Coats Group Plc · LSE:COA
Coats — H1 2022 Earnings Presentation
31 slides from Coats's earnings presentation, Aug 2, 2022
Slide 1: Accelerating and Transforming: 2022 Half Year Results
ACCELERATING AND TRANSFORMING 19% SALES GROWTH AND 180BPS INCREASE IN OPERATING MARGIN 2022 HALF YEAR RESULTS TUESDAY 2 AUGUST 2022
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
Slide 3: Agenda
AGENDA 01 Accelerating profitable sales growth 02 Transforming the business 03 Financial performance 04 Outlook 05 Appendices COATS GROUP PLC | 2022 HALF YEAR RESULTS 3
Slide 4: Highlights
HIGHLIGHTS OUTSTANDING H1 RESULTS ACCELERATING TRANSFORMING Group sales growth of 19%; growth in both A&F and PM Significant momentum on strategic projects Price/mix actions coupled with self-help programs offsetting inflation Sale of our Brazil and Argentina business Adjusted operating profit $125
Slide 5: Accelerating
ACCELERATING COATS GROUP PLC | 2022 HALF YEAR RESULTS 5
Slide 6: Apparel & Footwear Overview
ACCELERATING APPAREL & FOOTWEAR OVERVIEW GAINING ADVANTAGES FROM TRENDS; WINNING UNDER SUPPLY CHAIN VOLATILITY Retail sales coming back to 2019 levels Continued significant supply chain volatility 1.8 1.8 1.7 A&F 1.5 H1 2022 global vs H1 China Freight Input Supply retail sales chain 2019: 4% lockdow
Slide 7: Apparel & Footwear in H1
ACCELERATING APPAREL & FOOTWEAR IN H1 PREMIUMISATION, SUSTAINABILITY AND CUSTOMER FOCUS DELIVERING RESULTS Continuing momentum and growth ahead of market Price and mix actions offsetting inflation 20% 10% 6 monthly 0% sales trend -10% Product Supply Technical Sustainable (vs 2019) -20% quality agili
Slide 8: Performance Materials Overview
ACCELERATING PERFORMANCE MATERIALS OVERVIEW GROWTH ACROSS DIVERSE END MARKETS PERSONAL PROTECTION COMPOSITES PERFORMANCE THREAD (c.40% PM revenue) (c.25% PM revenue) (c.35% PM revenue) TRENDS Multi-hazard Light-weighting Premiumisation Comfort Internet proliferation Consistent demand DRIVERS Energy
Slide 9: Performance Materials in H1
ACCELERATING PERFORMANCE MATERIALS IN H1 SIGNIFICANT CUSTOMER WINS DELIVERING DOUBLE DIGIT SALES GROWTH Growth vs 2021 through Growing scale in all Significant customer wins price and volume three sub-segments H1 2022 vs H1 2021 35% H1 Sales 2022 Multiyear German military tender 30% Sales 28% 29% 25
Slide 10: Successfully Offsetting Inflation
ACCELERATING SUCCESSFULLY OFFSETTING INFLATION CONFIRMING VALUE THROUGH SELF-HELP & PRICE/MIX INFLATIONARY PRESSURES MITIGATING ACTIONS $36m Raw materials Price / mix $57m $22m Other incl. labour & energy Productivity & Procurement $12m $7m Freight $65m $69m COATS GROUP PLC | 2022 HALF YEAR RESULTS
Slide 11: Transforming
TRANSFORMING COATS GROUP PLC | 2022 HALF YEAR RESULTS 11
Slide 12: Strategic Projects
TRANSFORMING STRATEGIC PROJECTS SIGNIFICANT MOMENTUM; DELIVERING AHEAD OF INITIAL EXPECTATIONS What we said; What we are delivering; Improve overall cost base efficiency Cost base efficiency Optimise the portfolio and footprint • Well advanced; $5m savings already in H1 22 • FY 22 guidance increased
Slide 13: Texon Acquisition
TRANSFORMING TEXON ACQUISITION EXCITING NEW ADJACENCY Leading position Industry leader in Unique Compelling in highly attractive sustainability and additional growth financial growth market innovation opportunities rationale $132m 2021 Sales 36% 2021 Gross Margin 13% 2021 EBIT Margin $5m Synergies a
Slide 14: Financial Performance
FINANCIAL PERFORMANCE COATS GROUP PLC | 2022 HALF YEAR RESULTS 14
Slide 15: Key Financial Highlights
ACCELERATING KEY FINANCIAL HIGHLIGHTS ACCELERATING SALES AND PROFITS Accelerating Price/mix Adjusted Strong cash Strategic sales growth and self-help operating generation; projects programmes profit $125m 0.8x leverage1 momentum Offsetting Margins up Adj. FCF H1 $5m Up 19% inflation 180bps $30m FY $
Slide 16: Key Financial Metrics
ACCELERATING KEY FINANCIAL METRICS STRONG SALES AND MARGIN GROWTH H1 2022 H1 2021 Reported change CER1 Revenue ($ million) Apparel & Footwear 587 507 16% 21% Performance Materials 214 196 9% 16% Group 801 703 14% 19% Adj. operating Profit ($ million) Apparel & Footwear 107 85 26% 30% Performance Mat
Slide 17: Group Operating Profits and Margins
ACCELERATING GROUP OPERATING PROFITS AND MARGINS SIGNIFICANT VOLUME GROWTH; SELF-HELP PROGRAMMES OFFSETTING INFLATION ($m) 15.6% margin 13.8% margin INFLATIONARY PRESSURES ABSORBED BY SUCCESSFUL PRICING ACTIONS AND PRODUCTIVITY PROGRAMMES *figures relate to adjusted operating profit COATS GROUP PLC
Slide 18: Segmental Margins
ACCELERATING SEGMENTAL MARGINS STRONG A&F MARGINS DRIVEN BY VOLUMES A&F margins up 130bps PM MARGINS IMPROVING 18.2% APPAREL AND FOOTWEAR - Excellent commercial and operational delivery (%) - Increased volumes and factory utilisation 18.2% - Pricing and procurement initiatives offsetting 16.8% infla
Slide 19: Income Statement
ACCELERATING INCOME STATEMENT H1 2022 H1 2021 SIGNIFICANT EPS GROWTH DRIVEN BY $m Reported Reported OPERATING PROFIT PERFORMANCE Adjusted operating profit 125 97 Exceptional / acquisition related items Exceptional / acquisition related items (13) (4) – Commencement of strategic projects Operating pr
Slide 20: Cash Flow and Leverage
CASH FLOW AND LEVERAGE $m H1 2022 H1 2021 STRONG CASH GENERATION Adjusted free cash flow 30 49 H1 2022 CASHFLOW ($m) Pensions (23) (19) Exceptional and acquisitions (10) (2) Disposals and discontinued operations (23) (1) Dividends paid to equity shareholders (22) (15) Other (2) - H1 2021 Free cash f
Slide 21: Strategic Projects - Financial Impacts
TRANSFORMING STRATEGIC PROJECTS - FINANCIAL IMPACTS Overall financials – a reminder 2022 impacts – $50m incremental adjusted operating profit by 2024 – Significant momentum achieved – Benefits broadly weighted evenly between cost base – Adjusted operating profit benefits of optimisation and footprin
Slide 22: 2022 Modelling Guidance
ACCELERATING 2022 MODELLING GUIDANCE Area Guidance Raw material inflation We anticipate inflationary pressures to be offset by pricing and other self help productivity measures Other non raw material inflation – in line with past track record Freight cost inflation Sourcing and productivity savings
Slide 23: Key Highlights and Outlook
KEY HIGHLIGHTS AND OUTLOOK COATS GROUP PLC | 2022 HALF YEAR RESULTS 23
Slide 24: Highlights
HIGHLIGHTS OUTSTANDING H1 RESULTS ACCELERATING TRANSFORMING Group sales growth of 19%; growth in both A&F and PM Significant momentum on strategic projects Price/mix actions coupled with self-help programs offsetting inflation Sale of our Brazil and Argentina business Adjusted operating profit $125
Slide 25: Outlook
OUTLOOK RAISING FULL YEAR GUIDANCE We expect to see more normalised growth in the second half of the year as the stock replenishment of the first half gives way to more typical demand patterns. We will continue to use timely pricing actions to fully offset inflationary pressure, leveraging our unpar
Slide 26: 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 20 3936 2999 Participant access code 416968 Press *1 to ask a question, *2 to withdraw your question, or *0 for operator assis
Slide 27: Appendices
APPENDICES COATS GROUP PLC | 2022 HALF YEAR RESULTS 27
Slide 28: Supply Security, Resilience and Agility
too many words – Nick to simplify the message SUPPLY SECURITY, RESILIENCE AND AGILITY SUPPORTING OUR CUSTOMERS AND KEEPING EMPLOYEES SAFE Early identification of supply bottlenecks Solid health and safety performance Service levels maintained ensured no disruptions continued in H1 2022 Supplier base
Slide 29: Sustainability: Pioneering a Sustainable Future
SUSTAINABILITY: PILLAR TARGET 2022 PROGRESS 2022 TARGETS PIONEERING A SUSTAINABLE FUTURE WATER Water Intensity (37)% (40)% Strong progress in H1 2022 in water, Energy Intensity (11)% (7)% energy and waste ENERGY Certified renewables 7% n/a Good progress towards achieving social target again in 2022
Slide 30: Sustainability: Accelerating Our Journey
SUSTAINABILITY: ACCELERATING OUR JOURNEY Significantly increased ambitions to evolve sustainability strategy, increase momentum, and enhance competitive advantage $10m earmarked to fund the scaling up of green technologies and materials that are relevant to our industry supply chain Our Innovation H
Slide 31: Geographical Revenue Split
GEOGRAPHICAL REVENUE SPLIT Vs 2021 STRONG PERFORMANCE ACROSS ALL REGIONS $m H1 2022 H1 2021 1 CER change % Asia • Driven by key A&F markets Asia 475 407 19% • Exporter demand very strong in Indonesia and Bangladesh • Some ongoing Covid disruption in China and Vietnam Americas 172 153 13% Americas •