trading performance. And finally, given the strong first half performance and our confidence in the group outlook, we're pleased to declare an interim dividend of $0.01, an increase of 7.5% compared to the same period last year.

So now if we turn to Slide 17 on cash flow and leverage. The group delivered a free cash inflow of $54 million in the period prior to shareholder distributions, a significant step up from the same period last year, reflecting strong overall cash generation and minimal exceptional cash flows. With a working capital outflow of $31 million, we've continued to manage net working capital closely with a focus on inventory without compromising service levels. We also continued our disciplined approach to payables and receivables management during the period. Capital expenditure was $12 million as we maintained a disciplined approach to investing in growth opportunities and we anticipate 2025 full year capital expenditure to remain in the $30 million to $40 million range as we continue to invest in support of our growth strategy. At the end of the period, net debt excluding lease liabilities was $430 million, representing a pro forma leverage of 1.4x.

So I'll now hand back to David to provide the outlook for the rest of the year.

Thank you, Hannah. Turning now to Page 19, which summarizes the outlook. The group's full year outlook remains unchanged and is in line with current market expectations with a balanced weighting between the first and the second half trading. We expect to further increase free cash flow in the second half and into 2026. This is all underpinned by the strong operating margin performance. We remain mindful of the current market uncertainty, including from the dynamic tariff backdrop, but we are confident that we will continue to deliver despite this. Now we are happy to take your questions.

[Operator Instructions] Our first question comes from Maggie Schooley from Rothschild & Co Redburn.

Congratulations on the acquisition. I guess the first one I would have is I appreciate deals or slightly like buses and come along and you've known OrthoLite for some time. But can you give us a little background on the decision and the timing given the uncertain end markets with which you're operating on? Just to understand a little bit better about it, if it was the seller came to you or how this came out now?

Yes. Thanks for the question, Maggie. As I mentioned at the beginning, obviously, we've been tracking a set of targets for approximately 2 years well before I joined Coats and we have been very consistent with our M&A strategy of the companies and the areas of interest. So OrthoLite was always at the top of that list. There's been management engagement for over 18 months. And there was a process that was initiated by the private equity owner of OrthoLite earlier this year. Obviously, we have been investing already in the relationships quite a bit and we knew the asset pretty well. But since then, we've been able to perform pretty substantial due diligence that has reinforced our conviction. It's been a process that has taken a few months. And during these months, the performance of OrthoLite has been very strong in line with our expectations.

And obviously, the question I think behind your question is the fact of, okay, there's still uncertainty in the market, so how do we look at this. And this is a point that we've been considering quite in detail. We've looked at the uncertainty, the macro environment and discussed it with the whole Board and we've taken the view that fundamentally, the footwear space is an attractive space in terms of growth and profit potential over the medium term. And that OrthoLite as the market leader in that space, in technology that is going from low to high penetration is perfectly positioned for growth in the medium term independently of any, I would say, uncertainty or volatility that we may experience in the short term.

There's another consideration obviously about the scarcity of the asset, but as Hannah mentioned, we've been very disciplined as well in terms of looking at financial returns considering alternatives such as buybacks as kind of a hurdle rate and looking to clearly exceed, materially exceed those returns over the medium to long term.

Yes, makes a lot of sense. And secondly is a small point. And you mentioned that they have, I think I am pronouncing it correctly, the Cirql technology. Clearly, it's early stage and the decisions to have 5% royalty on future sales. Could you just tell us a little bit more about the technology and why 5% of royalties on sales and not profits and what the thought process is there?

Yes. So Cirql is a technology that addresses the midsole space. So it's another adjacency within the athleisure footwear. It's one of the most important components in the shoe and what OrthoLite has done is develop a technology that is very disruptive from the standpoint of performance and sustainability. So they are very excited about that technology, and they are very engaged with multiple brands to start launching it shortly. But we consider that there wasn't enough, I would say, certainties about that, and we didn't want to, therefore, value that as part of the deal upfront. Given obviously the fact they have invested quite heavily on the technology over $30 million and their conviction of the potential, we ended up agreeing to a royalty fee, as you mentioned, of 5% over 5 years that we think is a sensible way to handle the potential future upside of this technology. So we're quite happy with that arrangement.

Understand. Lastly, on the core group, if I could switch gears to that, and then I'll pass it on. But very good cost control in apparel by Adrian in the first half and year-on-year, sequentially, the margins were really good there. But can we expect or is there more to come in terms of footwear in terms of further cost control as we move through the year? Or is that something given the integration of will be part and parcel of how they're looking at the wider, more enlarged division?

Maggie, it's Hannah here. I think the short answer is yes. So there are, as I sort of referenced briefly in my script, there are some projects that we have undertaken in the first half of the year around footprint optimization, which are not associated with OrthoLite and we will see the benefits of those flow through to footwear margins in the second half alongside the regulatory cost control, so we would expect to see the margins in footwear to have increased slightly in the second half.

With regards to the Apparel margins, the team has done a great job and they as we referenced, we benefited from some price and mix within the first half. I think we might expect those to sort of moderate slightly in the second half, so there might be a bit of a sort of flip between the two. But yes, very pleased with the margin performance in the first half.

Our next question comes from Charles Hall from Peel Hunt.

I replicate what Maggie said, congratulations on the deal. Just a few questions on OrthoLite. Can you talk a little bit more detail on current trading there, just to get a feel of the trends and how they're being impacted by tariffs? And can you talk about their market share potential to increase it from here and what competitors they are currently facing into?

Yes. Thanks, Charles. Obviously, their performance in the first half is something we've been tracking during the process quite carefully, trying to understand the potential impact of the macro environment and uncertainty, which we've seen in our numbers in footwear and how it translated to them. They've been performing very strongly. They've grown in the first half at around 15% year-on-year, so which is a very strong performance. And that is supported by 2 drivers that they have that are specific to OrthoLite and beyond the -- just kind of the macros of the footwear industry. They are moving from low to high penetration with their technology. As you know, the open-cell foam technology is more and more adopted by the footwear brands and they've managed to extend this technology into additional shoe models across multiple brands.

So that's an additional upside that they are seeing and they've also seen a very good mix evolution as they are moving from flat insoles to moulded insoles, which have substantially higher price and they've managed to convert a lot of customers from more entry level to more premium technology. So these 2 drivers with diligence then obviously in big detail and they've supported a very strong first half performance. But it's fair to say that as part of our, I would say, modeling assumptions for the business, we've taken a very, very cautious view at what will happen in the second half and into next year.

So we've clearly not extrapolated that first half performance, and we've taken a substantial contingency or reduction in their numbers for the next 18 months, but it's been very resilient. With regards to market share potential, I just want to highlight first, obviously, their market share is around 36%, as we've mentioned, but probably the biggest driver for their growth in the future is continued penetration of open-cell foam technology across brands and within the brands across shoe models.

And we believe that, that penetration will continue for 2 reasons. One is consumer pool because consumers value the difference for a relatively incremental cost. But more importantly, because open cell technology is from a sustainability standpoint, step forward compared to the current technology that it replaces. And as a result, brands are also driving the integration to improve on their sustainability journey. But talking about market share potential, it's going to be continue to be driven by the adoption by the brands that they are in by the extension of their product into new shoe models.

So that's what they are driving plus the upselling that will continue to propel their market share. So we see opportunities as well in that area. I think you asked about competitors. Maybe worth saying this is an industry where OrthoLite is by far the largest player. There's other competitors but they tend to be smaller and regional and the #2 and #3 combined have a market share that we estimate between 15% and 20% combined. So they are the distant #1 player in the open-cell foam insole market. I hope that answers.

That's very helpful. And just a quick follow-up. They've got very broad list of brands that they work with. Is there any concentration in that? Just to get an understanding and also just a little bit more visibility on the leadership, is the full leadership team coming across?

Yes. So on customer concentration, no, they don't have a substantial customer concentration, just to give you an idea. They serve over 500 brands, Nike and [indiscernible] represent approximately 1/3 of their revenue, which is very reasonable when you look at the footprint that Adidas has in the overall athleisure industry. So we're not [indiscernible] concerning. And the rest those 500 brands that they are serving -- portfolio actually broader than ours. So if anything, we see opportunities to cross-sell because those brands for 30 years, they have deep relationship and we see opportunities to leverage some of those connections.

With regards to the management team [ Glenn Barrett ] is basically the founder. He is in his 70s, but he intends to continue. He's playing more of an advisory role at this stage, probably on the day to day, he's got a strong team underneath, but he's still very engaged and very excited about the deal and coming with us to execute on the vision. And the management team are experienced, high-caliber people who are also very excited to -- in short saying that through the process, we learned that we were obviously the first choice by the management team. And the reason is that they truly follow the vision of creating the super Tier 2 and becoming a big player in the footwear industry together.

Our next question comes from Kevin Fogarty from Deutsche Numis.

Well done on the transaction. Two questions, if I could, on OrthoLite. If we look at the historic financial performance that you've outlined for the business, just sort of confirming is that all sort of organic? Is there anything we should be thinking about in the historic numbers to just get a sort of the underlying performance there? And perhaps within that, if you could sort of touch on the 2023 performance, just sort of what can happen, the dynamics there? I think you've outlined for revenues, that would be quite good to just understand the history.

And secondly, if we look at some of the background info on OrthoLite, it sort of outlined a number of kind of patterns, I guess, it sort of holds. I just wanted to confirm presumably, these are in the core business and not significantly weighted towards Cirql and just a bit more sort of detail on those. Is that all around the kind of open-cell technology? Are those sort of key differentiators relative to the competition? But just a bit more color on that sort of patent capability will be useful.

Yes. Thanks, Kevin. Let me address maybe your last question and then I'll turn it over to Hannah to talk a little bit about their historical performance, okay? So in terms of patents, actually, most of their patents are on the Cirql technology, which they decided to take an approach of protecting through patents. Their core business, the open-cell foam is more protected through trade secrets. It's a business of really formulations and customization of formulations and they are protecting it through a very large portfolio formulation they have developed over time and capabilities to adjust the chemistry in a very agile way. They have over 400 formulations, which allows them to tweak for every new shoe model in a very fast way, always get kind of the best compromise between cushioning the performance, rebound of shoe, levels of recycled material content and that is core of their strength, right? So yes, most of the patents are more on the Cirql side, where they have taken a little bit of a different approach. I'll turn it over to Hannah to talk about the other point.

Yes. So just on revenue, your first question was whether the revenue performance is all organic. The answer is yes, it is. In terms of -- if you look back at that sort of revenue history, they've achieved a sort of 8% revenue CAGR from the period 2019 to '24. And if you look at sort of performance, the sort of ups and downs are very consistent with our performance in terms of that post COVID stocking, destocking cycle. So very consistent with the observation actually that their growth rates are stronger, driven by this market penetration perhaps that David has talked through. So -- and they've had a very good start to 2025 despite the tariff uncertainty, which I think just highlights the drive and penetration is sort of giving a resilience to the business from that perspective.

Great. That's really helpful. And I guess, is there any commentary on historic investments in the business, in the assets, what sort of rate it might have been running at? I guess, there's no sort of incremental sort of capital investment required or just a sort of an idea of the historic investment, if that's possible?

Yes. So we've had the opportunity to go around at least some of their sites and their facilities are well invested. So they're not going to require significant additional investments. It's running very similar to Coats profile in that sort of 3% of revenue type range. I did sort of touch on the plans that we have around site consolidation and the plan there is to sort of move to sort of 3 mega factories in the key geographies in which we both operate. You'll have seen that there's quite a strong overlap in our footprint between China, Vietnam and Indonesia. And as the slide indicates, will require some cost investments to realize $20 million of synergies. We're estimating that at around $35 million. And some of that will be around ERP system implementation. But in terms of sort of the operations, we've been pleased with the level of investment there and the quality of the operation.

Our next question comes from David Farrell from Jefferies.

First one, I guess, kind of relatively basic one, but can you just explain in a bit more detail the attraction of open-cell technology against what I think is the alternative EVA. What exactly is the difference? And given it is taking kind of market share, has the financial performance of 8% only consistent, I guess, with what Coats is delivering from its existing footwear business. A little bit light. Could it potentially grow at a faster rate than that?

Yes. Good question. So let me tell a little bit more. So open-cell technology is a technology that basically kind of -- it's a different chemistry and a different manufacturing process of foaming the insoles that keeps some air bubbles or air content trapped between the chemistry of the polymers. And through different formulations, basically, they're able to provide different levels of rebound and cushioning, and breathability as well. That's another marked advantage that makes it very appropriate for athleisure and athletic applications. And that has to be tweaked depending on what type of use the shoe is going to be for. Now this technology has very high levels of penetration in brands like ASICS because obviously, those are shoes for runners and that's where the level of penetrations are very high.

If you go into more generalist brands like Nike or Adidas, they deploy that technology into more of the premium shoes. But as I mentioned before, through a land and expand type of strategy, OrthoLite has been very successful at continuously expand the penetration of these open-cell foam technology into more and more shoe models. And that's the journey they're on, and there's still a lot of runway. Just to give you an idea, a company like ASICS may be at levels of penetration of the technology around 60%. If you look at more companies like Nike and Adidas, they are still probably in the 15% to 20%. So you see kind of the potential to go further.

And not to lose sight of the other big driver, which is sustainability. The technology replaces closed cell foam technology, which is called EVA, that's the acronym is a technology that has substantial sustainability challenges. And there's a general push and drive to basically find alternatives to that technology. Open-cell foam is a little bit more expensive, but we're talking about components that still represent a relatively very small part of the overall shoe cost. And there's a bigger push from the sustainability angle as well to transition from the EVA technology, which is the current baseline into open-cell, which is more sustainable, much more sustainable.

Now yes, you're asking a very good question. If our footwear business is targeted to grow at around 8% and OrthoLite has, call it, tailwind from technology penetration. Yes, theoretically, it should be outgrowing the rest of our footwear business. So yes, that's absolutely correct. Obviously, we've been cautious a little bit in some of our modeling assumptions, but we're very happy with that tailwind relative to our core footwear business. And actually, looking at the first half performance, we've seen really the divergence and kind of the outperformance that they have relative to our footwear business because of those extra drivers of growth. So yes, obviously, we have that in mind.

And I guess kind of a follow-up to that. As a -- what is now kind of a super Tier 2 supplier, how does that change how you go to market with the brands? How does 1 plus 1 become 2.5, 3? Does OrthoLite give you kind of extra credibility at the table to help innovate the shoe. I'm just trying to work out how some of the parts comes out at a higher value to your customers.

Yes, yes. So a couple of things. The products that we sell into the footwear industry are highly technical. That's why we picked these areas because they also allow good profit levels, right? But they are very technical, whether it's the thread or the structural components or the in-soles, you cannot have generalist teams kind of going into the customers because they require extreme depth of knowledge and optimization of the solutions to the customers. So the go-to-market will be very, very product driven, but we're obviously going to leverage the key account relationships that we have with the brands to open doors and promote our broader portfolio. We're very excited by the fact that OrthoLite, again work with over 500 brands. Our footwear portfolio is about 300 brands. They address many more brands, maybe some of the smaller brands. They can open doors to us to bring our -- the rest of our portfolio.

It's fair to say that they have -- we have a very good, I would say, brand portfolio and relationship with brands, but they have an even better one. So we think we benefit from their brand intimacy. At the Tier 1 level, we have much better relationships, and that's something that they are very keen on because their model is the same as ours. They specify their product with the brands and then they serve locally the Tier 1s. But because the insole is something that you slide into the shoe when it's finished. Unlike our products that are kind of manufactured into the assembly process or assembled with the shoe, our interaction with the Tier 1s is much deeper, and that's going to be a very positive to them because they have some challenges sometimes with compliance, product specified with brands making sure that the local manufacturers actually adhere to the specifications.

I mean they need to provide some technical and customer service support. They see our teams on -- in the local countries serving the Tier 1s and their relationships as a very important plus for them in terms of enforcing the specifications. So that's kind of how we look at the commercial angle of it. We're very excited about the technology angle. We haven't talked about it. But at the end of the day, our structural components business is a polymer business. The insoles is a polymer business. We're bringing together capabilities. We're starting to look at some of the things we're doing on chemistry, some of the things we're doing on combining components. We have carbon plates that are adjacent in the shoe to the insoles. And we're looking at opportunities to combine those technologies in a more innovative way. So we see, I would say, opportunities in the technology side as well.

And the third one, which is probably the area where we're going to bring the most to them, it's fair to say that they are extremely good in the front end, commercial product management, et cetera. We are probably better on the operational excellence side. So we see us bringing a lot to them in terms of improvement of their manufacturing processes. As we go into this kind of large factories at scale, we think they're going to benefit from that a lot. So I actually think we're very complementary in many, many ways. Yes, it's a very good marriage.

A Coats conference call wouldn't be a Coats conference call without a question on Performance Materials. So I just got a quick one on that. Given kind of you're alluding to a stronger second half driven by energy, can you confirm that is going to typically be a U.S. customer served out of your Spanish manufacturing facility? And therefore, is there any risk of tariffs around the delivery of that improvement in the second half?

No, it's really -- so a couple of things. First, we're very -- actually, I would say, very happy with the progress in Performance Materials sequentially since the second half. Just to give a few data points, you recall, last year, EBITDA for Performance Materials was 7% reported with actually a lower level in the second half. And at that point, when we announced those numbers, we also gave the medium-term target of 13% to 15% with obviously a lot of -- I would say, a lot of people questioning the feasibility of those targets. Well, now we are in the first half reporting 11.1%. And part of it is true is through the exit from the U.S. Yarns business that we've executed at pace and with positive cash proceeds.

But there's been a lot of initiatives in terms of operational improvements and cost improvements in the last few months, and that's coming through. So we're very, very happy with that. You see that already at more than 11%, we -- you can see line of sight to the 13% to 15% number that we guided. Second half, we will see further progression in margin. Part of it will come from, again, initiatives that we've driven in the first half that are going to deliver results in the second half. Part of it is from improvement in the mix. We have a strong order book in energy. I mentioned also a few months ago, that has been a huge focus area for us in the last few months. We've qualified new products with our energy customers. We've got a pretty full order book. Actually, all our sales forecast for the second half in energy is supported by a firm order book. So it's not kind of go get.

And that's accretive to the Performance Materials margins quite substantially. So yes, we feel good about that. Now tariffs is not an issue really because we don't ship into the U.S. It goes into oil companies, but actually the destination is more other parts of the Americas. Yes, we're not -- so we're not anticipating any issue with tariffs for that business. And we're happy with the trajectory of Performance Materials, including going back to growth in the second half after quite a few quarters of decline. We're going to see Performance Materials grow in the second half.

Great to see the level of ambition with the acquisition.

Our next question comes from Mark Fielding from RBC.

Just a few follow-ups. One, in terms of the synergy expectations, just how do we think about the time line? Is some of that relatively immediate in terms of its delivery? And then in terms of the acquisition, I suppose, one, can you just help me with following on the comments about the product being more sustainable, is it as simple as because there are pockets of air, so it's using less stuff? Or is there a lot more to this? Could you maybe just give us a bit more information about that and so we can also think about how that market might evolve in the future?

And then finally, on that customer penetration side, obviously, you've given us the 5-year financials, they look very strong. I am curious if at any point, there's been meaningful customer addition. For example, did they suddenly add Nike or Adidas? Or has it been more of a long-standing slow build with that sort of customer?

So let me take the cost synergy phasing, first of all. So the key driver of the cost synergies is the site optimization project where we're creating these 3 mega factories in Vietnam, China and Indonesia. And we are being very, very mindful that what we don't want to do with that is disrupt the top line growth. And as a result, we are phasing it over 3 years with the weighting more centered on year 2 and year 3 in terms of the synergy delivery. So just in terms of sort of proportion, it's relatively modest in the first year, a couple of million and then sort of more evenly spread between years 2 and year 3. And that's very intentional to protect the revenue growth line given the success of the business. And also, there's an ERP migration. And again, you need to do that in a very controlled way. So it's been very thoughtfully put through from that perspective. That was the first part of the question.

Yes. On the -- you're asking about open-cell versus EPA technology sustainability. There's a marked advantage in the kind of the components of -- it's not really because of the air pockets, so to speak, it's more because of the chemistry. It's a better chemistry from an environmental standpoint. And also the product has very, very high levels. It can be manufactured with very, very high levels of recycled material. So those are the 2 main advantages, superior chemistry from an environmental standpoint and very, very high levels of recycled content.

With regards to the strong growth we've seen in terms of penetration in the first half, it's really more driven -- it's not so much new brands. As I mentioned, it's how they are expanding into new shoes, new models within brands that they are already serving. I gave you the example of companies like Nike and Adidas, they have penetration of maybe 15% to 20% with them. But over time, they are expanding the technology into more models. And that's going to be a flow into the future as we keep driving that across brands.

[Operator Instructions] Our next question is from Jonathan Mounsey from BNP Paribas.

A couple of questions. First on the synergies, maybe you could also help us understand, you've given different pockets for the synergies, different drivers. What's the kind of split? I'm kind of interested you've got operational management savings, you've got support function savings. I guess that's hard cost reduction, and you've also got procurement. So we trying to understand how much of the $20 million is procurement.

And then secondly, on synergies, you talked about sources of growth synergies. You don't quantify them. Could you give us some sort of feeling on what the opportunity might be there for cross-selling, et cetera, in the future and when we might start to see that in the top line?

And then finally, more to do with recent trading. Obviously, during the most recent quarter, we had the tariff news. You talk a lot about the sort of impact, the uncertainty there. Could you talk more about maybe quantify what you're doing on pricing? Whether or not we basically spun up to what the new normal will be now or whether there's more impact to come in the second half? Just really trying to understand the impact of the tariff environment as we move forward on your business?

You want me to go with a cost synergy question, David?

Yes.

So just in terms of the breakdown of how does that $20 million breakdown and it's broadly speaking, about half of it is coming from the site optimization and then between procurement and support function savings, it's roughly 50-50, so 25%, 25% each. And the procurement savings are really derived from -- they are within OrthoLite rather than procurement synergies with the Coats Group because there's not that much crossover in terms of the materials that we buy. But what we have found is they have a very, very fragmented procurement organization at the moment, and they are not taking advantage of -- I'm going to say the Coats discipline, we have been very, very successful at driving procurement savings. So that is the sort of the main tenet of the procurement savings. Does that sort of help you? So roughly 50, 25%, 25%. And there was a question around revenue synergies.

Revenue synergies, I think Hannah alluded to the key drivers, right, for some of the -- or the main drivers. We haven't put a figure on those because we still need to kind of get access to more information to quantify them better. But the first thing we'll do is, obviously, they serve 500 brands. We serve 300 brands. We're going to look at the brands we're not serving and they can bring us into. So that's going to be the first thing. And then obviously, we're going to look at mapping kind of the brands that we both serve who has the best relationship, intimacy and see how we can leverage that to maybe advance our positions. So difficult to kind of put a number around it, but it's a playbook that we've been using also between our thread and our structural components business, and we know how to do that.

And then probably more medium term, the opportunities are more on the technology side, including Cirql. And obviously, in the first few months, we will spend a good time trying to understand how close it is to commercialization and how the brands are looking at it because that's really a key component of the shoe, the midsole, very strategic for the brands. So we need to have access to the brands and really understand that. But it's fair to say that the current management team, the OrthoLite management team feel very optimistic about the prospects of that technology, which is a substantial step forward in sustainability of that particular part of the shoe. And they are in contact with multiple brands to bring it to the market. And that is a sizable total addressable market, much bigger than the components that we serve because it's a much higher value component in the shoe. So yes, those are the areas where we could see upside and yes.

And the only other one I think is worth talking about is the innovation synergies. So the power of bringing technical capabilities...

I mentioned before, we're looking at, yes, like things, how can we combine maybe -- I mean, apart from accelerating just purely chemistry road map, it's more how to combine components. I mentioned the high-performance running shoes, there's carbon plates. And they are just literally next to the insole and there's opportunities to combine components. But those are going to be more kind of probably in the medium-term type of synergies. Difficult to put a figure there, but probably the biggest question mark is how big -- or what's behind the Cirql technology that looks potentially exciting, but difficult to put a number on it at this stage.

Now yes, you asked about recent trading, what we see. I think, Hannah explained that a little bit before. What we've seen in the last 2 months is basically what we call cautious ordering. And what that means is brands are taking a view on the future that there's uncertainty in terms of how consumer confidence and consumer demand will evolve, in particular in the U.S. And they've taken a view to be conservative in ordering, make sure that they protect inventory so that they don't do excess inventory buildup and at the risk that they are running out of product. And they've told us that, look, if they are -- if they get it wrong, then they will do what they call change orders or top-up orders, which are orders that come for delivery in very, very short time frame during the year. And that's their approach. So we've seen that in Q2. We expect that to continue in Q3. It's not a sequential decline, but we're staying at the same level of orders.

We don't see that kind of going down, but basically, it's not going up. So we estimate we will stay at the same level through Q3. And then we've looked at past historical patterns of this type of corrections. And we think in the Q4 time frame, we will see potentially some recovery there. Yes. So I think Hannah summarized our view on this. We're taking the current outlook, which is aligned with the brand's cautious view on the top line, but we feel very good about the profit and the cash delivery. And the reason, as Hannah explained is that sequentially from first half to second half, we see further momentum in both Performance Materials as well as the benefits from some of the footprint projects that Hannah alluded in the footwear side. So we think that will help us also underpin our second half numbers, and we'll continue to deliver very strong cash. I mean the first half was solid, and that will continue to improve in the second half and into 2026. So overall, that's why we're maintaining our outlook.

We currently have no further questions. So at this point, I'd like to hand back to David for some closing remarks.

Well, thank you very much for joining today and for the great discussion and questions. I look forward to getting with you more on this topic in the coming days. Thank you, and have a great day.

Thank you.