Coats Group Plc · LSE:COA
Coats — H1 2019 Earnings Presentation
34 slides from Coats's earnings presentation, Aug 1, 2019
Slide 1: 2019 half year results presentation
2019 half year results presentation Thursday 1 August 2019
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 2019 half year results presentation Introduction and highlights Business review Financial performance Outlook and summary
Slide 4: Introduction: good H1 performance and continued delivery of strategy
Introduction: good H1 performance and continued delivery of strategy Sustainability Strong growth report from released acquisitions Connecting Turkey and for Growth Portfolio China programme rationalised Innovation largely Hubs open complete © Coats Group plc | 2019 half year results presentation |
Slide 5: Financial highlights: growth in all operational metrics
Financial highlights: growth in all operational metrics • Revenue growth of 2%; key strategic focus areas performing well • Operating profit growth of 8%; continued margin expansion (80bps) due to self help initiatives • 4% growth in EPS; excluding non-operational one-offs • Continued strong cash ge
Slide 6: Business review
Business review Rajiv Sharma
Slide 7: Our new reporting segments: an overview
Our new reporting segments: an overview Market Value Growth End-markets Scale position proposition prospects Speed Low single Apparel, Global market 30,000 Personalisation digits market Innovation Apparel and leader in A&F customers growth over Footwear and Cost Footwear thread; >20% c.40 factories
Slide 8: Apparel and Footwear: resilient growth despite mixed retailer sentiment
Apparel and Footwear: resilient growth despite mixed retailer sentiment 1% revenue growth; 2% on like-for-like basis excluding portfolio rationalisation actions 3% A&F thread growth; ongoing exceptional service Continued fashion trends impacting zips 17% organic growth in software revenues
Slide 9: Performance Materials: our five new end-use categories
Performance Materials: our five new end-use categories Updated reporting categories reflecting market dynamics and strategic focus Telecoms and Energy: fast growing market (fibre optic Telecoms connectivity trend) - protective layers for cables / steel and Energy Household and Recreation replacement
Slide 10: Performance Materials: continued growth
Performance Materials: continued growth 4% revenue growth to $165m Gotex and Patrick Yarn acquisitions performing well Telecoms and Energy (up 27%), and Personal Protection (up 8%) growing strongly Transportation revenues broadly flat; slowdown in global automotive production Household and
Slide 11: Connecting for Growth: reinvestments stepping up to drive future growth
Connecting for Growth: reinvestments stepping up to drive future growth Actions now largely complete and programme set to close this year Innovation Digital Talent • 3 Innovation Hubs • Factory of the future: delivering • 100+ new roles created established: A&F and PM real-time manufacturing data •
Slide 12: ESG: significant progress to date and ambitious future targets
ESG: significant progress to date and ambitious future targets Progress to date Future activities 28% renewable energy / 20% water recycled Ambitious 2022 targets formed or re-used Construction underway on 3 further effluent New effluent treatment plant in Mexico in treatment plants 2019 J
Slide 13: Financial performance
Financial performance Simon Boddie
Slide 14: Overview
Overview Reported $m unless otherwise stated H1 2019 Organic 1 change Revenue 705 (3)% 2% Operating profit 2 102 3% 8% Operating margin % 14.5% 80bps 80bps EPS (cents) 2 3.4 (4)% Free cash flow 3 21 24% ROCE 40% 200 bps Interim Dividend per share (cents) 0.55c 10% 1 On a CER basis (2018 restated at
Slide 15: Operating review
Operating review Revenue Organic 1 4 $m H1 2019 H1 2018 Asia: 3% growth - good performance in key A&F markets change % Americas: 6% decline - difficult trading conditions in Latin America A&F and US consumer durables Asia 395 383 3% EMEA: 7% growth - driven by Performance Materials (Telecoms a
Slide 16: Segmental overview
Segmental overview Revenue and operating profit growth across H1 2019 1 Organic 4 H1 2018 both segments change % Revenue 2 ($m) Apparel and footwear profit up 9%; slightly ahead of the overall Group Apparel and footwear 539 533 1% Performance Materials profit up 4% to $23m; Performance materia
Slide 17: Income Statement
Income Statement • Exceptional / acquisition related items: significantly $m H1 2019 reported H1 2018 reported reduced year-on-year due to the reduction in C4G Adjusted operating profit 102 99 reorganisation spend ($1m; H1 2018: $17m) and a Exceptional / acquisition related items (1) (20) historic l
Slide 18: Cash flow and leverage
Cash flow and leverage $21m adj. free cash flow in H1; 24% Y-O-Y growth driven $m H1 2019 FY 2018 by operating profit growth and controlled NWC Adj free cash flow 21 96 Lower cash flows in H1 reflect normal working capital flows Pensions (12) (24) On a LTM basis, adj. free cash flow of $100m (
Slide 19: Robust financial delivery
Robust financial delivery Organic Operating Growing sales margin cash flows growth expansion Strong Minimal Balance exceptional Sheet items © Coats Group plc | 2019 half year results presentation | 1 August 2019 Page 19
Slide 20: Outlook and summary
Outlook and summary Rajiv Sharma
Slide 21: Outlook
Outlook In the second half of the year we will continue to drive performance through our focus on customer service and building on our innovation and digital capabilities, supported by our self-help initiatives. Our full year earnings per share will be impacted by the highlighted foreign exchang
Slide 22: Summary: delivering our strategy
Summary: delivering our strategy Global leader in Apparel & Value-add acquisitions Footwear Continued share gains Delivering Performance strong Materials profitability Accelerated and free sales growth cash flow Delivering self-help initiatives eg C4G, Innovation, Simplification, Digital © Coats Gro
Slide 23: Appendices
Appendices
Slide 24: Financial guidance
Financial guidance Area Guidance Capital expenditure • $45-55m in 2019 Connecting for Growth programme • $25m net benefits in 2019, after reinvestments (innovation, digital, people) • $30m total reorg. costs (excluded from adjusted operating profit); $24m incurred to date, with remainder expected in
Slide 25: IFRS16 – leases
IFRS16 – leases Income statement H1 2019 FY 2018 Accounting policy change effective for periods $m beginning on or after 1 Jan 2019 Eliminated operating lease charge 8.1 - Modified retrospective approach applied to Increased depreciation charge - right-of-use assets * (7.1) - restatement – no im
Slide 26: World's leading industrial thread manufacturer
World’s leading industrial thread manufacturer Customers include Performance Customers include Apparel and Footwear (A&F) Materials Apparel, footwear and High technology threads accessories thread and yarns from Zips and trims products performance materials Software solutions 2018 Sales Grou
Slide 27: Corporate timeline: a rich heritage
Corporate timeline: a rich heritage Coats is a company with more than 250 years of history London Stock 1750s 1812 1826 1890 Exchange 1891 James and Patrick Clark Clark’s sewing thread James Coats establishes first Coats’ initial share offering takes began work in Paisley, Scotland placed on the mar
Slide 28: Apparel and Footwear: A global leader - winning with the winners
Apparel and Footwear: A global leader - winning with the winners Unrivalled customer connections $1bn sales 4,000 brands 30,000 direct customers with 4% Operational CAGR* scale with global Consistent Compelling, reach share gains in value adding thread products and services (threads, engineered ya
Slide 29: Understanding the thread market landscape
Understanding the thread market landscape Size and structure A critical component in a Segmentation Consistent but moderate market global, agile industry Economy to premium growth $$$ 20%* 10-12 regional + Market value* ‘000s Specification local players $4.2bn # 2 and 3 Open spec Specified players 1
Slide 30: Software solutions – a clear opportunity to add value for our partners
Software solutions – a clear opportunity to add value for our partners Market opportunity Our solutions Case study Significant value chain waste Up to 25% of $400bn factory gate prices Market leader in Highly transactional production planning 20 million+ orders from Brands/Retailers on (key to servi
Slide 31: Pioneering a sustainable future: committed to leadership
Pioneering a sustainable future: committed to leadership, building on excellent progress to date 5 key priorities, with clear and ambitious 2022 targets, to drive accelerated progress 2018 Achieved zero liquid 91% of sites above New waste 20% water recycled / 28% renewable discharge at largest indus
Slide 32: Cost base
Cost base Full year 2018 - pre-exceptional costs Materials: raw materials (polyester, nylon, cotton) and intermediates (grey thread); direct materials (dyes, cones) and bought-in finished goods (craft products) Labour (mfg): ongoing inflationary pressures in the locations in which we operate E
Slide 33: Dividend and capital allocation
Dividend and capital allocation The Group aims to use the free cash flow it generates to balance its various capital demands Whilst maintaining its strong Balance Sheet position (target leverage 1-2x) We have adopted a progressive dividend policy where we aim to grow dividends along with under
Slide 34: For more information
For more information Rob Mann Head of Investor Relations +44 20 8210 5175 rob.mann@coats.com Coats Group plc www.coats.com © Coats Group plc | 2019 half year results presentation | 1 August 2019 Page 34