Coats Group Plc · LSE:COA
Coats — FY2020 Earnings Presentation
39 slides from Coats's earnings presentation, March 2021
Slide 1: 2020 Full Year Results
2020 FULL YEAR RESULTS CONTINUED RECOVERY IN H2, DIVIDEND REINSTATED March 2021
Slide 2: Disclaimer
DISCLAIMER Restricted distribution This presentation is not for release, publication or distribution, in whole or in part, directly or indirectly, in, into or from any jurisdiction where to do so would constitute a violation of the relevant laws or regulations of such jurisdiction (the ‘Restricted J
Slide 3: Agenda
AGENDA 01 Highlights 02 2020 - Navigating the storm 03 Strategic pillars 04 2020 - Market and our performance 05 2020 - Financial performance 06 2021 - Building through the recovery 07 Appendices COATS GROUP PLC | 2020 FULL YEAR RESULTS 3
Slide 4: Highlights
HIGHLIGHTS Continued recovery improving sales momentum Actions in 2020 place us well to win the recovery Continued share gains and customer wins Pace of innovation maintained - 22 new products Sustainability agenda remains key Margin resilience and ability to significantly flex cost base 1.2x levera
Slide 5: Our Purpose and Strategy
OUR PURPOSE AND STRATEGY TO CONNECT TALENT, TEXTILES AND TECHNOLOGY TO MAKE A BETTER, MORE SUSTAINABLE WORLD Profitable sales growth Underpinned by 01 A&F increasing our market share our strategic pillars PM leading with innovation, operational efficiencies Digital Continuing to strengthen the core
Slide 6: 2020 Navigating the Storm
2020 NAVIGATING THE STORM COATS GROUP PLC | 2020 FULL YEAR RESULTS 6
Slide 7: Organisation Pivoted to Four Priorities
ORGANISATION PIVOTED TO FOUR PRIORITIES HEALTH AND CASH SAFETY OF OUR MANAGEMENT EMPLOYEES MAINTAINING SUPPORTING THE CRITICAL OUR CUSTOMERS ELEMENTS OF OUR SUPPLY CHAIN COATS GROUP PLC | 2020 FULL YEAR RESULTS 7
Slide 8: Our Customers Remain at the Heart of Our Approach
OUR CUSTOMERS REMAIN AT THE HEART OF OUR APPROACH ‘Peace of mind’ for customers ever more critical in 2020 Speed Flexibility Quality Reliability Innovation Reputation How we responded Leveraging Providing 2,700 Leveraging Ongoing rollout Continued global footprint alternative technical digital tools
Slide 9: Maintaining the Critical Elements of Our Supply Chain
MAINTAINING THE CRITICAL ELEMENTS OF OUR SUPPLY CHAIN A quick, agile and collaborative response to procurement management required OUR PRIORITIES Balance short term critical needs and Be a responsible Work Maintain diverse Secure critical Navigate industry partner collaboratively supply channels sup
Slide 10: Operational Resilience
OPERATIONAL RESILIENCE DELIVERING THROUGH ADVERSITY Service levels maintained Resilient manufacturing Cost and productivity On Time In Full (%) Available capacity and volume 100 100 180 $16 million productivity 80 160 and sourcing savings via 60 75 140 continuous improvement 120 40 100 focus 50 20 8
Slide 11: Strategic Pillars
STRATEGIC PILLARS COATS GROUP PLC | 2020 FULL YEAR RESULTS 11
Slide 12: Digital
DIGITAL LEVERAGING OUR STRONG EXISTING PLATFORM TO DRIVE FURTHER PROGRESS Cloud and Innovating to End to end SAP AI-based camera Automation pilot modern provide customer Supply Chain implemented solution with real in China – workspace solutions: eg Management remotely at time notifications expected
Slide 13: Innovation
INNOVATION CONTINUED FOCUS, RICH PIPELINE OF OPPORTUNITIES COMPOSITES TELECOMS PERSONAL ENGINEERED YARNS SUSTAINABILITY OTHER PROTECTION INCREMENTAL NEW PRODUCTS GROUP VITALITY INDEX 2019: 25, $16m 11% (2019 9%) 2020: 22, $13m COATS GROUP PLC | 2020 FULL YEAR RESULTS 13
Slide 14: Growing Through Innovation
GROWING THROUGH INNOVATION WELCOME TO OUR INNOVATION HUB, NORTH CAROLINA, US COATS GROUP PLC | 2020 FULL YEAR RESULTS 14
Slide 15: Pioneering a Sustainable Future, Raising Our Ambition
PIONEERING A PROGRESS ON TARGETS SUSTAINABLE FUTURE 2020 Progress RAISING OUR AMBITION WATER Water Intensity (6)% WE REMAIN COMMITTED TO OUR 2022 Energy Intensity (3)% AND 2024 TARGETS. NO CHANGE IN THE ENERGY Certified renewables 6% GOALPOSTS, NOTWITHSTANDING THE PANDEMIC EFFLUENT ZDHC compliance 7
Slide 16: 2020 Market and Our Performance
2020 MARKET AND OUR PERFORMANCE COATS GROUP PLC | 2020 FULL YEAR RESULTS 16
Slide 17: Apparel & Footwear Market Overview 2020
APPAREL & FOOTWEAR MARKET OVERVIEW 2020 Retail down 20% Inventories managed well Winning segments US inventories % growth 2.0% 0.0% Source: -2.0% McKinsey state -4.0% of fashion 2021 -6.0% -8.0% -10.0% -12.0% Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Mixed across geographies 2019 2020 2020 202
Slide 18: Apparel & Footwear 2020 Performance
APPAREL & FOOTWEAR 2020 PERFORMANCE Sales decline 21% Market share gains Recovery momentum in Q4 Winning with the Winners & Footwear Good progress in China Domestic – Supporting our customers 2020 revenue decline of only 8% 2,700 technical customer support engagements, 24,000 people trained COATS GR
Slide 19: Performance Materials Market Overview 2020
PERFORMANCE MATERIALS MARKET OVERVIEW 2020 Personal Household Energy Telecoms Transportation Protection & Recreation Lower activity in oil, lower Global Oil Rig count Strong H2 rebound in Car production Global mattress manufacturing output and fibre optic investment Units: million cars production in
Slide 20: Performance Materials 2020 Performance
PERFORMANCE MATERIALS 2020 PERFORMANCE Improving exit rates 2020 end market themes Notable customer wins during the year Personal Protection: cyclical reduction in H2 demand, exacerbated by Covid disruption Major European Tier 1 Telecoms & Energy: returned to growth in Q4 automotive supplier – threa
Slide 21: 2020 Financial Performance
2020 FINANCIAL PERFORMANCE COATS GROUP PLC | 2020 FULL YEAR RESULTS 21
Slide 22: Key Financial Highlights
KEY FINANCIAL HIGHLIGHTS STRONG RECOVERY IN SECOND HALF Improving Operating Robust Strong balance Dividend sales profit ahead free cash sheet 1.2x reinstated momentum of expectations flows leverage COATS GROUP PLC | 2020 FULL YEAR RESULTS 22
Slide 23: Key Financial Metrics
KEY FINANCIAL METRICS SIGNIFICANT COVID 19 IMPACT ON ALL METRICS 2020 2019 Reported change CER1 Organic1 Revenue ($ million) Apparel & Footwear 823 1,063 (23%) (21)% (21)% Performance Materials 341 326 5% 7% (14)% Group 1,163 1,389 (16)% (14)% (19)% Operating Profit ($ million)2 Apparel & Footwear 9
Slide 24: Group Operating Profits and Margins
GROUP OPERATING PROFITS AND MARGINS UNDERPINNED BY STRONG COST MANAGEMENT 14.3% ($m) margin 10.2% 9.5% margin margin COATS GROUP PLC | 2020 FULL YEAR RESULTS 24
Slide 25: Segmental Margins
SEGMENTAL MARGINS STRONG RECOVERY IN H2 A&F MARGINS; HEADWINDS ON PM MARGINS Apparel & Footwear (organic) (%) Both segments impacted by Covid 19 volume declines; H1 2020 impacted by global lockdowns and FY 20 11.6% cancellations of orders H2 20 15.2% - A&F margins in H2 2020 recovered to 15.2% H1 20
Slide 26: Income Statement
INCOME STATEMENT LOWER EPS DRIVEN BY COVID 19 IMPACT ON OPERATIONS AND HIGHER TAX RATE 2020 2019 Exceptional / acquisition related items Primarily relate to non-cash Covid 19 impairments $m Reported Reported Adjusted operating profit 111 198 Exceptional / acquisition related items (7) (7) Finance co
Slide 27: Relentless Focus on Cash
RELENTLESS FOCUS ON CASH DIVIDEND REINSTATED Tight control Leveraging data H2 normalisation Reduce stocks / Bad debt charges of net working science to manage aligning payment terms < 0.3% revenue in working capital capital credit risk metrics Halted short term Critical spend 2021 Capex $35-40m Capit
Slide 28: Cash Flow and Leverage
CASH FLOW AND LEVERAGE ROBUST CASH GENERATION; UNDERPINNED BY CONTROLLING WORKING CAPITAL AND CAPEX $m 2020 2019 2020 Cashflow ($m) 145 Adjusted free cash flow 28 107 Pensions (11) (27) (26) (15) Discontinued - 32 (17) Acquisitions 4 28 (37) (5) (46) (18) Dividends paid to equity shareholders - (24)
Slide 29: 2021 Modelling Guidance
2021 MODELLING GUIDANCE Area Guidance Raw material inflation c.$15 million (majority expected to be offset by price) Other non raw material inflation c.$15 million (mainly labour) Sourcing and productivity savings c.$15 million Freight cost inflation c.$15 million Strategic projects $5 million Opex,
Slide 30: 2021 Building Through the Recovery
2021 BUILDING THROUGH THE RECOVERY COATS GROUP PLC | 2020 FULL YEAR RESULTS 30
Slide 31: A&F - Key Trends Post Covid 19
A&F - KEY TRENDS POST COVID 19 AS THE MOST ADAPTABLE & ADVANCED PLAYER THESE TRENDS PLAY TO OUR STRENGTHS Retail Shift to Double down on Rebalancing of Partnerships and Supply chain transformation casualisation Sustainability supply chains consolidation digitisation Shift to digital Work and lifesty
Slide 32: PM - Key Trends Post Covid 19
PM - KEY TRENDS POST COVID 19 INNOVATING TO ENHANCE FUNCTIONALITY AND PERFORMANCE Advanced Multi hazard Cost Performance Light-weighting Sustainability Composites protection reduction demands Innovation with Passenger cars: end- Increased worker On a strength per May be chemical and Durability to re
Slide 33: Outlook
OUTLOOK We remain cautious around the recovery profile of our various global end markets and will be vigilant regarding inflationary pressures within the supply chain. Notwithstanding this uncertainty we are encouraged by our improved trading performance towards the end of last year as well as in th
Slide 34: The Q&A Session Will Begin Shortly
THE Q&A SESSION WILL BEGIN SHORTLY If you would like to ask a question please dial United Kingdom 0800 640 6441 United Kingdom (Local) 020 3936 2999 All other locations +44 203 936 2999 Participant access code 942337 COATS GROUP PLC | 2020 FULL YEAR RESULTS 34
Slide 35: Appendices
APPENDICES COATS GROUP PLC | 2020 FULL YEAR RESULTS 35
Slide 36: Health and Safety of Our Employees
HEALTH AND SAFETY OF OUR EMPLOYEES Strong H&S Early Above and Rapid Favourable culture response beyond recovery results Our top priority Response plan Digital case-tracing Recovery matrix Zero widespread deployed weeks before transmission Journey to Zero pandemic declared Extra care Early and effect
Slide 37: Investment Case
INVESTMENT CASE DELIVERING OUR STRATEGY Global market leader Leading player in in Apparel & Footwear Performance Materials Continued share gains Accelerated sales growth and operational efficiencies Track record of delivering Track record of continuous improvements delivering free cash flow and oper
Slide 38: Revenues
REVENUES IMPROVING SALES MOMENTUM -19% FY -5% 2 months to Dec Group -15% 4 months to Oct -26% H1 -21% FY Apparel -7% 2 months to Dec & Footwear -15% 4 months to Oct -29% H1 -14% FY Performance -2% 2 months to Dec Materials -13% 4 months to Oct -19% H1 organic sales rates (versus 2019) COATS GROUP PL
Slide 39: Geographical Revenue Split
GEOGRAPHICAL REVENUE SPLIT Revenue CER1 Organic1 $m 2020 2019 changes % change% Covid 19 has impacted all geographical territories: Asia Asia 629 800 (20)% (20)% 20% decline – Key A&F markets, India and Bangladesh were in rolling local lockdowns for significant part of the year. This was partly offs