Coats Group Plc · LSE:COA
Coats — H1 2018 Earnings Presentation
35 slides from Coats's earnings presentation, Jul 31, 2018
Slide 1: Coats Group plc 2018 Half Year results presentation
Coats Group plc 2018 Half Year results presentation 31 July 2018
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 2018 Half Year results presentation Highlights Business review Financial performance Outlook and summary © Coats Group plc | 2018 half year results presentation | 31 July 2018
Slide 4: Highlights: strong financial results and operational performance
Highlights: strong financial results and operational performance Financial highlights Revenues up 5% - strong performance in A&F thread and hi-tech Performance Materials Operating profits up 12% to $100m alongside margin expansion to 12.7% Strong EPS (up 19%) and free cash flow ($85m LTM) perf
Slide 5: Business review
Business review Rajiv Sharma © Coats Group plc | 2018 half year results presentation | 31 July 2018 Page 5
Slide 6: Apparel and Footwear: customer led approach driving continued outperformance
Apparel and Footwear: customer led approach driving continued outperformance 3% revenue growth to $529m; – A&F thread business: up 4% – Premium thread sales: up 6% – Fast React: up 13% Continued market outperformance; – Service: “On Time In Full”: up 5% – Digital: – Online thread orders 84% – Sa
Slide 7: Performance Materials: innovation and globalisation driving hi-tech growth
Performance Materials: innovation and globalisation driving hi-tech growth 21% revenue growth; Geographic expansion 19% growth in Asia - 5% organic growth 11%* growth in EMEA - 16% contribution from the New sector growth acquisition of Patrick Yarn Mill 24% growth in personal protection Hi
Slide 8: Crafts: progress on refocused strategy
Crafts: progress on refocused strategy 2% decline in NA Crafts (15% decline in 2017) Progress on refocused strategy by new NA management team; – Reopened US distribution centre – Building new product pipeline – Entering further into premium yarn space – Online sales up 60% Smaller Latam busine
Slide 9: Strategic focus areas: positive progress continues
Strategic focus areas: positive progress continues Simplification Digital solutions • Connecting for Growth • Automated credit control / • 1,300 less tech. apps. reminders • 15% reduction in legal entities • >90% thread sampling • 30% brand harmonisation digitally enabled • 5% less suppliers • Re-la
Slide 10: Connecting for Growth: encouraging start, net benefits ahead of schedule
Connecting for Growth: encouraging start, net benefits ahead of schedule 2020 goals 2018 progress to date A 2 year programme; transforming into a lean, fit Encouraging start: benefits being realised faster. and fast organisation $10m net benefits in full year 2018 now expected $15m total net b
Slide 11: Financial performance
Financial performance Simon Boddie © Coats Group plc | 2018 half year results presentation | 31 July 2018 Page 11
Slide 12: Overview
Overview Reported CER $m unless otherwise stated H1 2018 1 Organic 2 change change Revenue 788 7% 5% 2% Operating profit 3 100 13% 12% 11% EPS (cents) 3 3.6 19% Free cashflow (last twelve months) 4 85 (23)% ROCE 35% 100 bps Interim Dividend per share (cents) 0.50 14% KPI 1 On a constant exchange rat
Slide 13: Segmental performance
Segmental performance CER 1 Organic 4 H1 2018 H1 2017 1 change % change % Revenue 2 ($m) Industrial 695 653 7% 3% Crafts Americas 93 97 (4)% (4)% Total 788 749 5% 2% Operating profit ($m) 2,3 Industrial 103 89 16% 15% Crafts Americas 1 5 (83)% (83)% 104 94 UK pension admin (4) (4) Group 100 90 12% 1
Slide 14: Industrial
Industrial Revenue CER 1 Organic 4 $m H1 2018 H1 2017 change % change % Asia: 5% growth reflecting continued momentum in key A&F markets Americas: 17% growth including first contribution from Patrick Yarn Asia 397 377 5% 5% Mill; encouraging performance in certain Latam markets, offset by contin
Slide 15: Crafts Americas
Crafts Americas Revenue CER 1 $m H1 2018 H1 2017 change • North America: down 2% (FY 2017 decline 15%) - impacted by own- label handknitting products introduced at major customer (from H2 Revenue 2017). 2017 impacted by $10m tornado lost sales. North America 62 63 (2)% • LatAm: 8% decline – market s
Slide 16: Income Statement
Income Statement Exceptional / acquisition related items: $m H1 2018 H1 2017 reported reported – $17m reorganisation charge in relation to C4G Adjusted operating profit 100 89 (out of a total $30m for the entire programme) Exceptional / acquisition related items (20) (3) – $4m acquisition related
Slide 17: Cash flow and leverage
Cash flow and leverage $18m adjusted free cash flow in H1 2018 (2017 $21m); increased $m H1 2018 H1 2017 profitability offset by higher working capital outflow EBITDA 120 109 Working capital (50) (37) FCF expected to be weighted to H2 due to normal working capital cycles Capital expenditure (21)
Slide 18: Record of delivering improving earnings and consistent cash flows
Record of delivering improving earnings and consistent cash flows Operating profit $m EPS (c) Free cash flow $m Last 12 months 6 months 6 months 13% CAGR 28% CAGR $80m+ ave. FCF p.a. Operating profit, EPS and FCF on an adjusted basis, 2014-17 as per 5 year summary in 2017 Annual Report. ROCE on a re
Slide 19: Outlook and summary
Outlook and summary Rajiv Sharma © Coats Group plc | 2018 half year results presentation | 31 July 2018 Page 19
Slide 20: Outlook
Outlook We look to build on a strong first half of the year by continuing to outperform the market, deliver productivity improvements, and maintaining tight control of our cost base, whilst investing in our growth opportunities. Encouraging progress has been made on the Connecting for Growth pro
Slide 21: Summary: delivering our strategy
Summary: delivering our strategy A&F PM Simplification Continued Higher Digital out- growth in Innovation performance hi-tech Acquisitions Profits Cash C4G Acceleration of Double- Consistent benefits digit generation growth © Coats Group plc | 2018 half year results presentation | 31 July 2018 Page
Slide 22: Appendices
Appendices
Slide 23: Financial guidance
Financial guidance Area Guidance Capital expenditure • $50-60m in 2018 Connecting for Growth • $10m net benefits in 2018 (previously $5m) programme • $15m net benefits by 2020, after $10m p.a. reinvestments (innovation, digital, people) • $30m total reorg. costs (excluded from adjusted operating pro
Slide 24: World's leading industrial thread manufacturer and major player in Americas textile crafts
World’s leading industrial thread manufacturer and major player in Americas textile crafts Industrial Crafts Apparel and Performance Crafts Footwear (A&F) Materials Americas Apparel, footwear and High technology threads Foundation and fashion accessories thread and yarns from handknitting Zi
Slide 25: Markets and global customers
Markets and global customers INDUSTRIAL Apparel and Footwear Performance Materials End uses include Customers include End uses include Customers include CRAFTS End uses include Brands include © Coats Group plc | 2018 half year results presentation | 31 July 2018 Page 25
Slide 26: 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 27: Our investment case
Our investment case Market leader in Leading player in Refocused Apparel and Footwear Performance Materials Americas Crafts Consistently gaining share through: Opportunity to grow in fragmented, • Leading consumer brands, • deep customer insight high growth market through strong market positions and
Slide 28: Cost base
Cost base Full year 2017 - pre-exceptional costs Materials: raw materials (polyester, nylon, cotton) and intermediates (grey thread); direct materials (dyes, cones) and bought-in Depreciation 3% finished goods (craft products) Administrative Labour (mfg): ongoing inflationary pressures 16% in th
Slide 29: The launch of the new www.Coats.com
The launch of the new www.Coats.com © Coats Group plc | 2018 half year results presentation | 31 July 2018 Page 29
Slide 30: Corporate Responsibility is at the heart of our business
Corporate Responsibility is at the heart of our business A focussed corporate responsibility strategy to identify the highest materiality issues to our Group, factoring in all stakeholders. For example: H&S and employment Environmental footprint Use of natural resources conditions • Renewable ener
Slide 31: 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 32: UK pensions update
UK pensions update Current financials UK scheme consolidation • As at 30 June 2018, UK schemes IAS19 now in • Consolidation of the 3 UK schemes (Coats, Brunel marginal ($1m) surplus position (31 Dec 2017 and Staveley) into 1 single scheme (Coats UK $106m deficit) Pension Scheme) on 1 July 2018 • Red
Slide 33: Pension schemes: H1 income statement and cashflow impact
Pension schemes: H1 income statement and cashflow impact Brunel Staveley Coats UK UK Total Coats other Total $m 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 Service charge - - - - - - - - 4 4 4 4 Administrative expenses 1 1 1 1 1 2 2 4 4 1 1 4 4 Operating profit impact 1 1 1 1 2 2 4 4
Slide 34: Pension schemes: balance sheet positions
Pension schemes: balance sheet positions Brunel Staveley Coats UK Other Total Jun Jun Jun Jun Jun Dec 2017 Dec 2017 Dec 2017 Dec 2017 Dec 2017 2018 2018 2018 2018 2018 $m Assets 211 221 337 359 2,291 2,417 Liabilities (230) (251) (330) (357) (2,278) (2,495) Net surplus/(deficit) (19) (30) 7 2 13 (78
Slide 35: 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 | 2018 half year results presentation | 31 July 2018 Page 35